INTEGRATEDREPORT

2 016

PassionMeets
Performance

Contents
04

The Wacoal Group’s Products

06

Wacoal’s History

08

SPECIAL FEATURE

22

Building a Global Presence for
Wacoal through Trust—China

Our Value30

Building Mutual Trust with Society (CSR Activities)

10

Tangible Assets—Financial Highlights

38

Directors and Audit & Supervisory Board Members

12

Intangible Assets—Non-financial Highlights

40

Corporate Governance

14

Characteristics of the Women’s Innerwear Market

44

Financial Section

16

New Medium-term Management Plan Overview

86

Corporate Data

18

Message from Top Management

87

Investor Information

OUR MISSIONOUR VISION

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

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

Editorial Policy for This Report
In accordance with international norms for integrated reporting, the Wacoal Group has been issuing integrated reports since
FY2011 as part of its communication with shareholders and other investors.
This integrated report explains the Wacoal Group’s value creation activities not only through financial information but also
through nonfinancial information about unique, significant assets and other facets of the Group’s business.
Further, the web site of Wacoal Holdings Corp. includes a wide range of information about the Group. We hope that referringto this integrated report in conjunction with the web site will further understanding of the Group. Going forward, we will continue
pursuing an editorial policy that responds to changes in reader expectations.

Publications to Help Stakeholders
Understand Wacoal

URL
Company Homepage

Integrated ReportNews for Shareholders

Annual Handbook

http://www.wacoalholdings.jp/en
IR Information

http://www.wacoalholdings.jp/en/ir
CSR Information

http://www.wacoalholdings.jp/en/csr

Mutual trust describes how all
employees of Wacoal become
people who are trusted both byothers in Wacoal and by membersof society. It is about establishinga body of people bound by trust
and respect, who do more thansimply get along; they act out of adeep and intense humanity tohelp and encourage others.
Mutual trust is not a value thatwill fade with time, rather it
remains a principle by which thewhole world can coexist andprosper, and it stands as the fundamental and enduring founding
spirit of the Wacoal Group.

Mutual
Trust

BeautySince our founding over 70 years
ago, we have aimed through ourbusiness operations to help
women realize their desire to
express their beauty. We like tothink that, as a result, we havehelped women across the world
feel more confident and leadmore fulfilled lives. Our focus onunderstanding women’s values
and sense of beauty, and ourempathy with women, has now
become a Wacoal value. The
ideal that we pursue is the creation of a beauty that can beshared by the world’s women.
01

Sophisticated Figure
Beauty and comfort in the perfect fit.
While brassieres that put appearance before functionality gain in popularity,
Wacoal daily continues to drive evolution in pursuit of theideal brassiere that provides both beauty and comfort for every woman.

Every Stitch,
Every Millimeter,
Every Second Counts
Our brassieres are made from about 40 parts in about 20 steps.
The decorative beauty of the finish and the body-fitting curves are
the result of the technical prowess of our employees
who perform the final stitching by hand.
With detailed production that leaves no room for even one millimeter error,
we also aim to boost efficiency through consciousness of every second,
and thoughtfulness in every stitch.
Bringing these three elements together allows us tomake Wacoal products loved by customers.

Passionfor Products
The Science of Women’s Beauty
Based on data compiled from more than 40,000 people over 50 years,
we have looked at the beauty of shape, motion,and comfort from the point of view of human science.
With many years of scientific research to support results such as the“Golden Canon,” a three-dimensional index of the balance of beauty,
and the “Aging of the Physique and the Principles of Beauty,”that makes clear the effects of age, we can respond to women’s desire to express their beauty.

02

Making it
HappenTo help the world’s women to express their beauty is themission and the objective of Wacoal. In today’s rapidlychanging society, women’s perceptions, values,
and lifestyles are overflowing with diversity, andtheir life stages are constantly in flux as time passes.
At Wacoal, our job is to understand those changes,
keep listening to women, and offer products
and services that match their needs.
We also hope to provide new value throughout the world
by strengthening Wacoal’s global presence.

03The Wacoal Group’s Products

Wacoal for Lifestyle
To meet the varying requirements of customers
throughout their lives, Wacoal offers a numberof product brands manufactured through leveraging our strengths.

Wacoal Junior
KIDS Wacoal
FAIRY TIARA

gra-P
Rakuraku Partner

Dailyy Life
Rich product lineups of both inner and outer wear
for everyone, regardless of gender or age.

WACOAL MEN
BROS

WacoalL’ge

Wing

LASSÉEWACOAL DIA

amphi

TrèflePuliliSaluteune nana cool

PARFAGEPEACH JOHN
SUCCESS WALK

04

Workout
Sportswear designed
for mobility and support
during physical activities.

CW-X

WACOAL BRIDAL

A New Life
Superior-quality bridal lingerie
gerie for the
rwear to keep
special day, maternity innerwear
pre and postnatal mothers comfortable,
ollows theand baby underwear that follows
baby’s growth.
WACOAL MATERNITYW

WACOALACOAL BABYWACOAL Swim Wear
Ai Swimwear
Think Sleeping
tsumori chisato SLEEP

Relax & Resort
Pajamas, and room wear essentials for relaxing, andswimwear for summer and resorts.

05

1970s
1960s
Domination of theDomestic Market

1950s
Birth of Wacoal
In Japan, women’s dress sense was transforming from Japanese to Western apparel.
At its factory, Wako Shoji designed andmass produced Western innerwear for
women, which had been until then unfamiliar to Japanese women. The company undertook unique promotional activities, suchas innerwear fashion shows, which established innerwear as a fashion item. From1956 to 1957, the first innerwear boom
grew sales beyond ¥500 million and expanded the workforce to 500, laying thefoundations of today’s businesses.

In the 1960s, Japan’s period of rapid economic growth was changing women’s lifestyles and heightening their interest in
fashion. In 1961, we completed a three-dimensional drawing method for brassieres.
And, in 1965 we obtained an international
patent for Tummy Girdle, which we developed by applying an innovative flexible
fabric. The Wacoal Group established theProduct Research Department and began
investigative research on the physique ofJapanese women in 1964. In the same
year, the Group listed on the stock market,
and we have continued to adhere to a passage of the address Koichi
Tsukamoto delivered at
this time. In fact, his words
have become our mission.

Overseas Strategy andDiversification
This era saw consumer tastes shift fromvolume to quality and from the material to
the spiritual. In 1970, we established joint
ventures in South Korea, Thailand, and Taiwan, laying the foundations of a stronger
global presence for the Wacoal Group. This
was also the era in which we sought to go
beyond the innerwear industry’s traditionalboundaries and become part of the fashionindustry by diversifying into peripheral industries. In 1979, to mark the 30th anniversary of our foundation, we renewed our
corporate logo to create the current “fashion flower” logo.

Net Sales(Sep. 1978—Aug. 1979)¥

Business Based on
Mutual Trust

74.3 billion

Labor relations became a major issue
for business in the 1960s. Ultimately,
management judged that it had to trust
employees completely, and the principleof “Business Based on Mutual Trust”
became a pillar of management.

Net Sales(Sep. 1968—Aug. 1969)

Net Sales(Sep. 1950—Aug. 1951)¥

35 million

Founding — 1950s

Developing theDomestic Market

06¥

9.7 billion

1960s

1970s

Establishing theDomestic Market

Wa
Developing theOverseas Market

2000s

1990s
1980s
Expansion Strategy
To expand our presence in overseas markets, we established local subsidiaries in
the United States in 1981 and in Hong
Kong in 1983. In 1985, we became the firstJapanese company to establish a joint
venture in China. Further, we overturned
conventional wisdom in the innerwear industry by launching Shape Pants with 17
choices of color in 1981. The product became a huge hit, shipping 2.8 million units.
Around this period, we began such social
contribution activities as corporate philanthropy in the areas of culture and sports. It
was the era in which we began sowing theseeds of long-term value creation.

As well as expanding manufacturing and sales
networks in Asia, we entered Europe’s market
as part of efforts to realize a stronger global
presence for the Wacoal Group. In Japan,
amid a growing consumer preference for authenticity, we advanced investigation and research of women’s physiques under thethemes beauty, comfort, and health. A productof these efforts, the Good Up Bra, launched in
1992, became an unprecedented successthrough advertising that emphasized its “gather and lift” functionality. Over five years, with10 million sold, it became aleading product in Japan’s
innerwear industry.

A New Centuryy
In 2000, Wacoal China Co., Ltd. became awholly-owned subsidiary and began rollingout products in earnest and heightening
brand-name recognition. In 2005, we adopted a holding company system to increase the accuracy and speed of operational decision making. Further, the Wacoal
Group pursued increased enterprise value
by welcoming companies into the Group:
Peach John Co., Ltd., in 2006 and Lecien
Corporation in 2009. Also, we have actively
pursued various social contributions as an
essential part of our role in society. For example, from 2002 we began Pink Ribbon
activities, which raise awareness of breast
cancer, while 2008 saw the launch of our
Brassiere Recycling Campaign.

Net Sales
Net Sales(Apr. 2008—Mar. 2009)(Apr. 1998—Mar. 1999)

Net Sales(Apr. 1988—Mar. 1989)¥

Evolution into a Global
Corporate Group107.9 billion¥

169.9 billion¥

171.0 billion
Net Sales(Apr. 2015–Mar. 2016)¥202.9 billion

2010sStrengthening
Our Global Presence
On a day-to-day basis, we are continuing efforts to establish a corporate groupthat is able to achieve further value creation and grow with customers by exploiting global networks and marketing rooted in countries or regions. The report “Aging of the Physique and the Principles of Beauty,” which we publishedbased on half a century of research, is a major achievement that has provided
new value to customers and shown the importance of wearing innerwear appropriate to the individual’s physique. In 2012, we made Eveden Group Limited
a wholly-owned subsidiary with a view to expanding our businesses in Europe.

coal’s History
1980s

1990s — Present

Establishing theOverseas Market

Building a
Global Wacoal

07

Our Value
Creating Value through Trust and Passion

Management to
Build Trust
Strengthening intangible assets is afundamental tenet of management.

Tangible Assets

Group plants in Japanand overseas

PhysicalAssetsFinancial
AssetsAppealing sales areas

Abundant capital
Strong financial foundations
Overwhelming market sharein Japan and Asia

Rich product lineup

Value
Creation
Autonomous,
innovative personnel
Extensive and diverse
groups of specialists
Operation ofwide range of stores

Trust-related
AssetsOrganizational
AssetsAbundant physique data andknowledge of Human Science
Research Center

Establishment ofrelationships of trust
through customer service

Beauty advisor training system

Social contribution
through businesses

Business management basedon mutual trust

Favorable business
partnerships

08

Unique designing for comfort,
manufacturing technology, andquality control system

Integrated manufacturing system
responsive to market feedback

Intangible Assets

Commitment to stronger global
presence for the Wacoal GroupFor sustained growth, Wacoal continues to invest in and strengthen intangible assets.
Based on appropriate management strategies, intangible assets areincorporated into our business model, providing society with the three values of beauty,
comfort, and health. Women’s values and sense of beauty differ widely by country and region.
Considering the hearts, minds, and bodies of women in each part of the world,
we aim to build a consistent business model with local roots.
Underlying this is strong desire to help the women of the world to express their beauty.

Offering Beauty,
Comfort, and Health
The foundation of our business is the desire forhelping women to express their beauty.

R&D

Product
Planning

Think
Globally,
Act Locally

Sales

Manufacturing

Products loved
by customers

New products meetingcurrent needs

BeautyComfortConduct of businessin a fair manner

Health09

Tangible Assets — Financial Highlights (for the year ended March 31, 2016)

Financial Assets
Consolidated Financial Data

Net Sales

¥

202.9

Full-year Cash Dividends
per Share of Common Stock

Operating Income

ROE

13.9

4.9

UP by 95.8%

UP by 1.0%¥

billionbillionUP by 5.8%

¥

%

33.0
UP by ¥3

Segment Information

9.5 %59.4 %

Other Businesses

Wacoal Business (Domestic)

Mainly operations ofNanasai Co., Ltd. andLecien Corporation

Mainly operations of Wacoal Corp.
in wholesale business for department stores, merchandising stores,
specialized stores, directly managed
stores, and online sales business, aswell as some domestic subsidiaries.

5.5 %Share of Sales
by Business Segment*

Peach John Business
Operations ofPeach John Co., Ltd.

Share of Sales
by Business(Wacoal Corp.)

25.6%
Wacoal Business (Overseas)
Mainly operations of
Wacoal International (U.S.),
Wacoal China Co., Ltd., andWacoal Europe Ltd. (U.K.).

*Calculated based on net sales to external customers

Wacoal Brand Business Dept.

52.1%

Wing Brand Business Dept.

22.8%

Retail Business Dept.

14.1%

Wellness Business Dept.

6.4%

Catalog Sales Business Dept.

4.6%

Net Sales to External Customers / Operating Income (Loss)
Wacoal Business (Domestic)

Wacoal Business (Overseas)

Peach John Business

Other Businesses(¥ million)(¥ million)(¥ million)(¥ million)

Net Sales

Operating Income

2016

Operating Income

2016

8,810

120,570

2015

4,433

112,203

2014

9,284

Operating Income

258

4,776

– 6,296

4,037

83

Operating Income

2016

364

19,2882015

11,626

2014

43,636Net Sales

11,1902015

48,107

2014

118,085

Net Sales
2016

51,869

2015

8,444

10

Net Sales

19,829158
2014

12,482456

19,578

Information by Region
Consolidated Overseas Sales

¥

52.2

United Kingdom

CanadaNetherlands

billionHong Kong

FranceUP by 7.7%

South Korea
United States

China
Japan

VietnamIsraelTaiwanMyanmarDominican Republic

Philippines

Overseas Affiliates Sales

¥

India

ThailandCambodia

Sri Lanka

45.8

Indonesia
Americasand Europe

Malaysia
Singapore

13.8%

Australia

billionUP by 8.6%
Number of Countries where the
Wacoal Group has Operating Bases

23

countries

Asia and
Oceania

25.6%
Sales

11

Manufacturing

2

Manufacturing / Sales 10

Share of Salesby Geographic
Segment*

Japan

60.6%

*Calculated based on net sales including net sales of overseas affiliates

Net Sales by Region (Consolidated)Japan(¥ million)

2016

Asia and Oceania(¥ million)

2016(¥ million)

2016

150,673
2015

Americas and Europe

34,33817,9062015

2015

143,250

32,254

16,261

2014

2014

2014

149,715

29,195

14,871

Physical Assets
Products Manufactured In-house*
More than 80% of products soldin Japan, and almost 100% ofbrassieres, are manufactured
in-house. This kind of in-housemanufacturing structure prevents our technological capability and manufacturing knowhow from leaking to external
parties, and allows us to maintain a dominant cost competitiveness that is little affected bymacroeconomic conditions.
*Wacoal Corp.

Worldwide Sales of Brassieres

Approx.
2016

More than

80

45.0

million2015
Approx. 44.6 million
2014%

Approx. 45.4 million

11

Intangible Assets — Non-financial Highlights

Organizational Assets
Women Assuming More Active Roles
Percentage offemale employees*1 (FY2016)

89

Percentage of employees
who take maternity/child leave%

Percentage of women in
managerial positions*1 (FY2016)11.9 %

18.6 %

Japanesecompany average*2

At Wacoal

82 %

99 %

Japanesecompany average*2

At Wacoal(FY2016)*1 Wacoal Corp.
*2 2015 Basic Survey of Gender Equality
in Employment Management, Ministryof Health, Labour and Welfare

Directors and Audit & Supervisory Board Members

As of June 29, 2016

Number andpercentage offemale officers

2

17

%

Outside officers
and ratio to total
directors and Audit &Supervisory Board members

6
12

50

%

Directors andAudit & Supervisory
Board members

12

As of June 2005

Directors andAudit & Supervisory
Board members

Number andpercentage offemale officers

1

8

%

12
Outside officers
and ratio to total
directors and Audit &Supervisory Board members

5

42

%

Cumulative Measurement Data*1
Countries &Regions Where Wacoal
Products are Sold

More
than

40,000Over nearly 50 years, we have studied the physiques of over 40,000 women. This data is thesource of Wacoal’s competitive products thatincorporate beauty, comfort, and health.

51

countries

Individual women on which
we have accumulated data
for nearly 30 years

More
than

100

Patents & Registrations in Japan*1
At Wacoal:

1410

Approx.

1990

2010

2016

550

Average at competitors

Approx.

170

inJapan*2*1 Wacoal Corp.
*2 Estimated by Wacoal

Trust-related Assets
Beauty Advisors Worldwide

Approx.

8,000

Our beauty advisors (BA) are important. They
not only provide consultation and information in
stores, but also understand what customers
need. Those customer needs and voices will
help new product planning and services,enhancing Wacoal’s competitive position.

Share of Women’s
Innerwear Market in Japan*1

26.2 %

41.0%

2005

2015

Nikkei Sangyo Shimbun (shipment value basis)

Quality Check150

criteria

In 1997, Wacoal became the first ISO 9001*2
certified company in Japan’s apparel industry. At
Wacoal, innerwear product quality control ismaintained according to over 150 criteria tested
during the preproduction stage. We also employ
unique quality standards for cutting and sewing,
further ensuring that we can be trusted to deliversafe, reliable products.
*1 Wacoal Corp. and domestic subsidiaries*2 An international standard that continuously increases customer satisfaction and improves
quality management systems through assurance of product and service quality.

13Characteristics of the Women’s Innerwear Market

Characteristics of Wacoal’s Business Worldwide

01

Business
unique toeach market

Wacoal’s business model does not
simply introduce products created forJapan to the global market. Instead,mainly with local subsidiary staff in eachcountry, we offer products and services
tailored to local cultures, practices, andpreferences. Our integrated system, frommanufacturing to sales, enables us torespond swiftly and flexibly to local
trends and customer needs.

02

Designs
differ by country
and region

Women’s physiques vary greatly, not only
among age groups and individuals, butalso among countries and regions. To
deliver innerwear that is comfortable forevery woman, Wacoal designs products
for all types of physiques and sensibilities
worldwide. We believe that with products
designed to fit for everyone, we can contribute to the beauty of the world’s
women in ways that customers love.

03

Responding
in detail, rather
than scale

The women’s innerwear industry is labor
intensive, and uses small lot sizes of raw
materials. This makes the economy ofscale less effective, which is an obstacle
for market entry to mass production/
mass retailing clothing companies.
However, this creates an opportunity for
Wacoal to respond to market demands insuperior detail.

Wacoal’sMarketEnvironment
Overseas
MarketUnited States

EuropeMarket Size*1

Market Size*1

12 billion

14

9 billion

Approx. $Approx.

Women’s innerwear
Market share as a ratio of GDP

Women’s innerwear
Market share as a ratio of GDP

0.07%

0.06 %

Some American brands occupy overwhelming
shares of the U.S. market, while others only havearound 1%. Half of the sales channels are comprised of shopping center specialty stores anddepartment stores, accounting for approximately
40% and 10%, respectively. Wacoal’s main sales
channel is department stores, which account for
approximately 23%, the largest share.

France, Italy, the United Kingdom, and Germany
are dominant, comprising a total of approximately
75% of the entire European market. The top
brand has 6–8% of each market’s share, followedby others with relatively equal shares of several
percent each. Wacoal’s share of the whole market
is approximately 1%. Specialty stores such as
boutiques account for an overwhelmingly large
portion of sales channels in Europe.

Domestic Market
Japan
Market Size*2

Approx. ¥644 billion

Women’s innerwear
Market share as a ratio of GDP

0.13 %The domestic innerwear market has relatively little price elasticity, and is relatively unaffected by economic cycles and changes in individuals’ incomes,
making it easier to secure stable sales volume in the market.
However, Japan’s domestic market has been contracting since its peak in
1988, mainly due to falling average sales prices. This market is expected toshrink further, given that the economically productive population will be decreasing. On the other hand, women are being encouraged to play more activeroles throughout society, which could increase demand for and diversity of innerwear. Higher-quality products are expected to sell better, which should befavorable for Wacoal.
Domestic Market Size*2

CAGR

Approx.
¥

–

CAGR

2.8 %

930 billion–

Approx.
¥

1998

1.8 %

758 billion

Approx.
¥2005

644 billion
2014

Change in Average Sales Price*2

Wacoal’s main products retail for over ¥4,000. Products priced above ¥4,000
accounted for approximately 38% of the entire market in 1998, but fell to approximately
18% in 2014. On the other hand, products priced under ¥1,500 accounted for about
7% in 1998 and rose to approximately 28% of the market in 2014.

China¥4,000– ¥7,499

34%– ¥1,499

28%¥7,500–4%¥4,000– ¥7,499

14%¥7,500–

4%

38%

1998

28%
2014

18%

Market Size*1

Approx.

80 billion RMB

Women’s innerwear
Market share as a ratio of GDP

0.10 %
Approximately 10% of the entire China innerwear
market is for mid- to high-end products soldmainly at department stores. Wacoal’s share ofthese sales at department stores is approximately
20%, making it the brand with the 3rd or 4th largest share. A local China brand has the largest
market share at approximately 30%.

Change in Proportion by Sales Channels*2

Wacoal’s main sales channels are department stores and merchandising stores. In theoverall market, though, department store sales have peaked and are contracting.
Merchandising store market sales have recently shown a tendency to decrease as well.
On the other hand, as directly managed stores and online sales are expanding, Wacoal
is putting more effort into opening direct stores and enhancing e-commerce websites.
Department stores
25%
Merchandising stores 27%

52%

Department stores
15%
Merchandising stores 31%
Direct stores
13%
Online sales
10%

1998

46%
2014

23%
*1 Estimated by Wacoal. *2 By Yano Research Institute, Ltd.

15

New Medium-term Management Plan Overview

Investment in Steady Medium- andLong-term Growth andReturn of Money to Shareholders
The Wacoal Group drew up a new three-year medium-term plan (from April 2016). The
Group aims to fulfill the concept of “Wacoal for the World.” To realize this, we will continue to develop the trust of customers worldwide while we make optimal use of management resources and the Group’s network to provide state-of-the-art products and further
develop new areas of innerwear culture. We will also focus on business profitability andefficiency while enhancing the company’s value by challenging ourselves to delve into
new areas as well as focusing on those in which Wacoal has a competitive position.

Overview of the New Medium-term Management Plan for
FY2017—FY2019

Responding to Market Change, andStrengthening Management Structure

The Group Aims to be“Wacoal for the World”

The previous medium-term management plan’s domestic goals
included creating more contact points with customers andincreasing our market share by area. Its international aims
were to increase our sales and revenue in the U.S., Europe,and China.
To achieve the previous medium-term management plan’snumerical targets, we rigorously curtailed costs, which involved
consolidating sourcing and shifting production to ASEAN countries. Despite the depreciation of the yen and rise of processing
wages, we came up slightly short of our target income. However,consolidated sales of ¥202.9 billion exceeded the planned target.
Domestic business sales increased because of the addition of a
new company, Ai Co., Ltd., that deals mainly with swimwear.
Overseas business sales increased significantly, not only
because of yen depreciation, but also on a local currency basis.
Peach John and other businesses ended with decreases in sales.
Profitability has been one of our priorities. Although the operating margin came in slightly under our target, profitability has
improved over the past three years.

We aim to secure revenue from domestic business, continuous
growth of overseas business, enhanced synergy and competitiveness across the group companies, and business portfolio expansion, thereby increasing profitability and operating efficiency.
Also, with the right financial strategy, we will improve our capital efficiency.

Achievement of Numerical Targets
Net Sales in FY2016

Target: over ¥200 billion
Operating Income in FY2016

Target: over ¥14 billion
Operating Margin in FY2016

Target: over 7%

16

¥

202.9

billion

13.9

billion¥

6.8

Improving profitability

The Previous Medium-term Management Plan from
FY2014—FY201604

Expanding businessportfolio

03

Strengthening groupsynergy02

Overseas business

01

Domestic business

Improving business efficiency%

05

Developing overall business
management foundations

Priorities of the New Medium-term Management Plan

Earnings in
01 Secure
Domestic Businesses

Group Synergies and
03 Create
Strengthen Competitiveness

Understand environmental changes accurately, and build
the channel mix with customers’ viewpoints in mind.

Leverage strengths of each group company to enhanceoverall competitiveness.

Fully leverage the Group’s extensive sales channels and encouragecustomer overlap among the Group’s stores and Internet sales sites.

Peach
John

Rebuild the brand image.
Enhance online-to-offline communication.
Expand store network and strengthen customer base.

LecienFocus on specific items in business portfolio.
Streamline planning and production.
Develop high added value products such as private
label products and handicraft goods.

Ai

Enhance year-round stores.
Expand resort wear products.
Improve business efficiency by incorporating logistics
functions and renewing IT infrastructure.

In order to improve productivity of wholesale business, further improve efficiency of human and physical resources.
Open more retail stores, and improve profitability by reducing
sourcing costs with appropriate product lineups.
Develop new products with high added value and product strategy
in accordance with target demographics.

Further Growth in
02 Generate
Overseas Business
Build robust operating foundations in our three large markets, the U.S., Europe, and China.
U.S.

Define mid-range and high-end markets.
Cultivate business in neighboring countries and newsales channels.
Develop management successors.

EuropeComplete organizational restructuring.
Review brand portfolio and improve business foundation.
Develop products by leveraging human science.

China

Leverage product power in high-end market to realize
operating margin that is close to corresponding levels in
the markets in the U.S. and Europe.
Review LA ROSABELLE business expansion plans, andreevaluate prospects for profitability.
Leverage other companies’ e-commerce websites anddevelop sales promotion.

Capital Policy andShareholder Returns
We will maintain a strong financial base while enhancing future
investment and returns to shareholders. Keeping in mind the
reduction of shareholder capital,in the final year of the current
three-year plan, we will achieve
over 5% ROE, a level that corresponds to the equity cost.

04 Expanding the Business Portfolio
Seek new business areas andmarkets based on our strengths.
Create new businesses other than innerwear and associate themwith the values of beauty, comfort, and health.
Introduce fiber products to new markets.

Our Group
05 Improve
Management Infrastructure
Sincerely engage with stakeholders toachieve sustainable growth.
Fulfill our management philosophy.
Respond to society’s demands and issues.
Continuously improve corporate governance.
Develop human resources including encouraging women to takemore active roles,etc.

FY2016FY2019Investment inexisting businessNew business

Cash Generation
Net income

Profitability
improvement¥

Working
capitalreduction

Depreciation
Review ofstrategic
shareholdings¥

224 billion

ROE

4.9 %

Stable dividends(Assets impairment)¥
Shareholders’Equity25 billion or more

Flexible share
repurchases

45 billion or more

We will reinvest and allocate
to shareholder returns
at least the amount of cash
generated during the period.

Shareholders’Equity¥220 billion

ROE

5% or higher
17

Message from Top Management

Wacoal for the World with

Passionand

Performance
Yoshikata Tsukamoto
President and Representative Director
Wacoal Holdings Corp.

18

The Wacoal Group drew up a new three-year medium-term plan totake effect April 2016 aimed at maximizing its network becoming“Wacoal for the World.” Based on passionately“helping the world’s women to express their beauty,”
the Group’s management is committed to further building“mutual trust” and increasing our corporate value.

Revenue and Profit Rise,
Slightly Less than Targets

store launches.
The ongoing depreciation of the yen accelerated overseas business, which marked an averageannual sales growth rate of 19.6%, accounting for

In FY2016, ended March 31, 2016, despite persistent

25.7% of consolidated sales and 33.0% of operat-

management challenges, net sales increased bying income.

5.8% year on year to ¥202.917 billion and operating

By region, the U.S. operating income has been

income increased by 95.8% to ¥13.865 billion, rais-

stable and the revenue increased by ¥8.6 billion,

ing both revenue and profit.

and in Europe the average operating income overDomestic businesses achieved higher sales

three consecutive years exceeded 10%. In China wethan in the previous fiscal year, mainly because ofbegan to turn a profit by undertaking a “scrap &the addition of a new company, Ai Co., Ltd. that pri-build” policy with our stores, curtailing the cost ofmarily carries swimwear, as well as an increase inmaterials, and simultaneously reinforcing our sales

launches of directly managed stores. Total sales

capabilities.

overseas also increased from the previous fiscal
year, as yen depreciation pushed up sales.
Operating income increased greatly, as impairment losses (recognized in the previous year) fromthe Peach John business ceased to have an impact.

In the Peach John business, its main sales channel of online sales did not recover, while sales inother businesses also decreased due to extended
slackness of Lecien outerwear sales.
Collectively, although our sales targets wereachieved, I would give the overall results a score ofDomestic Retail Business andOverseas Business on Track50 on a scale of 100, given that we could not develop

FY2016, the final year of the previous mid-term

been growing at a good pace. However, we need to

management plan, targeted ¥200 billion sales andexpand sales channels and our portfolio to acceler-¥14 billion operating income. Actual operating

ate growth in existing markets.

new opportunities to expand into new businessfields and markets.
Domestic retail and overseas businesses haveincome came in slightly under the target, but annual

Another key is to cultivate new markets. In

average sales growth stayed at 4.6%, achieving theIndia, we opened two stores jointly with a local

sales target.

partner. We would like to continue to meet the chal-With a desire to respond to diverse domestic
market needs, we acquired new customers by focus-

lenge of opening more new stores, while keeping
our eyes on markets for potential opportunities.

ing more on age groups such as beginning users of

For the duration of the previous medium-term

innerwear and seniors; enhancing sales promotion

plan, we proceeded with structural reform of ouractivities in selected target regions; expand the

production divisions and strengthening the founda-

lineup of products in the high volume price range;tion for further growth. To address rising wage stan-and increasing directly managed stores launched atdards in Asian countries including China, wereduced cost. Notably, our retail business revenue

launched a new sewing plant in Myanmar. In

grew nearly 30%, due largely to the increase in

Thailand, we acquired a material manufacturing

19

Message from Top Management

resources from wholesale to retail businesses. We
will open more retail stores to serve as locations inwhich to interact with prospective customers. We
will reduce sourcing cost by employing appropriate
product line-ups in order to improve profitability.
In the next stage, we will review business infrastructure. In-house trading rules designed for separating departments from each other will beamended. Furthermore, we will integrate the core
IT system to enable cross-channel management ofsales and inventory information. The final year of
the new three-year plan targets an increase in the
proportion of retail and e-commerce sales from thecurrent 28% of total sales to 34% of total sales.

2. Accelerating Growth of Overseas BusinessIn the three major markets of overseas businesscompany from Saha Group and restructured it.

(the U.S., Europe, and China), we will establish a

Manufacturing network expansion encouraged

robust management foundation, aiming for a con-healthy competition among production companies,

sistent operating income rate of 10%.

which are now working even harder to improve

In the U.S., although the size of our main salesquality and productivity. By leveraging our global

channel (department stores) is declining somewhat,sourcing base in such ways, we can continue tothe company is strengthening planning and produc-increase the Group’s profitability.

tion departments in order to increase our products’
added value. We will also proceed in developing

New Mid-term Management Plan
Targets—“Wacoal for the World”

the markets of countries that neighbor the U.S. andnew sales channels.
Our highest priority in Europe is to fully complete
PMI (post-merger integration). We will review the

The new medium-term management plan starting

brand portfolio and reorganize the business toin April 2016 frames the Group’s aims as “Wacoal

restore performance, especially across the Euro zone.

for the World.” The targets for the final fiscal year,

In China, we continue to make efforts to realize

2019 (ending March 31 2019), of this three-year plan,an operating income rate close to correspondingare ¥215 billion in consolidated sales and ¥15 bil-levels in the Europe and U.S. markets. By adding

lion in consolidated operating income. The operat-value to products, expanding our share among

ing income rate to achieve this target is 7%. The

department stores, and leveraging third-party

target for net profit is ¥11 billion. The ROE (return

e-commerce websites, we aim to increase our total

on equity) target for FY2019 is to exceed 5%, whichgross margin in China.

is higher than the company’s shareholders’ equity
cost of 4.5%–4.9 %.
I will explain how we intend to achieve thesetargets in line with five basic policies.

1. Ensuring Revenue from the Domestic Business20

3. Strengthening Group Synergy and Competitiveness
Peach John has been experiencing a declining proportion of online sales, but we aim to achieve balanced growth by opening more stores and strongly
encouraging customers to also become customers of

As the population of people in the economicallyother companies in the Group. For Lecien, we willproductive age groups has started decreasing, no

improve the capacity to respond as an OEM supplier,

growth can be expected if domestic businesses areand focus on higher value-added businesses, such as

conducted as before.

private label products and handcraft goods. As for

In order to redesign the sales channel mix, we

Ai Co., Ltd., which specializes in swimwear, we will

will pay more attention to consumers’ viewpoints,

incorporate Ai’s logistics functions with those of thesuch as where, what, and how they purchase. To

Wacoal Group and renew the IT infrastructure in

begin with, we will start shifting management

order to operate more efficiently.

On top of our efforts with each affiliated com-“contribute to society by helping women to express

pany, we will leverage the strengths (including

their beauty,” in keeping with the times, and createknow-how, sales channels, and functions) of eachnew value so that stakeholders can expect the com-company in the Group in order to strengthen ourpany to continue thriving even beyond its 100th

overall competitiveness.

anniversary.

4. Expanding the Business Portfolio

will continue to question what society expects and

The company possesses intangible strengths, com-demands in conducting our business. In particular,

manding both brand loyalty and trust accumulated

we aim to constantly improve our corporate gover-through years of business operation, and is finan-nance in consideration of stakeholders’ viewpoints.

Not only complying with laws and regulations, wecially healthy as well. Precisely because of this we

Also, because we respect the diversity of ourmust proceed right away to develop new businesshuman resources, we will intensify efforts to raiseand expand our markets. To that end, we launched

the profiles and enrich the roles of women andan in-house program in 2014 for employees to suggest

develop our human resources globally.

new business ideas. We have already received valuable suggestions, some of which are close to commer-

To Our Stakeholders

cialization. While a strong sense of ownership isnecessary when launching a new business project,
we will also actively consider innovative suggestions

The company expects to gain over ¥45 billion in cashfrom outside parties. There are no constraints uponover the course of this medium-term management

ideas, as long as the businesses suggested can deliverplan. We will invest more than ¥45 billion to growupon the values of beauty, comfort, and health. We

sustainably and enhance returns to shareholders.

will firmly maintain an in-house system and company

The mutual trust that our company fosters with

culture that is ready and willing to meet the chal-

all stakeholders is our main invaluable asset. We

lenge of starting new businesses.

will maintain integrity in all our communications
with our stakeholders based on this mutual trust,

5. Maintaining the Foundation of Management

and co-create our values with passion. We appreci-

The company will celebrate its 70th anniversary inate your further assistance and encouragement.

the fall of 2019. We should retain a broad sense of
our objective that we stated upon going public,

FY2019 Targets
Net Sales¥

215

Operating Income

billion¥15

Net Income

billion¥11

billionROE

5% or higher

Wacoal Business (Domestic)

Wacoal Business (Overseas)

Peach John Business

Other Businesses

Net Sales (¥ million)

Net Sales (¥ million)

Net Sales (¥ million)

Net Sales (¥ million)

122,50020192016 (Result)

120,570

Operating Income (¥ million)
2019

8,000

2016 (Result)

8,810

2019

58,00020192016 (Result)

51,8692016 (Result)Operating Income (¥ million)
20192016 (Result)

5,300
4,433

13,20011,190Operating Income (¥ million)
20192016 (Result)

800
258

2019

21,3002016 (Result)

19,288Operating Income (¥ million)
2019

900

2016 (Result)

364
21

22

S P E C I A L

F E AT U R E

Wacoalfor theWorld
Building a Global Presence for
Wacoal through Trust
China

China is a rising star in the global economy, andwe regard it as one of Wacoal’s most important overseas markets.
China is a major focus for our efforts to expand our business andrealize the concept “Wacoal for the World.”
We established a presence in China 30 years ago.
Our activities in China today are the result of swelling growth driven
by a business strategy of building mutual trust across national borders,
and transferring the characteristics that make Wacoal special,while also giving priority to localization.
Here is a look at where we are now.

23

Mutual Trust,the Key to Growth in China
In 1986, Wacoal became one of the first Japanese companies to establish business
operations in China. Our progress since then is the result of efforts to help
Chinese women to express their beauty.
A vast territory with a huge population, China possesses both a long history
and diverse culture. The keys to business success in China are a commitment tolearning about local customs, and the ability to adapt to a rapidly changing environment. Wacoal laid the foundations for its present growth through long years ofeffort, guided by these perspectives, building trust by offering products and services designed to meet the needs of Chinese women.
In recent years, we have developed structures that allow us to respond quickly
to changing needs, while also adapting our product planning and marketing
methods. Another component is the high-level capabilities of our frontline beauty
advisors, which have increased through a successful human resources strategy.
Mutual trust has allowed us to expand the potential of our business in China, andto build it into a major driving force for Wacoal’s growth as a global brand.

China
Chronology of Wacoal’s Business Activities in China

1980s

1990s

2000s

2010s

Beginnings

Development of manufacturing
and sales organization

New start withstrengthened structure

Business expansion,
pursuit of profit growth

1991 Beijing Wacoal begins trade incontracted processing for the Japan
market.
1995 Guangdong Wacoal established to
produce goods for the Japan market.
1997 Physique and somatotype survey with
the Fashion Institute of the China
Textile University (repeated in 1998).
Sales area extends to Guangzhou,
Chengdu and Dalian.
1998 Product planning centralized in
Shanghai.
1999 Sales extend east, south andsouthwest to Shanghai, Guangzhou
and Chengdu.

2000 Joint venture in China dissolved to
become a wholly owned-subsidiary.
2002 Wacoal (Shanghai) Human Science
R&D established.
2003 Beijing Wacoal becomes Wacoal
China. Dalian Wacoal established.
Pink Ribbon activities commence.
2009 “Salute” range of medium/high-levelproducts spearheads an expansionary strategy.

2010 The “Remamma” business launches.
2012 Wacoal targets middle-class customers with new “LA ROSABELLE”
brand.

1986 Launch of a significant presence in
China, joint venture Beijing Wacoal(44% Wacoal-owned).
1987 Aside from directly owned outlets,
the business struggles due to thelack of commercial facilities.

24

Wacoal Chinaby the Numbers(March 31, 2016)
Comments from Local Executives

72 %Accumulated
Figure Measurements

Approx.

5,000
peopleAnnual Sales of
Women’s Innerwear

Approx.

2

millionitems(1.2 million brassieres)Strengthening Our Presenceby Providing the Best Possible
Products and Services
China is 26 times larger than Japan in area
and over 10 times larger in population. China’s
diversity is a natural consequence of thisenormous scale. The evolution of Wacoal
China began with our realization that we
could not simply transplant the concepts thatdrove Wacoal’s success in Japan.
The first difference relates to physique.
Japanese women generally have narrower,
oval shaped rib cages, while Chinese womentend to have rounder rib cages, so products
designed for the Japan market would not be
acceptable to Chinese women. We also need totake regional variation into account whendeveloping our products because there are
significant differences in physique between
northern and southern China. In addition tothese factors, seasonal changes and fashion
trends also need to be reflected at the productplanning stage. By taking all of these factors
into account and working to create products

Wacoal China Co., Ltd.
Deputy General Manager

Kazunari Nakajima

that meet a wide range of needs, we have beenable to build a large customer base in China.
In terms of area, China’s provinces are aslarge as some countries. Culture, sensitivities,
and values differ between provinces, andobviously there are differences in the types ofservices needed. We recognize the importanceof customer service skills in ensuring customer satisfaction in China, and we havesteadily improved our business performanceby providing services tailored to the Chinese
market.
Because we work in a market characterized by the accelerating diversification of consumer needs, we are working to improve ourability to respond quickly in all areas of ouractivities. We have enhanced the effectivenessand efficiency of our business activities bybuilding flexible structures, by improving ourmarket reaction speed, and by providing
timely responses to customer input.

F E A T U R E

FemaleExecutives

S P E C I A L

1,390

Building a Global Presence for Wacoal through Trust

BeautyAdvisors

Pinpointing Customer Expectations through Beauty Advisor Training
Basic Training

Specialist Training

New Employees

Introductory Training

Intermediate Training(first year)(second year)(third and fourth years)

Recognizing
expectations

Meeting
expectations

Exceeding
expectations

Training courses in eachregion in the first, fourthand ninth month on
products, customer service
and fitting of brassieres
that match customer needs
based on accurate size
measurements.

How to match customer
expectations and also
advise about optimizing
appearance. Productknowledge, customer
interaction skills andverbal skills to earn trustand confidence.

Fashion studies, including
outerwear, to become
high-value beauty professionals guiding customers
to exceed expectations
and discover new beauty
potential.

Regular Intervals

To raise service levels
throughout China,
training on regional
differences in customer
physiques and needs,
as well the best ways
to work with customers
in each region.

25

he Brand Management
Department is responsible primarily for product planning, merchandising, andcustomer membership service
management. It functions as acontrol tower for Wacoal’s activities in China.
Every year we launch springsummer and fall-winter collections based on analyses of fashion
information and competitors’
sales. Product planning in preparation for these collections begins
with the formation of a project
team with the China Human
Science Research Center. In addition to rigorous in-house checking
processes, we also assess new
products with customer focus
groups. Only products that surpass
the scores for the previous season’s top products from Wacoal
and its competitors are taken to
the commercialization stage. Ourpolicy is to create products thatwill always exceed expectations.
At the merchandising stage,
we adopt regional marketing strategies because of regional differences in consumer needs, and weT

Integrated,
and Aiming
to be theNumber-One
Brand

Director,
Brand Management Department

implement product plans basedon data. In addition, monthly
sales, profit, and inventory numbers from each branch direct theformulation of marketing plans.
The Brand Management
Department is also responsible
targeting the over 200,000 customers in our membership service. We plan member incentive
programs and work to enhance
membership services, such as
promotions linked to sales activities. We also carry out PR activities designed to attract new
members.
Business coordination basedon organizational structures is afeature of Wacoal’s activities in
China. Our strengths include rapid
feedback systems, and our ability
to develop activities quickly while
maintaining high quality in all business areas. Wacoal is not yet the
number one brand in China. We
need to catch up with and overtake
our rivals by attracting new customers. That is why we must work as anintegrated structure to offer a continual stream of new services andproducts to our customers.

Gong Jian

WacoalVoicesTailoring Our Actions to

We want customers to choose our products. That is why we use
special promotions to build closer ties with our customers andprovide services designed to optimize the customer’s satisfactionand experience. Behind our success is a virtuous cycle driven by
the efforts of frontline staff that are dedicated to helping womenfeel more beautiful. The following are comments from local staff
members who support the growth of Wacoal China through their
day-to-day activities.

26

Zheng Ruoyun

Motivation and Pridefrom Helping Women to
Achieve Beauty

F E A T U R E

Huadong District Training Manager,
Sales Education Division

S P E C I A L

M

women to achieve beauty. As
women themselves, our beauty
advisors know how it feels to enhance their beauty by wearing
Wacoal products. I believe thatthey gain satisfaction, pride, andmotivation by sharing thatfeeling with their customers.
Our frontline workplaces
are imbued with a culture ofmutual trust. Most employees
who transfer to other innerwear
companies soon want to comeback to Wacoal. The generositywith which Wacoal welcomes
those women back is also the
key to the creation of workplaceenvironments in which each employee can feel a sense of motivation toward her work.

Building a Global Presence for Wacoal through Trusty task is to train thebeauty advisors whoform the link between
Wacoal and its customers. We
are continually enhancing ourstructured training program,which is designed to turn local
employees into beauty professionals. New employees vary
widely in terms of age and careerbackgrounds. All undergo training according to their years withthe company and their personalability levels.
Wacoal beauty advisors havegained an excellent reputationfor extensive knowledge and excellent customer service. Underpinning these qualities is ashared commitment to helping

the Local Market
n the past, Wacoal used
a variety of media, including magazines andtrain station advertising, to send
messages to consumers. Our main
PR tool now is the social media
application WeChat, which has
become extremely popular in
China over the past few years.
Our official account currently has
around 73,000 followers. We actively use the application for avariety of initiatives, including
event announcements, coupon
distribution, and the release of
information about seasonal
events and new products.
Another advantage of social
media is that beauty advisors cancommunicate directly with customers on a one-on-one basis. By

Iforming closer relationships withcustomers, we can build trust andshare timely information. This
helps to create an environment inwhich customers are more likely
to visit our stores. The social
media approach allows us tocommunicate more effectively ata lower cost than mass advertising. It also allows us to accumulate data, including the numberof visits to our pages.
Although Wacoal was the firstto use WeChat, many of our rivals
are now establishing a presence,and competition is intensifying.
We will continue our efforts todifferentiate our approach byusing new and uniquely Wacoal
ways to win the hearts of Chinese
women.

Deputy Divisional Manager,
Public Relations Division

Zhu Qian

Building Lasting
Relationships with
Customers

27

Learning to Understand
Chinese Women
To provide Chinese women with innerwear that will bring genuine
satisfaction, we need to achieve a profound understanding ofcommon Chinese body types. That was the starting point for Wacoal
Human Science R&D, the China Human Science Research Center,
which was established in Shanghai in 2002. Initially benefittingfrom over the half-century’s worth of know-how accumulated by
the Human Science Research Center in Japan, it has now updated
its approach to reflect conditions and market trends in China.
The Center helps to drive Wacoal’s growth through multiple
roles, including not only research activities, but also productdevelopment and marketing. Before its establishment, we had
been measuring physiques in cooperation with a local university
since 1997. To date, we have collected data for over 5,000 women.
We have created a string of hit products by developing originalitems based on these data.

The Contribution of the China Human Science Research Center

A Scientific
Perspective
on Markets
and Needs

Director,
China Human Science Research Center

Xu Zhaohui28

The Human Science Research Centerin Shanghai helps to create products
tailored for the Chinese market by scientifically analyzing women’s figures.
A major difference between our Centerand the one in Japanis the fact that we are
an integral part of the
product development
organization and playa central role in thecreation of new products, including thedevelopment of new
functions and materials. This unique structure allows us to identify customer needs quickly and create
products to satisfy those needs. The
Center has developed the majority ofnotable new products launched over the
past few years.

The Center also studies the Internet
buying behavior of consumers, and supplies the analysis of results to merchandising. We collaborate actively withvarious units, also sharing customer
relationship knowledge based on our extensive data resourcesand verification resultswith the sales andtraining units. We willcontinue to deepen
our physique-related
research, while also
taking up new challenges including thedevelopment of super-large sizes. By creating attractive
new products, we will make an evengreater contribution to the beauty ofChinese women.

Wider Straps
Like the wings, the straps areslightly wider at 13mm, comparedwith the Japanese standard of
10mm. This prevents the straps
from cutting into the shoulders
and also creates support with agreater sense of stability.

02
Metallic Colors andBold Floral Patterns
While there is regional variation,
Chinese women tend to preferbrighter designs. Vermillion red
is especially popular becauseof its reputation as a color thatbrings happiness.

01

04

Wider Wings

Round Cups

Because Chinese women tend to haverounder rib cages, the wings need tohave a minimum height of 9cm, compared with the 6-7cm in Japan. This
ensures a better fit for Chinese women,
who are especially sensitive about
unevenness or bulges on their sides.

The cups are shaped to matchthe natural contours of thebreasts. Their task is to enclose
the breasts and form the beautiful, delicate, natural curves
that Chinese women want toachieve in their bust lines.

F E A T U R E

Wacoal China is deploying threebrands in China—“Wacoal,” “Salute,”
and “LA ROSABELLE.” Chinese
women want to achieve a natural bustline that does not affect their outerwear. This is reflected in strong
demand for molded brassieres, and indetailed needs that differ from thosein the Japan market. Vast resources ofmeasurement data and research
results compiled by the China Human
Science Research Center are used toensure that every product feature,including design, quality, functionality,
and comfort, will meet the expectations of Chinese women.

S P E C I A L

03

Building a Global Presence for Wacoal through Trust

Products from Wacoal China

Record Net Sales and Operating Income in FY2016
Net sales of Wacoal China Co., Ltd. (¥ million)
Target 201911,3002016

11,067

2015
9,490

2014

8,588

2013
6,625

New Medium-term Management Plan
FY2017 through FY2019

We aim to achieve an
operating margin close tothat of our American andEuropean markets.

Operating income of Wacoal China Co., Ltd. (¥ million)
Target

1,020

2019
2016

487

2015
2014
2013

123

Major growth strategies

Use dominant product appeal in high-end market.
Improve “LA ROSABELLE” profitability.

409

Use other companies’ e-commerce,
sales promotion development.

– 346

29

Building Mutual Trust with Society (CSR Activities)

Our Goal with the CSR Initiatives“Building Mutual Trust with Society”— Earning the trust of society, by meeting society’s
demands and expectations —Building mutual trust with society is the goal of Wacoal’s
corporate social responsibility (CSR) initiatives.
Under the Wacoal’s management philosophy, building mutual trust with society is its corporate goal andraison d’etre . Comprising our mission, vision, andvalues, this management philosophy serves as a compass
for our CSR initiatives. Relationships in which we meetdemands and expectations, as well as gain the trust ofsociety, are critical for us to pursue healthy, lasting business activities.
Instead of focusing solely on markets, we conductbusiness in consideration of our care for and contributions to the society in which our markets exist.

Organizational
GovernanceCommunity
Involvement andDevelopment

Consumer Issues

Wacoal’s
Basic Policies on CSR

Fair Operating
Practices

Environment

Social Business Programs through Wacoal’s Main BusinessBusiness
Activities

Uniquepersonalityof Wacoal

CSR

Wacoal’s
CSR

CSR Activities Based on Wacoal’s Business Characteristics

Pink Ribbon Activities

Remamma Project

Breast Cancer Examination
Support Project

Wacoal’s CSR
30

Labor
Practices(responding tocustomers)

CSR Action Policy
Wacoal’s fundamental CSR objectives are to manufacture products that customers love, develop productsthat meet current needs, and conduct business fairly topave the way to a better future.
We conduct business in a fair manner and provide
products that customers need. “Manufacturing” is our
first step toward building relationships of trust withcustomers and society, as well as the foundation of our
CSR activities.
To advance CSR initiatives, Wacoal established its
Basic Policies on CSR based on the ISO 26000 standards published in November 2010 (Japan Standards
Association, 2010) according to seven core subjects (foraccountability, transparency, ethical behavior, respect
for stakeholders’ interests, respect for the rule of law,respect for international codes of conduct, and respectfor human rights) and seven basic policies (organizational governance, human rights, labor practices, environment, fair operating practices, consumer issues,
community involvement and development).
Furthermore, as part of its business strategy, Wacoal
conducts continuous CSR activities to address social
issues that are related to the main business. This also
strengthens brand power and competitiveness.

Human
RightsBra Recycling Campaign

Tsubomi School

CSR Highlights
Kyoto CSR Network*
Gion Festival Zero Garbage Initiative
Yoiyama (pre-party) of the Gion Matsuri
festival is a hugely popular event thatdraws hoards of visitors to various foodstalls, but dealing with the volume of
garbage is a challenge. The Kyoto CSR
Network wished help preserve the integrity of the festival and participated in theGion Matsuri as a group of volunteers to
support the environment.
* A diverse network of people responsible for CSR
in companies based in Kyoto prefecture plus civil
servants who exchange information, and provide
new learning opportunities about CSR to create
new collaborations.

In-house Seminars on Uterine Cancer
Sixty-five percent of female employees at Wacoal havebeen screened for uterine cancer. Although this constitutes a significant number of the company’s women,
we want even more employees to learn about the disease and why such screening is so important, andhosted in-house seminars in Kyoto and in Tokyo featuring an occupational health physician.
The many seminar participants listened to a discussion on health conditions
that are unique to women and the story of a uterine cancer survivor, which raised
the cancer awareness of many employees.
We will continue such activities to increase the percentage of employees
screened.

Tsubomi School
Tsubomi School refers to visiting classes the
Wacoal has been conducting since 2001 for girls,
from the fourth year of elementary school throughthe second year of junior high school, and their guardians. The classes are toenable participants to learn about the physical and emotional changes accompanying adolescence and give them information about how to choose innerwear. We
provide textbooks and lend innerwear samples to schools that our instructors areunable to visit. As of March 2016, 100,235 people had participated in the class.
In response to the recent growing demand for adult seminars, we have also
been holding Aging Seminars that explain how the physique ages.

Pink Ribbon Kyoto*
Stamp Rally
In October 2015, Pink Ribbon Kyoto
hosted a stamp rally in Kyoto, taking
advantage of the city’s wealth of popular
attractions. The purpose of the event was
to familiarize visitors with the subject ofbreast cancer by having them answer
quizzes on the topic when they visited
various temples and stores.
The company’s exhibit booth introduced Wacoal’s breast care activities andpublicized the importance of breast
cancer screening.
* Pink Ribbon Kyoto operates in collaboration with
doctors and nurses from medical institutes, NPOs,
local companies based in Kyoto, students, Kyoto
City and Kyoto prefecture, and mass media.

Brassiere Recycling
As one of our environmental initiatives, we have been conducting the Brassiere
Recycling Campaign since 2008. For privacy, collected brassieres are processed inunopened bags into RPF (Refuse Paper & Plastic Fuel).
2012

2013

2014

2015

2016

Cumulative
total*

Number ofbags collected

38,417

58,79868,12680,30584,616289,928
bags

Weight ofprocessed RPF

15,93022,45025,85030,71028,530141,390kg

Number ofbrassieres collected

159,300

224,500

258,500

307,100

285,300

1,413,900
bras*2008–2016

Nadeshiko Brand 2016
Wacoal Holdings, Corp. was selected as a Nadeshiko
Brand 2016 by METI. The company provides work
environments that fit women’s various life stages, andprioritizes talent before gender for recruitment and development of humanresources so that the company is not only easier to work for, but also provides meaningful jobs. Wacoal thereby encourages women to play active roles and energize
business that delivers beauty, comfort, and health to the world.

31

Building Mutual Trust with Society (CSR Activities)

Wacoal Breast Care Activities
Hand-in-Hand with Women
In support of women, Wacoal is on a mission to eliminate suffering from breast
cancer. Wacoal advances Breast Care Activities that promote raising awareness of breast cancer, breast cancer screenings, and post-surgical support.
The three pillars of Pink Ribbon activities, AIO, and Remamma Project, hasbeen put into action and gained trust worldwide. These initiatives lead people
to become long-term customers of Wacoal products.
For details, please see our website (Japanese only):

http://www.wacoalbreastcare.com/

01

Wacoal’s
Pink Ribbon Activities—Early detection, early diagnosis, and early treatment
Although it is said that one out of every
twelve Japanese women experiences
breast cancer, not many Japanese women
undergo annual breast screenings. Since
there is no means to prevent the development of breast cancer, it is crucial tofind it at an early stage. To address thisissue, Wacoal started Pink Ribbon
Activities in 2002 in Japan, and we areconfident that in the 14 years since, society has come to strongly associate Pink
Ribbon with Wacoal. From the start, wemade sure that our employees had sufficient knowledge of the subject. Our offices across Japan hosted motivationalseminars and took other initiatives, so
percentage of female employees at
Wacoal who undergo breast cancer
screening has increased from 30–40%
to nearly 80%. Today, we also host educational activities, such as co-operating
various events and charities for external
parties. Overseas, since 2001, Wacoal
America, Inc. has been raising funds andpublicizing brassiere fitting events at department stores and specialty storesthroughout the United States.

32

Since the company carries innerwear—the closest product to every woman’s body—Wacoal’s strong desire is for
women to live their lives with beautyand health. Wacoal will continue these
Pink Ribbon activities with a mission toraise awareness of breast cancer andprotect lives.

Pink Ribbon Logo
Original Logo combining
a tape measure andpink ribbon

Pink Ribbon Fitting Campaign at
2,000 stores across the nation
We started the Pink Ribbon Fitting Campaign in 2007. It takes place at about 2,000
stores across Japan during Breast Cancer Awareness Month, every October, to offer
opportunities for women to pay more attention to and learn more about their breasts.
Since 2008, our official website has featured a Pink Ribbon quiz, as well. Throughout
the campaign, Wacoal donates ¥10 for every brassiere that store visitors try on, and ¥3for every participation in the Pink Ribbon quiz, to the Wipe Out Breast Cancer Smile
Fund of the Japan Cancer Society and the Japan Society of Breast Health. 176,103
customers in 2015 tried on 473,263 brassieres, raising ¥4,732,630 in donations. Also,
the number of effective clicks on the Pink Ribbon quiz amounted to 174,689 which generated a donation of ¥524,067.

02

Breast Cancer Examination
Support Project (AIO)—Support for early detection
In October 2009, Wacoal purchased a mobile breast
cancer screening unit named AIO in line with a commitment to increase opportunities for women to get
screened for breast cancer, and thereby launched abreast cancer examination support project.
We have greatly expanded our field of activities toinclude attending industry and health insurance medical examinations, and introducing women to associatedmedical consultation should breast cancer be discovered. We will continue to help women be screened
without feeling undue anxiety.

Would you like to bescreened by the AIO again?

Yes:

96%

(Subject: People who werescreened by AIO / Our study)

Easier, Comfortable Breast Screening
with Wacoal’s AIO
Four benefits of AIO

Peaceof mindAn all-female staff provides
specific support and care fromwomen’s perspectives.

Easy

There is no need to travel to a hospital.
Screening is relatively quick,easy and convenient.

6,266
5,533

Trust

Since AIO launched in 2009,its days of operation have been
rapidly increasing.

Cleanliness

The space is clean and refreshingly
scented with aroma oils.
There is no need to worry about being
seen by others, unlike in hospitals.

5,063
4,663

142

3,686
124
114

104

2,351 83
66

Number ofpeople screened

Number of days
screening is offered

27,931

648

15
369

(FY)

2010

2011

2012

2013

2014

2015

AIO
Activities
Report
At Wacoal, staff can get screened for breast
cancer during working hours when the
AIO is parked next to their offices. We
interviewed employees in their 30s–50s
who had just been screened for breast
cancer, and asked about their impressionsof the screening.
Some had someone close who had suffered breast cancer, and others had opportunities at work to interact with people witha history of breast cancer. Overall, most ofthem felt that breast cancer screening wasnecessary, and made statements such as“I’ve been taking the test every year since2011 when breast cancer screening became
available with the AIO.”
The reason why they took advantageof the AIO program was that, unlike hospitals, it does not require appointments inadvance, so it is much easier to be screened.
Many women now feel “more familiar withbreast cancer screening” since the start of
the AIO screening project. The percentage of
employees at Wacoal getting screened forbreast cancer is significantly greater thanthat of the general public.
Since employees can be screened during
working hours, and as the screening process
is relatively quick and smooth, the ease of
the process minimizes the usual hurdles ofbreast cancer screening, these benefits
increase the screening ratio.
Other responses included praise of the
all-female staff; the cleanliness; the relaxing aroma; and privacy thatwas better than that which
they would experience at
hospitals. Wacoal willcontinue helping more
women get screened
with the AIO.

2016

33

Building Mutual Trust with Society (CSR Activities)

03

Remamma—Helping to restore women’s curves
The Remamma business, founded in 1974,
was inspired by Wacoal founder Koichi
Tsukamoto, who wanted to try to help
women who had lost breasts due to cancer
or injury. The name Remamma incorporates “re” (again) in reference to “restoring breasts” and “restoring a sense of
beauty.” This project has been developing
innerwear and swimwear for over 40
years for women who have undergone
major surgery.
The products are developed basedon the research data that Wacoal has
accumulated over decades regarding
women’s physiques, and opinions frommedical experts and patients. The products are rich in functionality, comfort,and design, and have received high recognition from customers.
Remamma considers interaction withcustomers to be essential, so there are six
Remamma rooms across Japan for direct
sales and free consultations with experts,
who advise customers and meet with themto help select suitable products. For customers who live in remote areas or who
are not well enough to travel, we also pro-vide a mail order service via operators
who listen to customers’ needs directly.
Seeing customers’ faces light up when
they try on a product, or how much happier they appear when they leave compared to when they arrived provides us
with all the motivation we need. Thisbusiness is something we can do specifically because we are Wacoal, and we will
never stop trying to bring more smiles
into the lives of our customers.

Pad pocket next toskin absorbs perspiration
Most pockets are made of cotton-blend
fabric with silk protein coating.** Made by processing sericin contained in silk
into fibers that make the material more comfortable for the skin.

Metal strap adjusters on theback avoid areas that havebeen operated on.

Product
Characteristics

Some products employ
half-circle adjustment to prevent straps from sliding off.

Three-position rear adjusters
vary the fit according touser’s condition.

Wide straps
decrease burden
on shoulders

For Restoring
Beauty and Smiles
1 9 70 s
How Remamma
StartedA woman with breast
cancer wrote about her
feelings to her husband
and put them together
in a book called “Letter
to My Husband.” Thebook became popularin the U.S. and led thefounder of Wacoal tolaunch the Remamma
project.

34

1 9 74
Early EraAt that time, breast
cancer operations
involved removal not
only of breasts but alsobreast muscle, soRemamma products
were initially made withflat, thick sheets ofmaterial. After aprocess of trial anderror, Remamma
products start to sell.

Crafted for comfort

Side portion higher than on
standard products.

Straps support bust andpads, and will not dig intoor slip from shoulders.

1 9 79

1 993

2010

RemammaDivision Grows

Launching Free
Consultations

Remamma
Products Evolve

What started as a social
welfare section isrenamed Remamma.
After that, the section
develops innerwear,
domestically produced
parts, and Remamma
swimwear, etc.

Remamma’s 20th
anniversary presents theopportunity to host free
innerwear consultations
across Japan. Thesesessions are still
conducted every year,with a total of 24,000
visitors at a total of 193
venues in 2015.

Remamma introduces
more gorgeous
brassieres to its lineup,incorporating the samekinds of lace used inother Wacoal brandproducts. The new
products also incorporate
silicone pads made withthermo-adjustingmaterials to enhance
warmth and comfort.

Interview

Remamma from
Inside andOutsideCare for Customers Leads to
Mutual Trust— Please tell us about Remamma
business operations andyour thoughts.

Nippon Sigmax Co., Ltd.
Consumer Business Department
Healthcare Unit

Narie Miyaura

Katayama Our objective is for custom-ers who have experienced breast cancer
to recover beautiful busts and smiles
again. With this in mind, we choose
products that will be comfortable, beautiful, and satisfying to customers. Body
condition after an operation is a very
sensitive topic and situations vary greatly among individuals. It is important tobe sympathetic with customers who
have suffered, so we at Remamma listen
to each and every one carefully andoffer our best solution.
Miyaura We supply the silicone pads
that are put into pockets in the brassieres. The pads are shaped much likebreasts and fit well to make the bust
look natural. We work every day with
Wacoal because we would like our products to contribute, even in a small way,
to the beauty of our customers.

— What is special about
Remamma products?
Katayama We aimed to achieve a balance of comfort and beauty. Wide straps
and sides enhance stability, so the products are easy to wear, yet maintain beautiful curves. The products are designedwith great care for details, with large
pockets inside the cups for easy insertion of pads. They’re also quite pretty.
Many customers’ eyes sparkle and saythat they want to try them on.

Wacoal isfull ofpassion forcustomers

Just forcustomers tosmile

Fukuoka Branch Store
Remamma Chief Advisor

Masami Katayama— Miyaura, what is yourimpression of Wacoal?
Miyaura I feel everyone’s passion toalways take action and prioritize what
is best for customers. I find it really
impressive. Wacoal is a manufacturer
specializing in innerwear that has its
own facility called the Human Science
Research Center that generates abundant data on women’s physiques, andaccumulates knowledge and expertise.
The company applies such strengths tomeet customers’ demands and develop
new products a step ahead of others.
The advisors are not just highly capable; their hospitality is fantastic, too.

— Please tell us how you feel wheninteracting with customers, andalso about the future of theRemamma business.
Katayama Some customers have said
great things like “I can go out again

with my head held high.” Another, witheyes filled with tears of joy, said, “Thismakes me feel like a woman again.”Every moment like that reassures methat I am fortunate to have this job.
Some of them even wrote me beautiful
thank you letters, which gave me great
pleasure. I want to remain fully committed to this work to eliminate my customers’ concerns and anxieties. I’d also
like to work on widening the promotional
activities for Remamma too, because
many customers tell me “I wish I had
known about Remamma earlier.” We will
also need to catch up with advances inmedical treatment, and respond to customers’ requests and concerns with new
product planning. I believe that our mission is to consider what only Wacoal iscapable of achieving, understand customers’ feelings, create products to help
them, and consistently strive to provide
better service.

35

Building Mutual Trust with Society (CSR Activities)

Environmental
Conservation Activities

Environmental
Objectives

Preserving theEnvironment as a
Global BusinessMedium-term Environmental Action Plan
for April 2016 –March 2019

1. Promote environment-friendly business activities such that “operational
improvement = environmental improvement = better productivity.”
2. Thorough control of CO2 emissions
3. Respond to 2015 revision of ISO 14001
4. Promote green purchasing
5. Thorough waste management
6. Thorough environmental risk management
7. Publicize environmental information
8. Raise employees’ awareness through education on the environment
9. Cooperate with local communities to contribute to the environment

Conducting business worldwide, Wacoal
considers preserving the global environment to be its responsibility as a company
and promotes environmental activities
based on the spirit of mutual trust withsociety. Currently, six domestic companies
and two overseas companies in the Groupare certified according to the standards ofISO 14001 (environment management
system) and four domestic plants are certified according to KES (Kyoto Environmental Management System Standard).

For details, please see CSR section on the company’s website:

http://www.wacoalholdings.jp/en/csr/pr_environment.html

Results of Activities*1

Electricity
use

FY201632.0%

1 1,383 thousand
kwh

CO2
emissions

FY2016FY201624.5 million

72 t

FY2016

3

20.0%

Water
use

Down

Down

1,186 t14.0%

Recyclepercentage

Down

1 12 thousandm

FY2016

25.3%

Waste
emissionsDown

620 thousandm

FY2016

77.8%

94 %

FY20163Up*2 Only CO2 emissions resulting from electricity and gas equivalent values based on FY2011

The Wacoal Group’s Original Self-evaluation Indicators

Value-added
Carbon Footprint* Ratio
We measure effect by calculating how
much value we have added per unit of CO2
emissions. This indicator is shown as the
product of value-added labor productivity(value added/total hours worked) and CO2
emissions per work hour. We aim to affectthe actions of each individual by adopting
a different approach that focuses on twoareas: heightening the capabilities of each
employee so that they work efficiently andreducing environmental burden during
operational hours.

(for Wacoal Holdings Corp. and Wacoal Corp.)

Value added

Value added

Total hours
workedCFP

Total hours
workedCFP

Total hours worked

Value added

Total hours worked

9,197¥ 31.39

Total hours worked

CFP

Total hours worked

CFP

9,197

3,328 t9,506

3,925 tValue-added carbon
footprint ratio

Value added¥ 29.13billionthousand hours

thousand hours* Carbon footprint (CFP) includes CO2 emissions resulting
from electricity, gas, water, and waste. For CO2 emissions
resulting from energy, equivalent values for each region
are used.

9,506

billionthousand hours

thousand hours

Down
FY201136

34.5%

Gas use

Down

Waste
incineration

Down

5,913 t*1 Compared to FY2007

FY201632.8%(electricity, gas)*2

16.7%

Officepaper use

Down

¥ 8.75 million/t¥ 0.75 million/t

FY2016¥ 8.00 million/t

Health Management

Your Health Keeps the Company Healthy!
Health Management Basic Policy

1.

Each employee is aware of the responsibility for protecting personal health, andmanaging it actively and autonomously.
The company supports this strongly.

2.

The company understands that maximizing each employee’s talent makes thecompany stronger, so it develops healthmanagement/promotion projects, maintains healthy environments, and builds acompany culture promoting comfortableworkplaces.

3.

4.
5.

The company, Wacoal Health Insurance
Union, and Labor Union co-establishedthe Health Management Committee. The
committee continuously maintains thePlan, Do, Check, Act cycle by identifying
health-related issues, deciding on andimplementing measures, evaluating
effects of such measures, and drawing up
responsive plans.
When the Health Management Committee
identifies issues and establishes measurements, it collaborates with the health dataplanning of the health insurance union to
maximize synergy.
Privacy information including health data
will be appropriately handled in compliance with relevant laws and regulations
that are thoroughly implemented.

Wacoal GENKI Project 2020
Under the “Wacoal GENKI Project 2020,” a medium-term plan for all employees
and the company to focus on health management, we set achievable targets andwork on fostering healthy corporate culture and environments.

Target regarding
lifestyle diseases

Target regarding
cancerTarget regarding
mental health issues

Reduction oflifestyle disease rate
Reduce (risk index*)

Increased percentage of
people tested for five
major types of cancers[ Target ][ Target ]Reduce long-term
absenteeism ordays absent due tomental health reasons

25

100%

under
%
(29.2% for FY2015)

for each test

[ Target ]Comprehensive index
on mental health*

under
Percentage of
people at high risk of
disease who takesecondary examination

7,000(9,555 in FY2015)[ Target ]100%
Decreasing
number of smokers.
* Risk index
Percentage of persons who are
afflicted with any of the following: high cholesterol, obesity,
abnormal blood pressure, orabnormal blood sugar level.

[ Target ]15Less than%
throughout the company* Total absence index
Number of absent employees ×days absent

Chosen as a “Health & Productivity Stock Selection 2016”
The Ministry of Economy, Trade and Industry(METI) and the Tokyo Stock Exchange (TSE)jointly select companies that enhance corporate value through employee health management initiatives. Wacoal was among companies
chosen in the “Health & Productivity Stock
Selection 2016.”
In November 2015, the company made an
official health announcement that was
intended to actively help employees manage
their health and hold top executives responsible for maintaining, improving, and promoting
health management. One of our efforts has

been making it easier for our female employees to be screened for cancer. In 2015, 82% of
Wacoal’s female employees were screened forbreast cancer and 65% were screened for uterine cancer, which is a higher screening participation than at other companies.
Wacoal also addressed issues regarding
working hours with the aim of improving productivity, and prescribed medications to help
employees quit smoking. That the company
was chosen as a “Health & Productivity Stock
Selection 2016” is recognition of these efforts.

37

Directors and Audit & Supervisory Board Members
Wacoal Holdings Corp.
As of June 29, 2016

38

HiroshiShirai

Akira
Katayanagi

Yoko
Takemura

Masashi
Yamaguchi

MasayaWakabayashi

Yoshikata
TsukamotoOutside Audit &Supervisory
Board Member

Outside Audit &Supervisory
Board Member

Outside Audit &Supervisory
Board Member

Director

Director andVice President

President andRepresentative
Director

President,
Shirai Certified Public
Accountant OfficeOutside Auditor,
Noritz Corporation
Outside Auditor,
ALTECO Co., Ltd.

Special Advisor,
Mitsubishi UFJ
NICOS Co., Ltd.
Outside Audit & Supervisory
Board Member,
TOTO Ltd.

LawyerOutside Statutory Auditor,
ADEKA Corporation

Our Management

Hironobu
Yasuhara

AtsushiHoribaMamoruOzaki

TomokiNakamura

MadokaMayuzumi

Kiyotaka
Hiroshima

Director andVice President

Outside Director

Outside Director
Advisor,Yazaki Sogyo Corporation
Outside Director,
Fujikyuko Co., Ltd.
Outside Director,
Kikkoman Corporation

Standing Audit &Supervisory
Board Member

Outside Director

Representative
Director and Chairman andPresident, HORIBA, Ltd.
Representative Director andChairman,
HORIBA STEC, Co., Ltd.
Outside Director,
Rock Field Co., Ltd.

Standing Audit &Supervisory
Board Member

Visiting Professor,
Kitasato University
Councilor,
Governing Council of East
Japan Railway Culture
Foundation
Councilor, The National
Art Center, Tokyo

39

Corporate GovernanceTo build a relationship of mutual trust with every stakeholder,
the Wacoal Group’s overriding goal of corporate governance is to continuously
grow enterprise value by ensuring that management is highly transparent,
equitable, and objective with respect to all stakeholders.

Corporate Governance System
Employment format

Company with an Audit & Supervisory Board

Reason for employment

Under this corporate governance system, meetings of the Board of Directors reach decisions reflecting the viewpoints
of directors conversant with their respective businesses and the objective, neutral advice of outside directors with extensive business experience and specialized knowledge. In addition, the Audit & Supervisory Board includes outside
Audit & Supervisory Board members. The Wacoal Group believes this system ensures the corporate governance ofgroup companies and effectively improves and maintains the quality of business management for shareholders, customers, and all other stakeholders.

Number of directors

7

Number of outside directors

3

Directors’ term of office

1 yearNumber of Audit &Supervisory Board members

5

Number of outside Audit &Supervisory Board members
Independent outside officers

3
6 (3 outside directors / 3 outside Audit &Supervisory Board members)

Number of Board of
Directors meetings

14

Number of Extraordinary Boardof Directors meetings

0

Number of Executive Compensation
Advisory Committee members

5 (1 outside director)

Independent outside officers

6 (3 outside directors /3 outside Audit &Supervisory Board members)

Wacoal Addresses Society’s Demands in a Timely Manner

1977

2002

2005

Wacoal issues ADRs*(American Depositary Receipt)

Introduction of the corporate
officer system

Switches to a pure holding company

Wacoal becomes the 8th Japanese company toissue ADRs. Upon issuance, the SEC (U.S. Securities and Exchange Commission) requires
consolidated financial statements and accounting report in accordance with U.S. GAAP.

In June 2002, the company employs a corporate officer system in order to delegate authority
and clarify responsibility more appropriately andefficiently. At the same time, the number of directors is reduced.

* In 2013, Wacoal stops listing ADRs on the U.S. NASDAQ
market and de-registers with the SEC.

Number of
directors:

13 9

We switch to a holding company system for effective, strategic decision making and resource
placement in order to execute quickly and clarify responsibilities and delegation of responsibilities at operating affiliate companies.

Appointment of outside officers
To promote fairness and independence of theBoard of Directors and the Audit & Supervisory
Board, the Group increases the number of outside
directors by two members and outside Audit &Supervisory Board members by one member.

Direction of Japanese Listed Companies*

40

1961

1997

2001

● Sony becomes first Japanese company
to issue ADRs.

● Domestic companies start introducing theexecutive oﬃcers system.
● Revision of laws lift ban on domestic pureholding companies.

● Following the revision of the Commercial
Code, an increasing number of companies
appoint outside directors.

Pick up
Improving the Efficiency of the Board of Directors

Independent Outside Officers Meeting
Directors: 3

Audit & Supervisory
Board members: 3

Management
Board of Directors

Sharing information

Improving
operations

Wacoal provides its directors and Audit & Supervisory Board memberswith the training that they need to fulfill their responsibilities, including
useful information on the basic requirements of their positions, theCompany’s regulations and governance, compliance with laws and statutes,
and management.
In addition, when outside directors and Audit & Supervisory Board
members take office, Wacoal explains management strategy, business overview, market trends, business environment, etc. for better understanding of
the Wacoal Group. The Corporate Planning Office distributes agendas of
the Board of Directors meetings and provides explanations to outside
directors in advance. To support our Audit & Supervisory Board members,
including the outside Audit & Supervisory Board members, we have established an administrative office for our Audit & Supervisory Board. Advancebriefings on proposals to be presented to the Board of Directors’ meetings
are conducted by our internal Audit & Supervisory Board members.
Since 2015, the Group has been holding an Independent Outside
Officers Meeting at least once a year where members discuss how to
improve corporate governance and the Board of Directors, and how toensure the effectiveness of every function.

Business operation
Internal control

To improve governanceby applying outside perspectives

2007

2010

2015

Established Executive Compensation
Advisory Committee

All outside officers are registeredwith the Tokyo Stock Exchange
as independent officers

Independent Outside Officer Meetingis established

Regarding appointment, promotion, and remuneration of the directors and executive officers,
the Executive Compensation Advisory Committee, chaired by the Director of the Administrative Department, was established with outside
directors included as members.

Number of committee members(including outside directors):

4

All outside directors and outside Audit & Supervisory Board members are registered with theTokyo Stock Exchange as independent officers.

Independent officers
registered:

The Independent Outside Officer Meeting is established with the intention of sharing information about improving corporate governance,
Board of Directors meetings, internal audits,
etc. The committee includes independent outside officers.

6* Wacoal research

2002

2009

2015

● The corporate oﬃcer system is improved after
the Commercial Code is revised.

● Securities listing regulations require listedcompanies to have one or more independentoﬃcers.

● Listing regulations, etc. are revised after
corporate governance code is established.

41

Corporate GovernanceManagement decision making process, management organization according to business operations and supervision,and other corporate governance structures. (As of June 29, 2016)
General Shareholders’ Meeting
Board of Directors

Group Management Meeting
Quarterly BusinessResults Review Committee
1

Independent
Accountants

Audit & Supervisory Board Secretariat

Group Strategy Meeting

Risk Management Committee

Representative Director

Compliance Committee
2

Audit &
Supervisory Board

3 Independent Outside Officers Meeting
4 Executive Compensation Advisory Committee

Corporate Ethics Committee

Office of Corporate Auditors

Corporate Ethics Hotline

Operating Subsidiary

1 Risk Management Committee

3 Independent Outside Officers Meeting

The committee consists of directors, heads of key business departments,and heads of administrative departments at headquarters. It investigatesrisks to the management of the Wacoal Group in order to enhance its risk
management system through activities to mitigate and take precautions
against such risks.

It consists of independent outside officers, and takes place at least once
per year with an agenda including issues of corporate governance,
improvement of operation of the Board of Directors, and sharing of information about internal audits, etc. The meeting can hire advisors from various fields, with fees to be borne by the Company.

2 Corporate Ethics Committee

4 Executive Compensation Advisory Committee

The committee consists of directors and Audit & Supervisory Board members of Wacoal Holdings and Wacoal Corp., and aims to thoroughly
enhance and implement compliance according to the corporate ethics. It
works on education and disseminates information about corporate ethics,
as well as handles complaints related to corporate ethics in cooperation
with relevant departments.

The committee is established in an advisory function to the Representative
Director. It discusses and submits reports on the appointment, promotion,
recognition, and remuneration of the directors and executive officers. The
Executive Compensation Advisory Committee has independent outside
directors as members.

Reasons for Appointment of the Said Outside Directors*

Reasons for Appointment of the Said Outside Audit &Supervisory Board Members

Mamoru Ozaki
It is anticipated that he will help enhance the transparency and objectivity of the Company’sbusiness management given his specialist knowledge and wide-ranging professional experience in such fields as finance.

Akira Katayanagi
Long experience in the financial industry and a wide range of experience and expertisein other industries make him an appropriate outside Audit & Supervisory Board
member for the Group.

Atsushi Horiba
It is anticipated that he will help strengthen the overseas development of the Company’sbusinesses given his abundant experience and insight as a corporate manager in relation
to business development in Japan and overseas as well as his strong leadership andextensive knowledge.

Yoko Takemura
Legal knowledge as an attorney and experience accumulated through specialization incommercial matters make her an appropriate outside Audit & Supervisory Board
member for the Group.

Madoka Mayuzumi
Hiroshi Shirai

As a haiku poet, she has made wide-ranging contributions to the fields of art and culture
in Japan and overseas. Her expertise and experience is expected to contribute to ourefforts to realize business management that emphasizes diversity, making her an appropriate outside director for the Group.

Specialized knowledge of accounting and finance as a certified public accountant,including U.S. GAAP, make him an appropriate outside Audit & Supervisory Board
member for the Group.

* Wacoal newly documented “Criteria for the Election of Directors” and “Criteria for Independence of Outside Officers” at the Board of Directors meeting on April 30, 2015.

Attendance of Outside Directors at Meetings of theBoard of Directors (April 2015–March 2016)
Mamoru Ozaki
Atsushi Horiba
Madoka Mayuzumi

Attended 14 of 14
Attended 11 of 14
Attended 10 of 10

Attendance of Outside Audit & Supervisory Board Members at Meetings of theBoard of Directors and the Audit & Supervisory Board (April 2015–March 2016)
Akira Katayanagi
Yoko Takemura
Hiroshi Shirai

Board of Directors

Audit & Supervisory Board

Attended 12 of 14
Attended 14 of 14
Attended 10 of 10

Attended 11 of 15
Attended 13 of 15
Attended 10 of 10

Details of Remunerations Paid to Officers
Category of Officers

Directors (Excluding outside directors)
Audit & Supervisory Board members(Excluding outside Audit & Supervisory Board members)
Outside officers

42

Aggregate Amount of
Remunerations, etc.
(Millions of yen)

Basic Remuneration

Stock Option

Bonus

Retirement Allowance

Number of
Relevant Officers

318

198

50

70

—

6

33

33

—

—

—

3

45

45

—

—

—

7

Aggregate Amount of Remunerations, etc., by Type Thereof (Millions of yen)Outside Director’s View

Reviewing What was Taken for Granted Leads to
Improvement in the Company Value.

and that supporting Wacoal’s history
and tradition is also my important duty.
In these rapidly changing times, it
is now very important to review what
used to be taken for granted, both positive and negative, to bring about thenext stage of growth. I am committed
to fulfilling my responsibility as someone closest to the general shareholders and to contribute to further growthof Wacoal Group’s company value.

Shift of corporate
structure may be necessary
according to the era

Madoka Mayuzumi
Outside Director,
Wacoal Holdings Corp.

Contribute to improving
company value from aneutral perspective
My responsibility as an outside director is to judge the management’s decisions and contribute to the company’s
continuous growth from the position ofa general consumer and a long-timeloyal customer to Wacoal. As a haiku
poet, who has experienced and interacted with many kinds of cultures andarts, I am aware of Wacoal’s role in creating the current innerwear culture,

Aside from its strong brand power,
Wacoal also maintains company
strength based on a diversity of products, quality, and human assets. With
clear positioning in the market, thecompany has established solid recognition as a top company in Japan.
However, that very strength holds
potential risk if it means the company
cannot change.
As women’s sense of values andbeauty are changing, it is necessary to
diversify the brand image. At theBoard of Directors meetings, with anunderstanding of management policies
and strategies, I ask simple questions
from the viewpoints of general shareholders and consumers to see whether
larger number of brands and products
would bring profit to consumers, thecompany, and eventually to sharehold-ers. Sometimes all of our opinions do
not match, but my questions are always
listened to respectfully, and answered
promptly. When necessary, some topics
are discussed again, so I feel there isdefinite feedback.

By creating environments for
women to be more active,
both society and women’s senseof beauty will change
Based on Wacoal’s mission of contributing to society by helping women to
express their beauty, Wacoal has beencreating the idea of female beauty fromthe post-war era up until today. I
strongly feel the need to create andshare a new style of beauty for womenbased on such history. In such context,
the company’s recent efforts in supporting women’s careers are wonderful.
As Wacoal takes the lead in establishing environments in which women
can thrive, and acts as a role model for
the whole world, they are also fostering a general society in which women
can take an active part. Thus more
women will enjoy active careers, morekinds of beauty will be recognized, andas that connects to consumer activities,
Wacoal will also benefit. I expect thissort of positive cycle because of whatkind of company Wacoal is, and wish to
be of help myself.

For more information about Wacoal Group’s corporate governance, please see:

http://www.wacoalholdings.jp/en/ir/governance/index.html

43

Financial Section

Eleven-Year Financial Summary
Wacoal Holdings Corp. and Subsidiaries

Years ended March 31

2016

2015

2014

¥202,917¥191,765¥193,781

95,90190,72291,008For the year
Net sales
Cost of sales% of net sales

47.3%

47.3%

47.0%

93,151

87,94088,913

45.9%

45.9%

45.9%

Operating income

13,865

7,082

13,860Total other income (expenses) – net

1,092

4,260

1,173

Income before income taxes, equity in net income of affiliated companies,
and net (income) loss attributable to noncontrolling interests

14,957

11,342

15,033

Income taxes

4,730

3,303

5,641

Net income attributable to Wacoal Holdings Corp.

11,1598,444

10,106Return on assets (ROA)

5.0%

4.0%

5.7%

Return on equity (ROE)

4.9%

3.9%

5.2%

Net cash provided by operating activities

12,635

14,337

8,949

Net cash (used in) provided by investing activities(11,407)

164

1,658

Net cash (used in) provided by financing activities(4,547)(8,391)(5,554)

Depreciation and amortization

4,815

5,074

5,036

Capital expenditures

7,546

3,093

2,265

Net income attributable to Wacoal Holdings Corp. (Basic)¥79.23¥59.95¥71.75

Cash dividends

33.00

30.00

33.00

Shareholders’ equity

1,593

1,625

1,456

Total current assets¥116,851¥120,264¥109,488

Total current liabilities

44,34342,302

46,608Cash and cash equivalents

34,05938,41030,658Net property, plant and equipment

53,93849,18848,978

Total assets

292,854300,272

271,988

Short-term bank loans and long-term debt, including current portion

12,147

14,817

18,147

Total shareholders’ equity

224,374

228,857

205,106

Selling, general and administrative expenses% of net sales
Special retirement related expenses

Per share of common stock (in yen)

At year-end

For the fiscal year ended March 31, 2012, to reflect earnings and losses during the fiscal year in the consolidated financial statements more appropriately, certain consolidated subsidiaries
have changed their settlement dates to March 31 to coincide with the settlement date of the Company. Consolidated financial statements for the fiscal year ended March 31, 2011, and priorfiscal years have been retroactively revised accordingly.

44

(Millions of yen, except per share amounts)

2013

2012

2011

2010

2009

2008

2007

2006

¥180,230¥171,897¥165,548¥163,548¥170,960¥165,201¥166,410¥164,122

84,54881,891

81,65980,101

83,87982,94384,65884,322

46.9%

47.6%

49.3%

49.0%

49.1%

50.2%

50.9%

51.4%

84,331

79,62977,71678,524

77,24868,921

68,85670,946

46.8%

46.3%

46.9%

48.0%

45.2%

41.7%

41.4%

43.2%
7,521

8,499

10,377

4,401

3,829

9,833

13,337

12,896

1,333

2,441

(170)

(474)

(674)

(2,504)

816

1,024

2,133

10,940

10,207

3,927

3,155

7,329

14,153

13,920

3,466

3,772

4,199

2,010

1,655

3,083

5,774

6,502

1,459

7,880

6,913

2,785

2,475

5,062

4,845

9,029

2,821

4.6%

4.7%

1.8%

1.4%

3.2%

5.8%

5.7%

1.5%

4.4%

4.1%

1.6%

1.5%

2.9%

2.6%

4.8%

1.6%

12,30910,06010,441

9,463

8,202

14,2499,339

719(23,520)(3,467)(703)(3,573)(4,759)3,709(1,185)(2,069)5,379(2,824)(4,965)(5,363)(7,448)(9,400)(8,404)(3,428)

4,888

4,660

4,685

4,765

4,544

3,892

3,735

3,433

2,475

2,708

2,652

3,981

2,370

1,110

2,536

6,456

¥55.95¥49.08¥19.73¥17.51¥35.57¥34.29¥63.18¥19.60

28.00

28.00

20.00

20.00

25.00

25.00

22.00

20.00

1,325

1,218

1,189

1,217

1,187

1,285

1,375

1,296

¥103,587¥ 97,295¥ 90,410¥ 89,455¥ 90,778¥ 97,671¥ 92,915¥110,773

50,50435,60733,88034,94531,76235,802

34,86835,52524,51429,98526,31622,32821,95427,06919,816

19,89349,66549,07849,73451,804

49,16551,18552,78253,501

254,536

221,098

215,276

222,889

213,827240,053

250,266

242,296

18,765

6,482

6,436

8,162

5,302

5,701

5,984

6,458

186,646

171,496

167,480

171,860

166,767

184,128

193,278

186,475

45

Financial Section

Management’s Discussion and Analysis
Wacoal Holdings Corp. and Subsidiaries

Financial information contained in this section is based on the consolidated financial statements included in this integrated report, prepared in accordance with generally accepted accounting principles in
the United States (U.S. GAAP). The Wacoal Group consists of one
holding company (the Company), 58 consolidated subsidiaries, andnine equity-method affiliates.
The Wacoal Group manufactures, wholesales, and—for certain
products—retails women’s foundation garments and lingerie, nightwear, children’s underwear, outerwear and sportswear, hosiery, andother textile products. Other operations include restaurant businesses, cultural and service-related operations, and the constructionof interiors for commercial premises.

Share of Net Sales
2016

Textile products

3.5%

Hosiery
1.1%

Other
5.8%

Outerwear andsportswear
9.4%
Children’s
underwear
0.7%
Nightwear
5.0%

Foundation garments
and lingerie
74.5%

OVERVIEW ....................................................................................
We are a leading designer, manufacturer, and marketer in Japan of
women’s intimate apparel, with the largest share of the Japanesemarket for foundation garments and lingerie. Foundation garments(primarily brassieres and girdles) and lingerie (primarily slips, braslips, and women’s briefs) accounted for 74.5% of consolidated net
sales for fiscal year 2016. We also design, manufacture, and sellnightwear, children’s underwear, outerwear, sportswear, hosiery andother apparel and textile products.

• COST OF SALES• NET SALES

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

Over the past five fiscal years, fluctuations in our sales have typically reflected changes in unit volume, as average unit prices havegenerally remained stable during this period.

We principally generate revenues from sales of innerwear (consisting offoundation garments and lingerie, nightwear, and children’s underwear),outerwear and sportswear, hosiery, textile products, and other products.
For fiscal year 2016, approximately 79% of the net sales of
Wacoal Corp. (the net sales of which account for approximately 59%
of consolidated net sales) were apparel sales made on a wholesalebasis to department stores, general merchandisers, and other generalretailers and approximately 19% were apparel sales made throughdirectly managed retail stores, catalogue sales, and the Internet.
Sales from other businesses (which include cultural products andother services) constituted the remaining, approximately 2%, of
Wacoal Corp.’s net sales for fiscal 2016.

• SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative (SG&A) expenses principally consist of employee compensation and benefit expenses and promotional expenses, such as advertising costs and renovation costs.
Other SG&A expenses include shipping and handling costs, payment
fees (including outsourcing payments), and rental payments for
directly managed retail stores.
• KEY INDUSTRY TRENDS

We believe that the following have been key trends in our industry
during the last two fiscal years:

Net Sales to External Customers (and Percentage) by Product Category
Millions of yen

2016

2015

2014

Innerwear
Foundation Garments and LingerieNightwear
Children’s Underwear
Total Innerwear

46¥151,166

74.5%¥142,681

74.4%¥144,322

74.5%

10,098

5.0%

9,514

5.0%

9,301

4.8%

1,386

0.7%

1,373

0.7%

1,475

0.8%

162,650

80.2%

153,56880.1%

155,098

80.1%

Outerwear and Sportswear

19,0749.4%

16,227

8.4%

16,954

8.7%

Hosiery

2,178

1.1%

2,437

1.3%

2,252

1.2%

Textile Products

7,161

3.5%

7,616

4.0%

8,577

4.4%

Other

11,854

5.8%

11,917

6.2%

10,900

5.6%

Total

¥202,917

100.0%¥191,765

100.0%¥193,781

100.0%

( i ) In the domestic innerwear market, sales began to decrease andthe outlook remains uncertain due to a decline in customer confidence as a result of the consumption tax increase, the influenceof rising prices associated with the weakening yen and otherincreasing burdens, while the female population is declining. On
the other hand, inbound consumption is expanding due to anincrease in tourists visiting Japan.
( ii ) As for sales channels, purchases are increasing at locations otherthan our traditional sales spaces such as department stores, general merchandisers and underwear specialty stores. Sales channels have changed and diversified, with growing sales on theInternet and at directly managed retail stores and casual apparelshops as a result of opening locations at shopping malls.
(iii) The apparel market is becoming competitive due to major outerwear manufacturers entering the market alongside specialty
apparel companies and non-store retailers. Retailers and specialty store retailers of private label apparel are trying to improve
the frequency of purchase by increasing customer contact
through direct retail sales, website sales, and other Internet sales.
General merchandise stores are also strengthening the development of “private brand” merchandise. Manufacturing companies
are making efforts to strengthen direct sales and OEM and todevelop new sales channels.
(iv) These manufacturers and other competitors are producing lower
priced women’s innerwear garments by sourcing fabric and producing garments in lower cost countries in Asia, but due to theweakening yen and a rise in labor costs, tend to develop products
at a higher price with value-added features.
( v ) We are conducting new marketing strategies to achieve morediversified sales channels and exposure to new consumer groups.
During the last two fiscal years, which are the reporting periods of the audited consolidated financial statements included inthis report, we made efforts to cultivate new customers by
responding to the diversifying domestic women’s innerwear
market, to rebuild the Group’s production base, and to expand
sales and profits in the overseas market in order to react to theabove trends. With regard to the domestic market, we implemented initiatives to respond to diversification, which include
strengthening our approach to the first-bra age group and senior
customers, expanding high volume products mainly in the retailbusiness, exploiting areas in which our market share remains relatively low, diversifying the directly managed retail store model,
and acquiring the swimwear business. As for production base, wehave a newly established factory in Myanmar and two raw materials manufacturing companies in Thailand. We aim to build aglobal production base by aligning these newly established companies and our existing manufacturing companies in the ASEAN
region. With regard to the overseas market, in the United States,
Wacoal America Inc. is expanding sales from e-commerce websites and its exports to surrounding countries. In Europe, we aremaking steady progress in restructuring. In China, we madeefforts to improve profitability and to enhance brand recognition
to the middle-class market. In addition, we have developed business and have already initiated sales in India. As a result of thesemanagement initiatives and sales efforts, consolidated businessresults for the current fiscal year were as follows: ¥202,917 millionof sales, an increase of 5.8% as compared to the previous fiscal
year, ¥13,865 million of operating income, an increase of 95.8%

as compared to the previous fiscal year, and ¥14,957 million ofincome before income taxes and equity in net income of affiliatedcompanies, an increase of 31.9% as compared to the previous
fiscal year.

SUMMARY OF BUSINESS RESULTS ...........................................
• SUMMARY OF OPERATIONSOur Group entered the last year of our three-year mid-term plan (fromfiscal 2014 to fiscal 2016), and we (primarily Wacoal Corp., our core
operating entity) continued our push for greater sales share by
responding to the diversifying domestic women’s innerwear market,
improving systems for businesses other than the women’s innerwear
business and strengthening growth and profitability by actively developing overseas business.
As a result of the above, with respect to the consolidated business results for the fiscal year ended March 31, 2016, sales from ourdomestic business exceeded the results for the previous fiscal year
due to the inclusion of sales of Ai Co., Ltd. and the increase in retailbusiness. Overall sales exceeded the previous results due to superior
performance of our domestic and overseas businesses, which were
inflated by the depreciation of the Japanese yen. In terms of profit,
overall operating income largely exceeded the results for the previous
fiscal year as a result of the impairment charges we recognized inrelation to our Peach John business during the previous fiscal year.

Net Sales:¥202,917 million(up 5.8% compared to fiscal 2015)

Operating income:¥13,865 million(up 95.8% compared to fiscal 2015)

Income before income taxes
and equity in net incomeof affiliated companies:¥14,957 million(up 31.9% compared to fiscal 2015)

Net income attributable to
Wacoal Holdings Corp.:¥11,159 million(up 32.2% compared to fiscal 2015)

Cost of Sales
Our cost of sales increased 5.7% from ¥90,722 million for fiscal 2015
to ¥95,901 million for fiscal 2016. This increase was mainly due to theinclusion of sales from Ai Co., Ltd. and the cost of sales from our foreign consolidated subsidiaries that were inflated by the depreciationof the Japanese yen. Cost of sales as a percentage of net sales forfiscal 2015 and fiscal 2016 was 47.3%.
Selling, General and Administrative Expenses

Our SG&A expenses increased 5.9% from ¥87,940 million for fiscal
2015 to ¥93,151 million for fiscal 2016. This increase was mainly due
to the inclusion of sales from Ai Co., Ltd. and SG&A expenses at foreign consolidated subsidiaries that were inflated by the depreciationof the Japanese yen.
Goodwill and Other Intangible Assets

At the end of fiscal 2015, we examined potential impairment charges on
trademarks and goodwill, all of which are recorded as other intangible
fixed assets of Peach John, pursuant to its business plan, and accordingly, recorded ¥1,176 million and ¥4,845 million of impairment charges,
respectively. There were no impairment charges for fiscal 2016.

47

Financial Section

Operating Margin

Our operating margin increased by 3.1% from 3.7% for fiscal 2015 to
6.8% for fiscal 2016. This increase was mainly due to the impairment
charges recorded for the Peach John business for the fiscal 2015.
Other Income/Expenses

We recorded ¥1,092 million as other income, a decrease of ¥3,168
million, as compared to ¥4,260 million of other income for fiscal 2015.
This decrease was mainly due to gain on sales and exchange of marketable securities and investments, which decreased by ¥1,495 million from fiscal 2015, and a profit of ¥1,405 million from the sale ofpaintings for fiscal 2015.
Net Income Attributable to Wacoal Holdings Corp.

Net income attributable to Wacoal Holdings Corp. for fiscal 2016 was¥11,159 million, an increase of ¥2,715 million as compared to fiscal
2015 as a result of an improvement in our operating margin, despite adecrease in other income and an increase in tax expense.
• SUMMARY OF OPERATIONS BY OPERATING SEGMENT
Wacoal Business (Domestic)In our domestic business, we focused on establishing a system thatcan respond to changes in the external environment and made efforts
to expand customer contact by responding to growing inbound consumption and carrying out cross-channel initiatives in rural and unexploited areas. We also made efforts to develop and expand products
targeting a generation that only recently started wearing brassieres
and middle-aged and senior consumers.
With respect to our Wacoal brand business, core brassieres andproducts for seniors showed favorable performance. Despite thestrong continued inbound demand at department stores in urban
areas and successful promotion of red underwear products, due tothe traditional link between red underwear and good luck, in the last
six months of the current fiscal year, overall sales remained
unchanged from the previous fiscal year.
In the Wing brand business, overall sales remained unchanged
from the previous fiscal year due to the expansion of shops handling
products for teens as well as the strong performance of core brassieres products, mainly our regular items.

SG&A Expenses / % of Net Sales(¥ billion / %)SG&A Expenses% of Net Sales

2016
2015
2014
2013
2012

45.9
45.9

87.9

45.9

88.9

46.8
46.3

48

93.1

84.3
79.6

In our retail business, sales from our directly managed retail store,
AMPHI, showed steady performance as a result of successful initiatives of exclusive offers for members, various monthly sales promotions, and a significant increase of sales through e-commerce
websites of other companies. Sales were also largely driven by
inbound demand at Wacoal Factory Stores in outlet malls, particularly
in areas around airports, and as a result, overall sales largely
exceeded the results for the previous fiscal year.
In our wellness business, while sales of sports conditioning wear
“CW-X” brand products through existing channels, including sports
specialty stores, showed weak performance since we were not successful in attracting new customers, overall sales remained
unchanged from the previous fiscal year as a result of offering new
products for daily use.
In our catalog sales business, sales were below the results fromthe previous fiscal year due to the impact of reducing the number of
products in our catalogues and decreasing the number of catalogue
issues to improve profitability. Although Internet sales were strong asa result of an increase in visitors to our website, which was no longer
affected by the shutdown that occurred the previous year, and as aresult of strengthening of efforts to attract visitors using smartphones,
overall sales fell below the results for the previous fiscal year.
Ai Co., Ltd., our domestic subsidiary that handles the swimwear
business and directly manages underwear business, which we
acquired from San-Ai group during the current fiscal year, saw sales
from the swimwear business below what we anticipated due to unstable summer weather. In addition, sales from the underwear businessalso performed poorly, and were below the sales we anticipated.
In summary, overall sales attributable to the “Wacoal Business(Domestic)” segment exceeded the results for the previous fiscal year
due to increased sales from Wacoal Corp., our core operating entity,
and the inclusion of sales from Ai Co., Ltd. With respect to profitability, operating income also exceeded the results for the previous fiscal
year as a result of the increased sales from Wacoal Corp.

Net Sales:¥120,570 million(up 7.5% compared to fiscal 2015)

Operating income:¥8,810 million(up 4.3% compared to fiscal 2015)

Wacoal Business (Overseas)
In the United States, Wacoal America, Inc. made efforts to improve
profits by expanding its share in the high-end market and throughenhancing sales of “b.tempt’d” brand products. Despite inventory
control at department stores in the United States, overall sales
exceeded the results for the previous fiscal year as a result of strong
performance of core Wacoal brand products and favorable results ofsales from e-commerce websites and of exports to surrounding countries (Canada). In terms of profit, operating income on a local currency
basis fell below the results for the previous fiscal year due to anincrease in SG&A expenses, resulting from increased labor costs,
while we controlled PR related costs. However, operating income on a
yen converted basis exceeded the results for the previous fiscal year
due to the depreciated yen.
Wacoal Europe made efforts to promote recognition of the
Wacoal brand and to expand sales across Europe and Australia.
Sales in the United States and Australia were strong, while sales inthe United Kingdom remained unchanged from fiscal 2015. However,consumer spending in the Eurozone did not recover because of political and economic instability. Therefore, Eurozone sales fell significantly from the previous fiscal year, due to weakness of Huit brandproducts, in addition to poor performance overall, particularly inFrance. As a result, total sales on a local currency basis fell below theresults for fiscal 2015, but sales on a yen converted basis remained
unchanged. With regard to profit, operating income largely fell below
the results for fiscal 2015 as a result of decreased sales and anincrease in purchase costs due to dollar appreciation.
In China, we made efforts to expand brands targeting the middle-class market and to establish a profit system. Sales during thefirst six months of the current fiscal year from January to June
showed favorable performance. Although sales growth slowed down
during the second half of the current fiscal year, during which there
was increasing concern that the economic slowdown was going tointensify as a result of a decreasing number of shop openings of LA
ROSABELLE, a brand targeting the middle-class market, and of failing to achieve the sales target for our campaign on external e-commerce websites in November 2015, overall sales exceeded the results
for fiscal 2015. In terms of profit, operating income largely exceeded
the results for fiscal 2015 due to increased sales.
As a result of the above, with respect to the overall sales andoperating income attributable to the “Wacoal Business (Overseas)”segment, overall sales exceeded the results for the previous fiscal
year, while operating income was lower.

Net Sales:¥51,869 million(up 7.8% compared to fiscal 2015)

Operating income:¥4,433 million(down 7.2% compared to fiscal 2015)

Peach John BusinessWe made efforts to maintain existing Peach John Co., Ltd. customer
contacts in our three-brand framework and to expand contact withnew customers through shop openings. Sales from our core mail-order catalogues largely fell below the results for the previous fiscal
year due to the decreased number of users visiting e-commerce websites. On the other hand, inbound demand contributed to sales fromdomestic directly managed retail stores which largely exceeded theresults for the previous fiscal year as a result of keeping a fresh merchandising approach by changing the products offered in our shops
on a weekly basis. Overseas sales largely exceeded those of the previous fiscal year due to a significant expansion of sales throughe-commerce websites of other companies in China despite the weak
performance of shop sales in Hong Kong. This offset a decrease insales resulting from initiatives to discontinue underperforming shops.
As a result of the above, overall sales from our Peach John business fell below the previous year’s results. In terms of profit, our operating income significantly improved from the previous fiscal year,
during which we recorded an operating loss, as a result of efforts toimprove sales profit by reviewing pricing and holding fewer discountsales as well as the impairment charges which we recognized during
fiscal 2015, in addition to a decrease in operating loss incurred fromour business in China.

Net Sales:¥11,190 million(down 3.8% compared to fiscal 2015)

Operating income:¥258 million(¥6,296 million operating loss in fiscal 2015)

Other

We moved to establish a stable profit structure and strengthen management bases.
We made efforts to cultivate new sales channels for the Lecien
Corporation (“Lecien”) and to build up our production base. Overallsales from Lecien fell below the results for the previous fiscal year due
to the weak sales from our apparel business division although sales ofour products to our major clients performed strongly in the core innerwear business division. In terms of profit, we recorded an operating
loss although there was a little sign of recovery compared to the previous fiscal year as a result of the reduced cost of raw materials andreviewing purchasing prices.
As for Nanasai Co., Ltd. (“Nanasai”), we worked to maintain andexpand rental business as well as increase sales by acquiring new
construction businesses. Sales from the rental business fell below
results for fiscal 2015. In the construction business, although we
received orders for the construction of new commercial facilities andorders from apparel brands, sales also fell below the previous year’s
results as the orders received were generally for smaller-scale projects. Our sales business showed an increase in the delivery of fixturesin connection with the construction orders received and largely
exceeded the results for the previous fiscal year. As a result, overallsales exceeded the results for the previous fiscal year. In terms of
profit, operating income largely exceeded the results for the previous
fiscal year due to increased sales.
As a result of the above, with respect to the overall sales andoperating income attributable to our “Other” segment, overall sales
fell below the results for the previous fiscal year while operating
income largely exceeded the results for the previous fiscal year.

Net Sales:¥19,288 million(down 2.7% as compared to fiscal 2015)

Operating income:¥364 million(up 130.4% compared to fiscal 2015)• SUMMARY OF OPERATIONS BY REGION
Japan

With respect to Wacoal Corp., while consumers continue to be budget-conscious after the consumption tax increase, sales exceeded
the results for the previous fiscal year as a result of the strong continued inbound demand, especially at department stores in urban areas
and outlet malls near airports, and of the increase in shops that arepart of our retail business. In terms of profit, operating income also
exceeded the results for the previous fiscal year due to efforts to holddown costs and increased sales.
Sales from Ai Co., Ltd., a domestic subsidiary, which now handles the swimwear business and directly manages underwear business, were below the sales we anticipated due to unstable summer
weather.
For the Peach John business, while inbound demand contributed
to favorable sales from domestic directly managed stores, overall

49

Financial Section

sales fell below the results for the previous fiscal year due todecreased sales affected by the performance of our core mail-ordercatalogues, which was impacted by a decrease in users visiting
e-commerce websites. In terms of profit, operating income significantly improved from the previous fiscal year, during which werecorded an operating loss, mainly due to impairment charges.
The overall sales of the Lecien Corporation (“Lecien”) fell below
the results for the previous fiscal year due to the weak sales from ourapparel business division although sales from our core innerwear
business division were strong. In terms of profit, we recorded an
operating loss due to an increase in purchase costs impacted by thedepreciation of the yen that could not be absorbed by efforts to
reduce the cost of raw materials.
As for Nanasai Co., Ltd. (“Nanasai”), our sales business showed asignificant expansion as a result of new transactions, and accordingly,
overall sales exceeded the results for the previous fiscal year.
Increased sales also resulted in an operating income that exceeded
the previous results.
As a result of the above, sales from our business in Japanamounted to ¥150,673 million, an increase of 5.2% compared to theprevious fiscal year.

Europe/North America

Wacoal America Inc.’s overall sales exceeded the results for the previous fiscal year as a result of strong performance of core Wacoal
brand products and favorable results of sales from e-commerce websites and to neighboring Canada. In terms of profit, operating income
on a local basis fell below the results for the previous fiscal year due
to an increase in SG&A expenses, a result of increased labor costs.
However, operating income on a yen converted basis exceeded theresults for the previous fiscal year due to the depreciated yen.
With respect to Wacoal Europe, sales in the United Kingdom
remained unchanged from the previous fiscal year while sales to theUnited States and Australia were strong. However, sales in theEurozone showed poor performance, as did Huit brand products. As
a result, overall sales on a local currency basis fell below the results
for the previous fiscal year, but sales on a yen converted basis
remained unchanged from the previous fiscal year. With regard to
profit, operating income largely fell below the results for the previous
fiscal year as a result of decreased sales and an increase in purchasecosts due to the appreciation of the dollar.
As a result of the above, sales from business in Europe/North
America amounted to ¥34,338 million, an increase of 6.5% as compared to the previous fiscal year.

Asia/Oceania

With respect to Wacoal China, sales during the first six months of thecurrent fiscal year from January to June showed favorable performance. Although sales growth slowed down during the second half ofthe current fiscal year from July to December overall sales exceeded
the results for the previous fiscal year. In terms of profit, operating
income largely exceeded the results for the previous fiscal year due toincreased sales and the closure of underperforming shops.
With respect to Peach John’s directly managed overseas stores,
sales exceeded those of the previous fiscal year as a result of initiatives to discontinue underperforming shops and to focus sales efforts
on external e-commerce websites in China, despite the weak performance of shop sales in Hong Kong.
As a result of the above, sales from our business in Asia/Oceania
amounted to ¥17,906 million, an increase of 10.1% as compared tothe previous fiscal year.

Our current policy is to fund cash needs from cash flows from operations, which allows us to secure working capital, make capital investments, and pay dividends without relying on substantial borrowings
or other financing from outside of our group companies. As of March
31, 2016, we had credit facilities at financial institutions totaling¥36,940 million, and the unused lines of credit for short-term financing amounted to ¥11,948 million. Of this credit, ¥5,500 million is available to Wacoal Holdings Corp., ¥3,111 million is available to Wacoal
Europe Ltd., ¥3,050 million is available to Wacoal Service Co., Ltd.,and ¥288 million is available to Nanasai.
In general, most of our credit facilities have automaticallyrenewed terms, and we are not aware of any issues with respect toany lenders that could cause these facilities to become unavailable.
Even if any of our subsidiaries loses access to funds from our credit

Net Cash Provided by Operating Activities

Capital Investment(¥ billion)(¥ billion)

2016

2016
12.6

2015

2013

8.9
12.3
10.1

4.5

2014
2013

2012

9.0

2015
14.3

2014

50

LIQUIDITY AND CAPITAL RESOURCES .......................................

2012

3.5
3.3
3.6

facilities, we believe that it is possible for other companies in ourGroup to provide any necessary funds. Our borrowing requirements
are not affected by seasonality.
We are not aware of any restrictions on the transfers of funds
from a subsidiary to a parent company in the form of a cash dividend.
We believe our working capital is adequate for present requirements
and for business operations in the short to long term.

As for retained earnings, with the aim of improving corporate value,
we have actively invested in expanding new points of contact with consumers for our domestic business and investing in our overseas businesses. We also plan to use retained earnings in strategic investments
for maintaining competitiveness and reinforcing growth. With these
efforts, we seek to benefit shareholders by improving future profitability.
We also intend to flexibly acquire treasury stock, and we will try to
improve capital efficiency and return profits to shareholders.

CASH FLOW STATUS ....................................................................
The balance of cash and cash equivalents at the end of fiscal 2016was ¥34,059 million, a decrease of ¥4,351 million as compared to theend of the previous fiscal year.
• CASH FLOW PROVIDED BY OPERATING ACTIVITIESCash flow provided by operating activities during fiscal 2016 was¥12,635, a decrease of ¥1,702 million as compared to the previous
fiscal year. It is the result after the net income of ¥11,472 million was
adjusted for depreciation expenses, deferred taxes and changes in
assets and liabilities.
• CASH FLOW USED IN INVESTING ACTIVITIESCash flow used in investing activities during fiscal 2016 was ¥11,407
million, as compared to ¥164 million of cash inflow for the previous
fiscal year, due to capital expenditures and business acquisitions.
• CASH FLOW USED IN FINANCING ACTIVITIESCash flow used in financing activities during fiscal 2016 was ¥4,547
million, a decrease of ¥3,844 million as compared to the previous
fiscal year, due to the cash dividend payments.

SUMMARY OF CAPITAL INVESTMENT, ETC................................
The amount of capital investment for the fiscal year ended March 31,
2016 was ¥8,978 million. A majority of our capital investment wasused in our construction project related to a business-use building,the information system investment for our domestic subsidiaries andmaintenance and repair work implemented for the real properties heldby the Company.
The amounts of capital investment made in Wacoal Business(Domestic), Wacoal Business (Overseas), Peach John Business, andOther were ¥6,977 million, ¥1,694 million, ¥245 million, and ¥62 million, respectively.

DIVIDEND POLICY ........................................................................
Our basic policy on profit distribution to shareholders is to makestable distributions based on consideration of consolidated performance while seeking to increase enterprise value through active
investment aimed at higher profitability and to increase net income
per share. Based on our basic policy, we provide a fiscal year-end
dividend once a year.
We also prescribe that the Company may distribute earnings subject to the resolution of the Board of Directors’ meeting pursuant to
the provisions of Article 459 of the Companies Act.
Based on such policy, we plan to distribute the year-end dividendof 33.00 yen per share as a distribution of earnings for the current
fiscal year.

RESEARCH AND DEVELOPMENT ................................................
Our research and development (R&D) activities are mainly conductedby our Human Science Research Center to achieve harmony between
the human body and clothing and to support better product creation.
Since 1964, we have been conducting research into the female
body in order to accurately understand the Japanese woman’s physique. In particular, we have developed a silhouette analysis system
and introduced a three-dimensional measuring system. We are also
working on an even more advanced measurement of sensory comfort.
R&D activities focus on addressing the proportional, physiological, andmental aspects of garment design. One of the most important results
was the enrichment of sensory comfort research through participation
in a project led by the Ministry of Trade and Industry (presently the
Ministry of Economy, Trade and Industry) from 1995 to 1998. Based onthat, we have been focusing on developing new products that are not
only comfortable for the wearer, but also have a positive physiologicaleffect based on the three factors of pressure, heat, and touch. In 2005,
we developed and created a new market for our breakthrough Style
Science series products, which support the creation of a healthy andbeautiful body by changing the idea of everyday walking to walking forexercise. In 2010, we conducted an analysis and announced principles
on the physiological changes associated with aging from a person’s
20s to 50s. We also strengthened the development of new products forcoping with aging and have been developing new functional products
based on the lifestyle habits of people as they undergo small physicalchanges associated with aging.
Our Human Science Research Center promotes R&D based on asurvey analysis that includes even the body shapes and needs ofyoung customers at the age at which our products are first introduced, and the senior generation.
In terms of product development, during fiscal 2016, weenhanced the development of new products which focus on “comfort” aspects and of new products for young adults, an age group that
does not wear girdles.
As a result of the above, we recorded ¥839 million for R&D during
fiscal 2016.
Our R&D covers a wide range of activities from basic research to
product development, mainly of women’s innerwear. Therefore, it isdifficult to relate each of those activities to a specific segment, andthus, we do not provide information regarding each project bysegment.
In order to promote “the realization of an industry supporting
women with unbounded living beauty,” we will make efforts to enrichR&D activities that contribute to the improvement of customer satisfaction and corporate value based on the key concepts of beauty,
comfort, and health. We will also work toward strengthening productappeal and developing new products or services that can gain support from and satisfy customers.

51

Financial Section

Consolidated Balance Sheets
Wacoal Holdings Corp. and Subsidiaries
Millions of yen
March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 2)

2016

2015

2016

¥ 34,059¥ 38,410$ 302,962

2,131

2,687

18,956ASSETS
CURRENT ASSETS:

Cash and cash equivalents
Time deposits
Marketable securities (Notes 3, 20 and 21)

1,880

2,387

16,723

Notes and accounts receivable (Note 18)

26,936

26,544

239,601

Allowance for returns and doubtful receivables (Note 4)(2,229)(2,409)(19,827)

Inventories (Note 5)

44,44542,893395,348

Deferred income taxes (Note 17)

3,832

5,488

34,086

Other current assets (Notes 18, 20 and 21)

5,797

4,264

51,566

116,851

120,264

1,039,415

Total current assets

PROPERTY, PLANT AND EQUIPMENT:Land (Note 9)

21,67722,009

192,822

Buildings and building improvements (Notes 9 and 11)

65,05664,038578,687

Machinery and equipment (Note 9)17,552

16,760156,129

Construction in progress

5,419

923

48,203

109,704

103,730

975,841(55,766)(54,542)(496,051)

53,93849,188479,790

20,71322,052

184,247

Total
Accumulated depreciation
Net property, plant and equipment

OTHER ASSETS:

Investments in affiliated companies (Note 6)
Investments (Notes 3, 20 and 21)

56,021

59,963498,319

Goodwill (Notes 7, 8 and 21)

17,911

18,750159,322

Other intangible assets (Notes 7, 8 and 21)

12,112

12,739107,739

Prepaid pension expense (Note 12)8,145

10,57772,452

Deferred income taxes (Note 17)

1,036

982

9,215

Other
Total other assets

TOTAL
See notes to consolidated financial statements.

52

6,127

5,757

54,501122,065

130,820

1,085,795¥292,854¥300,272$2,605,000

Millions of yen

Thousands of
U.S. dollars (Note 2)

2016

2015

2016

¥ 11,759¥ 10,038$ 104,599

LIABILITIES AND EQUITYCURRENT LIABILITIES:

Short-term bank loans (Note 9)
Notes and accounts payable:
Trade notes

1,431

1,031

12,729Trade accounts (Note 18)

12,017

11,346

106,894

6,106

6,686

54,314

Accrued payroll and bonuses

Other payables

7,152

6,936

63,619

Income taxes payable (Note 17)

711

2,064

6,324

Current portion of long-term debt (Notes 9 and 20)

293

534

2,606

Other current liabilities (Notes 20 and 21)
Total current liabilities

4,874

3,667

43,35544,34342,302

394,440

95

4,245

845

LONG-TERM LIABILITIES:Long-term debt (Notes 9 and 20)
Liability for termination and retirement benefits (Note 12)

1,703

1,680

15,149Deferred income taxes (Note 17)

15,58818,796

138,659

Other long-term liabilities (Notes 11, 12 and 17)
Total long-term liabilities

1,724

1,681

15,335

19,11026,402

169,988

13,26013,260117,951COMMITMENTS AND CONTINGENCIES (Notes 9, 10 and 13)

EQUITY:WACOAL HOLDINGS CORP. SHAREHOLDERS’ EQUITY (Notes 14 and 23):

Common stock, no par value authorized, 500,000,000 shares in 2016 and 2015;
issued 143,378,085 shares in 2016 and 2015
Additional paid-in capital (Note 14)

29,686

29,642

264,063

Retained earnings

162,196

155,264

1,442,769

Foreign currency translation adjustments

5,177

10,83146,051

Unrealized gain on securities

17,966

20,821

159,811Pension liability adjustments (Note 12)(1,035)

1,934(9,207)

22,10833,586

196,655(2,876)(2,895)(25,583)

224,374

228,857

1,995,855

5,027

2,711

44,717229,401

231,568

2,040,572¥292,854¥300,272$2,605,000

Accumulated other comprehensive income (loss) (Note 16):

Total accumulated other comprehensive income
Treasury stock, at cost -2,519,350 shares and 2,537,276 shares in 2016 and 2015, respectively
Total Wacoal Holdings Corp. shareholders’ equity
NONCONTROLLING INTERESTS

Total equity

TOTAL

53

Financial Section

Consolidated Statements of Income
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2016, 2015 and 2014

NET SALES (Note 18)
OPERATING COSTS AND EXPENSES:
Cost of sales (Notes 12 and 18)
Selling, general and administrative expenses (Notes 1, 10, 11, 12, 15 and 21)
Impairment charges on goodwill (Notes 8 and 21)
Impairment charges on other intangible assets (Notes 8 and 21)
Total operating costs and expenses
OPERATING INCOME
OTHER INCOME (EXPENSES):Interest income
Interest expense
Dividend income
Gain or loss on sales or exchange of marketable securities
and investments – net (Notes 3 and 16)
Valuation loss on marketable securities and investments (Notes 3 and 16)
Gain on bargain purchase (Note 7)
Gain on sales of paintings
Other – net (Notes 1, 16 and 21)
Total other income (expenses) – net
INCOME BEFORE INCOME TAXES AND EQUITY IN NET INCOME
OF AFFILIATED COMPANIES (Note 17)
INCOME TAXES (Note 17):
Current
Deferred
Total income taxes
INCOME BEFORE EQUITY IN NET INCOME OF AFFILIATED COMPANIESEQUITY IN NET INCOME OF AFFILIATED COMPANIES (Note 6)
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.

Millions of yen

Thousands of
U.S. dollars (Note 2)

2016¥202,917

2015¥191,765

2014¥193,781

2016$1,804,990

95,901
93,15191,00888,913853,060
828,598

189,052
13,86590,722
87,9404,845
1,176
184,683
7,082

179,921
13,8601,681,658
123,332

161
(65)
1,057

142
(98)
1,011

97
(105)
831

1,432
(578)
9,402

90

1,585

84

801

(20)
173

(14)

(47)

(178)
1,539

(304)
1,092

1,405
229
4,260

313
1,173

(2,705)
9,713

14,957

11,342

15,033133,045

3,442
1,288
4,730
10,227
1,245
11,472(313)¥ 11,159

5,223(1,920)
3,303
8,039
705
8,744
(300)
¥ 8,444

5,256
385
5,641
9,392
985
10,377(271)¥ 10,106

30,617
11,45742,074
90,971
11,075102,046(2,784)$ 99,262

2016

2015

2014

Yen
Years Ended March 31, 2016, 2015 and 2014

NET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.
PER SHARE (Note 19):
Basic
DilutedNET INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.
PER AMERICAN DEPOSITARY RECEIPT (5 shares of common stock) (Note 19):
Basic
Diluted

¥
¥

79.23
79.00

¥ 396.15¥ 394.99

¥
¥

59.95
59.80

¥ 299.77¥ 299.00¥¥

U.S. dollars (Note 2)

2016

71.75
71.61

$
$

0.70
0.70

¥ 358.77¥ 358.03

$
$

3.52
3.51

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
Wacoal Holdings Corp. and Subsidiaries

Years Ended March 31, 2016, 2015 and 2014

NET INCOME
OTHER COMPREHENSIVE INCOME, NET OF TAX (Note 16):
Foreign currency translation adjustments:
Amounts arising during the year
Reclassification adjustments
Total foreign currency translation adjustments
Unrealized (loss) gain on securities:
Amounts arising during the year
Reclassification adjustments
Total unrealized (loss) gain on securities
Pension liability adjustments:
Amounts arising during the year
Reclassification adjustments
Total pension liability adjustments
OTHER COMPREHENSIVE INCOME
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTSCOMPREHENSIVE INCOME ATTRIBUTABLE TO WACOAL HOLDINGS CORP.
See notes to consolidated financial statements.

54

Millions of yen

Thousands of
U.S. dollars (Note 2)2016¥ 11,472

2015¥ 8,7442014¥10,377

2016$ 102,046(5,670)8,671(50,436)(5,670)

8,671

8,342
27
8,369

(2,833)(47)(2,880)10,216
(974)
9,242

2,313
(11)
2,302

(25,200)(418)(25,618)(2,327)(644)(2,971)(11,521)(49)(270)¥ (319)

2,332
(176)
2,156
20,06928,813(472)¥28,341

1,468
233
1,701
12,372
22,749(412)¥22,337(20,699)(5,729)(26,428)(102,482)(436)(2,402)$ (2,838)(50,436)

Consolidated Statements of Equity
Wacoal Holdings Corp. and Subsidiaries

Millions of yen

Years Ended March 31, 2016, 2015 and 2014

BALANCE, APRIL 1, 2013
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥140 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted (Note 15)
Equity transactions with noncontrolling interests (Note 14)
BALANCE, MARCH 31, 2014
Net income
Foreign currency translation adjustments
Unrealized gain on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥165 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Share-based compensation granted and exercised (Note 15)
Equity transactions with noncontrolling interests (Note 14)
BALANCE, MARCH 31, 2015
Net income
Foreign currency translation adjustments
Unrealized loss on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, ¥150 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted and exercised (Note 15)
Increase due to establishment of subsidiaries (Note 7)
BALANCE, MARCH 31, 2016

Shares of
Outstanding
Common Stock(Thousands)

CommonStock

Additional
Paid-in
Capital140,844¥13,260¥29,514

Accumulated
Other
Retained Comprehensive
Earnings Income (Loss)¥145,306
10,106¥ 1,458

Total Wacoal
Holdings Corp.
Treasury Shareholders’ Noncontrolling
Stock
EquityInterests¥(2,892)

8,234
2,296
1,701
(3,944)¥186,646
10,106
8,234
2,296
1,701

¥2,179271
135
6(3,944)(3,944)
(148)

(6)
1

140,839(6)
0

13,26069
429,587

151,468
8,444

13,689(2,898)

8,521
9,215
2,161
(4,648)(6)
0
69
4205,106
8,444
8,521
9,215
2,161

(13)
2,430
300
150
27
(5)

(4,648)140,841

13,26055
029,642(3)
6
155,264
11,15933,586(2,895)(5,654)(2,855)(2,969)(4,225)(3)61
0228,857
11,159(5,654)(2,855)(2,969)

(1)
2,711
313
(16)
(25)
(2)

(4,225)140,859¥13,26044(2)¥29,686¥162,196¥22,108

(7)
1
25

(7)
1
67

¥(2,876)¥224,374

(190)
(3)
61
(1)
231,568
11,472(5,670)(2,880)(2,971)(4,225)

(206)
(5)
1
22

(148)
(6)
0
69
(9)
207,536
8,744
8,671
9,242
2,156
(4,648)

(190)
(3)
5

Total Equity¥188,825
10,377
8,369
2,302
1,701

2,252
¥5,027

(206)
(7)
1
67
2,252
¥229,401

Thousands of U.S. dollars (Note 2)

Year Ended March 31, 2016

BALANCE, MARCH 31, 2015
Net income
Foreign currency translation adjustments
Unrealized loss on securities
Pension liability adjustments
Cash dividends paid to Wacoal Holdings Corp.
shareholders, $1 per 5 shares of common stock
Cash dividends paid to noncontrolling interests
Repurchase of treasury stock
Sale of treasury stock
Share-based compensation granted and exercised (Note 15)
Increase due to establishment of subsidiaries (Note 7)
BALANCE, MARCH 31, 2016

CommonStock

Additional
Paid-in
Capital$117,951$263,672

Accumulated
Other
Retained Comprehensive
Earnings
Income$1,381,107
99,262$298,755(50,294)(25,396)(26,410)

Total Wacoal
Holdings Corp.
Treasury Shareholders’ Noncontrolling
Stock
EquityInterests$ (25,752) $2,035,733
99,262(50,294)(25,396)(26,410)(37,582)(37,582)(37,582)(1,832)$117,951

391

(18)

$264,063$1,442,769

(62)
9
222
$196,655

(62)
9
595

$ (25,583) $1,995,855

Total Equity$24,115 $2,059,848
2,784
102,046(142)(50,436)(222)(25,618)(18)(26,428)

20,032$44,717(1,832)(62)
9595
20,032$2,040,572

See notes to consolidated financial statements.

55

Financial Section

Consolidated Statements of Cash Flows
Wacoal Holdings Corp. and Subsidiaries
Millions of yen

2016

2015

2014

2016

¥ 11,472¥ 8,744¥10,377$ 102,046

4,815
67
(117)
1,288
59
256

5,074
60
(45)
(1,920)
38

5,036
69
365
385
94

42,830596(1,041)
11,457525
2,277

Years Ended March 31, 2016, 2015 and 2014

OPERATING ACTIVITIES:Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Share-based compensation (Note 15)
Provision for returns and doubtful receivables – net
Deferred income taxes
Gain or loss on sales or disposal of property, plant and equipment – net
Impairment charges on long-lived assets
Impairment charges on goodwill (Notes 8 and 21)
Impairment charges on other intangible assets (Notes 8 and 21)
Gain on sales or exchangeof marketable securities and investments (Notes 3 and 16)
Valuation loss on marketable securities and investments (Notes 3 and 16)
Gain on bargain purchase (Note 7)
Gain on sales of paintings
Equity in net income of affiliated companies, less dividends
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable
Increase in inventories(Increase) decrease in other current assets(Decrease) increase in notes and accounts payable
Decrease in liability for termination and retirement benefits(Decrease) increase in accrued expenses, income taxes payable
and other current liabilities
Other
Net cash provided by operating activities
INVESTING ACTIVITIES:
Increase in time deposits
Decrease in time deposits
Proceeds from sales and redemption of available-for-sale securities (Note 3)
Payments to acquire available-for-sale securities
Proceeds from redemption of held-to-maturity debt securities
Payments to acquire held-to-maturity debt securities
Proceeds from sales of paintings
Proceeds from sales of property, plant and equipment
Capital expenditures
Payments to acquire intangible assets (Note 8)
Proceeds from sales of other investments
Proceeds from sales of shares of affiliated companies
Acquisitions of subsidiaries, net of cash acquired and payments to acquire
additional shares of a subsidiaries
Payments to acquire additional shares of affiliated companies
Payments associated with the acquisitionof the business (net of cash and cash equivalents acquired) (Note7)
Other
Net cash (used in) provided by investing activities
FINANCING ACTIVITIES:
Increase (decrease) in short-term bank loans
with three months or less maturity - net
Repayments of short-term bank loans with more than three months maturity
Proceeds from issuance of long-term debt
Repayments of long-term debt
Repurchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid on common stock
Dividends paid to noncontrolling interests
Proceeds from payments from noncontrolling interests
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEARADDITIONAL CASH FLOW INFORMATION:
Cash paid for:
Interest
Income taxes
NONCASH INVESTING ACTIVITIES:Acquisition of property, plant and equipment by assuming payment obligation
See notes to consolidated financial statements.

56

Thousands of
U.S. dollars (Note 2)

4,845
1,176
(90)

(1,585)

(84)

(801)

20
(173)

14

47

178
(1,539)(482)(1,405)
(27)

(272)

(4,287)(195)(1,008)(1,111)(45)(2,101)534(1,038)(442)
1,302(1,601)(1,368)(339)
636(1,541)(827)(1,735)(8,966)(9,883)(400)(18,689)

(261)

505

(3,649)(2,322)

241
12,635108
14,337

20
8,949

2,144
112,390(2,459)
2,889
602
(420)
739
(629)

(3,548)3,383
4,499(1,353)
114
(568)
1,785
174
(3,093)(1,385)124
6(2,347)
2,291
4,685
(57)
113
(322)

(21,873)
25,6985,355(3,736)
6,574(5,595)24(2,265)(1,199)762

6,894(67,123)(12,738)
107
53

775
(7,546)(1,432)
12
6

(1)

(8)
(16)

(3,822)(33,998)(122)(11,407)

27
164

2,101

(6,784)(3)
1,658(1,085)(101,467)(455)

18,689(100)
4,460(1,226)(3)(4,463)(7)
1(4,225)(206)
2,252(4,547)(1,032)(4,351)
38,410¥ 34,059(4,648)
(190)

(901)
(6)
0
(3,944)(148)(8,391)
1,642
7,752
30,658¥38,410(5,554)
1,091
6,144
24,514¥30,658(39,699)(62)
9(37,582)(1,832)
20,032(40,445)(9,180)(38,702)341,664$ 302,962

¥

67
5,756

¥

100
4,497

¥

98
8,305

$

596
51,201

¥

736

¥

419

¥

582

$

6,547

Notes to Consolidated Financial Statements
Wacoal Holdings Corp. and Subsidiaries

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES .................................................................................................
BASIS OF FINANCIAL STATEMENTS—Wacoal Holdings Corp. (thegain or loss (net of tax) in accumulated other comprehensive income or“Company”) and subsidiaries are predominantly engaged in one industry,loss, a separate component of equity, until realized. Equity securities thatthe manufacture and sale of apparel, including foundation garments, lin-

do not have readily determinable fair values are recorded at cost. Gains

gerie, nightwear and outerwear in Japan, the United States of America,

and losses on sales of investments are computed based on cost deter-

Europe and certain Asian countries.

mined using the average cost method.

The accompanying consolidated financial statements, stated in

If a decline in the fair value of marketable securities and investments

Japanese yen, have been prepared on the basis of accounting princi-

is determined to be other than temporary, an impairment charge isples generally accepted in the United States of America (U.S. GAAP).

recorded in the consolidated statements of income. The Companies peri-

CONSOLIDATION—The consolidated financial statements include theodically determine whether a decline in the fair value of marketable secu-

accounts of the Company and its majority-owned subsidiaries (collec-

rities and investments is deemed to be other than temporary based on

tively, the “Companies”). All intercompany transactions and balances

criteria that include the duration of the market decline, the extent to which

are eliminated.

cost exceeds fair value, the financial position and business outlook of theSome foreign subsidiaries of the Company have a fiscal year ending

issuer and the intent and ability of the Companies to retain the impaired

December 31. The accounts of those subsidiaries are included in themarketable securities and investments for a sufficient period of time forCompany’s consolidated financial statements based on the subsidiaries’

anticipated recovery in fair value.

fiscal year. Necessary adjustments have been made for significant

ALLOWANCE FOR SALES RETURNS—Allowance for sales returns is

events that occurred during the period between their fiscal year ends

estimated based on historical products returns experience, sales move-and March 31.

ments, and the overall retail industry situation.

Investments in affiliated companies where the Companies’ ownershipis 20% to 50% are accounted for using the equity method.
Significant influence is generally deemed to exist if the Companies

ALLOWANCE FOR DOUBTFUL RECEIVABLES—Allowance for doubtful
notes and receivables is estimated based on historical collection experience and additional information including current economic conditions

have an ownership interest in the voting stock of the investee between

and creditworthiness of each applicable customer.

20% and 50%, although other factors are considered in determining

INVENTORIES—Inventories are stated at the lower of cost or market,

whether the equity method of accounting is appropriate.

cost being determined by the first-in, first-out method for raw materials

USE OF ESTIMATES—The preparation of consolidated financial state-

and the average cost method for work in process and finished products.

ments in conformity with U.S. GAAP requires management to make esti-

Cost includes net prices paid for materials purchased, production labormates and assumptions that affect the reported amounts of assets andcost, factory overhead and charges for customs duties.

liabilities and disclosure of contingent assets and liabilities at the date of

PROPERTY, PLANT AND EQUIPMENT—Property, plant and equipment

the consolidated financial statements and the reported amounts of reve-is stated at cost less accumulated depreciation and impairment charges.

nues and expenses during the reporting period. Actual results could differ

Depreciation of property, plant and equipment is computed by thefrom those estimates.

declining-balance method, except for buildings acquired on or after April

CASH AND CASH EQUIVALENTS—Cash and cash equivalents include all

1, 1998, which are depreciated using the straight-line method, based

time deposits (all of which are interest bearing) with original maturities ofupon the estimated useful lives of the assets. The estimated useful lives

three months or less.

are as follows:

FOREIGN CURRENCY TRANSLATION—Assets and liabilities of foreign

Buildings and building improvements: 2–50 years (mainly 38 years)

subsidiaries have been translated to Japanese yen at period-end

Machinery and equipment

exchange rates and income and expenses have been translated using(except for the part of the painting):

2–20 years (mainly 5 years)

average exchange rates for the period. Translation adjustments resulting

Depreciation expenses for the years ended March 31, 2016, 2015

from the process of translating consolidated financial statements, net ofand 2014 are ¥3,278 million, ¥3,356 million and ¥3,212 million, respec-

tax, are included in accumulated other comprehensive income, a separate

tively. The Companies recorded ¥295 million of land held for sale in othercomponent of equity. Exchange gains and losses resulting from foreign

current assets in the consolidated balance sheet as of March 31, 2016,

currency transactions and the conversion of monetary assets and liabili-

which represents the old site of the old Nagoya branch. The land isties denominated in foreign currencies are included in other income

included in the asset group for Wacoal Business (Domestic) in the seg-

(expenses) in the consolidated statements of income.

ment information. Please see information at Note 23 Subsequent events

Foreign currency translation gains (losses) for the years ended

for information on the transfer of this land.

March 31, 2016, 2015 and 2014 were ¥(519) million, ¥300 million and

IMPAIRMENT OF LONG-LIVED ASSETS—The carrying values of long-¥161 million, respectively. They have been included in other - net of otherlived assets, held and used by the Companies, are evaluated for impair-income (expenses).

ment whenever there is an event or change in circumstances that

MARKETABLE SECURITIES AND INVESTMENTS—The Companies clas-

indicates that such assets have been impaired or that the carrying

sify their marketable securities and investments into one of two catego-amounts of such assets might not be recoverable. The carrying amount of

ries: held to maturity or available for sale. Held-to-maturity securities area long-lived asset is not recoverable if it exceeds the sum of the undis-

measured at amortized cost. The Companies classify debt securities ascounted cash flows expected to result from the use and eventual disposi-

held to maturity only if the Companies have the positive intent and abilitytion of the asset. That assessment is based on the carrying amount of theto hold those securities to maturity. Available-for-sale securities are car-asset at the date it is tested for recoverability, whether in use or underried at fair value with a corresponding recognition of unrealized holding

development. The impairment charge is measured as the amount by

57

Financial Section

which the carrying amount of a long-lived asset exceeds its fair value.

capitalized. The payments on such leases are recorded as expense.

Impairment charges on long-lived assets for the year ended March 31,

The rental expense under operating leases is recognized on a straight-

2016 were ¥256 million in selling, general and administrative expenses.

line basis.

The Companies recorded no impairment charges on long-lived assets for

TREASURY STOCK—The Companies account for treasury stock underthe years ended March 31, 2015 and 2014.

the cost method and include treasury stock as a component of equity.

GOODWILL AND OTHER INTANGIBLE ASSETS—Goodwill represents

ACQUISITIONS—The Companies account for acquisitions using thethe excess of the purchase price of an acquired entity over the fair value

acquisition method in accordance with the guidance for business combi-

of assets acquired and liabilities assumed.

nations. The Companies allocate the purchase price to the assets

Goodwill and other intangible assets with indefinite useful lives are

acquired and liabilities assumed based on the estimated fair values at thetested for impairment annually, or more frequently if conditions indicate

date of acquisition, including intangible assets that can be identified andan earlier review is necessary. The goodwill is allocated to the reporting

named. The purchase price in excess of the fair value of the net assets isunit in which the business that created the goodwill resides. To test forrecorded as goodwill. In the case where the purchase price is below the

goodwill impairment, the carrying value of each reporting unit is com-fair value of the net assets, the Companies recognize the fain value of thepared with its fair value. If the carrying amount of a reporting unit exceeds

net assets in excess of the purchase price in earnings as a gain on bar-its fair value, the second step of the goodwill impairment test is per-gain purchase in the consolidated statements of income.

formed by comparing the carrying amount of reporting unit goodwill with

REVENUE RECOGNITION—The Companies recognize revenue on sales

its implied fair value. If the carrying amount of reporting unit goodwill

to retailers, mail order catalog sales and Internet sales when (1) persua-

exceeds its implied fair value, an impairment charge is recognized in ansive evidence of an arrangement exists, (2) delivery has occurred resulting

amount equal to that excess.

in transfer of title and risk of loss, (3) the sales price is fixed or determin-

To test for impairment of other intangible assets with indefinite usefulsales, the Companies recognize revenue when the products are sold tovalue. If the carrying amount of an intangible asset with indefinite useful

the ultimate customer. The Companies recognize revenue on direct retail-life exceeds its fair value, an impairment charge is recognized in an

ing sales at the Companies’ directly managed retail stores at the point ofamount equal to that excess.

sale to the customer.

Other intangible assets with estimable useful lives consist primarily of

SHIPPING AND HANDLING COSTS—Shipping and handling fees billed

brands, customer relationships and software and are amortized over their

to customers are classified in net sales. Shipping and handling costs are

estimated useful lives using the straight-line method. The estimatedexpensed as incurred. Shipping and handling costs for the years ended

useful lives are as follows:

March 31, 2016, 2015 and 2014 were ¥5,560 million, ¥5,487 million and

Brands:58

able, and (4) collectability is reasonably assured. As for consignment

lives, the carrying value of an intangible asset is compared with its fair

20–25 years (mainly 25 years)¥5,708 million, respectively, and have been included in selling, general

Customer relationships: 7 years

and administrative expenses.

Software:

ADVERTISING EXPENSES—Advertising costs are expensed as incurred.

5 years

ASSET RETIREMENT OBLIGATIONS—The Companies have obligations

Advertising expenses for the years ended March 31, 2016, 2015 and 2014

arising from contractual commitments to remove leasehold improvements

were ¥13,167 million, ¥13,103 million and ¥14,295 million, respectively,from leased facilities and return the property to a specified conditionand have been included in selling, general and administrative expenses.

when the lease terminates. The Companies recognize asset retirement

RESEARCH AND DEVELOPMENT COSTS—Research and development

obligations at the inception of a lease. The asset retirement obligations

costs are expensed as incurred. Research and development costs for theare measured with an expected present value technique based on histori-

years ended March 31, 2016, 2015 and 2014 were ¥839 million, ¥869 mil-cal experience and recorded in other long-term liabilities in the consoli-

lion and ¥808 million, respectively, and have been included in selling, gen-dated balance sheets and subsequently adjusted for changes ineral and administrative expenses.

estimated disposal costs. The difference between the gross expected

CONSUMPTION TAXES—Consumption taxes are excluded from sales,

future cash flow and its present value is accreted over the life of thecosts, and expenses in the consolidated statements of income.

related lease, which is determined using best estimate because the

INCOME TAXES—The provision for income taxes is determined under theCompanies’ lease contracts generally have automatic renewal articles.

asset and liability method in accordance with the guidance for income

The estimated asset retirement costs are capitalized as part of the carry-taxes. Under this method, deferred tax assets and liabilities are deter-

ing amount of the associated long-lived asset and depreciated over its

mined for temporary differences between the financial statements and tax

useful life.

bases of assets and liabilities and tax loss carryforwards at presently

TERMINATION AND RETIREMENT PLANS—Termination and retirement

enacted tax rates. A valuation allowance is recorded when it is more likely

benefits are accounted for in accordance with the guidance for retirement

than not that some portion or all of the deferred tax assets will not bebenefits. The Companies amortize net actuarial gains and losses and priorrealized in the future.

service cost over the average employees’ remaining service period by the

The Companies assess their income tax positions and record tax

declining-balance method and by the straight-line method, respectively.

benefits for all years subject to examination based upon their evaluation

The Companies do not recognize a gain or loss on settlement of theof the facts, circumstances and information available as of the end of thepension liability when the cost of all settlements in a year is less than or

fiscal year. For those tax positions only where there is greater than a 50%

equal to the sum of the service cost and interest cost components of net

likelihood that the tax position will be sustained, the Companies record

periodic pension cost for the plan for the year.

the largest amount of tax benefit that may potentially be realized upon

LEASES—Certain noncancelable leases are classified as capital leases

ultimate settlement with a taxing authority that has full knowledge of all

and the leased assets are included as part of property, plant andrelevant information.

equipment. Other leases are classified as operating leases and are not

SHARE-BASED COMPENSATION—Share-based compensation isaccounted for in accordance with the guidance for stock compensation.

guidance is not expected to have an impact on the Companies’ consoli-

The Company measures share-based compensation cost at the grant

dated financial position, results of operations, or cash flows, since it

date, based on the fair value of the award and recognizes the cost overrelates only to disclosure requirements.

the requisite service period, which is the vesting period. The fair value of

MEASUREMENT OF INVENTORY—In July 2015, the FASB issued a new

the award is estimated using the Black-Scholes option-pricing model.

standard related to simplifying the measurement of inventory. Currently an

DERIVATIVES—Derivative instruments, including certain derivative instru-

entity is required to measure inventory at the lower of cost or market.

ments embedded in other contracts, are accounted for in accordanceMarket could be replacement cost, net realizable value, or net realizablewith the guidance for derivatives and hedging. Because such derivativevalue less an approximately normal profit margin. This guidance requires

instruments are not designated as hedges, changes in the fair value arean entity to measure inventory at the lower of cost or realizable value. This

recorded in earnings or losses.

guidance is effective for fiscal years beginning after December 15, 2016,

SUBSEQUENT EVENTS—In accordance with the guidance for subse-

and interim periods within those fiscal years. The Company is currently

quent events, the Company has evaluated subsequent events throughevaluating the impact of adoption on the Company’s consolidated finan-

June 29, 2016.

cial position, result of operations, or cash flows.

RECLASSIFICATIONS—Certain reclassifications have been made to the

BALANCE SHEET CLASSIFICATION OF DEFERRED TAXES—In

prior years’ consolidated financial statements to conform to the current

November 2015, FASB issued a new accounting standard related to bal-

year’s presentation.

ance sheet classification of deferred taxes. This guidance requires an

RECENT ACCOUNTING PRONOUNCEMENTS:

entity to classify deferred tax liabilities and assets as noncurrent on the

REVENUE RECOGNITION—In May 2014, the Financial Accounting

consolidated financial position. This guidance is effective for fiscal years

Standard Board (the “FASB”) issued a new accounting standard related to

beginning after December 15, 2016. The Company is currently evaluating

revenue recognition. This guidance is based on the principle that revenue

the impact of the adoption on the Company’s consolidated financial posi-

is recognized to depict the transfer of promised goods or services to cus-tion, result of operations, or cash flows.

tomers in an amount that reflects the consideration to which the entity

RECOGNITION AND MEASUREMENT OF FINANCIAL INSTRUMENTS—

expects to be entitled in exchange for those goods or services. This stan-

In January 2016, FASB issued a new accounting standard related to rec-dard provides comprehensive guidance, and requires the disclosure ofognition and measurement of financial assets and financial liabilities. This

information to enable users of financial statements to understand theguidance requires an entity to measure equity investments (except thosenature, amount, timing, and uncertainty of revenue and cash flows arisingaccounted for under to the equity method of accounting or those thatfrom contracts with customers. In August 2015, FASB issued additional

result in consolidation of the investee) at fair value with changes in fairguidance and deferred the effective date of the guidance for a year. In May

value recognized in net income and change of related disclosures. This

2016, FASB also issued additional guidance to improve above guidance

guidance is effective for fiscal years beginning after December 15, 2017,by reducing the potential for diversity in practice at initial application andand interim periods within those fiscal years. The Company is currently

the cost and complexity of applying Topic 606 both at transition and on an

evaluating the impact of adoption on the Company’s consolidated finan-

ongoing basis. This guidance is effective for fiscal years beginning after

cial position, result of operations, or cash flows.

December 15, 2017 and interim periods within that annual period. The

LEASE—In February 2016, FASB issued a new accounting standard

Company is currently evaluating the impact of adoption on the Company’s

related to leases. This guidance requires an entity to recognize leaseconsolidated financial position, result of operations, or cash flows.

assets and lease liabilities on the balance sheet for, with a few excep-

EXTRAORDINARY AND UNUSUAL ITEMS—In January 2015, the FASB

tions, those leases classified as operating leases under current U.S.

issued a new accounting standard related to extraordinary and unusual

GAAP. This guidance is effective for fiscal years beginning after December

items. This guidance eliminates from U.S. GAAP the concept of extraordi-

15, 2018, and interim periods within that annual period. The Company isnary items and the requirements to 1) segregate an extraordinary item

currently evaluating the impact of adoption on the Company’s consoli-from the results of ordinary operations, 2) present the item separately on

dated financial position, result of operations, or cash flows.

the income statement, net of tax, after income from continuing operations

EQUITY METHOD—In March 2016, FASB issued a new accounting stan-and 3) disclose income taxes and earnings-per-share data applicable todard related to simplifying the transition to the equity method of account-the extraordinary item. This guidance is effective for fiscal years anding. This guidance eliminates the requirement that when an investment

interim periods within that annual period, beginning after December 15,

qualifies for use of the equity method as a result of an increase in the level2015. It is not expected to have an impact on the Companies’ consoli-of ownership interest or degree of influence, an investor must adjust thedated financial position, results of operations, or cash flows, since it

investment, results of operations, and retained earnings retroactively on arelates only to disclosure requirements.

step by step basis as if the equity method had been in effect during all

FAIR VALUE MEASUREMENT—In May 2015, the FASB issued a newprevious periods that the investment had been held. This guidance also

standard which amends fair value measurement. This guidance removes

requires that an entity that has an available-for sale equity security thatthe requirement to categorize within the fair value hierarchy all invest-

becomes qualified for the equity method of accounting recognize throughments for which fair value is measured using the net asset value per shareearnings the unrealized holding gain or loss in accumulated other com-practical expedient. The amendments also remove the requirement toprehensive income at the date the investment becomes qualified for use

make certain disclosures for all investments that are eligible to be mea-of the equity method. This guidance is effective for fiscal years beginning

sured at fair value using the net asset value per share practical expedient.

after December 15, 2016, and interim periods within that annual period.

Rather, those disclosures are limited to investments for which the entity

Earlier application is permitted. The Company adopted this guidance forhas elected to measure the fair value using that practical expedient. This

the year ended March 31, 2016. The adoption of this guidance does not

guidance is effective for fiscal years beginning after December 15, 2015,

have a material impact on the Companies’ consolidated financial position,and interim periods within those fiscal years. The adoption of thisresults of operations, or cash flows.

59

Financial Section

2. TRANSLATION INTO U.S. DOLLAR STATEMENTS..........................................................................................................
The consolidated financial statements are stated in Japanese yen, thebeen made at the rate of ¥112.42 to $1, the noon buying rate for yen incurrency of the country in which the Company is incorporated and oper-

New York City as of March 31, 2016. Such translations should not be

ates. The translations of Japanese yen amounts into U.S. dollar amounts

construed as representations that the Japanese yen amounts could be

are included solely for convenience of readers outside of Japan and have

converted into U.S. dollars at the above or any other rate.

3. MARKETABLE SECURITIES AND INVESTMENTS ..........................................................................................................
HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES—The fair value of debt and marketable equity securities classified as held to maturity
and available for sale is based on quoted market prices as of March 31, 2016 and 2015. The cost, gross unrealized gain and loss and the fair value ofheld-to-maturity and available-for-sale securities by major security type were as follows:
Millions of yen
2016

Available-for-sale securities:
Current:
National debt securities and municipal bonds
Corporate debt securities
Mutual funds
Total
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

Cost

¥

Gross
Unrealized Gain

10
395
1,083
¥ 1,488¥¥23,592

¥

114

¥

808

Gross
Unrealized Loss

279
279

¥0
1
¥1

10
395
1,361
¥ 1,766¥30,336¥3¥53,925

¥1

¥

113

0

¥3

¥

805

Gross
Unrealized Gain

Gross
Unrealized Loss

¥

¥

0

Fair Value¥

Millions of yen
2015

Available-for-sale securities:
Current:
National debt securities and municipal bonds
Corporate debt securities
Mutual funds
Total
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

Cost

¥

Fair Value

10
500
1,104
¥ 1,614

¥

1
291
292

¥
¥5
¥5

10
501
1,390
¥ 1,901¥23,587¥34,461¥0¥58,048

¥

486

¥

0

¥1

¥

485

¥

620

¥

0

¥3

¥

617

¥

Gross unrealized holding losses and fair values of held-to-maturity securities, all of which have been in a continuous unrealized loss position for more than
12 months as of March 31, 2016 and 2015, were as follows:
Millions of yen

2016

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

60

2015

Fair Value

Gross
Unrealized Loss

¥114

¥1

¥

¥

¥345

¥3

¥

¥

Fair Value

Gross
Unrealized Loss

Gross unrealized holding losses and fair values of available-for-sale and held-to-maturity securities, all of which have been in a continuous unrealized loss
position for less than 12 months as of March 31, 2016 and 2015, were as follows:
Millions of yen

2016

Available-for-sale securities:
Current:
Corporate debt securities
Mutual funds
Noncurrent:
Equity securities
Held-to-maturity securities:
Current:
Corporate debt securities
Noncurrent:
Corporate debt securities

2015

Fair Value

Gross
Unrealized Loss

Fair Value

Gross
Unrealized Loss

¥395
480

¥0
1

295

5

102

3

1

0

242

1

375

3

232

0

As of March 31, 2016, the available-for-sale securities in a continuous

Proceeds from sales of available-for-sale securities and the gross realized

unrealized loss position are composed of three equity securities, two cor-gain or loss on the sales of available-for-sale securities during the years

porate debt securities, and one mutual fund. The severity of decline wasended March 31, 2016, 2015 and 2014, were as follows:
Millions of yen

less than 25.0%. The Companies periodically determine whether adecline in the fair value of available-for-sale and held-to-maturity securities is deemed to be other than temporary based on criteria that includes
the duration of market decline, the extent to which cost exceeds fairvalue, the financial position and business outlook of the issuer and the

2016

2015

2014

Proceeds from sales ofavailable-for-sale securities¥102¥3,499¥190

Gross realized gain on sales ofavailable-for-sale securities

90

1,516

64

intent and ability of the Companies to retain the impaired available-forsale and held-to-maturity securities for sufficient period of time for anticipated recovery in fair value as described in Note 1. No available-for-saleand held-to-maturity securities were identified that meet the Companies’
criteria for recognition of an impairment charge on available-for-sale andheld-to-maturity securities in unrealized loss position presented above.
Therefore, the Companies do not believe the unrealized losses represent
an other-than-temporary impairment as of March 31, 2016 and 2015.
Future maturities of debt securities and mutual funds classified as available for sale excluding debt securities and mutual funds without fixedmaturities as of March 31, 2016, were as follows:

Due within one year
Due after one year through five years
Due within ten years
More than ten years
Total

During the year ended March 31, 2015, the Companies exchanged certain
equity securities for other marketable securities. The Companies recorded
the newly received securities at fair value and recognized a gain of ¥1 million in the year ended March 31, 2015. There was no exchange of marketable securities for the years ended March 31, 2014 and 2016.
The amount of impairment charges the Companies recognized on
available-for-sale securities in which declines in fair value were other than
temporary were ¥20 million, ¥4 million and ¥47 million in the years ended
March 31, 2016, 2015 and 2014, respectively.
COST-METHOD SECURITIES—Investments in nonmarketable equity

Millions of yen

securities for which there are no readily determinable fair values were

Cost

Fair Value

accounted for using the cost method and aggregated ¥1,288 million,

¥ 395
482

¥ 394
481

¥1,295 million and ¥1,362 million as of March 31, 2016, 2015 and 2014,

279¥1,156289¥1,164

respectively. Investments in nonmarketable equity securities are reviewed
annually or upon the occurrence of an event for other-than-temporary
impairment. The Companies recognized impairment charges on investments in nonmarketable equity securities of ¥0 million and ¥10 million in
the years ended March 31, 2016 and 2015, respectively. There were no

Future maturities of debt securities classified as held to maturity as of

impairment charges on investments in nonmarketable equity securities for

March 31, 2016 were as follows:

the year ended March 31, 2014.
Millions of yen

Due within one year
Due after one year through five years
Total

Cost

Fair Value

¥114
808
¥922

¥113
805
¥918

61

Financial Section

4. VALUATION AND QUALIFYING ACCOUNTS ...................................................................................................................
Information related to the Companies’ allowance for doubtful receivables was as follows:
Millions of yen

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

2016

2015

2014

¥ 198
110
(112)
¥ 196

¥201
45
(48)
¥198

¥180
32
(11)
¥201

2016

2015

2014

¥ 2,211
2,033(2,211)¥ 2,033¥ 2,120
2,211(2,120)¥ 2,211¥ 1,7022,120(1,702)¥ 2,120

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

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

5. INVENTORIES ....................................................................................................................................................................
The components of inventories as of March 31, 2016 and 2015, were as follows:
Millions of yen

Finished products
Work in process
Raw materials
Total

2016

2015

¥37,689
4,056
2,700¥44,445¥36,935
3,625
2,333¥42,893

6. INVESTMENTS IN AFFILIATED COMPANIES ..................................................................................................................
Investments are accounted for using the equity method of accounting if

appropriate. The Companies record investments in equity method invest-

the investment provides the Companies the ability to exercise significant

ees meeting these characteristics as “Investments in affiliated compa-

influence over an investee. Significant influence is generally deemed tonies.” Under the equity method, the Companies record their proportionate

exist if the Companies have an ownership interest in the voting stock ofshare of an affiliated companies’ income or loss based on the mostthe investee between 20% and 50%, although other factors are consid-

recently available financial statements.

ered in determining whether the equity method of accounting is

The primary affiliated companies and percentage of ownership as of March 31, 2016 and 2015, were as follows:
Percentage of ownership (%)
Name of Investee

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

2016

2015

34
25
42
50
24

34
25
42
50
24

Aggregate carrying amounts and fair values of investments in affiliated companies which have a quoted market price as of March 31, 2016 and 2015,
were as follows:
Millions of yen

Carrying amount
Aggregate value of quoted market price

62

2016

2015

¥13,522
11,561¥14,155
12,107

The following tables represent the affiliated companies’ summarized information from the balance sheets as of March 31, 2015, and statements of income
for the years ended March 31, 2015 and 2014. Summarized information of the balance sheets and statements of income of the affiliated companies forthe year ended March 31, 2016, is not disclosed as it is immaterial.
Millions of yen

2015

Current assets
Noncurrent assets
Total
Current liabilities
Long-term liabilities
EquityTotal¥45,218
45,317¥90,535¥10,262
9,678
70,595¥90,535
Millions of yen

Net sales
Gross profit
Income before income taxes
Net income

2015

2014

¥62,459
31,5192,848
2,196¥60,257
31,011
3,664
2,503

Dividends received from the affiliated companies were ¥763 million, ¥678 million and ¥713 million during the years ended March 31, 2016, 2015 and2014, respectively.
Retained earnings include net undistributed earnings of affiliated companies in the amount of ¥15,226 million and ¥14,948 million as of March 31,
2016 and 2015, respectively.

7. ACQUISITIONS ..................................................................................................................................................................
On April 1, 2015, Ai Co., Ltd., a wholly-owned domestic subsidiary of thetransfers have been reflected during the current consolidated fiscal year

Company, acquired the swimwear business and underwear business fromin consideration of the material impact of intervening events that occurred

San-Ai Co., Ltd. and San-Ai Style Co., Ltd., and the difference between

during the period after December 31, 2015 to March 31, 2016.

the acquisition cost and the estimated fair values of the identifiable assets

As a result of purchase price allocations for A Tech and G Tech,acquired and liabilities assumed, the details of which were investigatedgoodwill was recognized and recorded in the amount of ¥246 million andand analyzed, was recorded on the consolidated statements of income as¥223 million, respectively, on the consolidated balance sheets. Goodwill

a gain on bargain purchase in the amount of ¥173 million.

is not deductible for tax purposes.

The fair values of the assets and liabilities as of the date of theacquisition have been revised based on updated information obtained

The provisional fair value of the assets and liabilities of the businesses, which A Tech and G Tech acquired, were as follows:

after the date of acquisition, and are adjusted retroactively to the date ofMillions of yen

the acquisition.

February 1, 2016
A TechIn January 2016, Wacoal Corp., a wholly-owned subsidiary of theCompany, established A Tech Textile Co., Ltd. (“A Tech”) and G Tech
Material Co., Ltd. (“G Tech”) in the Kingdom of Thailand pursuant to joint
venture agreements executed on November 13, 2015. A Tech and G Tech
executed business transfer agreements with Textile Prestige PublicCompany Limited (“TPC”) and Erawan Textile Company Limited (“ETC”),
respectively, and transfers of the material business assets and liabilities
were completed on February 1, 2016.
In connection with these business transfers, A Tech and G Tech estimates the purchase price for the assets acquired and liabilities assumed,in the amount of ¥2,350 million (THB 704 million) and ¥693 million (THB
208 million), respectively.

Cash and cash equivalents
Notes and accounts receivable
Inventories
Other current assets
Property, plant and equipment
Goodwill
Other fixed assets
Total
Current liabilities
Other long-term liabilities
Total
Total shareholder’s equity

¥210
557
608
18
1,243
246
2,882
281
251
532
¥2,350G Tech

¥150
101
4
342
223
1
821
82
46
128
¥693

By establishing these two subsidiaries, the Group will build a worldwide system to supply materials and products in the ASEAN region,

Subsequent to March 31, 2016, on May 31, 2016, A Tech and TPC

which has the potential to further develop and grow, improve the manu-

reached an agreement on the purchase price for assets acquired and lia-

facturing quality and cost competitiveness of our entire group and aims tobilities assumed. The final purchase price is ¥2,334 million (THB 699 mil-stably supply high value-added materials and products to the global net-lion), and ¥230 million of goodwill is recognized. The ¥16 million

work of the Wacoal group and customers in the future.

adjustment to goodwill will be reflected in the first quarter of the year

The fiscal year end of these two subsidiaries is December 31. The

ending March 31, 2017, as an adjustment during the measurement period.

impacts of the establishment of these two subsidiaries and the business

63

Financial Section

8. GOODWILL AND OTHER INTANGIBLE ASSETS .............................................................................................................
GOODWILL—The changes in the carrying amount of goodwill for the years ended March 31, 2016, 2015 and 2014 were as follows:
Millions of yen

2016

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Acquisition during the year
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total

Wacoal Business(Overseas)

Peach John
Segment¥14,425¥11,203(6,878)
4,325¥25,628(6,878)18,750469(1,308)

11,203(6,878)¥ 4,325

24,789(6,878)¥17,911

14,425469(1,308)13,586¥13,586

Total

Millions of yen

2015

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Foreign currency translation adjustments
Impairment charges
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total

Wacoal Business(Overseas)

Peach John
Segment¥13,553¥11,203(2,033)
9,170

13,553872

14,425¥14,425

Total(4,845)¥24,756(2,033)22,723872(4,845)

11,203(6,878)¥ 4,325

25,628(6,878)¥18,750
Millions of yen

2014

Balance at the beginning of the year:
Goodwill
Accumulated impairment charges
Total
Foreign currency translation adjustments
Balance at the end of the year:
Goodwill
Accumulated impairment charges
Total

Wacoal Business(Overseas)

Peach John
Segment¥11,272¥11,203(2,033)
9,170¥22,475(2,033)
20,442
2,281

11,203(2,033)¥ 9,170

24,756(2,033)¥22,723

11,2722,281
13,553¥13,553

Total

During the year ended March 31, 2015, the Companies recorded impairment charges on goodwill of ¥4,845 million in the Peach John Segment. See Note
21 for further information.
OTHER INTANGIBLE ASSETS—The components of acquired intangible assets excluding goodwill as of March 31, 2016 and 2015 were as follows:
Millions of yen

2016

2015

Gross Carrying
AmountAccumulated
Amortization andImpairment Charge

Gross Carrying
AmountAccumulated
Amortization andImpairment Charge¥ 6,766
8,034
1,646¥16,446¥1,212
4,597
633¥6,442¥ 7,440
8,271
1,570¥17,281

¥ 999
5,035
605
¥6,639¥ 5,316114¥ 5,430¥3,322¥ 5,316103¥ 5,419¥3,322

Year Ended March 31

Amortized intangible assets:
BrandsSoftware
OthersTotal
Unamortized intangible assets:
Trademarks
Other
Total

64

¥3,322¥3,322Other intangible assets acquired during the year ended March 31, 2016

2016, 2015 and 2014 related to other intangible assets were ¥1,537 mil-

totaled ¥1,432 million which primarily consist of software with an esti-

lion, ¥1,536 million and ¥1,824 million, respectively. Future estimatedamortization expenses as of March 31, 2016, were as follows:

mated useful life of five years.
The gross carrying amounts of brands include foreign currency translation adjustments.
During the year ended March 31, 2015, the Companies recorded an
impairment charge on other intangible assets for the trademarks of¥1,176 million in the Peach John Segment. During the years ended March
31, 2016 and 2014, the Companies recorded no impairment charge onother intangible assets. See Note 21 for further information.
Aggregate amortization expenses for the years ended March 31,

Year Ending March 31

Millions of yen

Estimated amortization expense
2017
2018
2019
2020
2021
Total

¥1,355
1,273
1,042
783
499
¥4,952

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT ..................................................................................................
Short-term bank loans as of March 31, 2016 and 2015, consisted of the

The annual maturities of long-term debt as of March 31, 2016, were as

following:

follows:
Millions of yen

Unsecured bank loans

2016

2015

¥11,759¥10,038

The weighted-average annual interest rate on short-term bank loans as ofMarch 31, 2016 and 2015 was 0.4%.
Unused lines of credit for short-term financing as of March 31, 2016
and 2015, aggregated ¥24,779 million and ¥25,189 million, respectively.

Year Ending March 31

Millions of yen

2017
2018
2019
2020
2021
Thereafter
Total

¥293
20
20
20
20
15
¥388

The Companies compensate banks for these facilities in the form of commitment fees, which were not material during the years ended March 31,

A subsidiary has pledged assets as security for loans. As of March 31,

2016 and 2015.

2016 and 2015, assets pledged as collateral for bank loans were asLong-term debt as of March 31, 2016 and 2015, is summarized below.

follows:
Millions of yen

The interest rates and maturities are for loans as of March 31, 2016.
Millions of yen

Collateralized bank loans, with fixed interest
at 1.5%–1.8%, maturing through 2022

2016

2015

¥ 231

¥ 271

Unsecured bank loans, with floating interest
at 1.0%, maturing through 2016
Unsecured bank loans, with fixed interest
at 0.2%–1.5%, maturing through 2022
Total
Less current portionLong-term debt, less current portion

Land
Buildings
Total

2016

2015

¥150
236
¥386

¥150
258
¥408

3,957
As is customary in Japan, both short-term and long-term loans are made

157

551

388
(293)
¥ 95

4,779
(534)
¥4,245under general agreements which provide that security and guarantees for
future and present indebtedness will be given upon request of the bank.
The bank has the right to offset cash deposits against obligations thathave become due or, in the event of default, against all obligations due tothe bank.

10. LEASES ............................................................................................................................................................................
The Companies lease most of their store premises and certain equipment.
Most leases have automatic renewal provisions and allow the Companies
to extend the lease term beyond the initial base period, subject to theterms agreed at lease inception. Future minimum rental commitments on
operating leases having a remaining noncancelable lease term in excess
of one year as of March 31, 2016 are presented below:

Year Ending March 31

2017
2018
2019
2020
2021
Thereafter
Total

Millions of yen

¥ 716
566
344
102
81
89
¥1,898

Rental expenses were ¥7,902 million, ¥6,476 million and ¥5,975 million forthe years ended March 31, 2016, 2015 and 2014, respectively, and havebeen included in selling, general and administrative expenses.

65

Financial Section

11. ASSET RETIREMENT OBLIGATIONS .............................................................................................................................
The Companies recorded the fair value of asset retirement obligations in order to recognize legal obligations associated with the removal of leasehold
improvements from leased facilities and return of the property to a specified condition when the lease terminates.
A reconciliation of the beginning and ending aggregate carrying amount of the asset retirement obligation was as follows:
Millions of yen

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

2016

2015

2014

¥777
20
157
(74)
(2)
¥878

¥728
8
66
(32)
7
¥777

¥648
6
112
(43)
5
¥728

12. TERMINATION AND RETIREMENT PLANS....................................................................................................................
EMPLOYEE RETIREMENT PLANS—The Company and certain subsidiaries sponsor termination and retirement benefit plans that cover substantially all
employees. Benefits are based on the employee’s years of service, position and performance. If the termination is involuntary or caused by death, theemployee is usually entitled to greater payments than in the case of voluntary termination.
The Company and certain subsidiaries have a contributory defined retirement benefit plan and several unfunded termination plans administered by
the Company and certain subsidiaries. Benefits under the contributory defined retirement benefit plan are usually paid in a lump sum at the earlier of termination or retirement, although periodic payments are available under certain conditions. Benefits under the other termination and retirement benefit planare paid either as lump-sum payments or periodic payments under certain conditions. The benefits are usually paid as a lump-sum payment, if theemployee resigns before the mandatory retirement age.
CONTRIBUTORY DEFINED RETIREMENT BENEFIT PLAN—The following provides a reconciliation of benefit obligations, plan assets and funded statusof the plans:Millions of yen

Change in benefit obligations:Benefit obligations at the beginning of the year
Service cost
Interest cost
Participants’ contributions
Actuarial loss
Benefits paid from plan assets
Settlement paid from plan assets
Settlement paid by the Company and certain subsidiaries
Changes in foreign currency exchange rate
Change in the scope of consolidation
Benefit obligations at the end of the year
Change in plan assets:
Fair value of plan assets at the beginning of the year
Actual return on plan assets
Employer contributions
Participants’ contributions
Benefit payments
Settlement payments
Changes in foreign currency exchange rate
Fair value of plan assets at the end of the year
Funded status at the end of the year

2016

2015

2014

¥34,085
1,074
321
66
1,893
(950)
(850)
(100)
(6)
244
35,777¥33,712
1,021
417
66
1,001
(908)
(1,075)(149)¥34,449
1,025
398
66
(258)
(879)
(995)
(94)

34,08533,712¥43,137
(516)
1,275
66
(950)
(850)
(6)
42,156¥6,379¥37,738
5,565
1,751
66
(908)
(1,075)¥34,178
3,659
1,709
66
(879)
(995)

43,137¥9,052

37,738¥4,026

Amounts recognized in the consolidated balance sheets as of March 31, 2016 and 2015, consist of:Millions of yen

Prepaid pension expense
Accrued expenses
Liability for termination and retirement benefits

66

2016

2015

¥ 8,145(63)(1,703)¥ 6,379¥10,577(63)(1,462)¥ 9,052

Amounts recognized in accumulated other comprehensive income (loss), pre-tax, as of March 31, 2016 and 2015, were as follows:
Millions of yen

Actuarial loss
Prior service benefit

2016

2015

¥(1,264)607¥ (657)¥2,573
1,098¥3,671

The accumulated benefit obligation for all defined retirement benefit plans as of March 31, 2016 and 2015, was as follows:
Millions of yen

Accumulated benefit obligation

2016

2015

¥35,777¥34,085

The projected benefit obligations and the fair value of the plan assets for the Company and certain subsidiaries’ pension plans with projected benefit obligations in excess of plan assets, and the accumulated benefit obligations and the fair value of the plan assets for the Company and certain subsidiaries’
pension plans with accumulated benefit obligations in excess of plan assets were as follows:
Millions of yen

Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations
Fair value of plan assets
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations
Fair value of plan assets

2016

2015

¥2,659893¥2,342
817

2,659
893

2,342
817

Net periodic benefit costs for the Company and certain subsidiaries’ plans consisted of the following for the years ended March 31, 2016, 2015 and 2014:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service benefit

2016

2015

2014

¥1,074
321
(967)
(461)
(491)
¥ (524)¥1,021
417
(865)
220
(492)
¥ 301

¥1,025
398
(803)
936
(574)
¥ 982

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 and the straight-line method, respectively.
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended March 31, 2016, 2015 and2014 were as follows:
Millions of yen

Current year actuarial gain
Amortization of actuarial loss
Amortization of prior service benefit

2016

2015

2014

¥(3,376)
(461)
(491)
¥(4,328)¥3,699220(492)¥3,427¥3,114936(574)¥3,476The estimated amounts that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next year are summarized as follows:
Millions of yen

Actuarial gain
Prior service benefit

¥ 216
(486)

The Company and certain subsidiaries use a measurement date of March 31 for their plans. The weighted-average assumptions used as of March 31,
2016 and 2015 in computing the benefit obligations shown above were as follows:

Discount rate

2016

2015

0.5%

1.0%

67

Financial Section

The weighted-average assumptions used as of March 31, 2016, 2015

The Company and certain subsidiaries’ investment strategy is toand 2014, in computing the net periodic benefit cost shown above weremaintain actual asset weightings within a preset range of target alloca-

as follows:tions. The Company and certain subsidiaries’ investments are broadly

Discount rate
Rate of increasein future compensation
Expected long-term rateof return on plan assets

2016

2015

2014

1.0%

1.3%

1.2%

5.3%

7.6%

7.6%

2.5%

2.5%

2.5%

The Company’s approach to establishing the discount rate is based upon
corporate bond indices. The discount rate assumption is based upon theeffective yields as of March 31, 2016 on the corporate bond indiceswhose maturity dates approximate the timing of the expected future benefit payments.

diversified, consisting primarily of equity and debt securities. The
Company and certain subsidiaries believe these ranges represent anappropriate risk profile for the planned benefit payments of the plans
based on the timing of the estimated benefit payment.
The asset allocation as of March 31, 2016 and 2015, was as follows:

Equity securities
Debt securities
Life insurance company general accounts
Real estate
Short-term financing

2016

2015

46.4%
30.6%
12.2%
3.9%
6.9%

49.4%
29.8%
12.0%
1.4%
7.4%

The retirement benefit plan of the Company and a certain subsidiaryis the point-based benefits system, therefore, the rate of compensation

The target allocation percentages are reviewed and approved by theincrease has not been consolidated in computing the benefit obligations.

Pension Committee. The actual allocations for 2016 and 2015 are different

The expected long-term rate of return on plan assets is derived pro-from the target allocation percentages primarily because Wacoal Corp.

portionally from return assumptions determined for each of the major

maintained additional equity securities within a separate plan asset whichasset classes. The return expectations for each of the asset classes areis assigned to the plan based on an agreement between Wacoal Corp. andbased largely on assumptions about economic growth and inflation,

its employees and is not governed by the Pension Committee. As such,

which are supported by long-term historical data. The estimated long-

the actual allocation percentage of equity securities to the total plan assets

term rate of return is based on an asset allocation of equity securities ofis higher than the target allocation, and similarly, the actual allocation for

26.0%, debt securities of 54.0%, life insurance company general

some other types of assets is lower than the target allocation.

accounts of 18.0% and short-term financing of 2.0%.

The following tables present the Company and certain subsidiaries’ plan assets using the fair value hierarchy as of March 31, 2016 and 2015. The fairvalue hierarchy has three levels based on the reliability of the inputs used to determine fair value. For the reference to each level, see Note 21.
Millions of yen
2016

Equity securities:
Japanese companies
Pooled funds (a)Debt securities:
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Hedge funds (c)Pooled funds (d)Short-term financing
Total

68

Level 1

Level 2

¥9,508Total¥ 9,397¥ 9,508
9,397

9,139
5,135

25
9,139
5,135

1,273
6,288
1,391
¥32,623

1,273
6,288
1,391
¥42,156

25¥9,533

Level 3

Millions of yen
2015

Level 1Equity securities:
Japanese companies
Pooled funds (a)Debt securities:
Foreign government bonds
Pooled funds (b)Life insurance company general accounts
Other types of investments:
Hedge funds (c)Pooled funds (d)Short-term financing
Total

Level 2

¥9,424

Level 3

Total

¥11,552¥ 9,424
11,552

9,717
5,164

17
9,717
5,164

1,194
3,301
2,768
¥33,696

1,194
3,301
2,768
¥43,137

17¥9,441(a) This class includes common stock of approximately 32% Japanese companies and 68% foreign companies as of March 31, 2016 and those percentages were 25% and 75%, respectively, as of March
31, 2015.
(b) This class includes approximately 27% of Japanese government bonds, 4% of Japanese municipal bonds, 36% of foreign government bonds and 33% of corporate bonds as of March 31, 2016, andthose percentages were 28%, 3%, 33% and 36%, respectively, as of March 31, 2015.
(c) This class is hedge funds that invest both long and short in debt securities as of March 31, 2016 and 2015.
(d) This class includes approximately 39% of corporate bonds, 2% of common stock of Japanese companies, 8% of common stock of foreign companies, 27% of real estate and 24% of short-term
financing as of March 31, 2016. This class includes approximately 58% of corporate bonds, 2% of common stock of Japanese companies, 10% of common stock of foreign companies, 18% of realestate and 12% of short-term financing as of March 31, 2015.

Equity securities and debt securities presented in Level 1 are primarily

EMPLOYEE EARLY RETIREMENT PROGRAM—The Company and cer-valued using a market approach based on the quoted market prices oftain subsidiaries provide additional benefits to employees that elect toidentical instruments. Pooled funds in equity securities or debt securities

participate in the Company and certain subsidiaries’ early retirement pro-and hedge funds which are categorized in Level 2 are valued by the spon-gram. Retirement benefits of ¥125 million, ¥114 million and ¥228 million

sor of the funds primarily based on quoted prices in both active and inac-

were paid in addition to normal benefits and charged to selling, general

tive market for identical instruments which comprise funds. Life insurance

and administrative expenses for the years ended March 31, 2016, 2015

company general accounts include contracts with the insurance compa-

and 2014, respectively.

nies with guaranteed rates of return and capital, and those values are

TERMINATION PLAN FOR DIRECTORS—The Company previously had,based on the sum of original value and return.

and certain subsidiaries currently have, termination plans for directors.

The Company and certain subsidiaries’ funding policy for the funded

Payment of termination benefits to directors is made in a lump sum uponplans is to contribute amounts computed in accordance with actuarial

termination and requires the approval of the shareholders before pay-

methods accepted by Japanese tax law. The Company and certain sub-ment. In June 2005, the Company rescinded its termination plan for direc-

sidiaries expect to contribute ¥640 million to their plans in the year ending

tors upon the approval of its shareholders. The amount of benefit for each

March 31, 2017.

individual was fixed as of June 29, 2005 and will remain frozen until the

The following benefit payments, which reflect expected future ser-Year Ending March 31

2017
2018
2019
2020
2021
Thereafter

retirement of each respective director. The outstanding liabilities were¥340 million and ¥399 million as of March 31, 2016 and 2015, respec-

vices, as appropriate, are expected to be paid:
Millions of yen¥1,928
1,951
2,032
1,951
1,896
9,342

tively, and were recorded in other long-term liabilities. Subsidiaries maintained plans for their directors and recorded a liability for termination
benefits for directors at the amount that would be needed if all directors
were to resign at each balance sheet date in accordance with the guidance for determination of vested benefit obligation for a defined benefit
pension plan. However, the subsidiaries rescinded its termination plan for
directors in the year ended March 31, 2016. There was no outstandingbalance of the liabilities for termination benefits for directors as of March

DEFINED CONTRIBUTION PLAN —Certain subsidiaries have defined31, 2016. The liabilities for termination benefits for directors as of Marchcontribution plans. The amounts of cost recognized for their contributions

31, 2015 was ¥218 million, and was included in liability for termination

to the plan were ¥219 million, ¥203 million and ¥196 million for the years

and retirement benefits.

ended March 31, 2016, 2015 and 2014, respectively.

13. COMMITMENTS AND CONTINGENT LIABILITIES ........................................................................................................
The Company entered into a construction supervision contract and con-contractual obligations of ¥5,763 million as of March 31, 2015. The

struction contract of ¥6,395 million, in connection with the office that wasamount of contractual obligations as of March 31, 2016, is not disclosed

established in Minami-ku, Kyoto on October 20, 2014. The Company had

as the remaining terms of those contracts are less than one year.

69

Financial Section

14. EQUITY ............................................................................................................................................................................
Japanese companies are subject to the Companies Act of Japan (the“Companies Act”). The significant provisions in the Companies Act that(b) Increases/decreases and transfer of common stock,reserve and surplus

affect financial and accounting matters are summarized below:

The Companies Act requires that an amount equal to 10% of dividends(a) Dividends

must be appropriated as a legal reserve (a component of retained earn-

Under the Companies Act, companies can pay dividends at any timeings) or as additional paid-in capital (a component of capital surplus)

during the fiscal year in addition to the year-end dividend upon resolution

depending on the equity account charged upon the payment of such divi-

at the shareholders meeting. For companies that meet certain criteria, thedends until the total of aggregate amount of legal reserve and additional

Board of Directors may declare dividends (except for dividends in kind) at

paid-in capital equals 25% of the common stock. Under the Companies

any time during the fiscal year if the companies have prescribed so in its

Act, the total amount of additional paid-in capital and legal reserve may

articles of incorporation. The Company meets all the above criteria.

be reversed without limitation. The Companies Act also provides that

The Companies Act permits companies to distribute dividends in kindcommon stock, legal reserve, additional paid-in capital, other capital sur-(noncash assets) to shareholders subject to a certain limitation and addi-

plus and retained earnings can be transferred among the accounts undertional requirements.

certain conditions upon resolution of the shareholders.

Semiannual interim dividends may also be paid once a year upon(c) Treasury stock

resolution by the Board of Directors if the articles of incorporation of the

The Companies Act also provides for companies to purchase treasurycompanies so stipulate. The Companies Act provides certain limitations

stock and dispose of such treasury stock by resolution of the Board ofon the amounts available for dividends or the purchase of treasury stock.

Directors. The amount of treasury stock purchased cannot exceed the

The limitation is defined as the amount available for distribution to theamount available for distribution to the shareholders which is determinedshareholders, but the amount of net assets after dividends must be main-by a specific formula.

tained at no less than ¥3 million.

During the years ended March 31, 2016 and 2015, changes in Wacoal Holdings Corp.’s additional paid-in capital due to equity transactions with noncontrolling interest shareholders were as follows:
Millions of yen

Net income attributable to Wacoal Holdings Corp.
Increase in Wacoal Holdings Corp.’s additional paid-in capital due to transfers of Wacoal Holdings Corp.’sownership interests in its subsidiaries from noncontrolling interests
Change in net income attributable to Wacoal Holdings Corp. and transfers from noncontrolling interests

2016

2015

¥11,159¥8,4440¥11,159¥8,444

15. SHARE-BASED COMPENSATION ..................................................................................................................................
The Company adopted an annual stock option plan in the year ended
March 31, 2009. Under the stock option plan, the Company granted
shares of its common stock to directors of the Company excluding out-

Expected dividend yield is based on the actual payout of dividends inside directors and directors of the Company’s wholly-owned subsidiary,

the last fiscal year and the closing price of the Company’s common stockWacoal Corp., in the years ended March 31, 2016, 2015 and 2014. The

on the grant date. Expected volatility is based on the historical volatility ofCompany believes that such awards better align the interests of its direc-

the Company’s share price over the most recent period commensurate

tors with those of its shareholders, by sharing both risk and return fromwith the expected term of the Company’s stock options. The risk-free

fluctuations in stock prices and giving motivation to enhance its corporate

interest rate is based on the Japanese government bond yield curve invalue. Each stock option is exercisable to acquire 1,000 shares of theeffect at the time of grant for a period commensurate with the expectedCompany’s common stock at ¥1 per share. The compensation cost is

term of the Company’s share options. The expected term of options

measured at fair value on the grant date. Options vest over one year in

granted is based on the average remaining service period of directors,

proportion to the services rendered by the directors, and are exercisable

assuming that those who are granted options will render service until thefrom the day after the date of retirement up to (i) 20 years from the grantstated retirement date and they will exercise options immediately after

date or (ii) 5 years from the day after the date of retirement, whichever istheir retirement.

earlier.

70

The fair value of the options is estimated by using the Black-Scholes
option-pricing model with the following assumptions.

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

2016

2015

2014

2.0%
20.9%
0.0%
2.6 years

3.2%
18.7%
0.1%
3.1 years

2.8%
20.6%
0.1%
2.8 years

A summary of stock option activities under the plan for the year ended March 31, 2016, was as follows:
Yen

Outstanding as of April 1, 2015
GrantedExercised
Outstanding as of March 31, 2016
Exercisable as of March 31, 2016

Years

Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual Term

404,000
49,00022,000431,000
84,000¥1
1
1
1
1

13.99 years
3.77 years

Millions of yen
Aggregate
Intrinsic Value

¥578
113

The total intrinsic value of options exercised was ¥31 million and ¥6 mil-

The weighted-average grant date fair values of options granted forlion for the years ended March 31, 2016 and 2015, respectively. There

the years ended March 31, 2016, 2015 and 2014 were ¥1,419, ¥937 andwere no options exercised during the year ended March 31, 2014.

¥918, respectively.
As of March 31, 2016, there was ¥13 million in total unrecognized

The total compensation costs recognized for the years ended March
31, 2016, 2015 and 2014 were ¥67 million, ¥60 million and ¥69 million,

compensation cost related to nonvested share-based compensation

respectively. The total recognized tax benefits related thereto for the years

arrangements granted under the plan. That cost is expected to be recog-

ended March 31, 2016, 2015 and 2014 were ¥21 million, ¥21 million and

nized over three months.

¥25 million, respectively.

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

2016

Balance at the beginning of the year (after-tax)
Amount arising during the year:
Pre-tax amountTax credit
Net amount
Reclassification adjustments:
Pre-tax amountTax credit
Net amount
Other comprehensive income attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)

2015

Pension Liability
Adjustments

Foreign Currency
Translation
Adjustments

Unrealized Gain on
Securities

Pension Liability
Adjustments¥20,821¥1,934¥ 2,310¥11,606¥ (227)(4,169)1,336(2,833)(3,418)1,091(2,327)

9,019
(348)
8,671

15,809(5,593)
10,216

3,651(1,319)
2,332

(70)
23
(47)

(952)
308
(644)

(1,513)
539
(974)

(272)
96
(176)

16

25

2

(150)

(27)

5

5,177

17,966(1,035)

10,831

20,821

1,934

Foreign Currency
Translation
Adjustments

Unrealized Loss on
Securities¥10,831(5,890)220(5,670)71

Financial Section

Millions of yen

2014
Foreign Currency
Translation
Adjustments

Unrealized Gain on
Securities

Pension Liability
Adjustments¥(5,924)¥9,310¥(1,928)

8,582
(240)
8,342

3,709
(1,396)
2,313

2,578
(1,110)
1,468

27

(17)
6
(11)

362
(129)
233

Balance at the beginning of the year (after-tax)
Amount arising during the year:
Pre-tax amountTax credit
Net amount
Reclassification adjustments:
Pre-tax amountTax credit
Net amount
Other comprehensive income attributable
to noncontrolling interests (after-tax)
Balance at the end of the year (after-tax)

27
(135)

(6)

2,310

11,606(227)

Reclassification adjustments (pre-tax) of foreign currency translation adjustments are included in “Other - net.”
Reclassification adjustments (pre-tax) of unrealized gain or loss on securities are included in “Gain or loss on sales or exchange of marketable securities and Investments - net” and “Valuation loss on marketable securities and investments.”
Reclassification adjustments (pre-tax) of pension liability adjustments are included in “Cost of sales” and “Selling, general and administrative
expenses” as the net periodic benefit costs.

17. INCOME TAXES ...............................................................................................................................................................
Domestic and foreign components of income before income taxes, equity

Domestic and foreign components of income tax expense consist of:in net income of affiliated companies were summarized as follows:

Millions of yen

Millions of yen

JapanForeign
Total

2016

2015

2014

¥24,002(9,045)¥14,957¥19,902(8,560)¥11,342¥22,877(7,844)¥15,033

Current:
Japan
Foreign
Deferred:Japan
Foreign
Total income taxes

2016

2015

2014

¥1,666
1,776¥3,442¥ 3,852
1,371¥ 5,223¥3,7101,546¥5,256¥1,483(195)¥1,288¥4,730¥(1,983)63¥(1,920)¥ 3,303

¥ 549
(164)
¥ 385
¥5,641

Income taxes in Japan applicable to the Companies, imposed by the national, prefectural and municipal governments, in the aggregate resulted in anormal effective statutory tax rate of approximately 33.1%, 35.6% and 38.0% for the years ended March 31, 2016, 2015 and 2014, respectively. Foreignsubsidiaries are subject to income taxes of the countries in which they operate.
The Companies are subject to a number of different taxes based on income. The effective income tax rates differed from the normal statutory tax
rates for the following reasons for the years ended March 31, 2016, 2015 and 2014:

Normal Japanese statutory tax rates
Increase (decrease) in taxes resulting from:
Permanently nondeductible expenses
Change in valuation allowance
Undistributed earnings of associated companies
Differences in foreign subsidiaries’ tax rate
Tax exemption
Unrecognized tax benefits
Impairment charges on goodwill
Changes in Japanese income tax rates
Other - net
Effective tax rates

72

2016

2015

2014

33.1%

35.6%

38.0%

2.8
1.1
0.1
(1.2)
(0.2)
(0.1)

3.6
(9.4)
(0.5)
(3.3)
(0.1)
0.0
15.2
(10.7)
(1.4)
29.0%

3.3
(2.9)
0.1
(2.6)
(0.2)
0.2

(3.0)
(1.0)
31.6%

1.6
0.0
37.5%

Amendments to the Japanese tax regulations were issued on March 31,
2014. As a result of these amendments, the statutory income tax rate wasreverse in and after the consolidated fiscal year beginning April 1, 2016.
Due to this tax rate change, the deferred income taxes recognized in

reduced from 38.0% to 35.6% effective from the year beginning April 1,

the fiscal year ended March 31, 2015 decreased by ¥1,209 million as a2014. Consequently, the statutory income tax rate utilized for deferred tax

result of a reversal of the deferred tax assets and deferred tax liabilities.

assets and liabilities expected to be settled or realized in the period from

Following the amendments described above, new amendments, theApril 1, 2014 is 35.6%. The adjustment of deferred tax assets and liabili-

Act on the Partial Revision of the Income Tax Act, etc. (Act No. 15 ofties for this change in the tax rate resulted in an increase of income taxes2016) and the Act on the Partial Revision of Local Tax Act, etc. andby ¥255 million and has been reflected in income taxes in the consoli-

Related Matters (Act No. 13 of 2016), were enacted in the Diet session on

dated statements of income for the year ended March 31, 2014.

March 29, 2016, and the corporate tax rate is lowered starting from theFollowing the amendments described above, new amendments, theconsolidated fiscal year beginning on or after April 1, 2016. Accordingly,

Act on the Partial Revision of the Income Tax Act, etc. (Act No. 9 of 2015)

with respect to the Company and our major domestic subsidiaries, theand the Act on the Partial Revision of Local Tax Act, etc. (Act No. 2 ofeffective statutory tax rate used for the calculation of deferred tax assets2015), were issued on March 31, 2015, and the corporate tax rate has

and deferred tax liabilities has been changed from 32.3% to 30.9% forbeen lowered starting from the consolidated fiscal year beginning on andthe temporary differences which are expected to reverse during the con-after April 1, 2015. Accordingly, from the end of the fiscal year ended

solidated fiscal year beginning April 1, 2016 and the consolidated fiscal

March 31, 2015, with respect to the Company and our major domestic

year beginning April 1, 2017, and to 30.6% for the temporary differences

subsidiaries, the effective statutory tax rate used for the calculation ofwhich are expected to reverse in and after the consolidated fiscal year

deferred tax assets and deferred tax liabilities has been changed from the

beginning April 1, 2018.

current 35.6% to 33.1% for the temporary differences which were

Due to this tax rate change, the deferred income taxes recognized in

expected to reverse during the consolidated fiscal year beginning April 1,

the fiscal year ended March 31, 2016 decreased by ¥454 million as a2015 and to 32.3% for the temporary differences which are expected toresult of a reversal of the deferred tax assets and deferred tax liabilities.

The approximate effect of temporary differences and tax loss carryforwards that gave rise to deferred tax balances as of March 31, 2016 and 2015 wereas follows:
Millions of yen

2016
Deferred Tax
AssetsAllowance for returns
Allowance for doubtful receivables
Accruals not currently deductible
Inventory valuation
Accrued bonuses
Impairment charges on marketable securities and investments
Advanced depreciation on property, plant and equipment
Undistributed earnings of associated companies
Net unrealized gain on marketable securities and investments
Net realized gain on exchange of investments
Capitalized supplies
Enterprise taxes
Accrued vacation
Asset retirement obligation
Prepaid pension cost
Pension expense
Tangible fixed assets
Tax loss carryforwards
Intangible assets
Other temporary differences
Total
Valuation allowance
Total

¥

Deferred Tax
Liabilities

638
17
139
964
1,038
1,118

2015
Deferred Tax
Assets

¥

737
43
136
1,058
1,067
1,273

¥ 1,126
2,564
9,395
818
167
86
743
277

¥ 1,200
2,731
11,411
961
215
204
771
253

1,872
415
1,439
2,017
577
9,635
(2,360)¥ 7,275

Deferred Tax
Liabilities

2,825
430
1,214
3,300

2,017
203
17,995¥17,995

974
11,675(2,535)¥ 9,1402,276
6221,466¥21,466

73

Financial Section

The valuation allowance decreased by ¥175 million and ¥1,481 million for

There was no portion of undistributed earnings of foreign subsidiaries andthe years ended March 31, 2016 and 2015, respectively.

foreign corporate joint ventures which was deemed to be permanently

On November 28, 2014, the Company resolved a restructuring planfor its group organization. Based on the resolution, most of the assets andliabilities of Lecien Corp., a wholly-owned subsidiary of the Company,

invested as of March 31, 2016 and 2015.
A reconciliation of beginning and ending amounts of unrecognizedtax benefits was as follows:
Millions of yen

were transferred to a newly established subsidiary, and Wacoal Corp.,
another wholly-owned subsidiary of the Company, merged Lecien Corp.
with the remainder of their assets and liabilities on April 1, 2015.
In conjunction with the merger, deferred tax assets for temporary differences concerning the merged assets and liabilities and tax loss carryforwards were transferred from Lecien Corp. to Wacoal Corp., suchdeferred tax assets which had been fully covered by a valuation allowance due to the poor operating results of Lecien Corp. However, as a

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

2016

2015

2014

¥312

¥296

¥ 313

1

16

133

(13)
¥300

(150)
¥312

¥ 296

result of considering the change in the realizability of deferred tax assets
triggered by the resolution, the Company reversed ¥1,398 million of valu-

The total amount of unrecognized tax benefits that, if recognized, would

ation allowance and recognized the same amount of income tax benefit

affect the effective tax rate is ¥300 million, ¥312 million and ¥296 million

for the year ended March 31, 2015.

as of March 31, 2016, 2015 and 2014, respectively.

The Companies reversed a part of its valuation allowance and utilized

The Companies recognize interest and penalties accrued related to¥189 million and ¥811 million of tax loss carryforwards, and recognizedunrecognized tax benefits in income taxes in the consolidated statements

tax benefits of ¥56 million and ¥246 million for the years ended March 31,

of income. Total amounts of interest and penalties recognized in the con-2016 and 2015, respectively.

solidated statements of income for the years ended March 31, 2016, 2015
and 2014 were not material.

As of March 31, 2016, certain subsidiaries had tax loss carryforwards,

The Companies file income tax returns in Japan and various foreign tax

which are available to offset future taxable income of such subsidiaries,

jurisdictions. In Japan, the Companies are no longer subject to regularexpiring as follows:income tax examinations by the tax authorities for years before 2014 withYear Ending March 31

2017
2018
2019
2020
2021
2022
2023
2024
2025
Thereafter
Total

Millions of yen

few exceptions. For other countries, the Companies are no longer subject to

¥ 351
321
543
786
95
4

regular income tax examinations by the tax authorities for years before 2010
with few exceptions. The transfer pricing examinations of certain domestic
and U.S. subsidiaries’ 2007 and 2010 fiscal years were completed.

42
330
4,159
¥6,631

18. RELATED-PARTY TRANSACTIONS ................................................................................................................................
The Companies purchase merchandise from numerous suppliers through-2016, 2015 and 2014, respectively. The accounts receivable from affili-

out the world, including certain affiliated companies of the Companies.

ated companies were ¥97 million and ¥70 million as of March 31, 2016

The Companies purchased merchandise from affiliated companies in theand 2015, respectively.

amount of ¥2,468 million, ¥2,581 million and ¥2,375 million in the fiscal

certain affiliated companies. The amount of royalty revenue earned waspayable to affiliated companies were ¥188 million and ¥142 million as of¥266 million, ¥288 million and ¥248 million in the fiscal years ended

March 31, 2016 and 2015, respectively.

March 31, 2016, 2015 and 2014, respectively. Other accounts receivable

The Companies also sell supplies, materials and products to certain

74

The Companies earn royalties from the use of the Wacoal Brand by

years ended March 31, 2016, 2015 and 2014, respectively. The accounts

from affiliated companies, which are included in other current assets inaffiliated companies. Aggregate sales to affiliated companies were ¥335

the consolidated balance sheets, were ¥225 million and ¥219 million as ofmillion, ¥386 million and ¥342 million in the fiscal years ended March 31,

March 31, 2016 and 2015, respectively.

19. EARNINGS PER SHARE ..................................................................................................................................................
Basic net income attributable to Wacoal Holdings Corp. per share has

Corp. per share was 140,842,184 shares, 140,839,059 shares andbeen computed by dividing net income attributable to Wacoal Holdings

140,841,722 shares for the years ended March 31, 2016, 2015 and 2014,

Corp. by the weighted-average number of common shares outstanding

respectively. The weighted-average number of diluted common shares

during each year. Diluted net income attributable to Wacoal Holdings

outstanding used in the computations of diluted net income attributable

Corp. per share assumes the dilution that could occur if share-based

to Wacoal Holdings Corp. per share was 141,255,241 shares,

option to issue common stock were exercised.

141,203,998 shares and 141,135,395 shares for the years ended March

The weighted-average number of common shares outstanding used

31, 2016, 2015 and 2014, respectively.

in the computations of basic net income attributable to Wacoal Holdings

20. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK ......................................................................
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of financial instruments as of March 31, 2016 and 2015 were as follows:
Millions of yen

2016

Assets:Marketable securities (Notes 3 and 21)
Investments (Notes 3 and 21)
Foreign exchange contracts (Note 21)
Total assets
Liabilities:
Foreign exchange contracts (Note 21)
Long-term debt including current portion
Total liabilities

2015

Carrying Amount

Fair Value

Carrying Amount

Fair Value¥ 1,880
54,733¥ 1,879
54,730¥56,613¥56,609¥ 2,387
58,668209¥61,264¥ 2,386
58,665
209¥61,260¥¥¥ (4,779)¥ (4,779)¥ (4,780)¥ (4,780)

¥

(297)
(388)
(685)

¥

(297)
(389)
(686)

There are investments in nonmarketable equity securities and debt securi-

discounted cash flow analysis, using rates currently available for similarties for which there are no readily determinable fair values. See Note 3 fortypes of borrowings with similar terms and remaining maturities. The esti-

further information. The carrying amounts of all other financial instruments

mated fair value is based on Level 2 input.

approximate their estimated fair values because of the short maturity of

LIMITATIONS—Fair value estimates are made at a specific point in time,those instruments.

based on relevant market information and information about the financial

FOREIGN EXCHANGE CONTRACTS—The Companies are exposed to

instruments. These estimates are subjective in nature and involve uncer-

foreign currency exchange risks on the transactions denominated in for-tainties and matters of significant judgment and therefore cannot beeign currencies relating to its ongoing business operations. Such risks are

determined with precision. Changes in assumptions could significantly

primarily managed by using foreign currency exchange contracts. The

affect the estimates.

Companies measure forward currency exchange contracts at the fair

CONCENTRATION OF CREDIT RISK—The Companies’ business con-value since they are not designated as hedge.

sists primarily of sales of women’s intimate apparel to a large number of

MARKETABLE SECURITIES AND INVESTMENTS—Held-to-maturity

diverse customers in the Japanese retail industry, which include well-es-

debt securities are classified as marketable securities and investments as

tablished department stores, general merchandise stores and other gen-of March 31, 2016 and as investments as of March 31, 2015, respectively.

eral retailers and specialty stores. No single customer constitutes 10.0%

The fair value of these held-to-maturity debt securities are classified as

or more of the total sales, although the general retail customers that are

Level 1. For all other investments included in marketable securities andconsolidated companies within the Aeon Group collectively accounted forinvestments, see Notes 3 and 21.

approximately 8.8%, 8.9% and 10.0% of the total sales in fiscal years

LONG-TERM DEBT—The fair values for long-term debt are estimated by

ended March 31, 2016, 2015 and 2014, respectively.

75

Financial Section

21. FAIR VALUE MEASUREMENTS ......................................................................................................................................
The guidance for fair value measurements defines fair value as the price

Level 1—Inputs are quoted prices in active markets for identical assets orthat would be received to sell an asset or paid to transfer a liability (an exit

liabilities.

price) in the principal or most advantageous market for the asset or liabil-

Level 2—Inputs are quoted prices for similar assets or liabilities in active

ity in an orderly transaction between market participants at the measure-markets, quoted prices for identical or similar assets or liabilities

ment date. The guidance establishes a three-level fair value hierarchy thatin markets that are not active, inputs other than quoted prices

prioritizes the inputs used to measure fair value as follows:that are observable, and inputs that are derived principally fromor corroborated by observable market data by correlation orother means.
Level 3—Inputs are unobservable.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON A RECURRING BASIS
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and 2015 were as follows:
Millions of yen
2016

Level 1

Assets:Marketable securities:
Municipal bonds
Corporate bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Total assets
Liabilities:
Derivative instruments:
Foreign exchange contracts
Total liabilities

Level 2

Level 3

10
395
1,361
1,766

¥53,925¥53,925

Total

¥

¥

10
395
1,361
1,766

¥1,76653,925¥55,691¥ (297)¥ (297)

¥
¥

(297)
(297)

Millions of yen
2015

Level 1

Assets:Marketable securities:
Municipal bonds
Corporate bonds
Mutual funds
Total marketable securities
Investments:
Equity securities
Derivative instruments:
Foreign exchange contracts
Total assets

Marketable securities and investments presented in Level 1 are valued

Level 3

¥

10
501
1,390
1,901

¥58,048¥58,048

Total

¥

10
501
1,390
1,901
58,048209¥2,110209¥60,158

Derivative instruments are composed of foreign currency exchangeusing an unadjusted quoted market price in active markets with sufficient

contracts. Financial instruments presented in Level 2 are valued using

volume and frequency of transactions. Bonds presented in Level 2 arequotes obtained from third parties.

valued by the financial institution using quoted market price for identical

The changes in the fair value of the foreign currency exchange con-

instruments in markets that are not active and mutual funds presented intracts are recorded in earnings, since the foreign currency exchange con-Level 2 are valued by the financial institution based on quoted prices intracts are not designated as a hedge. The Companies recognized a gain

both active and inactive market for identical instruments which compriseof ¥(506) million, ¥192 million and ¥5 million in other - net of other income

funds.

(expenses) in the years ended March 31, 2016, 2015 and 2014,

As presented in Note 3, the Companies recorded impairment charges
on marketable securities and investments if a decline in fair value of mar-respectively.
The Companies recorded the derivative instruments at fair value inketable securities and investments is determined to be other thanthe consolidated balance sheets as other current liabilities of ¥297 million

temporary.

and as other current assets of ¥209 million as of March 31, 2016 and2015, respectively.

76

Level 2ASSETS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS
Assets measured at fair value on a nonrecurring basis as of March 31, 2016 and 2015 were as follows:
Millions of yen
2016

Level 1

Level 2Land
Buildings and building improvements
Machinery and equipment

Level 3

Total

Total Losses

¥133
0
0

¥133
0
0

¥(233)(8)(15)¥(256)

Level 3

Total

Total Losses¥4,325
1,994¥4,325
1,994¥(4,845)(1,176)¥(6,021)

Millions of yen
2015

Level 1

Level 2

Goodwill (Note 8)
Trademarks (Note 8)

During the fiscal year ended March 31, 2016, the Company categorized aunobservable inputs, such as management’s internal assumptions aboutcertain asset group as real estate for rent. The Company performed an

future cash flows, the rate of royalty, and appropriately risk-adjusted dis-

impairment analysis as of March 31, 2016 and determined that the faircount rate, which reflected the management’s estimate of assumptions

value of the real estate was below its carrying amount. Accordingly, thethat market participants would use in pricing the asset in an arm’s length

Company reduced the carrying amount from ¥366 million to ¥133 million

transaction as of the measurement date. Future cash flows were based on

for land and from ¥8 million to ¥0 million for buildings and structures,the management’s cash flow projections for the future five years, and after

respectively. The fair value is measured mainly based on the real estate

five years, future cash flows were estimated using the perpetuity growth

appraisal value. The impairment charge on the long-lived assets of ¥241

rate of 0%. The management’s cash flow projections were developed

million was included in an operating expense of Wacoal Businessusing estimates for expected future revenue growth rates, profit margins(Domestic) in the segment information.

and working capital levels of the reporting units. The rate of royalty used

As of March 31, 2015, goodwill with a carrying amount of ¥9,170 mil-for the valuation was based on the actual royalty ratio used in transactions.

lion was written down to its implied fair value of ¥4,325 million, resulting

The risk-adjusted discount rate represents a weighted-average cost ofin an impairment charge of ¥4,845 million, which is included in earnings

capital (WACC) adjusted for inherent risk spread.

for the year ended March 31, 2015. The impairment arose due to thedecline in its fair value, which was mainly caused by a downturn in con-There were no significant assets or liabilities that were measured atfair value on a nonrecurring basis as of March 31, 2014.

sumption due to general market conditions. To measure the fair values of
the reporting units, the Companies used the expected present value ofValuation process:future cash flows and incorporated relevant unobservable inputs, such as

The valuation process involved in Level 3 measurements for applicablemanagement’s internal assumptions about future cash flows and appro-

asset and liability is governed by the valuation policies and procedures,

priately risk-adjusted discount rates, which reflected the management’s

including evaluation method for fair value measurements, pre-approved

estimate of assumptions that market participants would use in pricing theby the Companies. Based on the policies and procedures, either person-

asset in an arm’s length transaction as of the measurement date.

nel from the accounting division or personnel in charge of valuation deter-

Trademarks with a carrying amount of ¥3,170 million as of March 31,

mine the valuation model to be utilized to measure each asset and liability

2015, were written down to their fair values of ¥1,994 million, resulting in

at fair value. We engage independent external experts of valuation torecognition of an impairment charge of ¥1,176 million for the year ended

assist us in the valuation process for certain assets over a specific

March 31, 2015. The impairment arose due to the decline in their fair value,amount, and their results of valuations are reviewed by the responsible

which was mainly caused by a downturn in consumption due to generalpersonnel. All the valuations including those performed by the externalmarket conditions. To measure the fair value of the trademarks, theexperts are reviewed and approved by the management of the Company

Companies used the relief-from royalty method and incorporated relevant

before being recorded in the general ledger.

Quantitative information regarding Level 3 fair value measurements:
Information about valuation techniques and significant unobservable inputs used for Level 3 assets measured at fair value for the year ended March 31,
2015 is as follows:
Millions of yen
March 31, 2015

Fair Value

Valuation TechniquePrincipal Unobservable Input

Trademarks¥1,994

Relief-from royalty method

Discount rate
Royalty rate
Short-term revenue growth rates (within five years)
Perpetuity growth rate (over five years)

Range

7.3%–11.3%
3.0%–4.0%
2.3%–5.3%
0%77

Financial Section

22. SEGMENT INFORMATION ..............................................................................................................................................
OPERATING SEGMENT INFORMATION

innerwear (consisting of foundation, lingerie, nightwear and children’s

The Companies have three reportable segments: “Wacoal businessinnerwear), outerwear, sportswear and hosiery. “Wacoal business (over-(domestic),” “Wacoal business (overseas),” and “Peach John,” which areseas)” segment produces and sells innerwear (consisting of foundation,

based on their locations and brands. These segments represent compo-

lingerie, nightwear and children’s innerwear), outerwear, sportswear andnents of the Companies for which separate financial information is avail-hosiery. “Peach John” segment produces and sells innerwear (consisting

able and for which operating income (loss) is reviewed regularly by theof foundation, lingerie, nightwear), outerwear, and other textile-related

chief operating decision maker in deciding how to allocate theproducts, which are sold under the “Peach John” brand. “Other” segment

Companies’ resources and in assessing their performance. The account-produces and sells innerwear (consisting of foundation, lingerie, night-

ing policies used for these reportable segments are the same as those

wear and children’s innerwear), outerwear, sportswear, other textile-re-described in the summary of significant accounting policies in Note 1.

lated products, mannequins and construction of stores and interior“Wacoal business (domestic)” segment primarily produces and sells

design.

Information about operating results and assets for each segment as of and for the years ended March 31, 2016, 2015 and 2014 is as follows:
Millions of yen
2016

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥120,570
1,427
121,997¥51,869
8,595
60,464¥11,190775
11,965¥19,288
6,102
25,390¥(16,899)(16,899)

110,144
3,043
113,187
8,810

54,711
1,320
56,031
4,433

11,442
265
11,707258

24,839187
25,026364(16,899)

254,269
6,977

80,580
1,694

11,959245

18,866
62(72,820)

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥112,203
1,906
114,109¥48,107
8,592
56,699¥11,626650
12,276¥19,829
5,046
24,875¥(16,194)(16,194)

102,789
2,876

50,444
1,479

12,080471
4,845

24,469248

Consolidated¥202,917(16,899)

202,917
184,237
4,815
189,052
13,865292,854
8,978
Millions of yen

2015

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Impairment charges on goodwill (Note 8)
Impairment charges onother intangible assets (Note 8)
Total
Operating income (loss)
Total assets and capital expenditures:
Total assets
Capital expenditures

78

Consolidated¥191,765(16,194)

1,176

191,765
173,588
5,074
4,845
1,176

105,665
8,444

51,923
4,776

18,572(6,296)

24,717
158(16,194)

184,683
7,082

261,467
3,338

78,143742

11,748300

20,78998(71,875)

300,2724,478

Millions of yen
2014

Net sales:
External customers
Intersegment
Total
Operating costs and expenses:
Operating costs and expenses
Depreciation and amortization
Total
Operating income
Total assets and capital expenditures:
Total assets
Capital expenditures

Wacoal Business(Domestic)

Wacoal Business(Overseas)

Peach John

Other

Elimination¥118,085
2,149
120,234¥43,636
8,049
51,685¥12,482455
12,937¥19,578
5,406
24,984¥(16,059)(16,059)

108,015
2,935
110,950
9,284

46,4101,238
47,648
4,037

12,270584
12,85483

24,249279
24,528456

244,502
2,210

69,352621

18,026296

20,070337

Consolidated¥193,781(16,059)(16,059)(79,962)

193,781
174,885
5,036
179,921
13,860271,988
3,464

The sum of the operating income of the reportable segments is consistent with the operating income on the consolidated statements of income. For areconciliation from operating income to income before income taxes and equity in net income of affiliated companies, see other income (expenses) on the
consolidated statements of income.
The Companies account for intersegment sales and transfers at cost plus a markup. Operating income (loss) represents net sales less operating costs
and expenses.
PRODUCTS AND SERVICE INFORMATIONNet sales information by product and service for the years ended March 31, 2016, 2015 and 2014 is as follows:
Millions of yen

Innerwear:
Foundation and lingerieNightwear
Children’s underwear
Subtotal
Outerwear/Sportswear
Hosiery
Other textile goods and related products
Others
Total

2016

2015

2014

¥151,166
10,098
1,386
162,650¥ 19,074
2,178
7,161
11,854¥202,917¥142,681
9,514
1,373
153,568¥ 16,227
2,437
7,616
11,917¥191,765¥144,322
9,301
1,475
155,098¥ 16,954
2,252
8,577
10,900¥193,781

GEOGRAPHIC INFORMATION
Information by major geographic area as of and for the years ended March 31, 2016, 2015 and 2014 is as follows:
Millions of yen

Net sales:Japan
Asia and Oceania
Americas and Europe
Consolidated
Long-lived assets:Japan
Asia and Oceania
Americas and Europe
Consolidated

2016

2015

2014

¥150,673
17,90634,338¥202,917¥143,250
16,261
32,254¥191,765¥149,715
14,871
29,195¥193,781¥ 46,136
4,490
3,312
¥ 53,938¥ 43,200
2,998
2,990
¥ 49,188¥ 43,446
2,894
2,638
¥ 48,978

Countries or areas are classified according to their geographical proximity.
Asia and Oceania includes East Asia, Southeast Asia, West Asia and Australia.
Net sales are attributed to countries or areas based on the location of sellers.
Long-lived assets represent property, plant and equipment.

79

Financial Section

23. SUBSEQUENT EVENTS ..................................................................................................................................................
(Transfer of property plant and equipment)(Purchase of Treasury Stock)

The Board of Directors resolved at the meeting held on January 29, 2016

On May 27, 2016, the Board of Directors resolved to purchase treasury

to transfer property, plant and equipment (land) as described below, andstock with the specific purchasing method as described below pursuant

accordingly, the delivery of land was completed on April 27, 2016.

to the provisions of Paragraph 1, Article 156 of the Companies Act, which
are applied by replacing the provisions of Paragraph 3, Article 165 of theCompanies Act, and carried out as follows.

a. Reason for Transfer
The Companies have decided to transfer the land, the site of the
Nagoya branch, to make effective use of managerial resources

a. Reason for Purchase: To improve capital efficiency and to implement
our capital policy with increased flexibility tai-because it is unlikely that the Companies will use this site for our busi-

lored to the business environment

ness in the future.
b. Details of Subject Transferred Asset
Details of Subject Asset: Land (1,370m2)
Location:c. Total Number of Shares to Be Purchased: 2,300,000 shares(at maximum)

15 Sakae 5-chome, Naka-ku,
Nagoya-shi, Aichi

d. Purchase Period: From June 2, 2016 through September 30, 2016

Current Status:

Leased for parking spaces

e. Total Amount to Be Purchased: ¥3,000 million (at maximum)

Carrying Amount:¥295 million

f. Method of Purchase: Market purchase through trust method

Transfer Price:¥4,149 million(Dividend Declaration)c. Outline of Transferee
Kabushiki Kaisha Nihon Ceremony

On May 9, 2016, the Board of Directors resolved to pay a cash dividendof ¥165 per 5 shares of common stock to holders of record as of Marchd. Schedule of Transfer
Resolution of the Board Meeting: January 29, 2016
Execution of Agreement:

February 12, 2016

Transfer of Land:

April 27, 2016

e. Impact on Business Results
In connection with the transfer of the subject property, plant and equipment the Company will record approximately ¥3.8 billion of gain onsale of property, plant and equipment during the consolidated firstquarter of the fiscal year ending March 2017.

80b. Type of Shares to Be Purchased: Common stock of the Company

31, 2016 (aggregate amount of ¥4,648 million).

Independent Auditors’ Report

To the Board of Directors and Stockholders of Wacoal Holdings Corp.
Kyoto, Japan
We have audited the accompanying consolidated financial statements of Wacoal Holdings Corp. and its subsidiaries, (the “Company”) which comprise theconsolidated balance sheets as of March 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, equity, andcash flows for each of the three years in the period ended March 31, 2016 (all expressed in Japanese yen), and the related notes to the consolidated
financial statements.

Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance withauditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparationand fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wacoal Holdings
Corp. and its subsidiaries as of March 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period
ended March 31, 2016, in accordance with accounting principles generally accepted in the United States of America.

Convenience Translation
Our audits also comprehended the translation of the Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been madein 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 ofreaders outside of Japan.

Report on Management's Report on Internal Control over Financial Reporting
Notwithstanding the second paragraph of the “Auditors’ Responsibility” section, we have performed an audit of management's report on internal control
over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act of Japan. A translated copy of management's report on ICFR alongwith a translated copy of our report is included within this Annual Securities Report as information for readers.

June 29, 201681

Financial Section

Management’s Annual Report on
Internal Control Over Financial Reporting (Translation)

NOTE TO READERS
The following is an English translation of management’s report on internal control over financial (“ICFR”) filed under the Financial Instruments andExchange Act of Japan. This report is presented merely as supplemental information.
There are differences between the management assessment of ICFR under the Financial Instruments and Exchange Act (“ICFR under FIEA”) and one
conducted under the attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).
In the management assessment of ICFR under FIEA, there is detailed guidance on the scope of management assessment of ICFR such as quantitative guidance on business units selection and/or account selection. In the management assessment of ICFR under the attestation standards establishedby the AICPA, there is no such detailed guidance. Accordingly based on the quantitative guidance which provides an approximately measure for thescope of assessment of internal control over business processes, we designated the business units that accounted for approximately two-thirds of theaggregated sales for the previous fiscal year on a consolidated basis as “significant business units” which should be subject to the process-level controls.

1. Matters Relating to the Basic Framework for Internal Control over Financial Reporting
Yoshikata Tsukamoto, President and Representative Director and Masaya Wakabayashi, Director and Vice President, are responsible for the designing andoperating effective internal control over financial reporting of Wacoal Holdings Corp. (the “Company”), and have designed and operated internal control
over financial reporting in accordance with the basic framework for internal control set forth in “The Standards and Practice Standards for Management
Assessment and Audit of Internal Control Over Financial Reporting” published by the Business Accounting Council.
The internal control is designed to achieve its objectives to the extent reasonable through the effective function and combination of its basic elements. Therefore, there is a possibility that misstatements may not be completely prevented or detected by internal control over financial reporting.

2. Matters Relating to Scope of Assessment, the Assessment Date, and Assessment Procedures
The assessment of internal control over financial reporting was performed as of March 31, 2016. The assessment was performed in accordance withassessment standards for internal control over financial reporting generally accepted in Japan.
In conducting this assessment, we evaluated internal controls which may have a material effect on the entire financial reporting in a consolidation(“company-level controls”) and based on the result of this assessment, we appropriately selected business processes to be evaluated, analyzed theseselected business processes, identified key controls that may have a material impact on the reliability of our financial reporting, and assessed the designand operation of these key controls. These procedures have allowed us to evaluate the effectiveness of its internal controls.
We determined the required scope of assessment of internal control over financial reporting for the Company, as well as its consolidated subsidiaries
and equity-method affiliated companies, from the perspective of the materiality that may affect the reliability of our financial reporting. The materiality that
may affect the reliability of the financial reporting is determined taking into account the materiality of quantitative and qualitative impacts. We confirmedthat we had reasonably determined the scope of assessment of internal controls over business processes in light of the results of assessment of company-level controls conducted for the Company, its consolidated subsidiaries and equity-method affiliated companies. We did not include those consolidated subsidiaries and equity-method affiliated companies which do not have any quantitatively or quantitatively material impact on the consolidated
financial statements in the scope of assessment of company-level controls.
Regarding the scope of assessment of internal control over business processes, we designated the business locations that accounted for approximately two-thirds of the aggregated sales for the previous fiscal year on a consolidated basis as “significant business locations” which should be subject
to the process-level controls.
At the selected significant business units, we included, in the scope of assessment, those business processes leading to sales or accounts receivableand inventories, as significant accounts that may have a material impact on the business objectives of us. Further, not only at selected significant business units, but also at other business units, we added to the scope assessment, as business processes having greater materiality considering their impact
on the financial reporting, (1) those business processes relating to greater likelihood of material misstatements and significant account involving estimates
and the management’s judgment, and (2) those business processes relating to businesses or operations dealing with high-risk transactions.

82

3. Matters Relating to the Results of Assessment
As a result of the assessment above, we concluded that our internal control over financial reporting was effective as of March 31, 2016.

4. Supplementary Matters
Not applicable.

5. Special Information
Not applicable.

Yoshikata Tsukamoto
President and Representative Director
WACOAL HOLDINGS CORP.
Masaya Wakabayashi
Director and Vice President
WACOAL HOLDINGS CORP.

83

Financial Section

Independent Auditors’ Report

NOTE TO READERS:
The following is an English translation of the Independent Auditors’ Report filed under the Financial Instruments and Exchange Act of Japan. This report ispresented merely as supplemental information.
There are differences between an audit of internal control over financial reporting (“ICFR”) under the Financial Instruments and Exchange Act (“ICFR
under FIEA”) and one conducted under the attestation standards established by the American Institute of Certified Public Accountants (“AICPA”).
In an audit of ICFR under FIEA, the auditors express an opinion on management’s report on ICFR, and do not express an opinion on the Company’s
ICFR directly. In an audit of ICFR under the attestation standards established by the AICPA, the auditors express an opinion on the Company’s ICFR
directly. Also in an audit of ICFR under FIEA, there is detailed guidance on the scope of an audit of ICFR, such as quantitative guidance on business units
selection and/or account selection. In an audit of ICFR under the attestation standards established by the AICPA, there is no such detailed guidance.
Accordingly, based on the quantitative guidance which provides an approximate measure for the scope of assessment of internal control over businessprocess, we used a measure of approximately 70% of total assets on a consolidated basis and income before income taxes on a consolidated basis forthe selection of significant business units.

(TRANSLATION)
Deloitte Touche Tohmatsu LLC
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Fumihiko Kimura
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:
Koichiro Tsukuda
Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:Seiichiro Nakashima

To the Board of Directors of Wacoal Holdings Corp.

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited the consolidated financial statements
included in the Financial Section, namely, the consolidated balance sheet as of March 31, 2016 of Wacoal Holdings Corp. and its consolidated subsidiaries (the “Company”), and the consolidated statement of income, comprehensive income, equity and cash flows for the fiscal year from April 1, 2015 toMarch 31, 2016, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America pursuant to the third paragraph of the Supplementary Provisions of the Cabinet Office Ordinance forPartial Amendment of the Regulations for Terminology, Forms and Preparation Methods of Consolidated Financial Statements (No. 11 of the Cabinet
Office Ordinance in 2002), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

84

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance withauditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wacoal Holdings
Corp. and its consolidated subsidiaries as of March 31, 2016, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act, we have audited management’s report on internal control over financial reporting of the Company as of March 31, 2016.

Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the preparation and fair presentation of its
report on internal control in accordance with assessment standards for internal control over financial reporting generally accepted in Japan. There is apossibility that misstatements may not be completely prevented or detected by internal control over financial reporting.

Auditors’ Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control audit. We conducted our internal control audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether management’s report on internal control is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of the assessment of internal control over financial
reporting in management’s report on internal control. The procedures selected depend on the auditors’ judgment, including the significance of effects on
reliability of financial reporting. An internal control audit includes examining representations on the scope, procedures and results of the assessment ofinternal control over financial reporting made by management, as well as evaluating the overall presentation of management’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion
In our opinion, management’s report on internal control over financial reporting referred to above, which represents that the internal control over financial
reporting of Wacoal Holdings Corp. and its consolidated subsidiaries as of March 31, 2016 is effectively maintained, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.

Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under the provisions of the Certified
Public Accountants Act.

June 29, 201685

Corporate Data
As of March 31, 2016

HEAD OFFICEInternational Network

29, Nakajima-cho, Kisshoin,
Minami-ku, Kyoto 601-8530, Japan
Tel 075-694-3111 Fax 075-694-3109

Wacoal International Corp. (U.S.)
One Wacoal Plaza, Lyndhurst,
N.J. 07071, U.S.A.
Tel 1-201-933-8400

Homepagewww.wacoalholdings.jp/en

Wacoal America, Inc.
136 Madison Avenue,
New York, N.Y. 10016, U.S.A.
Tel 1-212-532-6100

Date of Foundation
June 15, 1946
Date of Establishment
November 1, 1949

WACOAL CANADA INC.
155 Rene-Levesque Blvd, W.40th Floor
Montreal, Q.C., Canada H3B 3V2
Tel 1-514-448-2173

Shareholders’ Equity¥224,374 million
Number of Employees(Consolidated)
21,892

Domestic Principal Subsidiaries
Wacoal Holdings Equity Owned

Wacoal Corp.
Lecien Corporation
Peach John Co., Ltd.
Nanasai Co., Ltd.
Une nana cool Corp.
Ai Co., Ltd.
Kyushu Wacoal Manufacturing Corp.
Niigata Wacoal Sewing Corp.
Hokuriku Wacoal Sewing Corp.
Torica Inc.
Wacoal Career Service Corp.
Wacoal Service Co., Ltd.
Wacoal Distribution Corp.

%

100
100
100
99
100
100
100
100
100
57
100
100
100

Overseas Principal Subsidiaries
Wacoal Holdings Equity Owned

Wacoal International Corp. (U.S.A.)
Wacoal America, Inc.
WACOAL CANADA INC.
Wacoal Dominicana Corp.
Wacoal Europe Ltd.
Wacoal China Co., Ltd.
Guangdong Wacoal Inc.
Dalian Wacoal Co., Ltd.
Wacoal Hong Kong Co., Ltd.
Wacoal International Hong Kong Co., Ltd.
Wacoal Singapore Pte. Ltd.
Vietnam Wacoal Corp.
Philippine Wacoal Corp.
Wacoal India Private Limited
A Tech Textile Co., Ltd.
G Tech Material Co., Ltd.

%

100
100
100
100
100
100
100
100
80
100
100
100
67
51
54
51

Domestic Principal Joint Ventures
Wacoal Holdings Equity Owned%

House of Rose Co., Ltd.

24

Overseas Joint Ventures

86

Wacoal Holdings Equity Owned%

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

34
50
25
42
50
20

Wacoal Dominicana Corp.
Las Americas Industrial Free Zone,
KM.22, aut. Las Americas,
Santo Domingo, Dominican Republic
Tel 1-809-549-1090
Wacoal Europe Ltd.
The Corsetry Factory, Rothwell Road,
Desborough, Kettering,Northamptonshire NN14 2PG,
United Kingdom
Tel 44-1536-760-282
Wacoal China Co., Ltd.
Jia 16 Tongji North Road,
Beijing Economic and Technological
Development Area, Beijing 100176, P.R.C.
Tel 86-10-6787-2185
Guangdong Wacoal Inc.
Huahai Industrial District,
Xinhua Town, Huadu Qu,
Guangzhou City, Guangdong, P.R.C.
Tel 86-20-8686-1170
Dalian Wacoal Co., Ltd.
No.6 Fu An Street, Economic andTechnical Development Zone, Dalian,
116600, P. R. C.
Tel 86-411-8733-7722
Wacoal Hong Kong Co., Ltd.
8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong,
Kowloon, Hong KongTel 852-2811-3202
Wacoal International Hong Kong Co., Ltd.
8th Floor, EGL Tower,
No. 83 Hung To Road, Kwun Tong,
Kowloon, Hong KongTel 852-2561-9191

Wacoal Singapore Pte. Ltd.
215 Henderson Road,#01-08 Henderson Industrial Park,
Singapore 159554
Tel 65-6270-2887
Vietnam Wacoal Corp.
110 Amata Road,
Amata Modern Industrial Park,
Long Binh Ward, Bien Hoa City,
Dong Nai Province,
Socialist Republic of Vietnam
Tel 84-61-3936770
Philippine Wacoal Corp.
3rd Floor, 6788 Ayala Avenue,
Oledan Square, Makati City 1226,
Philippines
Tel 63-2-893-7432
Thai Wacoal Public Company Limited
132 Soi Charoenrat 7,
Bangklo, Bangkholaem,
Bangkok, 10120, Thailand
Tel 66-2-289-3100
Taiwan Wacoal Co., Ltd.
15 Jingkwo Road, Taoyuan,
Taiwan, R.O.C.
Tel 886-3-326-9369
Shinyoung Wacoal Inc. (South Korea)
345-54 Gasan-Dong, Geumcheon Gu,
Seoul 153-023, Korea
Tel 82-2-818-5120
PT. Indonesia Wacoal
Jl. Tarikolot Rt.01/Rk.001 No. 59,
Citeureup-Bogor 16810, Indonesia
Tel 62-21-560-0715
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

Investor Information
As of March 31, 2016

STOCK LISTINGTokyo

Ownership and Distribution of Shares
Securities firms

FISCAL YEAR-END
March 31

1.66%

Individuals and others

17.53 %

SECURITIES CODE
3591
COMMON STOCK
Issued: 143,378,085 shares
Outstanding: 140,858,735 shares

Financial
institutions

40.67 %TRADING UNIT
1,000 shares

Other Japanesecompanies

19.90 %SHAREHOLDER REGISTER AGENT FOR
COMMON STOCK
Mitsubishi UFJ Trust andBanking Corporation,
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Foreign institutions
and individuals

20.24 %AMERICAN DEPOSITARY RECEIPTS
Cusip No.: 930004205
Ratio (ADR:ORD): 1:5Market: OTCQX
Symbol: WACLY

Major Shareholders*Japan Trustee Services Bank Ltd. (Trust Account)

3.72

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

The Bank of Kyoto, Ltd.

3.34

NUMBER OF SHAREHOLDERS
14,078%The Bank of Tokyo-Mitsubishi UFJ, Ltd.

4.96

Meiji Yasuda Life Insurance Company

4.33

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

3.20

Nippon Life Insurance Company

2.60

The Shiga Bank, Ltd.

2.58

Mitsubishi UFJ Trust and Banking Corporation

2.16

The Dai-ichi Life Insurance Company, Ltd.

1.93

Asahi Kasei Fibers Corp.

1.76*The percentages exclude treasury stock.

Stock Price / Trading Volume
Stock Price (¥)
2,000
1,500
1,000
500
0
Trading Volume (Thousand shares)
20,00015,00010,000
5,000
0

07/1

08/1

09/1

10/1

11/1

12/1

13/1

14/1

15/1

16/1

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

8720160902-DN-A2T2

Printed in Japan
Cover photo: P Z\ hZe+) * / \ Ze^g] Zk, Sep.–Oct.