UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO ____________

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF EVENT REQUIRING THIS SHELL COMPANY REPORT ____________

KABUSHIKI KAISHA WACOAL HOLDINGS

WACOAL HOLDINGS CORP.

Japan
(Jurisdiction of Incorporation or Organization)

29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan
(Address of Principal Executive Offices)

Title of Each Class		Name of Each Exchange On Which Registered
Common Stock		NASDAQ Capital Market
American Depositary Shares (each representing 5 shares of such Common Stock)

Common Stock Outstanding:
140,450,847 shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ          No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o          No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ          No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o          No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP þ		International Financial Reporting Standards as issued by the International Accounting Standards Board o		Non-Accelerated Filer o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o          Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o          No þ

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     This annual report on Form 20-F contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about our company and our industry. You can identify these statements by the fact that they do not relate strictly to historic or current facts. The forward-looking statements discuss future expectations, identify strategies, contain projections of results of operations or of financial condition, or state other “forward-looking” information. In particular, the forward-looking statements may include statements relating to the impact of the ongoing global economic downturn and financial crisis, our development and sale of products, the expansion and operation of our specialty retail store network, our sales activities through catalog and Internet channels, the implementation of our CAP 21 strategic plan through strategic investments, acquisitions and other initiatives, continued development of our overseas business and operations, developments in our product sourcing and manufacturing practices and strategies, sales efforts, expenses, outcomes of contingencies and financial results. Forward-looking statements are contained in the sections entitled “Item 3.D. Risk Factors”, “Item 4.B. Business Overview”, and “Item 5. Operating and Financial Review and Prospects”, and elsewhere in this annual report.

     The forward-looking statements are subject to various risks and uncertainties. Information contained in the sections listed above and elsewhere in this annual report identifies factors that could cause our actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

     We undertake no obligation to update any forward-looking statements contained in this annual report, whether as a result of new information, future events or otherwise.

CERTAIN REFERENCES

     As used in this annual report on Form 20-F, unless the context otherwise requires, the “Company” and “Wacoal Holdings” refer to Wacoal Holdings Corp., and “Wacoal”, “we”, “us”, “our” and similar terms refer to Wacoal Holdings Corp. and its consolidated subsidiaries.

     The Company’s fiscal year-end is March 31. In this annual report, “fiscal 2009” refers to our fiscal year ended March 31, 2009, and other fiscal years are referred to in a corresponding manner.

CURRENCIES AND EXCHANGE RATES

     We publish our financial statements in Japanese yen. In this annual report on Form 20-F, references to “U.S. dollars” or “$” are to the currency of the United States and references to “yen” or “¥” are to the currency of Japan.

     Solely for your convenience, certain yen amounts in this annual report have been translated into U.S. dollars. The rate of translation is based on the noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on the various dates specified where the translations are set forth in this annual report. References to the “noon buying rate” in this annual report refer to this rate. These translations should not be taken as assurances that the yen amounts actually represent these U.S. dollar amounts or that they were or could have been converted in U.S. dollars at the rate indicated or at any other rate. The noon buying rate was ¥94.86 to $1.00 on July 24, 2009.

TABLE OF CONTENTS

			Page
PART I
ITEM 1. Identity of Directors, Senior Management and Advisers			1
ITEM 2. Offer Statistics and Expected Timetable			1
ITEM 3. Key Information			1
ITEM 4. Information on Wacoal Holdings			13
ITEM 4A. Unresolved Staff Comments			26
ITEM 5. Operating and Financial Review and Prospects			26
ITEM 6. Directors, Senior Management and Employees			50
ITEM 7. Major Shareholders and Related Party Transactions			57
ITEM 8. Financial Information			58
ITEM 9. The Offer and Listing			59
ITEM 10. Additional Information			60
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk			86
ITEM 12. Description of Securities Other than Equity Securities			88
PART II
ITEM 13. Defaults, Dividend Arrearages and Delinquencies			89
ITEM 14. Material Modifications to Rights of Security Holders and Use of Proceeds			89
ITEM 15. Controls and Procedures			89
ITEM 16A. Audit Committee Financial Expert			90
ITEM 16B. Code of Ethics			91
ITEM 16C. Principal Accountant Fees and Services			91
ITEM 16D. Exemptions from the Listing Standards for Audit Committees			92
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			94
ITEM 16F. Change in Registrant’s Certifying Accountant			95
ITEM 16G. Corporate Governance			95
PART III
ITEM 17. Financial Statements			98
ITEM 18. Financial Statements			98
ITEM 19. Exhibits			98
SIGNATURES			99
Index to Consolidated Financial Statements			F-1
Ex-1.1 Articles of Incorporation of the Registrant (English Translation)
Ex-1.2 Share Handling Regulations of the Registrant (English Translation)
Ex-1.4 Regulations of the Board of Corporate Auditors of the Registrant (English Translation)
Ex-12.1 Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Ex-12.2 Certification of the chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Ex-13.1 Certification of the principal executive officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Ex-13.2 Certification of the chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART I

Item 1. Identity of Directors, Senior Management and Advisers.

     Not applicable.

Item 2. Offer Statistics and Expected Timetable.

     Not applicable.

Item 3. Key Information.

A. Selected Financial Data.

     The following selected historical consolidated financial data of Wacoal Holdings have been derived from the audited consolidated financial statements of Wacoal Holdings as of and for the fiscal years ended March 31, 2009, 2008, 2007, 2006 and 2005. The selected consolidated income statement data for the fiscal years ended March 31, 2009, 2008 and 2007, and the selected consolidated balance sheet data as of March 31, 2009 and 2008, are derived from the audited consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), included elsewhere in this annual report. The selected consolidated income statement data for the fiscal years ended March 31, 2006 and 2005, and selected consolidated balance sheet data as of March 31, 2007, 2006 and 2005, are derived from Wacoal Holdings’ audited consolidated financial statements not included in this annual report.

						Fiscal year ended/as of March 31,
		2009								2008				2007				2006				2005
		(yen in millions and U.S. dollars in thousands unless otherwise indicated)
Income Statement Data
Net sales		¥	172,276			$	1,737,529			¥	165,761			¥	166,410			¥	164,122			¥	160,968
Operating income			10,129				102,158				13,540				12,896				1,333				11,766
Net income			5,230				52,748				4,966				9,029				2,821				6,790
Balance Sheet Data
Working capital1		¥	58,676			$	591,790			¥	62,835			¥	58,047			¥	75,208			¥	85,330
Total assets			213,486				2,153,162				241,619				250,266				242,296				226,196
Short-term bank loans			5,221				52,658				5,572				5,822				6,392				6,752
Long-term debt (including current portion)			81				817				129				162				66				159
Common stock			13,260				133,737				13,260				13,260				13,260				13,260
Shareholders’ equity			165,873				1,672,950				185,113				193,278				186,475				175,746
Per American Depositary Share Data (One ADR represents 5 shares of common stock):
Net income:
Basic		¥	184			$	1.86			¥	176			¥	316			¥	98			¥	236
Diluted		¥	184			$	1.86			¥	176			¥	316			¥	98			¥	236
Cash dividends declared:
Japanese yen		¥	125				—			¥	125			¥	110			¥	100			¥	100
U.S. dollars			—			$	1.26			$	1.25			$	0.94			$	0.85			$	0.93
Other Data
Weighted average number of shares of common stock outstanding (thousands)			142,317				—				141,304				142,910				143,934				143,956

     We publish our financial statements in yen. The following table sets forth information regarding the noon buying rates for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York, expressed in yen per $1.00 during the periods shown. The noon buying rate was ¥94.86 to $1.00 on July 24, 2009.

		Year ended March 31,
Yen exchange rates per U.S. dollar		2009				2008				2007				2006				2005
Period end		¥	99.15			¥	99.85			¥	117.56			¥	117.48			¥	107.22
Average rate during period			100.85				113.61				116.55				113.67				107.28
Highest rate during period			110.48				124.09				121.81				120.93				114.30
Lowest rate during period			87.80				96.88				110.07				104.41				102.26

Yen exchange rates		Highest rate				Lowest rate
per U.S. dollar		during period				during period
January 2009		¥	94.20			¥	87.80
February 2009			98.55				89.09
March 2009			99.34				93.85
April 2009			100.71				96.49
May 2009			99.24				94.45
June 2009			98.56				95.19

B. Capitalization and Indebtedness.

     Not applicable.

C. Reasons for the Offer and Use of Proceeds.

     Not applicable.

D. Risk Factors.

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

The recent global economic downturn and financial crisis, which has weakened the Japanese economy, could negatively affect our business, results of operations and financial condition

     The recent global economic downturn and financial crisis has affected many of the world’s largest economies, including those of Japan and the United States, where we have generated most of our sales in recent years. During fiscal 2009, the Japanese market accounted for approximately 87.0% of our sales, and the U.S. and European markets accounted for approximately 8.6%. In the major markets in which we operate, many companies and institutions currently face extreme financial difficulty, including declines in asset prices, liquidity problems and limited availability of credit. It is uncertain how long this crisis will last, but many economies may have entered a deep and prolonged recession. Such declines in economic activity may have a material adverse effect on our sales, results of operations and financial condition. Our businesses may be particularly sensitive to declines in consumer spending. In addition, the financial crisis may result in lower returns or losses on our financial investments.

Continued difficulties faced or changes in business policies made by department stores, general merchandise stores and other general retailers in Japan would hurt our business

     In fiscal 2009, a substantial majority of our net sales were made to department stores, general merchandise stores and other general retailers in Japan. We are attempting to increase our sales made through our own specialty retail store network, our catalog business and our Internet operations. However, we expect that the majority of our net sales will continue to be made through department stores, general merchandise stores and other general retailers in Japan for the foreseeable future.

     In recent years, many department stores, general merchandise stores and other general retailers in Japan have experienced business difficulties for a variety of reasons, including weak consumer spending, competition from convenience stores, catalog and Internet retailers and other sources. A number of department stores and general retailers have been able to improve their financial performance as a result of restructuring and other efforts. Nevertheless, the outlook for the sector remains uncertain, and poor performance could persist.

     Weakness in the department store, general merchandise and specialty retail sector would make it difficult to increase sales to our customers in these sectors, and the failure of one or more of our important general retail customers could materially harm our business. This would mean an immediate loss of sales to such failed retailer and the potential inability to collect some or all of our outstanding accounts receivable from it. Likewise, increased consolidation of Japanese department stores and general merchandise stores in preparation for a shrinking market due to the future anticipated decrease in the population of Japan may allow our customers to increase their bargaining power in negotiating pricing and other terms of trade, which could have a material impact on our profitability. Any change in business policy by Japan’s leading retailers would have an adverse impact on our performance, such as net sales or return on sales.

     As a result of any of the above factors or otherwise, any change in the business environment surrounding department stores, general merchandise stores or other general retailers in Japan would have a material impact on our business, profitability and financial condition.

Our sales may decline if we are unable to effectively anticipate and respond to consumer tastes and preferences and deliver high-quality products

     Our success depends in part on our ability to effectively anticipate and respond to changing consumer tastes, preferences and demands, and to translate market trends into products that consumers want to buy at prices that will allow us to be profitable. Customer tastes and fashion trends change rapidly and are difficult to predict. If we are unable to successfully anticipate or respond to changing styles or trends, or if we lose the support of our customers, we would be unable to achieve our sales targets and our financial results would suffer as a result.

     In addition, we believe that we have established broad brand recognition in our core Japanese market for our high quality and fashionable women’s innerwear garments, and that this brand recognition is very important for our ability to target the high end of the women’s innerwear market. As a result, our brand image may suffer if we misjudge the market or sell defective merchandise causing consumers to believe that we are not able to offer attractive fashions and top-quality products. If any event were to occur that harms our reputation for producing high-quality products, our sales, operations and financial condition could be materially adversely affected.

The apparel market is highly competitive, and our share of sales or profitability may decline if we are unable to maintain our competitiveness

     The sale of intimate and other apparel is highly competitive, and we must compete for sales with a wide range of other apparel companies. In addition to competition from wholesalers and direct retailers in the mid- to high-end undergarment market in Japan, we must also compete against door-to-door sales, catalog and Internet sales, and new entrants to the intimate apparel market, including mass-market and specialty apparel companies, such as Fast Retailing Co., Ltd., as well as outerwear fashion manufacturers.

     An important factor affecting the competitive environment in our industry in recent years has been the increased penetration of lower priced garments in the market. Factors driving this trend include increased product sourcing and production in China, Vietnam and other lower-cost countries, the introduction of new manufacturing technologies, consolidation in the retail industry and a prolonged period of sluggish consumer spending, particularly in Japan. We believe this trend has been accelerated by the global economic downturn and financial crisis, which began in fiscal 2009. Our strategy of focusing on the higher end of the intimate apparel market may help us avoid potential negative effects of such trends on our business and performance, including possible loss of market share and reduced profitability. However, we are affected by these competitive trends and our strategy may not be successful.

     Additionally, we continue to be challenged by the emergence of new and competitive retail concepts in the Japanese intimate apparel industry, which target customers through catalog marketing, e-commerce and other means. Increased competition could result in price reductions, increased marketing expenditures and loss of sales volume and market share, all of which could have a material adverse effect on our sales, financial condition and operating results.

Our specialty retail store network expansion may not lead to improved sales and profits

     As of March 31, 2009, we had a total of 102 specialty retail stores, including 14 factory outlet stores. Through our specialty retail stores, we hope to increase our contact with younger women and other consumers who may have less awareness of our brand and products and who may be less likely to shop for intimate apparel in the general retail stores that carry our products.

     In particular, we believe our ability to increase sales to younger women is key to our ability to increase our sales in the future. We entered into a strategic tie-up with Peach John Co., Ltd. (“Peach John”) in June 2006 by acquiring a 49% interest. We acquired the remaining 51% interest in January 2008 in an effort to strengthen our specialty retail store marketing efforts aimed at younger women.

     However, there are a number of risks that we must address in order for our specialty retail stores to succeed, and we may not be successful in resolving these risks, especially in light of our limited experience in operating our own stores. For example:

	•		our specialty retail store strategy depends in large part on our ability to find attractive store locations that will provide sufficient customer traffic to drive sales;
	•		we must compete for good store locations with other retailers pursuing similar strategies;
	•		we may not be able to open new stores with capital investment, leasing and other costs that will allow us to earn a reasonable return; and
	•		we must effectively recruit personnel, control inventory, market our stores and new product lines and otherwise operate our stores successfully.

     We are developing and marketing distinct lines of intimate apparel for our specialty retail stores under brands that do not feature the Wacoal name in order to reach the targeted customers for our stores and avoid competition with our general retail customers who carry our Wacoal brand apparel. This strategy carries risks, including the risk that our new apparel lines may not meet the fashion, function and other needs of our targeted customers.

     Rapid changes in the retail market in Japan in recent years, such as declines in the number and sales of department stores, new controls on mass-merchandising stores, increases in sales at direct sales outlets and on the Internet, and declines in the prices of innerwear and the number of innerwear items sold per person, make it difficult for us to evaluate the performance of our specialty retail stores to date and to estimate whether we will achieve success in the future. Further investment is necessary in order to expand our specialty retail store business, including costs for the development of new stores and the closure of underperforming stores, and improvement costs for the specialty retail store brand. Although we are working to recover our investment through increased earnings in our specialty retail stores, if new shops fail to secure the expected sales levels, if expenses such as shop rent or personnel costs increase due to changes in the market environment, or if the specialty retail store brand fails to be popular with customers, it is possible that we may not be able to make sufficient gains to recover the investment.

We may experience difficulties in successfully increasing our catalog and Internet sales

     We believe that our catalog and Internet sales will be increasingly important in achieving sales growth, and we are seeking to strengthen our capabilities in these channels. However, we face challenges in our catalog and Internet sales strategies. Our sales through these channels currently represent a small share of our overall sales. We face intense competition in our catalog and Internet business, and many of our competitors have more experience and have devoted more resources to these channels than we have. Additionally, our profit margins on catalog and Internet sales are typically lower than our profit margins on products sold through our core general retailer channel, and thus even higher sales volume through the catalog and Internet channels may not adequately replace sales through our core channels. Although our acquisition of Peach John—which has a large share of catalog sales to young people in Japan—will contribute to our efforts in this area, we believe that we need to make further system investments in order to expand our catalog and Internet sales for our group as a whole. However, we may not be successful in increasing our catalog and Internet sales sufficiently to compensate for continued flat or declining sales through our core general retailer channel, which could have a material adverse effect on our financial condition and operating results and may lead to impairment charges against goodwill and intangible assets recorded in connection with our acquisition of Peach John.

We are subject to inventory risks that could negatively impact our operating results

     Fluctuations in the demand for our products may affect the inventory we own because we usually manufacture our products well in advance of the applicable season and sometimes before fashion trends are identified or evidenced by customer purchases. In addition, the cyclical nature of the retail business requires us to carry additional inventory, especially prior to peak selling seasons when we generally build up inventory levels. We generally enter into contracts for the purchase and manufacture of merchandise with our suppliers well in advance of the applicable selling season. As a result, we are vulnerable to demand and pricing shifts and to sub-optimal selection and timing of merchandise purchases. Therefore, if we are unable to successfully anticipate or respond to changing styles or trends and misjudge the market for our products or any new product lines, our sales will suffer and we may be faced with significant amounts of unsold inventory. In response, we may be forced to reduce our product prices, increase our marketing promotions or take other steps, which could have a material adverse effect on our sales, results of operations and financial condition.

     In addition, we review our inventories on a regular basis for their salability and for indications of obsolescence to determine if a write-down to market value is necessary. The revaluation of inventories is based on the age of inventories, likelihood of obsolescence, actual product movements, changes in market demand and other factors. Any write-downs of inventory resulting from such reviews may have an adverse impact on our earnings and profitability, depending on the extent of the markdowns and the amount of inventory affected.

Improvement in our profitability will largely depend on our ability to reduce costs

     Reducing our cost of conducting business is a key element of our strategy to improve our profitability and business performance. In recent years we have taken certain steps intended to reduce our costs. For example, in order to improve the efficiency of our product distribution system, we reduced the number of our distribution centers from 18 in 1998 to 4 as of March 31, 2009. We are also taking steps to reduce our labor costs in Japan, such as closing production facilities, implementing an early retirement program and undertaking a reform of our pension plan. We are also seeking to produce or otherwise source more of our apparel in China, Vietnam and other lower-cost countries. Additionally, we are reorganizing production functions and taking other steps to reduce manufacturing costs.

     However, with the possibility of an increase in product material prices or costs being incurred in response to changes in the business environment, we may not be successful in materially reducing our costs, and any cost reductions that we achieve may not be large enough to compensate for difficulties that we may face in increasing our sales. A failure to reduce our costs would have a material adverse effect on our profitability and results of operations.

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

     The growth of our business depends significantly on our ability to attract, train and retain qualified personnel in areas such as product planning, manufacturing technology and sales and marketing. The competition for qualified personnel in Japan is intensifying due to factors such as a gradual reduction of the working population due to demographic trends in Japan and the increased demand for labor. Our ability to attract qualified personnel depends in large part on our ability to establish and maintain a positive image in the labor market. We may not be successful in attracting and retaining qualified personnel, which may have a material adverse effect on our financial condition and results of operations.

Our business may be adversely affected by seasonality

     Our business performance and results are affected by seasonality. Because consumer demand for innerwear and other apparel is easily influenced by the weather, large temperature fluctuations and other adverse weather conditions can have a large impact on sales of our seasonal campaign items and other seasonal products. Because we produce and acquire merchandise in advance of peak selling periods, seasonal fluctuations also affect our inventory levels. We cannot predict future weather patterns or judge the effect that weather patterns may have on our sales and profitability.

We may face increasing risks relating to conducting business internationally

     In fiscal 2009, approximately 87% of our sales were made in Japan. However, we have gradually increased both the amount of goods we produce and the amount of raw materials we procure in lower-cost countries, such as China—a trend we expect to continue. In addition, we are making efforts to expand our product sales in overseas markets, including in the United States, Europe and China. These initiatives and trends may increasingly subject us to various risks relating to the conduct of our business abroad, including:

	•		differing consumer tastes and preferences in overseas markets;
	•		political, social and economic instability in countries where we source, manufacture or sell our products;
	•		unexpected tax, legal or regulatory changes that may adversely impact our group;
	•		difficulty in staffing and managing widespread operations;
	•		changes in exchange rates;
	•		differing protection of intellectual property; and
	•		public health or similar problems in our important overseas markets or sourcing/production centers.

We may not be successful with acquisitions and other strategic transactions with third parties

     As part of our CAP 21 strategic plan, we intend to evaluate and pursue opportunities for acquisitions, investments and other strategic transactions that we believe will help us achieve our business objectives, including extending our product offerings in Japan and in overseas markets and strengthening our capabilities in Internet, catalog and other marketing channels. Two of our most recent key transactions are as follows:

	•		Peach John. In June 2006 we entered into a business and capital alliance with Peach John, which markets innerwear, outerwear and other products of its own original design to younger women in Japan through catalog and company-owned retail store sales, by acquiring a 49% interest. In January 2008, we acquired the remaining 51% interest and made Peach John a wholly owned subsidiary.
	•		Lecien. In May 2009, we entered into a share exchange agreement with Lecien Corporation (“Lecien”), which manufactures and sells women’s innerwear, clothing and accessories for the Japanese market, pursuant to which Lecien will become our wholly-owned subsidiary. We expect the share exchange to be implemented by August 17, 2009.

     Any acquisitions or other strategic transactions that we have pursued or may pursue in the future may involve significant risks to our company and the value of your shares. For example, your equity in us may be significantly diluted if we issue shares as consideration in any significant strategic transaction. Also, our balance of available cash will be reduced to the extent that we pay cash as consideration in one or more strategic transactions.

     Other potential risks that may arise from our strategic transactions include the following:

	•		difficulty and expense of assimilating the operations, technology and personnel of an acquired business;
	•		our inability to retain the management, key personnel and other employees of an acquired business;
	•		our inability to maintain an acquired company’s relationships with customers, suppliers and other key third parties;
	•		exposure to legal claims for activities of the acquired business prior to the acquisition;
	•		the diversion of our management’s attention from our core business;
	•		impairment charges we would have to take if we were to conclude that there had been an other-than-temporary decline in the fair value of our investment in an investee company, below its carrying value if, for example, the investee business were not generating increasing cash flows as quickly as we had expected at the time of our initial investment;
	•		possible impairment charges to goodwill or intangible assets; and
	•		failure to achieve any intended cost reductions through unsuccessful integration of or cooperation between our businesses with those of our counterparties.

     If any of these or any other material risks occur, it could have an adverse effect on a business we acquire, as well as the results, financial condition and cash flow of our existing operations. For example, Peach John operated below the initial plan following the initial capital alliance, and we recorded ¥4,694 million in investment losses in equity in net loss of affiliated companies for fiscal 2008.

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

     We are subject to certain risks in our business relating to intellectual property rights. In particular, we believe that our brands and related trademarks are important to our ability to create and sustain demand for our products, and to the value of our business. We may encounter trademark and related disputes in the future, and our actions to establish and protect our trademarks and other proprietary rights may not be adequate to prevent imitation of our products or the infringement of our trademarks and proprietary rights by others, which could materially harm our operations and financial condition. Additionally, other parties have asserted, and may assert in the future, that we have infringed their intellectual property rights. We cannot predict whether any such assertions or related claims will substantially harm our financial condition or results of operations.

If we fail to protect our customers’ privacy and data and maintain the confidentiality of our trade secrets we may face proceedings against us and lose customer confidence

     We must comply with laws and regulations regarding privacy and the protection of customer information in the jurisdictions where we conduct our business and operations. These laws and regulations change from time to time, and are not consistent across jurisdictions. Violations of these requirements could arise in a number of ways, including problems with our information systems and inadvertent or intentional disclosures of information by our employees. Any failure by us to comply with these laws and regulations could result in proceedings against us by governmental entities or others, which could potentially have an adverse effect on sales and profitability. Complying with varying privacy requirements could cause us to incur substantial costs and force us to change our business practices. Any failure by us or third parties to whom we entrust any of our operations to properly protect our customers’ privacy and data could cause customers to lose confidence in our business and products, which could result in a material adverse effect on our sales and profitability.

     In order for us to secure and maintain an advantageous position in the market, we need to protect our trade secrets, such as manufacturing technology and product information. If these trade secrets are divulged by any party related to us or infringed by another company, our business or financial condition could be materially affected.

If we fail to maintain adequate internal controls over financial reporting we may not be able to produce reliable financial reports in a timely manner or prevent financial fraud

     Beginning with our annual report on Form 20-F for fiscal 2007, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments.

     As a result of evaluations conducted by management and independent external auditors for fiscal 2007, 2008 and 2009, we did not discover any material deficiencies. However, we recognize that there are certain improvements that we should make with particular aspects of our internal controls.

     In addition, although we have a policy of actively responding to identified deficiencies at the group level, there is a possibility that we may not be able to successfully implement revised controls and procedures, and our revised controls and procedures may not be effective in remedying any deficiencies that are identified.

     Furthermore, there is a chance that new deficiencies will arise owing to changes and amendments to the standards for establishing and maintaining effective internal controls or changes that affect the business environment generally, and we may not be able to conclude in our annual reports that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

     Moreover, effective internal controls are necessary for us to produce reliable financial reports and important in helping prevent financial fraud. If we cannot provide reliable financial reports on a timely basis or prevent financial fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.

Our holdings of equity securities expose us to market risks

     We hold equity and other securities in a number of publicly traded Japanese companies. A significant drop in the value of these securities, or in the Japanese equity markets in general, could have an adverse impact on our financial results in the relevant reporting period. For example, although our balance sheet as of March 31, 2009 showed an unrealized gain on securities of ¥325 million, we were required to recognize a valuation loss on our equity securities holdings of ¥3,550 million for fiscal 2009. This loss recognition was primarily the result of a determination that a decrease in the fair market value of certain equity securities was other-than-temporary.

     In addition, if there is a decrease in our pension assets due to adverse conditions in stock or bond markets or other factors, additional funding and accruals may be required, and such funding and accruals may adversely affect our performance and financial condition. For example, our selling, general and administrative expenses for fiscal 2009 increased as compared to such expenses for fiscal 2008, due in part to a significant increase in the actuarial loss in our pension plans caused by poor returns on the securities included in the plan assets.

Natural disasters and epidemics could affect our manufacturing abilities or sales results

     In the event of a large earthquake or other natural disaster, or the outbreak of an epidemic, that impacts our employees or our ability to continue using any of our sales or manufacturing facilities, our sales and marketing efforts would be adversely impacted and we would face the possibility of work delays or stoppages, any of which could have a negative effect on our business. In addition, any such natural disaster or epidemic would also have a large impact on consumer activity, which would have a significant impact on the sales of our products. For instance, there have been recent reports of outbreaks of a highly pathogenic influenza caused by the H1N1 virus, as well as an influenza caused by the H5N1 virus, in certain regions of Asia and other parts of the world. An outbreak of such contagious diseases in the human population could result in a widespread health crisis, which in turn could have an adverse effect on our sales and operating results.

We may become classified as a passive foreign investment company, which could result in adverse U.S. tax consequences to U.S. holders of our stock or ADSs

     We may be classified as a passive foreign investment company (“PFIC”) by the U.S. Internal Revenue Service for U.S. federal income tax purposes. Such characterization could result in adverse U.S. federal income tax consequences to you if you are a U.S. investor. For example, U.S. investors who owned our common stock or ADSs during any taxable year in which we were a PFIC generally are subject to increased U.S. tax liabilities and reporting requirements for that taxable year and all succeeding years, regardless of whether we actually continue to be a PFIC, although a shareholder election to terminate such deemed PFIC status may be available in certain circumstances. The same adverse U.S. federal income tax consequences will apply to U.S. investors who acquire our common stock or ADSs during the current taxable year or any subsequent taxable year if we are treated as a PFIC for that taxable year.

     The determination of whether or not we are a PFIC is made on an annual basis and depends on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for U.S. tax purposes for a taxable year if either (i) 75% or more of our gross income for such taxable year is passive income, or (ii) 50% or more of the average percentage of our assets during such taxable year either produce passive income or are held for the production of passive income. For such purposes, if we directly or indirectly own 25% or more of the shares of another corporation, we generally will be treated as if we (i) held directly a proportionate share of the other corporation’s assets, and (ii) received directly a proportionate share of the other corporation’s income.

     We believe we may have been a PFIC for the taxable year ended March 31, 2009, and may be a PFIC for the current taxable year. Accordingly, the adverse U.S. federal income tax consequences described above could apply to you if you are a U.S. investor. Given the complexity of the issues regarding our classification as a PFIC, U.S. investors are urged to consult their own tax advisors for guidance as to the U.S. federal, state, local and foreign tax consequences of our status as a PFIC. For further discussion of the adverse U.S. federal income tax consequences of our classification as a PFIC, see “Item 10.E. Taxation—U.S. Federal Income Taxation—Taxation of U.S. Holders—Passive Foreign Investment Company” below.

Yen-dollar fluctuations could cause the market price of the ADSs to decline and reduce dividend amounts payable to ADS holders as expressed in U.S. dollars

     Fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will affect the U.S. dollar equivalent of the Japanese yen price of the shares on the Tokyo Stock Exchange and, as a result, are likely to affect the market price of the ADSs. If we declare cash dividends, dividends on the shares represented by the ADSs will be paid to the depositary in Japanese yen and then converted by the depositary into U.S. dollars. Therefore, exchange rate fluctuations will also affect the dividend amounts payable to ADS holders following conversion into U.S. dollars of dividends paid in Japanese yen on the shares represented by the ADSs.

As a holder of ADSs, you will have fewer rights than a shareholder has, and you must act through the depositary to exercise those rights

     The rights of shareholders under Japanese law to take various actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records and exercising appraisal rights, are available only to shareholders of record. Because the depositary, through its custodian agents, is the registered holder of the shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. The depositary will make efforts to vote the shares underlying a holder’s ADSs as instructed by the holder and will pay to the holder the dividends and distributions collected from us. However, in the holder’s capacity as an ADS holder, that holder will not be able to bring a derivative action, examine our accounting books and records or exercise appraisal rights through the depositary.

Japan’s unit share system imposes restrictions on holdings of our common stock that do not constitute whole units

     The Company Law of Japan allows companies to set one “unit” of shares for the purpose of exercising voting rights at the general meetings of shareholders. Under our articles of incorporation, one unit of our shares is comprised of 1,000 shares, equivalent to 200 ADSs. Each unit of our shares has one vote. A holder who owns shares or ADSs, in other than multiples of 1,000 or 200, respectively, will own less than a whole unit. Our articles of incorporation, in accordance with the Japanese Company Law, impose significant restrictions on the rights of holders of shares constituting less than a whole unit, which include restrictions on the right to vote, to attend a shareholders’ meeting and to bring derivative actions. Under the unit share system, holders of our shares constituting less than one unit have the right to require us to purchase their shares and the right to require us to sell them additional shares to create a whole unit of 1,000 shares. The unit share system does not affect the transferability of ADSs, which may be transferred in lots of any number of whole ADSs. For a further discussion of the Japanese unit share system, see “Item 10.B. Memorandum and Articles of Association—Capital Stock—Unit Share System”.

Item 4. Information on Wacoal Holdings.

A. History and Development of Wacoal Holdings.

     Wacoal Holdings Corp. is a joint stock corporation that was incorporated under the Commercial Code of Japan in 1949 with the name Wako Shoji Kabushiki Kaisha. Our name was changed to Wacoal Kabushiki Kaisha in 1957 and was further changed to Kabushiki Kaisha Wacoal (or Wacoal Corp.) in 1964.

     In October 2005, we transitioned to a holding company structure by spinning off all of our operations into a new wholly owned subsidiary. In connection with this, we changed our name to Wacoal Holdings Corp. and named our new subsidiary Wacoal Corp.

     Our corporate headquarters are located at 29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan, and our telephone number at that location is +81-75-682-5111. Our agent in the United States is Wacoal America, Inc., located at 136 Madison Avenue New York, N.Y. 10016 U.S.A, and our telephone number at that location is +1-212-532-6100.

     We conduct our business and operations principally in Japan. In addition, since our incorporation, we have established a number of overseas subsidiaries and joint venture companies, including in the U.S., China, France, the U.K. and several countries in Southeast Asia. These subsidiaries and joint venture companies are described in “Item 4.B. Business Overview” and elsewhere in this annual report on Form 20-F.

     For a discussion of recent and current capital expenditures and divestitures, please see “Item 5.B. Liquidity and Capital Resources—Capital Expenditures”.

     We have not received any indication of any public takeover offers by third parties in respect of our shares, and we have no current intention to make any takeover offers in respect of other companies’ shares.

B. Business Overview.

Overview

     We are a leading designer, manufacturer and marketer in Japan of women’s intimate apparel, with the largest share of the Japanese market for foundation garments and lingerie. Foundation garments (primarily brassieres and girdles) and lingerie (primarily slips, bra-slips and women’s briefs) accounted for approximately 71.3% of our consolidated net sales for fiscal 2009. We also design, manufacture and sell nightwear, children’s underwear, outerwear, sportswear, hosiery and other apparel and textile products, and engage in restaurant businesses, certain cultural projects and (through our subsidiary, Nanasai Co., Ltd.) build interiors for commercial premises, including sales counters operated by our sales promoters in department stores and other retailers carrying our apparel.

     In June 2006, we purchased 49% of the shares of Peach John for approximately ¥15,327 million. In January 2008, we acquired the remaining 51% of Peach John for ¥9,266 million, making it a wholly owned subsidiary of Wacoal. Peach John is engaged in mail-order sales of women’s apparel and various other apparel products.

     In May 2009, we entered into a share exchange agreement with Lecien, which manufactures and sells women’s innerwear, clothing and accessories for the Japanese market, pursuant to which Lecien will become our wholly-owned subsidiary. We expect the share exchange to be implemented by August 17, 2009.

     Most of our business operations and sales are in Japan, where we believe that we have established broad brand recognition for high quality and fashion. In fiscal 2009, a substantial majority of our net sales were made to department stores, general merchandise stores and other general retailers in Japan.

     In the U.S. market, our subsidiary Wacoal America, Inc. is engaged in sales of foundation garments and lingerie, and currently offers three brands. These offerings include the ordinary Wacoal brand and the luxury brand Wacoal LUXE since January 2008 and the alluring and fashionable brand b. tempt’d by wacoal since January 2009. Until December 31, 2008, we also sold Donna Karan Intimates (DKI) brand and the DKNY brand, in addition to Wacoal brand products. Wacoal America, Inc. operates from one facility in New Jersey and one facility in New York. One of our subsidiaries, Wacoal Dominicana Corp., manufactures products in the Dominican Republic and ships these products to Wacoal America, which in turn distributes the products, mostly to retailers in the U.S.

     In France, our subsidiary Wacoal France S.A. designs and markets foundation garments and lingerie in Europe. Most of these products are manufactured by our subsidiaries in China.

     In January 2002 we established Wacoal (UK) Limited in the U.K., which markets Wacoal products to Harrods, Selfridges and other major department stores in London and other large cities in the U.K.

     In China, our subsidiaries Guangdong Wacoal Inc. and Wacoal China Co., Ltd. serve as manufacturing and marketing bases. We also hold a minority ownership interest in a joint venture company, Shanghai Yadie Fashion Co., Ltd., which serves as a production base for our foundation garments, all of which are shipped to Wacoal in Japan. In November 2002, we established Wacoal (Shanghai) Human Science R&D Co., Ltd. in China as a wholly owned subsidiary. We are using this subsidiary to help expand our sales in China, including by developing intimate apparel and other products designed for the Chinese market. We have also expanded our operations in China through our Dalian production facility, which we opened in August 2003.

     Vietnam Wacoal Corp., which we established in Vietnam as a part of the expansion of our overseas manufacturing bases, commenced operations in April 1998. We also market our products through subsidiaries and affiliates in South Korea and a number of other countries in Asia, including Hong Kong, Singapore, the Philippines, Thailand, Taiwan, Indonesia and Malaysia.

     The following table sets forth information with respect to our net sales by category of products during fiscal 2009, 2008 and 2007:

Net Sales (and Percentage) by Product Category

		Year ended March 31,
		2009								2008								2007
		(yen in millions)
Innerwear
Foundation Garments and Lingerie		¥	122,823				71.3	%		¥	123,460				74.4	%		¥	123,295				74.1	%
Nightwear			11,009				6.4				10,611				6.4				10,081				6.0
Children’s Underwear			1,950				1.1				1,953				1.2				2,069				1.2
Total Innerwear		¥	135,782				78.8	%		¥	136,024				82.0	%		¥	135,445				81.3	%
Outerwear and Sportswear			15,424				8.9				8,920				5.4				8,751				5.3
Hosiery			1,657				1.0				1,803				1.1				2,102				1.3
Textile Products			6,899				4.0				3,963				2.4				4,051				2.4
Other			12,514				7.3				15,051				9.1				16,061				9.7
Total		¥	172,276				100.0	%		¥	165,761				100.0	%		¥	166,410				100.0	%

     The following table sets forth information with respect to our net sales by region during fiscal 2009, 2008 and 2007:

Net Sales (and Percentage) by Region

		Year ended March 31,
		2009								2008								2007
		(yen in millions)
Japan		¥	149,927				87.0	%		¥	139,618				84.2	%		¥	141,676				85.2	%
United States and Europe			14,776				8.6				18,497				11.2				18,021				10.8
Asia (excluding Japan)			7,573				4.4				7,646				4.6				6,713				4.0
Total		¥	172,276				100.0	%		¥	165,761				100.0	%		¥	166,410				100.0	%

Key business strategies

     Our key business strategies include the following:

     Maintain leadership position in our core innerwear business

     We believe that our leadership position in the women’s innerwear market in Japan and broad consumer association of the Wacoal brand with high-quality innerwear products are key strategic assets for our company. We intend to maintain and build on our leadership position by continuing to bring to market high-quality innerwear products with innovative features that appeal to women in Japan. In addition, we have established the Wacoal brand as one with a reputation for high-quality products and high functionality in the U.S., European and ASEAN markets, and we are pursuing a policy of establishing the Wacoal brand in China and Vietnam as well.

     Pursue growth opportunities

     We will seek to achieve profitable growth in our business by pursuing opportunities that we believe will allow us to leverage our market leadership and brand awareness in our core Japan market. Our efforts to achieve growth will include the following:

	•		We seek to expand our mid-priced innerwear offerings for young women, with an emphasis on more fashionable products.
	•		We seek to strengthen channels other than our traditional general retail store channel, such as our specialty retail store network, Internet and catalog sales and our Dublevé custom-made intimate apparel business.

	•		We will pursue capital alliances with or acquisitions of companies that have the know-how or technology in the business of offering mid-priced innerwear for young women or that will help us develop new distribution channels. For example, we formed a capital alliance with Peach John in 2006 and acquired all of its outstanding shares to become its 100% parent in 2008. In August 2009, we also expect to close the acquisition of Lecien, which has strong know-how and technology in the planning and manufacturing of mid-priced innerwear offerings for women.
	•		We seek to continue to develop and expand our sportswear business, including our CW-X product line, our X-FIT product group and other products that are aimed at the promotion of good health.
	•		We seek to expand development and sales of highly fashionable and functional innerwear offerings for men, such as Cross-Walker, which we launched in 2008. 860,000 units of Cross-Walker were sold in fiscal 2009.
	•		We seek to expand our overseas businesses, particularly in the United States and China, as well as in ASEAN countries where we introduced the ASEAN-wide sorci age product line, from March 2007.

     Reduce costs and pursue increased efficiencies

     We will seek to improve our business and financial performance through cost reductions and greater efficiency in our operations. Over the past several years, we have made gains in this area by consolidating our production resources and distribution facilities in Japan, producing more garments and sourcing more materials in China, Vietnam and other lower-cost countries in Asia. Since 2007, we have been working towards consolidating the production of Wacoal and Wing products, which represent our core businesses, and the consolidation is scheduled to be completed during fiscal 2010. In addition, we have been carrying out an early-retirement program and other efforts with respect to our work force in Japan. We will continue to seek improvements in our operating efficiency and cost base as a core part of our business strategy.

Operations

     Principal Products

     Our principal product categories are innerwear (consisting of foundation garments and lingerie, nightwear and children’s underwear), outerwear and sportswear, hosiery, textile products and other products.

     Foundation Garments and Lingerie

     Our foundation garments include brassieres, girdles and bodysuits (a one-piece combination brassiere and girdle). Most of these products are available in a variety of colors, with variations in lace, trim and detailing. Lingerie, consisting mainly of slips, bra-slips (a combination bra and slip), women’s briefs, undershirts and shorts, is produced in a variety of fashion styles. We market our foundation garments under a number of separate product lines, which are targeted at specific groups of consumers based on style, pricing and other factors.

     Wacoal and Wing Products. We launch product campaigns for our core Wacoal brand and our Wing brand foundation garments and lingerie each year for the spring/summer and fall/winter seasons. Our business success depends in large part on the success of these seasonal product campaigns.

	•		Wacoal Products: Through the spring/summer and fall seasons of 2008, we continued our LALAN brassier campaign, which was launched in the spring of 2007. This campaign reflects our belief that sales to mature women will represent an increasingly important part of our business over time, as Japan’s population ages and mature women become a growing proportion of the apparel market. Toward this goal, we also have developed our La Vie Aisée and Gra-P product lines, and we intend to develop additional products in the future for this market segment. Also in the fall of 2008, we launched Cross-Walker, from the Style Science series, a high-function bottom innerwear brand.
	•		Wing Products: We offer foundation garments and lingerie under our Wing label through general retailers. Recent campaign products for our Wing brand include Arrange Bra and Sarahada Bra for spring and summer 2007, and Kyutto-Up Bra and Style Up Pants Onaka for fall/winter 2007/2008. More recently, we conducted a new brassier campaign for the product Natural-Up Bra in the spring of 2008, and also continued our Kyutto-Up Bra and Sarahada Bra campaign products in the spring and summer of 2008. In the fall of 2008, we launched Slim Up Pants from the Style Science series.

     Luxury Products. In addition to our Wacoal and Wing brand products, our product line also includes our luxury products Tréfle, PARFAGE, Salute, L’ge and Lesiage. In February 2004, we launched a new luxury brand, WACOAL DIA and opened the brand’s first shop in the upscale Ginza shopping district in Tokyo. We are continuing to expand this new brand while limiting the number of stores and geographic areas in which it is available so as not to diminish its luxury image. Consistent with this policy, in addition to our direct sales outlet in the Ginza and Tokyo Midtown in Roppongi, two of Japan’s foremost shopping areas, we also began limited expansion into first class department stores.

     Nightwear. We design and market women’s nightwear, including pajamas, negligees, nightgowns and robes. Our nightwear products feature specialty offerings, such as our tsumori chisato romantic line targeted to younger women and our fashionable Grandér line targeted to mature women. Our nightwear products are primarily sold through department stores and chain stores.

     Children’s Underwear. Our children’s underwear products include undergarments for girls and teenage women, children’s sleepwear and other targeted garment offerings. Our children’s wear is also primarily sold through department stores, although there has been a shift in the sales of children’s underwear in recent years away from general department stores and toward other stores that specialize in goods for children and infants.

     Outerwear and Sportswear

     Our outerwear and sportswear product line consists of women’s outerwear, including dresses, skirts, slacks, jackets and sweaters, and sportswear, featuring our CW-X product line. Our outerwear products are sold principally through our catalog operations. Our CW-X product line, a high-function conditioning wear product that was developed from years of research and development, enjoys a strong reputation among athletes. We are continuing to expand this product line to develop new products that meet the needs of participants in various fields of sports. Further, we aim to keep prices low by limiting their functionality. By doing so, we also aim to increase sales by achieving popularity among the general sporting public. As part of these efforts, we are expanding our sales in the United States, including major sports shops, through our subsidiary, Wacoal Sports Science Corp.

     Hosiery

     Our hosiery products include pantyhose, tights, knee-highs and anklets offered in various sizes and colors. We are developing high value-added products, with such effects as the stimulation of leg muscles to improve blood circulation, which prevents foot swelling, and by using different denier and yarn combinations. These pantyhose and other hosiery products are sold at department stores, as well as at convenience stores and through the television and catalog. In addition to these products, we also offer functionality-focused shoe products. Their designs, based on ergonomic research, have a structure that prevents feet from getting tired after many hours of wear, and are well-received by women who work in offices or who must stand for long hours at work, such as flight attendants.

     Textile and Other Products

     We are engaged in several business lines that are ancillary to our core apparel business. We sell shoes and certain general merchandise, which we categorize as textile products. Our Nanasai subsidiary rents mannequins and fixtures, and designs and builds interiors for commercial premises, including sales counters used by our sales representatives in department stores and other general retailers carrying our apparel. In addition, we operate a restaurant business and are involved in various cultural projects and events, including exhibits by artists from around the world.

Principal Markets and Methods of Distribution

     We currently sell our products in Japan, the United States, China and certain countries in Europe and Southeast Asia. In all of our markets, we principally sell our apparel products to general retailers, although in Japan, we are seeking to expand our sales through specialty retail stores, mail order catalogs, and the Internet.

     Japan

     General Retailers

     In our core Japan market, we principally sell our apparel products to department stores, general merchandise stores, other general retailers and to specialty stores. Sales to general retailers in Japan represented a substantial majority of our total worldwide sales in fiscal 2009. No single Wacoal customer constitutes 10% or more of our net sales, although our general retail customers that are consolidated companies in the Aeon Group collectively accounted for approximately 9.8% of our net sales in fiscal 2009.

     Specialty Retail Stores

     As part of our product and marketing strategy, we are developing a network of directly managed specialty retail stores. We began developing our specialty retail stores in 2001, and we had 102 stores in our network in Japan as of March 31, 2009, including 14 factory outlet stores. In the near future we plan to pursue a policy of improving profitability of our existing stores, and prioritize the goal of making our direct sales outlets profitable at an early stage, rather than increasing the number of direct sales outlets.

     Through our specialty retail stores we intend to reach younger customers and others who prefer shopping for intimate apparel at malls or specialty stores rather than at department stores and other general retailers. We also intend to generally increase our points of contact with customers, and reduce our reliance on the general retailer channel to market our foundation garment and lingerie products.

     In addition to our core retail store brands, we operate Dublevé stores, which specialize in custom-made intimate apparel and which carry Wacoal brand products. At our factory outlet stores, we take older items that have not sold at our usual retail locations and sell them at discounted prices. We have expanded into several domestic large-scale outlet shopping malls as well. We believe that our factory outlet stores will continue to provide us with a new sales channel for discounted merchandise and additional opportunities for direct consumer contact and brand promotion.

     Mail-Order Catalog Business and Internet Sales

     We are seeking to expand our mail order catalog and Internet sales, to increase our points of contact with new customers and provide new selling channels for selected products. We are also seeking to expand our sales through the Internet as an alternate sales channel for selected products. Our Internet shopping site (http://store.wacoal.jp/) lists a number of over-the-counter innerwear products which are not included in our catalog sale items, and this approach expands the ways in which our customers can purchase Wacoal items. Our catalog sales increased for the first half of fiscal 2009, as compared to such sales for the first half of fiscal 2008, but decreased for the second half of fiscal 2009, as the unit purchase price and the number of orders placed both decreased. Our Internet sales, on the other hand, increased for fiscal 2009, as compared to such sales for fiscal 2008.

     United States

     In the U.S. market, we sell foundation garments and lingerie through our Wacoal America subsidiary. While we sold both Wacoal brand products and licensed products of Donna Karan Intimates and DKNY brands through 2008, we terminated the relevant license agreements as of December 31, 2008. Since the beginning of 2009, we offer three of our own brands through Wacoal America: the ordinary Wacoal brand, the luxury brand Wacoal LUXE, and the sexy and fashionable brand b. tempt’d by wacoal.

     We sell products in the U.S. market principally at high-end and other department stores. Wacoal America operates from one facility located in New Jersey and one facility located in New York. Our Wacoal Dominicana Corp. subsidiary manufactures products in the Dominican Republic and ships them to Wacoal America, which distributes them principally to retailers in the U.S. In August 2002, we established Wacoal Sports Science Corp. in the United States as a wholly owned subsidiary of Wacoal International Corp. for the purpose of expanding our CW-X sportswear line globally.

     China

     In China, we produce innerwear and other garments primarily for sale in Japan and China. Our marketing strategy in China is currently focused on developing relationships with local department stores and other retailers to strengthen our sales and distribution channels and on building consumer awareness of Wacoal as a premium brand for high-quality women’s innerwear. We believe that this strategy will help us to achieve profitable sales growth in China over time, as the spending power and sophistication of Chinese shoppers increases together with continued economic growth.

     In China, our subsidiaries Guangdong Wacoal Inc. and Wacoal China Co., Ltd. serve as manufacturing and marketing bases. We have also expanded our operations in China through Dalian Wacoal Co. Ltd., our Dalian production facility, which we opened in August 2003.

     Beginning with Dalian, we have established sales offices in several major cities in China to strengthen our marketing efforts there. In order to underpin the new office’s product-planning functions, we also established Wacoal (Shanghai) Human Science R&D Co., Ltd., which is tasked with developing unique products for the Chinese market based on the principles of human science and ergonomics.

     Other Asia

     We market our products through subsidiaries and affiliates in South Korea and a number of other countries in Asia, including Hong Kong, Singapore, Philippines, Thailand, Taiwan, Indonesia and Malaysia. In March 2007, we launched our innerwear brand sorci age in the ASEAN region (Malaysia, Indonesia, the Philippines and Singapore) with standardized design and price. Sorci age targets the 18 to 24 year old segment of the market, and we intend to develop this business with the aim of entering additional ASEAN markets over the next five years.

     Europe

     Our Wacoal France subsidiary designs and markets foundation garments and lingerie in Europe. Most of these products are manufactured by our subsidiaries in China. In January 2002, we established Wacoal (UK) Limited in the U.K., which imports Wacoal products from the U.S. and France and distributes the products through major department stores in London and other large cities in the U.K.

Seasonality

     Our business performance and results are affected by seasonality. We typically launch new intimate apparel product campaigns for the spring, summer, and fall/winter seasons of each year for our Wacoal and Wing brands. Our business success largely depends on the success of these seasonal product campaigns. Also, seasonal fluctuations may affect our inventory levels, since we produce and acquire merchandise in advance of peak selling periods and sometimes before new fashion trends are confirmed by consumer purchases. Changes in seasonal weather patterns and extreme weather events have also adversely affected our sales in recent years, and may do so again in the future.

Production and Sources of Supply

     Wacoal Corp. produces our apparel products through its subsidiaries in Japan, China, Vietnam and the Dominican Republic and through our joint venture companies in South Korea, Thailand, Taiwan and Indonesia. Our apparel products are also produced by third party subcontractors in Japan. All of these products are produced according to our specifications, using materials that we supply.

     We work with our joint venture companies and subcontractors to help them produce products that meet our specifications. For example, we supply them with cutting patterns and sewing machine attachments. We also provide certain of these entities with debt and equity financing for working capital and other purposes (including for the purchase of our sewing machines and other equipment), although such financing is not material to us.

     The principal raw materials that we use in our apparel business include nylon and other synthetic fabrics, lace, stretch fabrics, cotton fabrics, fasteners, tape and threads. These materials are obtained from approximately 300 sources, most of them within Japan.

     We have not experienced any significant difficulties in obtaining raw materials. However, although alternate sources of supply exist for our raw material requirements, we believe that our operations could be adversely affected by substantial increases in the price of such materials or by our suppliers having difficulty in obtaining materials essential to the manufacture of Wacoal products.

     As described above, we depend on our relationships with subcontractors, joint ventures and suppliers to source and manufacture our products. We do not materially depend on patents or licenses or on new manufacturing processes for our business or profitability.

Government Regulation

     We believe that regulation by governmental authorities in Japan and other countries where we operate does not significantly affect our business.

C. Organizational Structure.

     The following table sets forth our significant subsidiaries, as well as the jurisdiction of incorporation and percentage of equity ownership that we hold directly or indirectly in each such subsidiary as of March 31, 2009:

		Jurisdiction of				Wacoal Holdings
Principal Subsidiaries		Incorporation				Equity Owned (%)
Wacoal Corp.		Japan					100
Peach John Co., Ltd.		Japan					100
Studio Five Corp.		Japan					100
Wacoal Dublevé Corp.		Japan					100
Kyushu Wacoal Manufacturing Corp.		Japan					100
Niigata Wacoal Sewing Corp.		Japan					100
Fukuoka Wacoal Sewing Corp.		Japan					100
Hokuriku Wacoal Sewing Corp.		Japan					90
Miyazaki Wacoal Sewing Corp.		Japan					100
Torica Inc.		Japan					57
Nanasai Co., Ltd.		Japan					81
Wacoal Dominicana Corp.			U.S.A.				100
Wacoal International Corp.			U.S.A.				100
Wacoal America, Inc.			U.S.A.				100
Wacoal Sports Science Corp.			U.S.A.				100
Wacoal (UK) LTD.			U.K.				100
Wacoal France S.A.		France					100
Wacoal Singapore Pte. Ltd.		Singapore					100
Wacoal Hong Kong Co., Ltd.		Hong Kong					80
Wacoal International Hong Kong Co., Ltd.		Hong Kong					100
Wacoal China Co., Ltd.		China					100
Guangdong Wacoal Inc.		China					100
Dalian Wacoal Co., Ltd.		China					100
Wacoal (Shanghai) Human Science R&D Co., Ltd.		China					100
Vietnam Wacoal Corp.		Vietnam					100
Philippine Wacoal Corp.		Philippines					67

D. Property, Plants and Equipment.

     The principal facilities that we currently use in our business are as follows:

				Floor Space
				(1,000 square				Principal Activities or
Facility		Location		feet)1				Products Manufactured
Executive and sales office		Kyoto, Japan			344			Management, Sales and Administration
Western Japan distribution center		Shiga, Japan			424			Distribution
Kyoto South distribution center		Kyoto, Japan			284			Distribution
Tokyo distribution center		Tokyo, Japan			170			Distribution
Manufacturing plants:
Hokuriku Wacoal Sewing Corporation		Fukui, Japan			40			Lingerie
Kyushu Wacoal Manufacturing Corporation
Nagasaki plant		Nagasaki, Japan			88			Foundation Garments
Kumamoto plant		Kumamoto, Japan			42			Foundation Garments
Niigata Wacoal Sewing Corporation		Niigata, Japan			15			Nightwear
Fukuoka Wacoal Sewing Corporation		Fukuoka, Japan			32			Foundation Garments
Miyazaki Wacoal Sewing Corporation		Miyazaki, Japan			48			Children’s Innerwear, Foundation Garments
Torica Inc.		Tottori, Japan			284			Lingerie
Sales offices		Tokyo, Japan (3 offices)			158			Sales
		Sapporo, Japan			36			Sales
		Osaka, Japan			124			Sales
		Kyoto, Japan			144			Sales
		Fukuoka, Japan			54			Sales
SPIRAL Building		Tokyo, Japan			107			Cultural Activities
139 specialty retail stores and other select shops2		Tokyo, Osaka, Kanagawa and other locations in Japan			129			Retail sales
Peach John Co., Ltd.		Tokyo, Osaka and other locations in Japan			144			Sales

				Floor Space
				(1,000 square				Principal Activities or
Facility		Location		feet)1				Products Manufactured
Nanasai Co., Ltd.		Kyoto, Japan			267			Mannequins, Sales Equipment
Wacoal America, Inc.		New Jersey and New York, U.S.			217			Management and Sales
Wacoal Dominicana Corp.		Santo Domingo, Dominican Republic			169			Foundation Garments
Wacoal China Co., Ltd.		Beijing, China			132			Foundation Garments
Dalian Wacoal, Ltd.		Dalian, China			556			Foundation Garments
Wacoal Hong Kong Co., Ltd.		Hong Kong			48			Sales
Guangdong Wacoal Inc.		Guangzhou, China			70			Foundation Garments
Philippine Wacoal		Manila, Philippines			13			Sales
Vietnam Wacoal Corp.		Bien Hoa, Vietnam			163			Foundation Garments

     We are constantly engaged in upgrading, modernizing and revamping the operations of our manufacturing facilities, based on our assessment of market needs and prospects. As market conditions and our business objectives evolve, we adjust our capacity and utilization by opening, closing, expanding or downsizing production facilities accordingly. As a result, we believe it would require unreasonable effort to track the exact productive capacity and the extent of utilization of each of its manufacturing facilities with a reasonable degree of accuracy. We believe that our manufacturing facilities are generally all operating within normal operating capacity and not substantially below capacity.

     We own all of the foregoing facilities except for the following, which we lease from third parties: (i) several of our sales offices in Tokyo (19,702 square feet), (ii) our 139 specialty retail stores as of March 31, 2009 (total of 129,002 square feet for all stores), (iii) our management and sales facilities for Peach John (144,473 square feet), (iv) our office and warehouse facility for Nanasai (75,073 square feet), (v) our management and sales facility for Wacoal America, Inc. (85,961 square feet), (vi) our office and warehouse facility in China (47,899 square feet), (vii) our manufacturing facility in Dalian, China (486,260 square feet), our sales facility in Hong Kong (47,652 square feet), and (viii) our sales facility in Manila, Philippines (12,626 square feet).

     We spent approximately ¥1,500 million during fiscal 2009 to upgrade our information technology infrastructure. We also expect to spend approximately ¥1,600 million to rebuild and relocate some of our manufacturing operations. We expect to continue to make expenditures for the expansion of our specialty retail store network, for maintenance, to meet applicable legal requirements and to facilitate the manufacture of new products with new designs and specifications. Furthermore, we intend to evaluate and pursue opportunities for acquisitions, investments and other strategic transactions that we believe will help us achieve our business objectives, including extending our product offerings in Japan and in overseas markets and strengthening our capabilities in Internet, catalog and other marketing channels. We expect to fund these capital expenditures and other expenditures through our cash from operations, existing cash reserves and other available sources of liquidity. For additional information on our capital expenditures during fiscal 2009, 2008 and 2007, see “Item 5.B. Liquidity and Capital Resources—Capital Expenditures”.

     We believe that there does not exist any material environmental issues that may affect the utilization of our assets.

     We have no material tangible fixed assets other than those discussed above.

Item 4A. Unresolved Staff Comments.

     None.

Item 5. Operating and Financial Review and Prospects.

A. Operating Results

Overview

     We are the leading designer, manufacturer and marketer of women’s intimate apparel in Japan, with the largest share of the Japanese market for foundation garments and lingerie. We also sell our foundation garments and lingerie products in several overseas markets. Sales of foundation garments (primarily brassieres and girdles) and lingerie (primarily slips, bra-slips and women’s briefs) accounted for approximately 71.3% of our consolidated net sales for fiscal 2009. We also design, manufacture and sell nightwear, children’s underwear, outerwear, sportswear, hosiery and other apparel and textile products, and engage in several business lines that are ancillary to our core apparel business.

     Revenues

     We principally generate revenues from sales of innerwear (consisting of foundation garments and lingerie, nightwear and children’s underwear); outerwear and sportswear; hosiery; textile products; and other products.

     The following table sets forth information with respect to our net sales by category of products for fiscal 2009, 2008 and 2007:

Net Sales (and Percentage) by Product Category

		Year ended March 31,
		2009								2008								2007
		(in millions)
Innerwear
Foundation Garments and Lingerie		¥	122,823				71.3	%		¥	123,460				74.4	%		¥	123,295				74.1	%
Nightwear			11,009				6.4				10,611				6.4				10,081				6.0
Children’s Underwear			1,950				1.1				1,953				1.2				2,069				1.2
Total Innerwear			135,782				78.8				136,024				82.0				135,445				81.3
Outerwear and Sportswear			15,424				8.9				8,920				5.4				8,751				5.3
Hosiery			1,657				1.0				1,803				1.1				2,102				1.3
Textile Products			6,899				4.0				3,963				2.4				4,051				2.4
Other			12,514				7.3				15,051				9.1				16,061				9.7
Total			172,276				100.0	%			165,761				100.0	%			166,410				100.0	%

     For fiscal 2009, approximately 87% of the sales of Wacoal Corp. (the net sales of which account for approximately 67% of our consolidated sales) were apparel sales made on a wholesale basis to department stores, general merchandise stores and other general retailers, and approximately 11% were apparel sales made through our own specialty retail stores, catalog sales and the Internet. Sales from our other businesses (which include store and home design services, restaurant businesses, cultural products and other services) comprised the remaining 2% of Wacoal Corp.’s sales for fiscal 2009.

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

     Cost of Sales

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

     Selling, General and Administrative Expenses

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

     Key Industry Trends

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

	•		Consumer spending in Japan stagnated in the second half of fiscal 2008 following increased fuel prices and volatility in the stock and currency exchange markets due to the U.S. sub-prime mortgage crisis. Additionally, since September of fiscal 2009, with the collapse of Lehman Brothers and the global financial crisis, the economy has rapidly worsened and consumer spending has remained sluggish.
	•		The number of department stores, one of our key distribution channels, and retail sales through department stores declined due to the deterioration in consumption caused by the worsening economy. Mass merchandising stores faced not only decreases in the numbers of new branch openings due to stagnant consumption levels, but also reductions in store sizes and increases in store closings, as well as reductions in retail sales. At the same time however, sales at direct sales outlets and on the Internet have steadily risen.
	•		Due to the adverse changes in the retail industry coupled with factors such as a decline in the female population, the market for women’s innerwear garments in Japan shrank, and the prices of innerwear declined in terms of both overall prices and average price per item. The numbers of innerwear items purchased and owned per person also decreased.
	•		Outerwear and other manufacturers entered the innerwear market. These manufacturers offer their products by focusing on new elements, such as fashionability, lifestyle and price, rather than function and quality. Because the economic downturn has led consumers to become more price conscious, these new manufacturers and others achieved a greater market share.
	•		These manufacturers and other competitors strengthened their cost reduction efforts by, for example, sourcing fabric and producing garments in China and other lower-cost countries. Sales in Japan of lower priced women’s innerwear garments manufactured in these counties increased, leading to an intensification of price competition in our industry. The recent development and tendency of mass merchandise stores producing their own low priced “private brand” merchandise accelerated these trends.
	•		Although catalog marketing and direct marketing have made little progress, new sales strategies such as e-commerce and television marketing have led to more diversified sales channels and exposure to new customer groups.

     We have taken steps to address these key industry trends, in seeking to build on the core strengths of our market position and brand awareness with Japanese consumers. We continue to seek to sell higher-end products to reach consumers seeking high quality innerwear garments and to mitigate the adverse impact on sales and margins from lower priced garments. We have taken steps to reduce our cost structure, such as producing more products in lower-cost countries such as China and Vietnam, consolidating and modernizing our product distribution centers and expanding our early retirement program. We are also seeking to expand sales in overseas markets—in particular China, the United States and Europe, as well as in the ASEAN region, where we launched our sorci age brand—and increase sales through our own specialty retail stores, our catalog operations and the Internet. Pursuant to our CAP 21 strategic plan, we intend to extend our innerwear product offerings into the mid-price range and include more fashionable offerings in our product mix to help us reach a broader customer base. We believe that Peach John and our expected acquisition of Lecien will help us to advance these goals. We will continue to implement these steps and evaluate other strategies to address challenges and opportunities in the industry going forward.

     Currency Fluctuations

     We prepare our consolidated financial statements in Japanese yen. As a result, fluctuations in the exchange rates between the Japanese yen and other currencies may have a material effect on our results of operations, as well as on our reported value of our assets, liabilities, revenue and expenses as measured in Japanese yen. This in turn may materially affect reported earnings and the comparability of period-to-period results of operations. For purposes of our consolidated balance sheets, we translate assets and liabilities denominated in other currencies into Japanese yen at the prevailing market exchange rates as of the relevant balance sheet date. As a result, even if the amounts or values of these items remain unchanged in their respective local currencies, changes in exchange rates have an impact on the amounts or values of these items in our consolidated financial statements. For purposes of our consolidated income statements, revenue and expense items in local currencies are translated into Japanese yen at average exchange rates prevailing during the relevant period. The combined sales of our overseas subsidiaries decreased by approximately ¥3,800 million for fiscal 2009, as compared to sales for fiscal 2008, of which amount approximately ¥2,700 million was attributable to the increase in the value of the Japanese yen, as compared to the value of the currencies in which our overseas subsidiaries operate.

     Inflation

     We do not consider inflation to have had a material impact on our results of operations over the last three fiscal years.

Results of Operations

     The following table sets forth certain data from our consolidated statements of income for the last three fiscal years:

		Year ended/as of March 31,
		2009				2008				2007
		(in millions)
Net sales		¥	172,276			¥	165,761			¥	166,410
Cost of sales			84,686				83,127				84,658
Selling, general and administrative expenses			77,399				69,245				68,831
Other income (expenses), net			(2,502	)			813				1,024
Net income			5,230				4,966				9,029

Fiscal 2009 Compared to Fiscal 2008

     Net Sales

     Consolidated net sales increased 3.9% from ¥165,761 million for fiscal 2008 to ¥172,276 million for fiscal 2009, due to inclusion of sales through Peach John in our consolidated net sales. However, the net sales of our existing businesses decreased due to a deterioration in general economic conditions and consumer confidence in both Japan and the United States caused by the sub-prime crisis, the global financial crisis and the bankruptcy of Lehman Brothers, followed by the collapse of other major financial institutions.

     Innerwear

     In our innerwear business, sales for fiscal 2009 decreased 0.2% to ¥135,782 million as compared to sales for fiscal 2008 due to a deterioration in general economic conditions and consumer confidence. Sales from our innerwear products (consisting of foundation wear, nightwear and children’s underwear) comprised 78.8% of total consolidated sales for fiscal 2009.

     Wacoal Brand. In the Wacoal brand business department of Wacoal Corporation, which is our core operating company, overall sales performance of our main product of brassieres, including LALAN which is our new campaign brassiere, remained sluggish. In the fall and winter season, we actively developed Sugoi, a line of lingerie with sales that largely exceeded our expectations last season. However, due to an unusually warm winter and increased competition from other companies’ products, our overall sales of lingerie were lower than for fiscal 2008 even though the sales performance of Sugoi exceeded the fiscal 2008 figures. In contrast to this, the sales of our high value-added brands, Salute for specialist boutiques and Gra-P targeted at middle-age to senior consumers, exceeded fiscal 2008 sales. For girdle pants, we renamed our Style Science series products with new features for the lower body Cross Walker, which is the same name as our men’s Style Science products, and sales of these and other products for the lower body remained strong. Additionally, sales of sleepwear and casual clothes under the license of the designer brand Tsumori Chisato, and those of pajamas for women and children under Atsuko Matano, another designer brand, were both firm.

     Wing Brand. In our Wing brand business department, the overall sales of the core brassiere products were sluggish. Further, although sales of our new product Slim Up Pants, which launched in the fall as one of our Style Science series products performed strongly at first, sales of girdle pants were significantly lower compared to sales for fiscal 2008.

     Specialty Retail Business. Sales at our specialty retail business, mainly targeting the younger generation who have more consumer confidence compared to customers of our existing retail channels, exceeded sales for fiscal 2008. This business performed well due to a number of reasons including, the closure of non-performing stores, and slightly lower pricing leading to increased sales. Similarly, our specialty retail store business, Une Nana Cool Corp., which is also targeted at the younger generation, has been expanding well.

     Outerwear and Sportswear

     In our outerwear and sportswear business, sales for fiscal 2009 increased 72.9% to ¥15,424 million as compared to sales for fiscal 2008 due principally to the inclusion of the results of Peach John as a newly consolidated subsidiary. Additionally, the sales of men’s innerwear, which belongs to this segment, performed strongly for fiscal 2009. While sales of our main sports conditioning wear product CW-X increased significantly, primarily in sporting goods chains and specialty stores, sales in the shrinking swimming goods stores market were significantly lower than for fiscal 2008. Cross Walker products that we developed in spring 2008 as Style Science products for men were promoted under the men’s inner wear DAMS brand in department stores, and under the BROS brand, which is mainly promoted in chain store channels. Sales of these products have largely exceeded our sales plan because of wide media coverage that attracted much interest from consumers.

     Hosiery

     In our hosiery business, sales for fiscal 2009 decreased 8.1% to ¥1,657 million as compared to sales for fiscal 2008, due to sluggish hosiery sales in department stores, drugstores and convenience stores. There was, however, an increase in sales from TV shopping and catalog shopping, focusing mainly on our Style Cover products.

     Textile Products

     In our textile products business, sales for fiscal 2009 increased 74.1% to ¥6,899 million as compared to sales for fiscal 2008 due to a solid increase in sales of our Success Walk brand of shoes, which we account for in our textile products business, and which emphasize foot comfort and functionality.

     Other

     In our other businesses (mannequin and fixture rental, store design and construction, residential interiors, restaurants, culture, services), sales for fiscal 2009 decreased 16.9% to ¥12,514 million compared to sales for fiscal 2008, due mainly to the completion of large-scale remodeling projects in department stores in the Tokyo area, combined with the postponement, cancellation and wind-down of new remodeling plans due to worsening economic conditions.

     Overseas Sales

     United States. Our sales in the United States represented 7.9% of our total consolidated sales for fiscal 2009, compared to 10.5% for fiscal 2008. In the United States, sales for fiscal 2009 were significantly lower than for fiscal 2008 due to department stores suffering from a slump in sales caused by a deterioration in general economic conditions and confidence. Additionally, we had less business involving Donna Karan licensed products (DKI, DKNY), because the relevant licensing agreement was terminated as of December 31, 2008. On the other hand, we expect that Wacoal LUXE, which was launched in January 2008, and b. tempt’d by wacoal, which was launched in January 2009, both for high-grade department stores in the United States, will partly offset the decline in sales in our U.S. business caused by the terminations of the licensed products, which generated $24 million for fiscal 2008. We expect that the license terminations will not have a material adverse effect on our consolidated net income.

     Asia (Excluding Japan). Our sales in Asia outside of Japan (including China, Hong Kong and Singapore) represented 4.4% of our total consolidated sales for fiscal 2009, compared to 4.6% for fiscal 2008. Against this trend in Asia, our sales in China increased by 14.1% to ¥3,318 million for fiscal 2009 compared to ¥2,908 million for fiscal 2008. In China, we commenced a three-brand system with our youth orientated brand Amphi, our high value-added brand Salute and our core brand Wacoal, and have been enhancing selling space and product appeal that will meet diversified consumer needs. Additionally, since July 2008, as part of a joint promotion with some Asian countries, we have been working on improving the visibility and enhancement of the Wacoal brand image in China by running a campaign featuring a popular Japanese artist.

     Cost of Sales

     Our cost of sales increased 1.9% from ¥83,127 million for fiscal 2008 to ¥84,686 million for fiscal 2009. Cost of sales as a percentage of net sales decreased by 1.0%, from 50.1% for fiscal 2008 to 49.1% for fiscal 2009. This was due to a number of factors including product consolidation and improvements in inventory management by Wacoal Corp. resulting in fewer returned goods and fewer losses from inventory write-downs, improved efficiencies in overseas production and the consolidation of Peach John which has a comparatively lower cost percentage.

     Selling, General and Administrative Expenses

     Our selling, general and administrative expenses increased 11.8% from ¥69,245 million for fiscal 2008 to ¥77,399 million for fiscal 2009. Selling, general and administrative expenses as a percentage of net sales increased by 3.1% from 41.8% for fiscal 2008 to 44.9% for fiscal 2009 due mainly to the increase in our net periodic benefit costs and the consolidation of Peach John, which has considerably larger selling, general and administrative expenses as a percentage of net sales than Wacoal. The increase in our net periodic benefits costs was principally attributable to the significant increase in the actuarial loss with respect to our pension plans. Peach John’s greater selling, general and administrative expenses as a percentage of net sales than such expenses for Wacoal on a consolidated basis is attributable mainly to Peach John’s greater publicity and shipping costs, which are characteristic of a catalog business.

     Operating Margin

     Our operating margin (i.e., operating income as a percentage of net sales) decreased to 5.9% for fiscal 2009, as compared to 8.2% for fiscal 2008. Although our consolidated net sales increased as a result of Peach John consolidation, net sales from non-Peach John operations declined. In addition, with respect to non-Peach John operations, net sales declined at a greater rate than the decline in cost of sales, while selling, general and administrative expenses increased. As a result, the operating margin of non-Peach John operations decreased. The decrease in our consolidated operating margin was primarily due to the decrease in the operating margin of non-Peach John operations, which more than offset any positive impact of Peach John consolidation on our consolidated operating margin.

     Total Other Expenses, Net

     We had a net ¥2,502 million of other expenses for fiscal 2009, as compared to a net ¥813 million of other income for fiscal 2008. This change was primarily due to a loss on valuation of investment securities of approximately ¥2,600 million for fiscal 2009 and an approximately ¥600 million profit on sale of investment securities for fiscal 2008.

     Net Income

     Net income was ¥5,230 million for fiscal 2009, an increase of ¥264 million compared to fiscal 2008. Net income increased despite a large decrease in sales proceeds and pre-tax net income because fiscal 2008 included a large one-off ¥4,694 million write-down in the value of our investment in Peach John which was at that time not a consolidated subsidiary and therefore recorded as an investment loss under equity in net loss of affiliated companies.

Fiscal 2008 Compared to Fiscal 2007

     Net Sales

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

     Innerwear

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

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

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

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

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

     Outerwear and Sportswear

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

     Hosiery

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

     Textile Products

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

     Other

     Sales from our other businesses (mannequins and fixtures rental, store design and construction, residential interiors, restaurants, culture, services) decreased 6.3% to ¥15,051 million. The mannequin and fixtures rental businesses exceeded sales of the previous year due to an increase in orders. However, sales in our shop and store construction business fell below sales of the previous year because it focused on making profits amid increasingly stiff competition from competitors, including competitive bidding. Our residential design business, which was transferred from Wacoal Corp. to Nanasai Co., Ltd., in fiscal 2007, was significantly affected by a decrease in the number of new housing starts as a result of revisions to Japan’s building standards law, and this resulted in decreased revenues.

     Overseas Sales

     In Asia, Wacoal’s business in China continues to grow. In addition to the expansion of Wacoal brand products, we have begun to expand our youth orientated brand, Amphi, and in fiscal 2009, we plan to increase sales through a three-brand structure, including the high value-added brand Salute. Our sales in Asia outside of Japan (including China, Hong Kong and Singapore) grew 13.9% to ¥7,646 million from ¥6,713 million and represented 4.6% of total consolidated sales in fiscal 2008 versus 4.0% of total consolidated sales in fiscal 2007. Sales in China grew 42.3% over the previous year, which contributed to our overall strong performance in Asia.

     Sales in the U.S. represented 10.5% of our total consolidated sales in fiscal 2008, compared to 10.2% in 2007. Sales have been increasing in the U.S. over the last few years due to an increasing demand for luxury items and an increase in transactions with mid-level department stores that have not historically sold Wacoal products but that are repositioning themselves as up-scale department stores. However, decreased consumer confidence caused by the U.S. economic slowdown has led to sluggish store sales, and other factors, such as inventory adjustments, have also had an adverse effect, leading to sales levels that were up only slightly in fiscal 2008 over the previous fiscal year. Earnings were down significantly due to a decrease in profitability, caused primarily by in-store price reductions and increased material shipment costs, and an increase in personnel costs brought on by an increase in the number of sales staff in connection with new store openings.

     Our subsidiary Wacoal America, Inc. is currently engaged in sales of foundation garments and lingerie using the Wacoal brand and also the Donna Karan Intimates (DKI) brand and the DKNY brand. However, the licensing agreement for the Donna Karan Intimates (DKI) brand and the DKNY brand is set to expire on December 31, 2008 and will not be renewed. We are planning the launch of a new brand in the U.S. after the expiration of this licensing agreement, however we anticipate that sales in the U.S. will decline in the fiscal year ending March 31, 2009 as a result. We expect that income will also be affected by the decline in sales, however we expect the impact on income to be moderate since the operating margin for our licensing business is lower than our Wacoal Brand business. In addition, we anticipate an overall improvement in profitability in the U.S. in the fiscal year ending March 31, 2010, due to our plans to revive sales with the expansion of the new brand, in combination with decreased costs.

     Cost of Sales

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

     Selling, General and Administrative Expenses

     Selling, general and administrative expenses were ¥69,245 million in fiscal 2008, an increase of 0.6% from ¥68,831 million in fiscal 2007. The selling, general and administrative expenses ratio increased by 0.4% to 41.8% in fiscal 2008 compared to 41.4% in fiscal 2007. This increase was primarily due to an increase in personnel expenses resulting from an increase in the number of non-manufacturing employees in Wacoal Corp., Wacoal America, Inc., and Wacoal China Co., Ltd.

     At the operating profit level, although selling, general and administrative expenses increased slightly, the cost reductions were successful and we were able to increase our profits.

     Total Other Income, Net

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

     Net Income

     Net income was ¥4,966 million in fiscal 2008, a decrease of ¥4,063 million compared to fiscal 2007. This decrease was primarily due to a ¥4,694 million write-down of our 49% interest in Peach John Co., Ltd., which we acquired in fiscal 2007 as part of a capital alliance with Peach John. We acquired the remaining 51% equity interest in Peach John in January 2008 through a share exchange and prepared a new five-year business plan for the business. In connection with preparing the new five-year business plan, we reevaluated the fair value of our initial equity interest in Peach John, and we recognized an impairment because we concluded that there was an other-than-temporary decline in the value of our initial equity interest since a discounted cash flows analysis based on the new five-year business plan did not support the carrying value of the initial interest in Peach John on our balance sheet. The write-down was accounted for as an investment loss under equity in net (loss) income of affiliated companies.

Critical Accounting Policies and Estimates

     Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires our management to make estimates and assumptions. We believe that the following are some of the more critical judgment areas in applying our accounting policies in the preparation of our consolidated financial statements.

     Allowance for Doubtful Receivables and Returns

     We are required to assess the collectability of notes and accounts receivable. A considerable amount of judgment is required in assessing the ultimate realization of these notes and receivables, including the current creditworthiness of each applicable customer, taking into account business conditions, turnover of receivables and financial positions for significant customers. We believe that our allowance for doubtful receivables is adequate. However, in the event that a customer’s financial condition worsens, the allowance for doubtful receivables may increase and may adversely affect our financial condition and performance.

     We allow our customers to return their unsold products when the customers meet certain criteria established by us, as outlined in our applicable trade terms. We establish the allowance for estimated returns for each operating department based on historical experience and sales movements on the retail level and on the situation of the retail industry overall. We review and revise the allowance every quarter, in consideration of actual returns, planned product discontinuances and promotional sales. We record the allowance for estimated returns as a reduction to sales. We believe that our allowance for returns is sufficient, however a weakening of store sales, or a higher rate of returns than our initial estimates, may have a negative impact on our financial condition or operating results.

     Deferred Tax Assets

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

     Impairment Charges on Investments

     Impairment charges on investments are charged to earnings when a decline in fair value below the cost is other than temporary. We periodically determine whether a decline in the fair value of marketable securities and investments is deemed to be other-than temporary decline, based on criteria that include the duration and severity of market decline, the extent to which cost exceeds market value, our financial position and business outlook and our intent and ability to retain the impaired marketable securities and investments for sufficient period of time for anticipated recovery in market value.

     We believe that the criteria for evaluating impairment are reasonable. However, changes in the market or circumstances of each individual investment due to unforeseen changes in economic and business assumptions could affect the valuations of the investments. Currently, we generally conclude that an other-than-temporary impairment has occurred when the decline in fair value below the carrying value continues for over nine consecutive months. We may also consider other factors, including our ability and intent to hold the applicable securities and the severity of the decline in fair value.

     For fiscal 2009, we held securities with respect to which we recognized impairment charges, as well as securities with respect to which we did not recognize any impairment charges even though those securities had been in an unrealized loss position. Based on our assessment of the period of the decline in the fair values and our assessment of the relevant companies’ earnings outlook, we concluded that the decline in fair value for the securities not subject to impairment charges was only temporary and therefore that impairment charges did not need to be recognized for these particular securities. The unrealized holding losses for these securities for each quarter (up to three quarters), respectively, were as follows:

Period during which fair value was below

carrying value

(as of March 31, 2009)

Over three months,

Over six months, up

Up to three months

up to six months

to nine months

(in million yen)

Carrying value, less fair value

—

1,354

427

     Following the end of fiscal 2009, however, the fair value of these securities not subject to impairment charges for fiscal 2009 continued to remain below cost, and we subsequently made the determination that the declines in fair value were no longer temporary. As a result, we expect to recognize an impairment charge of ¥1,100 million in the first quarter of fiscal 2010.

     Valuation of Intangible Assets and Goodwill

     Under SFAS No. 142, “Goodwill and Other Intangible Assets”, we are required to perform an annual impairment test of our indefinite-lived intangible assets and goodwill. We also assess the impairment of intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Some of the factors we consider important which could trigger an impairment review include the following:

	•		significant underperformance relative to historical or projected future operating results;
	•		significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
	•		significant negative industry or economic trends.

     When we determine that the carrying amount of intangible assets and goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we evaluate the carrying amount of the assets based on their fair value. If the fair value is less than the carrying amount of the assets, we record an impairment loss based on the difference between the carrying amount and the fair value of the assets.

     If we make the initial determination that the carrying amount of intangible assets and goodwill may not be recoverable, we engage an independent appraiser to assist us in our determination of the fair values of our reporting units. In its determination of the fair values, the appraiser primarily utilizes a discounted cash flow analysis as well as other relevant valuation approaches including the stock price and market capitalization of the acquired entity and asset and liability structure of the reporting units. Significant assumptions used in this analysis include: (i) expected future revenue growth rates, profit margins and working capital levels of the reporting units; (ii) a discount rate; and (iii) a terminal value multiple. The revenue growth rates, profit margins and working capital levels of the reporting units are based on our expectation of future results. In evaluating the recoverability of other intangible assets which are allocated to the reporting units, we primarily utilize a discounted cash flow analysis as well as other applicable valuation approaches, and if applicable, independent valuations.

     On March 31, 2009, we evaluated the recoverability of goodwill and intangible assets and concluded that there was no impairment in the carrying value of such assets for any of our reporting units. As a result, we did not engage any appraiser for the purpose of determining the fair values of our reporting units.

     Impairment of Long-Lived Assets

     Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the undiscounted future cash flows from the long-lived assets are less than the carrying value, a loss is recognized equal to the difference between the carrying value and the fair value of the assets. We believe that our assessment of estimated future cash flows and the fair values of such assets has been reasonably performed. However, changes in estimated future cash flows and fair values may affect our impairment assessment.

     Employee Retirement Benefits

     We provide a number of retirement benefit plans to a substantial portion of our employees. Our wholly owned subsidiary Wacoal Corp. has a contributory retirement plan and certain of our other subsidiaries have qualified pension plans. The amount of the projected retirement benefit obligation and pension costs are dependent on management’s assumptions used by actuaries in calculating such amount. The key assumptions include discount rates, expected long-term rate of return on plan assets, retirement rates, mortality expectations and other factors. Our management believes that these actuarial assumptions and methods are appropriate in light of our circumstances. However, due to a change in an actuarial assumption, the amount of the projected retirement benefit plan liabilities and costs may be adversely affected.

     Wacoal Corp.’s approach to establishing the discount rate is based upon long term Japanese government bond rates and corporate bond indices. The discount rate assumption is based upon the five year average of the effective yields on the 20-year Japanese government bond, adjusted for an incremental yield of approximately 25 basis points that is achieved by selecting corporate bonds whose credit characteristics satisfy the quality requirements but whose yields are slightly higher than the yields on Japanese government bonds. On March 31, 2009, the discount rate used for the contributory retirement plan was 2.5%. For other plans, similar indices and methods are used.

     Wacoal Corp. determines the expected long-term rate of return on plan asset assumptions by evaluating both historical returns as well as estimates of future returns. Its expected return on assets was based on expected equity and debt securities returns weighted by the percentage of each of the major asset classes. Its estimate of the long-term rate of return on assets for the contributory retirement plan is 2.5% for fiscal 2009, 2.5% for fiscal 2008 and 2.5% for fiscal 2007. The estimated long-term rate of return is based on an asset allocation of equity securities of 36%, debt securities of 52% and other investments of 12%.

     These assumptions have a significant effect on the amount of the obligation and periodic benefit cost reported. A change of 0.5% in the discount rate and the expected long-term rate of return on plan assets would have the following effects:

										Thousands of
		Millions of yen								U.S. dollars
		0.5% decrease				0.5% increase				0.5% decrease				0.5% increase
Discount rate:
Effect on periodic benefit costs			(71	)			79				(716	)			797
Effect on benefit obligation			(2,411	)			2,216				(24,317	)			22,350
Expected long-term rate of return on plan assets:
Effect on periodic benefit costs			123				(123	)			1,241				(1,241	)
Effect on benefit obligation			—				—				—				—

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

New Accounting Pronouncements

     Fair Value Measurements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157”, which delayed the effective date of SFAS No. 157 for one year for certain nonfinancial assets and liabilities. We adopted SFAS No. 157 in the first quarter beginning April 1, 2008 for all financial assets and liabilities that are recognized or disclosed at fair value. This adoption did not have a material impact on our consolidated results of operations and financial position. We are currently in the process of assessing the impact of the adoption of SFAS No. 157 for all nonfinancial assets and liabilities, since the adoption of SFAS No. 157 for all nonfinancial assets and liabilities is effective for the fiscal years beginning after November 15, 2008. See Note 19 for disclosures required by SFAS No. 157.

     In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active”, which clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP No. FAS 157-3 is effective upon issuance. This adoption did not have a material impact on our consolidated financial position, result of operations or cash flows.

     In April 2009, the FASB issued FSP No. FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, which provides additional guidance on measuring the fair value of financial instruments when markets become inactive and quoted prices may reflect distressed transactions. FSP No. FAS 157-4 is effective for interim or fiscal years ending after June 15, 2009. We are currently in the process of assessing the impact of adoption of FSP No. FAS 157-4 on our financial position, results of operation or cash flows.

     The Fair Value Option for Financial Assets and Financial Liabilities (Including an Amendment of FASB Statement No. 115)

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 provides entities with an option to report selected financial assets and liabilities at fair value, with changes in fair value recorded in earnings. It also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 159 did not have a impact on our consolidated financial statements, since we did not elect to report financial assets and liabilities at fair value.

     Business Combinations

     In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. SFAS No. 141(R) replaces SFAS No. 141, “Business Combinations”. This statement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. This statement also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. In April 2009, FASB issued FSP No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”. FSP No. FAS 141(R)-1 amends and clarifies SFAS No. 141(R) to address application issues raised by preparers, auditors, and members of the legal profession on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. SFAS No. 141(R) and FSP No. FAS141(R)-1 are effective for business combinations for which the acquisition date is on or after the beginning of the fiscal year beginning on or after December 15, 2008. We are currently in the process of assessing the impact the adoption of SFAS No. 141(R) and FSP No. FAS 141(R)-1 will have on our consolidated financial position, cash flows or results of operations.

     Noncontrolling Interest in Consolidated Financial Statements

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of Accounting Research Bulletin No. 51”. This statement establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 160 on our financial position, results of operations or cash flows.

     Disclosure about Derivative Instruments and Hedging Activities

     In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. According to FSP No. FAS 133 and FIN 45-4, we adopted SFAS No. 161 in the fourth quarter ended March 31, 2009. SFAS No. 161 impacts disclosures only. See note 19 to our consolidated financial statements for disclosures required by SFAS No. 161.

     Employer’s Disclosures about Postretirement Benefit Plan Assets

     In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”. FSP No. FAS 132(R)-1 requires providing detailed disclosures about fair value measurements of plan assets such as information about how investment allocation decisions are made, the fair value of each major category of plan assets, information about the inputs and valuation techniques used to develop fair value measurements and significant concentrations of risk. FSP No. FAS 132(R) impacts disclosures only. FSP No. FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009.

     Recognition and Presentation of Other Than-Temporary Impairments

     In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. FSP No. FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP No. FAS 115-2 and FAS 124-2 are effective for interim or fiscal years ending after June 15, 2009. We are currently in the process of assessing the impact the adoption of FSP No. FAS 115-2 and FAS 124-2 will have on our consolidated financial position, cash flows or results of operations.

     Subsequent Events

     In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”. SFAS No. 165 provides guidance to establish general standards of accounting for and disclosure of events that occur after balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or fiscal years ending after June 15, 2009. We are currently evaluating the potential impact, if any, of the adoption of SFAS No. 165.

B. Liquidity and Capital Resources.

     Our main source of liquidity is cash 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 the group. Some of our subsidiaries, however, have credit facilities at financial institutions to secure working capital. The aggregate amount of these credit facilities is ¥14,474 million, and the outstanding balance drawn from these facilities was ¥5,221 million as of March 31, 2009, including borrowings by Wacoal Service of ¥2,878 million and borrowings by Nanasai of ¥2,000 million. In general, all of our credit facilities have unlimited or automatically renewed terms, and we are not aware of issues with respect to any of our lenders that could cause these facilities to become unavailable. Even if any of our overseas subsidiaries loses access to funds from such credit facilities, we believe we have or are capable of raising sufficient funds to meet their funding requirements. 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, loan or cash advance. We believe that our working capital is adequate for our present requirements and for our business operations both in the long- and short-term.

Cash Flows

     Our consolidated cash flows for fiscal 2009, 2008 and 2007 were as follows:

		Fiscal year ending March 31,
		2009				2008				2007
		(in millions)
Net cash provided by operating activities		¥	8,168			¥	14,225			¥	9,339
Net cash (used in) provided by investing activities			(4,714	)			3,590				(1,185	)
Net cash used in financing activities			(7,448	)			(9,400	)			(8,404	)

     Fiscal 2009 Compared to Fiscal 2008

     Cash Provided by Operating Activities. Net cash from operating activities was ¥8,168 million for fiscal 2009, as compared to ¥14,225 million for fiscal 2008. This significant decrease in net cash from operating activities, despite the increase in net income by ¥264 million, was, in part, because net income for fiscal 2008 reflected our equity in net loss of affiliated companies, less dividends, in the amount of ¥4,198 million, while net income for fiscal 2009 reflected our equity in net income of affiliated companies, less dividends, in the amount of ¥296 million. The significant decrease in net cash from operating activities was also attributable to a net decrease in assets and liabilities of ¥4,741 million that included an increase in inventories of ¥3,712 million, an increase in notes and accounts payable of ¥3,455 million, a decrease in liability for termination and retirement benefits of ¥1,404 million and a decrease in accrued expenses, income taxes payable and other current liabilities ¥6,231 million. The foregoing items were only partially offset by an increase in impairment charges on marketable securities and investments of ¥2,613 million.

     Net Cash Used in Investing Activities. Net cash used in investing activities was ¥4,714 million for fiscal 2009, as compared to net cash provided by investing activities of ¥3,590 million for fiscal 2008. This was primarily due to the impact of Peach John’s cash and cash equivalents of ¥4,115 million, which were consolidated into our accounts for fiscal 2008 and were no longer treated as cash provided by investing activities for fiscal 2009, as well as due to the following factors: a decrease in proceeds from the sale and redemption of marketable securities of ¥3,382 million, an increase in acquisition of investments of ¥1,253 million, and a decrease in proceeds from sale of investments and fixed assets of ¥2,282 million. The foregoing cash provided by investing activities was partially offset by a decrease in payments to acquire marketable securities of ¥4,453 million.

     Net Cash Used in Financing Activities. Net cash used in financing activities was ¥7,448 million for fiscal 2009, as compared to ¥9,400 for fiscal 2008. This was primarily due to a decrease in treasury stock purchases of ¥2,478 million in fiscal 2009 compared to fiscal 2008, which more than offset an increase in dividend payments of ¥491 million in fiscal 2009 compared to fiscal 2008.

Capital Expenditures

     Capital expenditures were ¥2,362 million for fiscal 2009, ¥1,211 million for fiscal 2008 and ¥2,536 million for fiscal 2007. These expenditures were primarily for the repair of office facilities of our domestic subsidiaries and the expansion of our specialty retail store network. Payments to acquire intangible assets were ¥1,846 million for fiscal 2009, ¥1,678 million for fiscal 2008 and ¥984 million for fiscal 2007. These payments primarily comprised of payments for information technology-related investments.

     We expect to spend approximately ¥1,600 million in fiscal 2010 (and possibly fiscal 2011) to rebuild and relocate some of our manufacturing operations. We also expect to continue to make expenditures for the expansion of our specialty retail store network (including costs for the development of new stores and the closure of underperforming stores) and for maintenance, to meet applicable legal requirements and to facilitate the manufacture of new products with new designs and specifications. Furthermore, we intend to evaluate and pursue opportunities for acquisitions, investments and other strategic transactions that we believe will help us achieve our business objectives, including extending our product offerings in Japan and in overseas markets and strengthening our capabilities in the Internet, catalog and other marketing channels. We expect to fund these capital expenditures and other expenditures through our cash from operations, existing cash reserves and other available sources of liquidity.

     In fiscal 2007, we sold domestic corporate housing units with a book value of ¥129 million. In fiscal 2008, we sold overseas corporate housing units and other property with a book value of ¥211 million, and in fiscal 2009, we sold plants and other property in connection with the liquidation of our subsidiary Tokai Wacoal Sewing Corp with a book value of ¥59 million.

Cash Dividends

     On May 8, 2009, our board of directors approved a fiscal year-end dividend of ¥125 per five shares of common stock to our shareholders on record as of March 31, 2009, and dividends in a total amount of ¥3,511 million were paid on June 3, 2009. Our current policy is to pay cash dividends once a year, and we seek to pay stable cash dividends based on our consideration of numerous factors, including our ability to improve our enterprise value through investments using retained earnings, ability to improve our net income per share and results of operations.

Share Repurchases

     On October 30, 2009, our board of directors approved by resolution repurchases of 3,500 thousand shares of common stock up to a total purchase amount of ¥3,500 million. Pursuant to this board of directors resolution, we had repurchased 2,855 thousand shares of common stock for a total purchase price of ¥3,493 million during the period from November 4 to December 19, 2008. In addition, we repurchased 36,240 shares of common stock during fiscal 2009 from shareholders who held shares constituting less than one unit and requested that such shares be repurchased. See “Item 10.B. Memorandum and Articles of Association—Capital Stock—Distribution of Surplus—Unit Share System”.

C. Research and Development, Patents and Licenses.

     For more than 40 years since the establishment of our Human Science Research Center in 1964, we have conducted many forms of basic research including research on the Japanese woman’s body. In order to accurately understand the Japanese woman’s physique, we have developed such things as a silhouette analysis system and a three-dimensional measuring system. However, we are currently developing equipment that we believe will provide an even more advanced measurement of sensory comfort. Our research and development activities focus on addressing the proportional, physiological and mental aspects of garment design.

     One of our most important research results was the Golden Canon, which we announced in 1995, and which provides a set of indicators that characterize the beautiful Japanese woman’s body. We also began utilizing new sales methods at that time. We also began applying new sales methods at that time. From 1995 and for 10 years, we participated in a project led by the Ministry of International Trade and Industry (presently the Ministry of Economy, Trade and Industry) enriching the basic study of sensory comfort and conducting research based on reactions to three factors: pressure, heat and touch. Based on this research, we are focused on developing new products that are not only comfortable for the wearer but have a positive physiological effect. In 2000, we conducted an analysis on the physiological changes associated with aging throughout a 25 year period from the teenage years to the 40s. We named the principles of these changes SPIRAL Aging. In addition, every year we take the measurements of 500 — 1,000 people focusing on women any age from teenagers to those in their 60s. Presently we have collect data from over 35,000 persons.

     In addition, we have been conducting further studies focusing on body movement. Based on these studies, we have been able to incorporate the principles behind “taping” for stabilizing joint function during exercise into sportswear products designed to create smooth movements and alleviate muscle fatigue such as CW-X. Also based on our studies, we have developed products such as those that support both posture and movement in order to ease and alleviate the aging and body changes that burden senior citizens.

     From fiscal 2007, we began research and development into men’s innerwear, and have progressed in implementing the measurement of the male body and improved the organization of our monitoring system. In fiscal 2008, we carried out various trials in relation to Style Science products for men and were able to verify their effectiveness. As a result, we developed our Cross Walker product and began sales in department stores and chain stores across Japan. This product has shown favorable sales. In addition, in fiscal 2009 we released an easy-to-understand summary of our collection and accumulation of information regarding the fat-burning ability of our Style Science products and this contributed to our marketing activities of the Style Science line.

     Overseas, we established the Chinese Human Science Research Center to undertake research and development into the Chinese woman’s body, similar to that conducted in Japan.

     The cost of research and development for fiscal 2009 was approximately ¥768 million, compared to ¥766 million for fiscal 2008 and ¥714 million for fiscal 2007.

D. Trend Information.

     The recent global economic downturn and financial crisis has affected many of the world’s largest economies, including those of Japan and the United States, where we have generated most of our sales in recent years. While it is difficult to anticipate macroeconomic trends, we expect that domestic consumer spending will continue to decline for fiscal 2010. The severe economic conditions have accelerated the consumer trend against high-end products sold at department stores and specialty retail stores in favor of low-end products sold online or through catalogs, and we expect this trend to continue for fiscal 2010.

     Regardless of any temporary macroeconomic trends, we expect the Japanese market over the long run to continue to shrink as a result of continuing decreases in the Japanese population, which will lead to flat or declining sales in the retail sector. Although we believe it will be difficult for the time being to expand business through our major sales channels such as department stores and general retailers, we plan to maintain our current level of sales by continually developing attractive products, such as Sugoi, our popular underwear product, and men’s Cross-Walker products. Additionally, we also plan to invest in and actively expand those business areas that continue to grow, such as our specialty retail stores, wellness business, men’s innerwear business and Peach John, which has a younger customer base than the Wacoal brand.

     The U.S. market will remain an important market for fiscal 2010, but we expect a further decrease in sales in the United States, which we believe will continue to suffer from the global economic downturn. We do not expect the European market to expand, although we do expect growth in the Chinese market, where we expect to increase our sales. Foreign exchange fluctuations may affect our sales, but it is difficult to anticipate the direction in which the value of the Japanese yen will move, as compared to other currencies.

     In view of the continued weakening Japanese equity markets, we expect decreases in our pension assets that could require additional funding and accruals, and such funding and accruals are expected to increase our operating expenses through increased pension costs. Similarly, a drop in the value of our equity investments in publicly traded Japanese companies may result in continued valuation losses on our equity securities holdings and thereby reduce our net income.

     As a result of these anticipated trends, we expect that sales for fiscal 2010 will be at the same or lower level, as compared to sales for fiscal 2009. We also expect operating income and net income to decrease for fiscal 2010.

     For a discussion of other trends that affect our business and operating results, see “Item 3.D. Risk Factors”, “Item 4.B. Business Overview” and “Item 5.A. Operating Results”.

     The discussion above includes forward-looking statements based on management’s assumptions and beliefs as to the factors set forth above, as to market and industry conditions and as to our performance under those conditions, and are subject to the qualifications set forth in “Cautionary Statement Regarding Forward Looking Statements”, which can be found immediately following the table of contents. Our actual results could vary significantly from these projections and could be influenced by a number of factors and uncertainties, including changes in the market and industry conditions, competition and other factors and risks as discussed in “Risk Factors” in Item 3.D. Additionally, unanticipated events and circumstances may affect our actual financial and operating results. As a result, no representation can be or is made with respect to the accuracy of the foregoing projections.

E. Off-Balance Sheet Arrangements.

     We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. We do not have any arrangements or relationship with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.

F. Tabular Disclosure of Contractual Obligations.

Contractual Obligations and Commitments

     For information regarding debt obligations including amounts maturing in each of the next five years, see note 7 to the consolidated financial statements.

     The following table summarizes our contractual obligations as of March 31, 2009.

						Less than				1-3				3-5				More than
		Total				1 year				years				years				5 years
		(millions of yen)
Capital (Finance) Lease Obligations			81				39				42
Operating Lease Obligations			3,683				820				1,248				669				946
Purchase Obligations			6,826				6,826				—				—				—
Total			10,590				7,685				1,290				669				946

G. Safe Harbor.

     All information that is not historical in nature disclosed under “Item 5.F. Tabular Disclosure of Contractual Obligations” is deemed to be a forward-looking statement. See “Cautionary Statement Regarding Forward-Looking Statements” for additional information.

Item 6. Directors, Senior Management and Employees.

A. Directors and Senior Management.

     The following is a current list of our directors and corporate auditors:

		Position(s) and
Name		Office(s) with
(Date of		Wacoal				Business Experience and Position(s) and Office(s)
Birth)		Holdings	Date			with Wacoal Holdings*
Yoshikata Tsukamoto		President and		Apr 1972		Joins Wacoal Corp.
(Jan 29, 1948)		Representative		Nov 1977		Director
		Director		Nov 1981		Managing Director
				Sep 1984		Executive Vice President and Representative      Director
				Jun 1987 — present		President and Representative Director
				Jun 2002		Corporate Officer
Shoichi Suezawa		Director and		Mar 1970		Joins Wacoal Corp.
(Jun 13, 1947)		Executive Vice		Jun 1996		Director
		President		Jun 2002		Managing Director and Corporate Officer
				Jun 2003		Senior Corporate Officer
				Apr 2005		Supervisor for Corporate Staff
				Jun 2005		Senior Managing Corporate Officer
				Oct 2005		Director
				Jun 2006		Senior Managing Director
				June 2008 — present		Director and Executive Vice President
Hideo Kawanaka		Director and		Apr 1965		Joins Isetan Co., Ltd.
(June 25, 1942)		Executive Vice President		Jun 1992		Director of Isetan Co., Ltd. and manager of       Matsudo Branch
				Jul 1993		Representative Director and President of West       Japan Railway Isetan Ltd.
				Jun 2001		Corporate Officer and Managing Director,       General Manager of Management and General       Affairs of OMRON Corporation
				Jun 2004		Representative Director and Senior Manager,       Sales Manager of Matsuzakaya Co., Ltd.
				Jun 2007		Advisor
				Jun 2007		Senior Managing Director
				Jun 2009 — present		Director and Executive Vice President

		Position(s) and
Name		Office(s) with
(Date of		Wacoal				Business Experience and Position(s) and Office(s)
Birth)		Holdings	Date			with Wacoal Holdings*
Tadashi Yamamoto		Director		Mar 1976		Joins Wacoal Corp.
(Nov 14, 1952)				Apr 2002		General Manager of Human Resources Department
				Jun 2002		Corporate Officer
				Oct 2005		Corporate Officer of Wacoal Corp.
				Apr 2006		General Manager of Personnel and Administration Department
				Jun 2006 — present		Director
Kazuo Inamori (Jan 30, 1932)		Director		Apr 1959		Established Kyoto Ceramic Co., Ltd. (currently      Kyocera Corporation)
				May 1966		President and Representative Director of Kyoto       Ceramic Co., Ltd.
				Apr 1984 — present		Established The Inamori Foundation; Chairman
				Jun 1984		Established DDI Corporation (currently KDDI       Corporation); Chairman and Representative       Director
				Jun 1985		Chairman and Representative Director and       President of Kyocera Corporation
				Jun 1997		Chairman Emeritus and Director of Kyocera       Corporation Chairman Emeritus and Director of DDI      Corporation
				Jun 2001 — present		Honorary Adviser of KDDI Corporation
				Jun 2005 — present		Chairman Emeritus of Kyocera Corporation
				Jun 2005 — present		Director of Wacoal Corp
Mamoru Ozaki		Director		Jun 1991		Commissioner of National Tax Agency
(May 20, 1935)				Jun 1992		Administrative Vice-Minister of Finance
				May 1994		President of People’s Finance Corporation
				Oct 1999		President of National Life Finance Corporation
				Feb 2003 — present		Advisor of Yazaki Sogyo Corporation
				Jul 2003		Advisor of Wacoal Corp.
				Jun 2005 — present		Director of Wacoal Corp.
Atsushi Horiba		Director		Sep 1972		Joined HORIBA, Ltd.
(Feb 5, 1948)				Jun 1982		Appointed Director and General Manager of      Overseas Business of HORIBA Ltd.
				Jun 1988		Appointed Senior Managing Director and General      Manager of Sales Division of HORIBA Ltd.
				Jan 1992		Appointed Representative Director and President      of HORIBA Ltd.
				Jun 2005 — present		Appointed Representative Director, Chairman,       and President of HORIBA Ltd.
				Jun 2008 — present		Director

		Position(s) and
Name		Office(s) with
(Date of		Wacoal				Business Experience and Position(s) and Office(s)
Birth)		Holdings	Date			with Wacoal Holdings*
Kimiaki Shiraishi		Standing Corporate		Aug 1976		Joined Wacoal Corp.
(Mar 20, 1950)		Auditor		Apr 2001		General Manager of Fukuoka Branch
				Apr 2002		General Manager of Wacoal Brand Products
				Jun 2002		Corporate Officer
				Jan 2006		Director of Wacoal Distribution Corp. and head of Western Japan Distribution Center
				Jun 2007 — present		Standing Corporate Auditor
Yoshio Kawashima		Standing Corporate		Mar 1974		Joined the Company
(Feb 5, 1952)		Auditor		Jul 1997		Appointed Manager of Finance Department
				Jun 2001		Appointed Business Management Group Manager of Overseas Business Division
				Apr 2007		General Manager of Internal Audit Department
				Jun 2008 — present		Standing Corporate Auditor
Yutaka Hasegawa (Oct 8, 1939)		Corporate Auditor		Apr 1962		Joined Mitsubishi Bank, Ltd. (currently Bank of Tokyo-Mitsubishi UFJ, Ltd.)
				Jun 1989		Director of Mitsubishi Bank, Ltd.
				May 1993		Managing Director of Mitsubishi Bank, Ltd.
				Apr 1996		Managing Director of Bank of Tokyo Mitsubishi, Ltd. (following merger of Mitsubishi Bank, Ltd. and Bank of Tokyo Ltd.)
				Jun 1998		Director and President of Diamond Business Consulting Kabushiki Kaisha (currently Mitsubishi UFJ Research & Consulting Co., Ltd.)
				Jan 1999		Corporate Auditor of Tokyo-Mitsubishi Securities Kabushiki Kaisha (currently Mitsubishi UFJ Securities Co., Ltd.)
				Jun 2001		Standing Corporate Auditor of Bank of Tokyo-Mitsubishi, Ltd. (currently Bank of Tokyo-Mitsubishi UFJ, Ltd.)
				Jan 2006		Standing Corporate Auditor of Bank of Tokyo-Mitsubishi UFJ, Ltd.
				Jun 2006 — present		Corporate Auditor
Tomoharu Kuda		Corporate Auditor		Sep 1972		Joined Deloitte Haskins & Sells
(Dec 7, 1946)				Oct 1979		Registered as Certified Public Accountant
				Sep 1987		Transferred to London Office
				Feb 1990		Partner of Deloitte Touche Tohmatsu
				Jun 1997		Representative Partner of Deloitte Touche Tohmatsu
				Jul 2007 — present		Corporate Auditor

		Position(s) and
Name		Office(s) with
(Date of		Wacoal				Business Experience and Position(s) and Office(s)
Birth)		Holdings	Date			with Wacoal Holdings*
Yoko Takemura		Corporate Auditor		Apr 1990		Registered as lawyer (Tokyo), joins Miyake Imai Ikeda law firm.
(Apr 7, 1952)				Jan 1997 — present		Partner at Miyake Imai Ikeda law firm.
				Jun 2005 — present		Corporate Auditor of Wacoal Corp.

     The terms of all of our directors expire in June 2010. The term as corporate auditor for Ms. Takemura expires in June 2013, the term as corporate auditor for Mr. Hasegawa expires in June 2010, the terms as corporate auditor for Messrs. Shiraishi and Kuda expire in June 2011, and the term as corporate auditor for Mr. Kawashima expires in June 2012.

B. Compensation.

Cash Compensation

     Aggregate compensation, including bonuses, paid by us in fiscal 2009 to our directors and corporate auditors was ¥365 million.

Retirement Benefits

     We terminated our retirement allowance benefit for our directors and corporate auditors. The balance of our existing liability for termination benefits for directors and corporate auditors was ¥339 million at March 31, 2009 and ¥368 million at March 31, 2008.

Stock Option Plan

     On June 27, 2008, our shareholders approved the issuance of stock acquisition rights to directors of Wacoal Holdings and Wacoal. On September 1, 2008, we granted to five directors of Wacoal Holdings and five directors of Wacoal stock acquisition rights to acquire a total of 57,000 shares of our common stock. These rights became fully vested on September 2, 2008. Each person’s right is to acquire amounts ranging from 3,000 to 19,000 shares of common stock. The exercise price for this plan has been set at ¥1 per share, and the rights are exercisable from the day after the date of retirement up to (i) 20 years from the grant date or (ii) five years from the day after the date of retirement, whichever is earlier.

C. Board Practices.

     Our articles of incorporation provide for a board of directors of not more than eight members and for not more than five corporate auditors. Shareholders elect the directors and corporate auditors at general shareholders’ meetings. The normal term of office of a director is one year and of a corporate auditor is four years. Directors and corporate auditors may serve any number of consecutive terms.

     Our board of directors may elect one chairman, one president and one or more vice chairmen, executive vice presidents, senior managing directors and managing directors. Our board of directors elects, pursuant to its resolutions, one or more representative directors. Each representative director represents us generally in the conduct of our affairs. Our board of directors has the ultimate responsibility for the administration of our affairs. None of our directors is party to a service contract with Wacoal Holdings or any of its subsidiaries that provides for benefits upon termination of employment.

     Under the Company Law of Japan (the “Company Law”), we must have at least three corporate auditors. At least half of the corporate auditors will be required to be persons who have not been a director, accounting counselor (in case that an accounting counselor is a judicial person, a member of such judicial person), executive officer, general manager or employee of Wacoal Holdings or any of its subsidiaries at any time in the past. Our corporate auditors may not at the same time be directors, accounting counselor (in case that an accounting counselor is a judicial person, a member of such judicial person), executive officers, general managers or employees of Wacoal Holdings or any of its subsidiaries. Together, our corporate auditors form our board of corporate auditors. Our corporate auditors have the duty to examine the financial statements and business reports proposed to be submitted by a representative director to the general shareholders’ meeting. Our corporate auditors also supervise the administration of our affairs by our directors. Corporate auditors are not required to be certified public accountants. They are required to participate in meetings of our board of directors but are not entitled to vote.

     In addition to corporate auditors, an independent certified public accountant or an audit corporation must be appointed at general meetings of shareholders as our independent auditor. This independent auditor has the duties to examine the financial statements proposed to be submitted by a representative director to the general meetings of shareholders and to report their opinion thereon to certain corporate auditors designated by the board of corporate auditors to receive such report (if such corporate auditors are not designated, all corporate auditors) and the directors designated to receive such report (if such directors are not designated, the directors who prepared the financial statements).

     On May 9, 2007, we established a non-statutory director and officer personnel and compensation advisory committee, which consists of the following members: Mitsuo Yamamoto, chair of the committee, Ikuo Otani, Shoichi Suezawa, Mamoru Ozaki and Naoki Hagiwara, the secretary. The committee was established with the goal of reforming the process of selecting our directors and officers and determining their compensation, and promoting objectivity and transparency in the process. The committee will be responsible for recommending new candidates and candidates for promotion, evaluating their performance and setting their compensation, as well as suggesting areas for improvement in the foregoing processes.

     Under the Company Law and our articles of incorporation, we may enter into a liability limitation agreement with each outside director or corporate auditor which limits the maximum amount of liabilities owed to us arising in connection with a failure to execute duties to an amount equal to the minimum liability limit amount prescribed in the laws and regulations.

D. Employees.

     The following table lists the number of our full-time employees as of March 31, 2009, 2008 and 2007:

														Asia (other
		Total				Japan				U.S.1				than Japan)				Others
March 31, 2009
Innerwear, Outwear and Sportswear, Hosiery and Textile Products			14,019				7,805				1,665				4,513				36
Other			380				378				—				2				—
Corporate			77				77				—				—				—
Total			14,476				8,260				1,665				4,515				36
March 31, 2008
Innerwear, Outwear and Sportswear, Hosiery and Textile Products			13,011				7,625				1,401				3,590				35
Other			365				363				—				2				—
Corporate			165				165				—				—				—
Total			13,541				8,153				1,401				3,592				35
March 31, 2007
Innerwear, Outwear and Sportswear, Hosiery and Textile Products			12,872				7,117				1,614				4,106				35
Other			367				365				—				2				—
Corporate			158				158				—				—				—
Total			13,397				7,640				1,614				4,108				35

     During fiscal 2009, we had an average of 1,456 temporary employees.

     In fiscal 2009, we converted certain contract workers who are part of our sales force to full-time employee status. We expect our personnel expenses to go up slightly primarily due to increased social insurance expenses in connection with these new full-time employees.

     Except for Nanasai, Peach John, Maruka and our six manufacturing subsidiaries in Japan, the employees of Wacoal Holdings and its Japanese subsidiaries are organized into one union. Each of Nanasai and our six manufacturing subsidiaries in Japan has an independent union for its respective employees. A number of labor unions have been formed with respect to our subsidiaries organized outside of Japan. We believe that the relations between management and these various unions are satisfactory.

E. Share Ownership.

     The following table lists the number of shares owned by our directors and corporate auditors as of July 24, 2009. As of such date, our directors and corporate auditors collectively held a total of 1,381,136 shares of our common stock as set forth below, and this number of shares constituted 0.98% of all outstanding shares of our common stock.

						% of
Name		No. of Shares				Common Stock
Yoshikata Tsukamoto			1,338,136				*
Shoichi Suezawa			11,000				*
Hideo Kawanaka			8,000				*
Tadashi Yamamoto			7,000				*
Atsushi Horiba			3,000				*
Kimiaki Shiraishi			3,000				*
Yoshio Kawashima			5,000				*
Yoko Takemura			6,000				*

     The following table lists the number of shares subject to the stock acquisition rights owned by our directors and corporate auditors as of July 24, 2009.

		No. of Shares
		Subject to Stock				Exercise Price
Name		Acquisition Rights				per Share
Yoshikata Tsukamoto			19,000			¥	1
Shoichi Suezawa			6,000				1
Hideo Kawanaka			6,000				1
Tadashi Yamamoto			5,000				1
Kimiaki Shiraishi			—				—
Yoshio Kawashima			—				—
Yoko Takemura			—				—

     Other than as described in Section 6.B above, there are no arrangements that involve the issue or grant of our options, shares or securities to our employees.

Item 7. Major Shareholders and Related Party Transactions.

A. Major Shareholders.

     As of March 31, 2009, 140,450,847 shares of our common stock were outstanding, which excludes 2,927,238 shares of treasury stock held by Wacoal Holdings.

     The following table shows information regarding each shareholder who, to our knowledge, beneficially owned more than 5% of our common stock as of March 31, 2009.

						Percentage of Total
Name of Shareholder		Number of Shares				Shares Outstanding
Tradewinds Global Investors, LLC*			16,528,990				11.53	%
Mitsubishi UFJ Financial Group, Inc.**			12,771,914				8.9	%

     Under the Financial Instruments and Exchange Law of Japan, any person who beneficially holds more than 5% of the total issued shares of a company listed on any Japanese stock exchange or traded on the over-the-counter market must file a report of substantial shareholding with the relevant local finance bureau. A similar report must be filed, with certain exceptions, if the percentage of shares held by a holder, either solely or jointly as a group, as applicable, of more than 5% of the total issued shares of a company, increases or decreases by 1% or more in the overall shareholding, or if any change to a material matter set forth in any previously filed reports occurs. See “Item 10. Additional Information—B. Memorandum and Articles of Association—Reporting of Substantial Shareholdings”.

     Over the past three years, based on filings made with the Kanto Local Finance Bureau, the number of our shares beneficially held by Tradewinds Global Investors, LLC has changed from (i) 16,755,091 shares, or 11.63% of our total issued shares, as of March 1, 2006, to (ii) 25,990,188 shares, or 18.05% of our total issued shares, as of October 31, 2007, and to (iii) 20,738,579 shares, or 14.46% of our total issued shares, as of January 15, 2009, the date of the most recent filing.

     Our major shareholders have the same voting rights as other shareholders. To the extent known to us, we are not directly or indirectly owned or controlled by any other corporation, any government, or any other natural or legal person or persons severally or jointly. We do not know of any arrangements that may, at a subsequent date, result in a change of control of us.

     As of March 31, 2009, approximately 3,165,010 shares, or 2.2% of the outstanding shares of our common stock other than in the form of American Depositary Shares, were held of record by 45 residents of the United States. The 17,396,360 shares of our common stock held of record by The Bank of New York Mellon on March 31, 2009 underlay the 3,479,272 American Depositary Shares of Wacoal Holdings held of record by 13 persons. Because some of these shares and ADRs were held by brokers or other nominees, the number of record holders with addresses in the United States might not fully show the number of beneficial owners in the United States.

B. Related Party Transactions.

     Wacoal purchases merchandise from numerous suppliers throughout the world, including from certain affiliates. Wacoal purchased merchandise from affiliates in the amount of ¥1,674 million in fiscal 2009.

     Wacoal also sells supplies, materials and products to certain affiliates. Aggregate sales to affiliates were ¥958 million in fiscal 2009.

     Certain of our subsidiaries provide loans to each other. As of March 31, 2009, the outstanding balance of such loans was ¥4,607 million.

     We do not consider the amounts involved in these transactions to be material to our business.

C. Interests of Experts and Counsel.

     Not applicable.

Item 8. Financial Information.

A. Consolidated Statements and Other Financial Information.

Consolidated Financial Statements

     See “Item 17. Financial Statements”.

Legal Proceedings

     There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or to which any of our property is subject.

Dividends and Divided Policy

     See “Item 5.B. Liquidity and Capital Resources—Cash Dividends” and “Item 10.B. Memorandum and Articles of Association—Capital Stock—Distributions of Surplus”.

B. Significant Changes.

     Except as provided above and elsewhere in this annual report on Form 20-F, there has been no significant change in our financial position since March 31, 2009, the date of our consolidated financial statements included in this annual report on Form 20-F.

Item 9. The Offer and Listing.

A. Offer and Listing Details.

Price Range of Shares

     Our common stock has been listed on the Tokyo Stock Exchange since 1964 and is traded on the First Section of that exchange. It is also listed on the Osaka Securities Exchange in Japan. Additionally, our American Depositary Shares are quoted for trading on the Nasdaq Capital Market in the U.S. The depositary of the ADSs is The Bank of New York Mellon. Each ADS represents five shares of our common stock.

     The following table sets forth for the periods shown the reported high and low sales prices of our common stock on the First Section of the Tokyo Stock Exchange and of our ADSs on the NASDAQ Capital Market. The last reported sale price of our common shares on the Tokyo Stock Exchange on July 24, 2009 was ¥1,239, and the last reported sale price of our ADSs on the NASDAQ Capital Market on July 24, 2009 was $65.20.

		Tokyo Stock Exchange								NASDAQ Capital Market
		Price Per Share								Price Per ADS
		High				Low				High				Low
Fiscal year ended March 31,
2005		¥	1,500			¥	1,033			$	69.99			$	46.62
2006			1,690				1,300				75.70				58.77
2007			1,821				1,358				80.99				57.00
2008			1,620				1,229				77.48				51.26
2009			1,573				844				76.85				35.15
Fiscal quarter ended/ending
March 31, 2007		¥	1,646			¥	1,453			$	68.28			$	60.04
June 30, 2007			1,578				1,454				64.49				60.34
September 30, 2007			1,593				1,350				66.37				58.68
December 31, 2007			1,553				1,229				69.61				51.26
March 31, 2008			1,620				1,254				77.48				57.74
June 30, 2008			1,573				1,255				76.85				58.26
September 30, 2008			1,301				1,060				60.54				48.25
December 31, 2008			1,325				844				70.36				35.15
March 31, 2009			1,240				1,053				69.99				52.50
June 30, 2009			1,340				1,138				67.66				57.08

		Tokyo Stock Exchange								NASDAQ Capital Market
		Price Per Share								Price Per ADS
		High				Low				High				Low
Month ended
January 31, 2009		¥	1,240			¥	1,061			$	69.99			$	57.48
February 28, 2009			1,195				1,103				65.77				57.60
March 31, 2009			1,235				1,053				63.25				52.50
April 30, 2009			1,237				1,138				63.00				57.08
May 31, 2009			1,340				1,142				67.66				59.75
June 30, 2009			1,245				1,165				63.54				59.42

B. Plan of Distribution.

     Not applicable.

C. Markets.

     See “Item 9.A. Offer and Listing Details” for information on the markets on which our common stock and ADSs are listed or quoted.

D. Selling Shareholders.

     Not applicable.

E. Dilution.

     Not applicable.

F. Expenses of the Issue.

     Not applicable.

Item 10. Additional Information.

A. Share Capital.

     Not applicable.

B. Memorandum and Articles of Association.

     The following summarizes certain provisions of our organizational documents and applicable Japanese law. This summary is qualified in its entirety by reference to the Company Law and our articles of incorporation, share handling regulations and regulations of the board of directors, each as filed as an exhibit to this annual report on Form 20-F.

Organization

     Wacoal Holdings is a joint stock corporation (kabushiki kaisha) incorporated in Japan governed by the Company Law. It is registered in the Commercial Register (shogyo tokibo) maintained by the Kyoto Local Registry Office of the Ministry of Justice.

Objects and Purposes

     Article 2 of our articles of incorporation provides the following objectives of Wacoal Holdings:

     1. To control and manage the business activities of the companies which are engaged in the following businesses by holding the shares of such companies:

	(1)		manufacture and sale of clothing and apparel and sundries pertaining to clothing and apparel;
	(2)		manufacture, sale and installation of furniture, bedding, interior decorations and other home furnishings;
	(3)		manufacture and sale of cosmetics, soap, cleansers, medical supplies and quasi-drugs and sale of health food;
	(4)		management of facilities for cultural, welfare, educational, sporting, entertainment, beauty and restaurant use, and manufacture and sale of commodities, provision of service, technical guidance and consulting pertaining to the above facilities;
	(5)		sale, purchase and brokerage of objects of art and curios and management and operation of picture galleries;
	(6)		acquisition, lease, alienation and technical guidance of intangible property rights such as industrial property rights and copyrights on literature, art, artistic handicraft, music, images and voice;
	(7)		publishing and advertising business;
	(8)		sale, purchase, lease, brokerage and management of real estate;
	(9)		lease and brokerage of personal property;
	(10)		non-life insurance agency, insurance agency under the Automobile Liability Security Law and life insurance solicitation agency;
	(11)		planning, design, supervision, execution, consulting and sale of construction work and interior decoration;
	(12)		sale of building materials and sale of equipment and apparatus pertaining to housing such as fittings, furniture, utensils, kitchens, modular baths and toilets;
	(13)		planning, design, supervision and consulting relating to community development, urban development and environmental conditioning;
	(14)		planning, design, supervision, execution and consulting relating to landscaping, gardening and stonecutting;
	(15)		production, sale and lease of trees, plants and materials for gardening;

	(16)		data processing, provision of information and development, purchase, sale, lease and consulting relating to computer hardware and software;
	(17)		processing of jewelry, precious metals and accessories and manufacture and sale of watches, eyeglasses, footwear, bags and umbrellas;
	(18)		money lending, loan agency, guarantee, holding of and investment in securities and credit card business;
	(19)		dispatching of workers;
	(20)		education, training and consulting relating to development of ability of the human resource to appropriately adapt to profession;
	(21)		undertaking of financial and accounting affairs, calculation of wages, etc., preparation of documents relating to internal and external transactions, reception and telephone switching affairs, telephone marketing, translation and interpretation, operation of office and communication equipment and system programming, etc.;
	(22)		warehousing;
	(23)		manufacture and sale of mannequins and display equipment;
	(24)		investments incidental to Items (1) through (23) above; and
	(25)		any and all business incidental or relate to Items (1) through (24) above.

     2. Any and all business incidental or related to any of the foregoing.

Directors

     Under the Company Law, our board of directors has the executive power and duty to manage our affairs, and each representative director, who is elected from among the directors by our board of directors, has the corporate authority to represent our company in all respects. Under both the Company Law and our regulations of the board of directors, our directors must refrain from engaging in any business which competes with that of our company, unless approved by our board of directors. Any director who has a material interest in the subject matter of a resolution to be taken by our board of directors cannot vote on such resolution.

     The Company Law and our articles of incorporation provide that the remuneration of directors and corporate auditors be determined at a general meeting of shareholders. Except as stated below, neither the Company Law nor our articles of incorporation sets forth any special provision as to a director’s or corporate auditor’s power to vote in connection with his or her compensation, the borrowing powers exercisable by a representative director (subject to requisite internal authorizations as required by the Company Law), the retirement age of any director or corporate auditor or any requirement to hold any shares of our capital stock.

     The Company Law specifically requires a resolution of the board of directors of a corporation to, among other things, acquire or dispose of material assets, borrow substantial amounts of money, employ or discharge from employment important employees, such as executive officers, and establish, change or abolish a material corporate division such as a branch office. A resolution of our board of directors is also specifically required for the establishment of a control system to ensure the adequacy of our affairs, such as a control system to ensure the exercise of our directors’ duty to comply with laws and regulations and our articles of incorporation. Our regulations of the board of directors require a resolution of our board of directors for the borrowing of significant amounts of money or the guarantee of debt by Wacoal Holdings. Our regulations of the board of directors also require a resolution of our board of directors to approve any transaction between Wacoal Holdings and one of its directors, any allocation of the remuneration and bonuses of directors as previously determined or approved by the general meeting of our shareholders and any determination of the amount and manner of payment of retirement allowances or condolence money payable to directors, the determination of which has been previously entrusted to our board of directors by the general meeting of our shareholders in accordance with the Company Law.

Capital Stock

     General

     Effective as of January 5, 2009, a new central book-entry transfer system for listed shares of Japanese companies was established pursuant to the Act Concerning Book-Entry Transfer of Corporate Bonds, Shares, etc. and regulations thereunder (collectively, the “Book-Entry Transfer Act”), and this system is applied to the shares of our common stock. Under this system, shares of all Japanese companies listed on any Japanese stock exchange are dematerialized, and shareholders of listed shares must have accounts at account management institutions to hold their shares unless such shareholder has an account at Japan Securities Depository Center, Inc. (“JASDEC”), the only institution that is designated by the relevant authorities as a clearing house under the Book-Entry Transfer Act. “Account management institutions” are financial instruments business operators (i.e., securities companies), banks, trust companies and certain other financial institutions which meet the requirements prescribed by the Book-Entry Transfer Act. Transfer of shares of our common stock is effected exclusively through entry in the records maintained by JASDEC and the account management institutions. Title to our shares passes to the transferee at the time when the transfer of the shares is recorded at the transferee’s account at an account management institution. The holder of an account at an account management institution is presumed to be the legal holder of the shares recorded in such account.

     Under the Company Law and the Book-Entry Transfer Act, in order for a shareholder to assert against us its rights to which it is entitled as of the record date (such as the right to vote at a general meeting of shareholders or receive dividends), the shareholder must have its name and address registered in our register of shareholders. Under the central book-entry transfer system, shareholders must notify the relevant account management institutions of information prescribed in the Book-Entry Transfer Act and our share handling regulations, including their names and addresses. The registration on the register of shareholders is made upon our receipt of necessary information from JASDEC (as described in “—Record Date” below). On the other hand, in order for a shareholder to assert directly against us its rights to which it is entitled regardless of record dates (such as certain “minority shareholders’ rights”, including the right to propose a matter to be considered at a general meeting of shareholders, but excluding the right to request us to purchase or sell shares constituting less than a full unit as described in “—Unit Share System” below), JASDEC will, upon the shareholder’s request, issue a notice of certain information including the name and address of such shareholder to us. Thereafter, the shareholder would be required to present us with a receipt of the request of the notice in accordance with our share handling regulations. Under the Book-Entry Transfer Act, the shareholder must exercise such shareholders’ right within four weeks after the notice above has been given.

     Non-resident shareholders are required to appoint a standing proxy in Japan or provide a mailing address in Japan. Each such shareholder must give notice of the standing proxy or mailing address to the relevant account management institution. The notice will be forwarded to the company through JASDEC. Japanese securities companies and commercial banks customarily act as standing proxies and provide related services for standard fees. Notices from the company to non-resident shareholders are delivered to such standing proxies or mailing addresses.

     The registered holder of the deposited shares underlying the American Depositary Shares (ADSs) is the depositary for the ADSs. Accordingly, holders of ADSs are not able to directly assert shareholders’ rights against us.

     Authorized Shares