RESOLVED to CHANGE
Annual Report 2 0 0 7

PROFILE
Seeking to benefit society at large by enabling women the world over toexpress their beauty, we have led the Japanese market for women’s innerwear
since our establishment in 1949. Still holding a dominant share of our homemarket, we are steadily growing sales in North America, Europe, and Asia.
Further, we have developed innerwear and other garments that realize
outstanding comfort and figure enhancement thanks to basic research on the
shape and movement of the human body as well as research on the physiologyof sensation. That research draws on a wealth of analytical data that we haveaccumulated by measuring the bodies of more than 35,000 Japanese women.
We will anticipate changing demand by continuing to develop and market
value-added products that offer differentiated beauty and comfort.
OUR MISSION
We will contribute to society by helping women to express their beauty.
OUR VISION
We, the employees and management of Wacoal, will maintaina refined corporate culture based on mutual trust and will continually strive
to make the Company a global leader in the industry.
OUR VALUES
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.
contents
1 Taking on Change
6 Financial Highlights
7 Resolved to Change(To Our Shareholders / Strategies for Mainstay Brands /Strategies for Direct Marketing)
14 Corporate Governance of Wacoal Holdings Corp.
16 Board of Directors and Corporate Auditors
17 Social Contribution Activities
and Environmental Management
18 Risk Factors
19 Management’s Discussion and Analysis
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
31 Notes to Consolidated Financial Statements
43 Management’s Report on Internal Control
over Financial Reporting
44 Report of Independent Registered Public
Accounting Firm
46 Corporate Data
47 Investor Information

Taking On Change
SO THAT CUSTOMERS WILL ALWAYS LOOK TO THE WACOAL GROUP FOR
NEW PRODUCTS AND SERVICES, THE GROUP WILL OFFER NEW VALUE THATMEETS THE NEEDS OF CHANGING TIMES AND MARKETS WHILE MAINTAINING
THE COMMITMENT TO QUALITY, ADVANCED FUNCTIONALITY, AND HIGH ADDEDVALUE THAT HAS BEEN ITS GREATEST ASSET.
IN THIS SECTION, WE GIVE AN OVERVIEW OF FOUR INITIATIVES THAT EXEMPLIFY
THE WACOAL GROUP’S TRANSFORMATION: THE DEVELOPMENT OF STYLE SCIENCEFUNCTIONAL INNERWEAR; A NEW MARKETING APPROACH CENTERED ON THE
LALAN BRAND; THE DEVELOPMENT OF JOINT OPERATIONS WITH PEACH JOHNTHROUGH A CAPITAL AND OPERATIONAL TIE-UP; AND OVERSEAS BUSINESSDEVELOPMENT INITIATIVES, SUCH AS THE INTRODUCTION OF SORCI AGE
AS A REGIONAL BRAND FOR ASEAN COUNTRIES.

O VERSEASS TRATEGYTaking on Change

Style Science refers to a completely new technology that firms up the body as
customers walk while wearing products. We develop these products based on scientific data gathered over many years of research conducted by our Human Science
Research Center. Among these offerings, the revolutionary functionality of flagship products Hip Walker and Onaka Walker has proven hugely popular; simply walking
while wearing the products tones the wearer’s buttocks or stomach. We have sold
4.8 million pieces of those two products since launching them in July 2005.
We will foster Style Science as a new mainstay product category by also
developing products for men.

2

Taking on Change

Positioned within the Wacoal brand, LALAN isa new brand that is the focus of a new marketing
campaign. Until now, for new products that welaunch each season, we have used names thatstress functionality and conducted discrete marketing campaigns. As a result, we have not built
a unified brand image.
Naming products under LALAN as a unifying
brand will encourage customers to associate newfunctionality with LALAN-brand products. Timedto coincide with the LALAN brand’s launch, wewill develop a marketing campaign themed on“love” and “satisfaction” that appeals to women’semotional side. Through those initiatives, we willheighten the value of the Wacoal brand by linking
LALAN with novelty, fashion, and innovation.
At the same time, lineups under the LALAN brandwill be practical and functional. We will use thisnew brand and marketing campaign as a chance
to strengthen the association of the Wacoal brandwith innerwear in the minds of customers in all
generations and “restore” the popularity of
Wacoal-brand brassieres.

3

Taking on Change

In June 2006, to increase our share of the domestic innerwear market, weentered into a capital and operational tie-up with Peach John, which is primarily
a mail-order innerwear retailer. Highly popular among teenage women andyoung career women, Peach John sells innerwear with a youthful, fashionable
look that is “energetic, happy, and sexy” through quarterly catalogs and 21
directly managed stores (as of July 31, 2007) in Japan.
Peach John has a different “culture” from the Wacoal Group. Our capitaland operational tie-up with Peach John will enable us to expand our innerwear
operations’ market area by including customer age groups and product styles
that we have not yet been able to develop fully. We believe that this tie-up will
accelerate our growth by giving us points of contact with more customers.

4

Taking on Change

O VERSEASS TRATEGY
Plans call for further allocation of management
resources to the United States and Asia, focusing on
the business model we cultivated in Japan’s mid-tohigh-end market. Particularly among consumers in
the United States, awareness of innerwear sizes has
risen due to the airing of television programs andother media coverage encouraging them to wear
brassieres of the correct size. Because we have traditionally conducted consultation sales based on trial
fittings, that heightened interest is becoming a tailwind for us. Further, amid an increasing polarization
between high-end and low-price products in theoverall U.S. innerwear market, mid-to-high-end
department stores are increasingly favoring prestige
brand products, leading to higher transaction volumes with the Wacoal Group. This trend is becoming
a significant driver of sales growth. Due to those factors, sales in the United States have remained strong,reaching ¥17.0 billion. Targeting sales of ¥19.3 billion
in three years, we aim to expand U.S. operations toa scale second only to those in Japan.
Meanwhile, our efforts in Asia will concentrateon China and ASEAN countries. Sales in China
have reached ¥2.4 billion, and our local production
subsidiary achieved profitability for the first timesince becoming a wholly owned subsidiary in 2001.
Targeting sales of ¥4.7 billion in three years, we will
work to increase sales while carefully upholding the
Wacoal brand’s reputation for quality and high added
value. In the ASEAN region, we will build on thehigh-end image that the Wacoal brand has cultivatedby beginning sales of the sorci age brand in Malaysia,
Indonesia, the Philippines, and Singapore. That new
brand will target women from 18 to 24 years of age,
who account for a large part of the ASEAN region’s
population. We plan to use the new brand to further
expand business, and we are considering marketingthe brand in other ASEAN countries. In five years,
our goal is to achieve annual sales of ¥1.0 billion.
The sorci age innerwear brandis being sold in the ASEAN region.
5

financial highlights
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005

Millions of Yen (except per 5 share amounts)% Change





 vs ¥164,122
1,333¥160,968
11,766$1,415,532
109,697+1.4 %+867.4

3,466
2,821
1.6

12,0796,790
3.9

118,408
76,803+301.6+220.1

¥ 316
110
6,874

¥ 98
100
6,480

¥ 236
100
6,105

$ 2.690.94
58,472+222.4+10.0+6.1¥193,278
250,266¥186,475
242,296¥175,746
226,196$1,644,080
2,128,836

+3.6
+3.3

Net sales¥166,410
Operating income
12,896
Income before income taxes, equity in net incomeof affiliated companies and minority interests
13,920Net income
9,029
ROE (%)
4.8
Per 5 shares of common stock (in yen/dollars):
Net income
Cash dividends
Shareholders’ equity
Shareholders’ equity
Total assets

Thousands of U.S. Dollars** The U.S. dollar amounts represent translations of Japanese yen solely for convenience at the rate of ¥117.56=$1.

net sales¥ billion200
164

net income

163

100

8 7.3

50

4

0

0

fy03

fy04

fy05

fy06

fy07

¥ billion

12

400
9.0
236

3 2.9
97

0

fy03

316

6.8

2.9

2.8

fy04

fy05

3.0
fy03

1.3

fy04

fy05

fy06

176

186

fy07

¥ billion

200

171

161
300

150

200

100

193 80

77.7
77.0

76.0

77.2

75

73.7

100

98

99

shareholders’ equity

12.9

11.8

12

6

6

16

150

9

Earnings per
5 shares (¥ / right scale)¥ billion

166

164

161

operating income

50
Equity ratio (% / right scale)

fy06

fy07

0

0

fy03

fy04

fy05

fy06

fy07

70

to our shareholders

Resolved to Change
THE WACOAL GROUP HAS INITIATED A NEW MEDIUMTERM MANAGEMENT PLAN THAT POSITIONS THE PERIODFROM APRIL 2007 AS “THREE YEARS OF SHIFTING TOGROWTH AND HEIGHTENING EARNING POWER.” WE ARE
FULLY COMMITTED TO CHANGE THAT WILL ENABLE US
TO ACHIEVE OUR BUSINESS PLANS.

Yoshikata Tsukamoto
Representative Director

Evaluation of Fiscal 2007 Business Results and the Previous
Medium-Term Management Plan
Fiscal 2007, ended March 31, 2007, was the final year of the medium-term
management plan that we launched in April 2004. (see Table 1)
Net sales fell significantly short of our management target. We sincerely regret that, when preparing the medium-term management plan, ourprojections of market trends were inaccurate and that our response tothese disparities was inadequate. Based on the mainstay Wacoal and Wing
brands, domestic wholesaling operations did not maintain stable revenues
through the Group’s mainstay department stores and general merchandising stores sales channels, as planned, and revenues and sales volumes
declined. Further, in domestic direct marketing business operations,which mainly comprise directly managed stores, developing SPA operations and strengthening Internet sales and mail-order catalog sales did
not produce the significant increase in sales hoped for.

7

Resolved to Change

Meanwhile, despite being slightly below target, operating income was
our highest in eight years. We achieved favorable operating income thanks
to progress in reforming our profit structure. For example, we have reduced
manufacturing costs by transferring production overseas in recent years.
Also, we have pursued initiatives under CAP21 (Corporate Activation
Project 21) since 2005 that include the integration and elimination of domestic sewing subsidiaries, the liquidation of a poorly performing outerwear
subsidiary, and the reduction of personnel costs through the introduction of
our first-ever voluntary retirement scheme.
Having learned the lessons of our inaccurate projections of market trends,
we are keenly aware of the need to establish product development and sales
systems that can steadily grow sales in any business conditions. Further, aiming to increase flexibility and responsiveness of production, we will rigorously
eliminate waste to improve operational efficiency and reduce costs, allowing
us to add value to products and market new low-cost products.

business plans & growth strategies

8

Market conditions: Challenging conditions are likely to continue in theGroup’s mainstay market Japan. Demographically, we expect a steepening
decline in the number of women in the Group’s primary customer group:
women between the ages of 20 and 69. In the domestic retail industry,
although markets for Internet sales and specialty store shopping malls are
expanding, markets for mainstay department stores and general merchandising stores are contracting. Against that backdrop, Japan’s innerwear market
has trended toward yearly decreases in revenues, volumes, and prices sincepeaking in 1998.
Moreover, in sales channels other than department stores, innerwear
prices continue to fall. And, increasing numbers of outerwear companies
are breaking into the innerwear market. At the same time, new markets
are forming centered on products that emphasize fashion, lifestyles, andprice rather than function and quality. Amid such market and productdiversification, individual customers now choose where to buy which product according to their varying needs and priorities.
New medium-term management plan and CAP21: In light of thosemarket conditions, the Group must develop business close to customers andincrease points of contact with more customers to establish a firm footing
in markets. In addition, the Group must pursue the following three goals.
• Establish a business model and an earnings platform that adapt tochanges in market conditions• Expand overseas operations and new businesses in response to the shrinking domestic innerwear market• Seek fast-paced growth by exploiting the capabilities of other companies
rather than relying solely on in-house resources

Resolved to Change

Mindful of those goals, we launched a new medium-term management
plan in April 2007 (see Table 2), themed on Getting Closer to Customers andpositioning the coming period as Three Years of Shifting to Growth andHeightening Earning Power. The plan sets out net sales of ¥180.0 billion andoperating income of ¥15.3 billion as targets for fiscal 2010. Further, since 2005
the Group has pursued the strategies of CAP21 (Medium-to-Long-Term
Growth Strategies) (see Table 3) created to enhance enterprise value by
enabling the Group to make a fresh start and step up the pace of growth.
CAP21 targets net sales of ¥200.0 billion and operating income of ¥18.0 billion
for fiscal 2011, the year after the end of the new medium-term management
plan. Aiming to reach those targets, we have already begun strategic moves,including the active consideration of mergers and acquisitions.
In measures aimed at shifting to growth, the Group will enlarge thedomestic market presence of its mainstay innerwear business through thedecisive development of market areas it has yet to fully exploit. In overseas
operations, the Group will further strengthen and expand operations in the
United States, which have been a major contributor to earnings. Also, wewill develop operations in earnest in China’s rapidly developing market.
Table 1 - -   ‒   
Millions of Yen

Net sales
Operating income

Table 2



 ¥190,000
13,500¥166,410
12,896

87.6%
95.5%

 - -  PeriodThemesApril 2007–March 2010
Getting Closer to Customers
Three Years of Shifting to Growth and Heightening Earning Power
Priority measures Reform and strengthen existing businesses to reflect changing markets
Increase points of contact with customers for new growth
Enforce rigorous quality control that justifies customers’ trust
Numerical targets for FY 2010
Millions of Yen

Net sales
Operating income

Table 3fy 2010increase compared with fy 2007

¥180,000
15,300+8.2%+18.6%

verview of cap21
LaunchAims

April 2005
Reorganize and strengthen existing businesses and develop businessin areas that promise growth through mergers and acquisitions,operational tie-ups, capital tie-ups, and independent initiatives
Numerical targets for FY 2011
Millions of Yen

Net sales
Operating income
Operating income margin

fy 2011

increase compared with fy 2007

¥200,000
18,0009.0%+20.2%+39.6%+1.3 percentage points

9Resolved to Change

In new businesses, we will venture into areas peripheral to the innerwear
business. Our Wellness Business has been the focus of such efforts so far. But,
we will also concentrate on realizing our Body Designing Business* strategy.
In addition, we will actively consider mergers and acquisitions, operational
tie-ups, and capital tie-ups to draw on the capabilities of other companies andachieve faster growth. In June 2006, we entered into a capital and operational
tie-up with Peach John Co., Ltd., a major mail-order retailer of innerwear thatis highly popular among women in their teens and 20s. We will develop joint
ventures with Peach John that enable us to leverage our respective strengths.
In measures for heightening our earning power, we will seek higher
levels of operational efficiency throughout our mainstay innerwear business.
We have benefited from reducing personnel costs and manufacturing costs.
However, we have lagged in the kind of internal cost efficiency improvements that are achievable by seeking productivity commensurate with costand rethinking inefficient operational management. Mindful of that, we aim
to improve inventory turnover rates by consolidating varieties and colors
for each product and optimizing overall production volumes. In addition, we
will achieve profitability in SPA operations and other direct marketing business operations. And, we will completely integrate the manufacture of
Wacoal- and Wing-brand products – separate for many years – while steppingup the pace at which we are moving production overseas.
The Group will steadily implement those measures to ensure growth forthe future and higher earnings. We are unwaveringly committed to carryingout multifaceted reforms that will transform our management team’s andemployees’ mind-sets, organizational systems, manufacturing procedures,and business strategies.
* Body Designing Business: This is a key business strategy of using core competence in innerwear to expand
peripheral businesses and provide value in three areas: beauty, comfort, and health. “Body” refers to thebody’s physical and emotional attributes.

enterprise value enhancement

10

The Group will continue doing its utmost to increase earnings steadily andraise enterprise value by implementing its new medium-term management
plan and CAP21. Our basic policy is to pay shareholders stable cash dividends
that reflect business results. However, we plan to increase returns to shareholders by growing earnings. Also, we are improving capital efficiency.
For example, over the six-year period since 2001, we purchased 13.4 million
shares of treasury stock, equivalent to approximately 9% of issued shares.
We will continue purchases of treasury stock, which we view as a part ofoverall returns to shareholders comparable with cash dividends. Reflectingthat philosophy, we paid cash dividends per ADR of ¥110 for fiscal 2007,
compared with ¥100 for fiscal 2006. Moreover, given projected improvements
in business results and as part of our efforts to heighten returns to shareholders, for fiscal 2008 we expect to pay cash dividends per ADR of ¥125, up ¥15from the fiscal year under review.

Resolved to Change

Meanwhile, we will continue investing retained earnings to enhanceearning power and enterprise value. Specifically, we will invest to expand
SPA operations; develop points of contact with customers; strengthen overseas business; start new businesses; and enter into mergers and acquisitions,operational tie-ups, and capital tie-ups. Further, the Group has a strong
financial base with respect to liquidity and shareholders’ equity, whichheightens management stability and flexibility, provides strategic options
in business development, and enhances enterprise value.
In addition, we need to ensure adequate cash to maintain and strengthen competitiveness that is built on research and development; develop
sales channels, including SPA shops, Internet sales, and mail-order catalog
sales; and advance growth strategies, including further expansion of overseas business.

outlookAs the innerwear market continues to shrink, the women’s innerwear
industry in Japan will likely see intensifying competition. In response,
the Wacoal Group will focus efforts on developing products that earn theendorsement of customers of all ages, from the young through to seniorcitizens. At the same time, we will continue developing new points ofcontact with customers.
In businesses catering to department stores and general merchandisingstores, we aim to increase earnings by stepping up the marketing of Style
Science lineups, which offer revolutionary functionality. These lineups
include Hip Walker, which has sold briskly since its launch, and Onaka Walker.
In domestic direct marketing business operations, plans call for achieving
profitability in SPA operations and developing joint operations with PeachJohn. Overseas, we will step up operational development in the UnitedStates and China. Meanwhile, in Southeast Asia we will cultivate a newcustomer group by marketing a brand that targets young career women.
For the fiscal year ending March 2008, we project increases of 2.2% in net
sales, to ¥170.0 billion; 4.7% in operating income, to ¥13.5 billion; and 8.5%
in net income, to ¥9.8 billion. Working in concert, our management teamand employees will continue unstinting efforts to enhance corporate value
and reach management targets. As we take on those challenges, I would liketo ask our shareholders and other investors for their continued understanding and support.
August 2007

Yoshikata Tsukamoto
Representative Director

11

Resolved to Change

strategies for mainstay brands
Having driven the development of the Wacoal Group,
wholesaling operations continue to play a major roleas an earnings platform. But, rather than looking topast success we will revamp operations thoroughly tobuild a highly profitable organization that prevails
against competition.

“We will draw on unique development capabilities
to introduce greater numbers of market-vitalizing
products and fundamentally change operational methods.”

Yuzo Ito
Director, Wacoal Holdings Corp.;
Director, Senior Corporate Officer, Wacoal Corp.,
in charge of Technical and Production Operations

Mainly developing the Wacoal- and Wing-brand lineups for department storesand general merchandising stores, wholesaling operations form the earnings
platform that underpins the Group’s stability. However, traditional sales
channels are struggling due to dramatic structural changes in Japan’s retailindustry. To grow in such conditions, we have to find new strategies. Mindfulof that imperative, we are determined to reinvent ourselves as a highly
profitable organization. We will draw on unique development capabilities
to introduce greater numbers of market-vitalizing products and fundamentally change operational methods that are based on past successes.
In product development, we will further develop the Style Sciencebusiness, which is growing into a new product category thanks to such hit
products as Onaka Walker. Also, we introduced the LALAN brand to increase
points of contact with customers.
Operationally, we are taking steps to integrate the manufacture of Wacoaland Wing-brand offerings. In the past year, we have identified and defined thedifferences between the two brands. By 2010, we plan to complete integration,
which will improve production efficiency due to materials sharing and the
manufacture of both brand’s products at the same plants. Further, we will
lower costs through increased overseas production. And, we will take rigorous
measures to improve inventory turnover rates by consolidating varieties andcolors for each product and adjusting initial delivery volumes to reflect sales.
As an initiative to secure new sources of earnings, we began ODM (Original
Design Manufacturing)* in the current fiscal year. The aim is to establish a business model that will generate steady profits by harnessing sewing technologies,
expertise, and patents that the Wacoal Group has accumulated over many
years. In April 2007, ODM operations began supplying products to Peach John.
* OEM (Original Equipment Manufacturing) is the manufacture of products under a business partner’s
brand name. ODM involves designing and manufacturing products on behalf of a business partner.
In OEM, business partners are responsible for product specifications and design; however, in ODM,
the Wacoal Group is responsible for stages from product design to manufacture.

12

Resolved to Change

strategies for direct marketing
Direct marketing business operations are tasked withfueling the Wacoal Group as it advances into a new
growth phase. In the coming three years, we willbalance growth and profit – investing strategicallyto continue business expansion and stepping up initiatives focused on earnings generation.

“We will change the shop development paradigm froma single-brand approach to brand mixes suited to respective
locations... attracting a larger group of customers.”

Tatsuya Kondo
Director, Wacoal Holdings Corp.;
Director, Senior Corporate Officer, Wacoal Corp.,
General Manager of Direct Marketing Business
Operations, responsible for Wellness Department
and Promoting Business in China

Comprising the sales channels of wholesaling operations, the market thathas supported the Wacoal Group’s growth is maturing. In response, we are
creating fresh growth opportunities by developing new sales channels andlaunching new businesses.
In mainstay SPA operations, we have established a network of 100 SPA
shops. Now, we must improve profitability. Accordingly, we will shift focus
to growing shop revenues and realizing profit. We aim to put SPA operationsin the black from the coming fiscal year. Specifically, we will change theshop development paradigm from a single-brand approach to brand mixes
suited to respective locations. By creating shops that attract a larger groupof customers, we aim to increase revenues and operational efficiency.
In Internet sales and mail-order catalog sales operations, we have focused on
improving profit structures. As a result, although sales were lower than in
the previous fiscal year, those operations moved into the black in the fiscal
year under review. Given the growth that the market for Internet sales
operations promises, we intend to expand and improve product lineups
and systems for these operations.
Further, we will bolster our three-pronged Wacoal retailing and marketing system, which integrates SPA shops, Internet sales, and mail-order catalog sales. This system unifies the management of information on customers’purchasing histories and attributes gathered by each sales channel, thereby
enabling more finely tuned marketing. The system also heightens convenience for customers by allowing them to buy our products from any sales
channel. In the coming one to two years, our aim is to build a solid businessmodel that will yield significant benefits in three years.

13

corporate governance of wacoal holdings corp.
Wacoal Holdings Corp. (“Wacoal”), a worldwide manufacturer of high-end women’s intimate apparel,
is a forward-thinking company with a strategy to enhance shareholder value over the medium to long term.
As the holding company of 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 governance is essential for Wacoal to optimize shareholder value andfoster continual growth of the Company.
Corporate Governance Structure
Corporate Governance Innovations
Wacoal has always been a leader in the corporate governancefield and has instituted several measures beyond thoserequired by law to ensure that its corporate governancesystem works to the greatest advantage of its shareholders.
We describe below a few of these innovations.
• Disclosure Committee In 2003, Wacoal established theDisclosure Committee to strengthen its corporate governance infrastructure. The Disclosure Committee ensures theaccuracy of the financial and other information made available to the public and filed with our regulators, including the
U.S. Securities and Exchange Commission and the Japanese
Financial Services Agency. This committee also reviews andconfirms the appropriateness of our internal controls.
• Corporate Ethics Committee In 2004, Wacoal created the
Corporate Ethics Committee, which is headed by a memberof Wacoal’s board. This committee produced a code of conduct for executives, corporate officers, and other employees,
and it works to instill a strong culture of ethics and legal
compliance at all levels of the Company. Wacoal’s corporate
ethics framework conveys strongly to employees the Company’s unyielding commitment to good corporate ethics.
• Hotline System Wacoal has established a hotline systemthat allows employees to ask questions about corporate

ethics and to report any violations or potential violations of
its ethics code. The hotline promotes good ethics within the
Company and provides a way for the Company to learn
promptly about ethics violations.
• Accidents and Disasters Countermeasures Committee
In 2006, Wacoal established the Accidents and Disasters
Countermeasures Committee as a subcommittee of the
Risk Management Committee to manage overall risks to
Wacoal. The Risk Management Committee establishes
measures to manage and control risks to the Company
and monitors Wacoal’s implementation of those measures.
The Risk Management Committee keeps the Board of
Directors fully informed about the operation of the risk
management system.
• Independent Committee In the event of a potential
takeover of the Company through the acquisition of substantial shares, Wacoal has granted independent outsiders extraordinary authority to exchange information and conduct
discussions about the Company without management. An“Independent Committee” – composed of one outside director, one outside auditor, and one academic – has the authority to call a meeting without the presence of the Company’s
executives and may retain external professionals to advise
them on takeover and related issues. With these powers andresources, the Independent Committee can evaluate takeover

general shareholders’ meetinggroup management meeting
6 Directors
2 Corporate Auditors

board of directors
6 Directors
2 Outside Directors
5 Corporate Auditors

quarterly business results
review committee

8 Directors
5 Corporate Auditors
Representative of Each Company and Departmentboard of corporate auditors
2 Corporate Auditors
3 Outside Corporate Auditors

Board of Corporate Auditors’ Secretariat
Representative Director

Executive Compensation Advisory Committee
Office of Corporate Auditors

Disclosure Committee
Operating Subsidiary
Information Security Promotion Division
Operating Subsidiary
Risk Management Committee
Operating Subsidiary
Corporate Ethics Committee
Operating Subsidiary
Corporate Ethics Hotline

14

Independent
Accountants

bids and pursue related strategies without management
interference. This committee serves as a powerful tool tosafeguard shareholder interests at a crucial juncture.
Statutory Auditor System
The aforementioned innovations complement Wacoal’s
corporate governance infrastructure under the statutory
auditor system. Operating under that system, Wacoal’s
directors oversee operations and provide broad oversight of
the Company and its subsidiaries. Wacoal’s statutory auditors, in turn, supervise the activities of the board and provide a check on the directors’ oversight of the Company.
In the following section, we discuss some of the specific features of Wacoal’s statutory auditor system and certain
enhancements designed to produce better governance.
1. Board of Directors
Following the ordinary general meeting of shareholders
in June 2007, Wacoal’s board was expanded from sevenmembers to eight members. In 2002, we reduced thenumber of directors to allow directors to respond more
flexibly and make decisions more efficiently in an everchanging business environment. This process was intended
to permit directors to focus on the supervisory and strategic
responsibilities and to unburden them from operationaland management duties.
Although Japanese law does not require any independent, outside directors on the board under the statutory
auditor system, Wacoal believes that including the voices
and perspectives of independent directors improves thegovernance of the Company. As a result, Wacoal has two
independent, outside directors who contribute to the workof the board.
The directors work diligently for the benefit of theCompany. To assist the members of the Board of Directors,
Wacoal has drafted guidelines for board meetings that areprovided in the Company’s articles of incorporation as well
as directors’ meeting rules.
Wacoal also believes that there should be a retirement
age for the members of the board so that fresh perspectives
can periodically be brought to the board. To enhance thetransparency of Wacoal’s corporate governance, theCompany has established the retirement age in its corporate
rules. Also, beginning with the current fiscal year, Wacoal
will include in the proxy materials the attendance records of
directors at board meetings.

While the board members have a depth of experienceand knowledge, Wacoal believes that continuous educationand training of directors are essential to good corporate
governance of the Company. To this end, new directorsof Wacoal attend an educational seminar for directors
conducted by outside professionals.
2. Statutory Auditors
The statutory auditors continually monitor the supervisory
activities of the board and the overall work of the Company.
The statutory 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 thestatutory auditors would allow the auditors to be more
effective “watchdogs” for the Company. We, therefore, havegone beyond what is required under Japanese law for statutory auditors. Although Japanese law only requires that 50%of the statutory auditors be independent, 60% of Wacoal’s
statutory auditors are independent of the Company.
3. Appointment and Compensation Committee
Wacoal has created the Executive Compensation Advisory
Committee. This committee, with the assistance of theManagement and Administration Department of theCompany, develops proposals for personnel appointments
and for compensation. The committee, which comprises
independent outside directors, a personnel officer, staff
supervisors, and members of the Management andAdministration Department, submits its proposals to
the President and Representative Director. The President
then reviews the proposals and submits the appointments
for a board resolution. A shareholder resolution would
then be made at the general meeting of shareholders.
Wacoal believes that this structure for determining nominees and compensation is appropriate for the Company.
For this reason, the Company does not maintain separateboard committees for these purposes.

Compensation and Stock Ownership
Wacoal has strived for a compensation system that aligns
the interests of directors/management with those of its
shareholders. We, therefore, encourage our executives
and directors to own shares of Wacoal so that they will besimilarly situated as our shareholders. Directors own
approximately 1% of the outstanding shares of Wacoal.
15

board of directors
and corporate auditors
As of June 28, 2007

We, however, do not provide equity compensation or
grant stock options to officers or directors. Although equity
compensation and stock option plans may incentivize
directors and employees to maximize shareholder value,
the potential conflicts of interest that arise with these compensation arrangements discourage Wacoal from adopting
them for the Company.

Independent Audit
Under the Japanese laws governing certified public accountants, an accounting firm cannot audit a company for morethan seven years. Consistent with these laws, the board
has adopted a resolution regarding the re-selection of
the Company’s accounting firm. When Wacoal changes
accounting firms, as required by law, it will seek shareholder approval of the new auditors.
Defensive Measures against Takeovers throughthe Acquisition of a Substantial Shareholdingof the Company
After the Company’s June 2006 ordinary general meetingof shareholders passed a resolution authorizing the adoptionof a basic policy on measures against the acquisition of a
substantial shareholding of the Company, the Board of
Directors decided upon specific countermeasures reflectingthat basic policy.
In principle, the Company does not oppose theacquisition of large shareholdings that contribute to theenhancement of the enterprise value and shareholders’common interests.
The Company’s defensive measures against takeovers,or peacetime takeover defensive measures, include providing
advance warning that there are procedures prospective purchasers of the Company’s shares must follow and that a gratis
allocation if acquisition rights for the subscription of newshares with discriminatory treatment for the exercise of suchrights may be implemented. In addition, the Company has
established the Independent Committee to ensure that initiations of defensive measures against takeovers are based on substantive, objective decisions and not based on arbitrary decisions by the Board of Directors. For further details, please referto the Company’s web site. www.wacoalholdings.jp/ir/news.html

16

Representative Director
Yoshikata Tsukamoto
Senior Managing Directors
Shoichi Suezawa
Hideo Kawanaka
Directors
Yuzo Ito
Tatsuya Kondo
Tadashi Yamamoto
Outside Directors
Kazuo Inamori
Mamoru Ozaki
Corporate Auditors
Hajime Kotake (Standing Corporate Auditor)
Kimiaki Shiraishi (Standing Corporate Auditor)
Yutaka Hasegawa (Corporate Auditor)
Tomoharu Kuda (Corporate Auditor)
Yoko Takemura (Corporate Auditor)

social contribution activities
and environmental management
To realize its goal of benefiting society at large by enabling women the world over to express their beauty,
the Wacoal Group draws on varied experience accumulated in its core operations to make uniquecontributions to society.

Remamma
In 1974, we began the Remamma
project to provide our originallydeveloped innerwear andswimwear for women that had
undergone operations for breast
cancer. More than 170,000 customers in Japan and overseas
have used these products to date.
www.wacoal.co.jp/products/remamma/
Pink Ribbon
Since September 2002, we havesupported Pink Ribbon activities, which raise awareness of
the importance of early diagnosis and treatment of breast
cancer. As part of those efforts, we donate to the “breast
cancer eradication smile fund.” Further, our shareholders
participate in efforts to eradicate breast cancer. In 2005, we
introduced a system whereby shareholders are able to makecontributions to the fund that are equivalent to a part of
the Wacoal essence check gift certificates provided as a shareholder benefit. Also, from February to March 2007 we helda Pink Ribbon Fitting Campaign in which we donated to
the “breast cancer eradication smile fund” ¥3.2 million,
equivalent to the total number of brassieres customers tried
on multiplied by ¥10. www.wacoalholdings.jp/pinkribbon/index.html
The Kyoto CostumeInstitute
Regarding cultural contributions, Wacoal established
the Kyoto Costume Institutein 1978, which specializes
Exhibition “Colors” © The Kyoto CostumeInstitute. Photo by Naoya Hatakeyama
in the collection, research,preservation, and display of historical, Western garments.
With a collection of 11,000 garments representing fashions
from the 17th century to the present day as well as 13,000
documents of cultural interest, the institute has jointly
held numerous major exhibitions with museums and art

galleries in Japan and around the world. In November 2005,
the institute received an award in the costume culture category of the Mecenat Awards 2005, which recognizes contributions to the promotion of the arts by companies or foundations. That award testifies to the high regard in which theinstitute’s activities are held. www.kci.or.jp

Tsubomi School Program
As a contribution to local educational initiatives, we haveheld Tsubomi School programs since 2001 for adolescent
girls and their parents. We began those programs to help
girls become healthy, beautiful women. The programs
seek to alleviate the uncertainty and insecurity that iscommon among adolescent girls by promoting understanding of the body’s development and addressing anxieties.
Together, parents and children learn how to choose innerwear to suit specific needs or stages of maturity, thereby
providing a chance for parents and children to discuss theseissues at home. www.wacoal.co.jp/company/tsubomi/index.html
Environmental Management
The Wacoal Group advances environmental activities.
To take one example, at Niigata Wacoal Sewing Corp.
fabric cuttings and scraps that are a byproduct of manufacturing processes are put to good use in the makingof jump-ropes for local kindergartens and towels fornursing-care facilities and hospitals. Another example
is Kyushu Wacoal Manufacturing Corp., which has
undertaken an ongoing voluntary tree-planting program on Unzen Fugen-dake, where volcanic eruptions haveleft the earth bare, since fiscal 2006.
In fiscal 2002, all the operational bases of Wacoal Corp.
obtained ISO 14001 accreditation, which is an international standard for environmental management. In fiscal
2007, all 16 domestic operational bases completed acquisition of ISO 14001 accreditation. Aiming to realize industry-leading environmental management, we will establish
environmental management systems throughout the
Wacoal Group, including overseas operational bases.
http://www.wacoalholdings.jp/profile/csr.html
17risk factors
Our business, performance and financial condition are subject to risks anduncertainties, including those described in 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 price of its common stock and American Depositary Shares, or ADRs.
1. Weakness in the Japanese market would hurt our business.
2. Continued difficulties faced by department stores and other generalretailers in Japan would hurt our business.
3. Our success depends on our ability to effectively anticipate and respondto consumer tastes and preferences and deliver high-quality products.
4. Our business is highly competitive.
5. Our specialty retail store network may not be successful.
6. We may experience difficulties in successfully increasing our catalog
and Internet sales.
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.
9. It may be difficult for us to attract and retain highly qualified personnel.
10. Our business is affected by seasonality.
11. We may face increasing risks relating to conducting business internationally.
12. We may not be successful with acquisitions and other strategic transactions
with third parties.
13. We face risks in our business relating to intellectual property rights.
14. We must comply with laws and regulations regarding privacy and theprotection of customer information.
15. If we fail to maintain adequate internal controls over financial reporting,
we may not be able to produce reliable financial reports in a timely manner
or prevent financial fraud.
16. Our holdings of equity securities expose us to risks.
17. We are subject to risks from natural disasters and epidemics.
18. We may become classified as a passive foreign investment company,
which could result in adverse U.S. tax consequences to U.S. holders of
our stock or ADRs.
19. Yen-dollar fluctuations could cause the market price of the ADRs
to decline and reduce dividend amounts payable to ADR holders as
expressed in U.S. dollars.
20. A holder of ADRs will have fewer rights than a shareholder and must act
through the depositary to exercise those rights.
21. There are restrictions on the withdrawal of shares from our depositary
receipt facility.

18

management’s discussion and analysis
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005

Financial information contained in this section is based on the consolidated financial statements includedin this annual 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),
35 consolidated subsidiaries and 9 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 ofinteriors for commercial premises.

business overview
We are a leading designer, manufacturer and marketer inJapan of women’s intimate apparel, with the largest share of
the Japanese market for foundation garments and lingerie.
Sales of foundation garments (primarily brassieres and girdles) and lingerie (primarily slips, bra-slips and women’s
briefs) accounted for 74.1% of our consolidated net sales forfiscal 2007. We also design, manufacture and sell nightwear,
children’s underwear, outerwear, sportswear, hosiery andother apparel and textile products, and engage in several
business lines that are ancillary to our core apparel business.
Revenues
We principally generate revenues from sales of innerwear(consisting of foundation garments and lingerie, nightwear
and children’s underwear); outerwear and sportswear;
hosiery and textile products; and other products.
The following table sets forth information with respect
to our total sales by product category for the fiscal years
ended March 31, 2007, 2006 and 2005.
In fiscal 2007, approximately 89% of the sales of Wacoal
Corp. (the total sales of which account for approximately
72% of Wacoal Group’s sales on a consolidated basis) wereapparel sales made on a wholesale basis to department stores,
general merchandising stores and other general retailers, andSales by Product Category

Share of Net Sales
2007

Foundation garments and lingerie 74.1%
Nightwear
6.0%
Children’s underwear
1.2%
Outwear and sportswear, etc.
5.3%
Hosiery
1.3%
Other textile products
2.4%
Other businesses
9.7%

Millions of YenFoundation garments and lingerieNightwear
Children’s underwear
Outerwear and sportswear, etc.
Hosiery
Other textile and related products
Other businesses
Total

approximately 8% were apparel sales made through ourown specialty retail stores, catalog sales and the Internet. Sales
from our other businesses (which include store and homedesign services, restaurant businesses, cultural products andother services) comprised the remaining 3% of Wacoal Corp.’ssales in fiscal 2007. For textile products, the percentages ofsales for raw materials, shoes and general merchandise havebeen decreasing mainly owing to a decline in catalog sales ofshoes and general merchandise in recent years.
Over the past five fiscal years, fluctuations in our sales
have typically reflected changes in unit volume, as average
unit prices have generally remained stable during this period.
Cost of Sales
Our cost of sales arises principally from material andmanufacturing costs related to the production of ourapparel products.

¥123,295
10,081
2,069
8,751
2,102
4,051
16,061¥166,410(74.1)
(6.0)
(1.2)
(5.3)
(1.3)
(2.4)
(9.7)
(100.0)% Change





 vs ¥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)¥114,895 (71.4)
10,746 (6.7)
2,317 (1.4)
9,628 (6.0)
2,398 (1.5)
5,250 (3.2)
15,734 (9.8)¥160,968 (100.0)

+2.9%
–3.4
–6.6
–4.1
–14.6
–11.9
+4.3
+1.4

19

Selling, General and Administrative Expenses
Our selling, general and administrative expenses principallyconsist of employee compensation and benefit expenses andpromotional 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 retailstores. Our selling, general and administrative expenses do
not include any impairment charges on long-lived assets
or any losses on the sale or disposal of property, plant andequipment. However, these expenses are included inoperating 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 was generally weak for a
prolonged period prior to fiscal 2007. Although there weresome signs of recovery in fiscal 2007, the generally stagnant
level of consumer spending in recent years has negatively
impacted performance at general retailers, our key distribution channel.
• The sale of lower-priced women’s innerwear garments inJapan – to a large degree manufactured in China and otherlower-cost countries – has increased. This has generally resulted in a greater degree of price competition in our industry.
• There has been increased demand for higher-end innerwear
products. This development (combined with increased
demand for lower-end products) has resulted in greater market segmentation.
• Manufacturers are increasingly focused on reducing theircosts, including by sourcing fabric and producing garments
in China and other lower-cost countries.
• Alternative marketing concepts for women’s innerwear garments, such as catalog marketing and e-commerce, arebecoming more prevalent as apparel companies seek todiversify their sales channels and reach new customer groups.

During the last three fiscal years, we have taken steps toaddress these key industry trends in seeking to build on thecore strengths of our market position and brand awarenesswith Japanese consumers. We believe that our strategicemphasis on higher-end products has helped us to reachconsumers seeking high quality innerwear garments and to
mitigate the adverse impact on sales and margins from lowerpriced 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 andmodernizing 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. andEurope – and increase sales through our own specialty retailstores, our catalog operations and the Internet. Pursuant to
our CAP21 strategic plan, we intend to extend our innerwear
product offerings into the mid-price range and include morefashionable offerings in our product mix to help us reacha broader customer base. We believe that our strategic alliancewith Peach John will help us to advance this goal. We willcontinue to implement these steps and evaluate other strategies to address challenges and opportunities in the industry
going forward.

operating results
Sales
Consolidated net sales increased 1.4% in fiscal 2007, from
¥164,122 million to ¥166,410 million.
Innerwear
Sales of our mainstay innerwear products (consisting offoundation garments and lingerie, nightwear and children’s
underwear), which comprised 81.3% of total consolidated
sales, increased 2.2% in fiscal 2007, to ¥135,445 million.

20

Wacoal Brand
With respect to the Wacoal brand business department of
Wacoal Corp., the overall sales of our core brassiere products
declined because sales of our spring campaign product, Love
Bra, did not meet expectations due to its failure to adequately
attract a wide range of customers, and because of a slump insales of our core summer products, strapless-type and seamless-type brassieres. On the other hand, Onaka Walker, which
was launched in July 2006 and has new functionality thatenhances mobility by stimulating the muscles while it is wornand shaping up the hips, as well as the Hip Walker, our undergarment launched in July 2005 which has revolutionary functionality, continued to show strong performance. However,notwithstanding the favorable performance of these highvalue-added brands (including our luxury brands, as noted
below), the above-mentioned decline in sales of our coreproducts as well as the return and accumulation of productswith poor sales, which was originally undertaken for the purpose of stimulating trade inventory, contributed to a decline
in the overall sales of our Wacoal brand business department.
Wing Brand
Although the sales of our core brassiere products in our Wing
brand business department were also generally weak, they
showed some signs of recovery, including our summer campaign product, Sarahada Bra, which achieved sales beyond our
initial plan, and our autumn campaign product, Kyutto-Up Bra,as well as this year’s sales of our Kikonashi-Up Bra, both of which
exceeded sales in the prior fiscal year. Style Up Pants Onaka, having functionality similar to the Onaka Walker, was added to the
Style Up Pants product line, and sales of this product line, as wellas undergarment products overall, significantly exceeded sales
from the prior fiscal year. Our Wing brand business department is working aggressively to sell men’s innerwear andachieved favorable sales, with an expansion in the number ofshops where they are sold and success in acquiring new customers through advertising and promotional activities. As aresult, we achieved the initial overall sales plan of our Wing
brand business department.
Luxury Brands
While sales of our high-value-added brand La Vie Aisée, which
is targeted toward the middle-age to senior markets, were
down slightly (¥5,062 million, a 6% decrease), sales of our luxury brand Tréfle (¥2,050 million, a 4% increase) and our othermiddle-age to senior targeted brand Gra-P (¥2,525 million,
a 13% increase) were favorable.
Specialty Retail Business
Our specialty retail store business, which includes such storesas une nana cool, which is operated as an independent subsidiary,
amphi, Subito and Sur la plage, which are direct retail stores of
Wacoal Corp., as well as the outlet Wacoal Factory Store, has not
yet generated overall profitability, although there were varied
results among brands.

Overseas Sales
Our overseas sales, which consist largely of sales of innerwear
products, were strong overall. Our sales in Asia outside ofJapan (including China, Hong Kong and Singapore) grew
16.0% to ¥6,713 million from ¥5,785 million and represented
4.0% of total consolidated sales in fiscal 2007 versus 3.5% of total
consolidated sales in fiscal 2006. Sales in China grew 39.7% overthe previous year, which contributed to our overall strong
performance in Asia. The implementation of a control systemfor production and sales in China has helped clear inventory
and led to an expansion in sales and improvement in revenue,
and this has resulted in profitability for the first time. Taking
AFTA (ASEAN Free Trade Area) into consideration, we maintained regional collaborations in connection with the design
and production of a common line of products, and in March
2007 we launched our new brand sorci age in Singapore,
Indonesia, Malaysia and the Philippines, targeting young
career women. In the U.S., which represented 10.2% of our
total consolidated sales in fiscal 2007 (8.5% in fiscal 2006), sales
increased 22.4% in fiscal 2007 as compared to fiscal 2006. Our
products have gained the attention of consumers throughtelevision and other mass media sources, which have reported
on the importance of wearing the appropriate brassiere size.
Our products and services focusing on consulting sales
through trial fittings have particularly gained the support ofconsumers. Furthermore, while the market appears to bebifurcating into luxury products and low-end goods, anincrease in sales through low-scale department stores has also
been a contributing factor to the expansion of sales.
Outerwear and Sportswear
In our outerwear and sportswear business, sales in fiscal 2007
decreased 4.1% to ¥8,751 million as compared to fiscal 2006.
Sales of our main sports conditioning wear product CW-X
were stagnant because we focused less on opening andexpanding new stores.
Hosiery
Hosiery sales (which include products sold under our Carlson
label) decreased 14.6% to ¥2,102 million as compared to fiscal
2006. Sales of Style Cover, which is sold in the stocking section of
department stores, as well as our internally developed footfriendly shoes, showed favorable performance. Although we
improved sales by selling these products through new sales
channels, such as television shopping, drug stores and variety
shops, sales of our panty stocking, a collaborative product21

with Seven Eleven Japan Co., Ltd., declined following theentry of more competitors into the market.
Textile Products
Sales of textile products and related items were ¥4,051 million,an 11.9% decrease compared to fiscal 2006.The main reasons forthis decline were a decrease in catalog sales of shoes and generalmerchandise and a decrease in sales of raw materials by our subsidiary Wacoal International Hong Kong Co., Ltd.
Other
Sales from our other businesses (mannequins, shop design andimplementation, restaurants, culture and services) increased
4.3%, to ¥16,061 million, primarily due to an increase in orders
in our rental business of mannequins and/or fixtures and anincrease in orders in the store design and construction businessconducted by our subsidiary Nanasai Co., Ltd.
Cost of Sales
Our cost of sales increased 0.4% in fiscal 2007, to ¥84,658 million
from ¥84,322 million in fiscal 2006. Cost of sales as a percentageof net sales decreased by 0.5 percentage points, from 51.4% in fiscal 2006 to 50.9% in fiscal 2007. This increase in our gross margin
was primarily due to the lower cost of sales per unit as a resultof a continuing increase in the amount of goods we manufacture overseas, as well as a large increase in our U.S. sales, which
has resulted in improved margins there.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses were ¥68,831 million in fiscal 2007, a decreaseof 1.3% from ¥69,720 million in fiscal 2006. This decrease wasprimarily due to a decrease in labor costs after implementing
our special voluntary retirement program in fiscal 2006.

SG&A Expenses*

80

80

60

60

40

40

20

20

¥ billion* Excluding impairment charges
on long-lived assets, government
subsidy and special retirement
related expenses
Ratio of SG&A expenses
to sales (% / right scale)

0

fy03

fy04

fy05

fy06

fy07

Other Income (Expenses), Net
We had a net ¥1,024 million of other income in fiscal
2007, as compared to a net ¥2,133 million of other income
in fiscal 2006. However, the drop was primarily the resultof a gain of ¥1,149 million recorded in fiscal 2006 as aresult of the exchange of shares of UFJ Holdings heldby Wacoal Corp. and Nanasai Co., Ltd., for shares ofMitsubishi UFJ Financial Group, the surviving entity inthe merger of Mitsubishi Tokyo Financial Group and
UFJ Financial Group.
Net Income
Net income in fiscal 2007 was ¥9,029 million, or ¥316
per American Depositary Receipt (“ADR,” equivalent
to five shares of common stock), versus ¥2,821 million,or ¥98 per ADR, in fiscal 2006. The increase in our net
income in fiscal 2007 was primarily due to the eliminationof expenses related to our special voluntary retirement
program and dissolution of Fukushima Wacoal Sewing
Corp. as well as reduction in labor costs due to said
special voluntary retirement program implemented infiscal 2006.

liquidity and capital resources
Our main source of liquidity is cash from operations. Our
cash from operations has allowed us to fund our working
capital requirements and our capital expenditures and makedividend payments without material borrowings or otherexternal financing. Some of our subsidiaries maintain credit
facilities with bank lenders for working capital purposes,
and the aggregate outstanding amount under such facilities
as of March 31, 2007 was ¥5,822 million.
We are not aware of any restrictions on the transfers offunds from a subsidiary to a parent company in the form of acash dividend. We believe that our working capital is adequate
for our present requirements and business operations.
220Cash FlowsNet cash provided by operating
activities during fiscal 2007 was¥9,339 million, an increase of¥8,620 million from ¥719
million in fiscal 2006, due tothe increase in net income,the increase in deferred taxes
owing to the extinguishmentof Wacoal’s deferred tax deficit
and a decrease in receivables.

Net Cash Provided byOperating Activities¥ billion

10
8
6
4
2
0

Net cash used in investing activities was ¥1,185 million
in fiscal 2007, as compared to ¥2,069 million in fiscal 2006.
This overall decrease was primarily due to the net effect of
our investment in our capital and business alliance with
Peach John in June 2006, which resulted in a sharp increasein our payments to acquire investments in affiliated companies, and a corresponding decline in cash used in payments
to acquire marketable securities.
Net cash used in financing activities was ¥8,404 million
in fiscal 2007, versus net cash used in financing activities of¥3,428 million in fiscal 2006. Net cash used in financing
activities increased due to a substantial increase in purchasesof treasury stock.

Capital Expenditures
Capital Expenditures¥ billion
Capital expenditures in fiscal
8
2007, 2006 and 2005 were ¥2,536
million, ¥6,456 million and
6¥5,418 million, respectively.
4
Our capital expenditures in 2007
were primarily in connection
2
with reconstruction of a product0
center for one of our subsidiaries
and improvements to ourdomestic factory and office locations, as well as for expansion offactories of Wacoal America, Inc.

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 ResearchCenter in 1964 (currently, the Human Science ResearchCenter). 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 ofsensory comfort. Our research and development activities are
based on the proportional, physiological and mental aspects ofgarment design. As part of our recent research results, in 1995
we announced the Golden Canon, a set of indicators that characterize the ideal body for Japanese women, and we are also utilizing new sales methods. In 2000, we conducted analysis on thephysiological changes associated with ageing throughout a 25year period from teenage years to 40s. We named the principlesof these changes SPIRAL Ageing. From 1995 to 1998, we participated in a project led by the Ministry of Economy, Trade andIndustry (formerly, the Ministry of International Trade andIndustry), enriching the basic study of sensory comfort, andconducted research based on reactions to three basic stimuli:pressure, heat and touch. Based on this research, we are focusedon 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 andenlist the assistance of approximately 1,000 registered trial-fitting monitors, we scientifically collect and analyze the needs
and attitudes toward the human body, and we are committed
to understanding the needs of our customers.

Based on these studies, we continually develop productswith 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 togive the right amount of stimulation to the muscles while
walking), Shakitto Bra (designed to make the figure look more
attractive with the movement of the bone structure of theupper trunk) and our Night Up Bra (designed to provide comfortable support to the bust while sleeping). We have recently
been conducting a comprehensive study of walking motion
and muscle movement and have developed products that
represent a complete departure from conventional girdles
and underpants, such as Hip Training Bottoms and Stomach 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 this consolidated fiscal year, we began research anddevelopment into men’s innerwear and we are implementing
the measurement of the male body and improving the organization of our monitoring system. Furthermore, we have signed
license agreements with new lines of business for patents heldby us, as well as cooperating with the parties who use thoselicenses for the development of new products. 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 2007
was ¥714 million.
23

eleven-year financial summary
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31







¥166,410
84,65850.9%
68,831
25¥164,122
84,322
51.4%
69,720612
614¥160,968
84,041
52.2%
72,128133

For the year:

Net sales
Cost of sales% of net sales
Selling, general and administrative
Loss (gain) 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(7,100)68,85641.4%
12,896
861
163

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

65,161
40.5%
11,766206
107

13,920
6,502
9,029

3,466
1,459
2,821

12,0795,800
6,790

Return on assets
Return on equity

3.7%
4.8%

1.2%
1.6%

3.0%
3.9%

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

9,339(1,185)(8,404)719(2,069)(3,428)2,045(5,528)296

Depreciation and amortization
Capital expenditures

3,735
2,536

3,433
6,456

3,312
5,418

¥ 316
110
6,874

¥ 98
100
6,480

¥ 236
100
6,105

¥ 92,915
34,86819,81652,782
250,266
5,984
193,278¥110,773
35,52519,89353,501
242,296
6,458
186,475¥120,300
34,97024,19551,826226,196
6,911
175,746

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)

















¥163,155
84,63851.9%
72,472455
2,574¥163,709
85,30652.1%
70,440143
556¥162,829
86,56753.2%
68,336740¥162,023
87,49354.0%
64,831
75¥165,937
89,29053.8%
66,004(474)¥169,996
91,95154.1%
67,319(706)¥169,967
91,47453.8%
65,328(3,262)¥168,330
90,64053.8%
64,725566

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

65,291
38.8%
12,399
549
324

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

13,272
7,018
7,336

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%

3.2%
4.6%

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)

5,474
962
(7,882)

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

2,368
2,480

¥ 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

¥ 236
68
5,219

¥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¥117,579
37,88440,31350,482
226,103
6,757
160,86925

consolidated balance sheets
WACOAL HOLDINGS CORP. AND SUBSIDIARIESMarch 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 2)

Millions of Yen







¥ 10,613
9,203
19,816
14,392¥ 11,635
8,258
19,89332,699$ 90,277
78,283
168,560
122,423550
22,882(2,979)30,1994,980
3,075
92,915458
23,192(2,778)27,135
7,442
2,692
110,733

4,678
194,641(25,340)
256,882
42,361
26,157790,362

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

20,874
59,16814,179472
94,693(41,911)52,782

20,97859,32813,78922
94,117(40,616)
53,501

177,560
503,300
120,6114,015
805,486(356,507)
448,979

Other assets:
Investments in affiliates (Note 6)
Investments (Note 3)
Prepaid pension expense (Note 9)
Deferred income taxes (Note 12)
Lease deposits and otherTotal other assets

34,012
54,117
7,089
1,048
8,303
104,569

16,03352,716992
8,321
78,062

289,316
460,335
60,301
8,915
70,628889,495

Total¥250,266¥242,296$2,128,836

ASSETS
Current 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 12)
Other current assets
Total current assets

See notes to consolidated financial statements.

26

Thousands of
U.S. Dollars (Note 2)

Millions of Yen







¥ 5,822¥ 6,392$ 49,524

1,503
10,536
6,900
6,416
1,378
51
2,262
34,8681,610
10,608
6,289
6,790
1,806
34
1,996
35,525

12,78589,622
58,69354,576
11,722434
19,241
296,597

Long-term debt (Notes 7 and 15)
Liability for termination and retirement benefits (Note 9)
Deferred income taxes (Note 12)
Other long-term liabilities
Total long-term liabilities

111
2,072
16,959517
19,65932
4,622
12,842397
17,893944
17,625144,258
4,398
167,225

Minority interests

2,461

2,403

20,934

13,26025,242
140,666

13,26025,242
134,515

112,794
214,716
1,196,546

716
14,4284,130
19,274(736)
14,311
13,575

6,091
122,729
35,131
163,951(5,164)
193,278(117)
186,475(43,927)
1,644,080¥250,266¥242,296$2,128,836

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent 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 15)
Other current liabilities
Total current liabilities
Long-term liabilities:

Commitments and contingencies (Note 8)
Shareholders’ equity (Note 10):

Common stock, no par value –authorized, 500,000,000 shares in 2007 and 2006;
issued 144,016,685 shares in 2007 and 2006
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss) (Note 11):
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Total accumulated other comprehensive income
Less treasury stock at cost –3,440,116 and 100,752 shares in 2007 and 2006
Total shareholders’ equity
Total

27

consolidated statements of income
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005
Thousands of
U.S. Dollars (Note 2)

Millions of Yen¥166,410


¥164,122
¥160,968
$1,415,532

Cost of sales
84,658Selling, general and administrative
68,831
Impairment charges on long-lived assets
Loss on sale or disposal of property, plant and equipment
25
Government subsidy (Note 9)
Special retirement related expenses (Note 9)
Total operating costs and expenses
153,514
Operating income
12,896
Other income (expenses):
Interest income
236Interest expense(73)
Dividend income
603
Gain on sale or exchange of marketable securities
and investments (Note 3)
406
Impairment charges on investments (Note 3)(365)
Other – net
217
Total other income, net
1,024
Income before income taxes, equity in net incomeof affiliated companies and minority interests (Note 12) 13,920
Income taxes (Note 12):Current
2,874
Deferred
3,628
Total income taxes
6,502
Income before equity in net incomeof affiliated companies and minority interests
7,418
Equity in net income of affiliated companies
1,771
Minority interests(160)
Net income¥ 9,029

84,322
69,720614
612

84,041
72,128720,126
585,497

133(7,100)212

7,521
162,789
1,333

149,202
11,7661,305,835
109,697

213
(56)
493

186
(79)
271

2,008
(621)
5,129

1,656
(65)
(111)
2,133

563
(618)
(10)
313

3,454
(3,105)
1,846
8,711

3,466

12,079118,408

3,268(1,809)
1,459

3,041
2,759
5,800

24,44730,86155,308

2,007
1,122
(308)
¥ 2,821

6,279
871
(360)
¥ 6,790

63,10015,064(1,361)$ 76,803

Net sales
Operating costs and expenses (income):

Yen

Earnings per share (Note 14)
Earnings per American depositary receipt(5 shares of common stock) (Note 14)
See notes to consolidated financial statements.

28

U.S. Dollars (Note 2)

¥63

¥20

¥47

$0.54

¥316

¥98

¥236

$2.69

consolidated statements of comprehensive income
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005
Thousands of
U.S. Dollars (Note 2)

Millions of Yen¥ 9,029

Net income
Other comprehensive income (loss), net of tax (Note 11):
Foreign currency translation adjustments
1,452
Unrealized gains (losses) on securities
117
Minimum pension liability
Total other comprehensive income
1,569
Comprehensive income¥10,598
¥ 2,821


¥6,790
$76,803

3,084
7,746

(308)
(266)
954
380
¥7,17012,351
996

10,830¥13,651

13,347$90,150

See notes to consolidated financial statements.

consolidated statements of shareholders’ equity
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005
Millions of Yen
Shares of
Outstanding
Common Stock(Thousands)

143,964
Net income
Other comprehensive income
Cash dividends paid, ¥75 per 5 sharesof common stock
Repurchase of treasury stock – other(20)
Balance, March 31, 2005
143,944
Net income
Other comprehensive income
Cash dividends paid, ¥100 per 5 sharesof common stock
Repurchase of treasury stock – other(28)
Balance, March 31, 2006
143,916
Net income
Other comprehensive income
Cash dividends paid, ¥100 per 5 sharesof common stock
Repurchase of treasury stock – other(3,339)Adjustment to initially apply SFAS No.158, net of tax (Note 9)
Balance, March 31, 2007
140,577
Balance, April 1, 2004

CommonStock

Additional
Paid-in
Capital¥13,260¥ 25,242

Retained
Earnings

Accumulated
Other
Comprehensive
Income¥ 129,941
6,790¥ 2,365 ¥Treasury
Stock

(50)

380
(2,159)13,26025,242

134,572
2,821

2,745

(23)
(73)

10,830(2,878)13,26025,242

134,515
9,029

13,575

(44)
(117)

1,569
(2,878)¥13,260¥25,242(5,047)4,130¥19,274 ¥(5,164)¥140,666

Thousands of U.S. Dollars (Note 2)

CommonStock

Balance, March 31, 2006
Net income
Other comprehensive income
Cash dividends paid, $0.85 per 5 sharesof common stock
Repurchase of treasury stock – other
Adjustment to initially apply SFAS No.158, net of tax (Note 9)
Balance, March 31, 2007

Additional
Paid-in
CapitalRetained
Earnings$112,794 $214,716 $1,144,224
76,803

Accumulated
Other
Comprehensive
Income$115,473 $Treasury
Stock

(995)

13,347(24,481)(42,932)
35,131$112,794 $214,716 $1,196,546 $163,951 $(43,927)

See notes to consolidated financial statements.

29

consolidated statements of cash flows
WACOAL HOLDINGS CORP. AND SUBSIDIARIES
Years Ended March 31, 2007, 2006 and 2005
Thousands of
U.S. Dollars (Note 2)

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
Loss on sale or disposal of property, plant and equipment
Impairment charges on long-lived assets
Government subsidy
Gain on sale or exchange of marketable securities
and investments
Impairment charges on investments
Equity in net income of affiliates, less dividends
Changes in assets and liabilities:
Decrease (increase) in notes and accounts receivable(Increase) decrease in inventories
Increase in other current assets
Increase (decrease) in notes and accounts payable(Decrease) increase in liability
for termination and retirement benefits(Decrease) increase 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
Proceeds from sales of investments
Payments to acquire investments in affiliated companies
Payments to acquire investments
Cash balances of acquired subsidiary in excess of cash paid
(Increase) decrease in other assets
Net cash used in investing activities
Financing activities:(Decrease) increase in short-term bank loans
Proceeds from issuance of long-term debt
Repayments of long-term debt
Repurchase of treasury stock
Dividends paid on common stock
Net cash provided by (used in) financing activities
Effect of exchange rate changes
on cash and cash equivalents
Net 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









¥ 9,029¥ 2,821¥ 6,790$76,803

3,735
173
3,628
25

3,433
503
(1,809)
612
614

3,312
169
2,759
133

31,771
1,472
30,861
212

(406)
365
(1,164)(1,659)
65
(674)

(563)
618
(448)

(3,454)
3,105(9,901)401(2,897)(371)
219(1,799)
274
(958)
(252)

(1,519)(878)(1,046)
1,198

3,411
(24,643)(3,156)
1,863(2,472)(2,068)1,193(21,028)

(696)
(230)
9,339

1,667
(51)
719

(2,655)82
2,045(5,920)(1,956)79,44028,509(9,929)524(2,536)8(15,326)(1,887)80(628)(1,185)32,161(21,525)513(6,456)
1,231(7,905)51,990(51,111)340(5,418)926(16)(2,985)242,506(84,459)
4,457(21,572)68(130,368)(16,051)(88)(2,069)746(5,528)(5,342)(10,080)

(575)
130
(34)
(5,047)(2,878)(8,404)

(409)
19
(116)
(44)
(2,878)(3,428)

2,813
45
(380)
(23)
(2,159)296(4,891)
1,106(289)(42,932)(24,481)(71,487)

173(77)
19,893¥19,816476(4,302)
24,195¥19,893(61)(3,248)27,443¥24,195

1,472
(655)
169,215$168,560

¥ 70
4,667

¥ 56
1,832

¥ 85
5,395

$ 565

Noncash investing activities:

Fair value of marketable securities received in exchange
for certain other marketable securities with a recorded
amount of ¥172 million in 2006
30

(7,100)

1,321

681

39,699notes to consolidated financial statements
WACOAL HOLDINGS CORP. AND SUBSIDIARIES

1. summary of significant accounting policies
Basis of Financial Statements – On October 1, 2005, Wacoal
Holdings Corp. (the “Company”) that was formerly known as“Wacoal Corp.” spun off all of the Company’s business into a newwholly owned subsidiary and changed over to a holding company
structure. The Company’s subsidiaries are predominantly engaged
in one industry, the manufacture and sale of apparel, including
foundation garments, lingerie, nightwear and outerwear in Japan,
the United States of America, Europe and certain Asian countries.
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 the omission of segment information as required by Statementof Financial Accounting Standards (“SFAS”) No. 131, “Disclosuresabout Segments of an Enterprise and Related Information.”
Consolidation – The consolidated financial statements include
the accounts 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 areincluded in the Company’s consolidated financial statements
based on the subsidiaries’ fiscal year.
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 theCompanies have an ownership interest in the voting stock of theinvestee of between 20% to 50%, although other factors are considered in determining whether the equity method of accounting isappropriate.
Use of Estimates – The preparation of financial statements inconformity with accounting principles generally accepted in the
United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at thedate 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 all time deposits and certificates of deposit (all of which
are interest-bearing) with original maturities of three months or
less, which can be withdrawn 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 beentranslated using weighted-average exchange rates for the period.
Translation adjustments are included in other comprehensive
income (loss), a separate component of shareholders’ equity.
Exchange gains and losses resulting from foreign currencytransactions 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-forsale and carry them at fair value with a corresponding recognitionof unrealized holding gains or losses (net of tax) in othercomprehensive income (loss), a separate component of shareholders’ equity, until realized. Equity securities that do not havereadily determinable fair values are recorded at cost. Gains andlosses on sales of investments are computed based on cost determined using the average cost method.
If 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 principallyconsider that an other-than-temporary impairment has occurred
when the decline in fair value below the carrying value continues
for over nine consecutive months. The Companies may also consider other factors, including their ability and intent to hold theapplicable investment securities until maturity, and the severityof the decline in fair value.
Inventories – Inventories are stated at the lower of cost or market, cost being substantially determined on the first-in, first-out
method for raw materials and the average cost method for workin process and finished products.
Property, Plant and Equipment – Property, plant and equipment is stated at cost less accumulated depreciation. Depreciationof property, plant and equipment is computed by the decliningbalance method, except for buildings acquired on or after April 1,
1998, which are depreciated using the straight-line method, based
upon the estimated useful lives of the assets. The estimated useful
lives are as follows:
Buildings and building
improvements:
5 - 50 years (Mainly 38 years)
Machinery and equipment:
5 - 20 years (Mainly 5 years)
Impairment of Long-lived Assets – The carrying values oflong-lived assets, held and used by the Companies, are evaluatedfor impairment whenever there is an event or change in circumstances that indicates that such assets have been impaired or thatthe carrying amounts of such assets might not be recoverable.
The Companies recorded ¥614 million in impairment charges
on long-lived assets for the year ended March 31, 2006, which
resulted from the impairment of primarily a building which waspart of the Companies’ branch office in Nagoya. In 2006, theCompany determined to close its Nagoya office and to demolishthe building. The office was closed on March 31, 2006 and theCompanies recognized an impairment of the asset to be abandoned. No impairment charges were recorded in the years ended
March 31, 2007 and 2005.
Derivatives – Derivative instruments, including certain derivative instruments embedded in other contracts are accounted forin accordance with SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” SFAS No. 138, “Accounting
for Certain Derivative Instruments and Certain Hedging Activities
an Amendment of FASB Statement No. 133,” and SFAS No. 149,
“Amendment of Statement 133 on Derivative Instruments andHedging Activities.” Changes in the fair value of a derivative arerecorded in other comprehensive income (loss) or in earnings,
depending on its intended use. Changes in fair value of foreign
currency forward exchange contracts designated as fair value
hedges of recognized assets and liabilities and firm commitments
are recognized in income. Changes in fair value of forward
exchange contracts designated and qualifying as cash flow hedgesof recognized assets and liabilities and firm commitments arereported in accumulated other comprehensive income. Theseamounts are reclassified into income in the same period as thehedged items affect income.
31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 to determine 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 theCompanies.
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 thecost of all settlements in a year is less than or equal to the sumof 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 and the leased assets included as part of property, plant andequipment. Such leasing arrangements involve the computer
aided design system and the computer hardware. Other leases
are classified as operating leases and are not capitalized. The payments on such leases are recorded as expense. The rental expense
under operating leases is recognized on a 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.
Advertising Expenses – Advertising costs are expensed as
incurred. Advertising expenses for the years ended March 31, 2007,
2006 and 2005 were ¥12,084 million ($102,790 thousand), ¥11,888
million and ¥13,241 million, respectively, and included in selling,
general, and administrative expenses.
Revenue Recognition – The Companies recognize revenue onsales to retailers when (1) persuasive evidence of an arrangement
exists, (2) delivery has occurred resulting in transfer of title andrisk of loss, (3) the sales price is fixed or determinable and (4) collectibility is reasonably assured. Retail sales are recognized at the
point of sale. The Companies establish allowances for estimatedreturns based on historical experience. As for consignment sales,
the Companies recognize revenue when the products are sold tothe ultimate customer.
Shipping and Handling Costs – Shipping and handling costs
for the years ended March 31, 2007, 2006 and 2005 were ¥4,186
million ($35,607 thousand), ¥4,239 million and ¥4,156 million,
respectively, and are 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 statements and tax bases of assets andliabilities at presently enacted tax rates. A valuation allowanceis 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 andcumulative translation adjustments of foreign subsidiaries whose
earnings are not deemed to be permanently invested.

32

Recent Accounting Pronouncements:
The Fair Value Option for Financial Assets and Financial
Liabilities - Including an Amendment of FASB Statement
No. 115 – In February 2007, the Financial Accounting Standards
Board (“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 fairvalue, with changes in fair value recorded in earnings. It alsoestablishes presentation and disclosure requirements designed tofacilitate comparisons between companies that choose different
measurement attributes for similar types of assets and liabilities.
SFAS No. 159 is effective for fiscal years beginning after November
15, 2007. The Companies are currently in the process of assessing
the impact the adoption of SFAS No. 159 will have on their financial position, cash flows or results of operations.
Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans, an Amendment of FASBStatements No. 87, 88, 106 and 132 (R) – In September 2006, the
FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendmentof FASB Statements No. 87, 88, 106 and 132 (R).” SFAS No. 158
requires an employer to recognize in its statement of financial
position an asset for a plan’s overfunded status or a liability fora plan’s underfunded status, measure a plan’s assets and its
obligations that determine its funded status as of the end of
the employer’s fiscal year, and recognize changes in the funded
status of a defined benefit postretirement plan in the year inwhich the changes occur. The requirement to recognize thefunded status of a benefit plan and the disclosure requirements
are effective as of the end of the fiscal year ending after December
15, 2006. The Companies adopted the recognition and disclosure
provisions of SFAS No. 158 at March 31, 2007. The effect of
adopting SFAS No. 158 on the Companies’ consolidated financial
condition at March 31, 2007 has been included in the accompanying consolidated financial statements. See Note 9 for further
information.
Fair Value Measurements – In September 2006, the FASB
issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157
defines fair value, establishes a framework for measuring fairvalue and expands disclosure of fair value measurements. SFAS
No. 157 applies under other accounting 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 after November 15,
2007. The Companies are currently in the process of assessing
the impact the adoption of SFAS No. 157 will have on their consolidated financial position, cash flows or results of operations.
Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial
Statements – In September 2006, the Securities and Exchange
Commission (“SEC”) staff published Staff Accounting Bulletin
No. 108 (SAB 108), “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current
Year Financial Statements.” In addressing the current diversityof practice, SAB 108 provides interpretive guidance on how
misstatements should be quantified and requires use of a “dualapproach” method when evaluating the materiality of financial
statement errors. Such approach requires consideration of
the impact of misstatements on both the income statement

(“rollover” method) and balance sheet (“iron curtain” method).
If such consideration, along with the evaluation of all relevant
quantitative and qualitative factors, results in quantifying a
misstatement as material, adjustment of the financial statement
is required. SAB 108 is effective for fiscal years ending afterNovember 15, 2006. The adoption of SAB 108 did not have amaterial effect on the consolidated financial statements of
the Companies.

Accounting for Uncertainty in Income Taxes – In June 2006,
the FASB issued FASB Interpretation No. (“FIN”) 48,“Accounting for Uncertainty in Income Taxes - an interpretationof 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. The Companies do not expect
the adoption of FIN 48 to have a material effect on the consolidated financial statements.

2. translation into u.s. dollar statements
The financial statements are stated in Japanese yen, the currencyof the country in which the Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for convenience of readers outsideof Japan and have been made at the rate of ¥117.56 to $1, the buy-

ing rate for yen in New York City at March 31, 2007. Such translations should not be construed as representations that theJapanese 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, 2007 and 2006. The fair values of thedebt and marketable equity securities were as follows:Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities
Total
Noncurrent:
Equity securities
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities
Total
Noncurrent:
Equity securities
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities
Total
Noncurrent:
Equity securities

Cost

Millions of Yen
Gross
Gross
Unrealized Unrealized
Gain
Loss

¥ 6,304
700
4,187
3,210
¥14,401¥¥26,842

166
3
¥ 173

¥125
2
43
12
¥182

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

Millions of Yen
Gross
Gross
Unrealized Unrealized
Gain
Loss

Fair Value¥13,539
7,702
5,431
5,914
¥32,586

¥ 132
1
167
1
¥ 301

¥ 80
13
68
27
¥188

¥13,591
7,690
5,530
5,888
¥32,699¥25,492¥26,479¥129¥51,842

Cost

Cost

$ 53,624
5,954
35,61627,305$122,499$228,326

4

Fair Value

Thousands of U.S. Dollars
Gross
Gross
Unrealized Unrealized
Gain
Loss

$

34

Fair Value

1,412
26
$ 1,472$1,06417
365
102$1,548$ 52,594
5,937
36,66327,229$122,423$224,379$ 859$451,846

33

Gross unrealized 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, 2007 and 2006, were as follows:Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities
Total
Noncurrent:
Equity securities
Current:
Corporate debt securities
Bank debt securities
Mutual fundNational debt securities
Total
Noncurrent:
Equity securities

Millions of Yen
Gross
Unrealized
Fair Value
Loss

Thousands of U.S. Dollars
Gross
Unrealized
Fair ValueLoss¥ 4,979
498
2,554
2,099
¥10,130

¥125
2
43
12
¥182

$42,353
4,236
21,725
17,855$86,169$1,06417
365
102$1,548¥ 1,711¥101$14,554$ 859

Millions of Yen
Gross
Unrealized
Fair Value
Loss¥ 5,027
5,488
3,746
3,686
¥17,947

¥ 80
13
68
27
¥188

¥ 2,264¥129

There were no securities which had been in a continuous unrealized loss position over 12 months at March 31, 2007 and 2006.
Future maturities of debt securities classified as available-for-sale at March 31, 2007 were as follows:
Millions of Yen
Cost
Fair Value

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 ¥2,573
million ($21,887 thousand), ¥2,903 million and ¥2,697 million forthe years ended March 31, 2007, 2006 and 2005, respectively. The
gross realized gains on the sales of available-for-sale securities forthe years ended March 31, 2007, 2006 and 2005 were ¥408 million($3,471 thousand), ¥510 million and ¥572 million, respectively.
The gross realized losses on the sales of available-for-sale securities
for the years ended March 31, 2007 and 2005 were ¥2 million ($17thousand) and ¥9 million, respectively.
During the year ended March 31, 2006, the Companies
exchanged certain equity securities for other securities. The
Companies recorded the newly received securities at fair value
and recognized a gain of ¥1,149 million in the year ended March
31, 2006. No such exchanges were made in the years ended March
31, 2007 and 2005.
The Companies recognized impairment charges on investmentsof ¥365 million ($3,105 thousand), ¥65 million and ¥618 million in
the years ended March 31, 2007, 2006 and 2005, respectively.

34¥ 3,199
9,449
323
1,000
¥13,971¥ 3,189
9,367
405
932
¥13,893

Thousands of
U.S. Dollars
Cost
Fair Value$ 27,212
80,3762,748
8,505$118,841$ 27,127
79,6783,445
7,928$118,178

Investments in non-marketable equity securities for which
there is no readily determinable fair value were accounted forusing the cost method and aggregated ¥945 million ($8,038 thousand) and ¥874 million at March 31, 2007 and 2006, respectively.
The Companies wrote down these investments whenever therecorded investments exceeded the Companies’ share of net assetsof the investees. These investments were not evaluated for further
impairment as the Companies did not identify any events orchanges in circumstances that may 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 the fair market value of ¥53 million ($4,126 thousand) as of March 31, 2007.

4. valuation and qualifying accounts
Information related to the Companies’ allowance for doubtful receivables was as follows:Balance at beginning of year
Charged to costs and expenses
Balances written-off/reversed
Balance at end of year

Millions of Yen

¥ 92
10
(20)
¥ 82





¥72
29
(9)
¥92

¥149
(77)
¥ 72

Information related to the Companies’ allowance for returns was as follows:Balance at beginning of year
Charged to costs and expenses
Balances utilized
Balance at end of year

Millions of Yen





Thousands of
U.S. Dollars



$ 783
85
(170)
$698
Thousands of
U.S. Dollars

¥ 2,686 ¥ 2,142 ¥ 1,991
2,897
2,686
2,142
(2,686) (2,142) (1,991)¥ 2,897 ¥ 2,686 ¥ 2,142$ 22,848
24,642(22,848)$ 24,642

Millions of Yen

Thousands of
U.S. Dollars

5. inventories
Inventories at March 31, 2007 and 2006 were as follows:

Finished products
Work in process
Raw materials
Total





¥24,691
4,110
1,398¥30,199¥22,507
3,295
1,333¥27,135



$210,029
34,961
11,892$256,882

6. investments in affiliates
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 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 indetermining whether the equity method of accounting is appropriate. The Companies record investments in equity method
investees meeting these characteristics as “Investments in affiliates.” Under the equity method, the Companies record their proportionate share of affiliates’ income or loss based on the mostrecently available financial statements. The Companies’ investments in affiliated companies and percentage of ownership at
March 31, 2007 include, among others, the following companies:

Thai Wacoal Public Company Limited (33.61%);
quoted market price per share:¥130 ($1,106)/share
aggregate value:¥5,225 million ($44,445 thousand)Shinyoung Wacoal Inc. (25.00%);
quoted market price per share:¥12,309 ($104,704)/share
aggregate value:¥2,769 million ($23,554 thousand)Indonesia Wacoal Co., Ltd. (42.02%)
Taiwan Wacoal Co., Ltd. (50.00%)
House of Rose Co., Ltd. (20.20%);quoted market price per share:¥1,663 ($14,146)/share
aggregate value:¥1,580 million ($13,440 thousand)Peach John Co., Ltd. (49.00%)

The following table represents the summarized information from the balance sheets and statements of operations for the affiliatedcompanies which are accounted for under the equity method as of and for the years ended March 31, 2007 and 2006.
Millions of Yen

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Minority interests
Net sales
Gross profit
Income before income taxes
Net income





¥48,058
32,291
12,5275,569
175,41438,2607,011
5,052¥36,205
27,497
9,658
4,741
1
60,631
31,607
4,664
3,262

Thousands of
U.S. Dollars$408,796
274,677
106,558
47,3729641,494
325,451
59,63842,97435

The difference between the amount at which an investment iscarried and the amount of underlying equity in net assets represents intangible assets such as customer list, trademarks andgoodwill.

Dividends received from the affiliated companies were ¥607
million ($5,163 thousand), ¥448 million and ¥423 million during
the years ended March 31, 2007, 2006 and 2005, respectively.

7. short-term bank loans and lease obligations
Short-term bank loans at March 31, 2007 and 2006 consisted of the following:
Millions of Yen

Unsecured bank loans





¥5,822¥6,392Thousands of
U.S. Dollars

$49,524

The weighted average annual interest rates on short-term bank loans as of March 31, 2007 and 2006 were 0.9% and 0.5%, respectively.
Lease obligations at March 31, 2007 and 2006 consisted of the following:
Millions of Yen

Lease obligations
Less current portion
Lease obligations, less current portion





¥162
51
¥111

¥66
34
¥32

Thousands of
U.S. Dollars

$1,378434$ 944

The future minimum payments required at March 31, 2007 were as follows:Year Ending March 31

2008
2009
Total

Millions of Yen

Thousands of
U.S. Dollars

¥ 51
111
¥162

$ 434
944
$1,378In 2007 and 2006, no assets were pledged as collateral.

8. leases
The Companies lease most of their store premises, some of their distribution centers and certain equipment. These operating leases
expire on various dates through 2013. 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 to at lease inception. Future minimum rental commitments on non-cancelable operating leases are presented below:
Year Ending March 31

2008
2009
2010
2011
2012
Thereafter
Total

Millions of Yen

Thousands of
U.S. Dollars

¥ 972
886
719
583
549
1,997
¥5,706$ 8,268
7,537
6,116
4,959
4,670
16,987$48,537

Rental expenses were ¥3,795 million ($32,281 thousand), ¥3,844 million and ¥3,703 million for the years ended March 31, 2007, 2006
and 2005, respectively.

9. 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 in the Companies and performance. If the termination is
involuntary or caused by death, the employee is usually entitledto greater payments than in the case of voluntary termination.
The Companies have a contributory retirement plan, several
partially funded plans administered by independent trustees
and several unfunded termination plans administered by theCompanies. Benefits are usually paid in a lump sum at the earlierof termination or retirement, although periodic payments areavailable under certain conditions.

36

The retirement plans provide either lump-sum termination
benefits or periodic payments under certain conditions. Benefits
are usually paid as a lump-sum at the earlier of the employee’s
termination or the mandatory retirement age.
The Companies adopted the recognition and disclosure provision of SFAS No. 158 on March 31, 2007. SFAS No. 158 required
the Companies to recognize the funded status of their pension
plans in the March 31, 2007 consolidated balance sheet, with acorresponding charge to accumulated other comprehensive
income.

Upon adoption, the Companies recorded a pre-tax adjustment of ¥6,965 million ($59,246 thousand) to the ending balance of accumulated other comprehensive income. Amounts recognized in accumulated other comprehensive income at March 31, 2007 consist of:

Unrecognized net actuarial gain
Unrecognized prior service benefit
Total

Millions of Yen

Thousands of
U.S. Dollars

¥ 702
6,263
¥6,965$ 5,971
53,275$59,246

As a result of adopting SFAS No. 158, the consolidated balance sheets changed as follows:
Millions of Yen
Balances Prior to
Adoption of
SFAS No. 158

Prepaid pension costAccrued expenses
Reserve for retirement benefit
Deferred income taxes
Accumulated other comprehensive income¥ 124(2,100)1,257

Adjustments

Balances after
Adoption of
SFAS No. 158¥ 6,965(113)
113(2,835)(4,130)¥ 7,089(113)(1,987)(1,578)(4,130)Thousands of U.S. Dollars
Balances Prior to
Balances after
Adoption of
Adoption of
SFAS No. 158
Adjustments
SFAS No. 158

Prepaid pension costAccrued expenses
Reserve for retirement benefit
Deferred income taxes
Accumulated other comprehensive income$ 1,055(17,863)
10,692$ 59,246(961)
961(24,115)(35,131)$ 60,301(961)(16,902)(13,423)(35,131)

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:

Actuarial gain
Prior service benefit

Millions of Yen

Thousands of
U.S. Dollars

¥123
691

$1,046
5,878

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





2.5%
0.5%

2.5%
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 rate of return on plan assets
Rate of increase in future compensation

Our wholly owned subsidiary, Wacoal Corp.’s approach toestablishing the discount rate is based upon long term Japanese
government bond rates and corporate bond indices. The discountrate 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 isachieved 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 otherplans, 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







2.5%
2.5%
0.5%

2.5%
2.5%
0.5%

2.5%
2.5%
0.4%

asset classes are based largely on assumptions about economic
growth and inflation, which are supported by long-term historical data. The estimated long-term rate of return is based on anasset allocation of equity securities of 33.0%, debt securities of
50.0% and other investments of 17.0%.
The Companies’ investment strategy is to maintain actual
asset weightings within a preset range of target allocations.
The Companies’ investments are broadly diversified, typicallyconsisting primarily of equity and debt securities. The Companies
believe these ranges represent an appropriate risk profile for theplanned benefit payments of the plans based on the timing of
the estimated benefit payment.

37

The asset allocation at March 31, 2007 and 2006 was as follows:
Equity securities
Debt securities
Life insurance company general accounts
Cash and cash equivalents

The target allocation percentages are reviewed and approved by
the Pension Committee. The actual allocations for 2007 and 2006
are different from the target allocation percentages primarily
because the Company contributes additional equity securities
to the plan which are not governed by the Pension Committee.
Based on an agreement between the Company and the employees, the Company contributes a certain amount of equity securities to the plan. As such, the actual allocation percentage ofequity securities to the total plan assets is higher than the target
allocation, and similarly, the actual allocation for the debt securities and other types of assets is lower than the target allocation.
The Company had a contributory retirement plan which wasinterrelated with the Japanese government social welfare programthat consisted of a substitutional portion and a corporate portion.
In January 2003, the Company applied for an exemption from theobligation to pay benefits for future employee services related tothe substitutional portion in accordance with the Defined Benefit
Pension Plan Law enacted in April 2002 and received approval
from the government in January 2003. In January 2004, the





54.8%
34.9%
5.7%
4.6%

57.3%
35.1%
6.7%
0.9%

Company received approval for exemption of the benefit obligation for past service related to the substitutional portion. In
September 2004, the substitutional portion of the benefit obligation and related plan assets were transferred to the government.
In accordance with the Emerging Issue Task Force (“EITF”)
Issue 03-2, “Accounting for the Transfer to the Japanese
Government of the Substitutional Portion of Employee Pension
Fund Liabilities” (“EITF 03-2”), the Company accounted for theentire separation process upon completion of the transfer to thegovernment of the substitutional portion of the benefit obligation
and related plan assets as the culmination of a series of steps in asingle settlement transaction. The transfer resulted in the
Company recording a subsidy from the government of ¥7,100
million representing the difference between the substitutional
portion of the accumulated benefit obligation and the related
plan assets. In addition, the Company recorded a gain from derecognition of previously accrued salary progression of ¥1,716 million, and a settlement loss from recognition of actuarial losses of¥2,644 million in the year ended March 31, 2005.

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

Thousands of
U.S. Dollars





¥32,687
936
748
75
(245)

$278,045
7,962
6,363
638
(2,084)

(883)
(105)
(154)
33,059¥36,481
1,228
722
92
2,926
(5,833)(281)(2,361)(287)
32,687

Change 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

35,860
581
2,520
75
(883)
(105)
38,04828,376
7,352
2,682
92
(281)
(2,361)35,860305,036
4,941
21,436638(7,511)(892)
323,648

Funded status at end of year

¥ 4,989¥ 3,173$ 42,438

Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Participants’ contributions
Actuarial gain (loss)
Prior service liabilities incurred due to plan amendment
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Companies
Benefit obligation at end of year

(7,511)(893)(1,310)281,210Amounts recognized in the consolidated balance sheets at March 31, 2007 consist of:Prepaid pension costAccrued expenses
Reserves for retirement benefit

38

Millions of Yen

Thousands of
U.S. Dollars¥7,089(113)(1,987)¥4,989$60,301(961)(16,902)$42,438

The funded status at March 31, 2006, reconciled to the net amount recognized in the consolidated balance sheet, is as follows:
Millions of Yen

Funded status
Unrecognized net actuarial gain
Unrecognized prior service benefit
Net amount recognized – Accrued benefit cost

¥ 3,173(769)(6,954)¥(4,550)

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

Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Net amortization
Derecognition of previously accrued salary progression
Settlement (gain) loss

The unrecognized net actuarial loss and prior service benefit
are being amortized over 12 years (the average remaining service
life of active participants) using the declining-balance method andthe straight-line method, respectively.
In July 2005, the Company amended its retirement plan tochange the interest rate used to determine periodic pension payments. Before the amendment, the interest rate was fixed at 4.3%.
Under the amended plan, the interest rate is floating and determined based on the interest rate of the Japanese government
bond within the range of 2.0% to 5.0%. The resulting prior service

Millions of Yen





¥ 936
748
(726)
(826)

¥1,228
722
(608)
12

¥ 132

(256)
¥1,098¥1,811
1,063
(629)
1,110
(1,716)
2,644¥4,283Thousands of
U.S. Dollars

$ 7,962
6,363(6,176)(7,026)$ 1,123

benefit is being amortized using the straight-line method over
12 years.
The accumulated benefit obligation for all domestic defined
benefit plans was ¥31,022 million ($263,882 thousand) and ¥30,691
million at March 31, 2007 and 2006, respectively.
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¥2,333 million ($19,845 thousand) to their plans in the year ending March 31, 2008.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:Year Ending March 31

2008
2009
2010
2011
2012
2013–2017

The Companies also provide additional benefits to employeesthat elect to participate in the Companies’ early retirement program. Retirement benefits of ¥14 million ($119 thousand), ¥364
million and ¥718 million were paid in addition to normal benefits
and charged to “selling, general and administrative” for the years
ended March 31, 2007, 2006 and 2005, respectively.
In November 2005, the Company announced a special voluntary retirement plan to eliminate approximately 300 positions toimprove the labor structure at March 31, 2006. Employees who
would be more than 50 years-old at March 31, 2006 could apply tothis program. As of March 31, 2006, the Company had eliminated362 positions and paid the special benefit of ¥6,931 million. In
March 2006, Fukushima Wacoal Sewing Corp., a subsidiary of theCompanies, terminated its operation and paid a special termination benefit of ¥590 million 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.”

Millions of Yen

Thousands of
U.S. Dollars¥1,292
1,340
1,347
1,415
1,504
9,400

$10,990
11,39811,45812,036
12,793
79,959Termination 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 and requires the approval of the shareholders before
payment. In June 2005, the Company rescinded its termination
plan for directors and corporate auditors upon the approval of its
shareholders. The amount of benefit for each individual was fixed
as of June 29, 2005 and will remain frozen until the retirement ofeach respective director and corporate auditor. The outstanding
liabilities at March 31, 2007 and 2006 were ¥373 million ($3,173
thousand) and ¥397 million, respectively, and were recorded inother long-term liabilities. Subsidiaries still maintain plans fortheir directors and corporate auditors. In accordance with EITF
88-1, the subsidiaries record a liability for termination benefits for
directors and corporate auditors at the amount that would beneeded if all directors and corporate auditors were to resign ateach balance sheet date. The liabilities for termination benefits for
directors and corporate auditors at March 31, 2007 and 2006 were
¥85 million ($723 thousand) and ¥72 million, respectively.

3910. shareholders’ equity
On and after May 1, 2006, Japanese companies are subject to a newcorporate law of Japan (the “Corporate Law”), which amended
and partially replaced the Commercial Code of Japan (the “Code”)
with various revisions that are, for the most part, applicable toevents or transactions which occur on or after May 1, 2006 andfor the fiscal years ending on or after May 1, 2006. The significant
changes 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 thatmeet certain criteria such as: (1) having a board of directors, (2)having independent auditors, (3) having a board of corporate
auditors and (4) having a one-year term of service for directors
prescribed in its articles of incorporation, rather than two years,
the board of directors may declare dividends (except for dividends
in kind) at any time during the fiscal year if the company has so
provided in its articles of incorporation. The Company meets all
the above criteria. The board of directors of companies withboard committees (an appointment committee, compensationcommittee and audit committee) may also do so, because
companies with board committees already, by definition, meet
the above criteria under the Corporate Law, even though they
have an audit committee instead of a board of corporate auditors.
The Corporate Law permits companies to distribute dividendsin-kind (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 of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but theamount of net assets after dividends must be maintained at no lessthan ¥3 million.
The amount of retained earnings available for dividends under
the Corporate Law was ¥103,627 million ($881,482 thousand) as ofMarch 31, 2007, 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 ofretained 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 the 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 bereversed without limitation. The Corporate Law also provides
that common stock, legal reserve, additional paid-in capital, othercapital 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 theboard of directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula.
The Corporate Law also provides that companies can purchaseboth treasury stock acquisition rights and treasury stock.

11. other comprehensive income (loss)
The changes in the components of accumulated other comprehensive income (loss) were reported net of income taxes as follows:
Millions of YenForeign currency translation adjustments
Unrealized gain (loss) on securities:
Unrealized holding gain (loss)
Reclassification adjustments (loss)
Net unrealized gain (loss)
Minimum pension liability
Other comprehensive income (loss)Pre-Tax
AmountTax
ExpenseNet
AmountPre-Tax
AmountNet
AmountPre-Tax
AmountTax(Expense)
CreditNet
Amount¥1,598¥(146)¥1,452¥ 3,345¥ (261) ¥ 3,084¥ (325)¥ 17¥(308)

56
129
185

(15)
(53)
(68)

41
76
117

13,761(816)
12,945(5,531)332(5,199)¥1,783¥(214)¥1,569¥16,290¥(5,460) ¥10,830

(334)
(76)
(410)
1,620
¥ 885

113
31
144
(666)
¥(505)

(221)
(45)
(266)
954
¥ 380

Thousands of U.S. Dollars

Foreign currency translation adjustments
Unrealized gain (loss) on securities:
Unrealized holding gain (loss)
Reclassification adjustments
Net unrealized gain (loss)
Other comprehensive income (loss)

40



Tax
(Expense)
CreditPre-Tax
AmountTax
ExpenseNet
Amount$13,593$(1,242) $12,351

476
1,098
1,574
$15,167

(128)
349
(450)
647
(578)
996
$(1,820) $13,347

8,230
(484)
7,746

12. income taxes
Income before income taxes, equity in net income of affiliated companies, and minority interests are summarized as follows:


Japan
Foreign
Total

Millions of YenThousands of
U.S. Dollars





¥14,487 ¥ 4,695 ¥12,789(567) (1,229)(710)¥13,920 ¥ 3,466 ¥12,079$123,231(4,823)$118,408

Income taxes expense consists of:Millions of YenCurrent:
Japan
Foreign
Deferred:Japan
Foreign
Total income taxes

Thousands of
U.S. Dollars







¥1,446
1,428¥2,874¥ 2,669599¥ 3,268¥2,437604¥3,041$12,300
12,147$24,447¥3,854(226)¥3,628¥6,502¥(1,845)36¥(1,809)¥ 1,459¥2,890(131)¥2,759¥5,800$32,783(1,922)$30,861$55,308

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, 2007, 2006 and 2005:
Normal Japanese statutory rates
Increase in taxes resulting from:
Permanently non-deductible expenses
Change in valuation allowance
Undistributed earnings of foreign subsidiaries
Differences in subsidiaries’ tax rate
Tax exemption
Tax loss on investment in subsidiaries
Other – net
Effective tax rates







40.7%

40.7%

40.7%

6.5
(2.0)
0.8
(0.8)
(1.3)

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

3.7
3.8
0.5
(1.9)
(0.9)
(0.2)
2.3
48.0%

2.8
46.7%

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances at March 31, 2007
and 2006 were as follows:
Deferred Tax
AssetsSales returns
Allowance for doubtful receivables
Inventory valuation
Intercompany profits
Accrued bonuses
Valuation loss on investments
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
Enterprise taxes
Accrued vacation
Pension expense
Fixed assets
Tax loss carryforwards
Other temporary differences
Total
Valuation allowance
Total

Millions of Yen

Deferred Tax
Liabilities¥ 1,117
¥ 383
1,273
218
1,392
760

2,331
39
20,325¥20,325



Deferred Tax
Assets

Deferred Tax
Liabilities¥ 1,037
115
1,211
153
1,474
615

1,724
2,742
10,691
2,415
330
126
812
753
1,445
1,795
838
10,859
(1,465)¥ 9,394

Thousands of
U.S. Dollars
Deferred Tax
Assets$ 9,501$ 3,258
10,8291,854
11,841
6,465¥ 1,753
2,363
10,726
2,415

343
195
788
2,271
1,600
3,965
769
14,536(1,651)¥12,885

Deferred Tax
Liabilities

36
17,293¥17,293

14,66523,32490,941
20,542
2,807
1,072
6,907
6,405
12,292
15,2697,128
92,370(12,462)$ 79,908

19,828332
172,890$172,890

41

A valuation allowance was recorded against the deferred tax assets, primarily related to loss carryforwards, of certain domestic andforeign subsidiaries. The valuation allowance decreased by ¥186 million ($1,582 thousand) for the year ended March 31, 2007 andincreased by ¥6 million for the year ended March 31, 2006.
At March 31, 2007, 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
Indefinitely until utilized
Total

¥ 204
790
738
542
408
905
1,005
¥4,592$ 1,735
6,720
6,278
4,610
3,471
7,698
8,549
$39,061

The portion of the undistributed earnings of foreign subsidiaries which are deemed to be permanently invested amounted to ¥3,556
million ($30,248 thousand) and ¥5,758 million at March 31, 2007 and 2006, respectively. It is not practicable to determine the unrecognized deferred tax liability on these earnings.

13. related party transactions
The Companies purchase merchandise from numerous suppliers
throughout the world, including certain affiliates of theCompanies. The Companies purchased merchandise from affiliates in the amount of ¥1,588 million ($13,508 thousand), ¥1,811
million and ¥1,805 million in the fiscal years ended March 31,
2007, 2006 and 2005. The accounts payable to affiliates were ¥9 million ($77 thousand) and ¥26 million at March 31, 2007 and 2006,
respectively.

The Companies also sell supplies, materials and products tocertain affiliates. Aggregate sales to affiliates were ¥1,042 million($8,864 thousand), ¥1,494 million and ¥1,679 million in fiscal
years ended March 31, 2007, 2006 and 2005. The accounts receivable from affiliates were ¥103 million ($876 thousand) and ¥176
million at March 31, 2007 and 2006, respectively.

14. earnings per share and american depositary receipt
The Company accounts for its earnings per share in accordancewith SFAS No. 128, “Earnings per Share.” Basic net income pershare has been computed by dividing net income available to common shareholders by the weighted-average number of commonshares outstanding during each year. Fully diluted income pershare 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, isbased on the weighted-average number of common shares outstanding. The weighted-average number of common shares outstanding used in the computations was 142,910,187 shares for 2007,
143,933,607 shares for 2006 and 143,956,284 shares for 2005.

15. financial instruments and concentration of credit risk
Fair Value of Financial Instruments – The carrying amountof cash and cash equivalents and short-term bank loans approximates fair value because of the short maturities of these instruments. The fair values of current and noncurrent marketablesecurities, as presented in Note 3, are primarily estimated basedon quoted market prices for these securities.
The fair value of long-term debt including current portion
at March 31, 2007 and 2006 was ¥162 million ($1,378 thousand)and ¥66 million, respectively. These fair values are based on comparisons of instruments with similar terms and maturities.
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.
Fair value estimates are made at a specific point in time, basedon relevant market information and information about the financial instrument. These estimates are subjective in nature andinvolve uncertainties and matters of significant judgment andtherefore cannot be determined with precision.

Forward Currency Exchange Contracts – The Company
occasionally uses forward currency exchange contracts to manage
its exposure to foreign currency fluctuation on the transactions
dominated in foreign currencies. At March 31, 2005, the notionalamount of its open forward currency contract was for the purchase of $3,000 thousand. The Company recorded the changes in
the fair value of the derivative contract of ¥10 million in otherincome since it was not designated as a hedge in the year ended
March 31, 2005. No derivative contract was outstanding as ofMarch 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 and other general retailers and to specialty stores.
No single customer constitutes 10% or more of the total sales,
although the general retail customers that are consolidated
companies in the Aeon Group collectively accounted for approximately 10.1%, 10.1% and 10.3% of the total sales in the fiscal years
ended March 31, 2007, 2006 and 2005, respectively.

16. subsequent event
On May 29, 2007, the Board of Directors resolved to pay a cash dividend of ¥110 ($0.94) per 5 shares of common stock to holders of record
as of March 31, 2007 (aggregate amount of ¥3,093 million ($26,310 thousand)).
42

management’s report on internal control
over 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 reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets ofthe company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of 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 assetsthat 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, or that 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, 2007. 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, 2007, Wacoal Holdings Corp.’s internal control overfinancial reporting was effective based on the COSO criteria.
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 as of March 31, 2007.

Yoshikata Tsukamoto
Representative Director

Shoichi Suezawa
Chief Financial Officer
June 28, 200743

report of independent registeredpublic 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, 2007 and 2006, and the related consolidated statements of income, comprehensive income, shareholders’ equity andcash flows for each of the three years in the period ended March 31, 2007, all expressed in Japanese yen. These financial statements
are the responsibility of the Companies’ 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 (UnitedStates). 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 anddisclosures 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 anEnterprise and Related Information” has not been presented in the accompanying financial statements. In our opinion, presentationof 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 all material respects, the financial position of Wacoal Holdings Corp. and Subsidiaries as of March 31, 2007 and 2006, and theresults of their operations and their cash flows for each of the three years in the period ended March 31, 2007 in conformity withaccounting 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 effectiveness of the Companies’ internal control over financial reporting as of March 31, 2007, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission andour report dated June 28, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Companies’
internal control over financial reporting and an unqualified opinion on the effectiveness of the Companies’ internal control overfinancial reporting.

June 28, 200744

report of independent registeredpublic accounting firm
To the Board of Directors and Shareholders of Wacoal Holdings Corp.
Kyoto, Japan:
We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over
Financial Reporting dated June 28, 2007, that Wacoal Holdings Corp. and Subsidiaries (the “Companies”) maintained effective internal control over financial reporting as of March 31, 2007, based on criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companies’ management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control overfinancial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of
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, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
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, 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. 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 reasonableassurance that transactions are recorded as necessary to permit preparation of 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 ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial 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 withthe policies or procedures may deteriorate.
In our opinion, management’s assessment that the Companies maintained effective internal control over financial reporting asof March 31, 2007, is fairly stated, in all material respects, based on the criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Companies maintained, in all material respects, effective internal control over financial reporting as of March 31, 2007, based on the criteria establishedin Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements of the Companies as of and for the year ended March 31, 2007 and our report dated June 28, 2007
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 28, 200745

corporate data
As of March 31, 2007

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

Shareholders’ Equity¥193,278 million

Date of Establishment
November 1, 1949

Number of Employees (Consolidated)
13,397

International Network

Domestic Principal Subsidiaries
Wacoal Holdings Equity Owned(%)

Wacoal America, Inc.

Vietnam Wacoal Corp.

Wacoal Corp.
Studio Five Corp.
Wacoal Dublevé 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

136 Madison Avenue,
New York, NY 10016, U.S.A.
Tel: 1-212-532-6100

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

100
100
100
100
100
90
53
77
100

Domestic Principal Joint Ventures
Wacoal Holdings Equity Owned(%)

Peach John Co., Ltd.
House of Rose Co., Ltd.

49
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

Date of Foundation
June 15, 1946

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

Wacoal France S.A.

7/11 Rue des Gazometres,
93218 Saint-Denis La Plaine Cedex,
FranceTel: 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.

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.

16th Floor East, Warwick House,
Taikoo Place, 979 King’s Road,
Quarry Bay, Hong Kong
Tel: 852-2561-9191

15, Jingkwo Road, Taoyuan,
Taiwan, R.O.C.
Tel: 886-3-326-9369~80

Wacoal China Co., Ltd.

Jl. Tarikolot No. 59,
Citeureup-Bogor, Indonesia
Tel: 62-21-875-3611

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

Indonesia Wacoal Co., Ltd.

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 information
As of March 31, 2007

Stock Listings
Tokyo, Osaka, NASDAQ
Fiscal Year-End
March 31
Securities Code3591
Common Stock
Issued: 144,016,685 shares
Outstanding: 140,576,569 shares
Trading Unit
1,000 shares
Shareholder Register Agentfor Common Stock
Mitsubishi UFJ Trust andBanking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

American Depositary Receipts
Cusip No.: 930004205
Ratio (ADR:ORD): 1:5
Exchange: NASDAQ
Symbol: WACLY
Depositary
The Bank of New York
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
Number of Shareholders
10,902* Shares deposited to issue American Depositary
Shares traded on the NASDAQ market.

Ownership and Distribution of Shares

Securities
Firms
1.05%
Individuals
and Others
17.22%
Other JapaneseCompanies
19.31%

Major Shareholders%
Hero and Company*
13.67
Meiji Yasuda Life
Insurance Company
4.98
The Bank ofTokyo-Mitsubishi UFJ, Ltd.
4.97
Nippon Life Insurance Company
3.88
The Bank of Kyoto, Ltd.
3.03
Japan Trustee Services Bank, Ltd.
(Trust Account)
2.71
The Shiga Bank, Ltd.
2.40
The Dai-ichi MutualLife Insurance Company
2.28
Mitsubishi UFJ Trustand Banking Corp
2.17
The Master Trust Bank of Japan, Ltd.
(Trust Account)
1.92

Stock Price/Trading Volume
2,000
Financial
Institutions
41.13%

(¥)

1,500
1,000

,

thousandshares5000Foreign Institutions
and Individuals
21.29%

20,000 (Thousand Shares)
15,00010,000
5,000
0
’00/4
Stock Price’01/ 1’02/1’03/ 1

’04/1

’05/1

’06/1

’07/1

Trading Volume

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

47

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

Printed in Japan
070810-FA-WT3