EMBRACINGCHANGENURTURING
FOUNDATION

Wacoal Holdings Corp.
Annual Report2008Since its establishment in 1949, Wacoal has remained at theforefront of the Japanese market for women’s innerwear
by enabling women the world over to express their beauty.
Consequently, we enjoy commanding shares of innerwear
markets, with sales growing steadily in North America,
Europe and Asia. Furthermore, we have developed innerwear
and other garments that realize outstanding comfort andfigure enhancement thanks to basic research on the shapeand movement of the human body as well as research on thephysiology of sensation. That research draws on a wealth ofanalytical data that we have accumulated by measuring thebodies of approximately 40,000 Japanese women. Going forward,
we will anticipate changing demand by realizing further added
value and functionality as well as providing beauty and comfort
to realize products that even more customers love.

Contents
1 Financial Highlights
2 To Our Shareholders
6 Toward Management Reforms
7 Special FeaturesEMBRACING CHANGE
NURTURING OUR FOUNDATIONOUR MISSION

We will contribute to society by helping women
to express their beauty.

13 Corporate Governance of Wacoal Holdings Corp.
16 Board of Directors and Corporate Auditors
17 Social Contribution Activities andEnvironmental Management
18 Risk Factors

OUR VISION

19 Management’s Discussion and Analysis

We, the employees and management of Wacoal, will maintaina refined corporate culture based on mutual trust and willcontinually strive to make the Company a global leader in
the industry.

24 Eleven-Year Financial Summary
26 Consolidated Balance Sheets
28 Consolidated Statements of Income
29 Consolidated Statements of Comprehensive Income
29 Consolidated Statements of Shareholders’ Equity
30 Consolidated Statements of Cash Flows

OUR VALUES

31 Notes to Consolidated Financial Statements

1. Create products loved by customers.
2. Develop new products that meet the needs of the times.
3. Conduct business in a fair manner with a forward focus.
4. Build a better Wacoal through better human resources.
5. Fear not failure and boast not of success.

43 Management’s Report on Internal Control
over Financial Reporting
44 Report of Independent Registered Public
Accounting Firm
46 Corporate Data
47 Investor Information

FINANCIAL HIGHLIGHTS
Wacoal Holdings Corp. and Subsidiaries
As of March 31, 2008

Millions of Yen (except per 5 share amounts)

Thousands of U.S. Dollars*% Change

2007

2006

2008

2008 vs 2007

¥166,410
12,896¥164,122
1,333$1,660,100
135,604– 0.4%+5.0

13,920
9,029
4.8

3,466
2,821
1.6

143,746
49,735+3.1– 45.02008

Net sales¥165,761
Operating income
13,540
Income before income taxes, equity in net income
    of affiliated companies and minority interests
14,353
Net income
4,966
ROE (%)
2.6
Per 5 shares of common stock (in yen/dollars):
    Net income
    Cash dividends
    Shareholders’ equity

¥

176
125
6,457

¥   316110
6,874¥   98
100
6,480

$1.76
1.25
64.67

– 44.4+13.6– 6.1

Shareholders’ equity
Total assets¥185,113
241,619¥193,278
250,266¥186,475
242,296$1,853,911
2,419,820

– 4.2
– 3.5

* The U.S. dollar amounts represent translations of Japanese yen solely for convenience at the rate of ¥99.85=$1.

Net Sales

Operating Income¥ Billion¥ Billion

163

161

164

166

166

12.9

11.8

13.5

3.0
1.3
FY04

FY05

FY06

FY07

FY08

FY04

FY05

FY06

Net Income

Shareholders’ Equity¥ Billion¥ Billion

316

176

6.8
99

98

2.9

2.8

FY05

FY06

Earnings per 5 shares (¥)

176
77.7

9.0

236

FY04

171

186

FY07

193

77.0

77.2

FY06

FY07

FY08

185

76.6

76.0

5.0

FY07

FY08

FY04

FY05

FY08

Equity ratio (%)

TO OUR SHAREHOLDERS AND OTHER INVESTORS
Representative Director   Yoshikata Tsukamoto

Fiscal 2008 was the first year of our
Medium-Term Management Plan, whichcalls for Three Years of Shifting to Growthand Heightening Earning Power.
Stepping up the pace of corporate
management, the Wacoal Group rolled
out products reflecting current trends,
strengthened its presence in existing markets,and cultivated new markets.

EMBRACINGCHANGEEVALUATION OF BUSINESS RESULTS AND

syndrome prevention, the response to those lineups has been enthu­

INITIATIVES IN THE FISCAL YEAR

siastic, and we are currently increasing production. Although women’s

In the fiscal year under review, ended March 31, 2008, net sales edged

lineups missed fiscal-year targets, I am convinced that we can develop

down 0.4% year on year, to ¥165.8 billion; operating income rose

Style Science, including products for men, into a major lineup and

5.0% year on year, to ¥13.5 billion; and net income decreased 45.0%,

earnings mainstay.

to ¥5.0 billion. Among the first-year targets set out in the Medium-

I think we can take some positives from our business results inTerm Management Plan, although we did not reach the ¥170 billion

the fiscal year. We did not achieve the target for net sales, but reduc­target for net sales, we did achieve the target of ¥13.5 billion fortions in manufacturing costs and SG&A expenses enabled us to reach

operating income. Net income was down significantly from thethe operating income target.

previous fiscal year. However, that decrease was due to recognition as
equity in losses of affiliates of a ¥4.7 billion write-down of our 49%

BUSINESS CONDITIONS AND MANAGEMENT ISSUES

interest in Peach John Co., Ltd., acquired in the previous fiscal year as

In the past several years, Japan’s apparel industry has generally faced

part of a capital alliance.

tough business conditions. And conditions in the innerwear industry

Net sales were below target for two main reasons. First, we did not

do not warrant optimism.

meet sales volume targets for new Style Science functional under­

Japan’s innerwear market has matured in recent years due in part togarments, which our domestic subsidiary Wacoal Corp. marketed

the aging of Japanese society. As a result, that market is unlikely tomainly through autumn and winter sales campaigns. In the third year

grow significantly. Moreover, amid those conditions, competition issince Hip Walker debuted, we believe sales fell short because store

becoming fiercer as more apparel manufacturers, retailers, and otherpromotional efforts that were smaller than in the first two years did notcompanies enter the innerwear manufacturing industry. Nevertheless, I

effectively appeal to new customers or spur replacement demand

think we should welcome such competition because it energizes theamong existing customers. Second, U.S. operations, which had beenmarket, which increases consumer interest in innerwear. The emerg­ing

growing steadily, entered a temporary correction phase. As part of ourinnerwear market is centered on low-price fashionable products andefforts to roll out products in a variety of stores, we sought to increasediffers from our traditional mainstay market, which focuses on high-sales at mid- to high-end department stores in the fiscal year. However,value-added products with advanced functionality. In order to establish

while some stores contributed steadily to sales growth, others saw aa presence in that emerging market, we will have to use unprecedented

mismatch between the customer groups of stores and product priceproducts, sales methods, sales channels, and pricing strategies. In my

ranges. Pulling out products from such stores increased returnedview, adopting such new approaches to realize further growth is a key

products and worsened profitability.

corporate management issue. Making Peach John a subsidiary partiallyOn the other hand, Wacoal’s new LALAN brassieres, the focus ofa marketing campaign from spring 2007, and Sugoi, a lineup of new-addresses that issue by providing Wacoal with a strategic foothold in a
new market segment.

fabric innerwear marketed in the autumn-winter season, sold briskly.

At the same time, to grow dramatically Wacoal must expand its

Our LALAN brassieres feature unique designs for each cup type andgrowth driver – overseas operations. Wacoal began developing overseas

size, thereby accurately catering to a wide variety of bust sizes. Further,

operations from the 1970s, mainly in Asia. Today, we have built a

Sugoi offerings proved popular because they are much thinner, lighter,worldwide operating system with production and marketing bases inand warmer than traditional innerwear. In addition, we launched Cross

the United States, China, and other countries. Going forward, we will

Walker as a Style Science innerwear lineup for men in spring 2008.

expand operations in regions where we have a presence while rolling

Amid growing consumer interest in such health issues as metabolicout Wacoal-brand lineups in new countries and regions.

Next, I would like to turn to overseas strategy *. In mainstay

GROWTH STRATEGIESIn light of the abovementioned business conditions and management

operations in the United States, we will increase sales channels by

issues, Wacoal is simultaneously advancing initiatives under its

adding marketing through specialty stores to sales at department stores,

Medium-Term Management Plan and the CAP21 (Corporate

which are centered on the Wacoal brand. Further, at the end of 2008

Activation Project 21). With the fiscal year as its first year, the Plan sets

we will end our manufacturing and sales contract for DKI and DKNY,

out operational strategies over three years under the slogan Three Years

designer brands that we manufacture and sell in the United States. To

of Shifting to Growth and Heightening Earning Power. Meanwhile, thereplace them, we will launch new brands. As a result of the contract

CAP21 seeks higher enterprise value by making a fresh start andcancellation, net sales in the current fiscal year will decrease. However,accelerating growth through initiatives that include mergers andwe expect that the roll-out of new brands will bring net sales back toacquisitions. Based on the benefits resulting from the implementation

their current level in the following fiscal year, improve the profitabilityof the Plan and the CAP21, I would like to discuss the Wacoal Group’sof U.S. operations, and put them on a steady growth track.

growth strategies more specifically from two standpoints.

Meanwhile, China continues to be the most promising market.

First, I would like to look at our mergers and acquisitions strategy.

China’s high-end innerwear market is beginning to become less

Following on from a capital tie-up in June 2006, we made Peach John ahomogeneous as it segments to reflect the characteristics of a variety ofwholly owned subsidiary in January 2008. Peach John’s features andconsumer groups. Responding to that market trend, we will roll out astrengths differ from those of Wacoal. Our new subsidiary has grownhigh-value-added brand and a brand that targets younger customers.

rapidly by targeting customers in their teens and twenties through mail-Also, we will give priority to strengthening our brand image byorder catalog sales and a chain of directly managed stores. Including

implementing advertising campaigns and increasing the number of

Peach John in the Wacoal Group not only increases Wacoal’s enterprise

stores carrying our lineups.

value and market presence but enables Wacoal to invest management

In other Asian regions, we will begin sales in Vietnam in January

resources in Peach John to accelerate the subsidiary’s growth and strength­

2009, ten years after establishing our first production base in the country.

en its earnings platform. Already, we have prepared plans that capitalize

Vietnam has the potential to contribute to the Group’s sales because iton each company’s expertise and customer base, which we will steadily

will remove regulatory restrictions in the retail industry on foreign

carry out. Making Peach John a wholly owned subsidiary is one of thecapital from 2009, which is likely to rapidly invigorate the country’s

major successes under the CAP21. Accordingly, we will continue to

distribution market and expand the country’s innerwear market.

actively consider mergers and acquisitions. Thus far, we have selected

Keeping that in mind, we will start sales operations at five department

mergers and acquisitions in business areas where we can bring to bear ourstores and a directly managed store in Hanoi. We will then develop

technology and expertise. However, we will consider expanding ouroperations in Hanoi and other major cities.

operations beyond such business areas by also looking at areas where we* For further details, please see pages 11 and 12.

can effectively leverage our financial strength and brand power.

MEDIUM-TERM MANAGEMENT PLAN OVERVIEW

PeriodApril 2007 – March 2010

Theme

Getting Closer to Customers, Three Years of Shifting to Growth and Heightening Earning Power

Priority measures

1. Reform and strengthen existing businesses to reflect changing markets
2. Increase points of contact with customers for new growth
3. Enforce rigorous quality control that justifies customers’ trust

Numerical targets *Net sales

194,000

for FY 2010 (¥ million)

Operating income

16,400* The Company revised numerical targets upon making Peach John Co., Ltd., a wholly owned subsidiary in January 2008.

CAP21* OVERVIEW

Aims

Reorganize and strengthen existing businesses and develop business in areas that promise growththrough mergers and acquisitions, operational tie-ups, capital tie-ups, and independent initiatives

Numerical targets

Net sales

200,000

for FY 2011 (¥ million)

Operating income

18,000Operating income margin* Corporate Activation Project 21

9%BASIC POLICY FOR RETURNS TO SHAREHOLDERS

In efforts to roll out new products, men’s innerwear operations

Guided by the Medium-Term Management Plan and CAP21,

are approaching a period of full-fledged growth. With the introduction

corporate management concentrates on strengthening our earningsof health checkups and consultations for metabolic syndrome, suchplatform and continuously heightening enterprise value. Our basic

Style Science offerings as the men’s innerwear Cross Walker, which canearnings appropriation policy is to pay stable dividends in light ofhelp reduce body fat, are rapidly attracting attention. By building on

consolidated business results. In addition, since 2001 we havethe success of Cross Walker, we can transform the image of men’s

continuously purchased treasury stock as part of returns to share­

innerwear to significantly grow the market for these products, thereby

holders. Over the past seven fiscal years, we have improved capitalcreating a major business chance. Mindful of such potential as wellefficiency by purchasing 17.4 million shares of treasury stock,

as of issues, we will continue to develop new businesses and reform

equivalent to approximately 12% of issued shares.

corporate management.

Increasing dividends for the third consecutive year, we paid cash

In the current fiscal year, ending March 31, 2009, year on year we

dividends per ADR of ¥125, compared with ¥110 in the previous

expect a 10.4% increase in net sales, to ¥183.0 billion, a 7.7% decrease in

fiscal year. For the current fiscal year, ending March 2009, we plan tooperating income, to ¥12.5 billion, and a 41.0% rise in net income, tomaintain dividends at the same level as in the fiscal year and pay cash

¥7.0 billion. The decrease in operating income is principally attributabledividends per ADR of ¥125.

to an anticipated loss of ¥0.7 billion accompanying the liquidation of a

Meanwhile, we will continue investing retained earnings to increase

sewing subsidiary; a ¥0.9 billion increase in retirement benefit payments

earning power and enterprise value. Specific investments will include– associated with an increase in recognition of actuarial loss in the current

developing new markets through SPA operations; cultivating points offiscal year likely to arise from deterioration in management of thecontact with new customers; strengthening overseas businesses; andCompany’s pension assets due to such external factors as falling sharestarting new businesses. Further, we will consider capital and operational

prices – and a ¥0.3 billion loss due to currency volatility, counteracting

alliances or mergers and acquisitions that accelerate growth.

an expected ¥0.9 billion contribution to earnings from Peach John,
which became a subsidiary in January 2008. At the present juncture, we

OUTLOOK AND FISCAL 2009 BUSINESS RESULTS

are assuming a foreign currency exchange rate of US$1 = ¥102. Because

PROJECTIONS

U.S. operations represent a considerable portion of the Company’s

Challenging market trends and fierce competition are likely to continue

consolidated financial statements, foreign currency fluctuation could

characterizing business conditions. Faced with those conditions, I feelsignificantly affect consolidated business results.

strongly that we must be alert to market changes and steadily
revolutionize our mind-set and corporate structures so that we can

In closing, I ask our shareholders and other investors for theircontinued understanding and support.

respond promptly to such changes. Happily, signs of such reform are
emerging. Last year, Hideo Kawanaka (please see page 6 for details)
joined our corporate management team. Drawing on extensive expe­

August 2008

rience and a long track record in the retail industry, he is spear­headingreform initiatives. In the past year, we have begun revising all
operational processes from development and manufacturing through tosales to reflect the priorities of customers rather than those of manufac­

Yoshikata Tsukamoto

turers. And, our management team and other employees continue toRepresentative Director

unite and advance reforms whenever and wherever needed.
Regarding SPA operations, an area on which we have been
focusing efforts in recent years, the existing shops and new shops ofindependently operated subsidiary Une nana cool Corp. are performing
well. Also, we are improving the profitability of amphi, Subito, and Sur
la plage – brands which the directly managed store operations of Wacoal
Corp. develop – by closing unprofitable shops, creating shared lineups
from approximately half of the lineups previously planned and manufac­
tured separately under each brand, and reducing production costs andinventory loss.

TOWARD MANAGEMENT REFORMS
Senior Managing Director   Hideo Kawanaka•  Senior Managing Director, Wacoal Holdings Corp.
•  Director and Vice President, Wacoal Corp.;
Operations Reform Manager and General Operations Manager•  Joined the Group management team in June 2007, following periods at Isetan Co., Ltd.,West Japan Railway Isetan Ltd., OMRON Corporation, and Matsuzakaya Co., Ltd.
Currently involved in reviewing all aspects of the operational process.

RESTRUCTURING ORGANIZATIONS AND REENGINEER­

overall presence in the innerwear market, and step up the pace of enter­

ING OPERATIONS TO BUILD A GROWTH PLATFORM

prise value enhancement. Peach John enjoys overwhelming endorse­ment

Launched in April 2007, our Medium-Term Management Plan’sand popularity among younger customers, a segment of the domestic

overriding goals include Shifting to Growth and Heightening Earning Power.

market in which Wacoal was weak. By joining forces, the com­panies can

In addition to those goals, we added the themes of Operational Restruc­tur­build a stronger standing among an even wider group of consumers.
The Wacoal Group will make a concerted effort to provide

ing and Advancement Systems in April 2008.
We added those themes to increase the overall strength of the Wacoal

multifaceted support that will expand Peach John’s operations and makeGroup and the organizational competitiveness of its operating subsidiaries.

them one of the Group’s growth drivers. In the fiscal year, Peach John’sSpecific restructuring measures comprise the creation of new departments

business results temporarily dipped because of delays in building a systemthat laterally coordinate and control our verticallyto prevent the subsi­diary from running out of brisk-

struc­tur­ed organization to ensure the optimal de­selling products as  customer-ordering methods shiftploy­ment of management resources and accurate
responses to market conditions. Also, we are develo­
ping a system for advan­cing opera­tional effi­ci­ency.
Already, Wacoal has strengthened the Group’s
strategy develop­ment capabilities by esta­blish­ing a
Corporate Strategy Division, while Wacoal Corp.

“The Wacoal Group will
redouble restructuringinitiatives to regain growth
impetus and further
strengthen earning power.”markedly from postcards and facsimiles to theInternet and mobile telephones. To ensure that
Peach John’s product delivery is problem-free andreliable, we are providing production infrastructure
and building support frameworks for information
systems. From the current fiscal year, we will ensure

has strengthened its ability to con­trol strategies thatthe earnings of the subsidiary grow by strengthening

transcend specific sales channels and brands by

its mail-order operations while developing directly
managed stores and overseas operations.

establishing a General Strategy Section.
Also, we have clarified the authority and roles

SEEKING NEW GROWTH OPPORTUNITIESof each operat­ing division to ensure steady progress toward achievement

For Wacoal to achieve sustainable growth, it has to extend its operatingof the numerical targets set out in the Medium-Term Management Plan.

platform from the mature domestic market to include the burgeoning

And, we have established regular meetings that check progress towardpotential of overseas markets. To that end, in addition to countries andtargets and the outcomes of specific measures and discuss counter­regions where Wacoal already has a presence, such as the United States,

measures if we are falling short of targets.

China, and Southeast Asia, the Company will exploit the production

In efforts to reengineer operations, we will move SPA operations

infrastructure and marketing expertise of existing operations to expand

into the black early by giving first priority to profitability through thethe Wacoal brand in new countries and regions. Through those efforts,

closure of unprofitable stores. Further, in order to cut excess cost, we

we aim to raise overseas sales from approximately ¥72 billion in the fiscal

intend to rigorously scrutinize the necessity of outsourced operations.

year to ¥100 billion.*

INCORPORATING PEACH JOHN AS A NEW SUBSIDIARYIn China, where economic growth is conspicuous, we plan to step

In June 2006, we acquired 49% of Peach John’s shares to form a capitalup operational expansion. Our goal is become a leading brand in thetie-up with the company and acquired the remaining 51% of shares tomid- to high-end market, comprising department stores in Beijing,

make it a wholly owned subsidiary in January 2008. As a result, PeachShanghai, Guangzhou, and other cities, and rapidly grow our market

John has become our second largest subsidiary in terms of sales after

share from its current level of approximately 6% to at least 10%.

Wacoal Corp. We decided to make Peach John a wholly owned subsi­

Hideo Kawanaka

diary to increase solidarity with the company, heighten the Group’s

Senior Managing Director* Total local sales of overseas subsidiaries and affiliates.

Restoring growth and improving profitability

EMBRACING
CHANGENURTURING
FOUNDATION

1.
Developing Highly Differentiated Products
through the Human Science Research Center
Wacoal’s Human Science Research Center has beenmeasuring the human body for more than four decades.
Based on that accumulated data, we are developing
original and functional products that create new markets.

Based on the cumulative results of more than four decades of independent research,
the Human Science Research Center aims to overwhelmingly differentiate us fromour competitors by conti­nuing to develop products that offer superior functionality.

Style Science lineups such as Onaka Walker and Hip Walker, CW-X,
Shakitto Bra…
Many of Wacoal’s flagship products result from the long-term
research of the Human Science Research Center.
For more than forty years, since its establishment in 1964, the
Human Science Research Center has specialized in research on thephysiques of women, boasting a long and varied track record ofachievements. Every year, the center measures the physiques of between
500 and 1,000 women, ranging from those in their late teens through tothose in their 60s. To date, we have gathered data on more than 40,000
individuals. Further, by measuring the same individuals over long periodsof time, we are advancing research that sheds light on the changes inwomen’s physiques that accompany aging. Other initiatives include body
movement research, which has enabled us to realize sportswear withadvanced functionality that promotes fluid movement and lessens muscle
fatigue by incorporating a taping principle to stabilize joints during
CW-X Performance-up Model

exercise. That research also underpins our offerings that alleviate theinfirmities of senior citizens resulting from changes in physique andphysiology as they age. And, Wacoal’s lineups featuring functions that
comfortably support posture and movement are also the fruit of researchon body movement. The center not only focuses on functionality but
enables the creation of comfortable products through research on thewearing comfort and texture of apparel. In those initiatives, the center
investigates the sensory and physiological reactions to three basic stimuli:
temperature, such as warmth or coolness; pressure, such as tightness orlooseness; and touch, such as pleasant or unpleasant textures.
In 2002, Wacoal established the Chinese Human Science ResearchCenter as a research base in China. Despite a common Asian ancestry,

The Human Science Research Center

Japanese and Chinese people differ significantly in their physiques andlifestyles. We cannot market products with the same measurements andspecifications as those marketed in Japan because they do not suit Chinese
women. Therefore, in the same way that we do for Japanese women, we
began collecting detailed measurement data on the physiques of Chinese
women, which we are now reflecting in original lineups.
Through such initiatives, Wacoal draws on a huge volume of data
and unparalleled expertise in research on proportional changes, thesenses and physiology to further product development. The outstanding
functionality that results markedly differentiates Wacoal’s products fromthose of competitors – a major factor in heightening brand value. Basedon an overriding strategy of applying technological capabilities and new
Onaka Walker

knowledge gained from human science research to product develop­
ment, we will create products that make everyone more beautiful,comfortable, and healthy and that customers will always love.

Restoring growth and improving profitability

EMBRACING
CHANGENURTURING
FOUNDATION

2.
Providing Our Products to More Customers
In response to Japan’s maturing market,
Wacoal is increasing points of contact with customers,
launching new sales campaigns, and developing
and creating sales channels.

In order to counteract the maturing of such wholesale channels as department
stores and general merchandising stores, we are creating fresh growth opportunities
by developing and strengthening new sales channels – including SPA operations,Internet sales and mail-order catalog sales – and developing new business areas toincrease points of contact with customers.
In recent years, Japan has seen growing concern about diseases andhealth problems stemming from obesity. Viewing that trend as a chance
to ex­pand our business, we developed Style Science lineups thatexercise the wearers’ bodies as they walk, thereby reducing body fat andfirming up the physique. Moreover, we have launched Style Science
products for men. Against the backdrop of the introduction of man­datory health check­ups and health guidance to prevent metabolic
syndrome, we have begun marketing those functional products throughsuch new sales chan­nels as corporate health insurance associations andgyms as well as through depart­ment stores, general merchandising storesand innerwear specialty stores.
In addition, Wacoal paved the way for expansion of innerwear
operations’ business area and market share by moving forward from acapital and operational tie-up with Peach John Co., Ltd., concluded inJune 2006, to make it a wholly owned subsidiary in January 2008.
Cross Walker marked our fully-fledged entry
into the underwear market for men

Through mail-order sales and retail operations targeting young
customers, our new subsidiary covers age groups and product preferencesthat we had not fully covered. Also, to strengthen Peach John’s mailorder catalog sales operations, we will rebuild the subsidiary’s production
base and information systems to realize a production-planning system
based on demand forecasts that will reduce sales opportunity loss due to
product shortages and deliver products to customers reliably.
Although the Company is developing new sales channels andincreasing points of contact with customers, sales of Wacoal’s mainstay
brassiere lineups have been declining in recent years. Reasons for that
decrease include the maturing of Japan’s innerwear market, product

Exwalker is sold through such channels as
corporate health insurance associations

diversification and consumers’ increasingly selective use of sales channels
and brands. Furthermore, as loyal customers who love and place a great
deal of trust in Wacoal products age, the number of young women or
young career women among our customers is decreasing.
One of Wacoal’s strategies in response to that trend is thedevelopment of a new Wacoal-brand marketing campaign centered on
the LALAN brand. Our aim is to excite the interest of women withlittle interest in Wacoal in order to have women of all generations equate
innerwear with Wacoal. To that end, we are developing a more stylish
image for the Wacoal brand. As part of that initiative, we have changed

Wacoal web store
http://store.wacoal.jp/top/CWcTop.jsp

from launching fresh marketing campaigns every season that highlightthe functionality of new products to an approach that emphasizes the
fashionable and stylish aspects of products. Those efforts will strengthen
the brand’s association with novelty, fashion and innovation, whichmarried with products’ practicality and functionality, will heighten brandvalue and drive recovery in brassiere sales.

10Restoring growth and improving profitability

EMBRACING
CHANGENURTURING
FOUNDATION

3.
Increasing Presence and Profitability
in Overseas Markets
The Wacoal Group will build its presence worldwide
by stepping up operations in countries and regionsin which it already has a presence while launching forays
into new regions that offer business opportunities.

11

Entry into Southeast Asian markets in the 1970s heralded the beginning of the Wacoal
Group’s operations overseas. Subsequently, we penetrated markets in the United States,
China and Europe and built Wacoal as a leading brand in mid-to-high-end markets
of numerous regions around the world. Japan’s innerwear market is unlikely to generatelarge increases in earnings due to the aging of society in recent years. Therefore, we must
expand our operational platforms in overseas markets for growth.
As well as stepping up initiatives in regions where it has a presence,
Wacoal will consider the feasibility of leveraging existing production
platforms to enter new countries and regions that promise growth.
Mainstay U.S. operations are making an increasingly important
contribution to the Company’s business results, accounting for morethan 10% of consolidated net sales. In those operations, we will cancel
our manufacturing and sales contract for DKI and DKNY designer
brands. As result of that cancellation, sales will decrease in the current
fiscal year. However, we will quickly bring sales back to previous levels
through our original Wacoal Luxe brand, which we have alreadymarketed, and the launch of a new brand: b.tempt’d by Wacoal.
Moreover, Wacoal will increase sales channels by targeting specialty
retail stores in addition to department stores. Also, we will advance newstrategies such as entering the Canadian market. In order to heighten
profitability, Wacoal will reduce the transportation times and costs forthe procurement of materials from Group companies while improving
productivity by increasing the operating efficiency of sewing plants.
In China’s promising market, Wacoal will deploy further manage­
ment resources to expand operations. Because the Chinese market is
beginning to segment into distinct consumer groups, the Company will
Sales counter in Bloomingdales, New York

cater to a wider range of customer groups by rolling out amphi as abrand for younger customers and Salute as a high-value-added brand.
And, aiming to heighten the image and name recognition of the Wacoal
brand, we will implement an advertising campaign featuring the singer
Ayumi Hamasaki, who is extremely popular in Japan and Asia. By
bringing new brands to market, developing advertising campaigns andadvancing initiatives to increase the number of stores that carry our
products, we will achieve even higher growth that reflects the pace ofmarket growth and changes in business conditions.
Vietnam, the location of some of our production bases, willremove regulatory restrictions in the retail industry on foreign capitalfrom 2009, which is likely to trigger inflows of foreign capital that

Sales counter in the Shanghai
Ongoing Department Store, China

will expand the country’s innerwear market. To ensure the Company
does not miss this opportunity to expand operations, Wacoal will
begin sales in Vietnam from January 2009. Further, Peach John plans
to expand its operations in Japan and develop directly managed storesoverseas. As a first step, the subsidiary aims to open a store in Hong
Kong in the current fiscal year.

12

CORPORATE GOVERNANCE OF
WACOAL HOLDINGS CORP.
Wacoal Holdings Corp. (“Wacoal”), a worldwide manufacturer of high-end women’s intimate apparel, is a forwardthinking company with a strategy to enhance shareholder value over the medium to long term. As the holding companyof 10 subsidiaries, Wacoal is continually innovating not only its product lines but also its governance mechanisms
to stay at the forefront of its industry. Wacoal believes that commitment to both its products and corporate governanceis essential for Wacoal to optimize shareholder value and foster continual growth of the Company.

CORPORATE GOVERNANCE STRUCTURE

management. An “Independent Committee” – composed of one

Corporate Governance Innovations

outside director, one outside auditor, and one academic – has the

Wacoal has always been a leader in the corporate governance field andauthority to call a meeting without the presence of the Company’s

has instituted several measures beyond those required by law to ensure

executives and may retain external professionals to advise them onthat its corporate governance system works to the greatest advantage

takeover and related issues. With these powers and resources, theof its shareholders.

Independent Committee can evaluate takeover bids and pursue related

We describe below a few of these innovations.

strategies without ma­nagement interference. This committee serves as• Disclosure Committee   In 2003, Wacoal established the Dis­closurea powerful tool to safeguard shareholder interests at a crucial juncture.

Committee to strengthen its corporate governance infrastructure.
The Disclosure Committee ensures the accuracy of the financial andStatutory Auditor Systemother information made available to the public and filed with our

The aforementioned innovations complement Wacoal’s corporate

regulators, including the U.S. Securities and Exchange Commission

governance infrastructure under the statutory auditor system. Operating

and the Japanese Financial Services Agency. This committee also

under that system, Wacoal’s directors oversee operations and provide

reviews and confirms the appropriateness of our internal controls.

broad oversight of the Company and its subsidiaries. Wacoal’s statutory• Corporate Ethics Committee   In 2004, Wacoal created the Corpo­

auditors, in turn, supervise the activities of the board and provide arate Ethics Committee, which is headed by a member of Wacoal’s

check on the directors’ oversight of the Company.

board. This committee produced a code of conduct for executives,

In the following section, we discuss some of the specific features ofcorporate officers, and other em­ployees, and it works to instill a strong

Wacoal’s statutory auditor system and certain enhancements designed

culture of ethics and legal compliance at all levels of the Company.

to produce better governance.

Wacoal’s corporate ethics framework conveys strongly to employees
the Com­pany’s unyielding commitment to good corporate ethics.

1. Board of Directors• Hotline System   Wacoal has established a hotline system that allows

Following the ordinary general meeting of shareholders in June 2007,

employees to ask questions about corporate ethics and to report any

Wacoal’s board was expanded from seven members to eight members.

violations or potential violations of its ethics code. The hotline

In 2002, we reduced the number of directors to allow directors topromotes good ethics within the Company and provides a way for the

respond more flexibly and make decisions more efficiently in an ever-Company to learn promptly about ethics violations.

changing business environment. This process was intended to permit• Accidents and Disasters Countermeasures Committee  

directors to focus on the supervisory and strategic responsibilities andIn 2006, Wacoal established the Accidents and Disasters Counter­to unburden them from operational and management duties.

measures Committee as a subcommittee of the Risk Mana­gement

Although Japanese law does not require any independent, outside

Committee to manage overall risks to Wacoal. The Risk Management

directors on the board under the statutory auditor system, Wacoal

Committee establishes measures to manage and control risks to thebelieves that including the voices and perspectives of independent

Company and monitors Wacoal’s implementation of those measures.

directors improves the governance of the Company. As a result,

The Risk Management Committee keeps the Board of Directors fully

Wacoal has two independent, outside directors who contribute to theinformed about the operation of the risk management system.

work of the board.

• Independent Committee   In the event of a potential takeover of

The directors work diligently for the benefit of the Company. To

the Company through the acquisition of substantial shares, Wacoal

assist the members of the Board of Directors, Wacoal has draftedhas granted independent outsiders extraordinary authority to exchange

guidelines for board meetings that are provided in the Company’s

information and conduct discussions about the Company without

articles of incorporation as well as directors’ meeting rules.

13

Wacoal also believes that there should be a retirement age for thefor the Company. We, therefore, have gone beyond what is required

members of the board so that fresh perspectives can periodically beunder Japanese law for statutory auditors. Although Japanese law only

brought to the board. To enhance the transparency of Wacoal’s cor­requires that 50% of the statutory auditors be independent, 60% of

porate governance, the Company has established the retirement age in

Wacoal’s statutory auditors are independent of the Company.

its corporate rules. Also, beginning with the current fiscal year,
Wacoal will include in the proxy materials the attendance records of

3. Appointment and Compensation Committee

directors at board meetings.

Wacoal has created the Executive Compensation Advisory Committee.

While the board members have a depth of experience and know­This committee, with the assistance of the Mana­­gement andledge, Wacoal believes that continuous education and training of

Administration Department of the Com­pany, develops proposals for

directors are essential to good corporate governance of the Company.

personnel appointments and for compensation. The committee, which

To this end, new directors of Wacoal attend an educational seminarcomprises independent outside directors, a personnel officer, staff

for directors conducted by outside professionals.

supervisors, and members of the Management and Administration
Department, submits its proposals to the President and Representative

2. Statutory Auditors

Director. The President then reviews the proposals and submits the

The statutory auditors continually monitor the supervisory activities

appointments for a board resolution. A shareholder resolution wouldof the board and the overall work of the Company. The statutory

then be made at the general meeting of shareholders.

auditors attend board meetings and separately meet with individual
directors once a month and Wacoal’s President twice a year.
Wacoal believes that enhanced independence of the statutory
auditors would allow the auditors to be more effective “watchdogs”

Wacoal believes that this structure for determining nominees andcompensation is appropriate for the Company. For this reason, theCompany does not maintain separate board committees for these
purposes.

Corporate Governance Structure (As of June, 27 2008)
GENERAL SHAREHOLDERS’ MEETINGGroup Management Meeting

Board of Directors

Board of Corporate Auditors

5 Directors
2 Corporate Auditors

5 Directors
3 Outside Directors
5 Corporate Auditors

2 Corporate Auditors
3 Outside Corporate Auditors

Quarterly Business Results
Review Committee
8 Directors
5 Corporate Auditors
Representative of Each Company and Department
Disclosure Committee

14

Board of Corporate Auditors’ Secretariat
Representative Director

Executive Compensation Advisory Committee
Independent
Accountants
11 Office of Corporate Auditors

Information Security Promotion Division

Operating Subsidiary

Risk Management Committee

Operating Subsidiary

Corporate Ethics Committee

Operating Subsidiary

Corporate Ethics Hotline

Operating Subsidiary

COMPENSATION AND STOCK OWNERSHIP

DEFENSIVE MEASURES AGAINST TAKEOVERS THROUGH

Wacoal has strived for a compensation system that aligns the interests

THE ACQUISITION OF A SUBSTANTIAL SHAREHOLDING

of directors/management with those of its shareholders. We,

OF THE COMPANY

therefore, encourage our executives and directors to own shares of

After the Company’s June 2006 ordinary general meeting of share­

Wacoal so that they will be similarly situated as our shareholders.

holders passed a resolution authorizing the adoption of a basic policy

Directors own approximately 1% of the outstanding shares of Wacoal.

on measures against the acquisition of a substantial shareholding of theWe, however, do not provide equity compensation or grant stock

Company, the Board of Directors decided upon specific counter­

options to officers or directors. Although equity compensation andmeasures reflecting that basic policy.

stock option plans may incentivize directors and employees to maxi­

In principle, the Company does not oppose the acquisition ofmize shareholder value, the potential conflicts of interest that arise

large shareholdings that contribute to the enhancement of thewith these compensation arran­gements discourage Wacoal fromenterprise value and shareholders’ common interests.

adopting them for the Company.

The Company’s defensive measures against takeovers, or peacetime
takeover defensive measures, include providing advance warning that

INDEPENDENT AUDIT

there are procedures prospective purchasers of the Company’s shares

Under the Japanese laws governing certified public accountants, anmust follow and that a gratis allocation if acquisition rights for theaccounting firm cannot audit a company for more than seven years.

subscription of new shares with discriminatory treatment for theConsistent with these laws, the board has adopted a resolution regar­ding

exercise of such rights may be implemented. In addition, the Company

the re-selection of a certified public accountant in charge of auditing

has established the Independent Committee to ensure that initiations of

the Company. When Wacoal changes certified public accoun­tants, as

defensive measures against takeovers are based on substantive, objective

required by law, it will seek shareholder approval of the new auditors.

decisions and not based on arbitrary decisions by the Board of Directors.
For further details, please refer to the Company’s web site.
www.wacoalholdings.jp/ir/news.html

15

BOARD OF DIRECTORS AND CORPORATE AUDITORS
Wacoal Holdings Corp. and Subsidiaries
As of March 31, 2008

REPRESENTATIVE DIRECTOR
Yoshikata Tsukamoto
Representative Director, President andChief Executive Officer, Wacoal Corp.

DIRECTOR AND VICE PRESIDENT
Shoichi Suezawa

SENIOR MANAGING DIRECTOR
Hideo Kawanaka
Director, Vice President and Corporate Officer,
Wacoal Corp.,
In charge of Business Restructuring andGeneral Manager of Sales Control Department

DIRECTORSCORPORATE AUDITORS
Tadashi Yamamoto

Kimiaki Shiraishi (Standing Corporate Auditor)

Director and Senior Corporate Officer, Wacoal Corp.,
General Manager of International Operation

Tsuneo Shimizu

Yoshio Kawashima (Standing Corporate Auditor)

Director and Senior Corporate Officer, Wacoal Corp.,
Assistant Manager of Sales Control Department

Kazuo Inamori (Outside Director)

Yutaka Hasegawa (Corporate Auditor)

Chairman Emeritus, Kyocera Corporation,

Corporate Auditor, The Hyakugo Bank, Ltd.

Honorary Adviser, KDDI Corporation

Mamoru Ozaki (Outside Director)

Tomoharu Kuda (Corporate Auditor)

Advisor, Yazaki Sogyo Corporation,

Certified Public Accountant

Outside Director, Fujikyuko Co., Ltd.,
Outside Director, Kikkoman Corporation

16

Atsushi Horiba (Outside Director)

Yoko Takemura (Corporate Auditor)

Representative Director and Chairman andPresident, HORIBA, Ltd.

Partner at Miyake Imai Ikeda law firm,
LawyerSOCIAL CONTRIBUTIONS AND ENVIRONMENTALCORPORATE MANAGEMENT
Benefiting society at large by enabling women the world over to express their beauty is both the goal of
the Wacoal Group and the philosophy at the heart of its success. Drawing on a variety of expertise garneredfrom our businesses, we will realize unique social contributions.

REMAMMAIn 1974, we began the Remamma

Tsubomi means bud in Japanese. The name Tsubomi School is basedon an analogy between women’s lives and flowers, with adolescentproject to provide our originally devel­

girls whose busts are beginning to develop called “buds.”

op­ed innerwear and swimwear for

http://www.wacoal.jp/company/tsubomi/index.html

women who have undergone ope­
rations for breast cancer. More than
170,000 women in Japan and overseas
have used these products to date.
http://www.wacoal.jp/remamma

SPORTS SPONSORSHIPAs a company empathetic to women, Wacoal formed the Spark Angels
women’s track team and supports the activities of the athletes that belong
to the team. The Spark Angels celebrated their 20th anniversary in 2007.
By sponsoring women that run like the wind, lithely and freely, andPINK RIBBON

personify our image as a company with operations focused on beauty,

Since September 2002, we have support­

health, and comfort, we want to show society at large the joy of sports anded Pink Ribbon activities, which raise

the radiant beauty of active women through sports.

awareness of the importance of early

http://www.wacoal.jp/cgi-bin/sports/index.cgi

diagnosis and treatment of breast cancer.
As part of those efforts, we do­nate to the“breast cancer eradication smile fund.”Our shareholders parti­ci­pate in efforts toeradicate breast cancer. In 2005, we
introduced a system where­by share­
holders are able to make contributions to the fund equivalent to a part of the
Wacoal essence check gift certificates provided as a shareholder benefit.
Wacoal matches the amount of those contributions with its own
contributions to the fund. Moreover, we hold Pink Ribbon Fitting
Campaign events in which we donate to the “breast cancer eradication
smile fund” the equivalent of the total number of brassieres customers try on
multiplied by ¥10. Also, we incorporate education for consumers aboutbreast cancer prevention in other events.
http://www.wacoalholdings.jp/pinkribbon/index.html

ENVIRONMENTAL CORPORATE MANAGEMENT

The Wacoal Group advances environmental activities. For example, at
Niigata Wacoal Sewing Corp. fabric cuttings and scraps that are a byproductof manufacturing processes are put to good use in the making of jumpropes for local kindergartens and towels for nursing-care facilities and

TSUBOMI SCHOOL

hospitals. Another example is Kyushu Wacoal Manufacturing Corp., which

As a contribution to local educational initiatives, we have held Tsubomi

since fiscal 2006 has undertaken an ongoing voluntary tree-planting

School programs since 2001 for adolescent girls and their parents. We

program on Unzen Fugen-dake, where volcanic eruptions have left thebegan those programs to help girls become healthy, beautiful women.

earth bare. In fiscal 2002, all the operational bases of Wacoal Corp. obtained

The programs seek to alleviate the uncertainty and insecurity that is

ISO 14001 accreditation, which is an international standard forcommon among adolescent girls by promoting understanding of theenvironmental corporate management. In fiscal 2007, all 16 domestic

body’s development and addressing anxieties. Together, parents andoperational bases acquired ISO 14001 accreditation. Overseas, our plants inchildren learn how to choose innerwear to suit specific needs or stages of

Guangdong, China, and Vietnam have acquired ISO 14001 accreditation,

maturity, thereby providing a chance for parents and children to discussand aiming to realize industry-leading environmental corporate mana­

these issues at home. Held with the cooperation of the National

gement, we will establish environmental management systems throughout

Federation of Kodomo-kai, our approximately 800 Tsubomi School

the Wacoal Group, including overseas operational bases.

programs have instructed more than 9,000 participants since 2001.

http://www.wacoalholdings.jp/profile/pdf/2007_07_kankyo.pdf

17

RISK FACTORS
Our business, performance and financial condition are subject to risks and uncertainties, including those describedin the risk factors below. These risks and uncertainties could result in a material adverse effect on
the results of operations and financial condition of Wacoal Holdings, and a material decline in the trading priceof our common stock and American Depositary Shares, or ADSs.

1. Weakness in the Japanese market would hurt our performance.

12. We may not be successful with acquisitions and other strategictransactions with third parties.

2. Continued difficulties faced or changes in business policies madeby department stores, general merchandise stores and other generalretailers in Japan would hurt our business.

13. We may face infringement of our intellectual property rights or
claims that we infringe the intellectual property rights of others.

3. Our sales may decline if we are unable to effectively anticipate and14. If we fail to protect our customers’ privacy and data and maintainrespond to consumer tastes and preferences and deliver high-the confidentiality of our trade secrets we may face proceedings

quality products.

against us and lose customer confidence.

4. The apparel market is highly competitive, and our share of sales or

15. If we fail to maintain adequate internal controls over financial

profitability may decline if we are unable to maintain ourreporting we may not be able to produce reliable financial reports

competitiveness.

in a timely manner or prevent financial fraud.

5. Our specialty retail store network expansion may not lead to

16. Our holdings of equity securities expose us to market risks.

improved sales and profits.
17. Natural disasters and epidemics could affect our manufacturing
6. We may experience difficulties in successfully increasing ourabilities or sales results.

catalog and Internet sales.
18. We may become classified as a passive foreign investment
7. We are subject to inventory risks that could negatively impact ouroperating results.
8. Improvement in our profitability will largely depend on our ability
to reduce costs.

company, which could result in adverse U.S. tax consequences to
U.S. holders of our stock or ADSs.
19. Yen-dollar fluctuations could cause the market price of the ADSs
to decline and reduce dividend amounts payable to ADS holders
as expressed in U.S. dollars.

9. It may be difficult for us to attract and retain highly qualified
personnel.

20. As a holder of ADSs, you will have fewer rights than ashareholder has, and you must act through the depositary to

10. Our business may be adversely affected by seasonality.
11. We may face increasing risks relating to conducting businessinternationally.

18

exercise those rights.
21. There are restrictions on the withdrawal of shares from ourdepositary receipt facility.

MANAGEMENT’S DISCUSSION AND ANALYSIS
Wacoal Holdings Corp. and Subsidiaries
Years ended March 31, 2008, 2007 and 2006

Financial information contained in this section is based on the consolidated financial statements included in thisannual report, which have been prepared in accordance with generally accepted accounting principles in
the United States (U.S. GAAP). The Wacoal Group consists of 1 holding company (the Company), 38 consolidated
subsidiaries and 8 equity-method affiliates. The Wacoal Group is engaged in the manufacturing, wholesaling,and – for certain products – retailing of women’s foundation garments and lingerie, nightwear, children’s underwear,
outerwear and sportswear, hosiery and other textile products. Other operations include restaurant businesses,
cultural and service-related operations, and the construction of interiors for commercial premises.

OVERVIEW

Cost of Sales

We are the leading designer, manufacturer and marketer of women’s
intimate apparel in Japan, with the largest share of the Japanese market forfoundation garments and lingerie. We also sell our foundation garments
and lingerie products in several overseas markets. Sales of foundation
garments (primarily brassieres and girdles) and lingerie (primarily slips,
bra-slips and women’s briefs) accounted for approximately 74.4% of ourconsolidated net sales for fiscal year 2008.We also design, manufacture andsell nightwear, children’s underwear, outerwear, sports­wear, hosiery andother apparel and textile products, and engage in several business lines thatare ancillary to our core apparel business.

Our cost of sales arises principally from material and manufacturingcosts related to the production of our apparel products.

Revenues

We principally generate revenues from sales of innerwear (consisting offoundation garments and lingerie, nightwear and children’s underwear);outerwear and sportswear; hosiery, textile products; and other products.
The following table sets forth information with respect to our total
sales by category of products for the fiscal years ended March 31, 2008,2007 and 2006:
In fiscal year 2008, approximately 88% of the sales of Wacoal Corp. (thetotal sales of which account for approximately 71% of our consolidated sales)
were apparel sales made on a wholesale basis to department stores, ge­ne­ralmerchandise stores and other general retailers, and approximately 10% wereapparel sales made through our own specialty retail stores, catalog sales andthe Internet. Sales from our other businesses (which include store and homedesign services, restaurant businesses, cultural products and other ser­vices)comprised the remaining 2% of Wacoal Corp.’s sales in fiscal year 2008.
Over the past five fiscal years, fluctuations in our sales have typicallyreflected changes in unit volume, as average unit prices have generally
remained stable during this period.

Share of Net Sales
2008

Foundation garments and lingerie 74.4%
Nightwear
6.4%
Children’s underwear
1.2%
Outwear and sportswear, etc.
5.4%
Hosiery
1.1%
Other textile products
2.4%
Other businesses
9.1%

Selling, General And Administrative Expenses

Our selling, general and administrative expenses principally consist of
employee compensation and benefit expenses and promotional expenses,
such as advertising costs and expenses associated with remodeling our sales
counters at department stores. Other selling, general and administrative
expenses include shipment costs, payment fees (including outsourcing
payments) and rental payments for our specialty retail stores. Our selling,
general and administrative expenses do not include any impairment charges
on long-lived assets or any gains or losses on the sale or disposal of property,
plant and equipment. However, these expenses are included in operating
costs and expenses and thus impact our operating income.
KEY INDUSTRY TRENDS

We believe that the following have been key trends in our industry
during the last three fiscal years:• Consumer spending in Japan had been gradually recovering in recent
years, but growth appears to have stalled in the second half of fiscal year
2008 following soaring fuel prices and volatility in the stock and currency
exchange markets due to the U.S. sub-prime mortgage crisis.
• The number of and sales through department stores, one of our key
distribution channels, are decreasing. Although sales at massmerchandising stores remain constant, they are being forced to review
their expansion strategies due to law reforms tightening controls on thedevelopment of large-scale stores in the suburbs. At the same time, sales
at direct sales outlets and on the Internet are steadily rising.
• Due to the above changes in the retail industry coupled with factors
such as a decline in the female population, the market for women’s
innerwear garments in Japan is shrinking, and the price of innerwear
continues to decline in terms of both overall prices and average price
per item. The numbers of innerwear items purchased and owned perperson are also decreasing.
• In addition, outerwear manufacturers and others continue to enter
the market. These manufacturers offer their products by focusing on
new elements, such as fashionability, lifestyle and price, rather thanfunction and quality, and have come to be accepted by consumers.

19

Sales by Product Category

Millions of Yen% Change

				

2008

2007
2006
				

Foundation garments and lingerieNightwear
Children’s underwear
Outerwear and sportswear, etc.
Hosiery
Other textile and related products
Other businesses
Total• These manufacturers and other competitors are strengthening theircost reduction by, for example, sourcing fabric and producing garments
in China and other lower-cost countries. Sales in Japan of lower priced
women’s innerwear garments manufactured in these counties has
increased, leading to an intensification of price competition in our
industry.
• Alternative marketing concepts for women’s innerwear garments, suchas catalog marketing, direct marketing and e-commerce, are becoming
more prevalent as apparel companies seek to diversify their sales
channels and reach new customer groups.
We have taken steps to address these key industry trends, in seeking tobuild on the core strengths of our market position and brand awarenesswith Japanese consumers. We believe that our strategic emphasis on
higher-end products has helped us to reach consumers seeking highquality innerwear garments and to mitigate the adverse impact on sales
and margins from lower priced garments. We have taken steps to reduce
our cost structure, such as producing more products in lower-cost
countries such as China and Vietnam, consolidating and modernizing our
product distribution centers and expanding our early retirement program.
We are also seeking to expand sales in overseas markets – in particular
China, the U.S. and Europe, as well as in the ASEAN region, where welaunched our Sorci age brand – and increase sales through our own specialty
retail stores, our catalog operations and the Internet. Pursuant to our CAP
21 strategic plan, we intend to extend our innerwear product offerings
into the mid-price range and include more fashionable offerings in our
products mix to help us reach a broader customer base. We believe that
our acquisition of Peach John will help us to advance these goals.We willcontinue to implement these steps and evaluate other strategies to address
challenges and opportunities in the industry going forward.

20¥123,295 (74.1)
10,081
(6.0)
2,069
(1.2)
8,751
(5.3)
2,102
(1.3)
4,051
(2.4)
16,061(9.7)¥166,410 (100.0)¥123,460 (74.4)
10,611
(6.4)
1,953
(1.2)
8,920
(5.4)
1,803
(1.1)
3,963
(2.4)
15,051(9.1)¥165,761 (100.0)¥119,875 (73.0)
10,440 (6.4)
2,216 (1.3)
9,128 (5.6)
2,462 (1.5)
4,598 (2.8)
15,403 (9.4)¥164,122 (100.0)

2008
vs
2007

+0.1%
+5.3
-5.6
+1.9
-14.2
–2.2
-6.3
-0.4

OPERATING RESULTS
Sales

Consolidated net sales decreased approximately 0.4% in fiscal year
2008, from ¥166,410 million in fiscal year 2007 to ¥165,761 million as
an aggregate ¥1,397 million decline in sales of hosiery, textiles and fromour other businesses were only partially offset by an aggregate ¥748
million increase in sales of innerwear, outerwear and sportswear.
Similarly, a ¥2,058 million decline in sales in Japan was only partially
offset by an aggregate ¥1,409 million increase in sales in Asia, Europe
and the U.S.
Innerwear

Sales of our mainstay innerwear products (consisting of foundation wear,nightwear and children’s underwear), which comprised 82.0% of total
consolidated sales, increased 0.4% in fiscal year 2008, to ¥136,024 million.
Wacoal Brand

In the spring, the Wacoal brand business department of Wacoal Corporation,
which is our core operating company, launched LALAN, our new cam­paign brassiere, which showed favorable sales performance. LALAN meetsthe needs of women of all bust sizes due to a unique design that is indivi­
dually tailored to each size, and we believe that the new-style advertising
campaign, which differs from traditional promotions that focus primarily on
functionality, has reached new consumers beyond our existing customer
base. Additionally, our switch in strategy from seasonal campaigns that
promote new products to increasing the number and variety of LALAN
se­ries products each season has extended the sales period for our campaign
products and resulted in an improvement in sales and stock clearance rates.
Fall/winter season sales of Sugoi, our newly developed line of lingerie thatutilizes new materials, largely exceeded our expectations. This was due towide acceptance of the product’s characteristics of being thinner, lighter andwarmer than past products, as well as extensive media coverage of the pro­
duct name, which gives the impression of a product that exceeds existingproducts in terms of image and functionality. On the other hand, sales ofpro­ducts from our Style Science brand category, which was introduced two
years ago with new features for the lower body, was well below the sales
levels of previous years. Our research shows that this was due to the fact that
two years have passed since the release of the original Hip Walker, and instore promotions have decreased. In addition, there has been a failure tocap­ture new customers, and our attempts to encourage existing customers
to buy replacement products have been ineffective. Due to poor sales per­for­mance of our Style Science series products, overall sales of our Wacoal brandbusiness department were below the results of the previous fiscal year.

Sales of the Gra-P brand, targeted at middle-age to seniorconsumers, grew 2.7% to ¥2,592 million compared to fiscal year 2007
thanks to market expansion and the development of new products.
However, sales of our high value-added brand La Vie Aisée, which isalso targeted at middle-age to senior consumers, were ¥4,494 million,a decrease of 11.2% compared to fiscal year 2007 due to decreased salesof innerwear for the lower half of the body, centered on Style Science
series products. Our luxury brand Tréfle, which is primarily sold in
department stores, suffered from tough competition, and sales decreased
by 9.4% to ¥1,858 million compared to fiscal year 2007.
Wing Brand

In our Wing brand business department, as with our Wacoal brand, ourcore brassieres, particularly our standard products, performed well, as
have girdles, body-suits and lingerie. On the other hand, sales of ourStyle Up Pants from our Style Science series have declined. Nevertheless,a Style Science product for men, the Cross-Walker, was developed andofficially went on sale in department stores under the DAMS brand in
February 2008 and in chain stores under the BROS brand name in
April 2008. There has been a very favorable consumer response to bothproducts, and we expect this line to expand in the future. As a result, theoverall business results in our Wing brand business department achieved
a sales level in line with that of the previous fiscal year. With thescheduled introduction of special health checks and guidance aimed atpreventing metabolic syndrome in April 2008 as a backdrop, we beganselling Exwalker Style Science products at various locations, including
gyms and corporate health insurance associations in January of this year.
Although sales of our core lines of the Style Science series products
aimed at women in fiscal year 2008 were disappointing, we believe that
there are still good opportunities to capture new customers andencourage existing customers to continue purchasing these products by
expanding our marketing channels and range of target customers andrenewing our promotional strategies.
Specialty Retail Business.

Our specialty retail store business consists of Une Nana Cool, an
independently operated subsidiary, our Wacoal Corporation direct retailstore business for our Amphi, SUBITO and Sur La Plage brands, and our
Wacoal Factory Stores chain of factory outlet stores. Une Nana Cool’s newand existing stores, as well as LuncH, a new type of store concentrating on
lingerie, are all performing well and have shown fiscal year profits for the
first time. In addition, efforts to limit the opening of new stores and focus
on increasing and improving the earnings of existing stores have led to
improved results for our direct retail store business as well.
Outerwear and Sportswear

In our outerwear and sportswear business, sales for fiscal year 2008
increased 1.9% to ¥8,920 million as compared to fiscal year 2007. Salesof our main sports conditioning wear product CW-X were lower thanin fiscal year 2007 as a result of delivery adjustments for inventory
maintenance purposes and product returns from stores.
Hosiery Sales

Hosiery sales decreased 14.2% to ¥1,803 million compared to fiscal year
2007. Although our entry into new businesses contributed positively tohosiery sales, our overall hosiery sales were lower than fiscal year 2007
because of the negative effects of weather on the performance of wet
weather footwear and a reduction in department store sales of leggings.

Textile Products

Although sales of shoes and general merchandise were relatively favorable,a ¥167 million year-on-year decrease in the sales of materials to our overseas
affiliates, which was due to an increase in materials sought overseas by ouraffiliates, resulted in an overall decrease in sales of textile products to ¥3,963
million, a decline of ¥88 million, or 2.2%, compared to fiscal year 2007.
Other

Sales from our other businesses (mannequins and fixtures rental, store
design and construction, residential interiors, restaurants, culture, services)
decreased 6.3% to ¥15,051 million. The mannequin and fixtures rental
businesses exceeded sales of the previous year due to an increase in orders.
However, sales in our shop and store construction business fell below salesof the previous year because it focused on making profits amid increasingly
stiff competition from competitors, including competitive bidding. Our
residential design business, which was transferred from Wacoal Corp. toNanasai Co., Ltd., in fiscal year 2007, was significantly affected by adecrease in the number of new housing starts as a result of revisions toJapan’s building standards law, and this resulted in decreased revenues.
Overseas SalesIn Asia, Wacoal’s business in China continues to grow. In addition to the
expansion of Wacoal brand products, we have begun to expand our youth
orientated brand, Amphi, and in the fiscal year ending March 2009, weplan to increase sales through a three-brand structure, including the highvalue-added brand Salute. Our sales in Asia outside of Japan (including
China, Hong Kong and Singapore) grew 13.9% to ¥7,646 million from¥6,713 million and represented 4.6% of total consolidated sales in fiscal
year 2008 versus 4.0% of total consolidated sales in fiscal year 2007. Sales
in China grew 42.3% over the previous year, which contributed to ouroverall strong performance in Asia.
Sales in the U.S. represented 10.5% of our total consolidated sales infiscal year 2008, compared to 10.2% in 2007. Sales have been increasing in
the U.S. over the last few years due to an increasing demand for luxury
items and an increase in transactions with mid-level department stores thathave not historically sold Wacoal products but that are repositioning
themselves as up-scale department stores. However, decreased consumer
confidence caused by the U.S. economic slowdown has led to sluggish
store sales, and other factors, such as inventory adjustments, have also had
an adverse effect, leading to sales levels that were up only slightly in fiscal
year 2008 over the previous fiscal year. Earnings were down significantly
due to a decrease in profitability, caused primarily by in-store pricereductions and increased material shipment costs, and an increase inpersonnel costs brought on by an increase in the number of sales staff inconnection with new store openings.
Our subsidiary Wacoal America, Inc. is currently engaged in sales offoundation garments and lingerie using the Wacoal brand and also the
Donna Karan Intimates (DKI) brand and the DKNY brand. However, thelicensing agreement for the Donna Karan Intimates (DKI) brand and the
DKNY brand is set to expire on December 31, 2008 and will not be renew­
ed.We are planning the launch of a new brand in the U.S. after the expira­tion of this licensing agreement, however we anticipate that sales in the
U.S. will decline in the fiscal year ending March 31, 2009 as a result. We
expect that income will also be affected by the decline in sales, however we
expect the impact on income to be moderate since the operating mar­gin for
our licensing business is lower than our Wacoal Brand business. In addition,21

we anticipate an overall improvement in profitability in the U.S. in thefiscal year ending March 31, 2010, due to our plans to revive sales with the
expansion of the new brand, in combination with decreased costs.
Cost of Sales

Our cost of sales decreased approximately 1.8% from ¥84,658 million
in fiscal year 2007 to ¥83,127 million in fiscal year 2008. Cost of sales
as a percentage of net sales decreased by 0.8%, from 50.9% in fiscal year
2007 to 50.1% in fiscal year 2008. This was primarily due to productconsolidation and a decrease of forward inventory by our subsidiary
Wacoal Corp., which resulted in fewer returned goods and fewer losses
due to inventory write-downs. Wacoal Corp. also increased overseas
production and raw material procurement, resulting in a 1% decreasein the cost ratio of Wacoal Corp.
Selling, general and administrative expenses

Selling, general and administrative expenses were ¥69,245 million in fiscal
year 2008, an increase of 0.6% from ¥68,831 million in fiscal year 2007.
The selling, general and administrative expenses ratio increased by 0.4%
to 41.8% in fiscal year 2008 compared to 41.4% in fiscal year 2007. This
increase was primarily due to an increase in personnel expenses resulting
from an increase in the number of non-manufacturing employees in
Wacoal Corp.,Wacoal America, Inc., and Wacoal China Co., Ltd.
At the operating profit level, although selling, general and admi­nis­
trative expenses increased slightly, the cost reductions were successful
and we were able to increase our profits.
Total Other Income, Net

We had a net ¥813 million of other income in fiscal year 2008, as compared
to a net ¥1,024 million of other income in fiscal year 2007. This decrease
was primarily due to a ¥558 million increase in losses from impair­ment
charges on investments, while profit on the sale or exchange of invest­ment
securities increased by ¥309 million compared to fiscal year 2007.

SG&A Expenses¥ Billion

72.5

72.1

69.7

68.8

69.2

44.4

44.8

42.5

41.4

41.8

because we concluded that there was an other-than-temporary decline in
the value of our initial equity interest since a discounted cash flows
analysis based on the new five-year business plan did not support thecarrying value of the initial interest in Peach John on our balance sheet.
The write-down was accounted for as an investment loss under equity in
net (loss) income of affiliated companies.
LIQUIDITY AND CAPITAL RESOURCES

Our main source of liquidity is cash from operations, which allows us tosecure working capital, make capital investments and pay dividends
without relying on substantial borrowings or other financing from outsideof the group. Some of our overseas subsidiaries, however, have credit
facilities at financial institutions to secure working capital. The aggregate
amount of these credit facilities is ¥16,143, and the outstanding balancedrawn from these facilities was ¥5,572 million as of March 31, 2008,
including borrowings by Wacoal Service of ¥3,800 million and borrowings
by Nanasai of ¥1,600 million.
We are not aware of any restrictions on the transfers of funds froma subsidiary to a parent company in the form of a cash dividend. We
believe that our working capital is adequate for our present requirements
and for our business operations both in the long- and short-term.
Cash FlowsNet cash from operating activities was ¥14,225 million in fiscal year
2008, an increase of ¥4,886 million compared to fiscal year 2007,
primarily due to an adjustment to cash flow for equity in net loss ofaffiliated companies due to a valuation loss of shares of Peach John of¥4,694 million, and a decrease in inventory assets as part of an effort toaggregate our inventory and to control forward inventory.
Net cash provided by investing activities was ¥3,590 million in
fiscal year 2008 versus net cash used in investing activities of ¥1,185
million in fiscal year 2007.This was primarily due to an increase in cash
and cash equivalents of Peach John Co., Ltd., which became a wholly
owned subsidiary through a share exchange in fiscal year 2008.
Net cash used in financing activities was ¥9,400 million, primarily
due to an approximately ¥6,000 million repurchase of our shares inorder to improve the efficiency of our capital and implement a more
flexible capital strategy.

Net Cash Provided by Operating Activities¥ Billion

FY04

FY05

FY06

FY07

6.5

FY08

5.4

Ratio of SG&A expenses to sales (%)

Net Income

Net income was ¥4,966 million in fiscal year 2008, a decrease of ¥4,063
million compared to fiscal year 2007. This decrease was primarily due toa ¥4,694 million yen write-down of our 49% interest in Peach John Co.,
Ltd., which we acquired in fiscal year 2007 as part of a capital alliancewith Peach John. We acquired the remaining 51% equity interest in
Peach John in January 2008 through a share exchange and prepared a
new five-year business plan for the business. In connection with preparing
the new five-year business plan, we reevaluated the fair value of ourinitial equity interest in Peach John, and we recognized an impairment

22

2.5

2.3

1.2

FY04

FY05

FY06

FY07

FY08

Capital Expenditures

Capital expenditures for fiscal year 2008 were ¥1,211 million. These ex­penditures were primarily for the repair of office facilities of our domestic
subsidiaries and the expansion of our specialty retail store network.
We expect to spend approximately ¥300 million for further expansionof our specialty retail store network.We also expect to spend approxi­ma­tely ¥1,500 million on system-related investments, including investments
aimed at integrating our Wacoal brand and Wing brand manufacturing
operations. In addition, we expect to spend approximately ¥1,300 million
on the introduction of new business solutions at Peach John to revitalize
sales, distri­bution and accounting systems. We also expect to continue tomake expen­ditures for maintenance, to meet applicable legal requirements
and to facilitate the manufacture of new products with new designs andspecifi­ca­tions. Furthermore, we intend to evaluate and pursue oppor­
tunities for acquisitions, investments and other strategic transactions that
we believe will help us achieve our business objectives, including exten­
ding our pro­duct offerings in Japan and in overseas markets andstrengthening our capabilities in the Internet, catalog and other marketing
channels. We expect to fund these capital expenditures and other expen­
ditures through our cash from operations, existing cash reserves and otheravailable sources of liquidity.

Capital Expenditures¥ Billion

14.2

9.3

5.2
2.0
0.7
FY04

FY05

FY06

FY07

FY08

RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES.

We have been conducting long-term research into the Japanese woman’s
body since the establishment of our Central Research Center in 1964
(currently, the Human Science Research Center). In order to accurately
understand the Japanese woman’s physique, we have developed specialized
equipment, such as silhouette analysis equipment and three-dimensional
measuring equipment, and we are currently developing equipment that
we believe will provide advanced measurement of sensory comfort. Our
research and development activities are based on the proportional,
physiological and mental aspects of garment design. As part of our recent
research results, in 1995 we announced the Golden Canon, a set ofindicators that characterize the ideal body for Japanese women, and weare also utilizing new sales methods. In 2000, we conducted an analysis on
the physiological changes associated with ageing throughout a 25 year
period from the teenage years to the 40s. We named the principles ofthese changes SPIRAL Ageing. From 1995 to 1998, we participated in a
project led by the Ministry of Economy,Trade and Industry (formerly the
Ministry of International Trade and Industry), enriching the basic studyof sensory comfort, and conducted research based on reactions to threebasic stimuli: pressure, heat and touch. Based on this research, we arefocused on developing new products that are not only comfortable forthe wearer but have a positive physiological effect. In addition, every year
we take the measurements of 500 – 1,000 people and enlist the assistanceof approximately 1,000 registered trial-fitting monitors. We scientificallycollect and analyze the needs and attitudes towards the human body, andwe are committed to understanding the needs of our customers.
Based on these studies, we continually develop products with new
functions designed to satisfy the needs of our customers, such as CW-X
(sportswear designed to alleviate muscle fatigue), Venus Return (comfort
stockings designed to give the right amount of stimulation to themuscles while walking), Shakitto Bra (designed to make the figure look
more attractive with the movement of the bone structure of the upper
trunk) and our Night Up Bra (designed to provide comfortable support
to the bust while sleeping). We have recently been conducting acomprehensive study of walking motion and muscle movement andhave developed products that represent a complete departure fromconventional girdles and underpants, such as Hip Training Bottoms, andStomach Training Bottoms. These products stimulate the muscles while
walking and work the hip and stomach area, encouraging increased
muscle activity. These are currently being sold as our Wacoal brands
Hip Walker and Onaka Walker, and our Wing brands Style Up Pants(Onaka) and Style Up Pants (Hip).
From fiscal year 2007, we began research and development into
men’s innerwear, and we are implementing the measurement of themale body and improving the organization of our monitoring system.
In fiscal year 2008, we carried out various trials in relation to Style
Science products for men and were able to verify their effectiveness. As
a result, we developed our Cross Walker product and began sales indepartment stores and chain stores. In addition, we developed our
Exwalker product as part of the Style Science series and began a new
business with sales aimed at health insurance societies and fitness gyms.
Overseas, we are promoting research into the Chinese woman’s body,
focused in the Chinese Human Science Research Centre.
The cost of research and development in fiscal year 2008 wasapproximately ¥766 million, compared to ¥714 million and ¥638 million
in 2007 and 2006, respectively, none of which we consider material.
As mentioned above we do not materially depend on patents orlicenses or on new manufacturing processes for our business or
profitability.

23

ELEVEN-YEAR FINANCIAL SUMMARY
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31

2008

2007

2006

¥165,761¥166,410¥164,122

For the year:

Net sales
Cost of sales% of net sales
Selling, general and administrative(Gain) loss on sale or disposal of property, plant and equipment
Impairment charges on long-lived assets
Government subsidy
Special retirement related expenses
Total selling, general and administrative expenses% of net sales
Operating income
Other income and expenses, net
Net interest income (expense)
Income before income taxes, equity in net incomeof affiliated companies and minority interests
Income taxes
Net income

83,12784,65850.1%
50.9%
69,24568,831
(184)
25
33		

84,322
51.4%
69,720
612
614		

			
			
69,09468,856
41.7%
41.4%
13,54012,896
588
861
225
163

7,521
78,467
47.8%
1,333
1,976
157

14,353
5,853
4,966

13,920
6,502
9,029

3,466
1,459
2,821

Return on assets
Return on equity

2.1%
2.6%

3.7%
4.8%

1.2%
1.6%

Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities

14,2253,590(9,400)9,339(1,185)(8,404)719(2,069)(3,428)Depreciation and amortization
Capital expenditures

3,908
1,211

3,735
2,536

3,433
6,456

¥   176125
6,457¥   316110
6,874¥   98100
6,480¥ 98,845
36,01028,04351,548
241,619
5,701¥ 92,915
34,86819,81652,782
250,266
5,984¥110,773
35,52519,89353,501
242,296
6,458

185,113

193,278

186,475

Per 5 shares of common stock (in yen):

Net income
Cash dividends
Shareholders’ equity
At year-end:

Total current assets
Total current liabilities
Cash and cash equivalents
Net property, plant and equipment
Total assets
Short-term bank loans and long-term debt, including current portion
Total shareholders’ equity

24Millions of Yen (except per 5 share amounts)

2005

2004

2003

2002

2001

2000

1999

¥163,709¥162,829¥162,023¥165,937¥169,996
85,306
86,56787,49389,29091,951
52.1%
53.2%
54.0%
53.8%
54.1%
70,44068,336
64,831
66,00467,319
143
740
75
(474)
(706)
556					1998

¥160,968
84,041
52.2%
72,128133
		
(7,100)¥163,155
84,63851.9%
72,472455
2,574¥169,967
91,47453.8%
65,328(3,262)

65,161
40.5%
11,766206
107

75,501
46.3%
3,016
1,404
112

71,13943.5%
7,264(2,800)140

69,076
42.4%
7,186
310
117

64,90640.1%
9,624
10,44362

65,53039.5%
11,117338(54)66,613
39.2%
11,432595
195

62,06636.5%
16,427(110)
256

12,079
5,800
6,790

4,532
2,520
2,902

4,604
2,487
2,898

7,613
3,785
4,983

20,129
9,058
10,88911,401
4,961
7,254

12,222
4,749
8,489

16,573
8,170
8,929

3.0%
3.9%

1.3%
1.8%

1.3%
1.8%

2.2%
2.9%

4.6%
6.3%

3.1%
4.2%

3.6%
5.0%

3.9%
5.5%

2,045
(5,528)
296

5,201
1,328
(6,138)

7,858(9,839)(6,006)

8,653(9,412)(5,472)

11,480(13,686)(6,478)8,451(9,624)(2,611)

8,813(10,624)(105)

12,971
2,045
(296)

3,312
5,418

3,081
2,338

2,971
2,104

3,533
2,484

3,265
1,182

3,157
7,757

2,447
8,604

2,269
5,941

¥ 236
100
6,105

¥ 99
75
5,931

¥ 97
68
5,487

¥ 166
68
5,640

¥ 356
83
5,709

¥ 235
68
5,632

¥ 275
68
5,485

¥ 290
68
5,314

¥120,300
34,97024,19551,826226,196
6,911
175,746¥123,045
33,89927,44349,932
224,803
4,450
170,758¥124,486
33,57627,24654,171
218,105
6,301
160,839¥127,390
37,09535,38157,291
223,985
8,079
168,205¥129,508
41,44941,196
58,644232,262
8,865
172,558¥127,734
38,49049,88959,990237,721
9,658
173,612¥129,206
39,54153,93356,339233,817
10,649169,065¥130,319
42,31955,622
52,878231,226
8,602
163,800

25

CONSOLIDATED BALANCE SHEETS
Wacoal Holdings Corp. and Subsidiaries
March 31, 2008 and 2007

		Millions of Yen

2008

2007

2008

¥ 15,857
12,18628,043
12,614¥ 10,613
9,203
19,816
14,392$ 158,808
122,043
280,851
126,330353
22,337(3,145)30,0205,411
3,212
98,845550
22,882(2,979)30,1994,980
3,075
92,915

3,535
223,706(31,497)(300,651)
54,191
32,168989,935

Property, plant and equipment:
Land		
Buildings and building improvements
Machinery and equipment
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment

20,71158,575
14,44899
93,833(42,285)
51,54820,874
59,16814,179472
94,693(41,911)52,782

207,421586,630
144,697991
939,739(423,485)
516,254

Other assets:
Investments in affiliates (Note 6)
Investments (Note 3)
Goodwill (Notes 9 and 10)
Other intangible assets (Notes 9 and 10)
Prepaid pension expense (Note 11)
Deferred income taxes (Note 14)
Other
Total other assets

18,94234,012
38,056
54,117
11,203		
13,216
3,470
3,444
7,089
1,462
1,048
4,903
4,833
91,226
104,569

189,705
381,132
112,198
132,358
34,492
14,642
49,104
913,631¥250,266$2,419,820

AssetsCurrent assets:
Cash and cash equivalents:
Cash
Time deposits and certificates of deposit
Total
Marketable securities (Note 3)
Notes and accounts receivable:
Trade notes
Trade accounts
Allowance for returns and doubtful receivables (Note 4)Inventories (Note 5)
Deferred income taxes (Note 14)
Other current assets
Total current assets

Total
See notes to consolidated financial statements.

26

Thousands of
U.S. Dollars (Note 2)¥241,619

		
Millions of Yen

Liabilities and Shareholders’ Equity

Thousands of
U.S. Dollars (Note 2)

2008

2007

2008

¥ 5,572¥   5,822$   55,804

1,935
9,394
6,327
6,645
3,872
48
2,217
36,0101,503
10,536
6,900
6,416
1,378
51
2,262
34,86819,37994,081
63,36566,55038,778481
22,203360,641

Long-term liabilities:
Long-term debt (Notes 7 and 17)
Liability for termination and retirement benefits (Note 11)
Deferred income taxes (Note 14)
Other long-term liabilities (Note 14)
Total long-term liabilities

81
2,181
14,527
1,356
18,145

111
2,072
16,959517
19,659811
21,843
145,488
13,581
181,723

Minority interests

2,351

2,461

23,545

13,26029,262
136,589

13,26025,242
140,666

132,799
293,060
1,367,942

Current liabilities:
Short-term bank loans (Note 7)
Notes and accounts payable:
Trade notes
Trade accounts
Other payables
Accrued payroll and bonuses
Income taxes payable
Current portion of long-term debt (Notes 7 and 17)
Other current liabilities
Total current liabilities

Commitments and contingencies (Note 8)
Shareholders’ equity (Note 12):
Common stock, no par value –authorized, 500,000,000 shares in 2008 and 2007;
issued 143,378,085 shares and 144,016,685 shares in 2008 and 2007
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (Note 13):
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Total accumulated other comprehensive income
Less treasury stock at cost –35,998 shares and 3,440,116 shares in 2008 and 2007
Total shareholders’ equity

248
5,295
514
6,057

716
14,4284,130
19,2742,484
53,0295,148
60,611(55)
185,113(5,164)
193,278(551)
1,853,911

Total		

¥241,619¥250,266$2,419,820

27

CONSOLIDATED STATEMENTS OF INCOME
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

		
Millions of Yen

2008

2007

Net sales¥165,761¥166,410
Operating costs and expenses (income):
Cost of sales
83,12784,658Selling, general and administrative
69,24568,831
Impairment charges on long-lived assets
33		
(Gain) loss on sale or disposal of property, plant and equipment(184)
25
Special retirement related expenses (Note 11)			
Total operating costs and expenses
152,221
153,514
Operating income
13,54012,896
Other income (expenses):
Interest income
303
236Interest expense
(78)
(73)
Dividend income
641
603
Gain on sale or exchange of marketable securities
and investments (Note 3)
715
406
Impairment charges on investments (Note 3)
(923)
(365)
Other – net
155
217
Total other income, net
813
1,024
Income before income taxes, equity in net (loss) incomeof affiliated companies, and minority interests (Note 14)
14,353
13,920
Income taxes (Note 14):
Current
5,577
2,874
Deferred276
3,628
Total income taxes
5,853
6,502
Income before equity in net (loss) incomeof affiliated companies and minority interests
8,500
7,418
Equity in net (loss) income of affiliated companies (Note 6)(3,392)
1,771
Minority interests
(142)
(160)
Net income¥   4,966¥   9,029

Thousands of
U.S. Dollars (Note 2)

2006

2008

¥164,122$1,660,100

84,322
69,720
614
612
7,521
162,789
1,333

832,519
693,490330(1,843)
1,524,496
135,604

213
(56)
493

3,034
(781)
6,420

1,656
(65)
(108)
2,133

7,161
(9,244)
1,552
8,142

3,466

143,746

3,268(1,809)1,459

55,854
2,764
58,618

2,007
1,122
(308)
¥   2,821

85,128(33,971)(1,422)$ 49,734

Yen

Earnings per share (Note 16)
Earnings per American depositary receipt(5 shares of common stock) (Note 16)
See notes to consolidated financial statements.

28

U.S. Dollars (Note 2)

¥ 35

¥ 63

¥20

$0.35

¥176

¥316

¥98

$1.76

CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

		
Millions of Yen

Net income
Other comprehensive income (loss), net of tax (Note 13):
Foreign currency translation adjustments
Unrealized gains (losses) on securities
Pension liability adjustments
Total other comprehensive income (loss)
Comprehensive income (loss)

Thousands of
U.S. Dollars (Note 2)

2008

2007

2006

2008

¥ 4,966¥ 9,029¥ 2,821$   49,735

(468)
1,452
(9133)
117(3,616)		
(13,217)1,569¥ (8,251)¥10,598

3,084
7,746

(4,687)(91,467)(36,214)(132,368)$ (82,633)

10,830¥13,651

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF
SHAREHOLDERS’ EQUITY
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

Millions of Yen
Shares of 				Outstanding		
Additional		Common Stock
CommonPaid-in
Retained(Thousands)
Stock
CapitalEarnings

Accumulated
Other
Comprehensive
IncomeBalance, April 1, 2005
¥143,944¥13,260¥25,242¥134,572¥2,745
Net income				2,821		Other comprehensive income					10,830Cash dividends paid, ¥100 per 5 shares 						of common stock				(2,878)		
Repurchase of treasury stock(28)					Balance, March 31, 2006
143,916
13,26025,242
134,515
13,575
Net income				9,029		Other comprehensive income					1,569Cash dividends paid, ¥100 per 5 shares 						of common stock				(2,878)		
Repurchase of treasury stock(3,339)					Adjustment to initially apply SFAS No.158, net of tax (Note 11)					4,130Balance, March 31, 2007
140,577
13,26025,242
140,666
19,274
Net income
			4,966		Other comprehensive loss				
(13,217)
Cash dividends paid, ¥110 per 5 shares					
of common stock			(3,093)		
Repurchase of treasury stock(3,936)					Cancellation of treasury stock				(5,950)		
Issuance of new shares to acquire a subsidiary (Note 9)
3,261		4,474			Distribution of treasury stock to acquire a subsidiary (Note 9)3,440		
(454)			Balance, March 31, 2008
143,342¥13,260¥29,262¥136,589¥ 6,057

Treasury
Stock

¥(73)

(44)
(117)

(5,047)(5,164)(6,015)(5,950)
5,174
¥(55)

Thousands of U.S. Dollars (Note 2)
					
			
Additional				CommonPaid-in
Retained		
Stock
CapitalEarnings

Accumulated
Other
Comprehensive
IncomeBalance, March 31, 2007		
$132,799$252,799$1,408,773$ 193,030
			
49,735		
Net income
Other comprehensive income					 (132,369)
Cash dividends paid, $1.10 per 5 sharesof common stock			
(30,977)		
Repurchase of treasury stock					Cancellation of treasury stock				(59,589)		
Issuance of new shares to acquire a subsidiary (Note 9)		44,807			
Distribution of treasury stock to acquire a subsidiary (Note 9)		(4,546)			
Balance, March 31, 2008		
$132,799$293,060$1,367,942$ 60,661

TreasuryStock$(51,718)(60,240)
59,58951,818$    (551)

See notes to consolidated financial statements.

29

CONSOLIDATED STATEMENTS OF CASH FLOWS
Wacoal Holdings Corp. and Subsidiaries
Years Ended March 31, 2008, 2007 and 2006

		
Millions of Yen

Operating activities:
Net income
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization
Provision for returns and doubtful receivables
Deferred income taxes(Gain) loss on sale or disposal of property, plant and equipment
Impairment charges on long-lived assets
Gain on sale or exchange of marketable securities and investments
Impairment charges on investments Equity in net loss (income) of affiliated companies, less dividends
Changes in assets and liabilities:   Decrease (increase) in notes and accounts receivable   Decrease (increase) in inventories   Decrease (increase) in other current assets   (Decrease) increase in notes and accounts payable   Decrease in liability for termination and retirement benefits   Increase (decrease) in accrued expenses,    income taxes and other current liabilities
Other
Net cash provided by operating activities
Investing activities:
Proceeds from sales and redemption of marketable securities
Payments to acquire marketable securities
Proceeds from sales of property, plant and equipment
Capital expenditures
Payments to acquire intangible assets
Proceeds from sales of investments
Payments to acquire investments in affiliated companies
Payments to acquire investments
Cash balances of subsidiary acquired in excess of cash paid
Cash balances of subsidiary acquired through share exchanges (Note 9)
Other
Net cash provided by (used in) investing activities
Financing activities:
Decrease in short-term bank loans, net
Proceeds from issuance of long-term debt
Repayments of long-term debt
Repurchase of treasury stock
Dividends paid on common stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Additional cash flow information:
Cash paid for:
Interest
Income taxes
Noncash investing activities:
Fair value of marketable securities received in exchange for certain   other marketable securities with a recorded amount of   ¥48 million ($481 thousand) and ¥172 million in 2008 and 2006
Acquisition of subsidiary through share exchanges (Note 9)30

Thousands of
U.S. Dollars (Note 2)

2008

2007

2006

2008

¥ 4,966¥ 9,029¥ 2,821$ 49,735

3,908
3,735
190
173
276
3,628
(184)
25
33		
(715)
(406)
923
365
4,198
(1,164)

3,433
503(1,809)612
614(1,659)65(674)

39,1391,903
2,764(1,843)330(7,161)
9,244(42,043)

1,822
1,218
49
(2,614)(2,613)401(2,897)(371)
219(2,472)(1,799)
274
(958)
(252)
(2,068)18,24812,198491(26,179)(26,169)2,681
87
14,225

(696)
(230)
9,339

1,667
(51)
719

26,850871
142,464

28,50932,161(9,929)(21,525)524
513(2,536)(6,456)
(984)
(668)
8
1,231
(15,326)(618)(1,887)(7,905)80
4,115			
(103)
356
580
3,590
(1,185)(2,069)105,218(99,069)
10,586(12,128)(16,805)
14,161

(259)
18
(51)
(6,015)(3,093)(9,400)(188)
8,227
19,816¥28,043

(575)
130
(34)
(5,047)(2,878)(8,404)
173(77)
19,893¥19,816

(409)
19
(116)
(44)
(2,878)(3,428)476(4,302)
24,195¥19,893(2,594)180(511)(60,240)(30,976)(94,141)(1,883)82,394
198,457$280,851¥    782,542¥    704,667¥    56
1,832$   781
25,458¥   143		
¥ 1,321
9,194			

$ 1,432
92,07810,506(9,892)
1,057(1,211)(1,678)
1,414(6,189)41,212(1,032)35,944NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wacoal Holdings Corp. and Subsidiaries

1. summary of significant accounting policies
Basis of Financial Statements – Wacoal Holdings Corp. (the“Company”) and subsidiaries are predominantly engaged in one­industry, the manufacture and sale of apparel, including foundation
garments, lingerie, nightwear and outerwear in Japan, the UnitedStates of America, Europe and certain Asian countries.
On October 1, 2005, the Company, which was formerly known as“Wacoal Corp.” moved to a holding company structure and changed
its name to Wacoal Holdings Corp. The business of the Company wastransferred to a new wholly owned subsidiary.
The accompanying consolidated financial statements, stated inJapanese yen, have been prepared on the basis of accounting principles
generally accepted in the United States of America except for theomission of segment information as required by Statement of Financial
Accounting Standards (“SFAS”) No. 131, “Disclosures about Segmentsof an Enterprise and Related Information.”
Consolidation – The consolidated financial statements include theaccounts of the Company and its majority-owned subsidiaries (collectively, the “Companies”). All intercompany transactions and balances
are eliminated.
Certain foreign subsidiaries of the Company have a fiscal year ending
December 31. The accounts of those subsidiaries are included in the
Company’s consolidated financial statements based on the subsidiaries’
fiscal year. As further described in footnote 9 to the financial statements,
on January 10, 2008, the Company acquired the remaining 51% interest in a domestic subsidiary with a fiscal year ending February 29, 2008.
Prior to January 10, 2008, the Company accounted for its original
investment of 49% in this subsidiary using the equity method. As of
March 31, 2008, the subsidiary is included in the Company’s consolidated balance sheet based on the subsidiary's fiscal year end. However,
because the subsidiary’s results of operations and change in financial
position between January 10, 2008 and March 31, 2008 were not significant, the Company continued to account for its investment using
the equity method and the income from the subsidiary’s operations
for the fiscal year ended February 29, 2008 was included in equity in
net (loss) income of affiliated companies in the consolidated statements
of income.
Investments in affiliates where the Company’s 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 ofbetween 20% to 50%, although other factors are considered in determining whether the equity method of accounting is appropriate.
Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the 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 alltime deposits and certificates of deposit (all of which are interest-bearing) with original maturities of three months or less, which can bewithdrawn at face value at any time without diminution of principal.
Foreign Currency Translation – Assets and liabilities of international
subsidiaries have been translated to Japanese yen at period-end
exchange rates and income and expenses have been translated using
weighted-average exchange rates for the period. Translation adjustments are included in other comprehensive income, a separate

component of shareholders’ equity. Exchange gains and losses resulting
from foreign currency ­transactions and the conversion of monetary
assets and liabilities denominated in foreign currencies are included in
the consolidated statements of income.
Marketable Securities and Investments – The Companies classify
their debt and marketable equity securities as available-for-sale andcarry them at fair value with a corresponding recognition of unrealized
holding gains or losses (net of tax) in other ­comprehensive income(loss), a separate component of shareholders’ equity, until realized.
Equity securities that do not have readily determinable fair values arerecorded at cost. Gains and losses on sales of investments are computed
based on cost determined using the average cost method.
If a decline in the fair value of marketable securities is determined
to be other than temporary, an impairment charge is recorded in the
consolidated statements of income.The Companies have generally
included that an other-than-temporary impairment is indicated when
the decline in fair value below the carrying value continues for overnine consecutive months. The Companies may also consider other factors, including their ability and intent to hold the applicable investment
securities until maturity, and the severity of the decline in fair value.
Inventories – Inventories are stated at the lower of cost or market, cost
being determined on the first-in, first-out method for raw materials
and the average cost method for work in process and finished products.
Property, Plant and Equipment – Property, plant and equipment isstated at cost less accumulated depreciation. Depreciation of property,
plant and equipment is computed by the declining-balance method,
except for buildings acquired on or after April 1, 1998, which are
depreciated using the straight-line method, based upon the estimateduseful lives of the assets. The estimated useful lives are as follows:     Buildings and building      improvements:
5 - 50 years (Mainly 38 years)     Machinery and equipment:
2 - 20 years (Mainly 5 years)
Impairment of Long-lived Assets – The carrying values of longlived assets, held and used by the Companies, are evaluated for
impairment whenever there is an event or change in circumstancesthat indicates that such assets have been impaired or that the carrying
amounts of such assets might not be recoverable.
The Companies recorded ¥33 million ($330 thousand) and ¥614
million in impairment charges on long-lived assets for the years ended
March 31, 2008 and 2006, respectively, which resulted from theimpairment of primarily land and buildings of a company residence in2008, and a building which was part of the Companies’ branch officein Nagoya in 2006. In 2008, the Company decided to sell the company residence to an unrelated party. The Company entered into a sales
contract on March 31, 2008 and the sales transaction completed in
April 2008. Therefore, the Companies recognized an impairment of
the asset to be disposed of by sale at the amount of the difference
between the sales price and the Company’s book value. In 2006, theCompany decided to close its Nagoya office and to demolish thebuilding. The office was closed on March 31, 2006 and the Companies
recognized an impairment of the asset to be abandoned. No impairment charges were recorded in the years ended March 31, 2007.
Goodwill and Other Intangible Assets – Goodwill represents
the excess of the purchase price over the related underlying tangible
and intangible net asset values of business acquired. Annually, or more
frequently if conditions indicate an earlier review is necessary, thecarrying value of the goodwill of reporting unit is compared to an
estimate of its fair value.

31

Other intangible assets with estimable useful lives consist primarilyof customer list and software and are amortized over their estimateduseful lives using the straight-line method. The estimated useful lives
are as follows:
Customer list:
7 years
Software:5 years
Other intangible assets with indefinite useful lives are evaluated forpotential impairment in a manner consistent with goodwill.
Derivatives – Derivative instruments, including certain derivative
instruments embedded in other contracts are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments andHedging Activities,” SFAS No. 138, “Accounting for Certain
Derivative Instruments and Certain Hedging Activities an Amendmentof the Financial Accounting Standards Board (“FASB”) Statement No.
133,” and SFAS No. 149, “Amendment of Statement 133 on Derivative
Instruments and Hedging Activities.” Changes in the fair value of a
derivative are recorded in other comprehensive income or in earnings,
depending on its intended use. Changes in fair value of foreign currency forward exchange contracts designated as fair value hedges ofrecognized assets and liabilities and firm commitments are recognized
in income. Changes in fair value of forward exchange contracts designated and qualifying as cash flow hedges of recognized assets andliabilities and firm commitments are reported in accumulated othercomprehensive income. These amounts are reclassified into income inthe same period as the hedged items affect income.
Asset Retirement Obligations – The Companies have obligations
arising from contractual commitments to remove leasehold improvements from leased facilities and return the property to a specified
condition when the lease terminates. Lease contracts have automatic
renewal articles and therefore, the Companies use their best estimate todetermine the lease termination dates for the purpose of calculating
asset retirement obligations.
Termination and Retirement Plans – Termination and retirement
benefits are accounted for in accordance with SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans.” Provisions for termination and retirement benefits include those for directors and corporate auditors of the Companies.
As allowed under SFAS No. 88 “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits,” the Companies do not recognize a gain or loss
on settlement of the pension obligation when the cost of all settlements
in a year is less than or equal to the sum of the service cost and interest
cost components of net periodic pension cost for the plan for the year.
Leases – Certain noncancelable leases are classified as capital leases andthe leased assets included as part of property, plant and equipment.
Such leasing arrangements involve the computer aided design systemand the computer hardware. Other leases are classified as operatingleases and are not capitalized. The payments on such leases are recorded
as expense. The rental expense under operating leases is recognized ona straight-line basis.
Treasury Stock – The Companies account for treasury stock under
the cost method and include treasury stock as a component of
Shareholders’ Equity.
Acquisition – The Company accounts for acquisitions using the­purchase method in accordance with SFAS No. 141, “Business
Combinations.” The Company allocates the purchase price to the assets
acquired and liabilities assumed based on the estimated fair values atthe date of acquisition, including intangible assets that can be identified
and named. The purchase price in excess of the fair value of the net
assets and liability is recorded as goodwill.
Revenue Recognition – The Companies recognize revenue on sales
to retailers, mail order catalog sales and internet sales when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred resulting
in transfer of title and risk of loss, (3) the sales price is fixed or determinable, and (4) collectibility is reasonably assured. The Companies
establish allowances for estimated returns based on historical experience. As for consignment sales, the Companies recognize revenue

32

when the products are sold to the ultimate customer. The Companies
recognize revenue on direct retailing sales at the Companies’ directly
managed retail stores at the point of sale to the customer.
Advertising Expenses – Advertising costs are expensed as incurred.
Advertising expenses for the years ended March 31, 2008, 2007 and2006 were ¥11,768 million ($117,857 thousand), ¥12,084 million and¥11,888 million, respectively, and have been included in selling, general,and administrative expenses.
Shipping and Handling Costs – Shipping and handling costs for theyears ended March 31, 2008, 2007 and 2006 were ¥4,062 million($40,681 thousand), ¥4,186 million and ¥4,239 million, respectively,
and have been included in selling, general, and administrative expenses.
Research and Development Costs – Research and development
costs are expensed as incurred. Research and development costs for theyears ended March 31, 2008, 2007 and 2006 were ¥766 million($7,671 thousand), ¥714 million and ¥638 million, respectively, andhave been included in selling, general, and administrative expenses.
Income Taxes – The provision for income taxes is determined under
the assets and liability method pursuant to SFAS No. 109, “Accounting
for Income Taxes.” Under this method, deferred tax assets and liabilities
are determined for temporary differences between the financial statement and tax bases of assets and liabilities 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.
Provisions are made for taxes on undistributed earnings and cumulative translation adjustments of foreign subsidiaries whose earnings are
not deemed to be permanently invested.
Reclassifications – Certain reclassifications have been made to theprior years’ financial statements to conform with the current year’s
presentation.
To conform to the 2008 presentation, the Companies have reclassified “Other intangible assets,” which had previously been presented as“Other” in other assets, in the consolidated balance sheets. In addition,
the Companies have reclassified “Payments to acquire software,” which
had previously been presented as “Other” in investing activities, in the
consolidated statements of cash flows.
Recent Accounting Pronouncements:
Accounting for Uncertainty in Income Taxes – In June 2006, the
FASB issued FASB Interpretation No. (“FIN”) 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement
No. 109,” which clarifies the accounting for uncertainty in tax positions. FIN 48 is effective for fiscal years beginning after December 15,
2006. See Note 14 for further discussion of the effect of adopting FIN
48 on the consolidated financial statements of the Companies.
Fair Value Measurements – In September 2006, the FASB issued
SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fairvalue, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS No. 157 applies under otheraccounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value
measurements. SFAS No. 157 is effective for fiscal years beginning afterNovember 15, 2007. The Companies are currently in the process ofassessing the impact the adoption of SFAS No. 157 will have on theirconsolidated financial position, cash flows or results of operations.
The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 – In February
2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of
FASB Statement No. 115.” SFAS No. 159 provides entities the option
to report selected financial assets and liabilities at fair value, with changes
in fair value recorded in earnings. It also establishes ­presentation and disclosure requirements designed to facilitate comparisons between
companies that choose different measurement attributes for similar typesof assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Companies are currently in theprocess of assessing the impact the adoption of SFAS No. 159 will haveon their financial position, cash flows or results of operations.

Business Combinations – In December 2007, the FASB issued SFAS
No. 141(R) “Business Combinations” (“SFAS No. 141(R)”), which
replaces SFAS No. 141, “Business Combinations.” This statement establishes principles and requirements for how an acquirer recognizes andmeasures in its financial statements the identifiable assets acquired, theliabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of thebusiness combination. SFAS No. 141(R) is effective for fiscal years
beginning after December 15, 2008. The Companies will apply SFAS
No. 141(R) prospectively to all business combinations subsequent toApril 1, 2009.
Noncontrolling Interest in Consolidated Financial Statements –In December 2007, the FASB issued SFAS No. 160 “Noncontrolling
Interests in Consolidated Financial Statements, an Amendment of
Accounting Research Bulletin No. 51” (“SFAS No. 160”). This statement establishes accounting and reporting standards for ownershipinterests in subsidiaries held by parties other than the parent, theamount of consolidated net income attributable to the parent and to
the noncontrolling interest, changes in a parent’s ownership interest,

and the valuation of retained noncontrolling equity investments whena subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interestsof the parent and the interests of the noncontrolling owners. SFAS No.
160 is effective for fiscal years beginning after December 15, 2008. The
Companies are currently evaluating the potential impact, if any, of the
adoption of SFAS No. 160 on its financial position, results of operations or cash flows.
Disclosure about Derivative Instruments and Hedging Activities –In March 2008, the FASB issued FASB Statement No. 161, “Disclosuresabout Derivative Instruments and Hedging Activities.” The new standard is intended to improve financial reporting about derivative
instru­­ments and hedging activities by requiring enhanced disclosures toenable investors to better understand their effects on an entity’s financial
position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning afterNovember 15, 2008, with early ­application encouraged. The Companies
are currently evaluating the potential impact, if any, of the adoption of
SFAS No. 161 on our financial statements.

2. translation into u.s. dollar statements
The financial statements are stated in Japanese yen, the currency of thecountry in which the Company is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for convenience of readers outside of Japan and havebeen made at the rate of ¥99.85 to $1, the noon buying rate for yen
in New York City at March 31, 2008. Such translations 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.

3. marketable securities and investments
The fair value of debt and marketable equity securities is based on quoted market prices at March 31, 2008 and 2007. The fair values of the debt
and marketable equity securities were as follows:
Millions of Yen

2008
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities	    Total
Noncurrent:	Equity securities

Cost

Gross Unrealized Gain

Gross Unrealized Loss

Fair Value¥ 4,302¥     4
¥ 127
100		
1
5,475
118
144
2,309
12		
¥12,186¥   134¥ 272¥ 4,179
99
5,449
2,321
¥12,048¥25,762¥13,333¥36,981

Cost

Gross Unrealized Gain

¥2,114
Millions of Yen

2007
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities	    Total
Noncurrent:	Equity securities

Gross Unrealized Loss

Fair Value¥ 6,304¥     4
700		
4,187
166
3,210
3
¥14,401¥   173

¥125
2
43
12
¥182

¥ 6,183
698
4,310
3,201
¥14,392¥26,842¥26,378¥101¥53,119

Cost

Gross Unrealized Gain

Thousands of U.S. Dollars

2008
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities	    Total
Noncurrent:	Equity securities

Gross Unrealized Loss

Fair Value$ 43,084$     40
$ 1,272
1,002		1054,832
1,182
1,442
23,125120		
$122,043$   1,342$ 2,724$ 41,852
992
54,572
23,245$120,661$258,007$370,366$133,530$21,171

33

There were no securities which had been in a continuous unrealized loss position for more than 12 months at March 31, 2008 and 2007. Grossunrealized holding losses and fair values of debt and marketable equity securities, all of which have been in a continuous ­unrealized loss position
for less than 12 months at March 31, 2008 and 2007, were as follows:
Millions of Yen

2008
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities	    Total
Noncurrent:	Equity securities

Fair Value

2007
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities	    Total
Noncurrent:	Equity securities

Fair Value

Thousands of U.S. Dollars

Gross Unrealized Loss

Fair Value

Gross Unrealized Loss

¥3,675
¥ 127
99
1
2,943
144
810		
¥7,527¥ 272$36,805
992
29,4748,112$75,383$ 1,27210
1,442¥5,351$53,590$21,171¥2,114$ 2,724

Millions of Yen
Gross Unrealized Loss

¥ 4,979
498
2,554
2,099
¥10,130

¥125
2
43
12
¥182

¥ 1,711¥101

The unrealized losses on investments were caused primarily by a general decline in stock prices in Japan as of the end of the fiscal year. The
Companies have generally concluded that an other than temporary impairment is indicated when there is a decline in fair value below the carrying value for over nine consecutive months as described in Note 1. No investments were identified that meet the Companies’ criterion forrecognition of an impairment loss on investments in unrealized loss position presented above. Therefore, the Companies do not believe the unrealized losses represent an other-than-temporary impairment as of March 31, 2008 and 2007.
Future maturities of debt securities and mutual fund classified as available-for-sale at March 31, 2008 were as follows:		Millions of Yen

Due within one year
Due after one year through five years
Due after five years through ten years
After ten years
Total
Proceeds from sales of available-for-sale securities were ¥2,136 million ($21,392 thousand), ¥2,573 million and ¥2,903 million for theyears ended March 31, 2008, 2007 and 2006, respectively. The grossrealized gains on the sales of available-for-sale securities for the years
ended March 31, 2008, 2007 and 2006 were ¥557 million ($5,578
thousand), ¥408 million and ¥510 million, respectively. The gross­realized losses on the sales of available-for-sale securities for the year
ended March 31, 2007 were ¥2 million. No realized losses wererecorded in 2008 and 2006.
During the years ended March 31, 2008 and 2006, the Companies
exchanged certain equity securities for other securities. The
Companies recorded the newly received securities at fair value andrecognized a gain of ¥95 million ($951 thousand) and ¥1,149 million
in the year ended March 31, 2008 and 2006. No such exchanges weremade in the year ended March 31, 2007.
The Companies recognized impairment charges on investments of¥923 million ($9,244 thousand), ¥365 million and ¥65 million in theyears ended March 31, 2008, 2007 and 2006, respectively.

34

Thousands of
U.S. Dollars

Cost

Fair Value

Cost

Fair Value¥ 2,593
6,543
1,323
1,727
¥12,186¥ 2,595
6,544
1,305
1,604
¥12,048$ 25,969
65,52813,25017,296$122,043$ 25,989
65,53813,07016,064$120,661

Investments in non-marketable equity securities for which there is
no readily determinable fair value were accounted for using the cost
method and aggregated ¥1,019 million ($10,205 thousand) and ¥945
million at March 31, 2008 and 2007, respectively. The Companies
write down these investments whenever the recorded value exceeds
the Companies’ share of net assets of the investees. These investments
were not evaluated for further impairment as the Companies did not
identify any events or changes in circumstances that might have a significant adverse effect on the carrying value of the investments. It is
not practicable to estimate the fair value of the investments.
The Company’s subsidiary in the United States of America adopted
a non-qualified deferred compensation plan and trust agreement.
Investments consist of several mutual funds, which are recorded at thefair market value of ¥56 million ($561 thousand) and ¥53 million as ofMarch 31, 2008 and 2007, respectively.

4. valuation and qualifying accounts
Information related to the Companies’ allowance for doubtful receivables was as follows:		Millions of Yen

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

Thousands of
U.S. Dollars

2008

2007

2006

2008

¥ 82
10
(15)
¥ 77

¥ 92
10
(20)
¥ 82

¥72
29
(9)
¥92

$ 821
100
(150)
$ 771

Information related to the Companies’ allowance for returns was as follows:		Millions of Yen

Balance at beginning of year
Charged to costs and expenses
Balances utilized
Balance at end of year

Thousands of
U.S. Dollars

2008

2007

2006

2008

¥ 2,897
3,068(2,897)¥ 3,068¥ 2,686
2,897(2,686)¥ 2,897¥ 2,1422,686(2,142)¥ 2,686$ 29,014
30,726(29,014)$ 30,726

5. inventories
Inventories at March 31, 2008 and 2007 were as follows:		Millions of Yen

Thousands of
U.S. Dollars

		

2008

2007

2008

Finished products		
Work in process		
Raw materials		
Total		

¥25,653
3,097
1,270¥30,020¥24,691
4,110
1,398¥30,199$256,915
31,017
12,719$300,651

6. investments in affiliates“Investments in affiliates.” Under the equity method, the Companies
record their proportionate share of an affiliate’s income or loss basedon the most recently available financial statements.
The difference between the amount at which an investment is­carried and the amount of underlying equity in net assets consists ofgoodwill and other intangible assets. Intangible assets with estimableuseful lives are amortized over such useful lives.

Investments are accounted for using the equity method of accounting
if the investment provides the Companies the ability to exercise significant influence, but not control, over an investee. Significant influenceis generally deemed to exist if the Companies have an ownershipinterest in the voting stock of the investee of between 20% to 50%,although other factors are considered in determining whether theequity method of accounting is appropriate. The Companies record
investments in equity method investees meeting these characteristics as

The Companies’ investments in affiliated companies and percentage of ownership at March 31, 2008 and 2007 include, among others, the following companies:
2008

					
		
Yen
Millions of Yen
U.S. Dollar

Thousands of
U.S. Dollars

			Percentage of		
Name of Investee
Ownership (%)
Quoted Market Price

Aggregate Valueof Quoted
Market Price

Thai Wacoal Public Company Limited
Shinyoung Wacoal Inc.
Indonesia Wacoal Co., Ltd.
Taiwan Wacoal Co., Ltd.
House of Rose Co., Ltd.

34
25
42
50
20

Aggregate Value 		of Quoted		Market Price
Quoted Market Price¥   111
15,064¥4,4883,389$   1,112
150,866$44,947
33,941

1,370

1,302

13,721

13,040

2007
		

Yen

			
Percentage of		
Name of Investee
Ownership (%)
Quoted Market Price

Thai Wacoal Public Company Limited
Shinyoung Wacoal Inc.
Indonesia Wacoal Co., Ltd.
Taiwan Wacoal Co., Ltd.
House of Rose Co., Ltd.
Peach John Co., Ltd.

34
25
42
50
20
49

Millions of Yen
Aggregate Valueof Quoted
Market Price¥   130
12,309¥5,225
2,769

1,663

1,580

35

The following tables represent the summarized information fromthe balance sheets and statements of operations for the affiliated companies which are accounted for under the equity method as of and forthe years ended March 31, 2008 and 2007. As described in Note 9,
Peach John Co., Ltd. (“PJ”), which was formerly accounted for underthe equity method, became consolidated subsidiaries during the year.
		Millions of Yen

Current assets
Noncurrent assets
Total
Current liabilities
Noncurrent liabilities
Minority interests
Net assets
Total

2008

2007

2008

¥40,330
37,690¥78,020¥13,2235,885
158,911¥78,020¥48,058
32,291¥80,349¥12,527
5,569
1
62,252¥80,349$403,906
377,466$781,372$132,429
58,93810
589,995$781,372		Millions of Yen

Net sales
Gross profit
Income before
income taxes
Net income

Thousands of
U.S. Dollars

Thousands of
U.S. Dollars

2008

2007

2008

¥81,466
44,063¥75,414
38,260$815,884
441,292

7,480
5,087

7,011
5,052

74,91250,946

Dividends received from the affiliated companies were ¥806 million ($8,072 thousand), ¥607 million and ¥448 million during theyears ended March 31, 2008, 2007 and 2006, respectively.
Acquisition of PJ – On June 2, 2006, the Company acquired 49%of the issued common shares of PJ, at the amount of ¥15,327 million
and paid in cash. The Company accounted for this investment using
the equity method for the year ended March 31, 2007, and recorded¥358 million of equity net income for the year ended March 31,
2007. The amount recorded as investment in affiliated companies asof March 31, 2007 included goodwill of ¥6,297 million and intangible assets of ¥6,521 million, if consolidated.
During the year ended March 31, 2008, the Company identified adecline in fair value of PJ’s shares and recognized an impairment lossof ¥4,694 million ($47,011 thousand), which was included in equity
in net loss of affiliated companies.
On January 10, 2008, the Company acquired remaining 51%­common shares of PJ, and made it a wholly owned subsidiary. The
Company consolidated the balance sheet of PJ as of February 29,
2008 which was the most recent fiscal year end of PJ subsequent tothe acquisition date. Income from PJ’s operation for the period fromMarch 1, 2007 to February 29, 2008 was accounted for under equity
method and included in equity in net loss of affiliated companies in
the consolidated statements of income. As such, balance sheet information of PJ is include in the table above as of March 31, 2007, but
nor as of March 31, 2008. Also the income statement information of
PJ for the years ended March 31, 2007 and 2008 is included in thetable above.

7. short-term bank loans and lease obligations
Short-term bank loans at March 31, 2008 and 2007 consisted of thefollowing:

The future minimum payments required at March 31, 2008 were as
follows:		Millions of Yen			Year Ending March 31
Millions of Yen

Unsecured bank loans

Thousands of
U.S. Dollars

2008

2007

2008

¥5,572¥5,822$55,804

The weighted average annual interest rates on short-term bank loans
as of March 31, 2008 and 2007 were 1.3% and 0.9%, respectively.

2009
2010
Total

¥ 48
81
¥129

Thousands of
U.S. Dollars

$ 481
811
$1,292

In 2008 and 2007, no assets were pledged as collateral.

Lease obligations at March 31, 2008 and 2007 consisted of thefollowing:		Millions of Yen

Lease obligations
Less current portion
Lease obligations,less current portion

Thousands of
U.S. Dollars

2008

2007

2008

¥129
(48)

¥162
(51)

$1,292
(481)

¥ 81

¥111

$ 811

8. leases
The Companies lease most of their store premises, some of their distribution centers 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 the terms agreed at lease inception. Future
minimum rental commitments on non-cancelable operating leases are presented below:
		Year Ending March 31
Millions of Yen

Thousands of
U.S. Dollars

2009
2010
2011
2012
2013
Thereafter
Total$11,037
8,773
6,560
5,438
5,388
13,911$51,107¥1,102
876
655
543
538
1,389
¥5,103

Rental expenses were ¥3,979 million ($39,850 thousand), ¥3,795 million and ¥3,844 million for the years ended March 31, 2008, 2007 and2006, respectively.

36

9. ACQUISITIONOn January 10, 2008, the Company acquired the remaining 51% of
the outstanding common shares of PJ, primarily a mail-order innerwear retailer, through share exchange. Until then, the Company had
held a 49% of the issued common shares since the initial acquisition on
June 2, 2006. This acquisition enables the Company to expand its
innerwear operations’ market area by including customer age groups
and product styles that it has not been able to develop fully.
This transaction was accounted for as a purchase. PJ is included in the
Company’s consolidated balance sheet as of March 31, 2008 based on
PJ’s fiscal year end, which is February 29, 2008. However, because PJ’s
results of operations and change in financial position between January
10, 2008 and March 31, 2008 were not significant, the Company continued to account for its investment using the equity method and theincome from PJ's operations for the fiscal year ended February 29,
2008 was included in equity in net (loss) income of affiliated companies in the consolidated statements of income.
The purchase cost of the additional shares was ¥9,266 million($92,799 thousand), which consisted of the fair value of the shares­distributed to the shareholder of PJ and the direct costs of the businesscombination. As consideration for the acquisition, the Company distributed 3,261,400 new shares and 3,440,000 shares of treasury stock
to the shareholder of PJ. Those shares were valued at ¥1,372 per share
which is the five-day average stock price before the acquisition
announcement on November 9, 2007.
The purchase price of additional PJ shares has been allocated based
upon the estimated fair value of the identifiable assets acquired and liabilities assumed. The Company’s new basis of investments in PJ was¥21,814 million ($218,468 thousand), including the initial investmentof ¥10,670 million for the 49% shares and the corresponding amountof deferred tax liability of ¥1,878 million for the outside basis temporary differences, which the Company recognized on investment in PJ
upon the acquisition.
As a result of the allocation of new basis of investment in PJ, theCompany recognized goodwill of ¥11,203 million ($112,198 thousand) and intangible assets of ¥8,677 million ($86,900 thousand),in aggregate, which were classified as goodwill and other intangible
assets in the consolidated balance sheets. Intangible assets consist of
trademark of ¥5,316 million ($53,240 thousand) and customer list of¥3,361 million ($33,660 thousand).The trademark is not subject toamortization and the customer list is subject to amortization over estimated useful life of 7 years. Goodwill is not deductible for tax purpose.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.
2008
		
Millions of Yen

Thousands of
U.S. Dollars

Current assets
Property, plant,
and equipment
Intangible assets
Goodwill
Other assets    Total assets acquired
Current liabilities
Long-term debt    Total liabilities assumed
Net assets acquired¥ 6,808$ 68,182

698
8,677
11,203692
28,078
2,432
3,832
6,264
¥21,814

6,991
86,901
112,198
6,930
281,20224,35638,37862,734$218,468

Unaudited Pro Forma Results
Unaudited pro forma financial information is presented below as
if the acquisition of PJ occurred at the beginning of the 2007 and­fiscal year.
		Millions of Yen

Pro forma sales
Pro forma
operating income
Pro forma
net income

Thousands of
U.S. Dollars

2008

2007

2008

¥180,407¥181,820$1,806,780

14,627

14,219146,490

5,492

9,802

55,003		Millions of Yen

Pro forma
earnings per share

Thousands of
U.S. Dollars

2008

2007

2008

¥39

¥66

$389

10.	GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets acquired during the year ended March 31, 2008 totaled ¥10,568 million ($105,839 thousands) which are primarily consist of
trademark of ¥5,316 million ($53,240 thousand), customer list of ¥3,361 million ($33,660 thousand) and software of ¥1,807 million ($18,097
thousand). Trademark and customer list are recorded from acquired business. Trademark is not subject to amortization and customer list is subject
to amortize over estimated useful life of 7 years.
The components of acquired intangible assets excluding goodwill at March 31, 2008 and 2007 were as follows:
2008
Millions of Yen
Year Ending March 31

Amortized intangible assets:
Customer list
SoftwareOther    Total
Unamortized intangible assets:
Trademark
Other    Total

Gross Carrying AmountThousands of U.S. Dollars

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization¥ 3,361		
5,633¥2,356
1,414
251¥10,408¥2,607$ 33,660
56,415
14,161$104,236$23,595
2,514$26,109¥ 5,316		
99		
¥ 5,415		

$ 53,240991$ 54,231

2007
Millions of Yen
Year Ending March 31

Amortized intangible assets:
SoftwareOther    Total
Unamortized intangible assets:
Other

Gross Carrying Amount

Accumulated Amortization¥4,047
1,451¥5,498¥1,893229¥2,122¥   9437

Aggregate amortization expenses related to intangible assets andfuture estimated amortization expense was as follows:

The changes in the carrying amount of goodwill for the year ended
March 31, 2008, were as follows:			Year Ending March 31
Millions of Yen		Millions of Yen

Thousands of
U.S. Dollars

Balance at April 1, 2007
Reclassification from an
investment accounted forusing the equity method
Goodwill acquired during year
Balance at March 31, 2008

¥

$

3,908
7,295
¥11,203

39,13873,060$112,198

Aggregate amortization expense
2008
Estimated amortization expense
2009
2010
2011
2012
2013
Total

Thousands of
U.S. Dollars¥ 909$ 9,104

1,379
1,260
1,200
1,084
841
¥5,764

13,811
12,61912,01810,856
8,423$57,727

11. termination and retirement plans
Employee Retirement Plans – The Companies sponsor termination
and retirement benefit plans that cover substantially all employees.
Benefits are based on the employee’s years of service, position and performance. If the termination is involuntary or caused by death, theemployee is usually entitled to greater payments than in the case ofvoluntary termination.
The Companies have a contributory defined retirement benefit
plan, several partially funded plans administered by independent trustees and several unfunded termination plans administered by theCompanies. Benefits under the contributory defined retirement benefit
plan are usually paid in a lump sum at the earlier of termination orretirement, although periodic payments are available under certain
conditions. Benefits under the other termination and retirement benefit plan are paid either as a lump-sum payments or a periodic payments
under certain conditions. The benefits are usually paid as a lump-sum
payment, if the employee resigns before the mandatory retirement age.
On March 31, 2007, the Companies adopted the recognition anddisclosure provision of SFAS No. 158, “Employers Accounting for
Deferred Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS No.
158 required the Companies to recognize the funded status of theirpension plans in the March 31, 2007 consolidated balance sheet, witha corresponding adjustment to accumulated other comprehensive
income. The adjustment to accumulated other comprehensive income
at adoption consisted of the unrecognized actuarial gain and the unrecognized prior service benefit, all of which were previously netted
against the plans’ funded status in the consolidated balance sheet pursuant to the provisions of SFAS No. 87. Upon adoption, the Companies
recorded a net-of-tax amount of ¥4,130 million to the ending balanceof accumulated other comprehensive income. The adoption of SFAS
No. 158 had no effect on the consolidated statements of income forthe year ended March 31, 2007, or for any prior period presented.

The following provides a reconciliation of benefit obligations, plan
assets and funded status of the plans:		
Millions of Yen

2008

Thousands of
U.S. Dollars

2007

Change in benefit obligation:
Benefit obligation
	  at beginning of year
¥33,059¥32,687
Service cost
858
936Interest cost
761
748
Participants’ contributions
73
75
Actuarial loss
(1,041)(245)
Benefits paid from	  plan assets
(394)
(883)
Settlement paid from	  plan assets
(569)
(105)
Settlement paid by	  the Companies
(187)
(154)
Increase due to change	  in scope of consolidation259		
Benefit obligation
	  at end of year
32,81933,059Change in plan assets:
Fair value of plan assets
	  at beginning of year
Actual return	  on plan assets
	Employer	  contributions
Participants’	  contributions
Benefit payments
Settlement payments
Fair value of plan	  assets at end of year
Funded status
	  at end of year

2008

$331,087
8,593
7,622
731
(10,426)(3,946)(5,699)(1,873)
2,594
328,683¥38,048¥35,860$381,052(5,581)581(55,894)

2,490

2,520

24,938

73
(394)
(569)

75
(883)
(105)

731
(3,946)(5,699)34,06738,048341,182¥ 1,248¥ 4,989$ 12,499

Amounts recognized in the consolidated balance sheets at March 31,
2008 and 2007 consist of:		Millions of Yen

Prepaid pension costAccrued expenses
Reserves for
retirement benefit

38

Thousands of
U.S. Dollars

2008

2007

2008

¥ 3,444(104)¥ 7,089(113)$ 34,492(1,042)(2,092)¥ 1,248(1,987)¥ 4,989(20,951)$ 12,499

Amounts recognized in accumulated other comprehensive income
at March 31, 2008 and 2007 were as follows:		Millions of Yen

Actuarial (loss) gain
Prior service benefit
Total

Thousands of
U.S. Dollars

2008

2007

2008

¥(4,705)5,572¥    867

¥ 702
6,263
¥6,965$(47,121)
55,803$ 8,683

The accumulated benefit obligation for all domestic defined benefit
plans at March 31, 2008 and 2007 were as follows:		Millions of Yen

Accumulated benefit
obligation

Thousands of
U.S. Dollars

2008

2007

2008

¥31,842¥31,022$318,898

Net periodic benefit costs for the Companies’ plans consisted of thefollowing for the years ended March 31:
		Millions of Yen

2008

Thousands of
U.S. Dollars

2007

Service cost
¥ 858
¥ 936
Interest cost on
projected benefit
obligation
761
748
Expected returnon plan assets
(788)
(726)
Net amortization
(770)
(826)
Settlement gain			
¥ 61
¥ 132

2006

2008

¥1,228$ 8,593

722

7,622

(608)
12
(256)
¥1,098(7,892)(7,712)$    611

The unrecognized net actuarial loss and prior service benefit are
being amortized over 12 years (the average remaining service life ofactive participants) using the declining-balance method and thestraight-line method, respectively.
Other changes in plan assets and benefit obligations recognized inother comprehensive income for the year ended March 31, 2008 wereas follows:		Millions of Yen

Thousands of
U.S. Dollars

Current year actuarial loss
Amortization of actuarial gain
Amortization of priorservice benefit¥(5,328)(79)$(53,360)
(791)

(691)
¥(6,098)(6,920)$(61,071)

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

Actuarial gain
Prior service benefit

Thousands of
U.S. Dollars

2008

2008

¥ 823
(691)

$ 8,242(6,920)

The Companies use a March 31 measurement date for the majorityof its plans. The weighted-average assumptions used as of March 31, in
computing the benefit obligation liabilities shown above were as
follows:
Discount rate
Rate of increase in
future compensation

2008

2007

2.5%

2.5%

0.0%

0.5%

The weighted-average assumptions used as of March 31, in computing the net periodic benefit cost shown above were as follows:
Discount rate
Expected long-term rateof return on plan assets
Rate of increase in
future compensation

2008

2007

2006

2.5%

2.5%

2.5%

2.5%

2.5%

2.5%

0.5%

0.5%

0.5%

The Company’s wholly owned subsidiary, Wacoal Corp.’s approachto establishing the discount rate is based upon long term Japanese government bond rates and corporate bond indices. The discount rate
assumption is based upon the five-year average of the effective yields
on the 20-year Japanese government bond, adjusted for an incremental
yield of approximately 25 basis points that is achieved by selecting corporate bonds whose credit characteristics satisfy the quality requirements
but whose yields are slightly higher than the yields on Japanese government bonds. For other plans, similar indices and methods are used.
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
based largely on assumptions about economic growth and inflation,
which are supported by long-term historical data. The estimated longterm rate of return is based on an asset allocation of equity securities of
36.0%, debt securities of 52.0%, and other investments of 12.0%.
The Companies’ investment strategy is to maintain actual asset
weightings within a preset range of target allocations. The Companies’
investments are broadly diversified, typically consisting primarily ofequity and debt securities. The Companies believe these ranges­represent an appropriate risk profile for the planned benefit paymentsof the plans based on the timing of the estimated benefit payment.
The asset allocation at March 31, 2008 and 2007 was as follows:
		

2008

Equity securities		
Debt securities		
Life insurance company general accounts
Cash and cash equivalents		

45.4%
54.8%
44.4%
34.9%
8.4%	  5.7%
1.8%	  4.6%

2007

The target allocation percentages are reviewed and approved by thePension Committee. The actual allocations for 2008 and 2007 are different from the target allocation percentages primarily because theCompany maintained additional equity securities as the separate plan
asset which was contributed to the plan based on an agreement
between the Company and employees and are not governed by thePension 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 the debt securities and othertypes of assets are lower than the target allocation.
The general funding policy of the funded plans is to contributeamounts computed in accordance with actuarial methods accepted by
Japanese tax law. The Companies expect to contribute ¥2,331 million($23,345 thousand) to their plans in the year ending March 31, 2009.
The following benefit payments, which reflect expected futureservice, as appropriate, are expected to be paid as follows:			Year Ending March 31
Millions of Yen

Thousands of
U.S. Dollars

2009
2010
2011
2012
2013
2014–2018$11,107
11,597
12,50913,671
15,393
92,168¥1,109
1,158
1,249
1,365
1,537
9,203

Employee Early Retirement Program – The Companies provide
additional benefits to employees that elect to participate in the
Companies’ early retirement program. Retirement benefits of ¥51 million ($511 thousand), ¥14 million and ¥364 million were paid in
addition to normal benefits and charged to selling, general and­administrative for the years ended March 31, 2008, 2007 and 2006,
respectively.
Special Termination Benefit – In November 2005, the Company
announced a special voluntary retirement plan to eliminate approximately 300 positions to improve the labor structure at March 31,
2006. Employees who would be more than 50 years-old at March 31,
2006 could apply to this program. As of March 31, 2006, the Com­pany had eliminated 362 positions and paid the special termination
benefit of ¥6,931 million.

39

In March 2006, Fukushima Wacoal Sewing Corp., a subsidiary of
the Companies, terminated its operations and paid an aggregate ¥590
million in special termination benefits to its employees. Those payments were also charged to special retirement related expenses. In
addition to those charges, a gain on settlement of ¥256 million wascredited to selling, general and administrative.
Termination Plan for Directors and Corporate Auditors – The
Company and certain subsidiaries had termination plans for directors
and corporate auditors. Payment of termination benefits to directors
and corporate auditors is made in a lump sum upon termination andrequires the approval of the shareholders before payment. In June
2005, the Company rescinded its termination plan for directors andcorporate auditors upon the approval of its shareholders. The amountof benefit for each individual was fixed as of June 29, 2005 and willremain frozen until the retirement of each respective director and corporate auditor. The outstanding liabilities at March 31, 2008 and 2007
were ¥368 million ($3,686 thousand) and ¥373 million, respectively,
and were recorded in other long-term liabilities. Subsidiaries still
maintain plans for their directors and corporate auditors. In accordancewith EITF 88-1, the subsidiaries recorded a liability for termination
benefits for directors and corporate auditors at the amount that would
be needed if all directors and corporate auditors were to resign at eachbalance sheet date. The liabilities for termination benefits for directors
and corporate auditors at March 31, 2008 and 2007 were ¥90 million($901 thousand) and ¥85 million, respectively, and were included inliability for termination and retirement benefits.

12. shareholders’ equity
Since May 1, 2006, Japanese companies have been subject to the
Corporate Law of Japan (the “Corporate Law”), which reformed
and replaced the Commercial Code of Japan. The significant provisions
in the Corporate Law that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain
criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) theterm of service of the directors is prescribed as one year rather than
two years of normal 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 has prescribed so in its articles of incorporation. The Company meets all the above criteria. The
Board of Directors of companies with board committees (an appointment committee, compensation committee and audit committee) can
also do so because such companies with board committees already, by
nature, meet the above criteria under the Corporate Law, even thoughsuch companies have an audit committee instead of the Board of
Corporate Auditors.
The Corporate Law permits companies to distribute dividends-inkind (non-cash 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 company so stipulate. The Corporate Law provides certain limitations on the amounts available for dividends or the purchase oftreasury stock. The limitation is defined 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.

The amount of retained earnings available for dividends under the
Corporate Law was ¥101,694 million ($1,018,468 thousand) as ofMarch 31, 2008, based on the amount recorded in the parent company’s general books of account.
(b) Increases/decreases and transfer of common stock, reserveand‑surplus
The Corporate Law 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 capital surplus)
depending on the equity account charged upon the payment of such
dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the
Corporate Law, the total amount of additional paid-in capital and legal
reserve may be reversed without limitation. The Corporate Law also
provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among
the accounts under certain conditions upon resolution of theshareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law 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 specific formula. Under the Corporate Law, stockacquisition rights, which were previously presented as a liability, arenow presented as a separate component of equity. The Corporate Law
also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly fromstock acquisition rights.

13. Other comprehensive income (loss)
The changes in the components of accumulated other comprehensive (loss) income were reported net of income taxes as follows:
Millions of Yen

2007

2008

40

2006

					
Pre-Tax
Tax
Net
Pre-Tax
AmountCreditAmountAmountTax			
(Expense)
Net
Pre-Tax
CreditAmountAmountTax(Expense)
CreditNet
AmountForeign currency translation adjustments
Unrealized (loss) gain on securities:
Unrealized holding (loss) gain
Reclassification adjustments	   Net unrealized (loss) gain
Pension liability adjustment
Other comprehensive (loss) income¥   (506)¥   38¥    (468) ¥1,598¥(146)¥1,452¥ 3,345¥ (261)¥ 3,084(14,658)(754)(15,412)(6,098)¥(22,016)

5,972
307
6,279
2,482
¥8,799(8,686)
56
(15)
(447)
129
(53)
(9,133)185(68)(3,616)			
¥(13,217) ¥1,783¥(214)

41
76
117

13,761(816)
12,945(5,531)332(5,199)

8,230
(484)
7,746

¥1,569¥16,290¥(5,460)¥10,830

Thousands of U.S. Dollars

2007
Pre-Tax
AmountForeign currency translation adjustments
Unrealized loss on securities:
Unrealized holding loss
Reclassification adjustments	   Net unrealized loss
Pension liability adjustment
Other comprehensive loss

Tax
ExpenseNet
Amount$   (5,068) $   381$   (4,687)(146,800) 59,810(7,552)
3,075(154,352) 62,885(61,071) 24,856$(220,491) $88,122(86,990)(4,477)(91,467)(36,215)$(132,369)

14. Income taxes
Income before income taxes, equity in net income of affiliated companies, and minority interests is summarized as follows:		Millions of Yen

JapanForeign
Total

Thousands of
U.S. Dollars

2008

2007

2006

2008

¥15,959(1,606)¥14,353¥14,487(567)¥13,920¥ 4,695(1,229)¥ 3,466$159,830(16,084)$143,746

Income taxes expense consists of:		Millions of Yen

Current:
Japan
Foreign		Deferred:Japan
Foreign		Total income taxes

Thousands of
U.S. Dollars

2008

2007

2006

2008

¥4,652925¥5,577¥1,446
1,428¥2,874¥ 2,669599¥ 3,268$46,590
9,264$55,854

¥ 280
(4)
¥ 276
¥5,853¥3,854(226)¥3,628¥6,502¥(1,845)36¥(1,809)¥ 1,459$ 2,804(40)$ 2,764$58,618

The Companies are subject to a number of different taxes based on
income. The effective income tax rates differed from the normal statutory rates for the following reasons for the years ended March 31,
2008, 2007 and 2006:
2007

2006

Normal Japanese statutory rates
40.7%
40.7%
Increase in taxes resulting from:
Permanently
	  non-deductible expenses
2.9
6.5
Change in valuation allowance (1.5)(2.0)
Undistributed earnings
	  of foreign subsidiaries
2.6
0.8
Differences in subsidiaries’	  tax rate
(2.5)
(0.8)
Tax exemption
(0.2)
(1.3)
Tax loss on investment
	  in subsidiaries			
Other — net
(1.2)
2.8
Effective tax rates
40.8%
46.7%

40.7%

2008

9.9
0.0
2.9
(4.7)
(3.2)
(4.9)
1.4
42.1%

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances at March 31, 2008 and 2007
were as follows:		Millions of Yen

2007

2008
Deferred Tax
AssetsSales returns¥ 1,082
Allowance for doubtful receivables
Inventory valuation
1,201
Intercompany profits
248
Accrued bonuses
1,420
Valuation loss on investments
1,141
Gain on sales of property, plant and equipment
Undistributed earnings of foreign subsidiaries
Net unrealized gain on securities
Net realized gain on exchange of equity securities
Capitalized supplies
291
Enterprise taxes
363
Accrued vacation
902
Pension expense
966
Fixed assets
1,343
Tax loss carryforwards
2,054
Intangible assets		
Investment in a subsidiary		
Other temporary differences
679
Total
11,690
Valuation allowance(1,418)
Total¥10,272

Thousands of
U.S. Dollars

Deferred Tax
Liabilities

Deferred Tax
Assets2008
Deferred Tax
Liabilities

Deferred Tax
Assets¥ 1,117		
$10,836¥   252		¥   383		
1,273		12,028218		
2,484
1,392		14,221760		
11,427
1,753		1,724		2,695		2,742		4,511		10,691		
2,453		2,415		
330		
2,914
126		
3,636
812		
9,034
815
753
2,331
9,675
1,445		13,4501,795		20,571
3,532			1,878			
37
838
39
6,800
17,926
10,85920,325
117,076(1,465)		
(14,202)¥17,926¥ 9,394¥20,325$102,874

Deferred Tax
Liabilities$   2,524

17,55626,99045,17824,567

8,162
35,37318,808371
179,529$179,529

41

A valuation allowance was recorded against the deferred tax assets,
primarily related to loss carryforwards of certain domestic and foreignsubsidiaries. The valuation allowance decreased by ¥47 million ($471
thousand) for the year ended March 31, 2008 and decreased by ¥186
million for the year ended March 31, 2007.
At March 31, 2008, certain subsidiaries had loss carryforwards
which are available to offset future taxable income of such subsidiaries
expiring as follows:			Year Carryforward Expires
Millions of Yen

Thousands of
U.S. Dollars

2009
2010
2011
2012
2013
2014
2015
Indefinitely until utilized
Total

$ 841
8,222
9,354
6,550
4,086
7,231
6,390
11,377$54,051¥   84
821
934
654
408
722
638
1,136
¥5,397

The portion of the undistributed earnings of foreign subsidiaries
which are deemed to be permanently invested amounted to ¥5,239
million ($52,469 thousand) and ¥3,556 million at March 31, 2008 and2007, respectively. It is not practicable to determine the unrecognizeddeferred tax liability on these earnings.

The Companies adopted FIN 48 effective April 1, 2007. As a resultof implementation of FIN 48, the Companies recognized a tax benefitof ¥181 million ($1,813 thousand) as of April 1, 2007, and did not
require a cumulative-effect adjustment to retained earnings.
A reconciliation of beginning and ending amount of unrecognizedtax benefits was as follows:		Millions of Yen

Thousands of
U.S. Dollars

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

¥ 181

$ 1,813

332
29
(122)
¥ 420

3,325
290
(1,222)$ 4,206

Total amount of unrecognized tax benefits that, if recognized,
would affect the effective tax rate is ¥420 million ($4,206 thousand).
The Companies recognize interest and penalties accrued related tounrecognized 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 year ended March 31,
2008 were not material.
The Companies file income tax returns in Japan and various foreign
tax jurisdictions. With few exceptions, the Companies are no longer
subject to regular income tax examinations by the tax authority for
years before 2007. The tax authorities are currently conducting transfer
pricing examinations of certain subsidiaries in Japan and the United States.

15. Related party transactions
The Companies purchase merchandise from numerous suppliers throughout the world, including certain affiliates of the Companies. The
Companies purchased merchandise from affiliates in the amount of ¥1,031
million ($10,325 thousand), ¥1,588 million, and ¥1,811 million in the fiscal years ended March 31, 2008, 2007 and 2006. The accounts payable toaffiliates were ¥48 million ($481 thousand) and ¥9 million at March 31,
2008 and 2007, respectively.

The Companies also sell supplies, materials and products to certaina­ ffiliates. Aggregate sales to affiliates were ¥803 million ($8,042 thousand),¥1,042 million, and ¥1,494 million in fiscal years ended March 31, 2008,2007 and 2006. The accounts receivable from affiliates were ¥60 million($601 thousand) and ¥103 million at March 31, 2008 and 2007,­respectively.

16. Earnings per share and american depositary receipt
The Company accounts for its earnings per share in accordance with
SFAS No. 128, “Earnings per Share.” Basic net income per share has
been computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during each year. Fully diluted income per share is not computed as
there are no common stock equivalents.

The computation of earnings per American Depositary Receipt(“ADR”), each ADR representing 5 shares of common stock, is basedon the weighted average number of common shares outstanding. The
weighted average number of common shares outstanding used in thecomputations was 141,304,256 shares for 2008, 142,910,187 shares for2007 and 143,933,607 shares for 2006.

17. Financial instruments and concentration of credit risk
Fair Value of Financial Instruments – The carrying amountof cash and cash equivalents and short-term bank loans approximatesfair value because of the short maturities of these instruments. The fairvalues of current and noncurrent marketable securities, as presented in
Note 3, are primarily estimated based on quoted market prices forthese securities. However, the fair values of investments in non-marketable equity securities are impracticable to estimate as the investments represent stocks of companies which are not publicly traded.
The fair value of long-term debt, including current portion, consistsof lease obligation, and there is no long-term debt which is required todisclose its fair value at March 31, 2008 and 2007.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision.
Forward Currency Exchange Contracts – The Company occa–
sionally uses forward currency exchange contracts to manage its

exposure to foreign currency fluctuation on the transactions denominated in foreign currencies. At March 31, 2008, the notional amount of
its open forward currency contract was for the purchase of $18,800
thousand U.S. dollars. The Company recorded the changes in the fairvalue of the derivative contract of ¥35 million ($351 thousand) inother expense since it was not designated as a hedge in the year ended
March 31, 2008. No derivative contract was outstanding as of March
31, 2007 and 2006.
Concentration of Credit Risk – The Companies’ businessconsists primarily of sales of women’s intimate apparel to a large number of diverse customers in the Japanese retail industry, which include
well established department stores, general merchandise stores andother general retailers and to specialty stores. No single customer­constitutes 10.0% or more of the total sales, although the generalretail customers that are consolidated companies in the Aeon
Group collectively accounted for approximately 11.2%, 10.1% and10.1% of the total sales in fiscal years ended March 31, 2008, 2007
and 2006, respectively.

18. Subsequent event
On May 29, 2008, the Board of Directors resolved to pay a cash dividend of ¥125 ($1.25) per 5 shares of common stock to holders of record as ofMarch 31, 2008 (aggregate amount of ¥3,584 million ($35,894 thousand)).

42

MANAGEMENT’S REPORT ON INTERNAL CONTROLOVER FINANCIAL REPORTING

The management of Wacoal Holdings Corp. is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The company’s internal control over financial
reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by
the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that:	  • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets ofthe company;	  • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and	  • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial statements.
	Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate.
Wacoal Holdings Corp.’s management assessed the effectiveness of internal control over financial reporting as of March 31, 2008. In making
this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal
Control – Integrated Framework (the COSO criteria).
Based on its assessment, management concluded that, as of March 31, 2008, Wacoal Holdings Corp.’s internal control over financial reporting
was effective based on the COSO criteria.
Management excluded Peach John from its assessment of internal controls over financial reporting as of March 31, 2008. We acquired a 100%
ownership interest in Peach John on January 10, 2008 and held a 49% ownership interest prior to that, which was initially acquired on June 2,
2006. Peach John’s total assets and net assets represented 3.4% and 3.0%, respectively, of our consolidated total assets and consolidated net assets
as of March 31, 2008. Peach John was consolidated as of February 29, 2008, the end of its most recent fiscal year, and included in our consolidated balance sheet as of March 31, 2008. However, because Peach John’s results of operations and change in financial position between January
10, 2008 and March 31, 2008 were immaterial, income from Peach John’s operations for the fiscal year ended February 29, 2008 was accounted
for using the equity method and included in equity in net (loss) income of affiliated companies in our statements of income.
Wacoal Holdings Corp.’s independent registered public accounting firm, Deloitte Touche Tohmatsu has issued an audit report on our assessment of internal control over financial reporting.

Yoshikata Tsukamoto
Representative Director

Shoichi Suezawa
Chief Financial Officer
June 27, 2008

43

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Wacoal Holdings Corp.
Kyoto, Japan:
We have audited the accompanying consolidated balance sheets of Wacoal Holdings Corp. and Subsidiaries (the “Companies”) as of March
31, 2008 and 2007, and the related consolidated statements of income, comprehensive (loss) income, shareholders’ equity and cash flows foreach of the three years in the period ended March 31, 2008, all expressed in Japanese yen. These financial statements are the responsibility of theCompanies’ management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Certain information required by Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise andRelated Information” has not been presented in the accompanying financial statements. In our opinion, presentation of segment information
concerning the Companies’ operations is required for a complete presentation of the Companies’ consolidated financial statements.
In our opinion, except for the omission of segment information, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Wacoal Holdings Corp. and Subsidiaries as of March 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2008, in conformity with accounting principles generally
accepted in the United States of America.
Our audits also comprehended the translation of the 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.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companies’
internal control over financial reporting as of March 31, 2008, based on the criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 27, 2008 expressed an unqualified opinion on the Companies’ internal control over financial reporting.

June 27, 2008

44

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Wacoal Holdings Corp.
Kyoto, Japan:
We have audited the internal control over financial reporting of Wacoal Holdings Corp. and Subsidiaries (the “Companies”) as of March 31,
2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission. As described in Management’s Report on Internal Control over Financial Reporting, management excluded PeachJohn Co., Ltd. (“PJ”) which was acquired on January 10, 2008, from its assessment of internal control over financial reporting. PJ’s total assets
and net assets represented 3.4% and 3.0% respectively, of the consolidated balance sheet as of March 31, 2008. Accordingly, our audit did notinclude the internal control over financial reporting at PJ. The Companies’ management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companies’ internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing therisk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis forour opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive
and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, andother personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Companies maintained, in all material respects, effective internal control over financial reporting as of March 31, 2008,
based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
financial statements as of and for the year ended March 31, 2008 of the Companies and our report dated June 27, 2008 expressed an unqualified
opinion on those financial statements, except for the omission of segment information required by Statement of Financial Accounting Standards
No. 131, “Disclosures about Segments of an Enterprise and Related Information.”

June 27, 200845

CORPORATE DATA
As of March 31, 2008

wacoal holdings corp.
Head Office
29, Nakajima-cho, Kisshoin,
Minami-ku, Kyoto 601-8530, Japan
Tel: (075) 682-5111
Fax: (075) 661-5603
URL: www.wacoalholdings.jp

Domestic Principal Subsidiaries
Wacoal Holdings Equity Owned(%)

Wacoal Corp.
Peach John Co., Ltd.
Studio Five Corp.
Wacoal Dublev Corp.
Une nana cool Corp.
Kyushu Wacoal
Manufacturing Corp.
Tokai Wacoal Sewing Corp.
Niigata Wacoal Sewing Corp.
Fukuoka Wacoal Sewing Corp.
Miyazaki Wacoal Sewing Corp.
Hokuriku Wacoal Sewing Corp.
Torica Inc.
Nanasai Co., Ltd.
Wacoal Distribution Corp.

100
100
100
100
100
100
100
100
100
100
90
57
77
100

Domestic Principal Joint Ventures
Wacoal Holdings Equity Owned(%)

House of Rose Co., Ltd.

20

Overseas Principal Subsidiaries
Wacoal Holdings Equity Owned(%)

Wacoal International Corp. (U.S.A.)
Wacoal America, Inc.
Wacoal France S.A.
Wacoal (UK) Limited
Wacoal Singapore Pte. Ltd.
Wacoal Hong Kong Co., Ltd.
Wacoal International
Hong Kong Co., Ltd.
Wacoal China Co., Ltd.
Guangdong Wacoal Inc.
Dalian Wacoal Co., Ltd.
Vietnam Wacoal Corp.
Wacoal Dominicana Corp.
Philippine Wacoal Corp.
Wacoal Sports Science Corp.
Wacoal (Shanghai) Human
Science R&D Co., Ltd.

100
100
100
100
100
80
100
100
100
100
100
100
67
100
100

International Joint Ventures

46

Wacoal Holdings Equity Owned(%)

Shinyoung Wacoal Inc. (South Korea)
Thai Wacoal Public Co., Ltd.
Taiwan Wacoal Co., Ltd.
Indonesia Wacoal Co., Ltd.
Wacoal Malaysia Sdn. Bhd.
Shanghai Yadie Fashion Co., Ltd.

25
34
50
42
50
20

Date of Foundation
June 15, 1946

Shareholders’ Equity¥185,113 million

Date of Establishment
November 1, 1949

Number of Employees (Consolidated)
13,541

International Network
Wacoal America, Inc.
136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-532-6100
Wacoal France S.A.
7/11 Rue des Gazometres,
93218 Saint-Denis La Plaine Cedex, France
Tel: 33-1-5593-0310
Wacoal (UK) Limited
4th Floor, Hardy House,
16-18 Beak Street,
London W1R 3HA,
United Kingdom
Tel: 44-207-439-6190
Wacoal Singapore Pte. Ltd.
215 Henderson Road,#01-08 Henderson Industrial Park,
Singapore 159554
Tel: 65-6270-2887
Wacoal Hong Kong Co., Ltd.
16th Floor East, Warwick House,
Taikoo Place, 979 King’s Road,
Quarry Bay, Hong Kong
Tel: 852-2811-3202
Wacoal International Hong Kong Co., Ltd.
16th Floor East, Warwick House,
Taikoo Place, 979 King’s Road,
Quarry Bay, Hong Kong
Tel: 852-2561-9191
Wacoal China Co., Ltd.
Jia 16 Tongji North Road,
Beijing Economic & Technological
Development Area,
Beijing 100176, P. R. of China
Tel: 86-10-6787-2185
Guangdong Wacoal Inc.
Huahai Industrial District,
Xinhua Town, Huadu Qu,
Guangzhou City,
Guangdong, P. R. of China
Tel: 86-20-8686-1170˜3
Dalian Wacoal Co., Ltd.
#42 Economic & TechnicalDevelopment Zone, Dalian,
Liaoning, P. R. of China
Tel: 86-411-8733-7722

Vietnam Wacoal Corp.
110 Amata Road,
Amata Modern Industrial Park,
Long Binh Ward, Bien Hoa City,
Dong Nai Province,
Socialist Republic of Vietnam
Tel: 84-61-892060˜2
Wacoal Dominicana Corp.
Zona Franca Industrial,
Las Americas KM22,
Autopista Lasamericas,
Santo Domingo, Dominican Republic
Tel: 1-809-549-1090
Philippine Wacoal Corp.
3rd Floor, 6788 Ayala Avenue,
Makati Metro Manila, Philippines
Tel: 63-2-893-7432
Shinyoung Wacoal Inc.
345-54, Ka San Dong, Cum Chone Gu,
Seoul, Republic of Korea
Tel: 82-2-818-5120
Thai Wacoal Public Co., Ltd.
930/1 Soi Pradoo 1,
Sathupradith Bangkholaem,
Bangkok, Thailand
Tel: 66-2-289-3100˜9
Taiwan Wacoal Co., Ltd.
15, Jingkwo Road, Taoyuan,
Taiwan, R.O.C.
Tel: 886-3-326-9369˜80
Indonesia Wacoal Co., Ltd.
Jl. Tarikolot No. 59,
Citeureup-Bogor, Indonesia
Tel: 62-21-875-3611
Wacoal Malaysia Sdn. Bhd.
5th Floor, Plaza Hamodal,
Lot 15, Jalan 13/2 (Section 13),46200 Petaling Jaya, Selangor, Malaysia
Tel: 60-3-7960-8308
Wacoal Sports Science Corp.
136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-743-9849
Wacoal (Shanghai) Human Science
R&D Co., Ltd.
7th Floor, Jiangnan Zaochuan Bldg.,
600 Luban Road, Luwan District,
Shanghai, P. R. of China
Tel: 86-21-6390-7448

INVESTOR INFORMATIONAs of March 31, 2008

Stock Listings
Tokyo, Osaka, NASDAQ

American Depositary Receipts
Cusip No.: 930004205
Ratio (ADR:ORD): 1:5
Exchange: NASDAQ
Symbol: WACLY

Fiscal Year-End
March 31
Securities Code3591

Trading Unit
1,000 shares

Number of Shareholders
10,448

Shareholder Register Agentfor Common Stock
Mitsubishi UFJ Trust andBanking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Ownership and Distribution of Shares
Securities
Firms
0.95%
Individuals
and Others
18.70%
Other JapaneseCompanies
19.38%

Hero and Company *Meiji Yasuda Life
Insurance Company
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Mika Noguchi
Nippon Life Insurance Company
The Bank of Kyoto, Ltd.
The Shiga Bank, Ltd.
The Dai-ichi MutualLife Insurance Company
Mitsubishi UFJ Trustand Banking Corp
Tokyo Marine & Nichido
Fire Insurance Co., Ltd.

Depositary
The Bank of New York Mellon
101 Barclay Street,
New York, NY 10286, U.S.A.
Tel: 1-212-815-8161
U.S. toll free: 888-269-2377(888-BNY-ADRS)URL: http://www.adrbny.com

Common Stock
Issued: 143,378,085 shares
Outstanding: 143,342,087 shares%

Major Shareholders

16.53
4.88
4.87
4.67
3.80
2.97
2.35
2.24
2.12
1.79

* Shares deposited to issue American Depositary Shares tradedon the NASDAQ market.

Stock Price/Trading Volume2,000 (¥)

Financial
Institutions
38.94%

142,798

1,500

1,000

thousandshares5000Foreign Institutions
and Individuals
22.03%

20,000 (Thousand Shares)
15,00010,000
5,000
0

’01/4
Stock Price

’02/1

’03/1

’04/1

’05/1

’06/1

’07/1

’08/1

Trading Volume

Forward-Looking Statements
Statements contained in this annual report that are not historical facts are forward-looking
statements that reflect the Company’s plans and expectations. These forward-looking
statements involve known and unknown risks, uncertainties, and other factors that may
cause the Company’s actual results, performance, or achievements to differ materiallyfrom those anticipated in these statements.

47

29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

Printed in Japan080820-FA-WT3