Annual Securities Report(The 70th Fiscal Year)
From April 1, 2017 to March 31, 2018

WACOAL HOLDINGS CORP.
29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto, Japan

E00590

The 70th Fiscal Year (from April 1, 2017 to March 31, 2018)

Annual Securities Report1.

2.

This is an English translation of the Annual Securities Report filed
pursuant to Paragraph 1, Article 24 of the Financial Instruments andExchange Act via the Electronic Disclosure for Investors’ Network(“EDINET”) as set forth in Article 27-30-2 of the same Act.
This does not contain English translations of the attachments to theAnnual Securities Report filed as set out in 1. above, other than theaudit report, the English translation of which is included at the end of
this document.

WACOAL HOLDINGS CORP.

Certain References and Information
This report is prepared for overseas investors and compiled based on the contents of the Annual Securities
Report(“Yukashoken Hokokusho”) of WACOAL HOLDINGS CORP. filed with the Director of the Kanto Local
Finance Bureau of Japan on June 28, 2018.
As used in this report , unless the context otherwise requires, “the Company” and “Wacoal Holdings” refer to
Wacoal Holdings Corp., and “Wacoal,” “we,” “us,” “our” and similar terms refer to Wacoal Holdings Corp.
and its consolidated subsidiaries. References to “U.S. dollars” or “$” are to the currency of the United States
and references to “yen” or “¥” are to the currency of Japan.
All financial statements and information contained in this report have been prepared in accordance withaccounting principles generally accepted in the United States, or U.S. GAAP except where otherwise noted.
A Cautionary Note on Forward-Looking Statements
This report contains forward-looking statements that are based on our current expectations, assumptions,estimates and projections about our companies and our industry. You can identify these statements by the factthat they do not relate strictly to historic or current facts. The forward-looking statements discuss future
expectations, identify strategies, contain projections of operation results or of financial condition, or state other“forward-looking” information. In particular, the forward-looking statements may include statements relating
to the impact of weak consumer spending in Japan and our other markets on our sales and profitability; theimpact on our business of anticipated continued weakness of department stores and other general retailers inJapan; our ability to successfully develop, manufacture and market products in Japan and our other markets thatmeet the changing tastes and needs of consumers and to deliver high quality products; the highly competitive
nature of our business and the strength of our competitors; our ability to successfully expand our network ofour directly managed retail stores and achieve profitable operations at these stores; our ability to further
develop our Internet sales capabilities; our ability to effectively manage our inventory levels, and effects ofirregular weather events; our ability to reduce costs; our ability to recruit and maintain qualified personnel;risks related to conducting our business internationally; risks from acquisitions and other strategic transactions
with third parties; risks relating to return of investment for the development of new markets; risks relating tointellectual property; risks relating to information system; risks relating to the protection of personal
information and our confidential information; risks relating to internal controls over financial reporting; theimpact of weakness in the Japanese equity markets on our holdings of Japanese equity securities; the impact of
any natural disaster or epidemic on our business; risks in relation to liability for termination and retirement
benefit; and risks related to realizability of deferred tax assets and transfer pricing; and compliance risk.
Forward-looking statements are contained in the sections entitled “II. Business Overview, 2. 【Risk
Factors】” and elsewhere in this report.
The forward-looking statements are subject to various risks and uncertainties. Information contained in thesections listed above and elsewhere in this annual report identifies factors that could cause our actual results,
performance or achievements to differ materially from those expressed or implied in any forward-looking
statement.
We undertake no obligation to update any forward-looking statements contained in this annual report, whether
as a result of new information, future events or otherwise.

Contents
Page
Annual Securities Report for the 70th Fiscal Year1

【Cover】
Part I【Information on Wacoal Holdings Corp. and its consolidated subsidiaries.】…………………………………

2

I.

【Overview of Wacoal Holdings Corp. and its consolidated subsidiaries.】……………………………………

2

1.【Key Financial Data】 ………………………………………………………………………………………

2

2.【History】 ……………………………………………………………………………………………………

4

3.【Description of Business】 …………………………………………………………………………………

5

4.【Information on Subsidiaries and Affiliated Companies】 …………………………………………………

7

5.【Employees】 ………………………………………………………………………………………………

9【Business Overview】 …………………………………………………………………………………………

10

1.【Management Policy, Business Environment and Management Issues】 …………………………………

10

2.【Risk Factors】 ………………………………………………………………………………………………

16

3.【Analyses of Financial Position, Operation Results, and Cash Flows by Management】 …………………

20

4.【Material Agreements, etc.】 ………………………………………………………………………………

31

II.

III.

IV.

V.
VI.

5.【Research and Development】 ………………………………………………………………………………

32【Property, Plants, and Equipment】 ……………………………………………………………………………

33

1.【Summary of Capital Investment, etc.】 ……………………………………………………………………

33

2.【Major Property, Plants, and Equipment】 …………………………………………………………………

33

3.【Plans for Capital Investment, Disposals of Property, Plants, and Equipment, etc.】………………………

35【Information on the Company】 ………………………………………………………………………………

36

1.【Information on the Company’s Stock, etc.】 ………………………………………………………………

36

2.【Information on Acquisition etc. of Treasury Stock】………………………………………………………

62

3.【Dividend Policy】 …………………………………………………………………………………………

64

4.【Changes in Share Prices】 …………………………………………………………………………………

64

5.【Directors and Audit & Supervisory Board Members】 ……………………………………………………

65

6.【Corporate Governance, etc.】 ………………………………………………………………………………

68【Financial Information】 ………………………………………………………………………………………

84

1.【Consolidated Financial Statements】 ………………………………………………………………………

84【Stock-Related Administration for the Company】 ……………………………………………………………

132

VII. 【Reference Information on the Company】 ……………………………………………………………………

133

1.【Information on the Parent Company】 ……………………………………………………………………

133

2.【Other Reference Information】……………………………………………………………………………… 133
Part II 【Information on Guarantors etc. for the Company】……………………………………………………………
Auditors’ Report and Internal Control Report134

End of this document

【Cover】【Document Filed】

Annual Securities Report (“Yukashoken Hokokusho”)【Applicable Law】

Paragraph 1, Article 24 of the Financial Instruments and Exchange Act【Filed to】

Director, Kanto Local Finance Bureau【Filing Date】

June 28, 2018

【Fiscal Year】

The 70th Fiscal Year (from April 1, 2017 to March 31, 2018)【Company Name】

KABUSHIKI KAISHA WACOAL HOLDINGS【Company Name in English】

WACOAL HOLDINGS CORP.

【Position and Name of Representative】

Hironobu Yasuhara, President and Representative Director【Address of Head Office】

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto【Phone No.】

Kyoto (075) 682-1007【Contact Person】

Shinichi Kitagawa, General Manager of Accounting Department【Contact Address】

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto【Phone No.】

Kyoto (075) 682-1007【Contact Person】

Shinichi Kitagawa, General Manager of Accounting Department【Place Where Available for PublicTokyo Stock Exchange, Inc.

Inspection】(2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)

1

Part I【Information on Wacoal Holdings Corp. and its consolidated subsidiaries.】
I. 【Overview of Wacoal Holdings Corp. and its consolidated subsidiaries.】
1. 【Key Financial Data】(1)Consolidated Financial Data, etc.
(Millions of yen, unless otherwise stated)
Fiscal Year

66th

67th

68th

69th

70th

Year-EndMarch 2014

March 2015

March 2016

March 2017

March 2018

Sales

193,781

191,765

202,917

195,881

195,725

Operating income

13,860

7,082

13,865

11,065

12,534

Net income attributable to
Wacoal Holdings Corp.

10,1068,444

11,15912,525

9,745

Comprehensive income (loss)

22,74928,813(49)

12,296

16,448Wacoal Holdings Corp.
shareholders' equity

205,106

228,857

224,374

227,568

232,712

Total assets

271,988

300,272

292,854294,958

298,534

Shareholders’ equity per share(yen)

2,912.64

3,249.87

3,185.80

3,317.05

3,454.40

Net income per share attributable
to Wacoal Holdings Corp.

(yen)

143.51119.91158.46180.26143.46

Diluted net income attributable to
Wacoal Holdings Corp. per share(yen)

143.21

119.60158.00179.71142.98

Shareholders’ equity ratio

(%)

75.4

76.2

76.6

77.2

78.0

Return on equity

(%)

5.2

3.9

4.9

5.5

4.2

Price earnings ratio(times)

14.68

22.55

16.95

15.24

21.47

Net cash provided by operating
activities

8,949

14,337

12,635

16,351

15,493

Net cash used in (provided by)investing activities

1,658

164

(11,407)(3,032)(7,362)

Net cash used in financing
activities(5,554)(8,391)(4,547)(13,055)(12,303)

Cash and cash equivalents, endof year30,65838,41034,05933,99529,487

18,912[1,391]

18,986[1,210]20,655[1,237]

21,139[1,018]20,904[771]

Number of employees[Average number of part-time
employees, etc.](Notes)(person)1.

The foregoing consolidated financial data has been prepared in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP). In the above table, operating income is stated instead ofordinary income.

2.
3.

Sales do not include consumption taxes, etc.
We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shareswere consolidated into one (1) share effective as of October 1, 2017. Accordingly, “Shareholders’ equity pershare,” “Net income per share attributable to Wacoal Holdings Corp.” and “Diluted net income attributable to
Wacoal Holdings Corp. per share” have been calculated assuming that such share consolidation had been
conducted at the beginning of the 66th fiscal year.
2(2) Financial data etc. of the Company(Millions of yen, unless otherwise stated)
Fiscal Year

66th

67th

68th

69th

70th

Year-EndMarch 2014

March 2015

March 2016

March 2017

March 2018

Operating revenue

8,967

10,898

10,934

13,13912,644

Ordinary income

5,301

7,350

7,044

9,215

6,308

Net income (loss)

4,955

(541)

6,739

11,453

6,461

Common stock

13,26013,26013,26013,26013,260143,378

143,378

143,378

143,378

71,689Net assets

145,605

140,578

143,135

145,496

140,510

Total assets

177,411

168,762

163,972

165,113160,140

Total number of issued andoutstanding shares(thousandshares)Net assets per share(yen)

2,063.15

1,990.97

2,026.40

2,114.38

2,078.38

Dividends per share(Interim dividends per
share)

(yen)

33.00
(－)

30.00
(－)

33.00
(－)

36.00
(－)

54.00
(18.00)Net income (loss) per share

(yen)

70.37

(7.70)

95.70

164.85

95.12

Diluted net income per
share

(yen)

70.21

－

95.40

164.32

94.47

Shareholders’ equity ratio

(%)

81.8

83.0

87.0

87.9

87.4

Return on equity

(%)

3.4

－

4.7

7.9

4.5

Price earnings ratio(times)

29.93

－

28.06

16.67

32.38

Dividend payout ratio

(%)

93.7

－

68.9

43.7

75.7

(person)

80
[－]

80
[－]

81
[－]

81
[－]

95
[－]

Number of employees[Average number of parttime employees, etc.](Note)

1.
2.

Operating revenue does not include consumption taxes, etc.
Dividends per share for the 66th fiscal year include a commemorative dividend of 3.00 yen in commemoration of
the 50th anniversary of our listing.

3.
4.
5.

Diluted net income per share data for the 67th fiscal year is not presented since a net loss was recorded.
Return on equity, price earnings ratio and dividend payout ratio for the 67th fiscal year are not presented since a net
loss was recorded.
We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares were6.

consolidated into one (1) share effective as of October 1, 2017. Accordingly, “Net assets per share,” “Net income(loss) per share” and “Diluted net income per share” have been calculated assuming that such share consolidation
had been conducted at the beginning of the 66th fiscal year.
Dividends per share of 54.00 yen for the 70th fiscal year are a total of the interim dividend (18.00 yen) and the yearend dividend (36.00 yen). As we have conducted a share consolidation of common stock of the Company pursuant
to which two (2) shares were consolidated into one (1) share effective as of October 1, 2017, such interim dividend
and year-end dividend are the amounts before such share consolidation and after such share consolidation,
respectively. Dividends per share for the 70th fiscal year will be 72.00 yen if calculated based on the per share
information after such share consolidation.
3

2. 【History】
June 1946
November 1949
June 1951

Wako Shoji founded by late Koichi Tsukamoto
Wako Shoji Corp. established with 1 million yen in capital (Nakagyo-ku, Kyoto)
Head office relocated to Anekoji-agaru, Muromachi-dori, Nakagyo-ku, Kyoto; plant opened; self-manufacturing
beginsNovember 1957

Company name changed to Wacoal Inc.

November 1959

Tokai Wacoal Sewing Corp. established as a domestic manufacturing company, and seven sewing subsidiaries

June 1964
September 1964

established in Japan
Company name changed to Wacoal Corp.
Wacoal listed on the Second Section of the Tokyo and Osaka Stock Exchanges and the Kyoto Stock Exchange

August 1970

A joint venture company, Korea Wacoal Corp. established in Korea

October 1970

A joint venture company, THAI WACOAL CO., LTD. (current THAI WACOAL PUBLIC CO., LTD.)established in Thailand

October 1970

Taiwan Wacoal Co., Ltd. established as joint venture company

January 1971

Wacoal listed on the First Section of the Tokyo and Osaka Stock Exchanges

April 1978

Singapore office (current WACOAL SINGAPORE PRIVATE LTD.) opened

August 1979
June 1981

Acquired shares from Torica Inc., a subsidiary of the Company, by way of capital increase through third-party
allocation
WACOAL AMERICA, INC. (current WACOAL INTERNATIONAL CORP.) established as an overseas

February 1983

subsidiary
Acquired shares from Nanasai Co., Ltd., a subsidiary of the Company, by way of capital increase through thirdparty allocation
WACOAL HONG KONG CO., LTD., established as an overseas subsidiary

December 1983

Acquired all shares in Teenform Inc., an American corporation (current WACOAL AMERICA, INC.)

December 1983

THAI WACOAL CO., LTD., listed on The Stock Exchange of Thailand

March 1982

January 1986
April 1989

Beijing Wacoal Co., Ltd. (current Wacoal China Co., Ltd.), established as joint venture company
PHILIPPINE WACOAL CORP. established as joint venture company

January 1990

WACOAL FRANCE S.A. established as an overseas subsidiary (current WACOAL EUROPE SAS)

January 1991

INDONESIA WACOAL CO., LTD. (current PT.INDONESIA WACOAL), established as a joint venturecompany
Joint venture agreement for Korea Wacoal Corp. canceled; investment made into Shinyoung Inc. (current

April 1993
January 1995
June 1997
December 2000
May 2003

Shinyoung Wacoal Inc.) in Republic of Korea
Guangdong Wacoal Inc. established as an overseas subsidiary
VIETNAM WACOAL CORP. established as an overseas subsidiary
Joint venture agreement for Beijing Wacoal Co., Ltd. (current Wacoal China Co., Ltd.), canceled andreestablished as Beijing Wacoal Co., Ltd., a wholly owned subsidiary
WACOAL MALAYSIA SDN BHD established as a joint venture company

August 2003

Dalian Wacoal Co., Ltd., established as an overseas subsidiary

October 2005

Company name changed to Wacoal Holdings Corporation pursuant to the transition to holding company system
Wacoal Corp. established through incorporation-type company split

January 2008

Peach John Co., Ltd. (“Peach John”), became a wholly owned Wacoal subsidiary through share exchange

August 2009

Lecien Corp. became a wholly owned Wacoal subsidiary through stock exchange

April 2012
January 2016

Eveden Group Limited (currently Wacoal Europe Ltd.) became a wholly owned Wacoal subsidiary through theacquisition of all of the issued and outstanding shares of Eveden Group Limited
A TECH TEXTILE CO., LTD. and one other company established as joint venture companies

43. 【Description of Business】
Our corporate group consists of one holding company (Wacoal Holdings Corp.), 57 subsidiaries, and eight affiliates, and isprincipally engaged in the manufacturing and wholesale distribution of innerwear (primarily women’s foundation wear,
lingerie, nightwear, and children’s underwear), outerwear, sportswear, and other textile goods and related products, as well as
the direct sale of certain products to consumers. Our corporate group also conducts business in the restaurant, culture,service, and interior design businesses.
The Company falls under the definition of “Specified Listed Companies” as prescribed under Paragraph 2, Article 49 of
the Cabinet Office Ordinance on Restrictions on Securities Transactions, etc. For this reason, whether an incident is minor(and not a material fact) under the insider trading restrictions will be determined on the basis of consolidated figures.
Segment information and a summary of the various companies that make up our corporate group are as follows:(1) Wacoal Business (Domestic)
This segment is composed of Wacoal Holdings Corp. and 12 subsidiaries in Japan.
Wacoal Corp. engages in the planning and designing of the above-mentioned products, procurement of materials forthe above-mentioned products, commercialization of semifinished products purchased from sewing companies in Japanand overseas and other business associates after inspection, and distribution to end consumers through department stores,
general merchandisers, and other general retailers in Japan, as well as directly managed retail stores and distributors inJapan and overseas. Each of our 4 apparel manufacturing companies, including Kyushu Wacoal Manufacturing Corp.,
receives a supply of raw materials from Wacoal Corp., conducts sewing and processing of innerwear and sportswear, anddelivers the semifinished products to Wacoal Corp. We have 4 sales companies, including Une Nana Cool Corp., which
conduct retail sales of innerwear, outerwear and swimsuit products.
(2) Wacoal Business (Overseas)
This segment is composed of 37 companies, including our overseas subsidiaries and affiliates.
Among our 30 overseas subsidiaries, eight companies are located in North and Central America; five companies arelocated in Europe; and 17 companies are located in Asia/Oceania. Seven overseas affiliates are located in Asia.
Among our eight overseas subsidiaries in North and Central America, Wacoal Dominicana Corp., an apparel
manufacturing company of innerwear products, ships its products to WACOAL AMERICA, INC., a manufacturing andsales company, which supplies these products to end consumers through local department stores and specialty retail stores.
In addition, Eveden Inc., a sales company, distributes innerwear products, which are mainly supplied from Wacoal Timex
LTD. and WACOAL EMEA LTD.
Among our five overseas subsidiaries in Europe, WACOAL EMEA LTD., distributes products to end consumers
through department stores and specialty retail stores mainly in the United Kingdom.
Our two subsidiaries and four affiliates in Asia/Oceania are manufacturing and sales companies, which distributeproducts to end-consumers through their local department stores and specialty retail stores, and also distribute a part oftheir products to Wacoal Corp. and sales companies in Asia. Our sales companies include six subsidiaries, including
Wacoal Singapore Private Ltd., Eveden Israel Ltd., and one affiliate. These sales companies distribute innerwear
products, which are mainly supplied from the group companies, to their local department stores, specialty retail stores anddirectly managed retail stores. Our nine remaining subsidiaries include four apparel manufacturing companies producing
innerwear, two raw materials manufacturing companies, one company that procures materials for subsidiaries andaffiliates in Asia, and two investment companies which make investments in the local subsidiaries and local affiliates that
manufacture and sell innerwear.
(3) Peach John BusinessThis segment is composed of four companies, including our domestic and overseas subsidiaries. The one domestic
subsidiary and three overseas subsidiaries are sales companies, and Peach John mainly engages in the retail sales of
products that are independently supplied mainly from nongroup companies.
(4) Other
This segment is composed of a total of 12 companies, including five domestic subsidiaries, six overseas subsidiaries
and one domestic affiliate.
Among the five domestic subsidiaries, Nanasai Co., Ltd. (“Nanasai”) engages in the manufacture and sale ofmannequins and fixtures, and interior design work and Lecien Corporation engages in the manufacture and wholesale
distribution of women’s innerwear and clothing, lace, thread, and fabrics for handicrafts. Our three remaining subsidiaries
include an apparel manufacturing company and two other subsidiaries which engage in other textile-related business, realestate leasing business, and other business.
Overseas, six subsidiaries are located in Asia.
Four of our subsidiaries in Asia are apparel manufacturing companies. The other two subsidiaries engage in the
manufacture and sale of mannequins and fixtures, interior design work, and other textile-related business.
The business distribution diagram of these subsidiaries and affiliates follows on the next page:5

Consumer/Client(Apparel Manufacturing: 4 companies)
Kyushu Wacoal Manufacturing Corp.
Hokuriku Wacoal Sewing Corp.
Niigata Wacoal Sewing Corp.
Torica Inc.

(Other Textile Related: 1 company)
Wacoal Distribution Corp.

(Manufacturing and Sales: 1 company)
Wacoal Corp.

(Cultural Business Service: 1 company)
Wacoal Art Center Co., Ltd.

(Sales: 4 companies)
Une Nana Cool Corp.
3 other companies(Other: 1 company)
WACOAL I NEXT CORP.

Wacoal Business (Domestic)

Peach John Business

Wacoal Business (Overseas)

Other(North/Central America: 8 companies)
WACOAL INTERNATIONAL CORP. (U.S.)(Sales: 4 companies)
Peach John Co., Ltd.

WACOAL AMERICA, INC.
WACOAL DOMINICANA CORP.
3 other companies(U.S.)(Dominican Republic)
EVEDEN INC(U.S.)(Lecien: 7 companies)
Lecien Corporation
LECIEN (VIETNAM) CO., LTD.
(Vietnam)
5 other companies

4 other companies(Europe: 5 companies)
WACOAL EUROPE LTD.

(U.K.)WACOAL EMEA LTD.
WACOAL EUROPE SAS.

(U.K.)(France)2 other companies(Asia/Oceania: 24 companies)
Wacoal Investment Co., Ltd.
(Taiwan)
WACOAL INTERNATIONAL HONG
KONG CO., LTD.
(Hong Kong)
Wacoal China Co., Ltd.
(China)WACOAL SINGAPORE PRIVATE LTD.
(Singapore)
WACOAL HONG KONG CO., LTD.
(Hong Kong)
Guangdong Wacoal Inc.
(China)Wacoal Timex Limited(Sri Lanka)
A TECH TEXTILE CO., LTD(Thailand)*Shinyoung Wacoal Inc.
(South Korea)*Taiwan Wacoal Co., Ltd.
(Taiwan)*THAI WACOAL PUBLIC CO., LTD(Thailand)
Out of 13 other companies,
4 equity method affiliates

Wacoal Holdings Corp. (holding company)
Without mark: a consolidated subsidiary*: an equity method affiliate

6(Other: 5 companies)
Nanasai Co., Ltd.
Wacoal Service Co., Ltd.
Wacoal Career Service Corp.
*House of Rose Co., Ltd.
1 other company

4. 【Information on Subsidiaries and Affiliated Companies】
Relationship
Company Name

Location

Capital(Millions of yen)

Principal Business

Percentage of
Voting Rights
Owned or Held(%)

Number ofCompany Officer(s)holding a Position
Lease/Rent of Facilities
as Officer in such
Subsidiaries andAffiliated Company(Consolidated Subsidiary)*1, *6
Wacoal Corp.

Minami-ku, Kyoto

5,000

Wacoal Business (Domestic)(Manufacture and sale of garments)

100

4Rent of officebuilding

Peach John Co., Ltd.

Shibuya-ku, Tokyo

90

Peach John Business(Sale of garments)

100

2

－

Lecien Corp.

Minami-ku, Kyoto

90(Manufacture and sale of garments
and other textile-related products)

100

2Rent of office･
storage building

Kyushu Wacoal Manufacturing Corp.

Unzen-shi,
Nagasaki70

Wacoal Business (Domestic)(Manufacture and sale of garments)

100－

Rent of officebuilding

Niigata Wacoal Sewing Corp.

Nishikan-ku,
Niigata

50

Same as above－

Same as above－

Same as above

2

Same as above

2

－

2

－

－

－

2

－

－

－

－

－

1

－

2

－

－

－

3

－

－

－

1

－

－

－

2

－

2

－

1

－

3

－

－

－

Other

Torica Inc.

Ibaraki-shi, Osaka

92

Nanasai Co., Ltd.

Minami-ku, Kyoto

90

Same as above

(100）

100
(100）

57
(57）

Other
(Manufacture and sale of mannequinsand display fixtures; interior design99

and construction work of stores)
20,000*1
WACOAL INTERNATIONAL CORP.

New York, USA

WACOAL AMERICA, INC.

New York, USA

WACOAL DOMINICANA CORP.

Santo Domingo,
Dominican
Republic

thousandUSD
2,062 thousand
USD
20 thousand
USD

Wacoal Business (Overseas)(Investment and funding in U.S.
affiliates)
Wacoal Business (Overseas)(Manufacture and sale of garments)
Wacoal Business (Overseas)(Sewing and sale of various textile
products)

100
(100）

100
(100）

100
(100）

WACOAL EUROPE LTD.

Northamptonshire,UK

175 thousand
GBP

Wacoal Business (Overseas)(Investment in affiliates)

WACOAL EMEA LTD.

Northamptonshire,UK

250 thousand
GBP

Wacoal Business (Overseas)(Manufacture and sale of garments)

100

WACOAL EUROPE SAS.

Saint-Denis, France

8 thousand
EUR

Wacoal Business (Overseas)(Sale of garments)

100

WACOAL HONG KONG CO., LTD.

Hong Kong*1

3,000 thousand
HK$373,690

WACOAL INTERNATIONAL HONG
KONG CO., LTD.

Hong Kong

VIETNAM WACOAL CORP.

Bien Hoa, Vietnam

thousandHK$
54,604 million
VND
59,000Wacoal Investment Co., Ltd.

Taipei, Taiwan

Guandong Wacoal Inc.

Guangzhou, China

thousandNT$
17,730thousand
RMB*1
Wacoal China Co., Ltd.

Beijing, China

189,364
thousand
RMB

Same as above
Wacoal Business (Overseas)(Import and export of raw materials)
Wacoal Business (Overseas)(Sewing and sale of various textile
products)

(100）
(100）

80
(80）

100
(100）

100
(100）

Wacoal Business (Overseas)

100(Investment in Taiwan affiliates)(100）

Wacoal Business (Overseas)(Sewing and sale of various textile

100

products)(100）

Wacoal Business (Overseas)

100(Manufacture and sale of garments)(100）

Wacoal Business (Overseas)

Bangkok, Thailand

1,000
million
THB

THAI WACOAL PUBLIC CO., LTD.

Bangkok, Thailand

120 million
THB

PT.INDONESIA WACOAL

Bogor, Indonesia

2,400 million
IDR

Same as above

Shinyoung Wacoal Inc.

Seoul, South Korea

4,500 million
WON

Same as above*1
A TECH TEXTILE CO., LTD.

100

(Manufacture and sale of raw
materials)

54
(54）

37 other companies(Equity Method Affiliate)

Taiwan Wacoal Co., Ltd.

Taoyuan, Taiwan*4, *5
House of Rose Co., Ltd.

Minato-ku, Tokyo

800 million
NT$

Wacoal Business (Overseas)(Manufacture and sale of garments)

Same as above

34
(34）

42
(42）

25
50
(50）

Other
934

(Manufacture and sale of cosmetics
products)

3 other companies

724

(Note)*1 Wacoal Corp., WACOAL INTERNATIONAL CORP., WACOAL INTERNATIONAL HONG KONG CO., LTD,
Wacoal China Co., Ltd. and A TECH TEXTILE CO., LTD. are categorized as a specified subsidiary under the
Financial Instruments and Exchange Act.
2 The number in brackets under the “Percentage of Voting Rights Owned or Held” column means the percentage ofindirect holding.
3 The name of operating segments is shown under the “Principal Business” column.
*4 The Company executed a business alliance agreement between House of Rose Co., Ltd.
*5 House of Rose Co., Ltd. is a company that is obliged to file an annual securities report.
*6 Wacoal Corp.’s sales (excluding the internal sales recorded among consolidated subsidiaries) account for morethan 10% in our consolidated sales.
Key Income Summary (i) Sales

106,534 million yen(ii) Ordinary income

11,559 million yen(iii) Net income

9,293 million yen(iv) Net assets

114,236 million yen(v) Total assets

151,495 million yen

85. 【Employees】(1) Employees within group
As of March 31, 2018
Name of Operating Segment

Number of Employees

Wacoal Business (Domestic)

7,658

[668]

Wacoal Business (Overseas)

10,885

[40]

432

[40]

1,929

[23]

20,904[771]

Peach John Business
Other
Total
(Note)

1

The number of employees is the number of individuals working within our group (excludes individuals seconded
from our group to third parties, but includes individuals seconded from third parties to our group). The average
number of temporary employees is indicated in brackets for the current consolidated fiscal year.

2

Temporary employees include temporary staff and part-time workers whose working period is about 3 months.

(2) Employees of the Company
As of March 31, 2018
Number of Employees
95(Note)

1
2
3

Average Age

Average Years of Service
47.2

Average Annual Salary (Yen)

21.2

5,979,985

The number of employees is the number of individuals working within the Company.
The average annual salary includes bonus and extra wages.
All employees of the Company belong to the Wacoal Business (Domestic) segment.

(3) Relationship with Labor Union
Employees of the Company are members of the Wacoal Labor Union. The Wacoal Labor Union is a member of The
Japanese Federation of Textile, Chemical, Food, Commercial, Service, and General Workers’ Unions.
Certain subsidiaries have their own labor unions.
Our relationship with Labor Unions is very stable and we have nothing to report on this matter.

9II. Business Overview
1.【Management Policy, Business Environment and Management Issues】
Any forward-looking statement contained below is based on our judgements as of the end of the current fiscal year.
(1) Basic Business Policy
Our business activities are built upon “relationships founded in mutual trust,” which are based on our listening to the voice ofeach and every one of our customers, and continuously transforming our business with a sense of humility. This spirit ofmutual trust is our starting point and has been our management philosophy since our establishment. We will continuously
enhance our corporate value by increasing transparency and ensuring fairness and independence of our corporate
management in order to build “mutual trust” in relationships with every stakeholder, including shareholders, customers,
employees, business partners and the local community.
(2) Measures for Business Targets
Our target is to achieve consolidated operating income margin of 7% and a consolidated ROE (i.e., return on Wacoal
Holdings Corp. shareholders’ equity for the current fiscal year) of 5% or higher as our mid-term financial data.
(3) Our Medium- and Long-term Business Strategy
We hope to promote sustainable growth and enhancement of our corporate value, and to become a company that is expectedby consumers to exist for 100 years or more, by making further achievements as we listen to the voice of the society andcontinuously improve our management foundation.
We continue to move forward with efforts to become “Wacoal of the World as a Group” based on our mid-term policies in
our three-year mid-term plan (from fiscal year 2017 to fiscal year 2019), which will end at the end of fiscal year 2019. We
take full advantage of our management resources and our group’s network, continue to offer pioneering products, cultivate
new market opportunities for the undergarments industry and gain reputation for our reliability from customers around theworld. In addition, we will challenge ourselves to participate in areas where we are most competitive and expand to new
business area in order to increase our corporate value.
(4) Business and Financial Issues to Address
While the domestic market is expected to steadily recover with the improvement in the job market, consumer spending
remains unpredictable, as consumers remain frugal. Also, more and more retail properties continue to close, the environment
for domestic women’s innerwear continues to be very difficult. On the other hand, growth in consumption by foreign
visitors to Japan, the rise of new distribution channels, women’s participation and success in society, and the 2020 Tokyo
Olympics are good opportunities for us to create new markets.
In the overseas business, although there are many risk factors such as financial and trade policies of the new U.S.
administration, political circumstances of European countries and the prospects of the Chinese economy, our overseas
business is and will always be our group’s biggest growth engine.
An accurate understanding of the social environment and consumers’ needs in each country and region and the establishmentof community-based products and marketing strategies will be essential for us. We will develop pioneering products in orderto enhance our brand recognition, and increase the productivity of our group and our employees as well as the efficiency of
our working capital. We will also improve the management of local entities and further improve our profitability in order todevelop a strong management foundation. Further, while we face challenges in an increasingly difficult environment for
manufacturing due to increasing wages in China and ASEAN-member countries and risks associated with procurement of
raw materials, we will strengthen the collaboration among our group companies to extend our global supply chain and toenable the improvement of product competitiveness and stable supply. In addition, by building close partnerships with all
suppliers involved in the production of our group products, we will fulfill our responsibility not only with respect to quality,
price and delivery deadlines, but also with respect to social needs including human rights, labor practices, environment andethics.

10

<Basic Policy of Mid-term Plan (from fiscal year 2017 to fiscal year 2019>(i)
Improve profitability of domestic businessWe will continue to develop new, attractive and high value-added products, and at the same time, build a greater mixof channels to deliver such products and their information through channels that improve the convenience for customers fromtheir perspective. In order to achieve our aim, we will first focus on increasing the productivity of our wholesale businessand the profitability of our retail business. We will also review our transaction system and integrate our IT systems. Further,
we will deepen our consumer base and facilitate movement by consumers across our different service channels, bydeveloping a unique service model that we call “omni-channel” service.
(ii)

Achieve further growth of our overseas businessWe will promote establishment of a stable management structure, particularly in the United States, Europe and China,that can respond to environmental changes in each country and region. We will focus on strengthening our businessstructure by strengthening our planning development capability to enhance the higher value-added components of our
products, through collaboration between Europe and the United States in product planning and production management andby strengthening our ability to respond to accelerating expansion of e-commerce markets throughout the world, such as
China. In addition, we will commercialize products that leverage superior materials and skills by using new functionalities
in our global supply chain.
(iii)

Achieve group synergies through collaboration and strengthen our competitivenessWe will implement measures to solve management issues at each of our operating entities, and enhance the overall
competitiveness of our group by leveraging each other’s strengths, such as business know-how, sales network, andmanufacturing capability within our group.
(iv)

Improve the infrastructure of our group management baseWe will always ask ourselves what society demands or expects from us and will reflect our answers in ourmanagement. For this purpose, we will emphasize our relationships with our stakeholders and aim to continuously improve
our management base. We believe that a person’s growth will eventually lead to a company’s prosperity, and with this inmind, we will focus on cultivating employees who are capable of playing active roles in our global society and nurture a
corporate culture that respects diversity. We will also continue to be committed to social issues (sustainability) regarding
environmental and human rights matters, socially responsible activities such as pink ribbon breast care, and guaranteeing thesafety or security of our products or services to build a relationship of trust with society.
(v)

Challenge for new businessWe will attempt to expand our business portfolio in combination with external management resources by leveraging

our tangible and intangible strengths. There are no constrains on our business target, and we will ensure that any new
business of ours will deliver “beauty,” “comfort” and “health” to society.
(5) Basic Policies on the Nature of Personnel who should Control the Determination of Financial andBusiness Policies of

Wacoal Holdings Corp.

Basic policies on the nature of personnel who should control the determination of financial and business
policies of Wacoal Holdings Corp. have been prescribed as follows as of the filing date of this report (June 28, 2018).
(i) Details of Basic Policy
Since our establishment in 1949, we have strived to develop a domestic market for female innerwear(undergarments), penetrate the global market, and establish our business with the aim of creating a global company
through a 50-year long-term management plan based on our business objectives of making and helping women in
becoming beautiful and facilitating the realization of women’s desire to be beautiful. Moreover, as a leading female
innerwear company, we have developed the Wacoal brand, which has become widely accepted by both domestic andinternational consumers.
Our corporate value is mainly generated from (i) our strong market position and brand value in the intimate
apparel market, which has been cultivated over a long period of time; (ii) our ability to develop highly functional, highvalue-added, attractive products based on the results of human scientific research from a medium- to long-term
perspective; (iii) our superb product quality and supporting technical staff, as well as our highly productive global
manufacturing and supply systems that use excellent sewing technology; (iv) our close personal relationships with
distributors in various sales channels, which link us with consumers; (v) the trust of consumers that has been gained
11through direct communication and sales by our beauty advisers, who have a sound knowledge of our products and awealth of sales experience; and (vi) our good social standing established through the promotion of various social action
programs, such as the “Remmama” project and “Pink Ribbon” activities, and our corporate value and the common
interests of our shareholders will suffer unless these “Wacoal strengths” are secured over the medium to long term. We,
therefore, believe that personnel who control the determination of financial and business policies must fully understandthese considerations and must be capable of securing and enhancing the corporate value and the common interests ofour shareholders over the medium to long term.
We will not uniformly reject an acquisition of a substantial shareholding of the Company, if it contributes tothe corporate value and the common interests of our shareholders. However, there are many acquisitions of substantial
shareholdings of companies that do not contribute to the corporate value of the target company or the common interestsof our shareholders. For example, this is the case where it is clear from the purpose of the acquisition that it will cause
damage to the corporate value of the target company or the common interests of our shareholders - where it is likely thatthe shareholders are in effect being forced to sell their shares, where insufficient time or information is given for the
Board of Directors and the shareholders of the target company to consider the conditions of the acquisition or for the
Board of Directors of the target company to make an alternative proposal, or where it is necessary for the target
company to negotiate with the prospective purchaser to obtain conditions that are more favorable than those proposedby the prospective purchaser.
In light of these circumstances, we believe that it is essential that we be ready at all times to implement asystem that will prevent any acquisition that is contrary to the corporate value or the common interests of ourshareholders by enabling our shareholders to determine whether or not to accept such an acquisition and enabling ourBoard of Directors to secure any necessary information and time to make an alternative proposal or to negotiate with theprospective purchaser on behalf of our shareholders at the time of an acquisition of our shares.
(ii) Specific Details of Efforts- Special efforts toward ensuring effective use of company assets, appropriate formation of group companies,
and implementation of other basic policies(Efforts to improve corporate value)
We were restructured as a holding company in 2005 in order to realize our medium- and long-term strategies
to further enhance our corporate value, and further, we are promoting expansion of domestic and overseas business(including through Mergers and Acquisitions deals), making efforts to improve profitability, and working to secure andenhance the corporate value and common interests of our shareholders under the medium-term and fiscal year
management policies.
We will continue to conduct our business operations in order to build “Wacoal” as an enduring corporate
brand while improving Wacoal’s strengths that form the basis of our corporate value as described in Section (i) above,and being mindful of our objectives in making and helping women in becoming beautiful and facilitating the realizationof women’s desire to be beautiful.
We will make efforts to enhance our corporate value by (i) improving the profitability of our domestic
business, (ii) achieving further growth of our overseas business, (iii) achieving group synergies through collaboration
and by strengthening our competitiveness, (iv) improving the infrastructure for our group management base, and (v)taking on new business, which are also the mid-term policies in our mid-term plan which will start during fiscal year
2017.
(Measures to Enhance Corporate Governance)
The purpose and basic policy of our group’s corporate governance is to continuously enhance our corporate
value by increasing transparency and securing the fairness and independence of our corporate management from theperspective of all stakeholders, including our shareholders and customers.
The following bodies and systems have been established within the Company with the aim of enhancing ourcorporate governance, and the entire Company is also working toward this goal.
As of March 31, 2018, our Board of Directors is composed of seven Directors. The board makes decisions on
matters concerning important business, such as management policy and management strategy and matters stipulated bylaws or ordinances or our Articles of Incorporation. Three of these seven Directors are independent Outside Directors
who give our Board of Directors advice and guidance from an objective perspective based on their wealth of experienceand knowledge of management, culture and art. The term of office of each Director is one year, and we are further
clarifying the responsibilities of our management to our shareholders. Further, with respect to the nomination,
promotion, and remuneration of Directors, an “Executive Compensation Advisory Committee,” whose members include
Outside Directors has been established, and operates with a high degree of transparency and fairness.
We use an “Audit & Supervisory Board Member system,” and our Audit & Supervisory Board consists of five
Audit & Supervisory Board Members, of which three are Outside Audit & Supervisory Board Members, as of March 31,
2018. The function of our Audit & Supervisory Board is to monitor and supervise our management.
12Further, all of the three Outside Directors and three Outside Audit & Supervisory Board Members have been
designated as our independent officers, and have been notified to the Tokyo Stock Exchange.
Wacoal Corp., our core business company, has adopted an executive officer system in order to separate
management supervision and management execution. “Group Management Rules” and “Group Accounting Rules”
have been established for Wacoal Corp. and all other group companies, and each group company conducts our business
operations in accordance with both sets of rules.
Further, the “Group Management Meeting” of our group that is composed of our Directors and Audit &Supervisory Board Members has been established in the Company. This meeting considers matters concerning themanagement strategy of our group and other important management issues, and conducts preliminary reviews of mattersfor review by our Board of Directors together with the “Wacoal Senior Management Meeting,” which involves
Directors, Audit & Supervisory Board Members, and senior executive officers of Wacoal Corp.
Further, the “Quarterly Business Results Review Committee” has been established under the “GroupManagement Meeting.” Every quarter, our Directors and Audit & Supervisory Board Members and the Directors, Audit& Supervisory Board Members, and executive officers of Wacoal Corp. attend meetings of the Quarterly BusinessResults Review Committee and review the business results of each company and business department. Also, under the“Group Management Meeting,’ we have established the “Group Strategy Committee,” where the managers of ourgroup’s major companies in Japan and overseas, in addition to the attendees of the “Group Management Meeting,”
attend meetings of the Group Strategy Committee and share management issues and review important matters.
In addition, the “Corporate Ethics and Risk Management Committee” have each been established ascommittees of the entire Company. Under these committees, the “Compliance Committee,” “Quality Assurance
Division,” “Accident and Disaster Measures Division,” and “Environmental Division” have each been established, andeach of these divisions is ready to enhance corporate value and respond to risks of loss in each field. These divisions
report to our Board of Directors from time to time on the status of their activities.

- Measures to prevent inappropriate persons from controlling the determination of financial and business
policies in light of the basic policy

For the purpose of securing and enhancing corporate value and the common interests of the shareholders of
the Company, the Company determined the basic policy for preventive measures to be taken against the acquisition of a
substantial shareholding of the Company (i.e., defensive measures against takeovers) at an ordinary general meeting ofshareholders held on June 26, 2015. The Board of Directors determined and updated specific measures at the meeting
held on the same day (which were introduced on June 29, 2006).
The Plan enables the Company’s shareholders, in the event of purchase or any similar act or a proposal topurchase the Company’s share certificates (hereinafter called “Purchase”), to determine whether or not to accept suchoffer for the Company’s shares, and enables its Board of Directors to secure any necessary information and sufficient
time to propose alternatives or to negotiate and consult with a person who purchases (hereinafter called “Purchaser”) on
behalf of its shareholders, in order to prevent a Purchase of the Company’s shares that is detrimental to its corporate
value or its shareholders’ common interests, and to secure and enhance its corporate value and the common interests of
its shareholders.
The Plan covers a Purchase that falls under ① or ② below:①②

purchase of share certificates issued by the Company that results in 20% or greater ownership by ashareholder of such share certificates; orpublic tender offer for share certificates issued by the Company that results in combined ownershipby the offeror and/or any of its affiliates of 20% or more of such share certificates.

If a Purchaser intends to launch a Purchase of the shares of the Company, such Purchaser will be requested tosubmit to the Company a document describing the information required to consider details of the Purchase, as well as anoath by such Purchaser that such Purchaser will follow the procedures prescribed by the Plan. Accordingly, theinformation provided by the Purchaser; the opinion of the Board of Directors; or any supporting materials, alternative
proposals (if any), or other information and/or materials will be submitted to the Independent Committee, which
consists of three members who are independent from the management operating the Company, and the Independent
Committee will evaluate and/or examine such information and/or materials. If need be, the Independent Committee will
also separately obtain advice from independent experts and evaluate and/or examine the terms and conditions of thePurchase, consider the alternatives presented by the Board of Directors, and negotiate with the Purchaser or disclose
information to the shareholders.
If (A) the Purchaser fails to follow the procedures as prescribed by the Plan or if (B) the Purchase is deemed
to fall under any of the requirements as prescribed by the Plan as a result of the examination of the terms and conditionsof the Purchase or discussions and/or negotiations with the Purchaser, and if implementation of a free allocation of stockacquisition rights is considered appropriate, the Independent Committee will advise the Board of Directors to implementa free allocation of stock acquisition rights. The Board of Directors will pay the utmost respect to the advice provided
by the Independent Committee, and will resolve to implement the free allocation of the stock acquisition rights. The
Company will implement a free allocation of the share acquisition rights to those shareholders, other than the Company,
13

who are registered or recorded in the Company’s final register of shareholders as of the allocation date that isdetermined separately, at such rate, as separately determined, up to a maximum of two stock acquisition rights for every
one common stock of the Company held. Also, even when the Purchase by the Purchaser is considered to fall undereither (A) or (B) above, if the Independent Committee considers it necessary to obtain the approval at an ordinary
general meeting of shareholders for implementation of a free allocation of stock acquisition rights, the Independent
Committee may advise the Board of Directors to do so. In this case, the Board of Directors, in principle, shall promptly
convene an ordinary general meeting of shareholders so that a meeting can be held within the shortest time practicallypossible and submit a resolution for the implementation of a free allocation of stock acquisition rights.
The holder of stock acquisition rights for the subscription of new shares (with terms that prohibit thePurchaser and certain people (hereinafter called “Nonqualified person”) from exercising such rights) is entitled toreceive one share of the Company by paying the amount determined by the Board of Directors or the ordinary general
meeting of shareholders in the resolution on the free allocation of stock acquisition rights, which shall be at least one
yen (¥1) but not exceeding one-half (1/2) of the fair value of one share of the Company. Also, the Company may
acquire stock acquisition rights held by shareholders other than the Nonqualified Person, and in exchange, deliver one
share of the Company for every stock acquisition right.
Promptly after passing a resolution by the Board of Directors or by an ordinary general meeting ofshareholders with regard to implementation or non implementation of the above-mentioned free allocation of stockacquisition rights, the Board of Directors will disclose the outline of such resolution and other information deemed
appropriate by the Board of Directors.
As with the effective period of the Basic Policy on Defensive Measures against Takeovers, the effective
period of the Plan will expire upon conclusion of the ordinary general meeting of shareholders to be held during the last
fiscal year ending within three years after the Ordinary General Meeting of Shareholders held on June 26, 2015.
However, the Plan may be changed or terminated to reflect the change made to the Basic Policy on Defensive Measuresagainst Takeovers by and pursuant to the resolution of the ordinary general meeting of shareholders, if the change or
termination of the Basic Policy on Defensive Measures against Takeovers is resolved by an ordinary general meeting ofshareholders. Further, the Plan will be terminated if so resolved by the Board of Directors.
There will be no direct, concrete impact on the shareholders caused by the Plan’s introduction, provided thefree allocation of stock acquisition rights is not implemented. On the other hand, if the free allocation of stockacquisition rights is implemented according to the Plan, the overall value of the shares held by the shareholders may bediluted if the procedures for exercising stock acquisition rights are not followed. However, no dilution of the overallvalue of the shares held will take place if the shares are provided in consideration of stock acquisition rights acquired by
the Company.

(iii) Judgment of Board of Directors as to Efforts under Section (ii) above and Reasons Thereof
As stated in Section (ii) above, the Plan was introduced in line with the Basic Policy mentioned in Section (i)above for the purposes of securing or enhancing corporate value and the common interests of shareholders. In particular,
highly rational fairness and/or objectivity is ensured under the Plan because (i) the Plan focuses on shareholders’intentions such that the effective period is prescribed as three years, and the Plan may be terminated at any time by aresolution of the Board of Directors or a resolution of an ordinary general meeting of the shareholders to terminate the
Basic Policy on Defensive Measures against Takeovers; (ii) the Plan establishes reasonably objective requirements, anda free allocation of stock acquisition rights is not implemented unless these requirements are met; (iii) the Independent
Committee shall consist of independent persons; (iv) a free allocation of stock acquisition rights under the Plan may not
be initiated unless a judgment is made by the Independent Committee; and (v) the Independent Committee may obtainadvice from independent experts at the expense of the Company. The Plan is formulated to maintain corporate value,
which is aligned with the common interests of the shareholders. It is not intended to maintain the status of the corporate
officers of the Company.
(Note)

Discontinuation (Abolition) of Measures against the Acquisition of a Substantial Shareholding of Wacoal Holdings
Corp. (i.e. Defensive Measures against Takeovers)
The Company has carefully considered what to do with the Measures against the Acquisition of a Substantial
Shareholding of Wacoal Holdings Corp. (i.e. Defensive Measures against Takeovers) (hereinafter called the“Measures”), when their effective period expires upon the conclusion of the 70th Ordinary General Meeting of
Shareholders held on June 28, 2018. After considerable discussion, our Board of Directors has resolved at its meeting
held on April 26, 2018 to discontinue (abolish) the Measures based on the judgment that the necessity of the Measures
has become relatively low; the regulations under the Financial Instruments and Exchange Act concerning the acquisitionof substantial shareholdings have become pervasive, thereby fulfilling to a certain extent the purpose of the Measures,
which was to ensure that shareholders had necessary information and time to make appropriate decisions, and theexternal circumstances surrounding defensive measures against takeovers have changed since the time the Measures
were implemented, as seen in the introduction of the corporate governance code.
In case a purchaser seeks to acquire a substantial shareholding of the Company, we will continue to takeappropriate actions to the extent permitted by the Financial Instruments and Exchange Act, the Companies Act and14other applicable laws and regulations by making efforts to ensure that our shareholders have time and information for
their consideration by requesting the purchaser to provide information necessary and sufficient for our shareholders tomake appropriate judgements on the acquisition of the substantial shareholding and sharing the opinions of our Board of
Directors, and will continue to make efforts to secure and enhance corporate value and the common interests of theshareholders of the Company.

15

2. 【Risk Factors】
Our business, performance, and financial condition are subject to risks and uncertainties, including those described in therisk factors below. These risks and uncertainties could result in a material adverse effect on our operation results andfinancial condition, and a material decline in the trading price of our common stock.
Forward-looking statements in this report are made based on information available as of the end of fiscal year 2018.
(1) We may be adversely affected by the domestic and global economy
In the major markets in which we operate, any weakness or deterioration in the economy may have a material
adverse effect on our sales, operation results and financial condition.
(2) Continued difficulties faced or changes in business policies made by department stores, general merchandisers, andother general retailers in Japan would hurt our businessIn fiscal year 2018, a substantial majority of our net sales were generated in department stores, generalmerchandisers, and other general retailers in Japan. Due to the ongoing structural change in the retail market, however,
we expect that the share of sales from department stores, general merchandisers and other general retailers in the overallretail market will remain weak and may continue to decline.
If the business of one or more of our important general retail customers fails as a result of continued weakness
in the department stores, general merchandise and other general retail sector, such a business failure may result not only
in decreased sales, but we may also be unable to collect some or all of our outstanding accounts receivable from suchcustomers.
Likewise, increased consolidation of Japanese department stores and general merchandisers in preparation fora shrinking market due to the future anticipated decrease in the population of Japan may allow our customers to increase
their bargaining power in negotiating pricing and other terms of trade. Any change in business policy by Japan’s
leading retailers would have an adverse impact on our performance, such as net sales or return on sales.
(3) Our sales may decline if we are unable to effectively anticipate and respond to consumer tastes and preferences anddeliver high-quality products
Customer tastes and fashion trends change continuously and are difficult to predict. If we are unable tosuccessfully anticipate or respond to changing styles or trends, and if we lose the support of our customers, we may beunable to achieve our sales targets and our financial results would suffer as a result.
In addition, our brand image may suffer if we misjudge the market or sell defective merchandise causing
customers to believe that we are not able to offer attractive fashions and top-quality products. If any event were tooccur that harms our reputation for producing high-quality products, our sales, operation results and financial condition
could be materially adversely affected.
(4) The apparel market is highly competitive, and our share of sales or profitability may decline if we are unable tomaintain our competitivenessIn the domestic innerwear market, in addition to competition from wholesalers and direct retailers in the midto high-end undergarment market in Japan, we must also compete against catalog and Internet sales, including massmarket and specialty apparel companies, as well as non-store retailing. In addition, competition may intensify with newentrants.
Increased competition could result in price reductions, increased marketing expenditures, and loss of sales
volume and market share, all of which could have a material adverse effect on our sales, financial condition, andoperation results.
(5) Expansion of our specialty retail store may not lead to improved sales and profits
Further investment is necessary in order to expand our specialty retail store business, including expenses forthe development of new stores and the closure of underperforming stores, and improvement expenses for the specialty
retail store brand. While we continue to make efforts in improving profitability, if new shops fail to secure the expectedsales levels, if expenses such as shop rent or personnel costs increase due to changes in the market environment, or if
the specialty retail store brand fails to be popular with customers, we may not be able to make sufficient gains torecover the investment.
(6) We may experience difficulties in successfully increasing our catalogue and Internet sales
We believe that our Internet sales will be increasingly important, and we are seeking to strengthen ourcapabilities in these channels. We also believe that we need to make further investments in systems for Internet sales inorder to expand the Internet sales of our entire group. However, as the system environment surrounding our catalogue
and Internet sales evolves rapidly, we cannot predict whether our accumulated investments would contribute to the16benefit of the entire group. We may not be successful in increasing Internet sales and profits sufficiently to compensate
for continued flat or declining sales through our core general retailer channel.
(7) Our business may be adversely affected by poor sales or production plans or weather events
If we fail to properly judge the market for our products, we may face a significant amount of unsold inventory
as a result of poor sales and excess production because we generally manufacture our products in advance of theapplicable season. Also, if a season is unusually warm, cold, short or long, sales of our seasonal campaign products or
our seasonal products may be adversely affected by irregular weather events. In response, we may be forced to reduce
our product prices, increase our marketing promotions, or revalue our inventory, which could have a material adverse
effect on our sales, operation results, and financial condition.
(8) Costs related to procurement of raw materials and products may rise due to changes in the environment
Raw materials such as nylon, polyester, polyurethane and cotton are used for our products and the price ofsuch raw materials fluctuates based on market conditions. We have gradually increased the amount of goods we
produce and raw materials we procure for our products in lower-cost countries in Asia. However, labor costs and prices
have been rising consistently, and we also face high political and social instability in those countries in Asia. Increases
in product material prices or labor or product costs at our places of production would increase our production costs, andadditional costs may be incurred in response to changes in business environment. Any of the foregoing may have amaterial adverse effect on our operation results and financial condition.
(9) It may be difficult for us to attract and retain highly qualified personnel
The growth of our business depends significantly on our ability to attract, train, and retain qualified personnel
in areas such as product planning, manufacturing technology, and sales and marketing. Our ability to attract qualified
personnel depends in large part on our ability to establish and maintain a positive image in the labor market. We may
not be successful in attracting and retaining qualified personnel, which may have a material adverse effect on ouroperation results and financial condition.
(10) We may face increasing risks relating to conducting business internationally
It is expected that the overseas production ratio will continue to expand, especially in Asian countries, inprocurement and manufacturing of products that our group sells in Japan. In addition, we are making efforts to expand
our product sales in overseas markets, including in the United States, Europe, and China. These initiatives and trends
may increasingly expose us to various risks relating to the conduct of our business abroad, including:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

the risk that our business may be adversely affected as a result of our failing to suit consumer tastes andpreferences in overseas markets;the risk that political, social, and economic instability in countries where we source, manufacture, or sell our
products may adversely affect our group;
the risk that unexpected tax, legal, or regulatory changes or actions may adversely affect our group;
the risk of our being unable to adjust to cultural differences which may lead to staffing or management failurethat may adversely affect our group business;the risk that the procurement costs of our group products or our consolidated business results may fluctuate due
to changes in exchange rates;
the risk of our not being able to protect our intellectual property as a result of different intellectual property
protection systems or our infringing on the intellectual property of other companies may adversely affect ourgroup business; andthe risk that public health or similar problems in our important overseas markets or sourcing/production centers
may adversely affect our group.

(11) We may not be successful with acquisitions and other strategic transactions with third parties
We intend to evaluate and pursue opportunities for acquisitions, investments, and other strategic transactions
that we believe will help us achieve our business objectives, including extending our product offerings in Japan and inoverseas markets and strengthening our capabilities in Internet, catalogue, and other marketing channels.
Any acquisitions or other strategic transactions, or any licensing business that we have pursued or may pursue
in the future may have an adverse effect on our group’s business results as a result of poor performance of the target
company or business partner due to deterioration in the economy, unsuccessful management integration or businesscollaboration, or failure to achieve satisfying results from synergy effects or the relevant business model. Also, there is
the risk of possible impairment charges on goodwill and other intangible assets which we obtained through businessacquisitions recorded on our consolidated balance sheet as a result of a decline in anticipated future cash flows.
(12) We may not be able to recover the cost of investments we make in pursuing growth opportunities and developing newmarkets
Our pursuit of growth opportunities and new markets through international expansion, acquisitions, strategic
alliances, or otherwise will require significant resources, time, and costs. There is no guarantee that we will generate
results that are sufficient to cover the cost of making any such investment, even if we conduct an extensive due
17diligence investigation and other analyses prior to making the investment to maximize the probability of success andminimize the risks. Failure to recover the cost of investments could have a material adverse effect on our operation
results and financial condition.
(13) We may face infringement of our intellectual property rights or claims that we infringe the intellectual property
rights of others
We believe that our intellectual property rights, our brands and related trademarks in particular, are importantto our ability to create and sustain demand for our products and to the value of our business. We may encounter
trademark and related disputes in the future, and imitation of our products or the infringement of our trademarks andproprietary rights by other could materially harm our operations and financial condition. Additionally, other parties
have asserted in the past, and may assert in the future, that we have infringed their intellectual property rights. We
cannot predict whether any such assertions or related claims will substantially harm our operation results and financial
condition.
(14) We may be exposed to risks in the occurrence of information system intrusion
Our computer system may be subject to an attack from external sources resulting in website defacement,
leaking of material data, or erasing of material data due to a computer virus, or occurring system problems as a result ofsystem development failures or delays. If any of these events occur, our sales may decline as a result of interruption of
our business activities and deterioration in our corporate image, which could have a material impact on our operation
results and financial condition.
(15) If we fail to protect our customers’ privacy and data and maintain the confidentiality of our trade secrets we may
face proceedings against us, lose customer confidence, or lose our market position
Any failure by us to comply with laws and regulations regarding privacy and the protection of customer
information could result in proceedings against us by governmental entities or others, which could potentially have an
adverse effect on our business, operation results and financial condition. Complying with varying privacy requirements
could not only cause us to incur substantial costs and force us to change our business practices, but also could cause
customers to lose confidence in our business and products, which could result in a material adverse effect on our sales
and profitability.
Additionally, in order for us to secure and maintain an advantageous position in the market, we need toprotect our trade secrets, such as manufacturing technology and product information. If these trade secrets are divulged
by any party related to us or infringed by another company, our business or financial condition could be materiallyaffected.
(16) If we fail to maintain adequate internal controls over financial reporting we may not be able to produce reliablefinancial reports in a timely manner or prevent financial fraud
Beginning with our annual report for fiscal year 2007, we are required to document and test our internal
control procedures.
Effective internal controls are necessary for us to produce reliable financial reports and important in helping
prevent financial fraud. If we cannot provide reliable financial reports on a timely basis or prevent financial fraud, ourbusiness and operation results could be harmed, investors could lose confidence in our reported financial information,and the trading price of our stock could drop significantly.
(17) Our holdings of equity securities expose us to market risks
We hold equity and other securities in publicly traded Japanese companies. A significant drop in the value ofthese securities or in the Japanese equity markets in general, could have an adverse impact on our financial results in therelevant reporting period.
(18) Natural disasters, epidemics, dispute, terrorism and riot could affect our manufacturing abilities, operation results,
or financial condition
Japan is one of the most seismically active countries in the world and regularly experiences typhoons andother natural disasters. In the event of a large earthquake, other natural disaster, or outbreak of an epidemic that affects
our employees or our ability to continue using any of our sales or manufacturing facilities, our sales and marketing
efforts would be adversely affected and we would face the possibility of work delays or stoppages, any of which could
have a negative effect on our business. Any such natural disaster, epidemic, dispute, terrorism and riot could also cause
disruptions in the transportation networks that our business relies upon and could interfere with our normal course of
production and distribution. Furthermore, any such natural disaster, epidemic, dispute, terrorism or riot would also havea large impact on consumer activity, which would have a significant impact on the sales of our products.
(19) We may be exposed to risks in relation to liability for termination and retirement benefit
Costs and liability for termination and retirement benefits are based on the actuarial assumptions that are used
for the calculation of the expected rate of return on plan assets or future liabilities for termination and retirement
18

benefits. Such costs and liability for termination and retirement benefits may increase if the actual results differ fromthe assumptions or if there is any change to the assumptions, due to fluctuations in the market for securities as well as
the interest rate environment. Further, additional obligations may arise if the retirement benefit scheme is amended. As
a result, our group business or financial condition could be adversely affected.
(20) We may be exposed to risks related to realizability of deferred tax assets and transfer pricing
According to our current accounting standards, deferred tax assets are recorded based on reasonableassumptions about our future taxable income. However, deferred tax assets may decrease due to changes in theestimated amount of future taxable income or changes in tax rates following tax reforms, which could have an adverse
impact on our operation results and financial condition.
As the international tax avoidance by certain multinational enterprises turned into a political issue, OECD
prepared and released a report on BEPS (base erosion and profit shifting) at the request of the G20 in October 2015 inefforts to improve tax rules. Following the release of this report, each country is reforming and reviewing its domestic
tax laws and tax treaties.
We believe that formulation of the international taxation rules will not have a material impact on our group;
however, the opinion of the tax authorities in each country may differ from our opinion regarding the newly prescribedtransfer pricing documentation.
(21) Compliance Risk
We conduct our business activities pursuant to the Wacoal Code of Ethics and in full compliance withapplicable laws and rules, and are taking various risk prevention measures by providing training for our employees, forwhich our Compliance Committee plays a key role to bring awareness of compliance and by making efforts tostrengthen our internal control process. However, if our reputation is damaged or significant compensation losses are
incurred due to events attributable to deceptive illegal acts or to business partners in our supply chain, it may have amaterial impact on our operation results.

19

3. 【Analyses of Financial Position, Operation Results, and Cash Flows by Management】(1) Overview of Status of Business Performance etc.
The overview of financial position, operation results and cash flows (“business performance etc.”) of our group (theCompany, consolidated subsidiaries and equity-method affiliates) for the current fiscal year are as follows.
(i)

Status of Financial Position and Operation ResultsA.

Status of Financial Position

Total assets at the end of fiscal year 2018 was 298,534 million yen, an increase of 3,576 million yen as comparedto the end of the previous fiscal year, due to an increase in investment due to increase in market value.
Total liabilities at the end of fiscal year 2018 was 61,037 million yen, a decrease of 1,439 million yen as comparedto the end of the previous fiscal year, due to a decrease in accrued taxes and deferred tax liabilities.
Total Wacoal Holdings Corp. shareholders' equity at the end of fiscal year 2018 was 232,712 million yen, an
increase of 5,144 million yen as compared to the end of the previous fiscal year, due to an increase in retained earnings
and valuation gains / losses on unrealized securities.
As a result of the above, shareholders' equity ratio at the end of fiscal year 2018 was 78.0%, an increase of 0.8% ascompared to the end of the previous fiscal year.
B.

Operation Results

During the current fiscal year (from April 1, 2017 to March 31, 2018), the consumer spending in the domestic
economy showed a sign of recovery to some extent as the employment environment improved. The environment
surrounding women’s domestic innerwear market, however, remained difficult, due to a slowdown in the recovery of
consumer spending, led by deep-rooted concern for future, which continued to make consumers budget-conscious, andas we continued to experience a series of closings and management of inventories of general merchandise stores. In theoverseas markets, consumer spending was stable in Europe and the United States, as consumer sentiment remained
strong in the United States, and the employment environment continued to improve in the Eurozone area, despite thesignificant uncertainty underlying Brexit in Europe. In China, consumer spending was stable as a result of strong
growth in the real per capita disposable income, and retail sales continued to achieve a high level of growth due toreduced employment uncertainty.
In such an environment, our group moved forward with efforts to improve and strengthen our businessstructure toward achieving the objectives of our mid-term business plan. In our domestic business, we made efforts toimprove business efficiency through restructuring and strengthening of our wholesale business structure, to realizeomni-channel services that will achieve synergies with our wholesale business and retail business, to form core IT
systems which will improve inventory efficiency, and to improve profitability by updating each of our brands andproduct groups. In our overseas business, we focused on our initiatives to pursue business collaboration among Europe
and the United States and Asian countries, strengthen our ability to respond to the e-commerce market, and improve
product quality and cost competitiveness in China and ASEAN-member countries where our product supply bases arelocated.
Our consolidated sales for the current fiscal year slightly fell by 0.1% from such sales for the previous fiscal
year. While consolidated sales from our domestic business for the current fiscal year fell by 2% from such sales for theprevious fiscal year due to difficult environment for our wholesale business, our consolidated sales from our overseas
business exceeded such sales for the previous fiscal year by 7% as a result of strong e-commerce sales and steady sales
at the existing stores in Europe, the United States and China. On the other hand, revenue from our Peach John and otherbusiness segments decreased.
Consolidated operating income increased by 13.3% as compared to such consolidated operating income forthe previous fiscal year. In addition to our initiatives to improve business profitability in the domestic business, anincrease in sales profit resulting from increased revenue from our overseas business contributed to the increase. Also,
consolidated operating income increased as a result of recognition of compensation income from leaving a factory space
occupied by our subsidiary and the absence of non-recurring expenses related to the liquidation proceedings for ourFrench subsidiary that we recorded for the previous fiscal year.
Income before income taxes declined by 13.8% from the previous fiscal year, due to the reaction of gains onsale of fixed assets (land) in the previous fiscal year.
The key exchange rates used for the current fiscal year were: 110.85 yen to the U.S. dollar; 147.03 yen to theSterling pound; and 16.63 yen to the Chinese yuan.

20

Net Sales:

195,725 million yen(a decrease of 0.1% as compared to the previous fiscal year)

Operating income:

12,534 million yen(an increase of 13.3% as compared to the previous fiscal year)

Income before income taxes andequity in net income of affiliatedcompanies:

14,286 million yen

Net income attributable to
Wacoal Holdings Corp.:

9,745 million yen(a decrease of 13.8% as compared to the previous fiscal year)(a decrease of 22.2% as compared to the previous fiscal year)
The following is a summary of operations by operating segment.
Wacoal Business (Domestic)
Wacoal Corp. reorganized its divisions, formerly called the Wacoal Brand Operation Division and Wing
Brand Operation Division, into the Wacoal Brand Operation Division, which is responsible for planning anddevelopment of “Wacoal” brand products and wholesale business mainly with department stores and specialty store
channels, and the Chain Store Operation Division, which is responsible for planning and development of “Wing” brandproducts and wholesale business with general merchandise stores.
Sales from our wholesale business, mainly composed of wholesale business from the Wacoal Brand
Operation Division and the Chain Store Operation Division, decreased by 2% as compared to such sales for the previous
fiscal year. Over-the-counter sales at department stores remained at about the same level as such sales for the previous
fiscal year due to weak sales in the provincial cities of the Kanto, Koshinetsu, and Hokuriku regions, although sales
expanded significantly in Tokyo and the Osaka area as a result of consumption by inbound tourists. Although we haveactively promoted renovations of our shops for “Dual W” that effectively brings together our Wacoal and Wing brands,
and expanded our share in the market, over-the-counter sales at general merchandise stores remained at about the samelevel as such sales for the previous fiscal year due to poor sales of men’s innerwear products and nightwear. With
respect to over-the-counter sales of our core brassieres products, while sales of our Wacoal brand products increased by
6% from such sales for the previous fiscal year due to strong sales of “GOCOCi,” our brassieres marketed for their
comfort, which achieved 2.9 times more than such sales for the previous fiscal year, sales of our Wing brand products
only increased by 1%. Although the over-the-counter sales were stable, a series of closings and management of
inventories of department stores and general merchandise stores impacted sales from our wholesale business.
In our retail business, sales only increased by 1% as compared to such sales for the previous fiscal year as aresult of prioritizing improving business profitability and closing 11 underperforming stores, while minimizing thenumber of new shop openings. Sales of our cross-store common products among directly managed retail stores,“BRAGENIC,” have increased by 54% from such sales for the previous fiscal year, which accounts for approximately
20% of the overall sales, and the number of registered shop members, mainly from our core directly managed retailstores, “AMPHI,” has reached over 660 thousand. We focused on increasing sales per product, and reducing discountsales through strengthening relationships with our important customers.
Sales from our wellness business fell by 5% as compared to such sales for the previous fiscal year due todecreased sales (by 9%) of our core “CW-X” brand products, which were impacted by the termination of business withcertain sport specialty stores, despite the strong sales of “SUCCESS WALK.”In our Web sales business (formerly catalog sales business), sales increased by 1% as compared to such sales
for the previous fiscal year. Sales from our webstore business increased by 14% as compared to such sales for theprevious fiscal year as a result of our efforts to give guidance to our registered shop members and to recapture ourinactive customers, in collaboration with our retail business, as well as our efforts to strengthen our ability to respond tophone orders and launch of consulting services by beauty advisers. On the other hand, sales from our catalog sales
business decreased by 4%, due to a gradual decrease in the number of users and purchasers in our winter and springcatalogues.
Sales from Ai Co., Ltd. were weak, which decreased by 8% as compared to such sales for the previous fiscal
year. Sales from our core swimwear business decreased by 5% as compared to such sales for the previous fiscal year
despite our efforts to enhance revenue efficiency per store by reducing the number of our seasonal stores opened only
during a period of peak demand, while retaining temporary sales representatives became difficult. Sales from theunderwear business were also weak and decreased by 14% as compared to such sales for the previous fiscal year due toclosure of underperforming stores, and a decline in the competitiveness of our products.
As a result, sales attributable to our “Wacoal Business (Domestic)” segment decreased by 1.9% as comparedto such sales for the previous fiscal year.
21Operating income increased by 13.3% as compared to such sales for the previous fiscal year. We focused on
improving the gross profit rate and minimizing selling, general and administrative expenses with our efforts to improvebusiness efficiency by reducing the amount of returned items in our wholesale business and to strengthen profitability of
our retail business, while IT infrastructure related expenses and expenses related to changes in the health insurance
premium rate increased. In addition, recognition of compensation income from leaving a factory space occupied by our
subsidiary during the first quarter of the current fiscal year contributed to the increase.
Net Sales:

116,085 million yen(a decrease of 1.9% as compared to the previous fiscal year)

Operating income:

7,885 million yen(an increase of 13.3% as compared to the previous fiscal year)

Wacoal Business (Overseas)
Sales (on a local currency basis) from Wacoal International Corp. (the United States) increased by 3% ascompared to such sales for the previous fiscal year. This was due to overall sales driven by e-commerce sales throughour website and third-party e-commerce websites, which showed strong sales growth, as well as the positive impact of
initial product delivery due to an increase in the number of department stores handling Wacoal brand products during
the first quarter of the current fiscal year. However, although over-the-counter sales were steady at department stores(physical shops) throughout the current fiscal year, sales for the second half of the current fiscal year fell by 3% ascompared to such sales for the corresponding period of the previous fiscal year due to the management of inventories bycertain department stores and the EC companies specialized for e-commerce.
Operating income on a local currency basis increased by 2% (ratio of operating income: 11%) as compared tosuch operating income for the previous fiscal year. While the gross profits rate increased as a result of reducing
discount sales and increasing the percentage of sales from our own e-commerce website, selling, general andadministrative expenses as a percentage of sales increased due to costs related to product listing advertisements andwebsite renewal to strengthen e-commerce sales, and an increase in medical insurance premiums. In addition, one-off
expenses from restructuring our subsidiary, Wacoal Sports Science Corp., in the United States during the fourth quarterof the current fiscal year impacted the results.
Sales on a local currency basis (Sterling pound) for Wacoal Europe increased by 3% as compared to suchsales for the previous fiscal year. This was due to steady sales through third-party e-commerce websites which
specialize in selling luxury lingerie and specialty stores in the major markets in the United Kingdom and the UnitedStates, while sales in France fell below such sales for the previous fiscal year due to the effect of loss of sales that could
have been recorded from the brands which were liquidated. In addition, sales in Germany and Spain achieved a doubledigit increase from such sales for the previous fiscal year due to an expansion in the number of brands handled by ourclients and sales which enjoyed the favorable effect of the appreciation of the Euro. In our underwear business, sales ofour plus-size brand “elomi” products continued to show strong growth with an increase of 20% as compared to suchsales for the previous fiscal year, and sales of our swimwear products under “FANTASIE” and “Freya” were also strong
with an increase of 17%, respectively, contributing to sales growth in various countries.
Operating income as a percentage of sales for the current fiscal year was 9%, as compared to the previous
fiscal year which recorded an operating loss due to the non-recurring expenses related to the liquidation proceedings for
our French subsidiary. Also, operating income improved over budget as a result of improvement in the gross profit ratefrom a depreciation of the dollar and reduction in transportation costs, as well as minimizing selling, general andadministrative expenses following the postponement of our website renewal for e-commerce sales.
In China, sales on a local currency basis increased by 10% as compared to such sales for the previous fiscal
year. We captured consumers who are becoming more sensitive to fashion trends and enhanced sales initiatives,
including through the openings of specialty stores during China’s high-demand seasons such as the Chinese New Year,
International Women’s Day and China National Day. As a result, sales per department store increased by 8% ascompared to such sales for the previous fiscal year. In addition, e-commerce sales through third-party e-commerce
websites increased by 29% as compared to such sales for the previous fiscal year as a result of focusing on handlingregular-priced products and of strong sales from the China Double 11 shopping festival sales. By brands, sales of our
Wacoal brand products increased by 10%, and sales of our Peach John brand products, including our popular product“Cover Cleavage Strapless” bras, also increased by 51%, resulting from steady growth in the number of repeat users.
Operating income on a local currency basis increased by 9% (ratio of operating income: 5%) as compared tosuch operating income for the previous fiscal year. While we continued to minimize selling, general and administrative
expenses through closure of underperforming stores, selling, general and administrative expenses as a percentage ofsales increased during the fourth quarter of the current fiscal year due to commencement of operation of our centralized
distribution warehouse to achieve effective distribution of bargain products, and costs related to advertisements tostrengthen e-commerce sales.

22As a result of the above, the overall sales attributable to our “Wacoal Business (Overseas)” segment on theJapanese Yen basis increased by 7.2% as compared to such sales for the previous fiscal year. The overall operating
income attributable to “Wacoal Business (Overseas)” segment on the Japanese Yen Basis increased by 26.1% ascompared to such operating income for the previous fiscal year. This increase was affected by the impairment charges
of 206 million yen on goodwill related to our raw materials company, A Tech Textile Co., Ltd., in Thailand, which wasrecognized for the current fiscal year.
Net Sales:

51,888 million yen(an increase of 7.2% as compared to the previous fiscal year)

Operating income:

3,852 million yen(an increase of 26.1% as compared to the previous fiscal year)

Peach John BusinessOverall sales attributable to our “Peach John Business” segment fell below by 2.8% as compared to such sales
for the previous fiscal year due to weak sales from our domestic mail-order catalogue business, while operating income
attributable to our “Peach John Business” segment increased by 17.9% as compared to such operating income for theprevious fiscal year as a result of an improvement in the gross profit rate in Japan, as well as an improvement in
profitability of our Chinese business.
Sales from our domestic business, specifically from retail stores, remained at about the same level as suchsales for the previous fiscal year. Although sales from our premium themed “Salon by Peach John” increased by 31%
as a result of a positive impact of new shop openings, sales of our “Peach John” products decreased by 2% as it was
impacted by a decrease in the number of shop visitors, despite the strong sales of “Miracle Work Bra” launched in the
fourth quarter of the current fiscal year. Sales from our mail-order catalogue business decreased by 12% from suchsales for the previous fiscal year. This was due to a decrease in the number of users who visited our own e-commerce
website as our products failed to attract consumers’ attention, while average spending per customer increased. Sales
from our wholesale business, particularly for the third-party e-commerce websites increased by 4% from such sales forthe previous fiscal year as a result of successful sales during the fourth quarter of the current fiscal year. Sales from ouroverseas business were strong as demonstrated by the sales from Taiwan Peach John Ltd., our subsidiary in Taiwan,
which, after commencing operations in May 2017, achieved sales over budget by 56% and were twice the sales
budgeted for our own e-commerce website.
Positive factors including an improvement in the gross profit rate resulting from a reduction in discount salesof our domestic innerwear products, our efforts to reduce advertising expenses, and an improvement in profitability ofour businesses resulting from sales expansion in China and Taiwan were attributable to the result of operating income.
Net Sales:

10,795 million yen(a decrease of 2.8% as compared to the previous fiscal year)

Operating income:

441 million yen(an increase of 17.9% as compared to the previous fiscal year)

Other
Sales from the business of Lecien Corporation (“Lecien”) decreased by 16% from such sales for the previous
fiscal year. This was impacted by sales of our core innerwear business decreased by 13% from such sales for theprevious fiscal year, due to a decrease in the number of orders received for our private brand products sold at major
general merchandise stores, a reduction in the number of products handled and weak shop sales. In addition, sales from
our art & hobby business decreased by 4% from such sales for the previous fiscal year, due to poor sales of sewing
fabrics, despite steady sales of handcraft products. Sales from our material business were also weak, decreasing by 13%
from such sales for the previous fiscal year due to a decrease in demand for garment laces. Further, sales from ourapparel business significantly decreased by 47% from such sales for the previous fiscal year due to the withdrawal of
our private brand business sold at major general merchandise stores and the impact of weak sales from teleshopping.
Operating income decreased by 86% from such operating income for the previous fiscal year due to a drop insales profit resulting from decreased revenue, despite our efforts to reduce selling, general and administrative expenses,
and the absence of the favorable effect of the exchange rate fluctuation on sales profit during the previous fiscal year.
Sales from Nanasai fell by 2% as compared to such sales for the previous fiscal year. Although business
confidence in the clothing industry continued to show no sign of prominent improvement, a sign of recovery was seen
in demand for short-term leases for specialty stores at department stores and demand for renovation projects in ourconstruction business for department stores and specialty stores as we entered the second half of the current fiscal year.
As a result, we were able to maintain sales from both rental business and sales business at about the same level as such23

sales for the previous fiscal year. However, sales from construction business could not make up for the absence of thenumber of large-scale orders received during the previous fiscal year, and decreased by 2%, which impacted the overallsales.
Operating income increased by 90% as compared to such operating income for the previous fiscal year due toan improvement in the gross profit rate from cost rate improvement in our rental business and a decrease in thepercentage of sales in our construction business.
As a result of the above, overall sales and operating income attributable to our “Other” segment decreased by
5.6% and 47.4%, respectively, as compared to the sales and operating income for the previous fiscal year.

Net Sales:

16,957 million yen(a decrease of 5.6% as compared to the previous fiscal year)

Operating income:

356 million yen(a decrease of 47.4% as compared to the previous fiscal year)(ii) Cash Flow Status
The balance of cash and cash equivalents at the end of fiscal year 2018 was 29,487 million yen, a decrease of 4,508
million yen as compared to the end of the previous fiscal year.
(Cash flow provided by operating activities)
Cash flow provided by operating activities during the fiscal year 2018 was 15,493 million yen, a decrease of 858
million yen as compared to the previous fiscal year. It is the result after the net income of 9,660 million yen was adjusted
for depreciation expenses, deferred taxes and changes in assets and liabilities.
(Cash flow used in investing activities)
Cash flow used in investing activities during the fiscal year 2018 was 7,362 million yen, an increase of 4,330 million
yen as compared to the previous fiscal year, due to an increase in time deposits and capital expenditures.
(Net cash used in financing activities)
Cash flow used in financing activities during the fiscal year 2018 was 12,303 million yen, a decrease of 752 million
yen as compared to the previous fiscal year, due to the cash dividend payments and repurchase of treasury stock.

24

(iii) Production, Orders Received, and Sales
A. Production Results
Our consolidated production results by operating segment for fiscal year ended March 2018 are as follows. No data isavailable for the Peach John Business since all of its entities are sales companies. The production results for othersegment are not shown since it is hard to define such term in this segment.
Amount (Millions of yen)

Changes as Compared toPrevious Fiscal Year (%)

Wacoal Business (Domestic)

43,892

93.3

Wacoal Business (Overseas)

16,054

107.1

59,946

96.6

Name of Operating Segment

Total(Note)The amount of operation results is based on the manufacturing costs and does not include consumption tax, etc.
B. Orders Received
Among Other, the department of Nanasai, which handles interior design and construction of general housings and storesat commercial facilities, adopts the build-to-order production system.
The status of orders received for other segment for fiscal year ended March 2018 is as follows:
Amount of Orders Changes as Compared Balance of Amount of Changes as Compared
Name of Operating Segment
Received
to Previous Fiscal
Orders Received
to Previous Fiscal(Millions of yen)
Year (%)(Millions of yen)
Year (%)
Other(Note)

5,533

106.0

536

211.9

The amounts in the above table do not include consumption tax, etc.
C. Sales Results
Our consolidated sales results by operating segment for fiscal year ended March 2018 are as follows:
Changes as Compared
Name of Operating Segment
Amount (Millions of yen)to Previous Fiscal Year

Wacoal Business (Domestic)

116,085

98.1

Wacoal Business (Overseas)

51,888107.2

Peach John Business

10,795

97.2

Other

16,957

94.4

195,725

99.9

Total
(Note)

1
2

None of the purchasers’ sales accounts for 10% or more of the total sales results.
The amounts in the above table do not include consumption tax, etc.

(2) Analysis and Consideration on the Status of Business Performance etc. from the Viewpoint of Management
The management’s understanding, analysis and consideration with respect to our group’s business performance etc.are as
follows. Any forward-looking statements contained below are based on our judgment as of the end of the current fiscal
year.
(i) Significant Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of theconsolidated financial statements requires our management to make estimates and assumptions. We believe that thefollowings are some of the more critical judgment areas in applying our accounting policies in the preparation of ourconsolidated financial statements.

25

A.

Revenue Recognition

We recognize revenue on sales to retailers, mail-order catalogue sales, and Internet sales when persuasive
evidence of an agreement exists, delivery has occurred resulting in transfer of title and risk of loss, the sales price isfixed or determinable, and collectibility is reasonably assured. As for consignment sales, we recognize revenue when
the products are sold to the ultimate customer. We recognize revenue on direct retail sales at directly managed retailstores at the point of sale to the customer.
B.

Allowance for Returns and Doubtful Receivable

We are required to assess the collectibility of notes and accounts receivable. A considerable amount of
judgment is required in assessing the ultimate realization of these notes and receivables, including the current
creditworthiness of each applicable customer, taking into account business conditions, turnover of receivables, andfinancial positions for significant customers. In the event that a customer’s financial condition worsens, the allowancefor doubtful receivables may increase and may adversely affect our financial condition and performance.
We allow our customers to return their unsold products when the customers meet certain criteria establishedby us as outlined in our applicable trade terms. We establish the allowance for estimated returns for each operating
department based on historical experience with product returns, sales movements, and the size of inventory on the retaillevel and on the situation of the retail industry overall. We review and revise the allowance every quarter, inconsideration of actual returns, planned product discontinuances, and promotional sales. We record the allowance for
estimated returns as a reduction to sales.
C.

Valuation Loss on Inventories

Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out basis for raw
materials and on an average cost basis for work in process and finished products. Market value, or net realizable value,is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimatedcosts necessary to make a sale. A periodic review of inventory is performed in order to determine if inventory isproperly stated at the lower of cost or market. Inventories are written down to the estimated net realizable values, if
appropriate. Factors, such as expected average selling price, expected average cost to make a sale, markdown rate, andclass or type of inventories, are analyzed to determine estimated net realizable value. We also consider potential
disposal of inventories. Criteria utilized to quantify the factors we consider include historical results, judgments
regarding future consumer demand, and other factors. We believe that the amount written down is appropriate.
However, if market conditions and demand are less favorable than our projections, the amount we write down may
increase and may adversely affect our financial condition or operation results.
D.

Deferred Tax Assets

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments.
Realization of our deferred tax assets is principally dependent upon the realization of projected future taxable income.
In estimating our future taxable income, we consider past operation results, the feasibility of ongoing tax planning
strategies, and other factors. Our judgments regarding future profitability may change due to future market conditions
and other factors. These changes, if any, may require recognition of a significant valuation allowance for these deferred
tax asset balances. In the event we determine that certain deferred tax assets may not be recoverable, such amounts will
be reserved for and may adversely affect net income. We believe our deferred tax assets after adjustments for valuation
allowance are recoverable. If we record lower-than-expected earnings and our deferred tax assets become
unrecoverable, however, a valuation allowance must be recorded against the amount that is not likely to be recovered,and this may have a negative impact on our profit and loss.
E.

Valuation Loss on Marketable Securities and Investments

Valuation loss on investments are charged to earnings when a decline in fair value below the cost is other than
temporary. We periodically determine whether a decline in the fair value of marketable securities and investments isdeemed to be other-than-temporary decline, based on criteria that include the duration and severity of market decline,
the extent to which cost exceeds market value, our financial position and business outlook, and our intent and ability toretain the impaired marketable securities and investments for sufficient period of time for anticipated recovery in fairvalue.
We believe that the criteria for evaluating impairment are reasonable. However, changes in the market or
circumstances of each individual investment due to unforeseen changes in economic and business assumptions could
affect the valuations of the investments.
As of March 31, 2018, we held securities which we did not recognize any impairment charges even thoughthose securities had been in an unrealized loss position. Based on our assessment of the period of the decline in the fairvalues and our assessment of the relevant companies’ earnings outlook, we concluded that the decline in fair value forthe securities not subject to impairment charges was only temporary and thus impairment charges did not need to berecognized for these particular securities.
26

As of March 31, 2018, we did not hold any security that had an unrealized material holding loss.
F.

Impairment of Long-Lived Assets

The carrying values of long-lived assets, held and used by the Companies, are evaluated for impairment
whenever there is an event or change in circumstances that indicates that such assets have been impaired or that thecarrying amounts of such assets might not be recoverable. When we determined impairment, we evaluate the carrying
amount of the assets based on their fair value.
In fiscal year 2018, we did not recognize any impairment charges on long-lived assets.
G.

Impairment of Indefinite-Lived Intangible Assets and Goodwill

We are required to perform an annual impairment test of our intangible assets with indefinite useful lives andgoodwill. We also assess the impairment of such intangible assets and goodwill whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. Some of the factors we consider important that
could trigger an impairment review include the following:
significant underperformance relative to projected future operation results;
significant changes in the manner of our use of the acquired assets or the strategy for our overall business;significant negative industry or economic trends; andsignificant changes in risk-adjusted discount rates.
When we determine that the carrying amount of indefinite-lived intangible assets and goodwill may not berecoverable based upon the existence of one or more of the above indicators of impairment, we evaluate the carrying
amount of the assets based on their fair value. If the fair value is less than the carrying amount of the assets, we record
an impairment charge based on the difference between the carrying amount and the fair value of the assets.
If we make an initial determination that the carrying amount of indefinite-lived intangible assets and goodwill
may not be recoverable, we engage an independent appraiser to assist us in our determination of the fair values of ourreporting units. In our determination of the fair value of goodwill, we utilize the net present value method andincorporate relevant unobservable inputs. In our determination of the fair value of trademark, we utilize the relief-fromroyalty method and incorporate relevant unobservable inputs.
As a result of the evaluation performed for fiscal year 2018, we recorded 206 million yen of impairment
charges on goodwill and judged impairment in the carrying value of the trademark is unnecessary.

H.

Employee Retirement Benefits

We provide a number of retirement benefit plans to a substantial portion of our employees. Our wholly
owned subsidiary, Wacoal Corp., has a contributory retirement plan. The amount of the projected retirement benefit
obligation and pension costs are dependent on management’s assumptions used by actuaries in calculating such amount.
The key assumptions include discount rates, the expected long-term rate of return on plan assets, retirement rates,
mortality expectations, and other factors. Our management believes that these actuarial assumptions and methods areappropriate in light of our circumstances. However, due to a change in an actuarial assumption, the amount of the
projected retirement benefit plan liabilities and costs may be adversely affected.
Our approach to establishing the discount rate is based upon domestic bond rates. The discount rate
assumption is based upon the effective yields as of March 31, 2018 on Japanese government bonds whose maturity
dates approximate the timing of the expected future benefit payments. On March 31, 2018, the discount rate used forthe contributory retirement plan was 0.5%.
We determine the expected long-term rate of return on plan asset assumptions by evaluating both historicalreturns, as well as estimates of future returns. The expected return on assets was based on expected equity and debt
securities returns weighted by the percentage of each of the major asset classes. The estimate of the long-term rate of
return on assets for the contributory retirement plan is 2.5% for fiscal years 2017 and 2018. The estimated long-term
rate of return is based on an asset allocation of equity securities of 26.0%, debt securities of 54.0%, life insurancecompany general accounts of 18.0%, and short-term financing of 2.0%.
These assumptions have a significant effect on the amount of the obligation and periodic benefit cost reported.
A change of 0.5% in the discount rate and the expected long-term rate of return on plan assets would have the following
effects:

27

Effect on net periodic benefit costs

Effect on benefit obligation

Discount rate: 0.5% decrease

an increase of 160 million yen

an increase of 1,812 million yen

Discount rate: 0.5% increasea decrease of 157 million yen

a decrease of 1,611 million yen

Expected long-term rate of return onplan assets: 0.5% decrease

an increase of 154 million yen-

Expected long-term rate of return onplan assets: 0.5% increasea decrease of 156 million yen-

The other retirement plans provide for either lump-sum termination benefits or periodic payments undercertain conditions. Benefits are usually paid as a lump sum at the earlier of the employee’s termination or the
mandatory retirement age.

I.

Recent Accounting Pronouncements:

Please see “V. Financial Information – Notes to Consolidated Financial Statements – 1. Summary of Significant
Accounting Policies – Recent Accounting Pronouncements”.
(ii) Understanding, Analysis and Consideration with respect to Status of Business Performance etc. for the Current
Fiscal YearOur group continues to move forward with efforts to improve and strengthen our business structure in line with the fiveelements of the basic policies in our three-year mid-term plan (from fiscal year 2017 to fiscal year 2019), which will end at
the end of the fiscal year 2019.
During the current fiscal year, we continued to make efforts to ensure profits from our domestic business and to achieve
further growth of our overseas business, while building on our group management base. Also, we made efforts to improve
profitability and business efficiency in the existing business domain by challenging ourselves to expand our businessportfolio, while strengthening our competitiveness by achieving group synergies through collaboration. In addition, we
focused on improving capital efficiency by implementing effective financial strategy.
The understanding, analysis and consideration with respect to the business strategies in line with the five elements of thebasic policies under our mid-term plan are as follows.
“To ensure profits from our domestic business,” Wacoal Corp., our core business company, worked on the
restructuring of our chain store operation and retail business, in particular, prioritizing the improvement of businessprofitability, to address the negative impact of the inevitable increase in selling, general and administrative expenses
related to increased health insurance premiums, better working conditions for the sales representatives and IT related
expenses, while our business was also impacted by shop closings and prolonged inventory controls in the distribution
channel. We strengthened our efforts to increase the gross margin rate by expanding sales of high value-added products,
reducing discounts and/or returns by prioritizing the achievement of proper shop inventory, and strengthening the handlingof the same products sold at directly managed retail stores. We intend to get back on the growth path at an early stage
while enhancing business productivity in Japan.
With respect to our aim to “achieve further growth of our overseas business,” our efforts through our core 3 business
entities in Europe, the United State and China to, as a way of responding to the rapidly expanding e-commerce markets,
enhance user-friendliness of our own e-commerce website and to conduct review of our merchandise and distribution
policies on third-party e-commerce websites resulted in strong sales expansion, which also led to further strengthen ourmanagement practices. On the other hand, it is taking a considerable amount of time to restructure the businesses of A
Tech Textile Co., Ltd., our raw materials company in Thailand, to solve quality issues and to dispose of underperforming
businesses after acquisition. We will continue to enhance our growth capability in the overseas by making growthinvestment.

28

In relation to the basic policy to “achieve group synergies through collaboration and strengthen our competitiveness,”
Peach John, Lecien, Nanasai and Ai Co., Ltd. could not respond to the changes in the distribution structure and consumer
needs, and as a result, both sales and operating income from these 4 domestic subsidiaries were below budget. Also, as theoperating margin has remained low at around 2% in recent years, we will undertake reform to ensure stable sales andrevenue by working on initiatives to improve profitability, with a view toward radical change in the business structure.
To “expand our business portfolio,” we carried out infrastructure development projects to start a hotel business usingkyomachiya. Simultaneously with our efforts to improve profitability from our existing business, we will also examine tobuild a new type of business portfolio that defies traditional business model.
With respect to the aim of “establishing our group management base,” we are intensifying our efforts to fulfill our
responsibility toward social needs including human rights, labor practices and ethics, by building close partnerships withall suppliers in accordance with “Wacoal Group CSR-based Procurement Guidelines” established in October 2017. Also,
we will continue to make efforts to improve our corporate governance, and are improving our business infrastructure bygoing further, not only to increase women’s participation in society but also to nurture a corporate culture that respects
diversity. We will aim to enhance the value of our “invisible assets” by further revitalizing our organization and humanresources through the promotion of work-style reform, including through the introduction of teleworking.
As a result, operating income, pre-tax net income, and net income attributable to Wacoal Holdings Corp. exceeded theforecast of the consolidated results for the current fiscal year by 1,034 million yen, 1,786 million yen and 745 million yen,respectively.
The understanding, analysis and consideration with respect to improvement of capital efficiency throughimplementation of our financial strategies and initiatives on shareholder returns are as follows.
While net income attributable to Wacoal Holdings Corp. exceeded the forecast of the consolidated results for the current
fiscal year, it was below the consolidated results of the net income attributable to Wacoal Holdings Corp. for the previous
fiscal year due to the absence of proceeds from sale of unused land which was recorded for the previous fiscal year.
Our basic policy on profit distributions to shareholders is to provide stable distributions based on our consolidated
results, while seeking to increase our enterprise value through active investment for improving profitability, and toincrease net income per share attributable to Wacoal Holdings Corp..
With respect to retained earnings, in addition to actively investing in expanding customer contacts in domestic businessand expanding overseas businesses, from the viewpoint of enhancing our enterprise value, we will make strategic
investments to maintain competitiveness and strengthen our growth potential. With these efforts, we hope to return to ourshareholders through improving future earnings.
In addition, we will acquire treasury shares flexibly while taking into account for the free cash flow level and the market
environment, and improve capital efficiency and return to our shareholders.
The amount of capital investment for the fiscal year ended March 2018 was 5,884 million yen. Our capital investment
was used in IT infrastructure for omni-channel services in Japan, creation of a platform for our e-commerce businessoverseas and renewal of construction facilities. The amount of return of profits to our shareholders will be 11,393 million
yen, the sum of 7,386 million yen, in the form of dividends, and 4,007 million yen, in the form of repurchases.
However, total shareholders’ equity increased 5,144 million yen to 232,712 million yen due to the impact of unrealized
gain on securities and as a result, the consolidated ROE (i.e., return on Wacoal Holdings Corp. shareholders’ equity forthe current fiscal year) was 4.2%.
To achieve future growth, we will continue to make efforts to improve business profitability, while also actively andstrategically seeking for investment opportunities.

29

Objective indices for judging whether management policy and management strategy as well as management targets
have been achieved are as follows.
Our target is to achieve consolidated operating margin of 7% and a consolidated ROE (i.e., return on Wacoal
Holdings Corp. shareholders’ equity for the current fiscal year) of 5% or higher as our mid-term financial data.
Our operating margin increased 0.8% from 5.6% for the fiscal year 2017 to 6.4% for the fiscal year 2018. This increase
was mainly due to improvement in cost of sales as a percentage of net sales as a result of a different mix of products inJapan, greater appreciation of the British pound against the U.S dollar and the absence of the impact of impairment of
inventories for the fiscal year 2017, recognition of subsidy revenue from leaving a factory space occupied by our
subsidiary, as well as reduction in selling, general and administrative expenses as a percentage of sales as a result of theabsence of non-recurring expenses related to the liquidation proceedings for our French subsidiary that we recorded for the
fiscal year 2017. Consolidated ROE decreased 1.3% from 5.5% for the fiscal year 2017 to 4.2%. This decrease was due toa decrease in net income attributable to Wacoal Holdings Corp. resulting from the absence of gain on sales of property(land) that we recorded for the fiscal year 2017, although we recorded increased operating income for the fiscal year 2018.
We will continue to endeavor to improve these financial indicators.

(iii) Capital Resources and Liquidity
Our current policy is to fund our cash needs from cash flows from operating activities, which allows us to secure mostof working capital, make capital investments, and pay dividends without relying on substantial borrowings or otherfinancing from outside of our group companies. As of March 31, 2018, we had credit facilities at financial institutions
totaling 30,965 million yen, and the balance of short-term financing which established line of credit amounted to 7,291
million yen. Of this credit, 2,500 million yen is available to Wacoal Holdings Corp., 1,988 million yen is available to
Wacoal Europe Ltd., 2,616 million yen is available to Wacoal Service Co., Ltd., and 187 million yen is available toNanasai.
In general, most of our credit facilities have automatically renewed terms, and we are not aware of any issues withrespect to any of our lenders that could cause these facilities to become unavailable. Even if any of our subsidiaries loses
access to funds from our credit facilities, we believe that it is possible for other companies in our group to provide anynecessary funds. Our borrowing requirements are not affected by seasonality.
We are not aware of any restrictions on the transfers of funds from a subsidiary to a parent company in the form of acash dividend. We believe our working capital is adequate for our present requirements and for our business operations inthe short to long term.
A.

Capital Investments

Please see “III. Property, Plants and Equipment – 1. Summary of Capital Investment, etc.”
B.

Cash Flows

Please see “(1) Overview of Status of Business Performance etc. (ii) Cash Flow Status.”30

4. 【Material Agreements, etc.】
Not applicable.

31

5. 【Research and Development】
Our research and development activities are mainly conducted by our Human Science Research Center to achieve
harmony between the human body and clothing and to support better product making.
Since 1964, we have been conducting research into the female body in order to accurately understand the Japanese
woman’s physique. In particular, we have developed a silhouette analysis system and introduced a three-dimensional
measuring system. We are also working on an even more advanced measurement of sensory comfort. Our research anddevelopment activities focus on addressing the proportional, physiological, and mental aspects of garment design. One ofour most important research results was the enrichment of our research on sensory comfort through our participation in a
project led by the Ministry of Trade and Industry (presently the Ministry of Economy, Trade and Industry) from 1995 to
1998. Based on this research, we have been focusing on developing new products that are not only comfortable for thewearer, but also have a positive physiological effect based on the basic study from three factors, which are pressure, heat,and touch. In 2005, we developed and created a new market for our breakthrough Style Science series products, which
support the creation of a healthy and beautiful body by changing the idea of everyday walking to walking for exercise. In
2010, we conducted an analysis and announced principles on the physiological changes associated with the aging period
from a person’s 20s to their 50s. We also strengthened the development of new products coping with aging and have beenworking on developing new functional products based on the lifestyle habits of people as they undergo small physicalchanges associated with aging.
Our Human Science Research Center is promoting research and development, which is based on a survey analysis of the
body shapes and needs of young customers including customers of an age of which the products for the first time introduced,
and a senior generation.
During the fiscal year ended March 31, 2018, we worked on research and development focusing on “physical sensation” totarget the market for comfort products and on research and development of high value-added products, responding to theneeds for “beauty” and “health.”
As a result of the above, we recorded 781 million yen for our research and development during the fiscal year ended
March 2018.
Our research and development activities cover a wide range of research from basic research to product development,
mainly of women’s innerwear. Therefore, it is difficult to relate each of such activities to a specific segment, and thus, we do
not provide information regarding such research and developments by segment.
In order to promote “the realization of an industry supporting women with unbounded living beauty,” we will make efforts toenrich research and development activities that contribute to the improvement of customer satisfaction and corporate value
based on the key concepts of beauty, comfort, and health. We will also work toward strengthening product appeal anddeveloping new products or services that can gain support from and satisfy our customers.

32

III. 【Property, Plants, and Equipment】
1. 【Summary of Capital Investment, etc. 】
The amount of capital investment for the fiscal year ended March 31, 2018, was 5,884 million yen. A majority of ourcapital investment was used in the information system investment for our subsidiaries and maintenance and repair work
implemented for the real properties held by the Company.
The amounts of capital investment made in Wacoal Business (Domestic), Wacoal Business (Overseas), Peach John
Business, and Other were 3,649 million yen, 1,752 million yen, 365 million yen, and 118 million yen, respectively.

2. 【Major Property, Plants, and Equipment】
The table below shows our major property, plants, and equipment within our group (Company and consolidated
subsidiaries).
(1) Wacoal Holdings Corp.
As of March 31, 2018
Book Value (Millions of yen)
Facility(Location)

Head Office(Minami-ku, Kyoto) and other

OperatingSegment

Type of Equipment
and Facilities
Buildings andstructures

WacoalFacilities for

Business

administration(Domestic)

affairs, etc.

20,341

MachineryandEquipment

1,218

2

Land (m )18,342(266,637)

Number of
Employee(s)Total

39,90295［－］(2) Domestic Subsidiaries
As of March 31, 2018
Book Value (Millions of yen)
Name of Company(Location)

Wacoal Corp. Head Office

OperatingSegment

Type of Equipment
and Facilities
Buildings andstructures

WacoalFacilities for

Business

administration(Domestic)

affairs

Wacoal Corp. Tokyo OfficeWacoalFacilities for(Chiyoda-ku, Tokyo)

Business

administration

One other business office in Tokyo(Domestic)

affairs

Wacoal Corp. Spiral Business

WacoalDepartment

Business(Minato-ku, Tokyo)(Domestic)

Wacoal Distribution Corp.

WacoalFacilities forMoriyama Distribution Center

Businessmerchandise(Moriyama, Shiga)(Domestic)

management

Kyushu Wacoal Manufacturing

WacoalCorp., Nagasaki Plant

Business(Unzen, Nagasaki)(Domestic)

Torica Inc.

Wacoal(Saihakugun Nanbucho, Tottori)

BusinessThree other plants(Domestic)(Minami-ku, Kyoto)
Two other business office in Kyoto
districtNanasai Co., Ltd.
Osaka Commodity Center(Yodogawa-ku, Osaka)

Other

Sales facilities

Manufacturing
facilities
Manufacturing
facilities
Manufacturing
facilities

33

Number of
Employee(s)Machinery,
Vehicle,Equipment,
and Fixtures

Land (m )

41

274

－

316

31

39

－

71

72

76

－

149

16

92

－

108

1

77

－

78

416

92

226

7

2

180
(40,840)150(2,790)

Total

688

383

2,196
［ 181］

1,575
［ 72］
－
［ －］
368
［ －］
348
［－ ］
155
［ 43］
20
［－ ］

(3) Overseas Subsidiaries
As of March 31, 2018
Book Value (Millions of yen)
Name of Company(Location)

OperatingSegment

Type of Equipment
and Facilities
Buildings andstructures

Machinery,
Vehicle,Equipment,
and Fixtures2

Land (m )Total

Number of
Employees

Facilities for
WACOAL AMERICA, INC.
(New York, USA)

Wacoaladministration

Businessaffairs/(Overseas)

merchandise

1,019

115

611

212

11

34

372

－

208

31

256
(32,300)

174

1,390

［ －］

management
WACOAL DOMINICANA
CORP.
(Santo Domingo, Dominican
Republic)

WacoalBusiness(Overseas)

Manufacturing
facilities

WACOAL SINGAPORE

WacoalFacilities for

PRIVATE LTD.

Business

administration(Singapore)(Overseas)affairs

WACOAL HONG KONG CO.,WacoalFacilities forLTD.

Business

administration(Hong Kong)(Overseas)

Wacoal China Co., Ltd.
(Beijing, China)

Business(Overseas)

Guandong Wacoal Inc.
(Guandong, China)

WacoalBusiness(Overseas)

VIETNAM WACOAL CORP.
(Bien Hoa City, Vietnam)

Dalian Wacoal Co., Ltd.
(Dalian, China)

WacoalBusiness(Overseas)
WacoalBusiness(Overseas)

A TECH TEXTILE CO., LTD.
(Kabin Buri, Thailand）(Note)

Wacoal

WacoalBusiness(Overseas)

86(24,459)

200
(235）

1,772

910

［ －］

53

245

［ 16］
121

372

－

［ 20］

affairs
Facilities for adm
inistration affairs/
manufacturing
facilities
Manufacturing
facilities

110

152

105

109

Facilities for adm
inistration affairs/
manufacturing－（－）［ 11,871］－（－）［ 11,224］

599

239

［ －］

425

262

［ －］

－
（－）

1,681

214

［ 1］

［ 25,195］

facilities－

Manufacturing

291

facilities

238

（－）

637

529

［ －］

［ 27,543］

Manufacturing270

facilities

837

259
( 65,136）

393

1,366

［ －］

1
2
3

The amount of book value above does not include consumption taxes, etc.
Area of land under lease by the Company is shown in brackets.
None of our major facilities is currently out of service.

4

Buildings and land regarding certain domestic subsidiaries under (2) above are under lease by the Company. The
book value of the buildings and land are as follows:
Name of Business Office(Location)

Operating Segment

Type of Equipment andFacilities

Book Value (Millions of yen)
Buildings and structures2

Land (m )Wacoal Corp. Head Office(Minami-ku, Kyoto)

Wacoal Business

Facilities for

Two other business office in(Domestic)

administration affairs(Chiyoda-ku, Tokyo)

Wacoal Business

Facilities for

One other business office in(Domestic)

administration affairs

11,997

1,885(11,208)

Kyoto district
Wacoal Corp. Tokyo Office
1,299

1,945
(1,471)

Tokyo
Wacoal Corp. Spiral Business
Department(Minato-ku, Tokyo)

Wacoal Business

Sales facilities(Domestic)

34

1,207

3,972
(1,739)

Wacoal Distribution Corp.
Moriyama Distribution
Center(Moriyama, Shiga)
Kyushu Wacoal Manufacturing
Corp., Nagasaki Plan
(Unzen, Nagasaki)

5
6Facilities for

Wacoal Businessmerchandise(Domestic)

1,419

1,807

(38,923)

management

Wacoal Business

Manufacturing(Domestic)facilities

52

223

(19,369)

The average number of temporary employees during the period is in brackets.
The details of the major leased facilities by other entities other than the above consolidated subsidiaries are as
follows.
(1) Domestic Subsidiaries
Name of Business Office(Location)

Operating Segment

Peach John Co., Ltd. Head Office

Peach John

(Shibuya-ku, Tokyo)

Business

Type of Equipment
and Facilities

2

2

Buildings (m )Land (m )

1,708

－

Annual Lease
Amount(Millions of yen)

Facilities foradministration

143

affairs(2) Overseas Subsidiaries
Name of Company(Location)

WACOAL AMERICA, INC.
(New York, USA)
PHILIPPINE WACOAL CORP.
(Manila, Philippines)

Operating Segment

Type of Equipment
and Facilities

WacoalFacilities for

Business

administration(Overseas)affairs

WacoalFacilities for

Business

administration(Overseas)affairs2(2) Disposals of Important Facilities
Not applicable.

35

Annual Lease
Amount(Millions of yen)

Land (m )

4,599

－

139

926

－

14

3. 【Plans for Capital Investment, Disposals of Property, Plants, and Equipment, etc.】(1) Additions of Important Facilities
Not applicable.

2

Buildings (m )IV. 【Information on the Company】
1. 【Information on the Company’s Stock, etc.】(1) Total number of shares, etc.
(i) Total number of shares
Class(Note)

Total Number of Shares Authorized to be Issued

Common stock

250,000,000 shares

Total

250,000,000 shares

The total number of shares authorized to be issued decreased by 250,000,000 shares to 250,000,000 shares following theshare consolidation of common stock of the Company pursuant to which two (2) shares were consolidated into one (1)share effective as of October 1, 2017, as resolved by the 69th ordinary general meeting of shareholders held on June 29,2017.
(ii) Number of Shares Issued
Names of Stock Exchanges on
Number of Shares Issued
Number of Shares Issued which the Company is listed
as of the end of Fiscal
as of the Filing Dateor Names of AuthorizedYear (March 31, 2018)(June 28, 2018) (shares) Financial Instruments Firms(shares)
Association

Class

Common stock

71,689,042

70,689,042

Description

Shareholders haveunlimited standard rights.
The number of sharesFirst section of Tokyo
Stock Exchange

constituting a unit is 100.
Total
(Note)

1

71,689,042

70,689,042－－

The number of shares issued decreased by 71,689,043 shares to 71,689,042 shares following the shareconsolidation of common stock of the Company pursuant to which two (2) shares were consolidated into one (1)share effective as of October 1, 2107, as resolved by the 69th ordinary general meeting of shareholders held on June29, 2017. The total number of shares issued decreased to 70,689,042 shares following the cancellation of treasury
stock of 1,000,000 shares conducted on May 25, 2018 as resolved by the Board of Directors’ meeting held on May
2

15, 2018.
The number of shares in one unit of shares has changed from 1,000 shares to 100 shares effective as of October 1,
2017, as resolved by the 69th ordinary general meeting of shareholders held on June 29, 2017.

(2) Status of Stock Acquisition Rights(i) 【Stock Option Plans】（1st Stock Acquisition Rights / 2nd Stock Acquisition Rights）
Date of resolution

July 30, 2008

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

Director of the Company 5

Director of subsidiary 5

19 (Note 1)

8 (Note 1)

Common stock

Common stock

9,500 shares (Note 2)

4,000 shares (Note 2)

One yen per share
From September 2, 2008
until September 1, 2028

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock
Terms and conditions for exercising the stock acquisition rights
Matters related to transfer of the stock acquisition rights

Issue price: 2,275 yen
Amount capitalized as common
stock: 1,138 yen(Note 3)
Subject to the approval of the Board of Directors

36

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one (1) stock acquisition right is 500 shares.
2

In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:

Adjusted Conversion
Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary
notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
3(1)

Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.

(2)

Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i)if the Exercise Start Date of the Option holder has not occurred by September 1, 2027
From September 2, 2027 until September 1, 2028.

(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officer(3)
4of the Company is passed):For 15 days from the day after the date of said approval.
If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.

In the event that the Company conducts Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
37

The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company to(5)

be issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:(6)

From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 40-1 of the Japanese Company Accounting Regulations. Any amount less than one (1) yen shallbe rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.

(7)
(8)

Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer;(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights by(9)transfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above:（3rd Stock Acquisition Rights / 4th Stock Acquisition Rights）
Date of resolution

July 30, 2009

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stock38

Director of the Company 4

Director of subsidiary 4

20 (Note 1)

8 (Note 1)

Common stock

Common stockacquisition rights

10,000 shares (Note 2)

Amount to be paid upon exercise of stock acquisition rights

4,000 shares (Note 2)

One yen per share
From September 2, 2009
until September 1, 2029

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock

Issue price:2,169 yen
Amount capitalized as common
stock: 1,085 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:
Adjusted Conversion
Ratio

=

Conversion Ratio prior toadjustment

X

Ratio of stock split
or reverse stock split

This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary
notification or announcement to Option holders no later than the day immediately preceding the day on which the3adjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(2)(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the “Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2028
From September 2, 2028 until September 1, 2029.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
39

(3)
4

If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.

In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:

(2)
(3)

(4)

The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company tobe issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted

(5)

(6)

upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:
From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in

(7)
(8)

capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.
Limitation on Acquisition of Stock Acquisition Rights by Transfer.
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights.
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer;(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
40

(9)

Other Conditions relating to the Exercise of Stock Acquisition Rights.
To be determined pursuant to Note 3 above.

（5th Stock Acquisition Rights / 6th Stock Acquisition Rights）
Date of resolution

July 30, 2010

Category and number of eligible grantees

Director of the Company 4

Director of subsidiary 3

21 (Note 1)

7 (Note 1)

Common stock
10,500 shares (Note 2)

Common stock
3,500 shares (Note 2)

Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

One yen per share
From September 2, 2010
until September 1, 2030

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock

Issue price: 2,163 yen
Amount capitalized as common
stock: 1,082 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note)

1
2

The number of shares represented by one stock acquisition right is 500 shares.
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:

Adjusted Conversion=

Conversion Ratio prior to

X

Ratio of stock split

Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary

3

notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,(2)

that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where the41stock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i)if the Exercise Start Date of the Option holder has not occurred by September 1, 2029
From September 2, 2029 until September 1, 2030.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
(3)
4

If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company to(5)

be issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:(6)

From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.

(7)
(8)

Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;
42

(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer;(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
(9)

Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（7th Stock Acquisition Rights / 8th Stock Acquisition Rights）
Date of resolution

July 29, 2011

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

Director of the Company 5

Director of subsidiary 5

37 (Note 1)

18 (Note 1)

Common stock
18,500 shares (Note 2)

Common stock
9,000 shares (Note 2)

One yen per share
From September 2, 2011
until September 1, 2031

Exercise period
Issue price for shares issued through the exercise of the stock

Issue price: 1,757 yen

acquisition rights and the amount capitalized as common stock

Amount capitalized as common
stock: 879 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2

In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:

Adjusted Conversion
Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary
notification or announcement to Option holders no later than the day immediately preceding the day on which the43adjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
3(1)

Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.

(2)

Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i)if the Exercise Start Date of the Option holder has not occurred by September 1, 2030
From September 2, 2030 until September 1, 2031.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
(3)
4

If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company to(5)

be issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:(6)

From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.
44

(7)

Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.

(8)

Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.

(9)

Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（9th Stock Acquisition Rights / 10th Stock Acquisition Rights）
Date of resolution

July 31, 2012

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

Director of the Company 5

Director of subsidiary 4

40 (Note 1)

14 (Note 1)

Common stock
20,000 shares (Note 2)

Common stock
7,000 shares (Note 2)

One yen per share
From September 4, 2012
until September 3, 2032

Exercise period
Issue price for shares issued through the exercise of the stock

Issue price: 1,599 yen

acquisition rights and the amount capitalized as common stock

Amount capitalized as common
stock: 800 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2

In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:

Adjusted Conversion
Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
45

and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary
notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
3(1)

Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.

(2)

Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i)if the Exercise Start Date of the Option holder has not occurred by September 1, 2031
From September 2, 2031 until September 3, 2032.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
(3)
4

If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

(5)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company tobe issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:
From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
46

(6)

Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:
(i)

(7)
(8)

In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.

(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.
Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general(9)

meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（11th Stock Acquisition Rights / 12th Stock Acquisition Rights）
Date of resolution

July 31, 2013

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

Director of the Company 5

Director of subsidiary 6

44 (Note 1)

25 (Note 1)

Common stock
22,000 shares (Note 2)

Common stock
12,500 shares (Note 2)

One yen per share
From September 3, 2013
until September 2, 2033

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock

Issue price: 1,837 yen
Amount capitalized as common
stock: 919 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights(Note 4)

accompanying reorganization acts

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).

47

(Note)1
2

The number of shares represented by one stock acquisition right is 500 shares.
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:

Adjusted Conversion

Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary

3

notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,(2)

that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2032
From September 2, 2032 until September 2, 2033.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting of(3)
4

shareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said

stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:
(1)

(2)
(3)

Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
48

(4)

Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company tobe issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.

(5)

Exercise Period for Stock Acquisition Rights:
From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.

(6)

Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increase

(7)
(8)

in common stock stipulated in (i) above.
Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of the(9)Company for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（13th Stock Acquisition Rights / 14th Stock Acquisition Rights）
Date of resolution

July 31, 2014

Category and number of eligible grantees
Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

Director of the Company 5

Director of subsidiary 5

39 (Note 1)

17 (Note 1)

Common stock
19,500 shares (Note 2)

Common stock
8,500 shares (Note 2)

One yen per share
From September 2, 2014
until September 1, 2034

Exercise period49

Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock
Terms and conditions for exercising the stock acquisition rights

Issue price: 1,875 yen
Amount capitalized as common
stock: 938 yen(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:
Adjusted Conversion

Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary

3

notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,(2)

that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2033
From September 2, 2033 until September 1, 2034.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting of(3)
4

shareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said

stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to the50case where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company to(5)

be issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:(6)

From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.

(7)
(8)

Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights by(9)transfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

51

（15th Stock Acquisition Rights / 16th Stock Acquisition Rights）
Date of resolution

July 31, 2015

Category and number of eligible grantees

Director of the Company 5

Director of subsidiary 4

37 (Note 1)

12 (Note 1)

Common stock

Common stock

18,500 shares (Note 2)

6,000 shares (Note 2)

Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

One yen per share
From September 2, 2015

Exercise period

until September 1, 2035

Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock
Terms and conditions for exercising the stock acquisition rights

Issue price: 2,839 yen
Amount capitalized as common
stock: 1,420 yen(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:
Adjusted Conversion

Conversion Ratio prior to
Ratio of stock split
=
X
Ratio
adjustment
or reverse stock split
This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary

3

notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,(2)

that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2034
From September 2, 2034 until September 1, 2035.
52

(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
(3)
4

If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
(2)
(3)

(4)

Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company to(5)

be issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:(6)

From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.

(7)
(8)

Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;53

(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights by(9)transfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（17th Stock Acquisition Rights / 18th Stock Acquisition Rights）
Date of resolution

July 29, 2016

Category and number of eligible grantees

Director of the Company 4

Director of subsidiary 6

43 (Note 1)

26 (Note 1)

Common stock
21,500 shares (Note 2)

Common stock
13,000 shares (Note 1)

Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

One yen per share
From September 2, 2016
until September 1, 2036

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock

Issue price: 2,089 yen
Amount capitalized as common
stock: 1,045 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:
Adjusted Conversion
Ratio

=

Conversion Ratio prior toadjustment

X

Ratio of stock split
or reverse stock split

This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting ofshareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary
notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
54

3

(1)

(2)

Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2035
From September 2, 2035 until September 1, 2036.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting ofshareholders is not required, if a resolution of the board or determination by the chief executive officer(3)
4of the Company is passed):For 15 days from the day after the date of said approval.
If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said
stock acquisition rights.

In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:(1) Number of Stock Acquisition Rights of the Surviving Company to be Granted:

(2)
(3)

(4)

The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company tobe issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted

(5)

(6)

upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:
From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:(i) In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with
Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in(7)

capital shall be increased by the amount remaining after deducting the increase in the limit for increasein common stock stipulated in (i) above.
Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
55

(8)

Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of theCompany for the acquisition of the shares to be issued upon the exercise of stock acquisition rights by(9)transfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

（19th Stock Acquisition Rights / 20th Stock Acquisition Rights）
Date of resolution

July 31, 2017

Category and number of eligible grantees

Director of the Company 4

Director of subsidiary 7

28 (Note 1)

18 (Note 1)

Common stock
14,000 shares (Note 2)

Common stock
9,000 shares (Note 2)

Number of stock acquisition rights
Class, description and number of shares represented by stockacquisition rights
Amount to be paid upon exercise of stock acquisition rights

One yen per share
From September 2, 2017
until September 1, 2037

Exercise period
Issue price for shares issued through the exercise of the stockacquisition rights and the amount capitalized as common stock

Issue price: 2,919 yen
Amount capitalized as common
stock: 1,460 yen

Terms and conditions for exercising the stock acquisition rights(Note 3)Matters related to transfer of the stock acquisition rights

Subject to the approval of the Board of Directors

Matters related to the grant of stock acquisition rights
accompanying reorganization acts

(Note 4)

Above is based on information available as of the end of the current fiscal year (March 31, 2018). No change has been made asof the end of the month preceding the filing date (May 31, 2018).
(Note) 1
The number of shares represented by one stock acquisition right is 500 shares.
2
In the event that the Company conducts a stock split (including the free allocation of shares of common stock of
the Company; hereinafter the same) or a reverse split of its common stock, the Conversion Ratio will be adjusted inaccordance with the following formula:
Adjusted Conversion
Ratio

=

Conversion Ratio prior toadjustment

X

Ratio of stock split
or reverse stock split

This adjustment will apply from the day following the record date in the case of a stock split and from the day on
which the reverse stock split becomes effective in the case of a reverse stock split. However, in the event that theCompany conducts a stock split that is conditioned on approval at a general meeting of shareholders of theCompany of an increase in stockholders’ equity or additional paid-in capital by decreasing the amount of surplus,
and provided that the record date for such stock split is set prior to the conclusion of such general meeting of56

shareholders, from the day following the conclusion of such general meeting of shareholders, the adjustment will
apply retroactively from the day following the record date.
In addition to the above, the Conversion Ratio shall be reasonably adjusted as may be required in unavoidable
circumstances.
Any fractional shares that result from the above adjustment will be rounded down to the nearest whole share.
Furthermore, in case of any adjustment of the Conversion Ratio, the Company shall make any necessary

3

notification or announcement to Option holders no later than the day immediately preceding the day on which theadjusted Conversion Ratio becomes effective. However, if the Company is unable to provide such notification or
announcement by such date, the Company shall provide prompt notification or announcement thereafter.
(1) Option holders may exercise their stock acquisition rights on the Date of Loss of Status; provided, however,(2)

that in such case, such Option holder may only exercise his or her stock acquisition rights until the earlier of(i) the expiration date of the exercise period as stipulated in the table above and (ii) the five-year anniversaryof the Exercise Start Date.
Notwithstanding the foregoing, during the exercise period set forth in the table above, the Option holders
may exercise their stock acquisition rights in the following cases (for item (ii), excluding the case where thestock acquisition rights of the Surviving Company are granted to the Option holders pursuant to Note 4
below) only during the respective periods designated below:(i) if the Exercise Start Date of the Option holder has not occurred by September 1, 2036
From September 2, 2036 until September 1, 2037.
(ii) if the general meeting of shareholders of the Company approves a merger agreement pursuant to which
the Company is to be dissolved or a stock swap agreement or share transfer plan that makes theCompany a wholly owned subsidiary (or, in the event a resolution of the general meeting of(3)
4

shareholders is not required, if a resolution of the board or determination by the chief executive officerof the Company is passed):For 15 days from the day after the date of said approval.
If an Option holder waives his or her stock acquisition rights, such Option holder may not exercise the said

stock acquisition rights.
In the event that the Company conducts an Organizational Restructuring, stock acquisition rights of the Surviving
Company shall be granted to each holder of the Residual Stock Acquisition Rights in accordance with thefollowing terms and conditions. In such case, the remaining stock acquisition rights shall be canceled, and theSurviving Company shall issue new stock acquisition rights; provided, however, that this shall be limited to thecase where the grant of stock acquisition rights of the Surviving Company pursuant to the following conditions is
stipulated in the absorption-type demerger agreement, incorporation-type demerger agreement, merger and spin-off
agreement, new spin-off plan, stock swap agreement, or share transfer plan:
(1)

(2)
(3)

(4)

(5)

(6)

Number of Stock Acquisition Rights of the Surviving Company to be Granted:
The number of stock acquisition rights to be granted shall be equal to the number of Residual Stock
Acquisition Rights.
Class of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
Common stock of the Surviving Company.
Number of Shares of the Surviving Company to be Issued upon Exercise of the Stock Acquisition Rights:
To be determined pursuant to Note 2 above after taking into consideration the terms and conditions of theOrganizational Restructuring.
Amount Capitalized upon Exercise of Stock Acquisition Rights:
The amount capitalized upon the exercise of each stock acquisition right to be granted shall be the amount
paid after restructuring as prescribed below multiplied by the number of shares of the Surviving Company tobe issued upon the exercise of the stock acquisition rights as determined in accordance with (3) above. The
amount paid after restructuring shall be one yen per share of the Surviving Company, which may be granted
upon exercise of each stock acquisition right to be granted.
Exercise Period for Stock Acquisition Rights:
From the later of (i) the starting date of the exercise period for stock acquisition rights as stipulated in thetable above and (ii) the effective date of Organizational Restructuring, and lasting until the expiration date
for the exercise of stock acquisition rights as stipulated in the table above.
Matters concerning Increases in Capital Stock and Additional Paid-in Capital in case of Issuance of Shares
due to the Exercise of Stock Acquisition Rights:
57

(i)

In the event that shares are issued due to the exercise of stock acquisition rights, shareholders’ equity
shall be increased by half the limit for increases in common stock that are calculated in accordance with

Article 17-1 of the Japanese Company Accounting Regulations. Any amount less than one yen shall be
rounded up to the nearest yen.
(ii) In the event that shares are issued due to the exercise of stock acquisition rights, additional paid-in
capital shall be increased by the amount remaining after deducting the increase in the limit for increase(7)(8)

in common stock stipulated in (i) above.
Limitation on Acquisition of Stock Acquisition Rights by Transfer:
The acquisition of stock acquisition rights by transfer shall be subject to approval by resolution of the board.
Provisions for the Acquisition of Stock Acquisition Rights:
In the event that a general meeting of shareholders of the Company approves any of the following (or, whenshareholder approval is not necessary, in the event that the board or the representative executive officer
approves of any of the following), the Company may acquire stock acquisition rights without compensation
on a date separately specified by the board:(i) a proposed merger agreement under which the Company is to be dissolved;(ii) a proposed corporate division agreement or plan under which the Company would be split;(iii) a proposed share transfer agreement or plan that makes the Company a wholly owned subsidiary;(iv) a proposed amendment of the Articles of Incorporation to add a provision that prescribes that theCompany, with respect to all of its issued shares, shall be required to obtain the approval of theshareholders of the Company for the acquisition of such shares by transfer; or(v) a proposed approval for an amendment of the Articles of Incorporation to add a provision thatprescribes that the Company shall be required to obtain the approval of the shareholders of the(9)Company for the acquisition of the shares to be issued upon the exercise of stock acquisition rights bytransfer or that the Company shall obtain all of the shares of said class by a resolution of the general
meeting of shareholders.
Other Conditions relating to the Exercise of Stock Acquisition Rights:
To be determined pursuant to Note 3 above.

(ii) 【Right Plans】
Not applicable.
(iii) 【Other Stock Acquisition Rights】
Not applicable.
(3) Status of Exercise of Bonds with Stock Acquisition Rights containing a Clause for Exercise Price Adjustment
Not applicable.
(4) Trends in the Total Number of Shares Issued, Common Stock, etc.
Changes in the
Balance of
Changes in
Total Number
Total Number
Commonof Sharesof Shares
Date
Stock
IssuedIssued(Millions of(Thousands of(Thousands ofyen)shares)shares)
October 1, 2017
(Note 1)
(Note)

1(71,689)

71,689－Balance ofCommonStock(Millions ofyen)

Changes in
Additional
Paid-in Capital(Millions ofyen)

Balance of
Additional
Paid-in Capital(Millions ofyen)

13,260－29,294

Reflect the share consolidation pursuant to which two (2) shares were consolidated into one (1) share.

2 Total number of shares issued decreased by 1,000,000 shares following the cancellation of treasury stock conductedon May 25, 2018, as resolved by the Board of Directors’ meeting held on May 15, 2018.

58

(5) Status of Shareholders
As of March 31, 2018
Status of Shares (1 unit = 100 shares)
Shares Less
Than One
Unit(share)Foreign Shareholders
Category

National and
Local
Governments

Financial
Institutions

Securities
Companies

Other
Corporations

Foreignshareholders
other than
individuals

Individuals

－

55

26

192

237

8

10,847

11,365－－287,337

6,588

136,410

143,16842

141,842715,387

150,342

－

40.16

0.92

19.07

20.01

0.01

19.83

100

－

Number ofshareholders

Individuals
and Other

Total

Number ofshares held
(units)Ratio (%)

(Note)

1
2
3

Out of the treasury stock of 4,322,121 shares, 43,221 units are included under “Individuals and Other,” and 21
shares of less than one unit are included under “Shares less than One Unit.”
Shares under “Other Corporations” and “Shares less than One Unit” include 2 units and 27 shares, respectively,
held under the name of the Japan Securities Depository Center.
The number of shares in one unit of shares has changed from 1,000 shares to 100 shares effective as of October 1,
2017, as resolved by the 69th ordinary general meeting of shareholders held on June 29, 2017.

(6) Status of Major Shareholders
As of March 31, 2018
Name of Shareholder

Address

Number of Shares
held by Shareholder(Thousands of shares)

Shareholding
Ratio (%)

The Bank of Tokyo-Mitsubishi UFJ,Ltd.

2-7-1, Marunouchi, Chiyoda-ku, Tokyo

3,295

4.89

Meiji Yasuda Life Insurance Company

2-1-1, Marunouchi, Chiyoda-ku, Tokyo

3,050

4.53

Japan Trustee Services Bank, Ltd. (Trust
Account)

1-8-11, Harumi, Chuo-ku, Tokyo

2,895

4.30

2-11-3, Hamamatsucho, Minato-ku, Tokyo

2,409

3.58

700, Yakushimae-cho, Karasuma-dori,Matsubara-agaru, Shimogyo-ku, Kyoto

2,352

3.49

Nippon Life Insurance Company

1-6-6, Marunouchi, Chiyoda-ku, Tokyo(Nippon Life Insurance Securities Services)

1,836

2.73

The Shiga Bank, Ltd.

1-38, Hamamachi, Otsu-shi, Shiga

1,823

2.71

Mitsubishi UFJ Trust and Banking
Corporation

1-4-5, Marunouchi, Chiyoda-ku, Tokyo

1,525

2.26

The Dai-ichi Life Insurance Company,
Limited13-1, Yurakucho 1-chome, Chiyoda-ku,
Tokyo

1,366

2.03

Asahi Kasei Corporation

1-105 Jimbocho Kanda Chiyoda-ku Tokyo

1,241

1.84

Total

──────

21,79432.35

The Master Trust Bank of Japan, Ltd.
(Trust Account)
The Bank of Kyoto, Ltd.

(Note)

1

The Company is holding 4,322 thousand shares of treasury stock, which are not listed in the above list of major
shareholders.

2

The numbers of shares held by Japan Trustee Services Bank, Ltd. (Trust Account) and The Master Trust Bank ofJapan, Ltd. (Trust Account) are related to their respective trust services.

3

The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its trade name to MUFG Bank, Ltd. as of April 1, 2018.

4

The substantial shareholding report dated April 13, 2017, filed by Mitsubishi UFJ Financial Group, Inc., which is
publicly available, indicates that the shareholders in the below table are holding the respective number of the59Company’s shares as of April 6 , 2017. However, as we were unable to confirm the actual status of theshareholdings of these shareholders as of the end of fiscal year 2018, those shareholdings have not been reflectedin the above list. In addition, the content of such substantial shareholding report (the amended report) is as follows:
We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares wereconsolidated into one (1) share effective as of October 1, 2017. The number of shares held in the table below,
however, indicates the number of shares before such share consolidation.
Name of Shareholder

Number of Shares
held by Shareholder Shareholding Ratio(Thousands of(%)
shares)Address

The Bank of Tokyo-Mitsubishi UFJ,Ltd.

2-7-1, Marunouchi, Chiyoda-ku, Tokyo

6,590

4.60

Mitsubishi UFJ Trust and Banking
Corporation

1-4-5, Marunouchi, Chiyoda-ku, Tokyo

6,398

4.46

1-12-1, Yurakucho, Chiyoda-ku, Tokyo

522

0.36

13,5109.42

Mitsubishi UFJ International AssetManagement Co., Ltd.

Total

(7) Status of Voting Rights(i) Shares Issued
As of March 31, 2018
Category
Shares without voting rights
Shares with restricted voting rights –treasury stock, etc.
Shares with restricted voting rights –otherShares with full voting rights –treasury stock, etc.

Number of Shares(Shares)Number of Voting Rights(Units)Description

－

－

－

－

－

－

－

－

－

(Treasury stock)
Common stock
4,322,100

Shareholders haveunlimited standard
rights. The number ofshares constituting a unit－

is 100.
Shares with full voting rights – other
Shares less than one unit

Common stock
67,216,600
Common stock
150,342

Total number of shares issued
Total voting rights held by all
shareholders(Note)

71,689,042

672,166－

Same as above.

－－
672,166－

Same as above.

－

1 Shares under “Shares with full voting rights – other” include 200 shares held under the name of the Japan Securities
Depository Center. Also, 2 units of the voting right under the “Number of Voting Rights” are related to the shareswith full voting rights held under the name of the Japan Securities Depository Center.
2 Total number of shares issued decreased by 71,689,043 shares to 71,689,042 shares following the share consolidationof common stock of the Company pursuant to which two (2) shares were consolidated into one (1) share effective asof October 1, 2017.

60

(ii) Treasury Stock, etc.
As of March 31, 2018
Name of
Shareholder

Address

Number of
Shares held under
Own Name

Number of
Shares held under
the Name of
OthersTotal Number of
Shares held

Shareholding Ratio(%)(Treasury stock)

29 Nakajima-cho,

Wacoal Holdings
Corp.

Kisshoin, Minamiku, Kyoto

4,322,100－

4,322,100

6.03

Total

－

4,322,100－

4,322,100

6.03(Note)We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares wereconsolidated into one (1) share effective as of October 1, 2017.

61

2. 【Information on Acquisition etc. of Treasury Stock】<Class of shares>
Acquisition of shares of common stock under the condition set forth in Article 155, Item 3 of the Companies Act,acquisition of shares of common stock under the condition set forth in Article 155, Item 7 of the Companies Act andacquisition of shares of common stock under the condition set forth in Article 155, Item 9 of the Companies Act(1) Acquisition of Treasury Stock based on a Resolution of General Meeting of Shareholders
Not applicable.
(2) Acquisition of Treasury Stock based on a Resolution of Board of Directors
Acquisition pursuant to Article 155, Item 3 of the Companies Act
Number of Shares
Category(Shares)
Status of Resolution of Board of Directors (May 10, 2017)(Period for acquisition: From May 15, 2017 to December 31,
1,400,000
2017)

Total Amount (Yen)
4,000,000,000

Treasury stock acquired prior to the current fiscal year－－

Treasury stock acquired during the current fiscal year

1,240,700

3,998,101,500

159,300

1,898,500

11.4

0.0

－

－

11.4

0.0

Total number of remaining shares resolved and total amountUnexercised percentage as of the end of the current fiscal year(%)
Treasury stock acquired during the current period
Unexercised percentage as of the filing date of this report (%)(Note)We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares wereconsolidated into one (1) share effective as of October 1, 2017, as resolved by the 69th ordinary general meeting ofshareholders held on June 29, 2017, and the number of shares in the table above indicates the number of shares after
such share consolidation.
Number of Shares(Shares)Category
Status of Resolution of Board of Directors (May 15, 2018)(Period for acquisition: From May 21, 2018 to December 31,
2018)

Total Amount (Yen)

2,200,000

7,000,000,000

Treasury stock acquired prior to the current fiscal year－－

Treasury stock acquired during the current fiscal year－－

Total number of remaining shares resolved and total amount－－Unexercised percentage as of the end of the current fiscal year
(%)

－

－

149,200

488,565,500

93.2

93.0

Treasury stock acquired during the current period
Unexercised percentage as of the filing date of this report (%)(Note)The number of shares of treasury stock acquired during the current period does not include the number of shares oftreasury stock acquired during the period from June 1, 2018 until the filing date of this report.
Acquisition pursuant to Article 155, Item 9 of the Companies Act
Number of Shares
Category(Shares)

Total Amount (Yen)
Purchase unit price

Status of Resolution of Board of Directors (October 31, 2017)(Day for acquisition: October 31, 2017)

1,068

multiplied by the numberof shares subject topurchase

Treasury stock acquired prior to the current fiscal year－－

Treasury stock acquired during the current fiscal year

1,068

3,454,980

62

Total number of remaining shares resolved and total amount－－Unexercised percentage as of the end of the current fiscal year
(%)

－

－

Treasury stock acquired during the current period－－

Unexercised percentage as of the filing date of this report (%)－－(Note)

1 The Company purchased all fractional shares of treasury stock arisen as a result of the share consolidation conducted
on October 1, 2017 pursuant to Article 235, Paragraph 2 of the Companies Act, and Article 234, Paragraphs 4 and 5of the Companies Act.
2

The purchase unit price is the closing price of the Company’s common stock traded on the Tokyo Stock Exchange on
the date of purchase.

(3) Acquisition of Treasury Stock not based on a Resolution of Ordinary General Meeting of Shareholders or Board of
Directors
Acquisition pursuant to Article 155, Item 7 of the Companies Act
Number of Shares
Category(Shares)
Treasury stock acquired during the current fiscal year
Treasury stock acquired during the current period(Note)

1

Total Amount (Yen)

2,587

5,535,394

87

287,905

We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares wereconsolidated into one (1) share effective as of October 1, 2017, as resolved by the 69th ordinary general meeting ofshareholders held on June 29, 2017. Of the 2,587 shares of treasury stock acquired during the current fiscal year,
1,666 shares were acquired before such share consolidation, and 921 shares were acquired after such shareconsolidation.
2 The number of shares of treasury stock acquired during the current period does not include the number of sharesless than one unit purchased during the period from June 1, 2018 until the filing date of this report.

(4) Status of Disposition and Holding of Acquired Treasury Stock
Category

Current Fiscal Year

Current Period

Number of Total Disposition
Number of Total Disposition
Shares (Shares) Amount (Yen)
Shares (Shares) Amount (Yen)
Acquired treasury stock that was offered to subscribers
for subscription

－

－

－

－

Acquired treasury stock that was canceled－－

1,000,000

2,631,119,119

Acquired treasury stock that was transferred due tomerger, stock swap, or company split

－

－

－

－

Other (transfer of shares less than one unit perpurchase request)

6

19,770

－

－

5,000

13,105,000－－

Other (decrease as a result of share consolidation)

3,743,439－－－

Number of shares of treasury stock held

4,322,121

Other (exercise of stock acquisition rights)(Note)－

3,471,408－

1

We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares were2

consolidated into one (1) share effective as of October 1, 2017, as resolved by the 69th ordinary general meeting ofshareholders held on June 29, 2017. The number of shares under “Other (transfer purchase request per shares lessthan one unit)” for the current fiscal year (i.e., 6 shares) reflects such share consolidation.
The number of shares of treasury stock held during the current period does not include shares less than one unit
purchased or sold during the period from June 1, 2018 until the filing date of this report.

63

3. 【Dividend Policy】
Our basic policy on profit distribution to shareholders is to make stable distributions based on consideration of ourconsolidated performance, while seeking to increase our enterprise value through active investment aimed at higher
profitability and to increase net income per share.
Our basic policy is to distribute earnings twice a year in the form of interim and year-end dividends and the Board of
Directors is the decision-making body for distribution of earnings.
Based on such policy, we plan to distribute a year-end dividend of 36.00 yen per share as a distribution of earnings for thecurrent fiscal year. As a result, the annual cash dividend per share, including an interim dividend of 18.00 yen per share, willbe 54.00 yen for the current fiscal year.
Please note that we have conducted a share consolidation of common stock of the Company pursuant to which two (2)shares were consolidated into one (1) share effective as of October 1, 2017. As such, the annual cash dividend is a total of
the interim dividend, before such share consolidation, and the year-end dividend, after such share consolidation. Without
taking into consideration of the share consolidation, the year-end dividend per share will be 18.00 yen, and the annual
dividend amount per share will be 36.00 yen.
As for retained earnings, with the aim of improving our corporate value, we have actively invested in expanding new
points ofcontact with consumers for our domestic business and our overseas businesses. We also plan to use our retained earnings in
our strategic investments for maintaining competitiveness and reinforcing growth. With these efforts, we seek to benefit ourshareholders by improving future profitability. We also intend to acquire treasury stock in a flexible manner taking into
account the level of free cash flow as well as the market environment, and will make efforts to improve capital efficiency andreturn profits to our shareholders.
We also provide that the Company may distribute earnings subject to the resolution of the Board of Directors pursuant to
the provisions of Paragraph 1, Article 459 of the Companies Act.
(Note)The distribution of earnings for which record date belongs to the current fiscal year is as follows:
Total Dividend Amount
Dividend Amount per Share
Date of Resolution(Millions of yen)
(Yen)

October 31, 2017
Resolution of Board of Directors’ meeting
May 15, 2018
Resolution of Board of Directors’ meeting

2,446

18.00

2,425

36.00

4. 【Changes in Share Prices】(1) Highest and Lowest Share Prices in each of the Recent Five Fiscal Years
Fiscal Year

66th

67th

68th

69th

70th

Year EndMarch 2014

March 2015

March 2016

March 2017

March 2018

Highest (yen)

1,128

1,471

1,768

1,463

Lowest (yen)

938

992

1,220

970

(Note)

1
2

3,640(1,648)3,015(1,309)The share prices are market prices on the first section of the Tokyo Stock Exchange.
We have conducted a share consolidation of common stock of the Company pursuant to which two (2) shares wereconsolidated into one (1) share effective as of October 1, 2017. The share prices for 70th fiscal year indicate thehighest and lowest price after such share consolidation, and the share prices in brackets indicate the highest andlowest price before such share consolidation.

(2) Highest and Lowest Share Prices in each of the Recent Six Months
Month

October 2017

November 2017

December 2017

January 2018

February 2018

March 2018

Highest (yen)

3,380

3,495

3,640

3,605

3,350

3,170

Lowest (yen)

3,200

3,205

3,455

3,335

3,015

3,020

(Note)The share prices are market prices on the first section of the Tokyo Stock Exchange.
64

5. 【Directors and Audit & Supervisory Board Members】
Male:

12 persons

Female: 1 person (which accounted for 7.7% of the total number of directors and audit & supervisory board members)
Number of
Title

Representative
Director andChairmanName

Yoshikata
Tsukamoto

Date of Birth

Jan. 29, 1948

Business Experience and Position(s) and Office(s)Apr. 1972

Joined the Company

Nov. 1977

Director of the Company

Nov. 1981

Managing Director of the Company

Sep. 1984

Executive Vice President of the Company

Sep. 1984

Representative Director (acting)Jun. 1987

President and Director of the Company

Oct. 2005

Representative Director, President and Corporate Officer of

Office Shares Owned
Term (Thousands ofshares)

Note 1

287

Note 18Note 19

Wacoal Corp.
Apr. 2011

Representative Director and Chairman of Wacoal Corp.

Jun. 2018

Representative Director and Chairman of the Company (acting)Mar. 1975

Joined the Company

Apr. 2005

Corporate Officer/General Manager of Wing Brand Business
Department of the Company

Jun. 2006

Director and Managing Corporate Officer, General Manager ofWing Brand Business Department, of Wacoal Corp.

Apr. 2010
President andRepresentative
Director

Hironobu
Yasuhara

Director and Senior Managing Corporate Officer, and General
Manager of Wacoal Brand Business Department, of Wacoal

Dec. 28, 1951

Corp.
Apr. 2011

Representative Director, President and Corporate Officer of
Wacoal Corp.

Jun. 2011

Director of the Company

Jun. 2013

Senior Managing Director of the Company

Jun. 2016

Vice President and Director of the Company

Apr. 2018
Jun. 2018

Representative Director and Chairman of Wacoal Corp.(acting)President and Representative Director of the Company (acting)Apr. 1979
Apr. 2008

Joined the Company

Apr. 2010

Corporate Officer, Chief of Corporate Planning of Wacoal Corp.

Apr. 2011

Director, Corporate Officer, Chief of Corporate Planning ofGeneral Manager of Corporate Planning of the Company

Wacoal Corp.

Director andMasayaVice President

Wakabayashi

Jan. 6, 1956

Apr. 2013

Director, Managing Corporate Officer, Chief of Corporate

Apr. 2014

Planning of Wacoal Corp.
Director, Managing Corporate Officer, Supervisor of
Administration of Wacoal Corp.

Jun. 2014

Managing Director and Supervisor of Group Business
Management of the Company

Jun. 2016

Vice President and Director and Supervisor of Group Business
Management of the Company

Jun. 2017

Vice President and Director and Supervisor of Group Business
Management and International Affairs of the Company (acting)Apr. 1981

Joined the Company

Apr. 2006

Business Administration Manager of Wing Brand Operation

Apr. 2011

Division of Wacoal Corp.
Corporate Officer and Manager of Personnel Division of Wacoal
Corp.

Apr. 2013

Director and Corporate Officer, and General Manager of
Personnel and Administration Division of Wacoal Corp.

Apr. 2014
Managing

Masashi

Director

Yamaguchi

Director and Managing Corporate Officer, and General Manager
of Personnel and Administration Division of Wacoal Corp.

Nov 26, 1957

Apr. 2015

Director and Senior Managing Corporate Officer in charge of
Administration, and General Manager of Personnel and
Administration Division of Wacoal Corp. (acting)Jun. 2015

Director in charge of Personnel and Administration of theCompany (acting)Apr. 2017

Director, Vice President Corporate Officer in charge of
Administration, and General Manager of Personnel andJun. 2017

Administration Division of Wacoal Corp. (acting)Managing Director and Superviser of Personnel and
Administration and Future Business of the Company (acting)

65

Note 1

2

Mar. 1984

Joined the Company

Oct. 2007

Manager of Business Management and Administration of
Wacoal Brand Operation Division of Wacoal Corp.

Director

Akira
Miyagi

Apr. 2011

Director and Deputy General Manager of Wacoal China Co.,Ltd.

Apr. 2014

General Manager of Corporate Planning of the Company

Oct. 18,1960

Note 1

2Note 1－

Note 1－

Note 1－

Note 440Note 3

3(acting)
Apr. 2017

Corporate Officer of Wacoal Corp.

Jun. 2018

Director of the Company (acting)

Aug. 1996

Launched and organized monthly haiku magazine Gekkan
HepburnJan. 2001

Member of “National Language Subdivision” of Council for
Cultural Affairs, Ministry of Education, Culture, Sports, Scienceand Technology

Dec. 2004
Director

MadokaMayuzumi

Member of “Council for the Promotion of Cultural Diplomacy”,
Cabinet Secretariat

Jul. 31, 1962

May. 2013

Member of “Forum to Realize Culture and Arts-Oriented
Nation” held by Minister of Education, Culture, Sports, Science

Apr. 2014

and Technology
Member of “Cultural Policy Subdivision” of Council for
Cultural Affairs, Ministry of Education, Culture, Sports, Scienceand Technology

Director

Shigeru
Saito

Jan 26, 1957

Apr. 2014

Advisor of the Company

Jun. 2015

Director of the Company (acting)Nov. 1979

Joined TOSE CO., LTD.
General Manager of Development Department

Oct. 1985

Director of TOSE CO., LTD.

Feb. 1987

Representative Director and President of TOSE CO., LTD.

Sep. 2004

Representative Director and President, and CEO of TOSE CO.,LTD.

Dec. 2015

Appointed Representative Director and Chairman, and CEO of
TOSE CO., LTD. (acting)Jun. 2017

Director of the Company (acting)Apr. 1979

Joined Shiseido Co., Ltd.

Apr. 2002

General Manager of Product Commercialization, Planning
Department, Shiseido Co., Ltd.

Apr. 2008

Corporate Officer, General Manager of Technical Department ,Shiseido Co., Ltd.

Director

Tsunehiko
Iwai

May 28, 1953

Jun. 2014

Director, Corporate Executive Officer in charge of Research &Development, Production and Technical Affairs, Shiseido Co.,
Ltd.

Jan. 2016

Representative Director, Executive Vice President Chief
Technology & Innovation Officer, Shiseido Co., Ltd.

Standing Audit& Supervisory
Board Member

TomokiNakamura

Jan 22, 1958

Mar. 2018

Senior Advisor, Shiseido Co., Ltd. (acting)Jun. 2018

Director of the Company (acting)Apr. 1980

Joined the Company

Oct. 2007

Accounting Manager of Wacoal Corp.

Apr. 2008

Accounting Manager of the Company

Apr. 2012

Audit & Supervisory Board Member/Secretariat of Board ofAudit & Supervisory Board Members

Jun. 2012

Audit & Supervisory Board Member of the Company (acting)Apr. 1981

Joined the Company

Apr. 2008

Materials Control Manager of Technology/Production Divisionof Wacoal Corp.

Apr. 2009
Standing Audit& Supervisory
Board Member

Production Control Manager of Technology/Production Divisionof Wacoal Corp.

Kiyotaka
Hiroshima

Jan 4, 1958

Apr. 2010

Corporate Officer and General Manager ofTechnology/Production Division of Wacoal Corp.

Apr. 2011

Director and Corporate Officer and General Manager ofTechnology/Production Division of Wacoal Corp.

Apr. 2015

Director and Corporate Officer and Supervisor ofTechnology/Production of Wacoal Corp.

Jun. 2015

Audit & Supervisory Board Member of the Company (acting)66

Audit &Supervisory

Hiroshi ShiraiOct. 21, 1953

Board Member

Nov. 1977

Joined Pricewaterhouse

Aug. 1982

Registered as Certified Public Accountant

Jul. 1992

Joined Aoyama Audit Corporation

Aug. 2007

Joined Deloitte Touche Tohmatsu

Jun. 2010

Vice Chairman of The Japanese Institute of Certified Public
Accountants Kinki Chapter

Sep. 2011

Left Deloitte Touche Tohmatsu

Oct. 2011

Established Shirai public accounting firm, Managing Partner

Note 3

1Note 5－Note 6－(acting)
Jun. 2013

Resigned from position as Vice Chairman of The JapaneseInstitute of Certified Public Accountants Kinki Chapter

Audit &
Supervisory
Board Member

Mitsuhiro
Hamamoto

Apr. 18, 1970

Jun. 2015

Audit & Supervisory Board Member (acting)Oct. 2000
Oct. 2000

Admitted to the Bar
Joined the Law Office of Tadashi Yamada

Oct. 2004

Joined the Kikkawa Law Office

Apr. 2008

Partner at the Kikkawa Law Office (acting)Jun. 2017

Audit & Supervisory Board Member of the Company (acting)Apr. 1977

Joined The Bank of Tokyo, Ltd. (current “MUFG Bank, Ltd.”)

Jun. 2004

Corporate Officer, General Manager of Corporate Banking
Group No.1, Corporate Banking Division No.4, The Bank ofTokyo Mitsubishi, Ltd. (current “MUFG Bank, Ltd.”)

May. 2005

Corporate Officer, Manager of New York Branch

Apr. 2008

Managing Corporate Officer, General Manager of Corporate
Banking Group, Nagoya Branch, The Bank of Tokyo -Mitsubishi

Audit &
Supervisory
Board Member

UFJ, Ltd. (current “MUFG Bank, Ltd.”)
MinoruShimadaFeb. 22,1955

Jun. 2010

Representative Director and Vice President, SOTSU
CORPORATION

Jun. 2011

Representative Director and President, NAIGAI Construction
Co., Ltd.

Jun. 2012

Representative Director and President, SOTSU
CORPORATION
Representative Director and President, Sotsu Amenity Service
Corporation (acting)Jun. 2018

Director and Chairman, SOTSU CORPORATION
Audit & Supervisory Board Member of the Company (acting)
Total(Note)

1
2
3
4
5
6
7

The term of office of a Director is one year from the conclusion of the Ordinary General Meeting of Shareholders
held on June 28, 2018.
Directors Ms. Madoka Mayuzumi, Mr. Shigeru Saito and Mr. Tsunehiko Iwai are Outside Directors.
The term of office of an Audit & Supervisory Board Member is four years from the conclusion of the Ordinary
General Meeting of Shareholders held on June 26, 2015.
The term of office of an Audit & Supervisory Board Member is four years from the conclusion of the Ordinary
General Meeting of Shareholders to be held on June 29, 2016.
The term of office of an Audit & Supervisory Board Member is four years from the conclusion of the Ordinary
General Meeting of Shareholders to be held on June 29, 2017.
The term of office of an Audit & Supervisory Board Member is four years from the conclusion of the Ordinary
General Meeting of Shareholders to be held on June 28, 2018.
Audit & Supervisory Board Members Mr. Hiroshi Shirai, Mr. Mitsuhiro Hamamoto and Mr. Minoru Shimada are
Outside Audit & Supervisory Board Members.

67

356

6【Corporate Governance, etc.】(1) 【Status of Corporate Governance】
Fundamental Policies for Corporate Governance:
The purpose and basic policy of our group’s corporate governance is to continuously enhance our corporate
value by increasing transparency and securing the fairness and independence of our corporate management to establish
mutual confidence relationship with all stakeholders, including our shareholders, customers, employee, client andcommunity.
(i)

System of Corporate GovernanceA.

Outline of System of Corporate Governance
We, as a holding company, use an “Audit & Supervisory Board Member system” for the purpose of ensuring
the corporate governance of group companies, and have both the Board of Directors and the Audit & Supervisory Board
monitor and supervise the management operating the Company.
Our Board of Directors is composed of eight Directors (including three Outside Directors) and one of them isfemale. Their roles are to supervise and make business judgments from an objective perspective. We have beenworking to enhance the supervisory function and to improve the decision-making process. Further, the term of office ofeach Director is one year for the purpose of clarifying the responsibilities of our management, and establishing amanagement system that may respond promptly to changes in the business environment.
In addition to the supervisory function of the Board of Directors, the Audit & Supervisory Board is composedof five Audit & Supervisory Board Members (including three Outside Audit & Supervisory Board Members). Theirfunction is to monitor and supervise our management.
We have designated the above-stated three Outside Directors and three Outside Audit & Supervisory Board
Members (i.e., six persons in total) as our independent officers.
We, as a holding company, seek to govern our group companies with the management, audit, and supervisorysystems as set out below:--

The Board of Directors shall hold a regular Board of Directors’ meeting every month and also hold a special
Board of Directors’ meeting from time to time, as necessary, in accordance with the rules of the Board of
Directors, to make decisions on matters concerning important business, such as management policy andmanagement strategy and matters stipulated by laws or ordinances or our Articles of Incorporation. Further,
we have established the “Group Management Meeting” comprising our Directors and major management
members, which considers matters concerning the management strategy of our group and other importantmanagement issues and conducts preliminary reviews of matters for review by our Board of Directors.
With respect to the nomination, promotion, and remuneration of Directors, an “Executive Compensation
Advisory Committee” which is chaired by Director and Supervisor of Group Business Management andwhich consists of four members (including an Outside Director) and one secretariat, has been established.
The Executive Compensation Advisory Committee discusses about the nomination, promotion andremuneration of Directors, and reports the resolved matters to the President and Representative Director.
This Committee operates with a high degree of transparency and fairness by holding a meeting four times ayear and by resolving matters by the unanimous approval of all members.
The following diagram illustrates the outline of our corporate governance system:

68

69

B.

Reason for Adoption of Corporate Governance System
The Company has adopted a governance system by a “Board of Directors” composed of Directors who areexperts in each business area and Outside Directors with diverse careers, and an “Audit & Supervisory Board” including
Outside Audit & Supervisory Board Members. We, as a holding company, believe that this governance system is
effective in supervising and auditing the execution of duties at our group companies and to realize and maintain highquality management. For the foregoing reason, we have adopted our current governance system.

C.

Status of Improvement of Internal Control System
Our fundamental philosophy toward the internal control system and the status of improvement thereof, detailsof which have been determined at the Board of Directors’ meetings, are as follows:＜System to Ensure Appropriate Business Conduct＞(System to ensure that execution of duties by Directors and/or employees is in compliance with laws and regulations
and the Articles of incorporation)
To ensure that all Directors and employees of the business group comprised of the Company and its subsidiaries(“the Wacoal Group”) comply with laws and regulations and the Articles of Incorporation and conduct business-based on sound social norms, we have enacted the Wacoal Code of Ethics and the Corporate Ethics: Wacoal
Standards of Conduct.
In order to improve our system of compliance, we have established a Corporate Ethics and Risk Management
Committee, for which our Representative Director and President acts as administrative manager and the Directorof Supervisor of Group Business Management acts as chairman, which will consider any compliance issues
which may have a material impact on the Wacoal Group, enhance awareness and enlightenment on corporate
ethics and effectively promote control of any management risks on the Wacoal Group. The Management
Planning Department shall act as organizer, and shall be responsible for the corporate ethics and risk-

management related to the Wacoal Group.
We have established a system under which our legal/compliance department could be promptly notified if thefact that a Director and/or employee of the Wacoal Group may have violated the “Wacoal Code of Ethics” or the“Corporate Ethics: Wacoal’s Code of Conduct”, or any other compliance issues is found. We have alsoestablished an internal alerting system (corporate ethics hotline to the legal/compliance department and a lawfirm). After being notified and/or alerted, the legal/compliance department conducts an investigation andformulates preventive measures after discussions with the related department. If the issue is critical, thelegal/compliance department will refer the matter to the Corporate Ethics and Risk Management Committee and-will report the results of its deliberation to the Board of Directors and/or Audit & Supervisory Board.
The Corporate Ethics: Wacoal Standards of Conduct prescribes that Directors, and employees shall firmly
refuse to comply with demands of antisocial forces. In order to handle unjust demands of antisocial forces, we
cooperate with outside specialized institutions, collect and/or control information related to antisocial forces andare building an internal system.

(System concerning the Storage and Management of Information related to Execution of Duties by Directors)
With the approval of the Board of Directors, we have enacted the Document Management Rules pursuant towhich we store the following documents (including electromagnetic records; hereafter the same) along with any
related materials:
Minutes of the General Meeting of Shareholders, minutes of the Board of Directors’ meetings, minutes of
the Group Management meetings, documents for which a Director is the final decision maker, and anyother documents prescribed in the Document Management Rules.
-

The retention period and the place for storage of the documents prescribed in the preceding paragraph shall be
subject to the Document Management Rules, but such retention period shall be at least ten years. The Directors
and Audit & Supervisory Board Members shall have access to these documents at all times.

(Rules and Other Systems Concerning Risk Management of Losses)-

In order to understand the management risk within the Wacoal Group in general and to improve and/or
strengthen our risk management system, we have established the Corporate Ethics and Risk Management
Committee, for which our Representative Director and President acts as administrative manager and the Directorof Supervisor of Group Business Management as Chairman. The Management Planning Department shall act as
the organizer.
70

-

-

The Corporate Ethics and Risk Management Committee prescribes risk management rules, subject to theapproval of the Board of Directors, which form the basis for our risk management system. The Corporate Ethics
and Risk Management Committee clarifies the responsibilities by risk category pursuant to these rules, andformulates a risk management system that thoroughly and/or comprehensively controls potential risk within the
Wacoal Group.
The Corporate Ethics and Risk Management Committee regularly reports on the operations of the Wacoal
Group’s risk management system to the Board of Directors.

(System to Ensure Effective Execution of Duties by Directors)
In order to enhance appropriate decision-making by our Directors, we will appoint several independent Outside
Directors.
--

We will formulate a medium-term management plan to be shared by the Directors and/or employees within the
Wacoal Group and will direct and confirm courses of action and business targets in the mid to short term that areconsistent with such plan.
We will follow the business results of each Wacoal Group company on a monthly basis and report back to theBoard of Directors. In addition, by holding “Quarterly Business Results Review Committee” and “Group
Strategy Committee”, we will confirm the business results and the implementation of measures and policies,
consider measures in the event targets are not achieved, and review such targets, as may be necessary.

(System to Ensure Appropriate Business Conduct within Group Companies)--

We have enacted our Group Management Rules, which prescribe basic policies regarding the management ofGroup companies and matters to be decided by our Board of Directors, as well as matters to be reported to theCompany and manage our Group companies in accordance with the rules.
We conduct any intercompany transaction fairly in compliance with laws and regulations, accounting principles
and the tax system.
Our audit office will conduct internal audits, including an audit of the establishment and/or operation of ourcompliance system and risk management system, within the group companies and will report the results of its
audits to the Board of Directors and appropriate departments and give guidance and/or advice related to theabove group companies to ensure the appropriate conduct of business.

-

We adopt a corporate officer system under which we seek to build an appropriate and efficient management
system which clearly defines the delegation of authority and responsibilities in major subsidiaries.

-

Our foreign subsidiaries will comply with the laws and regulations of their respective home countries and will
adopt a system that is in line with our policies to the extent reasonable.

(Matters Concerning Assistants to Audit & Supervisory Board Members)-

Audit & Supervisory Board Members may appoint employees of the Company as their assistants who are toassist the duties of the Audit & Supervisory Board Members.
Such assistants shall be full-time employees and the Audit & Supervisory Board Members will be consulted
regarding the appointment, evaluation, relocation and discipline of such assistants as well as other related
matters, and their opinions will be respected to ensure the effectiveness and independence of such assistants.

(Reporting System of Directors and Employees to the Audit & Supervisory Board Members and Other Reporting
System to Audit & Supervisory Board Members)
Directors of the Wacoal Group will promptly report to the Audit & Supervisory Board Members if they become--aware of a material fact that violates the applicable laws and regulations and/or our Articles of Incorporation,
misconduct or a fact that may cause significant damage to any company of the Wacoal Group.
Employees of the Wacoal Group may directly report to the Audit & Supervisory Board Members if they becomeaware of a material fact that violates the applicable laws and regulations and/or our Articles of Incorporation,
misconduct or a fact that may cause significant damage to any company of the Wacoal Group. Any employee
who makes such report will not be at a disadvantage for the reason of making such report.
Through the reporting of the following matters in addition to statutory matters to the Audit & Supervisory Board
Members by Directors and employees of the Wacoal Group, we strive to have the Audit & Supervisory Board
Members audit conducted effectively.
Matters referred to the Group Management Meeting
Monthly and quarterly group management conditions
71

Results of internal audits
The condition of our internal reporting to our internal alert system
Other significant matters(Other Systems to Ensure Effective Audit by the Audit & Supervisory Board Members)
The majority of the Audit & Supervisory Board Members will be independent Outside Audit & Supervisory
Board Members to enhance the transparency and neutrality of management.
--

The Audit & Supervisory Board Members may order employees who belong to the audit office to perform any
tasks that are required to provide audit services. In addition, the Audit & Supervisory Board Members may
request the Company for reimbursement of expenses incurred for performing their duties.
Audit & Supervisory Board Members will attend meetings of the Board of Directors and may also attend otherprimary meetings of the Wacoal Group.
The Audit & Supervisory Board Members will regularly meet with the audit office and the Accounting Auditor
to receive reports and to exchange opinions.
The Audit & Supervisory Board may consult legal counsel, certified public accountants, consultants, or otheroutside advisers as it deems necessary.

< Outline of Operation of our “System to Ensure Appropriate Business Conduct>(System to ensure that execution of duties by Directors and/or employees is in compliance with laws and regulations
and the Articles of Incorporation)--

We have a Compliance Committee which specifically establishes and operates our compliance system. The
Compliance Committee held a meeting each quarter and discussed and reviewed awareness of compliance andmatters reported to us through the internal alert system.
Our legal/compliance department continued to provide level-specific group education and e-learning programs

as part of our educational activities for our employees. We have also worked on awareness activities andfulfilling the internal alert system for our foreign group companies.
(System concerning the Storage and Management of Information related to Execution of Duties by Directors)
Documents prescribed in the Document Management Rules have been properly stored in accordance with theDocument Management Rules and the Directors and Audit & Supervisory Board Members have access to these
documents on a timely basis.
(Rules and Other Systems Concerning Risk Management of Losses)
The Corporate Ethics and Risk Management Committee assessed risks, monitored the implementation of-

measures taken, and reported to the Board of Directors on a quarterly basis.
In April 2017, we launched a project to promote CSR-based procurement to formulate and establish an ethicalprocurement structure and in October 2017, established “Wacoal Group CSR-based Procurement Guidelines” as
our group guidelines, which include the promotion of business transactions with business enterprises thatemphasize attention to social needs including human rights, labor practices, environment and ethics.

(System to Ensure Effective Execution of Duties by Directors)--

We engage in highly transparent decision-making by appointing three independent Outside Directors among oureight Directors. In addition, “Criteria for Appointment of Officers” and “Criteria for Appointment of Outside
Officers (to ensure independence)” were newly stipulated in April, 2015.
We held discussions and prepared a policy for Wacoal Group’s plan for fiscal year 2019.
We held meetings of the “Quarterly Business Results Review Committee” and “Group Strategy Committee’ on
a quarterly basis and confirmed and reviewed the business results and implementation of measures.

(System to Ensure Appropriate Business Conduct within Group Companies)-

Matters to be decided and reported by our subsidiaries are appropriately managed in accordance with the GroupManagement Rules.

-

Our audit office develops an audit plan for each fiscal year and conducts audits on the operation and internal
controls of the Company and our domestic and overseas subsidiaries.

72

(Matters Concerning Assistants to Audit & Supervisory Board Members)-

Our audit office is currently assisting the duties of the Audit & Supervisory Board Members upon their requestfrom time to time. Audit & Supervisory Board Members have not requested or appointed any assistant for theirduties.

(Reporting System of Directors and Employees to the Audit & Supervisory Board Members and Other Reporting
System to Audit & Supervisory Board Members)-

The Audit & Supervisory Board Members attended primary meetings and received reports on matters that werediscussed and on the management condition, and also received reports, from time to time, on the results ofinternal audits and matters reported through the internal alert system.

(Other Systems to Ensure Effective Audits by Audit & Supervisory Board Members)
-

-

D.

We enhance the effectiveness of audit by appointing three independent Outside Audit & Supervisory Board
Members among the five Audit & Supervisory Board Members.
The Company reimburses any and all expenses incurred by the Audit & Supervisory Board Members for
performing their duties.
The Audit & Supervisory Board Members conducted hearings with the Directors and visited our domestic andoverseas subsidiaries to conduct audits. In addition, the Audit & Supervisory Board Members presided at“Audit & Supervisory Board Group Meetings” and received periodic reports from the audit & supervisory board
members of the domestic subsidiaries.
The Audit & Supervisory Board Members have, regularly and whenever necessary, exchanged information andopinions with the Accounting Auditor and the audit office.

Status of Accounting Audit

An accounting audit agreement has been executed between the Company and Deloitte Touche Tohmatsu LLC(“Tohmatsu”) pursuant to the Companies Act and the Financial Instruments and Exchange Act. There are no special
relationships between the Company and the said accounting firm and any of their partners who have been engaged in
the audit of the Company. Also, the said accounting firm takes precautionary measures not to have any of its
engagement partners participate in the audit of the Company for any longer period than the prescribed maximum period.
The names of the certified public accountants who were engaged in the audit of the Company and the composition of
the assistants for the audit services for this fiscal period are as follows:
Names of the certified public accountants who were engaged in the audit:
Designated Limited Liability Partners and Managing Members: Wakyu Shinmen, Hiroaki Sakai,
Seiichiro NakashimaComposition of the assistants for the audit services:
11 certified public accountants, 6 persons who passed the certified public accountant examination and
15 other persons
E.

Matters Concerning Limitation of Liability Agreements with Outside Directors and Outside Audit & Supervisory
Board Members
Pursuant to the provisions of Paragraph 1, Article 427 of the Companies Act and our Articles ofIncorporation, the Company has executed an agreement with its Directors (excluding executive directors, etc.) and
Audit & Supervisory Board Members to limit their liability for damages as stipulated in Paragraph 1, Article 423 of theCompanies Act.
The maximum amount of liability under such agreement is the minimum amount as provided by laws andregulations.

F.

Number of Directors
Our Articles of Incorporation prescribe that the number of Directors of the Company shall be not more thaneight.

G.

Decision-Making Body for Distribution of Earnings, etc.
Our Articles of Incorporation prescribe that matters set out in each Item of Paragraph 1, Article 459 of theCompanies Act (including the matters concerning distribution of earnings) shall be determined by a resolution of the73

Board of Directors, unless otherwise provided for in any laws or regulations, for the purpose of performing an
expeditious profit return to our shareholders.
H.

Requirement for Appointment of Directors
Our Articles of Incorporation prescribe that resolutions to appoint Directors shall be made by a majority voteof the voting rights of shareholders present at a General Meeting of Shareholders, where such shareholders present shallhold shares representing one-third or more of the voting rights of all shareholders who are entitled to exercise suchvoting rights and that resolutions to appoint Directors shall not be adopted by cumulative voting.
I. Requirement for Special Resolutions at General Meeting of Shareholders
Our Articles of Incorporation prescribe that a resolution as stipulated in Paragraph 2, Article 309 of theCompanies Act shall be adopted by a two-thirds majority of the voting rights held by the shareholders present at theGeneral Meeting of Shareholders, who shall represent one-third or more of the total number of voting rights of theshareholders who are entitled to exercise such voting rights. The purpose of this provision is to more surely secure thequorum for a special resolution at any General Meeting of Shareholders.
(ii)

Status of Audit & Supervisory Board Members and Internal Audit Department
Our Audit & Supervisory Board Members and internal audit department (audit office) have a regular meetingfor reporting and confirmation once a month. The main purpose of such meeting is to report the discussions at major
meetings at which our Audit & Supervisory Board Members attended, activities conducted by our audit office, and othermatters. We have implemented an audit system allowing the sharing of documents and information necessary for audit
so that audit working papers are mutually exchanged and confirmed by our Audit & Supervisory Board Members andaudit office, and the audit can be performed more efficiently and effectively through alliance between our Audit &Supervisory Board Members and audit office.
The number of staff of our internal audit department (audit office) as of June 28, 2018, was 8.
Further, our Audit & Supervisory Board Members and Accounting Auditor have regular meetings fordiscussion six times a year. The purpose of such discussion is mainly to report and confirm the plan and status of theaudit and to exchange opinions on the management. In addition, they have a meeting from time to time as necessary.
Standing Audit & Supervisory Board Member Mr. Tomoki Nakamura has many years of accounting
experience at our Accounting Department with a respectable degree of finance and accounting knowledge. Also, Audit& Supervisory Board Member Mr. Hiroshi Shirai is qualified as a certified public accountant with a considerable degreeof finance and accounting knowledge as well.

(iii)

Outside Directors and Outside Audit & Supervisory Board Members
We have three Outside Directors and three Outside Audit & Supervisory Board Members.
We have elected those persons playing an active role widely in the field of arts and culture in Japan andoverseas and persons having extensive knowledge and experience as executives to our Outside Directors, and each ofsuch persons takes a role in improving the appropriateness of the decision made by the Board of Directors by giving
objective and independent advice based on their long careers in each business area and extensive professional
knowledge. Also, we have elected those persons who have experiences as business administrators in financial services,
independent attorneys at law or independent certified public accountants having a considerable degree of finance andaccounting knowledge, to our Outside Audit & Supervisory Board Members. Each Outside Audit & Supervisory Board
Member conducts a strict audit on the legality of Directors’ decision making and performance of their businesses from atechnical perspective by maintaining high levels of independence.
The Company prescribes “Criteria for Appointment of Officers” and “Criteria for Appointment of Outside
Officers (that ensures independence)” for appointing an Outside Director and an Outside Audit & Supervisory Board
Member.
Upon the appointment of an Outside Director or an Outside Audit & Supervisory Board Member, theExecutive Compensation Advisory Committee will submit a list of candidates based on the following criteria to the
President and Representative Director, and the Board of Directors will nominate the candidates based on such list andsubmit them as an agenda item for the General Meeting of Shareholders.
A candidate with superior character and knowledge and is mentally and physically healthy;-

A candidate pursues a law-abiding spirit;
A candidate has comprehensive experience in business operation, company management, legal
community, administration, accounting, education or culture and art;74-

A candidate is not in violation of the “Criteria for Appointment of Outside Officers (that ensures
independence)” separately prescribed by the Company;

A candidate is not currently holding a position as an officer of 4 or more listed companies;
By appointing such candidate, Board of Directors and the Audit & Supervisory Board will each have abalanced knowledge, experience and expertise that ensures diversity;
We also believe that an Outside Director and an Outside Audit & Supervisory Board Member shall maintain-an independent position so that each will not cause any conflict of interest with general shareholders. From this aspect,
the Company shall appoint a candidate for an Outside Officer who does not fall under any of the following items:
1. Has held a position to execute duties at any of our group companies;
2. A major shareholder holding the shares of the Company under its name or other name, is equal to or higher
than 5% as percentage of voting rights; in case such major shareholders is a legal entity or an associationsuch as general partnership (“Entities”), a candidate who is holding a position to execute duties at such
Entities;
3. A candidate who:
- is the major client of our group or considers our group as the candidate’s major client; in case suchcandidate is an Entity, a candidate who is holding a position to execute duties at such Entity;- is the major lender of our group; in case such lender is an Entity, a candidate who is holding a position to
execute duties at such Entity;- is holding a position to execute duties at lead manager securities company; or- is holding a position to execute duties at any Entity in which our group hold shares, whose percentage ofvoting rights is equal to or greater than 5%.
4. A certified public accountant who works at an audit firm, which is the Accounting Auditor of our group;
5. Any legal counsel, accountant, tax accountant, patent attorney, consultant or other expert who receives large
amount of monies or other assets from our group; in case such candidate is an Entity, an expert who works
at such Entity;
6. Anyone who receives large amount of donation from our group; in case such candidate is an Entity, acandidate who is holding a position to execute duties at such Entity;
7. A candidate who is holding a position to execute duties at other companies having a relationship involving
mutual appointment of outside officers;
8. A spouse or second-degree relative of a person (limited to those significant) who falls under any of theitems under 1 through 7 above;
9. A candidate who used to fall under any of the items under 1 through 8 above during the past three years;
10. A candidate who is deemed to have a special circumstance where a possible conflict of interest with generalshareholders of the Company may arise.
It should be noted, however, that a candidate who falls under any of the items under 2 through 9 above, but
who fulfills the requirements of an outside officer under the Companies Act, and if the Company deems it appropriate
for such candidate to be appointed as an outside officer, may exceptionally become a candidate for an outside officer bydescribing the reasons of the Company for making such judgment.
For our Outside Directors, the Management Planning Department hands out documents setting out the
proposals presented to the Board of Directors’ meetings in advance and gives prior explanations on important matters tothem. For Outside Audit & Supervisory Board Member, Standing Audit & Supervisory Board Member does it.
One of our Outside Audit & Supervisory Board Members holds 1,000 shares of common stock of theCompany. Other than the foregoing, there are no special interests between our Outside Directors or Outside Audit &Supervisory Board Members and the Company.
The reasons for the election of our Outside Directors and Outside Audit & Supervisory Board Members are as
follows:
Title
Outside Director

Name
Madoka Mayuzumi

Reasons for Election
Ms. Mayuzumi plays an active role as a haiku poet in the field of arts andculture in Japan and overseas. While serving as Advisor of the Company from
April 2014, she has provided advice that addresses social challenges andeducational training for employees of the Company and Wacoal Corp. We
75

Outside Director

Shigeru Saito

Outside Director

Tsunehiko Iwai

Outside Audit &Hiroshi Shirai

Supervisory Board
MemberOutside Audit &Mitsuhiro Hamamoto

Supervisory Board
MemberOutside Audit &Supervisory Board
MemberMinoru Shimada

expect that, with her knowledge and experience, she will contribute to theCompany’s management which respects diversity.
Although Ms. Mayuzumi has never been involved in the Company’s
management other than by way of serving as an Outside Director or Outside
Audit & Supervisory Board Member in the past, we believe that she will beable to perform her duties appropriately for the above-stated reasons.
Also, because she meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated her as an independent
officer.
Mr. Saito currently serves as the Representative Director and Chairman at
another company, and has many years of experience and knowledge as abusiness manager. We believe that he is qualified to be an Outside Director tofurther strengthen the supervisory function of the Company management.
Also, because he meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated him as anindependent officer.
We believe that Mr. Iwai is qualified to be an Outside Director to further
strengthen the supervisory function of the Company management, as he has
extensive knowledge and experience as management, as well as specialized
knowledge in the fields of research & development, production andtechnology.
Also, because he meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated him as anindependent officer.
We believe that Mr. Shirai is qualified to be our Outside Audit & Supervisory
Board Member, as he has knowledge and experience in accounting and finance(including U.S. accounting standards) as a certified public accountant.
Mr. Shirai worked at Deloitte Touche Tohmatsu LLC, our accounting auditor,
from August 2007 to September 2011, but he was never involved in the audit
services engaged for the Company during such period. It has been six years
and eight months since Mr. Shirai left Deloitte Touche Tohmatsu LLC.
Also, because he meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated him as anindependent officer.
We believe that Mr. Hamamoto is qualified to be our Outside Audit &Supervisory Board Member, as he has legal knowledge and great store ofexperience of business and commercial issues as an attorney at law.
Also, because he meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated him as anindependent officer.
We believe that Mr. Shimada is qualified to be our Outside Audit &Supervisory Board Member, as he has years of experience in the financial
industry and also has extensive experience and expertise in different industrial
sectors.
Also, because he meets the eligibility requirements which the Company
prescribes under “Criteria for Appointment of Outside Officers (to ensure
independence)” and because there are no concerns that any conflict of interest
with general shareholders may arise, we have designated him as anindependent officer.

76

(iv) Details of Remunerations Paid to Officers
A. Aggregate amount of remunerations, etc., paid to each category of officers, aggregate amount of remunerations, etc.,
by type thereof, as well as the number of relevant officers:
Aggregate
Aggregate Amount of Remunerations, etc., by Type Thereof
Amount of(Millions of yen)
Category of Officers
Remunerations,
Basic
Retirement
etc. (Millions ofStock Option
Bonus
Remuneration
Allowanceyen)
Directors(Excluding Outside
Directors)
Audit & Supervisory Board
Members(Excluding Outside Audit &Supervisory Board
Members)

297

198

41

57

－

4

36

36

－

－

－

2

46

46

－

－

－

8

Outside Oofficers(Note)

Number of
Relevant
Officers

As of March 31, 2018, the numbers of Directors, Audit & Supervisory Board Members, and Outside Officers
were four, two, and six, respectively. These numbers were inconsistent with the numbers described above
because the numbers described above include two Outside Officers who resigned as Director upon the close of
the 69th Ordinary General Meeting of Shareholders held on June 29, 2017.

B.

Aggregate amount, etc., of the consolidated remunerations, etc., of the person who receives 100 million yen or more
as remunerations, etc., on a consolidated basis:Amount of Consolidated Remunerations, etc., by Type
Aggregate
Thereof (Millions of yen)Amount ofConsolidated
Category of
Relevant
Name
Remunerations
Officers
Company
Basic
Retirement, etc.
Stock Option
Bonus
Remuneration
Allowance(Millions ofyen)
Yoshikata
TsukamotoC.

Director

WacoalHoldings
Corp.

115

21

29

－

Director

Wacoal Corp.

24

－

－

－

189

Details and Method of Determination of Policies for Determination of Amount of Remunerations, etc., Paid to
Officers or Method of Calculating such Amount
Our compensation system for officers is designed by the “Executive Compensation Advisory Committee,”whose members include an Outside Director, and therefore, such system is highly objective and transparent.
The remunerations paid to Directors under said system consists of “Basic Remuneration,” the amount of
which is fixed, and “Bonus,” which is linked to the business results of each fiscal year, as well as “Stock Option,” which
is linked to medium- and long-term business results. In the case of Outside Directors and Audit & Supervisory Board
Members who shall be in the position independent from the management, only “Basic Remuneration” is paid because
any remuneration linked to business results are not appropriate in such case.
The level of remuneration has been set according to the business results and scale of the Company, comparedwith other companies within the same industry or of the same scale.
The maximum annual amounts of the basic remuneration paid to Directors and Audit & Supervisory Board
Members were determined to be 350 million yen (excluding the amount paid as salaries for employees to the Directors
who concurrently serve as employees) and 75 million yen, respectively, by the resolution adopted at the 57th Ordinary
General Meeting of Shareholders held on June 29, 2005. The amount of bonuses was determined to be such amount as
is determined according to the business results of each fiscal year, which was resolved at each Ordinary General
Meeting of Shareholders held for the relevant year. Further, the maximum annual amount of stock options wasdetermined to be 70 million yen by the resolution adopted at the 60th Ordinary General Meeting of Shareholders heldon June 27, 2008.

77

The retirement allowance system for officers was abolished by the resolution adopted at the 57th Ordinary
General Meeting of Shareholders held on June 29, 2005.
(v)

Information on Shareholdings
The status of the shareholding by the Company is as follows:A.

Equity securities held for purposes other than pure investment (including unlisted shares):
Number of stock names:
Three stock names
Total amount recorded on the balance sheet:
6 million yen

B.

Stock name, number of shares, amount recorded in the balance sheet, and purpose of holding of listed equity
securities held for purposes other than pure investment are as follows:
Fiscal Year 2017
Specified investment stocks:
Amount Recorded in
Number of Shares
Stock Name
the Balance Sheet
Purpose of Holding(shares)(Millions of yen)

The Dai-ichi Life Insurance Holdings,
Inc.

2,100

4

Number of Shares(shares)Amount Recorded in
the Balance Sheet(Millions of yen)

2,100

4

Maintaining and enhancing business
transactions

Fiscal Year 2018
Specified investment stocks:
Stock NameThe Dai-ichi Life Insurance Holdings,
Inc.
(Note)

Purpose of Holding
Maintaining and enhancing business
transactions

The foregoing table shows the information of one specified investment stock held by the Company, although theamount recorded in the balance sheet as to such investment stock is not more than one-hundredth of the stated capitalof the Company.

C.

Total amount recorded in the balance sheet for the fiscal year 2017 and the fiscal year 2018, as well as the amountof dividends received, the gain/loss on sale, and the valuation gain/loss for fiscal year 2018 of equity securities held
for pure investment are as follows:
N/A.

D.

Stock names, number of shares, and the amount recorded in the balance sheet of equity securities, the purpose ofholding of which has been changed from pure investment to any other purpose other than pure investment:
N/A.
Stock names, number of shares, and the amount recorded in the balance sheet of equity securities, the purpose ofE.

holding of which has been changed from any other purpose other than pure investment to pure investment:
N/A.
We are a holding company. Shares held by Wacoal Corp., which is among the Company and our consolidated
subsidiaries and holds the largest amount of equity securities on the balance sheet (i.e., the balance sheet amount ofinvestment stocks) are as follows:A.

Equity securities held for purposes other than pure investment (including unlisted shares):
Number of stock names:
97 stock names
Total amount recorded in the balance sheet: 67,425 million yen

B.

Stock names, number of shares, amount recorded in the balance sheet, and purpose of holding of those listed equity
securities held for purposes other than pure investment of which the amount recorded in the balance sheet is morethan one-hundredth of the stated capital of the Company are as follows:78

Fiscal Year 2017
Specified investment stocks:
Number of Shares(Shares)Amount Recorded in
the Balance Sheet(Millions of yen)

3,520,500

10,286

Maintaining and enhancing transactions

Nissin Foods Holdings Co., Ltd.

575,100

3,548

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Kyocera Corporation

445,900

2,765

Maintaining and enhancing transactions

Aeon Co., Ltd.

1,535,261

2,494

Maintaining and enhancing business
transactions

Bank of Kyoto, Ltd.

2,849,985

2,311

Maintaining steady financial transactions

Kokuyo Co., Ltd.

1,509,400

2,165

Maintaining and enhancing transactions

Mitsubishi UFJ Financial Group, Inc.

2,885,850

2,019

Maintaining steady financial transactions

SCREEN Holdings Co., Ltd

217,179

1,778

Isetan Mitsukoshi Holdings Ltd.

1,315,769

1,607

Shimadzu Corporation

825,000

1,459

Aeon Financial Service Co., Ltd.

687,300

1,441

Heiwado Co., Ltd.

517,531

1,398

Horiba, Ltd.

230,000

1,373

2,312,040

1,320

Maintaining steady financial transactions

274,000

1,286

Maintaining steady financial transactions

1,000,000

1,201

Maintaining and enhancing transactions

Taisho Pharmaceutical Holdings Cp.,
Ltd.

132,000

1,193

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Shiseido Co., Ltd.

383,000

1,122

Maintaining and enhancing transactions

Chori Co., Ltd.

548,890

1,064

Maintaining and enhancing transactions

Nippon Shinyaku Co., Ltd.

175,000

992

Maintaining and enhancing regional
economy relationship

Toppan Printing Co., Ltd.

852,000

967

Maintaining and enhancing transactions

J. Front Retailing Co., Ltd.

541,388

893

Ezaki Glico Co., Ltd.

159,500

861

Mitsubishi UFJ Lease & Finance
Company Limited

1,320,000

732

Maintaining and enhancing transactions

Fukuyama Transporting Co., Ltd.

1,022,000

682

Maintaining and enhancing transactions

154,969

675

Maintaining and enhancing business
transactions

4,940,000

668

Maintaining and enhancing transactions

Stock NameKDDI Corporation

Shiga Bank, Ltd.
Tokio Marine Holdings, Inc.
Takara Holdings Inc.

Seven & i Holdings Co., Ltd.
Saha Pathana Inter-Holding PCL

79

Purpose of Holding

Maintaining and enhancing regional
economy relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing regional
economy relationship

Maintaining and enhancing business
transactions
Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Asahi Kasei Corporation

598,195

646

Maintaining and enhancing transactions

Tokyo Broadcasting System Holdings,
Inc.

310,700

617

Maintaining and enhancing transactions

Hisamitsu Pharmaceutical Co., Inc.

90,000572

Maintaining and enhancing transactions

H2O Retailing Corporation

310,759

556

Maintaining and enhancing business
transactions

NTT DoCoMo, Inc.

209,200

542

Maintaining and enhancing transactions

Aoyama Trading Co., Ltd.

141,500

540

Hankyu Hanshin Holdings, Inc.

120,200

435

Odakyu Electric Railway Co., Ltd.

197,500

427

Chuo Warehouse Co., Ltd.

381,300

412

Maintaining and enhancing transactions

Nissha Printing Co., Ltd.

147,000

387

Maintaining and enhancing transactions

Yomeishu Seizo Co., Ltd.

170,500

357

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Seino Holdings Co., Ltd.

283,000

353

Maintaining and enhancing transactions

Kintetsu Department Store Co., Ltd.

1,000,000

341

Maintaining and enhancing business
transactions

I.C.C INTERNATIONAL PCL

2,677,300

331

Maintaining and enhancing transactions

Nichikon Corporation

296,500

307

Ono Pharmaceutical Co., Ltd.

130,000

299

Marui Group Co., Ltd.

151,487229

IZUMI Co., Ltd.

45,648228

Matsuya Co., Ltd.

205,000

216

Sanyo Shokai Ltd.

1,000,000

165

Strategic information sharing

Fuji Company, Limited

62,600152

Maintaining and enhancing business
transactions

Dai Nippon Printing Co., Ltd.

116,000

139

Maintaining and enhancing transactions

Number of Shares(Shares)Amount Recorded in
the Balance Sheet(Millions of yen)KDDI Corporation

2,544,000

7,433

Mitsubishi UFJ Financial Group, Inc.

3,365,000

2,354

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Maintaining and enhancing regional
economy relationship
Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Stocks deemed to be held:
Stock Name

(Note)

Details of Rights
Authorization to give directions on theexercise of voting rights as toretirement benefit trust agreement
Authorization to give directions on theexercise of voting rights as toretirement benefit trust agreement

In specifying the major stock names in light of the amount recorded in the balance sheet, specified investment stocks
and stocks deemed to be held have not been combined.
80

Fiscal Year 2018
Specified investment stocks:
Number of Shares(Shares)Amount Recorded in
the Balance Sheet(Millions of yen)

3,520,500

9,563

Maintaining and enhancing transactions

Nissin Foods Holdings Co., Ltd.

575,100

4,244

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Bank of Kyoto, Ltd.

569,997

3,385

Maintaining steady financial transactions

Kokuyo Co., Ltd.

1,509,400

3,159

Maintaining and enhancing transactions

Aeon Co., Ltd.

1,539,247

2,923

Maintaining and enhancing business
transactions

Kyocera Corporation

445,900

2,677

Maintaining and enhancing transactions

Shiseido Co., Ltd.

383,000

2,609

Maintaining and enhancing transactions

Shimadzu Corporation

825,000

2,468

Maintaining and enhancing transactions

SCREEN Holdings Co., Ltd

217,179

2,119

Maintaining and enhancing regional
economy relationship2,885,850

2,011

Maintaining steady financial transactions

Horiba, Ltd.

230,000

1,895

Aeon Financial Service Co., Ltd.

687,300

1,680

Isetan Mitsukoshi Holdings Ltd.

1,315,769

1,544

Taisho Pharmaceutical Holdings Co.,Ltd.

132,000

1,380

Heiwado Co., Ltd.

517,531

1,331

Tokio Marine Holdings, Inc.

274,000

1,297

Maintaining steady financial transactions

4,940,000

1,293

Maintaining and enhancing transactions

175,000

1,246

Maintaining and enhancing regional
economy relationship

Shiga Bank, Ltd.

2,312,040

1,239

Maintaining steady financial transactions

Takara Holdings Inc.

1,000,000

1,181

Maintaining and enhancing transactions

Chori Co., Ltd.

548,890

1,151

Maintaining and enhancing transactions

J. Front Retailing Co., Ltd.

541,388

979

Maintaining and enhancing business
transactions

Fukuyama Transporting Co., Ltd.

204,400

959

Maintaining and enhancing transactions

Ezaki Glico Co., Ltd.

159,500

888

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Asahi Kasei Corporation

598,195

836

Maintaining and enhancing transactions

1,320,000

823

Maintaining and enhancing transactions

852,000

743

Maintaining and enhancing transactions

Stock NameKDDI Corporation

Mitsubishi UFJ Financial Group, Inc.

Saha Pathana Inter-Holding PCL
Nippon Shinyaku Co., Ltd.

Mitsubishi UFJ Lease & Finance
Company Limited
Toppan Printing Co., Ltd.

81

Purpose of Holding

Maintaining and enhancing regional
economy relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment
Maintaining and enhancing business
transactions

Hisamitsu Pharmaceutical Co., Inc.

90,000741

Maintaining and enhancing transactions

Seven & i Holdings Co., Ltd.

154,969

707

Maintaining and enhancing business
transactions

Tokyo Broadcasting System Holdings,
Inc.

310,700

701

Maintaining and enhancing transactions

H2O Retailing Corporation

310,759

604

Aoyama Trading Co., Ltd.

141,500

592

NTT DoCoMo, Inc.

209,200

568

Maintaining and enhancing transactions

Seino Holdings Co., Ltd.

283,000

554

Maintaining and enhancing transactions

Hankyu Hanshin Holdings, Inc.

120,200

474

Ono Pharmaceutical Co., Ltd.

130,000

428

Chuo Warehouse Co., Ltd.

381,300

425

Maintaining and enhancing transactions

Odakyu Electric Railway Co., Ltd.

197,500

425

Maintaining and enhancing business
transactions

Nissha Printing Co., Ltd.

147,000

419

Maintaining and enhancing transactions

Yomeishu Seizo Co., Ltd.

170,500

408

Kintetsu Department Store Co., Ltd.

100,000

383

2,677,300

366

Nichikon Corporation

296,500357

IZUMI Co., Ltd.

45,648331

Marui Group Co., Ltd.

151,487

328

Matsuya Co., Ltd.

205,000

309

Sanyo Shokai Ltd.

100,000232

YAGI & CO., LTD.

71,100177

Fuji Company, Limited

62,600141

Number of Shares(Shares)Amount Recorded in
the Balance Sheet(Millions of yen)KDDI Corporation

2,544,000

6,910

Mitsubishi UFJ Financial Group, Inc.

3,365,000

2,345

I.C.C INTERNATIONAL PCL

Maintaining and enhancing business
transactions
Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Maintaining and enhancing business
transactions
Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment

Building, maintaining and enhancing
cooperative and transactional relationship inbusiness deployment
Maintaining and enhancing business
transactions
Maintaining and enhancing transactions
Maintaining and enhancing regional
economy relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Strategic information sharing
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Stocks deemed to be held:
Stock Name

82

Details of Rights
Authorization to give directions on theexercise of voting rights as toretirement benefit trust agreement
Authorization to give directions on theexercise of voting rights as toretirement benefit trust agreement

C.

Total amount recorded in the balance sheet for the fiscal year 2017 and the fiscal year 2018, as well as the amount ofdividends received, the gain/loss on sale, and the valuation gain/loss for fiscal year 2018 of equity securities held for

D.

E.

(2)

pure investment are as follows:
N/A.
Stock names, number of shares, and the amount recorded in the balance sheet of equity securities, the purpose ofholding of which has been changed from pure investment to any other purpose other than pure investment:
N/A.
Stock names, number of shares, and the amount recorded in the balance sheet of equity securities, the purpose ofholding of which has been changed from any other purpose other than pure investment to pure investment:
N/A.
【Audit Fees】(i)【Fees to Certified Public Accountants】
Fiscal Year Ended March 31, 2017
Category
Fees for Audit Services(Millions of yen)

Fiscal Year Ended March 31, 2018

Fees for Nonaudit
Services(Millions of yen)

Fees for Audit Services(Millions of yen)

Fees for Nonaudit
Services(Millions of yen)

The Company

138

12

141

32

Consolidated
subsidiaries

14

－

14

－

Total

153

12

155

32

(ii)【Other fees】(Fiscal year ended March 31, 2017)
Wacoal International Corp., one of the Company’s consolidated subsidiaries, and its consolidated subsidiaries
paid 57 million yen as fees for audit services to Deloitte & Touche LLP, which belongs to the same network as theCompany’s certified public accountants, etc.
(Fiscal year ended March 31, 2018)
Wacoal International Corp., one of the Company’s consolidated subsidiaries, and its consolidated subsidiaries paid 60
million yen as fees for audit services to Deloitte & Touche LLP, which belongs to the same network as the Company’s
certified public accountant, etc.
(iii)【Description of nonaudit services provided to the Company】(Fiscal year ended March 31, 2017)
The Company pays fees to the accounting auditor or certified public accountants as compensation for the advice andguidance regarding the creation of Group Accounting Rules and Accounting Definition Glossary, which is out of thescope of the services that are set forth in Paragraph 1, Article 2 of the Certified Public Accountants Act.
(Fiscal year ended March 31, 2018)
The Company pays fees to the accounting auditor or certified public accountants as compensation for the advice andguidance regarding the creation of Group Accounting Rules and consulting services for CSR procurement activities,
which are out of the scope of the services that are set forth in Paragraph 1, Article 2 of the Certified Public AccountantsAct.
(iv)【Policy on determination of audit fees】
The Company determines the amount of audit fees to be paid to the certified public accountants, etc., taking into
account the number of days required for the audit, the characteristics of services, and other factors.

83

V. 【Financial Information】
1. 【Consolidated Financial Statements】
Consolidated Balance Sheets
March 31, 2018 and 2017

Millions of Yen
2018
2017

ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Time deposits
Marketable securities (Notes 3, 18 and 19)
Notes and accounts receivable (Note 6)
Allowance for returns and doubtful receivables (Note 4)Inventories (Note 5)
Deferred income taxes (Note 16)
Other current assets (Notes 6, 19, 20 and 22)
Total current assets
PROPERTY, PLANT AND EQUIPMENT:Land (Notes 9 and 19)
Buildings and structures (Notes 9, 11 and 19)
Machinery and equipment (Note 19)
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
OTHER ASSETS:
Investments in affiliated companies (Note 6)
Investments (Notes 3, 18 and 19)
Goodwill (Notes 7 and 8)
Other intangible assets (Note 8)
Prepaid pension expense (Note 12)
Deferred income taxes (Note 16)
Other
Total other assets

TOTAL

¥

29,487
4,296
1,567
25,873(2,459)42,676¥

4,372

33,9952,722
1,457
25,563(2,477)
43,822
4,049
4,683

105,812

113,814

Thousands of
U.S. Dollars(Note 2)
2018$

41,168996,347

21,55572,664
17,722
274
112,215(56,927)

203,023
693,201
172,0152,392
1,070,631(559,021)

54,33355,288511,610

22,512
69,318
16,594
12,85910,178
1,194
5,734

20,86859,847
16,071
11,84910,2871,060
5,874

211,977
652,712156,252
121,083
95,838
11,24353,993

138,389

125,856

1,303,098¥ 298,534¥ 294,958

CURRENT LIABILITIES:
Short-term bank loans (Note 9)
Notes and accounts payable:
Trade notes payable
Trade accounts payable (Note 6)
Other payables
Accrued payroll and bonuses
Income taxes payable (Note 16)
Current portion of long-term debt (Notes 9 and 18)
Other current liabilities (Notes 19 and 20)
Total current liabilities

277,655
40,452
14,755
243,625(23,154)401,846

21,561
73,61818,268
254
113,701(59,368)

Millions of Yen
2018
2017

LIABILITIES AND EQUITYLONG-TERM LIABILITIES:Long-term debt (Notes 9 and 18)
Liability for termination and retirement benefits (Note 12)
Deferred income taxes (Note 16)
Other long-term liabilities (Notes 11, 12 and 16)
Total long-term liabilities

¥

7,104

¥

7,716

Thousands of
U.S. Dollars(Note 2)
2018$

66,893

1,174
11,393
7,053
7,213
1,979
50
3,666
39,632

1,438
11,605
6,185
7,093
2,964
50
4,008
41,05911,054
107,279
66,412
67,91918,635471
34,520373,183

138
1,852
17,231
2,184
21,405185
1,956
17,862
1,414
21,4171,300
17,439162,250
20,565201,554

13,26029,765
172,418

13,26029,707
170,062

124,859
280,273
1,623,522

2,274
27,424(1,101)

1,212
21,075(414)

21,412
258,230(10,367)

28,597

21,873

269,275(11,328)(7,334)(106,667)

232,712
4,785
237,497

227,568
4,914
232,482

2,191,262
45,0562,236,318¥ 298,534¥ 294,958$ 2,811,055

COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
EQUITY:WACOAL HOLDINGS CORP. SHAREHOLDERS' EQUITY (Note14):
Common stock, no par value –authorized, 250,000,000 shares in 2018 and 2017; issued
71,689,042 shares in 2018 and 2017
Additional paid-in capital (Note 14)
Retained earnings
Accumulated other comprehensive income (Note 15):
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments (Note 12)
Total accumulated other comprehensive
incomeTreasury stock, at cost – 4,322,121 shares and3,083,605 shares in 2018 and 2017, respectively
Total Wacoal Holdings Corp.
shareholders' equity
Noncontrolling interests
Total equity
TOTAL$ 2,811,055

As of October 1, 2017, Wacoal Holdings Corp. effected a one-for-two ordinary share reverse stock split. The number ofordinary shares, outstanding shares and treasury stock are calculated assuming that the reverse stock split occurred at the
beginning of the earliest fiscal year presented in the consolidated financial statements.
See notes to consolidated financial statements.
84

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2018, 2017 and 20162018

Millions of Yen
2017

2016

Thousands of
U.S. Dollars(Note 2)2018

¥ 195,725¥ 195,881¥ 202,917$ 1,842,985

91,90992,95095,901

865,433

91,784(708)
206

91,866

93,151

864,256(6,667)1,940

183,191

184,816

189,052

1,724,962

12,534

11,065

13,865

118,023

194
(10 )
1,329

157
(27 )
1,176

161
(65 )
1,057

1,827
(94 )
12,514

203

441

90

1,911

3

1
3,770

(20 )

28

33

(14 )

173
(304)

311

Total other income (expenses) – net

1,752

5,504

1,092

16,497

INCOME BEFORE INCOME TAXES AND EQUITYIN NET INCOME OF AFFILIATED COMPANIES

14,286

16,56914,957

134,520

INCOME TAXES (Note 16):
Current
Deferred

4,880
662

4,830
450

3,442
1,288

45,951
6,234

5,542

5,280

4,730

52,185

8,744

11,28910,227

82,335

916

1,359

1,245

8,625

9,660

12,648

11,47290,960

85

(123)

(313)

801

NET SALES (Note 6)
OPERATING COSTS AND EXPENSES (REVENUE):
Cost of sales (Notes 12 and 6)
Selling, general and administrative expenses (Notes 1,
10, 11, 12, 13, 19 and 21)
Compensation income
Impairment charges on goodwill (Notes 8 and 19)
Total operating costs and expenses
OPERATING INCOME
OTHER INCOME (EXPENSES):Interest income
Interest expense
Dividend income
Gain (loss) on sale or exchange of marketable securities
and investments – net (Note 3)
Valuation gain (loss) on marketable securities andinvestments – net (Note 3)
Gain on sale of property, plant and equipment
Gain on bargain purchase (Note 7)
Other – net (Notes 1, 15 and 20)

Total income taxes
INCOME BEFORE EQUITY IN NET INCOME OF
AFFILIATED COMPANIESEQUITY IN NET INCOME OF AFFILIATEDCOMPANIES (Note 6)
NET INCOME
NET INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO WACOALHOLDINGS CORP.

¥

9,745

¥

12,525¥

11,159$91,761(Continued)
85

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2018, 2017 and 2016

2018

Yen
2017

2016

U.S. Dollars(Note 2)2018

NET INCOME ATTRIBUTABLE TO WACOALHOLDINGS CORP. PER SHARE (Note 17):
Basic
Diluted¥ 143.46¥ 142.98¥ 180.26¥ 179.71¥ 158.46¥ 158.00$ 1.35$ 1.35NET INCOME ATTRIBUTABLE TO WACOALHOLDINGS CORP. PER AMERICANDEPOSITARY RECEIPT (5 shares of common
stock) (Note 17):
Basic
Diluted¥ 717.30¥ 714.89¥ 901.30¥ 898.55¥ 792.30¥ 789.99$ 6.75$ 6.73As of October 1, 2017, the Company effected a one-for-two ordinary share reverse stock split. Net income
attributable to Wacoal Holdings Corp. per share is calculated assuming that the reverse stock split occurred at the
beginning of the earliest fiscal year presented in the consolidated financial statements.
See notes to consolidated financial statements.

(Concluded)86

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended March 31, 2018, 2017 and 2016
Thousands of
U.S. Dollars(Note 2)
2018

Millions of Yen
2017

2016

9,660

¥ 12,648¥ 11,472

1,113(4,079)(5,670)

10,4801,113(4,079)(5,670)

10,480

Unrealized gain (loss) on securities:
Amounts arising during the year
Reclassification adjustments
Total unrealized gain (loss) on securities

6,494
(139)
6,355

3,413
(304)
3,109

(2,833)(47 )(2,880)61,149(1,309)59,840Pension liability adjustments:
Amounts arising during the year
Reclassification adjustments
Total pension liability adjustments

(487)
(193)
(680)

619
(1 )
618

(2,327)(644)(2,971)(4,586)(1,817)(6,403)OTHER COMPREHENSIVE INCOME (LOSS)

6,788

(352)

(11,521)63,917COMPREHENSIVE INCOME (LOSS)

16,44812,296(49 )

154,877

COMPREHENSIVE (INCOME) LOSSATTRIBUTABLE TO NONCONTROLLINGINTERESTS

21

(6 )

(270)

198

COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO WACOAL HOLDINGS
CORP.

¥ 16,469¥ 12,290(319)$ 155,075

2018
NET INCOME¥

OTHER COMPREHENSIVE INCOME, NET OF TAX(Note 15):
Foreign currency translation adjustments:
Amounts arising during the year
Total foreign currency translation
adjustments

See notes to consolidated financial statements.

87

¥

$

90,960Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Equity
Years Ended March 31, 2018, 2017 and 2016

BALANCE, APRIL 1, 2015
Net income
Foreign currency translation adjustments
Unrealized loss on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp. shareholders, ¥150 per 5 shares ofcommon stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Disposal of treasury stock
Share-based compensation granted (exercised) (Note 13)
Increase due to establishment of subsidiaries (Note 7)
BALANCE, MARCH 31, 2016
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp. shareholders, ¥165 per 5 shares ofcommon stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2017
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp. shareholders, ¥270 per 5 shares ofcommon stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Disposal of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2018

Shares of
Outstanding
Common Stock(Thousands)
70,420CommonStock

Additional
Paid-in
CapitalRetained
Earnings¥ 13,260¥ 29,642¥ 155,264

Millions of Yen
Accumulated
Other
TreasuryComprehensive
Stock,
Incomeat Cost¥ 33,586¥(2,895)

11,159(5,654)(2,855)(2,969)(4,225)

Total Wacoal
Holdings Corp.
Shareholders'EquityNoncontrolling
Interests

Total Equity¥ 228,857¥ 2,711¥ 231,568

11,159(5,654)(2,855)(2,969)

313
(16 )
(25 )
(2 )

11,472(5,670)(2,880)(2,971)(4,225)

2,252(4,225)
(206)
(7 )
1
67
2,252

224,374

5,027

229,401

12,525(3,965)
3,109
621

123
(114 )
0(3 )12,648(4,079)3,109618(206 )(3 )1
1170,42944
13,26029,686

(7)
1
25

(2 )
162,196

22,108(2,876)

12,525(3,965)
3,109
621(4,648)(7 )
1
67(4,648)48(4,648)(167)(4,522)
74
48

227,568

4,914

232,482

9,745
1,062
6,349
(687)

(85 )
51
6
7

9,660
1,113
6,355
(680)

(167 )(1,851 )27
68,60521
13,26029,707(4,522)64(11 )170,062

21,873(7,334)

9,745
1,062
6,349
(687)
(7,386)(4,522)74(7,386)86(7,386)(194)(4,007)0
68
86¥ 4,785¥ 237,497(194 )(1,243)0
567,36758¥ 13,260¥ 29,765(4,007)0
13(3 )¥ 172,418¥ 28,597¥ (11,328)(4,007)068¥ 232,712

As of October 1, 2017, Wacoal Holdings Corp. effected a one-for-two ordinary share reverse stock split. The number of outstanding shares is calculated assuming that the reverse stock split occurred at the beginning of the earliest fiscal year presented in the
consolidated financial statements.

(Continued)
88

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Equity
Years Ended March 31, 2018, 2017 and 2016

BALANCE, MARCH 31, 2017

CommonStock

Additional
Paid-in
CapitalRetained
Earnings$ 124,859$ 279,707$ 1,601,337

Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp. shareholders, $2 per 5 shares ofcommon stock
Cash dividends paid to noncontrolling interests
Purchase of treasury stock
Disposal of treasury stock
Share-based compensation granted (exercised) (Note 13)
Equity transactions with noncontrolling interests
BALANCE, MARCH 31, 2018

Thousands of U.S. Dollars (Note 2)
Accumulated
Total Wacoal
Other
Treasury
Holdings Corp.
Comprehensive
Stock,
Shareholders'
Incomeat CostEquity$ 205,961$(69,058)

91,761
10,00059,783(6,469)(69,548)

Noncontrolling
Interests

Total Equity$ 2,142,826$ 46,271$ 2,189,097

91,761
10,00059,783(6,469)

(801)
480
57
66

90,960
10,48059,840(6,403)(69,548)810(69,548)(1,827)(37,731)0640
810$ 45,056$ 2,236,318(1,827)546$ 124,859$ 280,273(37,731)
0
122

(28)
$ 1,623,522$ 269,275$ (106,667)(37,731)0640$ 2,191,262

See notes to consolidated financial statements.

(Concluded)
89

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2018, 2017 and 2016

Millions of Yen
2017

2016

9,660

¥ 12,648¥ 11,472

5,492
68
18
662
250
(708)
206

5,032
74
264
450
(3,374)

4,815
67
(117)
1,288
59

(3)
(203)

(441)
(1)

(397)

(837)

256
(90 )
20
(173)
(482)

(232)
1,012
270
676
(833)
(518)
73
15,493

882
(378)
475
(95)
(417)
1,615
454
16,351(195)(1,008)(1,111)(45 )(2,101)(261)
241
12,635(2,185)
9,529
2,542
6,365
(7,844)(4,877)688
145,885(5,129)
3,368
394
(489)
554
(1,138)159
708(3,429)(2,455)13(4,336)
3,717
1,968
(313)
109
(330)
3,585

(2,459)
2,889
602
(420)
739
(629)
775

(5,504)(1,941)15(39)
4(7,546)(1,432)
12(48,296)
31,7143,710(4,605)
5,217(10,715)
1,497
6,667
(32,288)(23,117)122

6(3,822)(122)(11,407)772(69,322)2018
OPERATING ACTIVITIES:Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation (Note 13)
Allowance for returns and doubtful receivables – net
Deferred income taxes
Loss (gain) on sales or disposal of property, plant and equipment – net
Compensation income
Impairment charges on goodwill (Notes 8 and 19)
Impairment charges on long-lived assets(Gain) loss on sale or exchange of marketable securities and investments – net (Note 3)
Valuation (gain) loss on marketable securities and investments – net (Note 3)
Gain on bargain purchase (Note 7)
Equity in net income of affiliated companies, less dividends received
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in notes and accounts payable
Decrease in liability for termination and retirement benefit(Decrease) increase in accrued expenses, income taxes payable and other current liabilities
Other
Net cash provided by operating activities¥

INVESTING ACTIVITIES:
Increase in time deposits
Decrease in time deposits
Proceeds from sales and redemption of available-for-sale securities (Note 3)
Payments to acquire available-for-sale securities
Proceeds from redemption of held-to-maturity debt securities
Payments to acquire held-to-maturity debt securities
Proceeds from sales of property, plant and equipment
Compensation income
Capital expenditures
Payments to acquire intangible assets (Note 8)
Proceeds from sales and redemption of other investments
Payments to acquire other investments
Proceeds from sales of shares of affiliated companies
Payments associated with the acquisition of a business (net of cash and cash equivalents acquired) (Note 7)
Other
Net cash used in investing activities
FORWARD¥

Thousands of
U.S. Dollars(Note 2)
2018

82
(7,362)33(3,032)

8,131¥ 13,319

¥

1,228

$

90,96051,714
640
169
6,234
2,354
(6,667)1,940(28)(1,911)(3,738)$76,563(Continued)
90

Wacoal Holdings Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2018, 2017 and 2016

2018
FORWARD
FINANCING ACTIVITIES:(Decrease) increase in short-term bank loans withoriginal maturities of three months or less – net
Proceeds from issuance of long-term debt
Repayments of long-term debt
Purchase of treasury stock
Disposal of treasury stock
Proceeds from sales of treasury stock
Dividends paid on common stock
Dividends paid to noncontrolling interests
Other
Net cash used in financing activities

Millions of Yen
2017

2016

Thousands of
U.S. Dollars(Note 2)
2018

¥

8,131

¥ 13,319

¥

1,228

$

76,563

¥

(755)

¥

¥

2,101

$

(7,109)(47 )(4,007)
0(3,613)250(403)(4,522)(4,463)(7)(442)(37,731)0(7,386)(194)
86(12,303)(4,648)(167)
48(13,055)

1(4,225)(206)
2,252(4,547)(69,548)(1,827)810(115,847)

(336)

(328)

(1,032)(3,164)

NET DECREASE IN CASH AND CASH
EQUIVALENTS(4,508)(64 )(4,351)(42,448)

CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR

33,99534,05938,410320,103¥ 29,487¥ 33,995¥ 34,059$ 277,655¥¥¥

EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OFYEARADDITIONAL CASH FLOW INFORMATION:
Cash paid for:
Interest
Income taxes

11
5,853

NONCASH INVESTING ACTIVITIES:Acquisition of property, plant and equipment byassuming payment obligation

¥583

27
2,812

¥795

67
5,756

$ 104
55,113¥736$5,490See notes to consolidated financial statements.

(Concluded)
91

Wacoal Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements
1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Financial Statements – Wacoal Holdings Corp. (the "Company") and subsidiaries are predominantly
engaged in one industry, the manufacture and sale of apparel, including foundation garments, lingerie,nightwear, and outerwear in Japan, the United States of America, Europe and certain other countries in Asia.
The accompanying consolidated financial statements, stated in Japanese yen, have been prepared on the basisof accounting principles generally accepted in the United States of America ("U.S. GAAP").
Consolidation – The consolidated financial statements include the accounts of the Company and its majorityowned subsidiaries (collectively, the "Companies"). All intercompany transactions and balances have been
eliminated.
Some foreign subsidiaries of the Company have a fiscal year ending December 31. The accounts of thosesubsidiaries are included in the Company's consolidated financial statements based on the subsidiaries' fiscal
year end. Necessary adjustments have been made for significant events related to subsidiaries that occurred
during the period between their fiscal year ends and March 31.
Investments in affiliated companies where the Companies' ownership is 20% to 50% are accounted for using
the equity method.
Significant influence is generally deemed to exist if the Companies have an ownership interest in the voting
stock of the investee from 20% to 50%, although other factors are considered in determining whether theequity method of accounting is appropriate.
Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents – Cash and cash equivalents include all highly liquid investments with original
maturities of three months or less.
Foreign Currency Translation – Assets and liabilities of foreign subsidiaries have been translated to Japanese
yen at period-end exchange rates and income and expenses have been translated using average exchange rates
for the period. Translation adjustments resulting from the process of translating consolidated financial
statements, net of tax, are included in accumulated other comprehensive income, which is a separate
component of equity. Exchange gains and losses resulting from foreign currency transactions and theconversion of monetary assets and liabilities denominated in foreign currencies are included in other income(expenses) in the consolidated statements of income.
Foreign currency translation gains (losses) for the years ended March 31, 2018, 2017 and 2016 were ¥(189)
million, ¥(175) million and ¥(519) million, respectively. They have been included in other – net of otherincome (expenses).

92

Marketable Securities and Investments – The Companies classify their marketable securities and investments
into one of three categories: trading, available-for-sale or held-to-maturity. Trading securities are recorded atfair value and unrealized holding gains and losses on trading securities are included in earnings. Availablefor-sale securities are recorded at fair value with a corresponding recognition of unrealized holding gain or loss
(net of tax) in accumulated other comprehensive income or loss, which is a separate component of equity, until
realized. Held-to-maturity securities are measured at amortized cost. The Companies classify debt securities
as held-to-maturity only if the Companies have the positive intent and ability to hold those securities tomaturity. Equity securities that do not have readily determinable fair values are recorded at cost. Gains andlosses on sales of marketable securities and investments are computed based on cost determined using the
average cost method.
If a decline in the fair value of marketable securities and investments is determined to be other than temporary,
an impairment charge is recorded in the consolidated statements of income. The Companies periodicallydetermine whether a decline in the fair value of marketable securities and investments is deemed to be otherthan temporary based on criteria that include the duration of the market decline, the extent to which costexceeds fair value, the financial position and business outlook of the issuer and the intent and ability of theCompanies to retain the impaired marketable securities and investments for a sufficient period of time for
anticipated recovery in fair value.
Allowance for Sales Returns – An allowance for sales returns is estimated based on historical product returns
experience, sales movements, and the overall retail industry considerations.
Allowance for Doubtful Receivables – An allowance for doubtful notes and receivables is estimated based on
historical collection experience and additional information including current economic conditions and thecreditworthiness of each applicable customer.
Inventories – Inventories are stated at the lower of cost or net realizable value, cost being determined by the
first-in, first-out method for raw materials and the average cost method for work in process and finishedproducts. Cost includes net prices paid for materials purchased, production labor cost, factory overhead andcharges for customs duties.
Property, Plant and Equipment – Property, plant and equipment is stated at cost less accumulated
depreciation and impairment charges. Depreciation of property, plant and equipment is computed by the
declining-balance method, except for buildings acquired on or after April 1, 1998 as well as building
improvements and structures acquired on or after April 1, 2016, which are depreciated using the straight-line
method based upon the estimated useful lives of the assets. The estimated useful lives are as follows:
Buildings and structures

2 to 50 years (mainly 38 years)

Machinery and equipment(except for the part of the paintings)

2 to 20 years (mainly 5 years)

Depreciation expenses for the years ended March 31, 2018, 2017 and 2016 are ¥3,681 million, ¥3,443 millionand ¥3,278 million, respectively.
Impairment of Long-Lived Assets – The carrying amount of long-lived assets held and used by the Companies
is evaluated for impairment whenever there is an event or change in circumstances that indicates that such
assets have been impaired or that the carrying amounts of such assets might not be recoverable. The carrying
amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use and eventual disposition of the asset. That assessment is based on the carrying amountof the asset at the date it is tested for recoverability, whether in use or under development. The impairment
charge is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.
Impairment charges of ¥256 million on long-lived assets were included in selling, general and administrative
expenses in the consolidated statement of income for the year ended March 31, 2016. The Companies
recorded no impairment charges on long-lived assets for the years ended March 31, 2018 and 2017.

93Goodwill and Other Intangible Assets – Goodwill represents the excess of the purchase price of an acquired
entity over the fair value of assets acquired and liabilities assumed.
Goodwill and other intangible assets with indefinite useful lives are tested for impairment annually, or more
frequently if conditions indicate an earlier review is necessary. The goodwill is allocated to the reporting unit
in which the business that created the goodwill resides. To test for goodwill impairment, the carrying amountof each reporting unit is compared with its fair value. If the carrying amount of a reporting unit exceeds its fairvalue, the second step of the goodwill impairment test is performed by comparing the carrying amount ofreporting unit goodwill with its implied fair value. If the carrying amount of reporting unit goodwill exceeds
its implied fair value, an impairment charge is recognized in an amount equal to that excess.
To test for impairment of other intangible assets with indefinite useful lives, the carrying value of an intangible
asset is compared with its fair value. If the carrying amount of an intangible asset with indefinite useful life
exceeds its fair value, an impairment charge is recognized in an amount equal to that excess.
Other intangible assets with estimable useful lives consist primarily of brands and software and are amortizedover their estimated useful lives using the straight-line method. The estimated useful lives are as follows:
Brands

20 to 25 years (mainly 25 years)

Software5 years

Asset Retirement Obligations – The Companies have obligations arising from contractual commitments toremove leasehold improvements from leased facilities and return the property to a specified condition when
the lease terminates. The Companies recognize asset retirement obligations at the inception of a lease. The
asset retirement obligations are measured with an expected present value technique based on historicalexperience and recorded in other long-term liabilities in the consolidated balance sheets and subsequently
adjusted for changes in estimated disposal costs. The difference between the gross expected future cash flow
and its present value is accreted over the life of the related lease, which is determined using best estimates
because the Companies' lease contracts generally have automatic renewal provisions. The estimated asset
retirement costs are capitalized as part of the carrying amount of the associated long-lived asset anddepreciated over its useful life.
Termination and Retirement Plans – Termination and retirement benefits are accounted for in accordancewith the guidance for retirement benefits. The Companies amortize net actuarial gains and losses and priorservice cost over the average employees' remaining service period by the declining-balance method and by thestraight-line method, respectively.
Leases – Certain noncancelable leases are classified as capital leases and the leased assets are included as partof property, plant and equipment. Other leases are classified as operating leases and are not capitalized.
Treasury Stock – The Companies account for treasury stock under the cost method and include treasury stock
as a component of equity.
Acquisitions – The Companies account for acquisitions using the acquisition method in accordance with theguidance for business combinations. The Companies allocate the purchase price to the assets acquired andliabilities assumed based on the estimated fair values at the date of acquisition, including intangible assets thatcan be identified and named. The purchase price in excess of the fair value of the net assets is recorded as
goodwill. In the case where the purchase price is below the fair value of the net assets, the Companies
recognize the excess of fair value of the net assets over the purchase price in earnings as a gain on bargain
purchase in the consolidated statements of income.

94

Revenue Recognition – The Companies recognize revenue on sales to retailers, mail order catalog sales andweb sales when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred resulting intransfer of title and risk of loss, (3) the sales price is fixed or determinable, and (4) collectability is reasonably
assured. As for consignment sales, the Companies recognize revenue when the products are sold to theultimate customer. The Companies recognize revenue on direct retailing sales at the Companies' directly
managed retail stores at the point of sale to the customer.
Shipping and Handling Costs – Shipping and handling fees billed to customers are classified in net sales.
Shipping and handling costs are expensed as incurred. Shipping and handling costs for the years ended March
31, 2018, 2017 and 2016 were ¥5,185 million, ¥5,249 million and ¥5,560 million, respectively, and have been
included in selling, general and administrative expenses.
Advertising Expenses – Advertising costs are expensed as incurred. Advertising expenses for the years ended
March 31, 2018, 2017 and 2016 were ¥12,719 million, ¥12,694 million and ¥13,167 million, respectively, andhave been included in selling, general and administrative expenses.
Research and Development Costs – Research and development costs are expensed as incurred. Research anddevelopment costs for the years ended March 31, 2018, 2017 and 2016 were ¥781 million, ¥810 million and¥839 million, respectively, and have been included in selling, general and administrative expenses.
Consumption Taxes – Consumption taxes are excluded from sales, costs, and expenses in the consolidated
statements of income.
Income Taxes – The provision for income taxes is determined under the asset and liability method in
accordance with the guidance for income taxes. Under this method, deferred tax assets and liabilities are
determined for temporary differences between the financial statements and tax bases of assets and liabilities
and tax loss carryforwards at presently enacted tax rates. A valuation allowance is recorded when it is more
likely than not that some portion or all of the deferred tax assets will not be realized in the future.
The Companies assess their income tax positions and record tax benefits for all years subject to examination
based upon their evaluation of the facts, circumstances and information available as of the end of the fiscal
year. For those tax positions only where there is greater than a 50% likelihood that the tax position will besustained, the Companies record the largest amount of tax benefit that may potentially be realized uponultimate settlement with a taxing authority that has full knowledge of all relevant information.
Share-Based Compensation – Share-based compensation is accounted for in accordance with the guidance forstock compensation. The Company measures share-based compensation cost at the grant date, based on thefair value of the award and recognizes the cost over the requisite service period, which is the vesting period.
The fair value of the award is estimated using the Black-Scholes option-pricing model.
Derivatives – Derivative instruments, including certain derivative instruments embedded in other contracts, areaccounted for in accordance with the guidance for derivatives and hedging. Because such derivative
instruments are not designated as hedges, changes in the fair value of the derivatives are recorded in earnings
or losses.
Subsequent Events – In accordance with the guidance for subsequent events, the Company has evaluatedsubsequent events through June 28, 2018.
Reclassifications – Certain reclassifications have been made to the prior years' consolidated financial
statements to conform to the current year's presentation. And as of October 1, 2017, the Company effected a
one-for-two ordinary share reverse stock split. The number of ordinary shares, outstanding shares, treasury
stock and net income attributable to Wacoal Holdings Corp. per share are calculated assuming that the reverse
stock split occurred at the beginning of the earliest fiscal year presented in the consolidated financial
statements.

95

Recent Accounting Pronouncements:
Recently Adopted Accounting Guidance
Measurement of Inventory – In July 2015, the Financial Accounting Standards Board (the "FASB") issued a
new guidance related to simplifying the measurement of inventory. Previously, an entity was required tomeasure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or
net realizable value less an approximately normal profit margin. This guidance requires an entity to measure
inventory at the lower of cost or net realizable value. This guidance is effective for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal years. In applying this provision, the Company
has not retroactively revised past consolidated financial statements. The adoption of this guidance did not havea material impact on the Company's consolidated financial position, results of operations or cash flows.
Balance Sheet Classification of Deferred Taxes – In November 2015, the FASB issued a new accounting
guidance related to balance sheet classification of deferred taxes. This guidance requires an entity to classify
deferred tax liabilities and assets as noncurrent on the consolidated financial position. This guidance iseffective for fiscal years beginning after December 15, 2016. The Company has applied this provision fromthe first quarter commencing on April 1, 2017. In applying this provision, the Company has not retroactively
revised past consolidated financial statements. The carrying amount of the current portion of deferred tax
assets in the Companies' consolidated balance sheet as of March 31, 2017 was ¥4,049 million. There was no
current portion of deferred tax liabilities as of March 31, 2017.
Recent Accounting Guidance Not Yet Adopted
Revenue Recognition – In May 2014, the FASB issued new accounting guidance related to revenue
recognition. This guidance is based on the principle that revenue is recognized to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. This standard provides comprehensive
guidance, and requires the disclosure of information to enable users of financial statements to understand thenature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In
August 2015, the FASB issued additional guidance and deferred the effective date of the guidance for a year.
In May 2016, the FASB also issued additional guidance to improve the above guidance by reducing thepotential for diversity in practice upon initial application and the cost and complexity of applying the new
guidance both upon transition and on an ongoing basis. This guidance is effective for fiscal years beginning
after December 15, 2017 and interim periods within that annual period. The adoption of this guidance is notexpected to have a material impact on the Company's consolidated financial position, results of operations or
cash flows.
Recognition and Measurement of Financial Instruments – In January 2016, the FASB issued new
accounting guidance related to recognition and measurement of financial assets and financial liabilities. This
guidance requires an entity to measure equity investments (except those accounted for under the equity methodof accounting or those that result in consolidation of the investee) at fair value with changes in fair value
recognized in net income and change of related disclosures. In February 2018, the FASB issued new
accounting guidance related to recognition and measurement of financial assets and financial liabilities. This
guidance requires the cumulative effect of non-marketable equity investments (except those accounted forunder the equity method of accounting or those that result in consolidation of the investee) to reflect their fairvalues to be adjusted to the beginning retained earnings. The guidance is effective for fiscal years beginning
after December 15, 2017 and interim periods within those fiscal years. The Company will adopt the guidancein the first quarter of 2019. Adoption of the guidance will require the Company to recognize unrealized gainsof ¥27,320 million (net of tax) on available-for-sale securities as a cumulative-effect adjustment fromaccumulated other comprehensive income (loss) to retained earnings at the beginning of the fiscal year ending
March 31, 2019. Further, the Company will measure non-marketable equity securities at fair value andrecognize unrealized gains of ¥515 million (net of tax) as a cumulative-effect adjustment.
Leases – In February 2016, the FASB issued new accounting guidance related to leases. This guidance
requires an entity to recognize lease assets and lease liabilities on the balance sheet for under the new leasestandard (“ASC842”), with a few exceptions, those leases classified as operating leases under current U.S.
GAAP (“ASC840”).
In January 2018, the FASB also issued a new accounting guidance related to land easements. This guidanceclarifies that land easements are within the scope of ASC 842 and introduces a transition practical expedient
allowing the Company to forgo assessment as to whether existing expired land easements that were not
96

previously accounted for as leases under ASC 840 are or contain leases under ASC 842. The guidance iseffective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The
Company is currently evaluating the impact of adoptions on the Company’s consolidated financial position,
results of operations or cash flows.

97Classification of Certain Cash Receipts and Cash Payments – In August 2016, the FASB issued new
accounting guidance related to classification of certain cash receipts and cash payments. This guidance isintended to reduce existing diversity in practice with respect to classification of certain cash receipts andpayments in the statement of cash flows. This guidance is effective for fiscal years beginning after December
15, 2017 and interim periods within that annual period. The adoption of this guidance is not expected to havea material impact on the Company's consolidated financial position, results of operations or cash flows.
Income Taxes – In October 2016, the FASB issued new accounting guidance related to income taxes. This
guidance requires an entity to recognize income tax consequences of intra-entity transfers of assets other thaninventory. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods
within that annual period. The adoption of this guidance is evaluated to have no material impact on the
Company's consolidated financial position, results of operations or cash flows.
Simplifying the Test for Goodwill Impairment – In January 2017, the FASB issued new accounting guidance
related to goodwill and other intangible assets. This guidance simplifies the goodwill impairment test byeliminating Step 2 from the test. This guidance is effective for fiscal years beginning after December 15, 2020
and interim periods within that annual period. The Company is currently evaluating the potential impact of
adoption on its consolidated financial position and results of operations.
Periodic Pension Cost – In March 2017, the FASB issued new accounting guidance related to periodic
pension cost and net periodic post retirement benefit cost. This guidance requires an entity to disaggregate theservice cost component from the other components of net periodic benefit costs. This guidance is effective forfiscal years beginning after December 15, 2017 and interim periods within that annual period. The Company
will adopt this guidance in the first quarter of the year ending March 31, 2019. The guidance will be applied
retrospectively for the presentation of the service cost and the other components of net periodic pension costs.
The adoption of the guidance is expected to increase operating expenses by ¥1,040 million and ¥783 million in
the fiscal years ended March 31, 2018 and 2017, respectively, and to decrease non-operating expenses by thesame amounts.

2.

TRANSLATION INTO U.S. DOLLAR STATEMENTS
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside of Japan and has been made at the rate of ¥106.2 to $1,
the noon buying rate for yen in New York City as of March 31, 2018. Such translation should not be
construed as representations that the Japanese yen amounts could be converted into U.S. dollars at the above or
any other rate.

98

3.

MARKETABLE SECURITIES AND INVESTMENTS
Held-to-Maturity and Available-for-Sale Securities – The fair value of debt and marketable equity securities
classified as held-to-maturity and available-for-sale is based on quoted market prices as of March 31, 2018 and2017. The cost, gross unrealized gain and loss and the fair value of available-for-sale and held-to-maturity
securities by major security type were as follows:
Millions of Yen
Gross
Gross
Unrealized
Unrealized
Gain
Loss

2018

Cost

Available-for-sale securities:
Current:
Municipal bonds
Mutual funds

¥ 10
575

¥ 0
15

¥ 10
590

¥ 585

¥ 15

¥ 600

Total
Noncurrent:
Corporate debt securities
Equity securities
Total

¥

464
23,106150
43,645¥0614
66,751¥ 43,795¥0¥ 67,365

¥967

¥8

¥959

¥646

¥12

¥634

¥ 23,570

Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities¥

Fair Value¥

Millions of Yen
Gross
Gross
Unrealized
Unrealized
Gain
Loss

2017

Cost

Available-for-sale securities:
Current:
Municipal bonds
Mutual funds

¥ 10
701

¥

0
168

¥1

¥ 10
868

¥ 711

¥ 168

¥1

¥ 878

¥23,153¥34,833¥10¥57,976

¥567

¥3

¥564

¥566

¥4

¥562

Total
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

99

Fair Value

Gross unrealized holding losses and fair values of held-to-maturity securities, all of which have been in acontinuous unrealized loss position for more than 12 months as of March 31, 2018 and 2017, were as follows:
Millions of Yen
2018

Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

2017

Fair Value

Gross
Unrealized
Loss

Fair Value

Gross
Unrealized
Loss

¥424

¥3

¥340

¥3

¥105

¥2

Gross unrealized holding losses and fair values of available-for-sale and held-to-maturity securities, all ofwhich have been in a continuous unrealized loss position for less than 12 months as of March 31, 2018 and2017, were as follows:
Millions of Yen
2018
Fair Value
Available-for-sale securities:
Current:
Mutual funds
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

2017
Gross
Unrealized
Loss

Fair Value

Gross
Unrealized
Loss

¥8

¥1

¥10

¥0

¥172

¥10

¥535

¥5

¥224

¥0

¥529

¥10

¥562

¥4

As of March 31, 2018 and 2017, available-for-sale securities in a continuous unrealized loss position werecomposed of one equity security, and three equity securities and one mutual fund, respectively. The
percentage of decline from acquisition cost was 1.1% and 11.5% as of March 31, 2018 and 2017, respectively.
The Companies periodically determine whether a decline in the fair value of available-for-sale and held-tomaturity securities is deemed to be other than temporary based on criteria that include the duration of themarket decline, the extent to which cost exceeds fair value, the financial position and business outlook of theissuer, and the intent and ability of the Companies to retain the impaired available-for-sale and held-tomaturity securities for a sufficient period of time for anticipated recovery in fair value as described in Note 1.
No available-for-sale or held-to-maturity securities were identified that meet the Companies' criteria forrecognition of an impairment charge on available-for-sale and held-to-maturity securities in an unrealized loss
position presented above. Therefore, the Companies do not believe the unrealized losses represent an otherthan-temporary impairment as of March 31, 2018 and 2017.

100

Future maturities of debt securities and mutual funds classified as available-for-sale, excluding debt securities
and mutual funds without fixed maturities as of March 31, 2018, were as follows:
Millions of Yen
Fair
Cost
Value
Due within one year
Due after one year through five years
Due within ten years
More than ten years

¥

10
295
464
280

Total

¥ 1,049

¥

10
300
614
290

¥ 1,214

Future maturities of debt securities classified as held-to-maturity as of March 31, 2018 were as follows:
Millions of Yen
Fair
Cost
Value
Due within one year
Due after one year through five years

¥

967
646

Total

¥ 1,613

¥

959
634

¥ 1,593

Proceeds from sales of available-for-sale securities and the gross realized gain or loss on the sales of availablefor-sale securities during the years ended March 31, 2018, 2017 and 2016 were as follows:
2018
Proceeds from sales of available-for-sale securities
Gross realized gain on sales of available-for-sale securities
Gross realized loss on sales of available-for-sale securities

¥394
203

Millions of Yen
2017¥1,573
458
17

2016
¥102
90

The Companies recorded newly-received securities at fair value and recognized a loss of ¥0 million for theyear ended March 31, 2017. There was no exchange of marketable securities and investments for the years
ended March 31, 2018 and 2016.
The amount of impairment charges the Companies recognized on available-for-sale securities in which
declines in fair value were deemed to be other than temporary was ¥2 million, ¥3 million and ¥20 million forthe years ended March 31, 2018, 2017 and 2016, respectively.
Trading Securities – A subsidiary in the United States of America has trading securities consisting of mutual
funds, which are recorded as investments at a fair value of ¥46 million and ¥44 million as of March 31, 2018and 2017, respectively. There were no trading securities as of March 31, 2016. The Companies recorded again of ¥5 million and ¥4 million for the years ended March 31, 2018 and 2017, respectively. There was nogain or loss related to trading securities for the year ended March 31, 2016.

101

Cost Method Securities – Investments in nonmarketable equity securities for which there are no readily
determinable fair values were accounted for using the cost method and aggregated ¥1,261 million and ¥1,273
million as of March 31, 2018 and 2017, respectively. Investments in nonmarketable equity securities arereviewed annually or upon the occurrence of an event for other-than-temporary impairment. There were no
impairment charges on investments in nonmarketable equity securities for the years ended March 31, 2018 and2017, respectively. The Companies recognized impairment charges on investments in nonmarketable equity
securities of ¥0 million for the year ended March 31, 2016.
4.

ALLOWANCES FOR DOUBTFUL RECEIVABLES AND SALES RETURNS
Information related to the Companies' allowance for doubtful receivables was as follows:
2018

Millions of Yen
2017

2016

Balance at the beginning of the year
Charged to costs and expenses
Balances written-off/reversed

¥ 219
28
(40 )

¥ 196
68
(45 )

¥ 198
110
(112)

Balance at the end of the year

¥ 207

¥ 219

¥ 196

2018

Millions of Yen
2017

2016

Balance at the beginning of the year
Charged to costs and expenses
Balances utilized¥ 2,258
2,252(2,258)¥ 2,033
2,258(2,033)¥ 2,211
2,033(2,211)

Balance at the end of the year

¥ 2,252¥ 2,258¥ 2,033

Information related to the Companies' allowance for sales returns was as follows:

5.

INVENTORIESThe components of inventories as of March 31, 2018 and 2017 were as follows:
Millions of Yen
2018
2017

6.

Finished products
Work in process
Raw materials¥ 36,635
3,678
2,363

¥ 37,586
3,743
2,493

Total

¥ 42,676¥ 43,822

INVESTMENTS IN AFFILIATED COMPANIES
Certain investments are accounted for using the equity method if the investment provides the Companies withthe ability to exercise significant influence over an investee. Significant influence is generally deemed to exist
if the Companies have an ownership interest in the voting stock of the investee between 20% and 50%,although other factors are considered in determining whether the equity method of accounting is appropriate.
The Companies record investments in equity method investees meeting these characteristics as "Investments inaffiliated companies." Under the equity method, the Companies record their proportionate share of anaffiliated company’s income or loss based on the most recently available financial statements.

102

The primary affiliated companies and percentage of ownership as of March 31, 2018 and 2017 were as
follows:
Percentage of Ownership (%)
2018
2017

Name of Investee
Shinyoung Wacoal Inc.
Taiwan Wacoal Co., Ltd.
THAI WACOAL PUBLIC CO., LTD.
PT. Indonesia Wacoal
House of Rose Co., Ltd.

25
50
34
42
24

25
50
34
42
24

Aggregate carrying amounts and fair values of investments in affiliated companies which have a quoted
market price as of March 31, 2018 and 2017 were as follows:
Millions of Yen
2018
2017
Carrying amount
Aggregate value of quoted market price¥15,191
11,445¥13,556
11,754

The following tables represent the affiliated companies' summarized information from the balance sheet as ofMarch 31, 2017 and statement of income for the year ended March 31, 2017. Summarized information of thebalance sheet and statements of income of affiliated companies for the years ended March 31, 2018 and 2016
were not disclosed as they were immaterial.
Millions ofYen
2017
Current assets
Noncurrent assets¥ 40,589
41,773Total¥ 82,362

Current liabilities
Long-term liabilities
Equity¥Total¥ 82,362

8,538
7,366
66,458Millions ofYen
2017
Net sales
Gross profit
Income before income taxes
Net income¥ 59,17230,2005,105
4,089

The balance of receivables and payables to affiliated companies as of March 31, 2018 and 2017 were as
follows:
Millions of Yen
2018
2017
Accounts receivable
Accounts payable
Other receivable

¥598
472
272

103

¥513
237
226

The amounts of transaction with affiliated companies as of March 31, 2018, 2017 and 2016 were follows:

Sales
Cost of sales corresponding to sales of material and products
Purchases
Royalties

2018

Millions of Yen
2017
2016

¥2,700
2,675
5,744
300

¥1,8981, 753
2,646
263

¥335
159
2,468
266

Dividends received from affiliated companies were ¥519 million, ¥522 million and ¥763 million for the years
ended March 31, 2018, 2017 and 2016, respectively.
Retained earnings includes net undistributed earnings of affiliated companies of ¥16,411 million and ¥15,689
million as of March 31, 2018 and 2017, respectively.
7.

ACQUISITIONSIn January 2016, Wacoal Corp., a wholly-owned subsidiary of the Company, established A Tech Textile Co.,
Ltd. ("A Tech") and G Tech Material Co., Ltd. ("G Tech") in the Kingdom of Thailand pursuant to joint
venture agreements executed on November 13, 2015. A Tech and G Tech executed business transfer
agreements with Textile Prestige Public Company Limited ("TPC") and Erawan Textile Company Limited("ETC"), respectively, and transfers of the material business assets and liabilities were completed on February
1, 2016.
In connection with these business transfers, A Tech and G Tech agreed to pay the purchase price for the assets
acquired and liabilities assumed in the amount of ¥2,334 million (THB 699 million) and ¥693 million (THB
208 million), respectively.
By establishing these two subsidiaries, the Companies will build a worldwide system to supply materials andproducts in the ASEAN region, which has the potential to further develop, grow and improve the
manufacturing quality and cost competitiveness of the Wacoal Group and to stably supply high value-added
materials and products to the global network of the Wacoal Group and customers in the future.
As a result of purchase price allocations for A Tech and G Tech, goodwill was recognized and recorded in the
consolidated balance sheet as of March 31, 2016. Goodwill is not deductible for tax purposes.
Furthermore, based on updated information obtained after the date of the transfers, the fair values of the assets
and liabilities as of the date of the transfers were adjusted. During the year ended March 31, 2017, A Tech and
TPC reached a final agreement on the purchase price. As a result of these changes, the amount of goodwill
relating to A Tech and G Tech decreased by ¥39 million and ¥18 million, respectively. These adjustments
during the measurement period were reflected in the consolidated balance sheet as of March 31, 2017.

104

The fair value of the assets and liabilities of the businesses which A Tech and G Tech acquired were as
follows:
Before Adjustment
Millions of Yen
February 1, 2016
A TechG TechCash and cash equivalents
Notes and accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other noncurrent assets
Total

¥

210
557
608
18
1,243
246
2,882

¥ 150
101
4
342
223
1
821

Current liabilities
Other long-term liabilities
Total

281
251
532

82
46
128

Total shareholder's equity¥ 2,350¥ 693

After Adjustment
Millions of Yen
February 1, 2016
A TechG TechCash and cash equivalents
Notes and accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other noncurrent assets
Total

¥

210
557
608
18
1,265
207
2,865

¥ 150
101
4
342
205
1
803

Current liabilities
Other long-term liabilities
Total

282
249
531

64
46
110

Total shareholder's equity¥ 2,334

¥ 693

105

8.

GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill – The changes in the carrying amount of goodwill by operating segment for the years ended March
31, 2018, 2017 and 2016 were as follows. For information about the Companies' operating segments, see Note
23.
Millions of Yen
2018
WacoalBusiness(Overseas)
Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Impairment charges
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges¥ 11,746
11,746(206)
736

Peach John

Total

¥ 11,203(6,878)4,325¥ 22,949(6,878)16,071(206)
736

11,203(6,878)23,685(7,091)

4,325¥ 16,594

12,482
(213)

Total

¥ 12,269¥

Millions of Yen
2017
WacoalBusiness(Overseas)
Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Adjustments during the measurement period
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges¥ 13,586
13,586(57 )(1,783)Peach John

Total

¥ 11,203(6,878)4,325¥ 24,789(6,878)17,911(57 )(1,783)

11,203(6,878)22,949(6,878)4,325¥ 16,071

11,746

Total¥ 11,746¥

Millions of Yen
2016
WacoalBusiness(Overseas)
Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Acquisition during the year
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges¥ 14,425
14,425469(1,308)Peach John

Total

¥ 11,203(6,878)4,325¥ 25,628(6,878)18,750469(1,308)

11,203(6,878)24,789(6,878)4,325¥ 17,911

13,586

Total¥ 13,586

106¥

The Company recorded “Impairment charges on goodwill” of ¥206 million of A Tech in the fiscal year ended March
31, 2018, which is included in operating expenses of Wacoal Business (overseas). During the years ended March 31,2017 and 2016, the Companies recorded no impairment charge on goodwill. See Note 19 for further information.

107

Other Intangible Assets – The components of intangible assets excluding goodwill as of March 31, 2018 and2017 were as follows:Year Ended March 31
Amortized intangible assets:
BrandsSoftware
OthersTotal
Unamortized intangible assets:
Trademarks
Other
Total

Gross
Carrying
Amount¥Millions of Yen
2018
Accumulated
Amortization
Grossand Impairment
Carrying
ChargeAmount2017
Accumulated
Amortization
and Impairment
Charge6,219
11,777
1,703¥ 1,671
6,434
805

¥

5,853
9,692
1,601

¥ 1,3115,434
660¥ 19,699¥ 8,910¥ 17,146¥ 7,405¥ 5,31676¥ 3,322¥ 5,316114¥ 3,322¥ 5,392¥ 3,322¥ 5,430¥ 3,322

Other intangible assets acquired during the years ended March 31, 2018, 2017 and 2016 totaled ¥2,569
million, ¥1,941 million and ¥1,432 million, respectively, which primarily consist of software with an estimateduseful life of five years.
The gross carrying amounts of brands include foreign currency translation adjustments.
During the years ended March 31, 2018, 2017 and 2016, the Companies recorded no impairment charge onother intangible assets. See Note 19 for further information.
Aggregate amortization expenses for the years ended March 31, 2018, 2017 and 2016 related to otherintangible assets were ¥1,811 million, ¥1,589 million and ¥1,537 million, respectively. Future estimatedamortization expenses as of March 31, 2018 were as follows:Year Ending March 31

Millions ofYen

Estimated amortization expense
2019
2020
2021
2022
2023

¥ 1,791
1,591
1,308
1,099
808

Total

¥ 6,597108

9.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2018 and 2017 consisted of the following:
Millions of Yen
2018
2017
Unsecured bank loans¥7,104¥7,716

The weighted-average annual interest rate on short-term bank loans as of March 31, 2018 and 2017 were 0.3%
and 0.4%, respectively.
Unused lines of credit for short-term financing as of March 31, 2018 and 2017 aggregated ¥23,511 million and¥26,830 million, respectively. The Companies compensate banks for these facilities in the form ofcommitment fees, which were not material during the years ended March 31, 2018 and 2017.
Long-term debt as of March 31, 2018 and 2017 is summarized below. The interest rates and maturities are forloans as of March 31, 2018.
Millions of Yen
2018
2017
Collateralized bank loans, with fixed interest at 0.6%, maturing
through 2022
Unsecured bank loans, with fixed interest at 0.4%, maturing
through 2022
Total
Less current portionLong-term debt, less current portion

¥ 75

¥ 95

113
188
(50 )

140
235
(50 )

¥ 138

¥ 185

The annual maturities of long-term debt as of March 31, 2018 were as follows:
Millions of
Yen

Year Ending March 31
2019
2020
2021
2022

¥ 50
50
50
38

Total

¥ 188

A subsidiary has pledged assets as security for loans. As of March 31, 2018 and 2017, assets pledged ascollateral for bank loans were as follows:
Millions of Yen
2018
2017
Land
Buildings

¥ 150
191

¥ 150
213

Total

¥ 341

¥ 363

109

As is customary in Japan, both short-term and long-term loans are made under general agreements which
provide for security and guarantees for future and present indebtedness to be given upon request of the bank.
The bank has the right to offset cash deposits against obligations that have come due or, in the event of default,
against all obligations due to the bank.
10.

LEASES
The Companies lease most of their store premises and certain equipment. Most leases have automatic renewal
provisions and allow the Companies to extend the lease term beyond the initial base period, subject to theterms agreed at lease inception. Future minimum rental commitments on operating leases having a remaining
noncancelable lease term in excess of one year as of March 31, 2018 are presented below:
Millions of
Yen

Year Ending March 31
2019
2020
2021
2022
2023
Thereafter

¥

738
434
212
91
54
167

Total

¥ 1,696

Rental expenses were ¥7,830 million, ¥7,862 million and ¥7,902 million for the years ended March 31, 2018,2017 and 2016, respectively, and have been included in selling, general and administrative expenses.
11.

ASSET RETIREMENT OBLIGATIONSThe Companies recorded the fair value of asset retirement obligations in order to recognize legal obligations
associated with the removal of leasehold improvements from leased facilities and return of the property to a
specified condition when the lease terminates.
A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation is asfollows:

12.

2018

Millions of Yen
2017

2016

Balance at the beginning of the year
Accretion expense
Liabilities incurred
Liabilities settled
Change due to translation of foreign currencies

¥ 855
1
62
(91 )
(2 )

¥ 878
2
84
(111)
2

¥ 777
20
157
(74 )
(2 )

Balance at the end of the year

¥ 825

¥ 855

¥ 878

TERMINATION AND RETIREMENT PLANS
Employee Retirement Plans – Certain subsidiaries of the Company sponsor termination and retirement benefit
plans that cover substantially all employees. Benefits are based on the employee's years of service, positionand performance. If the termination is involuntary or caused by death, the employee is usually entitled togreater payments than in the case of voluntary termination.

110

The Company and certain subsidiaries have contributory defined retirement benefit plans and several unfunded
termination plans administered by the Company and certain subsidiaries. Benefits under the contributory
defined retirement benefit plan are usually paid in a lump sum at the earlier of termination or retirement,
although periodic payments are available under certain conditions. Benefits under the other termination andretirement benefit plan are paid either as lump-sum payments or periodic payments under certain conditions.
The benefits are usually paid as a lump-sum payment, if the employee resigns before the mandatory retirement
age.
Contributory Defined Retirement Benefit Plan – The following provides a reconciliation of benefit
obligations, plan assets and funded status of the plans:
2018
Change in benefit obligations:Benefit obligations at the beginning of the year
Service cost
Interest cost
Participants' contributions
Actuarial (gain) loss
Prior service cost arising during the year
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Company and certain subsidiaries
Changes in foreign currency exchange rates
Change in the scope of consolidation
Benefit obligations at the end of the year

¥ 34,935
1,086
205
63
432

Millions of Yen
2017

2016

(1,007)(1,003)(138)
7¥ 35,777
1,103
183
65
(509)
271
(958)
(865)
(125)
(7 )

34,58034,935

(950)
(850)
(100)
(6)
244
35,777

Change in plan assets:
Fair value of plan assets at the beginning of the year
Actual return on plan assets
Employer contributions
Participants' contributions
Benefit payments
Settlement payments
Changes in foreign currency exchange rates
Fair value of plan assets at the end of the year

¥ 43,203
878
612
63(1,007)(1,003)(10 )
42,736¥ 42,156
2,176
633
65
(958)
(865)
(4 )
43,203¥ 43,137
(516)
1,275
66
(950)
(850)
(6)
42,156

Funded status at the end of the year

¥

¥

¥

8,156

8,268

Amounts recognized in the consolidated balance sheets as of March 31, 2018 and 2017 consist of:Millions of Yen
2018
2017
Prepaid pension expense
Other current liabilities
Liability for termination and retirement benefits¥ 10,178(170)(1,852)¥ 10,287(63 )(1,956)

Total

¥

¥

111

8,156

8,268

¥ 34,085
1,074
321
66
1,893

6,379

Amounts recognized in accumulated other comprehensive income, pre-tax, as of March 31, 2018 and 2017
were as follows:
Millions of Yen
2018
2017
Actuarial loss (gain)
Prior service benefit¥ (35)

¥ 667
121

Total

¥ (35)¥ 788

The accumulated benefit obligation for all defined retirement benefit plans as of March 31, 2018 and 2017 was
as follows:
Millions of Yen
2018
2017
Accumulated benefit obligations¥34,580¥34,935

The projected benefit obligations and the fair value of the plan assets for the Company's and certain
subsidiaries' pension plans with projected benefit obligations in excess of plan assets, and the accumulated
benefit obligations and the fair value of the plan assets for the Company's and certain subsidiaries' pension
plans with accumulated benefit obligations in excess of plan assets were as follows:
Millions of Yen
2018
2017
Plans with projected benefit obligations in excess of plan
assets:
Projected benefit obligations
Fair value of plan assets
Plans with accumulated benefit obligations in excess of plan
assets:Accumulated benefit obligations
Fair value of plan assets¥2,838815¥2,905
886

2,838
815

2,905
886

Net periodic benefit costs for the Company and certain subsidiaries' plans consisted of the following for theyears ended March 31, 2018, 2017 and 2016:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss (gain)
Amortization of prior service benefits

2018

Millions of Yen
2017

2016

¥ 1,086205(991 )(157 )(121 )¥ 1,103183(967 )
213(215 )¥ 1,074321(967 )(461 )(491 )¥¥¥ (524 )22

317

The unrecognized net actuarial gain or loss and prior service benefits are amortized within 12 years (theaverage remaining service life of active participants) using the declining-balance method and the straight-line
method, respectively.

112

Other changes in plan assets and benefit obligations recognized in other comprehensive income for the years
ended March 31, 2018, 2017 and 2016 were as follows:
2018
Actuarial (loss) gain
Amortization of actuarial (gain) loss
Prior service cost arising during the year
Amortization of prior service benefits

Millions of Yen
2017¥ (545)(157)

2016¥ (3,376)
(461)

(121)

¥ 1,718213(271 )(215 )¥ (823)¥ 1,445¥ (4,328)(491)

The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic
benefit costs over the next year are summarized as follows:
Millions of
Yen
Actuarial loss

¥4

The Company and certain subsidiaries use a measurement date of March 31 for their plans. The weightedaverage assumptions used as of March 31, 2018 and 2017 in computing the benefit obligations shown above
were as follows:

Discount rate

2018

2017

0.5%

0.6%

The weighted-average assumptions used as of March 31, 2018, 2017 and 2016 in computing the net periodic
benefit costs shown above were as follows:

Discount rate
Rate of increase in future compensation
Expected long-term rate of return on plan assets

2018

2017

2016

0.6%
5.3%
2.5%

0.5%
5.3%
2.5%

1.0%
5.3%
2.5%

The Company's approach to establishing the discount rate is based upon corporate bond indices. The discountrate assumption is based upon effective yields as of March 31, 2018 on the corporate bond indices for whichmaturity dates approximate the timing of the expected future benefit payments.
The retirement benefit plan of the Company and a certain subsidiary is a point-based benefits system, and,
therefore, the rate of compensation increase has not been included in computing the benefit obligations.
The expected long-term rate of return on plan assets is derived proportionally from return assumptions
determined for each of the major asset classes. The return expectations for each of the asset classes are basedlargely on assumptions about economic growth and inflation, which are supported by long-term historical data.
The estimated long-term rate of return is based on an asset allocation of equity securities of 26.0%, debt
securities of 54.0%, life insurance company general accounts of 18.0% and other short-term investments of
2.0%.

113

The plan investment strategy of the Company and certain subsidiaries is to maintain actual asset weightings
within a preset range of target allocations. The plan investment strategy of the Company and certain
subsidiaries is broadly diversified, consisting primarily of equity and debt securities. The Company andcertain subsidiaries believe these ranges represent an appropriate risk profile for the planned benefit paymentsof the plans based on the timing of the estimated benefit payments.
The asset allocation as of March 31, 2018 and 2017 was as follows:

Equity securities
Debt securities
Life insurance company general accounts
Real estate
Other short-term investments

2018

2017

41.1%
37.2%
10.3%
3.2%
8.2%

48.3%
26.3%
11.1%
3.9%
10.4%

The target allocation percentages are reviewed and approved by the Pension Committee. The actual
allocations for 2018 and 2017 are different from the target allocation percentages primarily because Wacoal
Corp. maintained additional equity securities within a separate plan asset which is assigned to the plan basedon an agreement between Wacoal Corp. and its employees and is not governed by the Pension Committee. As
such, the actual allocation percentage of equity securities to the total plan assets is higher than the target
allocation and, similarly, the actual allocation for some other types of assets is lower than the target allocation.
The following tables present the plan assets of the Company and certain subsidiaries using the fair value
hierarchy as of March 31, 2018 and 2017. The fair value hierarchy has three levels based on the reliability of
the inputs used to determine the fair value. For references to each level, see Note 19.
2018

Level 1

Assets evaluated by other than net asset value
per share
Equity securities:
Japanese companies
Foreign companies
Debt securities:
Foreign government bonds
Life insurance company general accounts
Other types of investments:
Other short-term investments
Assets evaluated by net asset value per share (a)Equity securities:
Pooled funds (b)Debt securities:
Pooled funds (c)Other types of investments:
Hedge funds (d)Pooled funds (e)Total¥ 9,423
17

Total

¥

69

9,423
17

¥ 4,403

69
4,403

2,403

2,403
6,030
11,0953,870
5,426¥ 9,509

114

Millions of Yen
Level 2
Level 3

¥ 6,806¥ 42,736

2017

Level 1

Assets evaluated by other than net asset value
per share
Equity securities:
Japanese companies
Foreign companies
Debt securities:
Foreign government bonds
Life insurance company general accounts
Other types of investments:
Other short-term investments
Assets evaluated by net asset value per share (a)Equity securities:
Pooled funds (b)Debt securities:
Pooled funds (c)Other types of investments:
Hedge funds (d)Pooled funds (e)
Total

¥

Millions of Yen
Level 2
Level 3

9,962
25

Total

¥

9,962
25

67
¥ 4,805

67
4,805

3,235

3,235
10,021
7,894
1,377
5,817

¥ 10,054¥ 8,040¥ 43,203(a) Certain assets evaluated by net asset value per share (or its equivalent) are not categorized in the fairvalue hierarchy. Total amounts in the above table are presented to reconcile the amounts in the fairvalue hierarchy to the amounts stated on the consolidated balance sheets.
(b) This class includes common stock of approximately 52% Japanese companies and 48% foreigncompanies as of March 31, 2018 and 34% and 66%, respectively, as of March 31, 2017.
(c) This class includes approximately 55% of foreign government bonds, 45% of corporate bonds
investments as of March 31, 2018. This class includes approximately 15% of Japanese government
bonds, 2% of Japanese municipal bonds, 38% of foreign government bonds, 44% of corporate bonds
and 1% of other short-term investments as of March 31, 2017.
(d) This class consists of hedge funds that invest in both long- and short-term debt securities as of March
31, 2018 and 2017.
(e) This class includes approximately 34% of corporate bonds, 4% of common stock of Japanesecompanies, 16% of common stock of foreign companies, 26% of real estate and 20% of other shortterm investments as of March 31, 2018. This class includes approximately 35% of corporate bonds,
2% of common stock of Japanese companies, 13% of common stock of foreign companies, 29% ofreal estate and 21% of other short-term investments as of March 31, 2017.
Equity securities and debt securities presented in Level 1 are primarily valued using a market approach basedon the quoted market prices of identical instruments. Life insurance company general accounts categorized in
Level 2 include contracts with insurance companies with guaranteed rates of return and capital, and thosevalues are based on the sum of original value and return. Pooled funds are valued using the net asset value pershare provided by the administrator of the fund.

115

The funding policy for the funded plans of the Company and certain subsidiaries is to contribute amounts
computed in accordance with actuarial methods accepted by Japanese tax law. The Company and certain
subsidiaries expect to contribute ¥597 million to their plans in the year ending March 31, 2019.
The following benefit payments, which reflect expected future services, as appropriate, are expected to bepaid:
Millions of
Yen

Year Ending March 31
2019
2020
2021
2022
2023
Thereafter¥2,062
2,025
1,928
1,894
2,049
9,495

Defined Contribution Plan – Certain subsidiaries have defined contribution plans. The amounts of cost
recognized for their contributions to the plan were ¥327 million, ¥249 million and ¥219 million for the years
ended March 31, 2018, 2017 and 2016, respectively.
Employee Early Retirement Program – The Company and certain subsidiaries provide additional benefits toemployees that elect to participate in the Company's and certain subsidiaries' early retirement program.
Retirement benefits of ¥210 million, ¥143 million and ¥125 million were paid in addition to normal benefits
and charged to selling, general and administrative expenses for the years ended March 31, 2018, 2017 and2016, respectively.
Termination Plan for Directors – The Company previously had, and a certain subsidiary currently has,termination plans for directors. Payment of termination benefits to directors is made in a lump sum upon
termination and requires the approval of the shareholders before payment. In June 2005, the Company
rescinded its termination plan for directors upon the approval of its shareholders. The amount of benefits foreach individual was fixed as of June 29, 2005 and will remain frozen until the retirement of each respective
director. Outstanding liabilities of ¥348 million and ¥340 million as of March 31, 2018 and 2017,
respectively, were recorded in other long-term liabilities. A certain subsidiary has plans for its directors andrecorded a liability for termination benefits for directors at the amount that would be needed if all directors
were to resign at each balance sheet date in accordance with the guidance for determination of vested benefit
obligations for a defined benefit pension plan.
13.

SHARE-BASED COMPENSATIONThe Company adopted an annual stock option plan in the year ended March 31, 2009. Under the stock option
plan, the Company granted shares of its common stock to directors of the Company, excluding outside
directors and directors of the Company's wholly-owned subsidiary, Wacoal Corp., in the years ended March
31, 2018, 2017 and 2016. The Company believes that such awards better align the interests of its directors
with those of its shareholders by sharing both risk and return from fluctuations in stock prices and giving
motivation to enhance corporate value. Each stock option is exercisable to acquire 500 shares of theCompany's common stock at ¥1 per share. The compensation cost is measured at fair value on the grant date.
Options vest over one year in proportion to the services rendered by the directors, and are exercisable from the
day after the date of retirement up to (i) 20 years from the grant date or (ii) 5 years from the day after the dateof retirement, whichever is earlier.
The fair value of the options is estimated by using the Black-Scholes option-pricing model with the following
assumptions.

116Expected dividend yield is based on the actual payout of dividends in the last fiscal year and the closing priceof the Company's common stock on the grant date. Expected volatility is based on the historical volatility of
the Company's share price over the most recent period commensurate with the expected term of the Company's
stock options. The risk-free interest rate is based on the Japanese government bond yield curve in effect at thetime of grant for a period commensurate with the expected term of the Company's share options. The expected
term of options granted is based on the average remaining service period of directors, assuming that those whoare granted options will render service until the stated retirement date and they will exercise options
immediately after their retirement.

Expected dividend yield
Expected volatility
Risk-free interest rate
Expected term

2018

2017

2016

2.3%
23.7%
(0.2)%
3.4 years

2.9%
25.1%
(0.2)%
2.5 years

2.0%
20.9%
0.0%
2.6 years

A summary of stock option activities under the plan for the year ended March 31, 2018 and 2017 was asfollows:
Yen

Outstanding as of April 1, 2017
GrantedExercised
Outstanding as of March 31, 2018
Exercisable as of March 31, 2018

Shares

WeightedAverage
Exercise
Price

Aggregate
Intrinsic
Value

222,500
23,0005,000
240,500
21,000¥1
1
1
1
1

14.39 years
2.30 years

¥740
65

Yen

Outstanding as of April 1, 2016
GrantedExercised
Outstanding as of March 31, 2017
Exercisable as of March 31, 2017

Millionsof YenYears
WeightedAverage
Remaining
Contractual
Term

Millionsof YenShares

WeightedAverage
Exercise
Price

Years
WeightedAverage
Remaining
Contractual
Term

Aggregate
Intrinsic
Value

215,500
34,50027,500222,500
26,000¥1
1
1
1
1

14.58 years
3.10 years

¥611
71

The total intrinsic value of options exercised was ¥16 million, ¥69 million and ¥31 million as of the years
ended March 31, 2018, 2017 and 2016, respectively.
The total compensation costs recognized for the years ended March 31, 2018, 2017 and 2016 were ¥68
million, ¥74 million and ¥67 million, respectively. The total recognized tax benefits related thereto for theyears ended March 31, 2018, 2017 and 2016 were ¥21 million, ¥23 million and ¥21 million, respectively.
The weighted-average grant date fair values of options granted for the years ended March 31, 2018, 2017 and2016 were ¥2,918, ¥2,088 and ¥2,838, respectively.
As of March 31, 2018, there was ¥10 million in total unrecognized compensation cost related to nonvested
share-based compensation arrangements granted under the plan. That cost is expected to be recognized overthree months.

117

*

As of October 1, 2017, the Company effected a one-for-two ordinary share reverse stock split. The
number of shares to be granted for exercise of stock option is calculated assuming that the reverse stock
split occurred at the beginning of the earliest fiscal year presented in the consolidated financial statements.

118

14.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to
the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies thatmeet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3)having an Audit and Supervisory Board, and (4) the term of service of the directors being prescribed as
one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may
declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company hasprescribed so in its articles of incorporation. The Company meets all the above criteria and, accordingly,
the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal
year.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders
subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if
the articles of incorporation of the companies so stipulate. The Companies Act provides certain
limitations on the amounts available for dividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to the shareholders, but the amount of net assets after
dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus), depending on the equity account charged upon the payment of such dividends, until the total of
the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock.
Under the Companies Act, the total amount of additional paid-in capital and legal reserve may bereversed without limitation. The Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained earnings can be transferred among theaccounts under certain conditions upon resolution of the shareholders.
(c) Treasury Stock
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury
stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which is determined by a specific formula.

119

15.

OTHER COMPREHENSIVE INCOME (LOSS)
The changes in the components of accumulated other comprehensive income, including amounts attributable to noncontrolling interests were as follows:
Millions of Yen
2017

2018
Foreign
Currency
Translation
Adjustments

PensionLiability
Adjustments

Foreign
Currency
Translation
Adjustments

Unrealized
Gain onSecurities

Unrealized
Gain onSecurities

Balance at the beginning of the year (after-tax)
Amount arising during the year:
Pre-tax amountTax credit
Net amount
Reclassification adjustments:
Pre-tax amountTax credit
Net amount
Other comprehensive income (loss) attributable to noncontrollinginterests (after-tax)¥ 1,212¥ 21,075¥ (414)¥ 5,177

1,158
(45 )
1,113

9,309
(2,815)
6,494

(655)
168
(487)

(4,109)30(4,079)

(201)
62
(139)

(278)
85
(193)

(51 )

(6 )

(7 )

Balance at the end of the year (after-tax)¥ 2,274¥ 27,424¥ 1,1012016
PensionLiability
Adjustments

Foreign
Currency
Translation
Adjustments

Unrealized
Loss onSecurities

PensionLiability
Adjustments¥ 17,966¥ (1,035)¥ 10,831¥ 20,821¥ 1,934

4,905(1,492)
3,413

1,062
(443)
619

(5,890)220(5,670)(4,169)1,336(2,833)(3,418)1,091(2,327)

(438)
134
(304)

(2 )
1
(1 )

(70 )
23
(47 )

(952)
308
(644)

114

(0)

3

16

25

2

¥ 1,212¥ 21,075

5,177¥ 17,966¥ (1,035)

¥

(414)

¥

Reclassification adjustments (pre-tax) of unrealized gain or loss on securities are included in "Gain (Loss) on sales or exchange of marketable securities and investments – net" and "Valuation gain or loss on marketable securities and investments – net" in the
consolidated statements of income.
Reclassification adjustments (pre-tax) of pension liability adjustments are included in "Cost of sales" and "Selling, general and administrative expenses" in the consolidated statements of income as the net periodic benefit costs.
16.

INCOME TAXES
Domestic and foreign components of income before income taxes and equity in net income of affiliated companies for the years ended March 31, 2018, 2017 and 2016 were summarized as follows:
2018

Millions of Yen
2017

2016

Japan
Foreign¥ 25,139(10,853)¥ 27,487(10,918)¥ 24,002(9,045)

Total¥ 14,286¥ 16,569¥ 14,957

Domestic and foreign components of income taxes for the years ended March 31, 2018, 2017 and 2016 consist of:Current:
Japan
Foreign

Deferred:Japan
Foreign

Total income taxes

2018

Millions of Yen
2017

2016

¥ 3,289
1,591¥ 3,230
1,600¥ 1,666
1,776¥ 4,880¥ 4,830¥ 3,442

¥

394
268

¥

690
(240 )¥ 1,483(195 )

¥

662

¥

450

¥ 1,288¥ 5,280¥ 4,730¥ 5,542120

Income taxes in Japan applicable to the Companies imposed by the national, prefectural and municipal
governments in the aggregate resulted in normal effective statutory tax rates of approximately 30.9%, 30.9%
and 33.1% for the fiscal years ended March 31, 2018, 2017 and 2016, respectively. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
The Companies are subject to a number of different taxes based on income. The effective income tax rates
differed from the normal effective statutory tax rates for the following reasons for the years ended March 31,
2018, 2017 and 2016:
2018

2017

2016

Normal Japanese effective statutory tax rates
Increase (decrease) in taxes resulting from:
Permanently nondeductible expenses
Change in valuation allowance
Undistributed earnings of associated companies
Differences in foreign subsidiaries' tax rate
Tax exemption
Unrecognized tax benefits
Changes in Japanese income tax rates
Other – net

30.9%

30.9%

33.1%

3.0
2.8
0.7
(1.3)
(0.9)
(0.1)
2.0
1.7

2.4
3.1
(2.1)
(0.5)
(0.4)
(1.8)
0.2
0.1

2.8
1.1
0.1
(1.2)
(0.2)
(0.1)
(3.0)
(1.0)

Effective tax rates

38.8%

31.9%

31.6%

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was enacted into law, which significantly
reduced corporate tax rates in the United States. As a result of the TCJA, deferred tax assets of foreignsubsidiaries in the United States decreased and income tax expense increased by ¥290 million.

121

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax
balances as of March 31, 2018 and 2017 were as follows:
Millions of Yen

Allowance for returns
Allowance for doubtful receivables
Accruals not currently deductible
Inventory valuation
Accrued bonuses
Impairment charges on marketable securities andinvestments
Advanced depreciation on property, plant andequipment
Undistributed earnings of associated companies
Net unrealized gain on marketable securities andinvestments
Net realized gain on exchange of investments
Capitalized supplies
Enterprise taxes
Accrued vacation
Asset retirement obligation
Prepaid pension expense
Liability for termination and retirement benefit
Tangible fixed assets
Tax loss carryforwards
Intangible assets
Other temporary differences
Total
Valuation allowance
Total

2018
DeferredDeferredTax
TaxAssetsLiabilities

2017
DeferredDeferredTax
TaxAssetsLiabilities

¥

¥

600
15
213
840
999
449

713
14
221
830
963
972

¥

1,981
2,355

¥

12,266
818
175
216
727
255

10,738
818
162
298
761
267

2,402
479
1,005
1,861
92
7,926
(2,337)¥ 5,589

1,992
2,209

2,462
478
1,472
1,491

1,762
42
21,626¥ 21,626

525
9,167(1,845)¥ 7,322

1,761
95
20,075¥ 20,075

The valuation allowance decreased by ¥492 million and ¥515 million for the years ended March 31, 2018 and2017, respectively.
On November 28, 2014, the Company resolved a restructuring plan for its group organization. Based on the
resolution, most of the assets and liabilities of Lecien Corp. ("Lecien"), a wholly-owned subsidiary of theCompany, were transferred to a newly-established subsidiary, and Wacoal Corp., another wholly-owned
subsidiary of the Company, merged with Lecien, including Lecien's remaining assets and liabilities on April 1,
2015.
In conjunction with the merger, deferred tax assets for temporary differences related to the merged assets andliabilities and tax loss carryforwards were transferred from Lecien to Wacoal Corp., including deferred tax
assets for which a full valuation allowance had been established due to the poor operating results of Lecien.
However, as a result of considering the restructuring, there was a change in assessment of the realizability ofdeferred tax assets, and the Company reversed ¥1,398 million of the valuation allowance and recognized thesame amount of income tax benefit for the year ended March 31, 2015.
The Companies also reversed a part of the valuation allowance and utilized ¥333 million and ¥257 million of
tax loss carryforwards, and recognized tax benefits of ¥87 million and ¥77 million for the years ended March
31, 2018 and 2017, respectively.

122As of March 31, 2018, certain subsidiaries had tax loss carryforwards which are available to offset futuretaxable income of such subsidiaries and expire as follows:
Millions of
Yen

Year Ending March 31
2019
2020
2021
2022
2023
2024
2025
2026
2027
Thereafter

¥

483
812
228
440
1,069
42
71
662
502
2,419

Total

¥ 6,728

There was no portion of undistributed earnings of foreign subsidiaries and foreign corporate joint ventures
which was deemed to be permanently invested as of March 31, 2017 and 2016.
A reconciliation of beginning and ending amounts of unrecognized tax benefits is as follows:
2018

Millions of Yen
2017

2016

Balance at the beginning of the year
Additions based on tax positions related to the current year
Reductions for tax positions of prior years

¥4
1

¥ 300
1
(297)

¥ 312
1
(13 )

Balance at the end of the year

¥5

¥

¥ 300

4

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is ¥5
million, ¥4 million and ¥300 million as of March 31, 2018, 2017 and 2016, respectively.
The Companies recognize interest and penalties accrued related to unrecognized tax benefits in income taxes
in the consolidated statements of income. Total amounts of interest and penalties recognized in the
consolidated statements of income for the years ended March 31, 2018, 2017 and 2016 were not material.
The Companies file income tax returns in Japan and various foreign tax jurisdictions. In Japan, the Companies
are no longer subject to regular income tax examinations by the tax authorities for years before 2014, with few
exceptions. For other countries, the Companies are no longer subject to regular income tax examinations by
the tax authorities for years before 2010, with few exceptions. For certain subsidiaries in Japan, the UnitedStates, and Asia, the transfer pricing examinations for the fiscal years ended March 31, 2017, 2011 and 2008
were completed.
17.

EARNINGS PER SHARE
Basic net income attributable to Wacoal Holdings Corp. per share has been computed by dividing net income
attributable to Wacoal Holdings Corp. by the weighted-average number of common shares outstanding during
each year. Diluted net income attributable to Wacoal Holdings Corp. per share assumes the dilution thatwould occur if share-based options to issue common stock were exercised.

123

The weighted-average number of common shares outstanding used in the computations of basic net income
attributable to Wacoal Holdings Corp. per share was 67,928,557 shares, 69,483,315 shares and 70,421,092
shares for the years ended March 31, 2018, 2017 and 2016, respectively. The weighted-average number ofdiluted common shares outstanding used in the computations of diluted net income attributable to Wacoal
Holdings Corp. per share was 68,157,430 shares, 69,696,631 shares and 70,627,620 shares for the years ended
March 31, 2018, 2017 and 2016, respectively.
*

18.

As of October 1, 2017, the Company effected a one-for-two ordinary share reverse stock split. Net
income attributable to Wacoal Holdings Corp. per share is calculated assuming that the reverse stock split
occurred at the beginning of the earliest fiscal year presented in the consolidated financial statements.

FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Fair Value of Financial Instruments
The carrying amounts and fair values of financial instruments as of March 31, 2018 and 2017 were as follows:
Millions of Yen
2018
2017
Carrying
Fair
Carrying
Fair
AmountValue
AmountValue
Assets:Marketable securities (Notes 3 and 20)
Investments (Notes 3 and 20)

¥

1,567
68,057¥

1,559
68,045¥

1,445
58,586¥

1,442
58,582

Total assets¥ 69,624¥ 69,604¥ 60,031¥ 60,024

Liabilities:
Long-term debt including current portion

¥ 188

¥ 188

¥ 235

¥ 235

Total liabilities

¥ 188

¥ 188

¥ 235

¥ 235

There are investments in nonmarketable equity securities and debt securities for which there are no readily
determinable fair values. See Note 3 for further information. The carrying amounts of all other financial
instruments approximate their estimated fair values because of the short maturity of those instruments. For
information about fair values of foreign exchange contracts, see Note 19.
Marketable Securities and Investments – Held-to-maturity debt securities are classified as marketablesecurities and investments as of March 31, 2018 and 2017. The fair value of these held-to-maturity debt
securities are classified as Level 1. For all other investments included in marketable securities andinvestments, see Notes 3 and 19.
Long-Term Debt – The fair values for long-term debt are estimated by discounted cash flow analysis, using
rates currently available for similar types of borrowings with similar terms and remaining maturities. The
estimated fair value is based on Level 2 inputs.
Limitations – Fair value estimates are made at a specific point in time based on relevant market informationand information about the financial instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Concentration of Credit Risk – The Companies' business consists primarily of sales of women's intimate
apparel to a large number of diverse customers in the Japanese retail industry, which include well-establisheddepartment stores, general merchandise stores and other general retailers and specialty stores.

124

19.

FAIR VALUE MEASUREMENTS
The guidance for fair value measurements defines fair value as the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the measurement date. The guidance
establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value as follows:
Level 1

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2

Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs that are derived principally from or corroborated byobservable market data by correlation or other means.

Level 3

Inputs are unobservable.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2018 and 2017 were as
follows:
2018

Level 1

Assets:Marketable securities:
Municipal bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Corporate debt securities
Mutual funds
Total investments
Derivative instruments:
Foreign exchange contracts

Millions of Yen
Level 2
Level 3

¥

10
590
600

Total

¥

¥ 66,751
614

66,751614
46
67,411

6

6¥ 1,220¥ 68,017

¥

13
31

¥

13
31

¥

44

¥

44

614
46
66,797

Total assets¥ 66,797

Liabilities:
Derivative instruments:
Foreign exchange contracts
Currency swap
Total liabilities

125

10
590
600

2017

Level 1

Assets:Marketable securities:
Municipal bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Mutual funds
Total investments
Derivative instruments:
Foreign exchange contracts

Millions of Yen
Level 2
Level 3

¥ 10
868
878

Total

¥

¥ 57,976
44
58,020Total assets¥ 58,020

Liabilities:
Derivative instruments:
Foreign exchange contracts
Total liabilities

10
868
878
57,97644
58,020

2

2

¥ 880

¥ 58,900

¥

4

¥

4

¥

4

¥

4

Investments presented in Level 1 are valued using unadjusted quoted market prices in active markets with
sufficient volume and frequency of transactions. Bonds presented in Level 2 are valued by financial
institutions using quoted market prices for identical instruments in markets that are not active. Mutual funds
presented in Level 2 are valued by financial institutions based on quoted prices in an inactive market for
identical instruments which are included in the mutual funds.
As discussed in Note 3, the Companies record impairment charges on marketable securities and investments if
a decline in fair value of marketable securities and investments is determined to be other than temporary.
Foreign exchange contracts and currency swaps presented in Level 2 are valued by financial institutions basedon market data in both active and inactive markets.
Assets Measured at Fair Value on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis as of March 31, 2018 were as follows:
Millions of Yen
2018

Level 1

Level 2

Level 3

Total

Goodwill (Note 8)

Impairment
Losses¥ (206)¥ (206)

As of March 31, 2018, all the carrying amount of A Tech‘s goodwill was written down resulting in an
impairment charges of ¥206 million, which is included as a charge to earnings for the year ended March 31,
2018. The impairment arose mainly due to the revision of the future business plan made in response to a slump
in sales. To measure the fair values of A Tech’s reporting units, the Companies used the expected present
value of future cash flows and incorporated relevant unobservable inputs, such as management's internal
assumptions about future cash flows and appropriately risk-adjusted discount rates, which reflected
management's estimate of assumptions that market participants would use in pricing the asset in an arm's
length transaction as of the measurement date.
There were no assets measured at fair value on a nonrecurring basis as of March 31, 2017.

126

20.

DERIVATIVE INSTRUMENTS
Risk Management Policy – The Companies are exposed to the risk of changes in foreign currency exchange
rates. Derivative instruments are used to manage such risk. Derivative instruments are used based on
Company policy and administrative provisions. There were no derivative instruments used for the purpose of
speculative trading. The Companies consider the related credit risk to be low since these derivative
instruments are provided by financial institutions with international credibility.
Foreign Exchange Risk – Assets and liabilities denominated in foreign currencies, which are primarily related
to international business, are exposed to the risk of changes in foreign currency exchange rates. Foreignexchange contracts are used to mitigate such risk.
Derivative Instruments Not Designated as a Hedge – Foreign exchange contracts are classified as derivative
instruments, which are not designated as a hedge since these derivative instruments do not qualify for hedge
accounting. These derivative instruments are used to mitigate the risk of changes in foreign currency exchange
rates, and the changes in fair value of such derivative instruments are recorded in earnings immediately.
Notional contract amounts of foreign currency exchange contracts that are not designated as hedges were¥1,598 million and ¥1,313 million as of March 31, 2018 and 2017, respectively. The changes in the fair valueof the foreign currency exchange contracts are recorded in earnings, since the foreign currency exchange
contracts are not designated as hedges. The Companies recognized a gain of ¥29 million, a gain of ¥295
million and a loss of ¥(506) million in other – net of other income (expenses) for the years ended March 31,
2018, 2017 and 2016, respectively.
The Companies recorded derivative instruments at fair value in the consolidated balance sheets as other current
assets and other current liabilities in the amount of ¥6 million and ¥44 million, respectively, as of March 31,
2018, and as other current assets and other current liabilities in the amount of ¥2 million and ¥4 million,
respectively, as of March 31, 2017.

21.

REORGANIZATION EXPENSES
Eveden Huit SAS, a wholly-owned subsidiary of the Company which sold underwear and swimwear, filedwith the Rennes Commercial Court in France for reorganization on April 1, 2016. On July 9, 2016, thesubsidiary was instructed to transfer its business to Trendy Capital Co., which operates in France.
Accordingly, in connection with this reorganization, expenses of ¥805 million were recognized during the year
ended March 31, 2017.
The changes in the amount of related liabilities for the years ended March 31, 2018 and 2017 were as follows:

2018

Retirement
Cost

Balance at the beginning of theyear:
Reorganization expenses
Expenses without cash payment
Cash payments madeForeign currency translation
adjustments

Millions of Yen
Depreciation and Losson Disposal
Otherof Assets without
RelatedCash Payment – Net
Expenses¥

Balance at the end of the year

¥

127

87

Total
¥

87

(91)

(91)

4

4
¥

2017
Balance at the beginning of theyear:
Reorganization expenses
Expenses without cash payment
Cash payments madeForeign currency translation
adjustments
Balance at the end of the year

Retirement
Cost

¥ 237

Millions of Yen
Depreciation and Losson Disposal
Otherof Assets without
RelatedCash Payment – Net
Expenses

¥ 301
(301)

(237)

¥

¥

Total

¥ 212
(2)
(121)

¥ 750
(303)
(358)

(2)

(2)

¥

87

¥

87

The Companies recorded no reorganization expenses in the fiscal year ended March 31, 2018 and recorded
reorganization expenses of ¥211 million and ¥539 million in costs of sales and selling, general andadministrative expenses, respectively, in the consolidated statement of income for the year ended March 31,
2017. These expenses were included in the operating costs and expenses for Wacoal business (overseas) in thesegment information.
22.

ASSETS CLASSIFIED AS HELD FOR SALE
The Companies sold land, located at the site of the Nagoya branch, on April 27, 2016 to make effective use ofresources because it was unlikely that the Companies would use this site for future business.
As a result of the transfer, the Companies recorded a gain on sale of property, plant and equipment of ¥3,770
million in the consolidated statement of income for the year ended March 31, 2017.

23.

SEGMENT INFORMATION
Operating Segment Information
The Companies have three reportable segments: "Wacoal business (domestic)," "Wacoal business (overseas),"and "Peach John," which are based on their locations and brands. These segments represent components of theCompanies for which separate financial information is available and for which operating income (loss) isreviewed regularly by the chief operating decision-maker in deciding how to allocate the Companies' resources
and in assessing their performance. The accounting policies used for these reportable segments are the sameas those described in the summary of significant accounting policies in Note 1.
The "Wacoal business (domestic)" segment primarily produces and sells innerwear (consisting of foundation,
lingerie, nightwear and children's innerwear), outerwear, sportswear and hosiery. The "Wacoal business(overseas)" segment produces and sells innerwear (consisting of foundation, lingerie, nightwear and children's
innerwear), outerwear, sportswear, hosiery and other textile-related products. The "Peach John" segment
produces and sells innerwear (consisting of foundation, lingerie, nightwear), outerwear, and other textilerelated products, which are sold under the "Peach John" brand. The "Other" produces and sells innerwear(consisting of foundation, lingerie, nightwear and children's innerwear), outerwear, other textile-related
products, and mannequins and also engages in construction of stores and interior design.

128

Information about operating results and assets for each segment as of and for the years ended March 31, 2018, 2017 and 2016 is as follows:
Millions of Yen
2018
Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Impairment charges on goodwill
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination¥ 116,085
1,051
117,136¥ 51,888
10,18062,068¥ 10,795
1,281
12,076¥ 16,957
5,283
22,240¥ (17,795)(17,795)

105,782
3,469

11,290345

21,712
172(17,795)

109,251
7,885

56,504
1,506
206
58,216
3,852

11,635441

21,884356(17,795)

260,582
3,649

77,374
1,752

13,825365

18,261
118(71,508)

298,534
5,884

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination

Consolidated¥ 118,389
1,098
119,487¥ 48,423
9,236
57,659¥ 11,107
1,006
12,113¥ 17,962
5,947
23,909¥ (17,287)(17,287)

109,280
3,248
112,528
6,959

53,3201,284
54,604
3,055

11,427
312
11,739374

23,044
188
23,232
677(17,287)259,531
5,233

77,313
1,799

11,882355

18,684
58(72,452)

294,958
7,445

WacoalBusiness(Domestic)

WacoalBusiness(Overseas)

Peach John

Other

Elimination

Consolidated¥ 120,570
1,427
121,997¥ 51,869
8,595
60,464¥ 11,190
775
11,965¥ 19,288
6,102
25,390¥ (16,899)(16,899)

110,144
3,043
113,187
8,810

54,711
1,320
56,031
4,433

11,442
265
11,707258

24,839187
25,026364(16,899)

254,269
6,977

80,580
1,694

11,959245

18,866
62(72,820)

Consolidated¥ 195,725
195,725
177,493
5,492
206
183,191
12,534

Millions of Yen
2017
Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures¥ 195,881(17,287)

195,881
179,784
5,032
184,816
11,065

Millions of Yen
2016
Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

129¥ 202,917(16,899)

202,917
184,237
4,815
189,052
13,865292,854
8,978

The sum of the operating income (loss) of the reportable segments is consistent with the operating income on
the consolidated statements of income. For a reconciliation from operating income to income before income
taxes and equity in net income of affiliated companies, see other income (expenses) on the consolidated
statements of income.
The Companies account for intersegment sales and transfers at cost plus a markup. Operating income (loss)
represents net sales less operating costs and expenses.
Products and Services Information
Net sales information by product and service for the years ended March 31, 2018, 2017 and 2016 is as follows:

Innerwear:
Foundation and lingerieNightwear
Children's underwear
Subtotal
Outerwear/sportswear and others
Hosiery
Other textile goods and related products
Others
Total

2018

Millions of Yen
2017

2016

¥ 146,970
8,758
1,376
157,104¥ 145,188
9,154
1,429
155,771¥ 151,166
10,098
1,386
162,650¥¥¥

16,1281,983
8,907
11,603¥ 195,725

17,1892,235
9,346
11,340¥ 195,881

19,074
2,178
7,161
11,854¥ 202,917

Geographic Information
Information by major geographic area as of and for the years ended March 31, 2018, 2017 and 2016 is asfollows:

Net sales:Japan
Asia and Oceania
Americas and Europe
Consolidated
Long-lived assets:Japan
Asia and Oceania
Americas and Europe
Consolidated

2018

Millions of Yen
2017

2016

¥ 143,196
21,05731,472¥ 147,061
19,187
29,633¥ 150,673
17,90634,338¥ 195,725¥ 195,881¥ 202,917¥ 46,367
4,916
3,050

¥ 47,452
4,661
3,175

¥ 46,136
4,490
3,312

¥ 54,333¥ 55,288¥ 53,938

Countries or areas are classified according to their geographical proximity.
Asia and Oceania includes East Asia, Southeast Asia, West Asia and Australia.
Net sales are attributed to countries or areas based on the location where sold.
Long-lived assets represent property, plant and equipment.

130

24.

SUBSEQUENT EVENTS(Purchase of Treasury Stock)
On May 15, 2018, the Board of Directors resolved to purchase treasury stock based on a specific purchasing
method as described below pursuant to the provisions of Paragraph 1, Article 459 of the Companies Act asfollows.
a.

Reason for Purchase:
To improve capital efficiency and to implement capital policy tailored to the business environment withincreased flexibilityb.

Type of Shares to Be Purchased:
Common stock of the Companyc.

Total Number of Shares to Be Purchased:
2,200,000 shares (at maximum)d.

Total Amount to Be Purchased:¥7,000 million (at maximum)e.

Purchase Period:
From May 21, 2018 through December 31, 2018

(Retirement of Treasury Stock)
On May 15, 2018, the Board of Directors resolved to retire treasury stock based on a specific purchasing method
as described below pursuant to the provisions of Article 178 of the Companies Act as follows.
a.

Type of Shares to Be Retired:
Common stock of the Companyb.

Total Number of Shares to Be Retired:
1,000,000 sharesc.

Date for Retirement
May 25, 2018

(Dividend Declaration)
On May 15, 2018, the Board of Directors resolved to pay a cash dividend of ¥180 per 5 shares of common stock toholders of record as of March 31, 2018 (aggregate amount of ¥2,425 million).

******

131

VI. 【Stock-Related Administration for the Company】
Fiscal year

From April 1 to March 31

Ordinary General Meeting of
Shareholders

To be held in June

Record date

March 31

Record date for distribution of
surplusNumber of shares constituting
one unit
Purchase and sale of shares lessthan one unit

September 30
March 31

Office for handling businessTransfer agent

100 shares(Special Account)
Osaka Securities Transfer Section
Mitsubishi UFJ Trust and Banking Corporation
6-3, Fushimi 3-chome, Chuo-ku, Osaka
Securities Transfer Section
Sumitomo Mitsui Trust Bank, Limited
1-10, Nikkocho, Fuchu-shi, Tokyo (Note 2)(Special Account)
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Forwarding office―――Handling charge forpurchase and Sale

Free of charge

Method of public noticeSpecial benefit forshareholders(Notes)1.

2.

Public notice of the Company shall be in electronic form; provided that, where public
notice cannot be provided electronically due to an accident or unavoidable event, it shallbe published in Nihon Keizai Shimbun.
(i) Wacoal Essence Check (coupon for goods) shall be presented to the shareholders as
follows (with the date of determination of the shareholders entitled thereto being the endof March and September):- To shareholders holding 500 shares or more, but less than 1,500 shares:
Wacoal Essence Check worth JPY3,000 shall be presented twice a year.
- To shareholders holding 1,500 shares or more:
Wacoal Essence Check worth JPY5,000 shall be presented twice a year.
(ii) Shareholder special discount shall be made for Wacoal products by means of catalogue
sales as follows:- Wacoal catalogue shall be sent to those shareholders who want it and 20% discountshall be made for the products ordered for purchase by such shareholders.

Our Articles of Incorporation prescribe that the shareholders holding shares constituting less than one unit of theCompany may not exercise any rights, except for the rights as prescribed under each item in Paragraph 2, Article 189of the Companies Act, the claim rights pursuant to the provisions of Paragraph 1, Article 166 of the same law, theright to receive an allocation of share offerings and stock acquisition rights in proportion to the number of shares
held, and the right to request the sale of additional shares not constituting one unit.
For those shareholders of the Company who held shares of Lecien Corporation at the special account as of August
16, 2009 (i.e., the day preceding the effective date of the share exchange between the Company and Lecien
Corporation), Sumitomo Mitsui Trust Bank, Limited shall act as an account management institution of the special
account.

132

VII. 【Reference Information on the Company】
1. 【Information on the Parent Company】
The Company does not have the parent company set out in Paragraph 1, Article 24-7 of the Financial Instruments
and Exchange Act.

2. 【Other Reference Information】
The Company filed the following documents during the period from the commencing date of the fiscal year ended
March 31, 2018, to the filing date of the Annual Securities Report.
(1） Annual Securities Report andFiscal Year
From April 1, 2016
Filed with the Director of thethe attachments thereto, and(69th Fiscal Year)
to March 31, 2017
Kanto Local Finance Bureau on
Confirmation Letter
June 29, 2017(2） Internal Control Report and theattachments thereto(3） Quarterly Report andConfirmation Letter

Filed with the Director of the
Kanto Local Finance Bureau on
June 29, 2017
(First quarter of 70th
Fiscal Year)

From April 1, 2017
to June 30, 2017

(Second quarter of 70th From July 1, 2017
Fiscal Year)to September 30, 2017
(Third quarter of 70th
Fiscal Year)(4） Extraordinary Report

From October 1, 2017
to December 31, 2017

Filed with the Director of the
Kanto Local Finance Bureau on
August 9, 2017
Filed with the Director of the
Kanto Local Finance Bureau on
November 10, 2017
Filed with the Director of the
Kanto Local Finance Bureau on
February 9, 2018

Extraordinary Report on the Results of the Exercise of
Filed with the Director of the
Voting Rights at General Meeting of Shareholders pursuant Kanto Local Finance Bureau on
to Item 9-2, Paragraph 2, Article 19 of the Cabinet Office
June 30, 2017
Ordinance Concerning Disclosure of Corporate Affairs, etc.

(5） Share Repurchase Report

Reporting Period

Reporting Period

Reporting Period

Reporting Period

Reporting Period

Reporting Period

Reporting Period

Reporting Period(6) Correction report of the Share
Repurchase Report

From June 1, 2017
To June 30, 2017
From July 1, 2017
To July 31, 2017
From August 1, 2017
To August 31, 2017
From September 1, 2017
To September 30, 2017
From October 1, 2017
To October 31, 2017
From November 1, 2017
To November 30, 2017
From December 1, 2017
To December 31, 2017
From May 1, 2018
To May 31, 2018

Correction report of the Share Repurchase Reportsubmitted on January 11, 2018133

Field with the Director of the
Kanto Local Finance Bureau on
July 5, 2017
Field with the Director of the
Kanto Local Finance Bureau on
August 7, 2017
Field with the Director of the
Kanto Local Finance Bureau on
September 4, 2017
Field with the Director of the
Kanto Local Finance Bureau on
October 4, 2017
Field with the Director of the
Kanto Local Finance Bureau on
November 6, 2017
Field with the Director of the
Kanto Local Finance Bureau on
December 7, 2017
Field with the Director of the
Kanto Local Finance Bureau on
January 11, 2018
Field with the Director of the
Kanto Local Finance Bureau on
June 6, 2018
Filed with the Director of the
Kanto Local Finance Bureau on
January 18, 2018

Part II 【Information on Guarantors etc. for the Company】
Not applicable.

134

INDEPENDENT AUDITORS' REPORTTo the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the accompanying consolidated financial statements of Wacoal Holdings Corp. and its subsidiaries(the "Company"), which comprise the consolidated balance sheets as of March 31, 2018 and 2017, and the related
consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the
period ended March 31, 2018 (all expressed in Japanese yen), and the related notes to the consolidated financial
statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors' judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparationand fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Wacoal Holdings Corp. and its subsidiaries as of March 31, 2018 and 2017, and the results of
their operations and their cash flows for each of the three years in the period ended March 31, 2018, in accordancewith accounting principles generally accepted in the United States of America.
Convenience Translation
Our audit for the year ended March 31, 2018 also comprehended the translation of Japanese yen amounts into U.S.
dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2.
The translation of the financial statement amounts into U.S. dollars has been made solely for convenience of readers
outside of Japan.
Report on Management's Report on Internal Control over Financial Reporting
Notwithstanding the second paragraph of the "Auditors' Responsibility" section, we have performed an audit ofmanagement's report on internal control over financial reporting ("ICFR") under the Financial Instruments andExchange Act of Japan. A translated copy of management's report on ICFR along with a translated copy of ourreport is included within this Annual Securities Report as information for readers.

June 28, 2018

NOTE TO READERS:
Following is an English translation of the Independent Auditors' Report filed under the Financial Instruments andExchange Act of Japan. This report is presented merely as supplemental information.
There are differences between an audit of internal control over financial reporting ("ICFR") under the Financial
Instruments and Exchange Act ("ICFR under FIEA") and one conducted under attestation standards established by
the American Institute of Certified Public Accountants ("AICPA").
In an audit of ICFR under FIEA, the auditors express an opinion on management's report on ICFR, and do not
express an opinion on the Company's ICFR directly. In an audit of ICFR under attestation standards established by
the AICPA, the auditors express an opinion on the Company's ICFR directly. Also, in an audit of ICFR under FIEA,
there is detailed guidance on the scope of an audit of ICFR, such as quantitative guidance on business unit selection
and/or account selection. In an audit of ICFR under attestation standards established by the AICPA, there is no suchdetailed guidance. Accordingly, based on the quantitative guidance which provides an approximate measure for thescope of assessment of internal control over business processes, we used a measure of approximately 70% of total
assets on a consolidated basis and income before income taxes on a consolidated basis for the selection of significant
business units.
(TRANSLATION)
INDEPENDENT AUDITORS' REPORT
June 28, 2018
To the Board of Directors of Wacoal Holdings Corp.
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Wakyu Shinmen
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Hiroaki Sakai
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Seiichiro Nakashima
Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Financial Section, namely, the consolidated balance sheet as ofMarch 31, 2018 of Wacoal Holdings Corp. and its consolidated subsidiaries (the "Company"), and the consolidated
statements of income, comprehensive income, equity and cash flows for the fiscal year from April 1, 2017 to March
31, 2018, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in the United States of America pursuant to the thirdparagraph of the Supplementary Provisions of the Cabinet Office Ordinance for Partial Amendment of theRegulations for Terminology, Forms and Preparation Methods of Consolidated Financial Statements (No. 11 of the
Cabinet Office Ordinance in 2002), and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors' judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation andfair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, thefinancial position of Wacoal Holdings Corp. and its consolidated subsidiaries as of March 31, 2018, and the resultsof their operations and their cash flows for the year then ended, in accordance with accounting principles generally
accepted in the United States of America.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited
management's report on internal control over financial reporting of the Company as of March 31, 2018.
Management's Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the
preparation and fair presentation of its report on internal control in accordance with assessment standards for internal
control over financial reporting generally accepted in Japan. There is a possibility that misstatements may not becompletely prevented or detected by internal control over financial reporting.
Auditors' Responsibility
Our responsibility is to express an opinion on management's report on internal control based on our internal control
audit. We conducted our internal control audit in accordance with auditing standards for internal control overfinancial reporting generally accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether management's report on internal control is free from material misstatement.

An internal control audit involves performing procedures to obtain audit evidence about the results of the assessmentof internal control over financial reporting in management's report on internal control. The procedures selected
depend on the auditors' judgment, including the significance of effects on reliability of financial reporting. Aninternal control audit includes examining representations on the scope, procedures and results of the assessment ofinternal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement's report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, management's report on internal control over financial reporting referred to above, which represents
that the internal control over financial reporting of Wacoal Holdings Corp. and its consolidated subsidiaries as ofMarch 31, 2018 is effectively maintained, presents fairly, in all material respects, the results of the assessment ofinternal control over financial reporting in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required
under the provisions of the Certified Public Accountants Act.

The above represents a translation, for convenience only, of the original report issued in the Japanese language.

【Cover】【Document Filed】

Annual Securities Report (“Yukashoken Hokokusho”)【Applicable Law】

Paragraph 1, Article 24 of the Financial Instruments and Exchange Act【Filed to】

Director, Kanto Local Finance Bureau【Filing Date】

June 28, 2018

【Company Name】

KABUSHIKI KAISHA WACOAL HOLDINGS【Company Name in English】

WACOAL HOLDINGS CORP.

【Position and Name of Representative】

Hironobu Yasuhara, President and Representative Director【Position and Name of Chief Financial
Officer】

Masaya Wakabayashi,Director and Vice President【Address of Head Office】

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto【Place Where Available for PublicTokyo Stock Exchange, Inc.

Inspection】(2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING(TRANSLATION)NOTE TO READERS
Following is an English translation of management's report on internal control over financial reporting ("ICFR") filed
under the Financial Instruments and Exchange Act of Japan. This report is presented merely as supplemental
information.
There are differences between management’s assessment of ICFR under the Financial Instruments and Exchange Act("ICFR under FIEA") and one conducted under the attestation standards established by the American Institute ofCertified Public Accountants ("AICPA").
In management’s assessment of ICFR under FIEA, there is detailed guidance on the scope of management's
assessment of ICFR, such as quantitative guidance on business unit selection and/or account selection. In
management’s assessment of ICFR under the attestation standards established by the AICPA, there is no suchdetailed guidance. Accordingly, based on the quantitative guidance which provides an approximate measure of thescope of the assessment of internal control over business processes, we designated the business units that accounted
for approximately two-thirds of the aggregated sales for the previous fiscal year on a consolidated basis as"significant business units" which should be subject to management’s assessment of the process-level controls.
1.【Matters Relating to the Basic Framework for Internal Control over Financial Reporting】
Hironobu Yasuhara, President and Representative Director, and Masaya Wakabayashi, Director and Vice President,
are responsible for designing and operating effective ICFR of Wacoal Holdings Corp. (the "Company"), and havedesigned and operated ICFR in accordance with the basic framework for internal control set forth in "On the
Revision of the Standards and Practice Standards for Management Assessment and Audit concerning Internal
Control Over Financial Reporting (Council Opinions)" published by the Business Accounting Council.
The internal control is designed to achieve its objectives to the extent reasonable through the effective function andcombination of its basic elements. Therefore, there is a possibility that misstatements may not be completely
prevented or detected by ICFR.
2.【Matters Relating to Scope of Assessment, the Assessment Date, and Assessment Procedures】
The assessment of ICFR was performed as of March 31, 2018. The assessment was performed in accordance withassessment standards for ICFR generally accepted in Japan.
In conducting this assessment, we evaluated internal controls which may have a material effect on the entire financial
reporting in a consolidation ("company-level controls") and, based on the result of this assessment, we appropriately
selected business processes to be evaluated, analyzed these selected business processes, identified key controls that
may have a material impact on the reliability of our financial reporting, and assessed the design and operation ofthese key controls. These procedures have allowed us to evaluate the effectiveness of the internal controls.
We determined the required scope of the assessment of ICFR for the Company, as well as its consolidated
subsidiaries and equity method affiliated companies, from the perspective of the materiality that may affect thereliability of our financial reporting. We determined the materiality that may affect the reliability of the financial
reporting taking into account the materiality of quantitative and qualitative impacts. We confirmed that we hadreasonably determined the scope of assessment of internal controls over business processes in light of the results of
the assessment of company-level controls conducted for the Company, its consolidated subsidiaries and equity
method affiliated companies. We did not include those consolidated subsidiaries and equity method affiliatedcompanies which do not have any quantitatively or quantitatively material impact on the consolidated financial
statements in the scope of the assessment of company-level controls.

Regarding the scope of assessment of internal control over business processes, we selected business units for testingas "significant business units," whose combined sales were at least two-thirds of total consolidated sales for the prioryear on a consolidated basis.
At the selected significant business units, we included in the scope of our assessment those business processes
leading to sales or accounts receivable and inventories as significant accounts that may have a material impact on ourbusiness objectives. Further, not only at selected significant business units, but also at other business units, we added
to the scope assessment the following as business processes with greater materiality considering their impact onfinancial reporting:(1) those business processes relating to greater likelihood of material misstatements and significant accounts
involving estimates and management's judgment, and (2) those business processes relating to businesses oroperations dealing with high-risk transactions.
3.【Matters Relating to the Results of Assessment】
As a result of the assessment above, we concluded that our ICFR was effective as of March 31, 2018.
4.【Supplementary Matters】
Not applicable.
5.【Special Information】
Not applicable.