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, 2010

OR

o

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

FOR THE TRANSITION PERIOD FROM                      TO                     

OR

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                     

Commission file number 000-11743

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)

i-otani@wacoal.co.jp, +81-75-682-1028
29 Nakajima-cho, Kisshoin, Minami-ku, Kyoto 601-8530, Japan

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

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common
stock as of the close of the period covered by the annual report.

Common Stock Outstanding:
141,198,346 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):

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o

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		Other 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 and new markets, 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 2010” refers to our fiscal year ended March 31, 2010, 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 into U.S. dollars at the rate indicated or at any other rate. The noon buying rate was ¥88.48 to $1.00 on July 9, 2010.

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 the Company			13
ITEM 4A. Unresolved Staff Comments			26
ITEM 5. Operating and Financial Review and Prospects			26
ITEM 6. Directors, Senior Management and Employees			55
ITEM 7. Major Shareholders and Related Party Transactions			64
ITEM 8. Financial Information			66
ITEM 9. The Offer and Listing			66
ITEM 10. Additional Information			68
ITEM 11. Quantitative and Qualitative Disclosures about Market Risk			93
ITEM 12. Description of Securities Other than Equity Securities			96
PART II
ITEM 13. Defaults, Dividend Arrearages and Delinquencies			98
ITEM 14. Material Modifications to Rights of Security Holders and Use of Proceeds			98
ITEM 15. Controls and Procedures			98
ITEM 16A. Audit Committee Financial Expert			99
ITEM 16B. Code of Ethics			100
ITEM 16C. Principal Accountant Fees and Services			100
ITEM 16D. Exemptions from the Listing Standards for Audit Committees			101
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			102
ITEM 16F. Change in Registrant’s Certifying Accountant			103
ITEM 16G. Corporate Governance			103
PART III
ITEM 17. Financial Statements			107
ITEM 18. Financial Statements			107
ITEM 19. Exhibits			107
SIGNATURES			108
Index to Consolidated Financial Statements			F-1
EX-1.2 Share Handling Regulations 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, 2010, 2009, 2008, 2007 and 2006. The selected consolidated income statement data for the fiscal years ended March 31, 2010, 2009 and 2008, and the selected consolidated balance sheet data as of March 31, 2010 and 2009, 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, 2007 and 2006, and selected consolidated balance sheet data as of March 31, 2008, 2007 and 2006, are derived from Wacoal Holdings’ audited consolidated financial statements not included in this annual report.

		Fiscal year ended/as of March 31,
		2010								2009				2008				2007				2006
		(yen in millions and U.S. dollars in thousands unless otherwise indicated)
Income Statement Data
Net sales		¥	163,297			$	1,748,362			¥	172,276			¥	165,761			¥	166,410			¥	164,122
Operating income			3,810				40,792				10,129				13,540				12,896				1,333
Net income attributable to Wacoal Holdings Corp.			2,524				27,024				5,230				4,966				9,029				2,821
Balance Sheet Data
Working capital1		¥	54,250			$	580,835			¥	58,676			¥	62,835			¥	58,047			¥	75,208
Total assets			223,387				2,391,724				213,486				241,619				250,266				242,296
Short-term bank loans			7,941				85,021				5,221				5,572				5,822				6,392
Long-term debt (including current portion)			188				2,103				81				129				162				66
Common stock			13,260				141,970				13,260				13,260				13,260				13,260
Shareholders’ equity			171,630				1,837,580				165,873				185,113				193,278				186,475

		Fiscal year ended/as of March 31,
		2010								2009				2008				2007				2006
		(yen in millions and U.S. dollars in thousands unless otherwise indicated)
Per American Depositary Share Data (One ADR represents 5 shares of common stock)
Net income attributable to Wacoal Holdings Corp.
Basic		¥	89			$	0.95			¥	184			¥	176			¥	316			¥	98
Diluted		¥	89			$	0.95			¥	184			¥	176			¥	316			¥	98
Cash dividends declared Japanese yen		¥	100				—			¥	125			¥	125			¥	110			¥	100
U.S. dollars			—			$	1.07			$	1.26			$	1.25			$	0.94			$	0.85
Other Data
Weighted average number of shares of common stock outstanding (thousands)			141,353				—				142,317				141,304				142,910				143,934

     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 ¥88.48 to $1.00 on July 9, 2010.

		Year ended March 31,
Yen exchange rates per U.S. dollar		2010				2009				2008				2007				2006
Period end		¥	93.40			¥	99.15			¥	99.85			¥	117.56			¥	117.48
Average rate during period			92.49				100.85				113.61				116.55				113.67
Highest rate during period			100.71				110.48				124.09				121.81				120.93
Lowest rate during period			86.12				87.80				96.88				110.07				104.41

Yen exchange rates		Highest rate				Lowest rate
per U.S. dollar		during period				during period
January 2010		¥	93.31			¥	89.41
February 2010			91.94				88.84
March 2010			93.40				88.43
April 2010			94.51				92.03
May 2010			94.68				89.89
June 2010			92.33				88.39

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, which has weakened the Japanese economy, could negatively affect our business, results of operations and financial condition

     The recent global economic downturn has affected many of the world’s largest economies, including those of Japan and the United States, where we generate the majority of our sales. Although there are signs of economic recovery following the recent implementation of economic stimulus measures in many countries, the pace of the recovery in most of the world’s developed countries, including in Japan and the U.S., continues to be slow. Furthermore, there is a lingering fear of the increasing sovereign risk of some European countries. During fiscal 2010, the Japanese market accounted for approximately 88.0% of our sales, and the U.S. and European markets accounted for approximately 7.0%. In the major markets in which we operate, the continued weakness or deterioration in the economy 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, another 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 merchandisers and other general retailers in Japan would hurt our business

     In fiscal 2010, a substantial majority of our net sales were made to department stores, general merchandisers and other general retailers in Japan, and we expect that the majority of our net sales will continue to be made through department stores, general merchandisers and other general retailers in Japan for the foreseeable future.

     In recent years, many department stores, general merchandisers 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. Continued weakness in the department store, general merchandise and specialty retail sector would make it difficult to increase sales to our customers in this sector, 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 merchandisers 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 merchandisers 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. 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, 2010, we had a total of 113 specialty retail stores, including 13 factory outlet stores. Through our specialty retail stores, including those of Peach John Co., Ltd. (“Peach John”), 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.

     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. 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, 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 2008 acquisition of Peach John—which has a large share of catalog sales to young people in Japan—has contributed 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 due to changes in market demand and other factors is necessary. 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, particularly in the coming years during which growth in sales will remain difficult to achieve as consumer spending remains stagnant in Japan.

     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, over the years we have reduced the number of our distribution centers, which has been four since August 2008. We have also taken steps over the years 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 2010, approximately 88% 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 August 2009, Lecien Corporation (“Lecien”), which manufactures and sells women’s innerwear, clothing and accessories for the Japanese market, became our wholly-owned subsidiary through a share exchange. Lecien’s strength is in the so-called “volume zone”, which is the market for products in the mid-price range generating the largest volume of sales.

     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, in fiscal 2010, we evaluated the recoverability of Peach John’s customer relationships, which had been recorded as an intangible fixed asset, and recognized an impairment loss of approximately ¥1,023 million as a result.

We may not be able to recover the cost of investments we make in pursuing growth opportunities and developing new markets

     Our pursuit of growth opportunities and new markets through international expansion, acquisitions, strategic alliances or otherwise will require significant resources, time and costs. There is no guarantee that we will generate results that are sufficient to cover the cost of making any such investment, even if we conduct an extensive due diligence investigation and other analyses prior to making the investment to maximize the probability of success and minimize the risks. Failure to recover the cost of investments could have a material adverse effect on our financial condition and results of operations.

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 in the past, and may assert in the future, that we have infringed their intellectual property rights. We cannot predict whether any such assertions or related claims will substantially harm our 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 2008, 2009 and 2010, 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, 2010 showed an unrealized gain on securities of ¥3,669 million, we were required to recognize a valuation loss on our equity securities holdings of ¥1,460 million for fiscal 2010. 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.

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, 2010, 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 the Company.

A. History and Development of the Company.

     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.

     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.

     Lecien, which manufactures and sells women’s innerwear, clothing and accessories for the Japanese market, became our wholly-owned subsidiary as a result of a stock exchange on August 17, 2009.

     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% of our consolidated net sales for fiscal 2010. 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.

     We adopted guidance for segment reporting in accordance with U.S. GAAP in the year ending March 31, 2010. See note 21 to our consolidated financial statements for further details. We divide our businesses into five segments: Wacoal Business (Domestic), Wacoal Business (Overseas), Peach John Business, Nanasai Business and Other. Further details of these segments and their principal products are provided below (see “—Operations—Principal Products” below for further details of these principal products).

     Wacoal Business (Domestic)

     This segment comprises 21 companies all of which are based in Japan, including Wacoal Corp. and Wacoal Holdings., and are principally engaged in the manufacture and distribution of apparel in Japan other than the businesses conducted by Peach John and Lecien. The core products in this segment include innerwear (foundation, lingerie, nightwear and children’s innerwear), outerwear, sportswear, hosiery, restaurant, culture and services.

     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 2010, a substantial majority of our net sales were made to department stores, general merchandisers and other general retailers in Japan.

     Wacoal Business (Overseas)

     This segment comprises 18 companies, all of which are based outside Japan, and are principally engaged in the manufacture and distribution of apparel outside Japan. Included in this segment are our subsidiaries and affiliates in the United States, France, the U.K., China, Vietnam and other countries in Asia. The core products in this segment include: innerwear (foundation, lingerie, nightwear and children’s innerwear), outerwear, sportswear and hosiery.

     Peach John Business

     This segment comprises Peach John and two other related companies, which are principally engaged in mail-order sales of women’s apparel and various other apparel products for the Japanese market. The core products in this segment include innerwear (foundation, lingerie, nightwear and children’s innerwear), outerwear and other textile-related products.

     Nanasai Business

     This segment comprises Nanasai, which is principally engaged in the manufacture and rental of mannequins and fixtures, and the interior design and construction of commercial premises including sales counters used by our sales representatives in departments stores and other general retailers that carry our apparel.

     Other

     This segment comprises Lecien and 9 other companies, which are principally engaged in the manufacture and sale of women’s innerwear, clothing and accessories for the Japanese market. The core products in this segment include innerwear (foundation, lingerie, nightwear and children’s innerwear), outerwear, and other textile-related products.

     The following table sets forth information with respect to our net sales to external customers by business segment during fiscal 2010, 2009 and 2008:

Net Sales to External Customers (and Percentage) by Business Segment

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Wacoal Business (Domestic)		¥	113,929				69.7	%		¥	124,228				72.1	%		¥	126,355				76.2	%
Wacoal Business (Overseas)			18,899				11.6				22,323				13.0				26,142				15.8
Peach John Business			13,224				8.1				14,893				8.6
Nanasai Business			7,502				4.6				9,729				5.6				12,099				7.3
Other			9,743				6.0				1,103				0.7				1,165				0.7
Total		¥	163,297				100.0	%		¥	172,276				100.0	%		¥	165,761				100.0	%

     The following table sets forth information with respect to our net sales by region during fiscal 2010, 2009 and 2008:

Net Sales (and Percentage) by Region

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Japan		¥	144,048				88.2	%		¥	149,927				87.0	%		¥	139,618				84.2	%
Americas and Europe			11,364				7.0				14,776				8.6				18,497				11.2
Asia (excluding Japan)			7,885				4.8				7,573				4.4				7,646				4.6
Total		¥	163,297				100.0	%		¥	172,276				100.0	%		¥	165,761				100.0	%

     The following table sets forth information with respect to our net sales by category of products during fiscal 2010, 2009 and 2008:

Net Sales (and Percentage) by Product Category

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Innerwear:
Foundation and Lingerie		¥	116,068				71.0	%		¥	123,368				71.6	%		¥	123,460				74.4	%
Nightwear			9,438				5.8				11,019				6.4				10,611				6.4
Children’s Underwear			1,608				1.0				1,950				1.1				1,953				1.2
Total Innerwear		¥	127,114				77.8	%		¥	136,337				79.1	%		¥	136,024				82.0	%
Outerwear and Sportswear			17,241				10.6				15,498				9.0				8,920				5.4
Hosiery			1,701				1.0				1,657				1.0				1,803				1.1
Textile Products			7,462				4.6				6,270				3.6				3,963				2.4
Other			9,779				6.0				12,514				7.3				15,051				9.1
Total		¥	163,297				100.0	%		¥	172,276				100.0	%		¥	165,761				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.

     Expand our overseas businesses in order to decrease our reliance on the Japanese market

     We will continue to make efforts to become a global firm in order to move beyond the Japanese apparel market, where the potential growth will be limited by the demographic trends. In this regard, we view China and the United States as our priority markets. The United States has historically been our largest overseas market, and despite the current economic downturn, the United States will continue to be a key market for our existing Wacoal brand products. In China, we are 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. In addition, we are proactively seeking to develop our business operations in other markets and emerging economies, including through establishment of country specialists to implement customer acquisition strategies tailored to each country.

     Implement effective structural reforms, particularly in our domestic innerwear business

     We have increasingly focused our efforts on achieving stable profits in the challenging economic environment in Japan, where there is great uncertainty as to the future of our flagship innerwear products market and core sales channels—department stores, general merchandisers and specialty stores. Against these challenges, we will continue to engage in the following efforts:

	•		Improve our ability to respond quickly to market trends and operational productivity;
	•		Conduct ongoing review of operations and business structure from multiple perspectives and implement appropriate structural reforms from time to time to improve profitability; and
	•		Draw on our collective strengths across all areas of our business and leverage our research know-how that we have built over the years in order to expand into new low-price, high volume markets.

     Identify promising business lines and flexibly shift resources into those lines to develop profitable brands

     We aim to continue to develop new business lines by investing resources in the creation of new profitable brands. Recent examples of these efforts include our entry into the wellness business that capitalized on increasingly health-conscious consumers, as well as expansion of our men’s product lineups and development of our network of directly managed specialty retail stores.

     Strengthen our ability to effectively manage across groups and countries

     In order to effectively execute our strategies, we seek to strengthen our ability to manage across groups in a manner that will maximize the synergies from group collaboration. In addition, we seek to improve cross-border coordination in our value chain network in order to achieve better production and distribution, as well as cost reductions. Recent examples of these efforts include sharing of distribution networks and materials among our group companies, use of Wacoal Corp.’s research and development capabilities to develop products for Lecien and Peach John, and use of Lecien’s production base for our other group companies.

     Continue to fulfill our corporate social responsibility by promoting our support for women

     Since the founding of our business in 1949, we have made contributions to society by supporting women flourish in their beauty. For example, as a company that has earned the trust of women consumers, we have a long and successful history of undertaking breast cancer awareness initiatives known as the “Pink Ribbon” initiatives. We seek to build on this success by providing more comprehensive support, such as breast cancer screening and launching brassiere products designed for breast cancer patients. We believe meeting our corporate social responsibility in this manner will help us understand and meet the needs of women, who will remain our key customer segment.

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 2009, 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 LASÉE 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 2008/2009. More recently, we conducted a new brassier campaign for the product Natural-Up Bra in the spring of 2009, and also continued our Kyutto-Up Bra and Sarahada Bra campaign products in the spring and summer of 2009. In the fall of 2008, we launched Slim Up Pants from the Style Science series. We also sell Cross-Walker products as part of our Wing “BROS” brand mainly through general merchandisers.

     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. This product category has been the most successful of our products categories over the last three fiscal years, as net sales grew consistently from ¥8,920 million for fiscal 2008, or 5.4% of out total net sales, to ¥17,241 million for fiscal 2010, or 10.6% of our total net sales. 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, including lower-priced products with more limited functionality for general consumers rather than professional athletes. 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.

     Textile and Other Products

     We are engaged in several business lines that are ancillary to our core apparel business. We 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. We also sell certain general merchandise which we categorize as textile products. We rent out mannequins and fixtures, and design and build 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 merchandises, other general retailers and to specialty stores. Sales to general retailers in Japan represented a substantial majority of our total worldwide sales in fiscal 2010. 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 10.4% of our net sales in fiscal 2010.

     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 113 stores in our network (excluding Peach John) in Japan as of March 31, 2010, including 13 factory outlet stores. The number of Peach John retails stores was 27, as of March 31, 2010, as compared to 28, as of March 31, 2009. 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. We have also sold innerwear, outerwear and other products through Peach John, our wholly-owned subsidiary since January 2008. Peach John generates approximately 70% of its net sales from mail orders and the Internet.

     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, the 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.

     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 affiliated 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 affiliated 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, 2010:

		Jurisdiction of		Wacoal Holdings
Principal Subsidiaries		Incorporation		Equity Owned (%)
Wacoal Corp.		Japan			100
Peach John Co., Ltd.		Japan			100
Lecien Corporation		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			100
Miyazaki Wacoal Sewing Corp.		Japan			100
Torica Inc.		Japan			57
Nanasai Co., Ltd.		Japan			82
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			26			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			262			Lingerie
Sales offices		Tokyo, Japan			160			Sales
		(3 offices)
		Sapporo, Japan			36			Sales
		Osaka, Japan			124			Sales
		Kyoto, Japan			144			Sales
		Fukuoka, Japan			54			Sales
SPIRAL Building		Tokyo, Japan			107			Cultural Activities
155 specialty retail stores and other select shops2		Tokyo, Osaka, Kanagawa and other locations in Japan			138			Retail sales
Peach John Co., Ltd.		Tokyo, Osaka and other locations in Japan			139			Sales

				Floor Space
				(1,000 square				Principal Activities or
Facility		Location		feet)1				Products Manufactured
Nanasai Co., Ltd.		Kyoto, Japan			267			Mannequins, Sales Equipment
Lecien Corporation		Kyoto, Japan			345			Foundation Garments
Wacoal America, Inc.		New Jersey and			217			Management and Sales
		New York, U.S.
Wacoal Dominicana Corp.		Santo Domingo,			169			Foundation Garments
		Dominican Republic
Wacoal China Co., Ltd.		Beijing, China			142			Foundation Garments
Dalian Wacoal, Ltd.		Dalian, China			556			Foundation Garments
Wacoal Hong Kong Co., Ltd.		Hong Kong			46			Sales
Guangdong Wacoal Inc.		Guangzhou, China			70			Foundation Garments
Philippine Wacoal		Manila, Philippines			15			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 our 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 155 specialty retail stores as of March 31, 2010 (total of 138,175 square feet for all stores), (iii) our management and sales facilities for Peach John (139,383 square feet), (iv) our office and warehouse facility for Nanasai (75,402 square feet), (v) our management and sales facilities for Lecien (39,321 square feet), (vi) our management and sales facility for Wacoal America, Inc. (85,961square feet), (vii) our office and warehouse facility in China (58,061 square feet), (viii) our manufacturing facility in Dalian, China (486,260 square feet), our sales facility in Hong Kong (46,479 square feet), and (ix) our sales facility in Manila, Philippines (14,790 square feet).

     We spent ¥1,320 million during fiscal 2010 to rebuild and relocate some of our manufacturing operations. Although we currently do not have any concrete plans, 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 2010, 2009 and 2008 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 71.0% of our consolidated net sales for fiscal 2010. Our outerwear and sportswear product category has been the most successful of our product categories over the last three fiscal years, as net sales grew consistently from ¥8,920 million for fiscal 2008, or 5.4% of out total net sales, to ¥17,241 million for fiscal 2010, or 10.6% of our total net sales. We also design, manufacture and sell nightwear, children’s underwear, 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 2010, 2009 and 2008:

Net Sales (and Percentage) by Product Category

										Year ended March 31,
		2010								2009								2008
		(yen in millions)
Innerwear:
Foundation and lingerie		¥	116,068				71.0	%		¥	123,368				71.6	%		¥	123,460				74.4	%
Nightwear			9,438				5.8				11,019				6.4				10,611				6.4
Children’s underwear			1,608				1.0				1,950				1.1				1,953				1.2
Total innerwear		¥	127,114				77.8	%		¥	136,337				79.1	%		¥	136,024				82.0	%
Outerwear and sportswear			17,241				10.6				15,498				9.0				8,920				5.4
Hosiery			1,701				1.0				1,657				1.0				1,803				1.1
Textile products			7,462				4.6				6,270				3.6				3,963				2.4
Other			9,779				6.0				12,514				7.3				15,051				9.1
Total		¥	163,297				100.0	%		¥	172,276				100.0	%		¥	165,761				100.0	%

     For fiscal 2010, approximately 86% of the sales of Wacoal Corp. (the net sales of which account for approximately 64% of our consolidated sales) were apparel sales made on a wholesale basis to department stores, general merchandisers and other general retailers, and approximately 12% 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 2010.

     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.

     Income Tax Expenses

     Our income tax expenses depend on our taxable income, applicable statutory tax rates and the proportion of current and deferred income taxes. Our effective tax rate depends on a range of factors, including applicable statutory tax rates, permanently non-deductible expenses, unrecognized tax benefits, any valuation allowance with respect to tax loss carryforwards and tax exemptions. The effective tax rate was 50.4% for fiscal 2010, 42.1% for fiscal 2009 and 40.8% for fiscal 2008.

     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 has stagnated since the second half of 2007 following increased fuel prices and volatility in the stock and currency exchange markets due to the U.S. sub-prime mortgage crisis, and has not gained strength. Although there are signs of economic recovery following the recent implementation of economic stimulus measures in many countries, the pace of the recovery in most of the world’s developed countries continues to be slow. The women’s apparel industry in particular continues to be in a sluggish state, characterized by an increasing number of cost conscious consumers who are exercising more cautious spending habits.
	•		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. General 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 consumer behavior and 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 general merchandisers producing their own low priced “private brand” merchandise accelerated these trends.
	•		Although catalog marketing has 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 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 ¥3,100 million for fiscal 2010, as compared to sales for fiscal 2009, of which amount approximately ¥2,000 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.

     Environmental Matters

     We are committed to minimizing the negative impact of our business activities on the environment and believe our operations are in compliance with all applicable laws and regulations. We currently do not expect any existing or proposed domestic legislation or regulations or international accords relating to climate change to have a material impact on our results of operations. Additionally, we currently do not expect climate change to disrupt sourcing or sales efforts or otherwise affect our manufacturing or distribution processes.

Results of Operations

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

Consolidated Operating Results

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Net sales		¥	163,297				100.0	%		¥	172,276				100.0	%		¥	165,761				100.0	%
Cost of sales			79,953				49.0	%			84,686				49.1	%			83,127				50.1	%
Selling, general and administrative expenses			78,392				48.0	%			77,399				44.9	%			69,245				41.8	%
Total other (loss) income, net			(687	)			(0.4	%)			(2,502	)			(1.5	%)			813				0.5	%
Net income attributable to Wacoal Holdings Corp.			2,524				1.5	%			5,230				3.0	%			4,966				3.0	%

     The following table sets forth information with respect to our operating results by business segment during fiscal 2010, 2009 and 2008:

Operating Results by Business Segment

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Wacoal Business (Domestic)
Net Sales
External customers		¥	113,929				98.5	%		¥	124,228				98.6	%		¥	126,355				98.8	%
Intersegment			1,793				1.5	%			1,765				1.4	%			1,484				1.2	%
Total			115,722				100.0	%			125,993				100.0	%			127,839				100.0	%
Operating costs and expenses			(111,180	)			(96.1	%)			(118,523	)			(94.1	%)			(117,724	)			(92.1	%)
Operating profit (loss)		¥	4,542				3.9	%		¥	7,470				5.9	%		¥	10,115				7.9	%
Wacoal Business (Overseas)
Net Sales
External customers		¥	18,899				75.2	%		¥	22,323				78.4	%		¥	26,142				80.7	%
Intersegment			6,226				24.8	%			6,148				21.6	%			6,262				19.3	%
Total			25,125				100.0	%			28,471				100.0	%			32,404				100.0	%
Operating costs and expenses			(23,795	)			(94.7	%)			(26,903	)			(94.5	%)			(29,503	)			(91.0	%)
Operating profit (loss)		¥	1,330				5.3	%		¥	1,568				5.5	%		¥	2,901				9.0	%
Peach John Business
Net Sales
External customers		¥	13,224				99.9	%		¥	14,893				100.0	%
Intersegment			7				0.1	%			5				0.0	%
Total			13,231				100.0	%			14,898				100.0	%
Operating costs and expenses			(14,556	)			(110.0	%)			(13,995	)			(93.9	%)
Operating profit (loss)			(¥1,325	)			(10.0	%)		¥	903				6.1	%

		Year ended March 31,
		2010								2009								2008
		(yen in millions)
Nanasai Business
Net Sales:
External customers		¥	7,502				87.5	%		¥	9,729				88.2	%		¥	12,099				89.3	%
Intersegment			1,069				12.5	%			1,306				11.8	%			1,452				10.7	%
Total			8,571				100.0	%			11,035				100.0	%			13,551				100.0	%
Operating costs and expenses			(9,214	)			(107.5	%)			(11,101	)			(100.6	%)			(13,268	)			(97.9	%)
Operating profit (loss)			(¥643	)			(7.5	%)			(¥66	)			(0.6	%)		¥	283				2.1	%
Other
Net Sales:
External customers		¥	9,743				81.8	%		¥	1,103				40.0	%		¥	1,165				40.7	%
Intersegment			2,171				18.2	%			1,656				60.0	%			1,695				59.3	%
Total			11,914				100.0	%			2,759				100.0	%			2,860				100.0	%
Operating costs and expenses			(12,008	)			(100.8	%)			(2,505	)			(90.8	%)			(2,619	)			(91.6	%)
Operating profit (loss)			(¥94	)			(0.8	%)		¥	254				9.2	%		¥	241				8.4	%

Fiscal 2010 Compared to Fiscal 2009

     Net Sales

     Consolidated net sales decreased 5.2% from ¥172,276 million for fiscal 2009 to ¥163,297 million for fiscal 2010.

     Wacoal Brand

     Innerwear. The overall sales of brassieres, our main product, for fiscal 2010 were below the sales for fiscal 2009. This was the case despite the strong performance of our Ribbon Bra, a product that we launched in January 2010 as part of our campaign brassiere LALAN series and that gained strong support from our consumers for its functionality and design, because this strong performance was more than offset by the poor performance of other brassiere products. We launched new products in our new Style Science functional underwear series in each of the four seasons in fiscal 2010, with an emphasis on the Cross-Walker, but the sales of these new products for fiscal 2010 were below the sales of this series for fiscal 2009. Although the summer products from our Sugoi seasonal undergarments performed well, overall sales from this series were below the sales for fiscal 2009 due to the poor performance of our usual autumn and winter products, which were affected by increased competition from our competitors’ products. Outside Japan, b.tempte’d by Wacoal and our new lower-priced brassiere and functional bottom products marked in the United States performed strongly, and sales of our coal Wacoal brand products in China grew.

     Outerwear. In contrast to the performance of our innerwear products, our new outerwear product, Sugo-T, achieved sales exceeding our expectations, and fiscal 2010 sales of Gra-P, our value-added brand targeting senior consumers, exceeded the sales for fiscal 2009.

     Thus, the overall sales for fiscal 2010 of our Wacoal brand products fell below the sales for fiscal 2009 due primarily to generally weak sales of our innerwear products, which more than offset gains in sales of our outerwear and other products sold under the Wacoal brand.

     Wing Brand

     In our Wing brand business, although sales of some of our campaign brassieres continued as planned, our other brassiere and Style Science products performed poorly. As in our Wacoal brand business, sales of our Wing brand undergarments were lower than fiscal 2009 sales due to increased competition from private-label brands sold by specialty clothing stores and general merchandisers. The overall sales of our men’s innerwear products, which achieved significant growth during the fiscal 2010 as a result of an increase in new store openings, exceeded fiscal 2009 sales. This was primarily due to the performance of our Cross-Walker products, which were sold mainly by general merchandisers under the BROS brand and more than offset the decreased sales of DAMS at department stores as compared to fiscal 2009 sales. Thus, the overall sales of our Wing brand business fell below fiscal 2009 sales due primarily to the poor performance of our core women’s products, which more than offset any increased sales of our men’s innerwear products.

     Other Brands

     Luxury Products. Sales of our luxury products fell below sales for fiscal 2009, primarily because sales of our department store product PARFAGE, along with other luxury products, fell below the sales for fiscal 2009.

     Wellness Products. In our wellness business, sports-related products performed strongly primarily because of an increase in health conscious consumers. These products include our new sports tights in our conditioning wear product, CW-X sports, and our functional wear for golf and running, Jyuryu. With the aim of furthering the brand recognition of our CW-X line, we opened our first retail store in January 2010 and one additional store in February 2010. Due to the successful openings of these stores, sales of our CW-X line for fiscal 2010 increased as compared to sales for fiscal 2009. Similarly, our leggings and footwear products performed well. Sales of our body styling wear, Style Cover, and our highly fashionable and functional business footwear, Success Walk, increased as compared to sales for fiscal 2009. As a result of the foregoing, overall sales of our wellness products exceeded the sales for fiscal 2009.

     Lecien Products. Net sales of Lecien’s innerwear and clothing products for fiscal 2010 were below its sales for fiscal 2009 due to the severe conditions of general merchandisers.

     Licensed Products. As a result of the termination of our manufacturing and distribution license for Donna Karan (DKI, DKNY) products during fiscal 2009, we did not carry any licensed products in the United States for fiscal 2010.

     Specialty Retail Business

     AMPHI. In our specialty retail store business, we focused our expansion on our retail store AMPHI. Despite an increase in the number of customers and sales volume that we achieved primarily through price reductions, the average amount spent per customer for fiscal 2010 was lower for fiscal 2009, resulting in decreased sales for fiscal 2010.

     Wacoal Factory. Sales for fiscal 2010 from our Wacoal Factory Store, which is located in outlet malls, exceeded the sales for fiscal 2009.

     Une Nana Cool. Our subsidiary specialty retail business, Une Nana Cool Corp., experienced a decrease in sales at existing stores compared to fiscal 2009 primarily due to a decrease in the number of customers visiting shopping centers where our shops are located. Sales for fiscal 2010 at Une Nana Cool, however, did not change materially as compared to sales from fiscal 2009, because sales from our new store openings offset decreased sales at our existing stores.

     Peach John. Although we made efforts to improve net sales through Peach John’s retail stores by continuing to develop products sold only at those retail stores, net sales for fiscal 2010 at the retail stores declined as compared to net sales for fiscal 2009, primarily due to a decrease in the overall number of shoppers at the shopping malls and other buildings in which Peach John is a tenant. The decrease in the number of Peach John retail stores from 28, as of March 31, 2009, to 27, as of March 31, 2010, also contributed to the decrease in net sales.

     As a result of the foregoing, overall sales of our specialty retail store business for fiscal 2010 increased as compared to sales for fiscal 2009. We are currently focused on improvement of profitability of our specialty retail business, and as part of these efforts, we have been reorganizing our shop brands to consolidate them into AMPHI as the “master shop brand” from fiscal 2010.

     Catalogue and Online Sales Business

     In our Wacoal brand catalog sales business, although the number of purchasers of our core catalog sales remained broadly the same between fiscal 2010 and fiscal 2009, the average amount spent per customer was lower, and as a result, sales for fiscal 2010 fell below fiscal 2009 sales. Peach John mail-order sales from our seasonal catalogs for fiscal 2010 were all below the sales for fiscal 2009 due to a fall in Peach John catalog orders. In contrast to our catalog business, the number of purchasers at our Wacoal Web Store and sales increased for fiscal 2010, even though the average amount spent per customer remained largely unchanged as compared to the average amount for fiscal 2009. The growth in our online business was mainly a result of our expanded product categories and an active Internet advertising campaign. As a result, the overall sales from our catalog and online sales business increased for fiscal 2010.

     Other Businesses

     Fiscal 2010 net sales attributable to our mannequin and fixture rental business, as well as interior design and remodeling business, which we conduct through our subsidiary Nanasai, decreased due to reduced orders primarily resulting from poor sales at department stores, suspension and termination of store remodeling and downsizing that accompanies the economic deterioration.

     Cost of Sales

     Our cost of sales decreased 5.6% from ¥84,686 million for fiscal 2009 to ¥79,953 million for fiscal 2010, primarily due to a decrease in net sales, which more than offset the impact of our acquisition of Lecien in August 2009. Cost of sales as a percentage of net sales decreased 0.1%, from 49.1% for fiscal 2009 to 49.0% for fiscal 2010. The slight improvement in cost of sales as a percentage of net sales is primarily due to the absence of losses, including a liquidation expense of ¥630 million, associated with the liquidation of Tokai Wacoal Sewing Corp., which we recognized as cost in fiscal 2009. The cost of sales would have increased slightly for fiscal 2010 without the effect of these losses, despite our efforts to improve inventory management by achieving fewer returned goods and fewer losses from inventory write-downs, as well as improved efficiencies in overseas production.

     Selling, General and Administrative Expenses

     Our selling, general and administrative expenses increased 1.3% from ¥77,399 million for fiscal 2009 to ¥78,392 million for fiscal 2010. This increase was primarily due to an increase in our net periodic benefit costs, which in turn was primarily attributable to the increased amortization of actuarial losses, as well as the impact of our acquisition of Lecien in August 2009, which more than offset any cost-reduction efforts. The amortization of actuarial losses increased for fiscal 2010, because of the significant valuation loss in plan assets as of the end of fiscal 2009 that were required to be amortized starting in fiscal 2010. The selling, general and administrative expenses as a percentage of net sales increased by 3.1% from 44.9% for fiscal 2009 to 48.0% for fiscal 2010. The greater increase in the selling, general and administrative expenses as a percentage of net sales, as compared to the increase in the absolute number, is primarily due to the decrease in net sales.

     Impairment of Goodwill and Other Intangible Assets

     When Peach John became our wholly-owned subsidiary in fiscal 2008, we recognized Peach John’s catalog customer relationships as an intangible fixed asset with the intent to depreciate it using the straight-line method over a period of seven years. At the end of fiscal 2010, however, we evaluated the recoverability of this asset and recognized an impairment loss of approximately ¥1,023 million as a result. In addition, we also recognized an impairment loss of ¥71 million with respect to Lecien, after we evaluated the recoverability of the goodwill we recognized when we acquired a 100% interest in Lecien in August 2009. See “Item 5.A. Operating Results—Critical Accounting Policies and Estimates—Valuation of Intangible Assets”.

     Operating Margin

     Our operating margin (i.e., operating income as a percentage of net sales) decreased to 2.3% for fiscal 2010, as compared to 5.9% for fiscal 2009, because the rate of decrease in our operating costs and expenses was not sufficient to offset the rate of decrease in net sales, and we recognized significantly larger impairment charges for fiscal 2010. The slower rate of decrease in our operating costs and expenses were primarily attributable to stagnant sales through department stores and general merchandisers, which have historically yielded a greater operating margin through higher prices for us than other distribution channels, combined with decreased operating margin of our Peach John Business, as we incurred increased personnel and other costs from store openings and other expansion efforts to market the business.

     Total Other Loss, Net

     Total other loss, net, decreased ¥1,815 million from ¥2,502 million for fiscal 2009 to ¥687 million for fiscal 2010. This decrease was primarily due to a decrease in impairment charges on marketable securities and investments.

     Net Income Attributable to Wacoal Holdings Corp.

     Net income attributable to Wacoal Holdings Corp. for fiscal 2010 was ¥2,524 million, a decrease of ¥2,706 million compared to ¥5,230 million for fiscal 2009. The smaller decrease in net income attributable to Wacoal Holdings Corp. as compared to the decrease in income before income taxes, equity in net income (loss) of affiliated companies, and net loss (income) attributable to noncontrolling interests is primarily due to the decrease in income taxes. Although our current income taxes increased for fiscal 2010, it was more than offset by the decrease in our deferred income taxes. However, the effective tax rate increased from 42.1% in fiscal 2009 to 50.4% in fiscal 2010, primarily due to an increase in permanently non-deductible expenses as a percentage of taxable income, unrecognized tax benefits and undistributed earnings of foreign subsidiaries, which more than offset a decrease in the valuation allowance for tax loss carryforwards. The decrease in the valuation allowance for tax loss carryforwards was due to a reversal in the valuation allowance as a result of changes in our legal structure. Accordingly, we utilized ¥721 million of tax loss carryforwards, and recognized the tax benefits of ¥293 million for the year ended March 31, 2010.

     Segment Information

     Wacoal Business (Domestic)

     Net Sales to External Customers. Net sales for our Wacoal Business (Domestic) segment as a percentage of our total net sales decreased to 69.7%, as compared to 72.1% for fiscal 2009. During fiscal 2010, despite signs of a partial economic recovery in the midst of the global financial crisis, the Japanese economy continued to remain weak due to continued deterioration in employment and consumer spending levels. Several service sectors, including department stores and general merchandisers, continued to face a challenging environment, as they confronted an increased number of cost-conscious consumers exercising cautious spending habits. Despite our launch of lower-priced products to address changes in consumer spending habits, sales of most of the products in this segment declined, primarily because of the challenging conditions in the women’s apparel market. As a result of the foregoing, net sales to external customers for this segment decreased 8.3% from ¥124,228 million for fiscal 2009 to ¥113,929 million for fiscal 2010.

     Operating Cost and Expenses. Operating cost and expenses for our Wacoal Business (Domestic) segment decreased 6.2% from ¥118,523 million for fiscal 2009 to ¥111,180 million for fiscal 2010, primarily due to a decrease in cost of sales and also due to a decrease in selling, general and administrative expenses. Decreases in cost of sales and selling, general and administrative expenses, in turn, are primarily attributable to a decrease in net sales and efforts to cut publicity and other costs at Wacoal Corp.

     Operating Profit. As a result of the foregoing, the operating profit from our Wacoal Business (Domestic) segment was ¥4,542 million for fiscal 2010, as compared to ¥7,470 million for fiscal 2009. The operating margin decreased to 3.9% for fiscal 2010, as compared to 5.9% for fiscal 2009, because the rate of decrease in operating costs and expenses was not sufficient to offset the rate of decrease in net sales. The slower rate of decrease in operating costs and expenses was primarily attributable to stagnant sales through department stores and general merchandisers, which generally yield a greater operating margin for us than other distribution channels.

     Wacoal Business (Overseas)

     Net Sales to External Customers. Net sales for our Wacoal Business (Overseas) segment as a percentage of our total net sales decreased to 11.6%, as compared to 13.0% for fiscal 2009.

	•		United States. Net sales in the United States represented 55.0% of net sales for this segment for fiscal 2010, compared to 61.3% for fiscal 2009. In the United States, sales for fiscal 2010 were significantly lower than for fiscal 2009 as a result of decreased sales at department stores caused by deterioration in the general economic conditions and consumer spending. In addition, we had lower sales as a result of the termination of our manufacturing and distribution license for Donna Karan (DKI, DKNY) products during fiscal 2009. Sales of Wacoal Luxe products were below fiscal 2009 sales due to weak performance of premium-price products sold at high-end department stores. On the other hand, b.tempt’d by Wacoal, our sexy and fashionable brand launched in the beginning of fiscal 2010, contributed to net sales, as the product gained support from business partners and customers. In addition, our new lower-priced brassiere and functional bottom products performed strongly.
	•		Asia (Excluding Japan). Net sales in Asia outside of Japan (including China, Hong Kong and Singapore) represented 40.1% of net sales for this segment in fiscal 2010, compared to 33.8% in fiscal 2009. In China, we have been successful in gradually expanding our business and market share with our existing shops (mainly in the department store channel), by developing a three-brand system that includes our core Wacoal brand, our youth-oriented brand, AMPHI, and our high value-added brand, Salute. Since August 2009, we have been conducting a campaign featuring the famous Chinese actress with the aim of improving our brand recognition by Chinese consumers and expanding our sales. As a result, net sales from our business in China exceeded net sales for fiscal 2009.
	•		Europe. Net sales in Europe represented 4.9% of net sales for this segment in fiscal 2010, compared to 4.9% in fiscal 2009.
	•		Foreign Currency. The average noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York was ¥92.49 for fiscal 2010, as compared to ¥100.85 for fiscal 2009. Approximately 60% of the decrease in net sales to external customers for this segment is attributable to the significant strengthening of yen against the U.S. dollars and other currencies of the markets in which we sell our products.

     As a result of the foregoing, net sales to external customers for this segment decreased 15.3% from ¥22,323 million for fiscal 2009 to ¥18,899 million for fiscal 2010.

     Operating Cost and Expenses. Operating cost and expenses for our Wacoal Business (Overseas) segment decreased 11.6% from ¥26,903 million for fiscal 2009 to ¥23,795 million for fiscal 2010 due to decreases in both cost of sales and selling, general and our administrative expenses. These decreases, in turn, were primarily due to declines in net sales in countries other than China and our cost-reduction efforts.

     Operating Profit. As a result of the foregoing, the operating profit from our Wacoal Business (Overseas) segment was ¥1,330 million for fiscal 2010, as compared to ¥1,568 million for fiscal 2009. The operating margin for this segment decreased to 5.3% for fiscal 2010, as

compared to 5.5% for fiscal 2009. While the termination of license agreements in connection with distribution in the United States of licensed Donna Karan products helped to improve the operating margin for this segment, these gains in the operating margin were offset by the greater marketing costs we incurred in Asia outside Japan, particularly in China, as we made efforts to increase Wacoal’s brand recognition.

     Peach John Business

     Net Sales to External Customers. Net sales for our Peach John Business segment as a percentage of our total net sales decreased to 8.1%, as compared to 8.6% for fiscal 2009. Peach John mail-order sales from our seasonal catalogs were below the sales for fiscal 2009 due to a general fall in catalog orders. In addition, sales from our direct retail stores fell below the sales for fiscal 2009 due to stagnant sales at existing stores, as well as a slight decrease in the number of stores. As a result of the foregoing, net sales to external customers for this segment decreased 11.2% from ¥14,893 million for fiscal 2009 to ¥13,224 million for fiscal 2010.

     Operating Cost and Expenses. Operating cost and expenses for our Peach John Business segment increased 4.0% from ¥13,995 million for fiscal 2009 to ¥14,556 million for fiscal 2010, primarily due to impairment charges on other intangible assets that were recognized for fiscal 2010 but not for fiscal 2009. These charges were the result of an evaluation of the recoverability of Peach John’s catalog customer relationships at the end of fiscal 2010. See “Item 5.A. Operating Results—Critical Accounting Policies and Estimates—Valuation of Intangible Assets”. Operating cost and expenses for this segment also increased due to an increase in selling, general and administrative expenses that more than offset a decrease in cost of sales. The increase in selling, general and administrative expenses is attributable to the increased personnel and other costs associated with marketing of the business, which were not sufficiently offset by a reduction in the number of catalogs issued and of advertisements in public transportation. Because of our continued expansion efforts in China, we expect to see an increase in selling, general and administrative expenses for fiscal 2011.

     Operating Loss. As a result of the foregoing, the operating loss from our Peach John Business segment was ¥1,325 million for fiscal 2010, as compared to the operating profit of ¥903 million for fiscal 2009. The operating margin decreased to -10.0% for fiscal 2010, as compared to 6.1% for fiscal 2009.

     Nanasai Business

     Net Sales to External Customers. Net sales for our Nanasai Business segment as a percentage of our total net sales decreased to 4.6%, as compared to 5.6% for fiscal 2009. Nanasai’s sales were lower than for fiscal 2009 due to reduced orders primarily resulting from poor sales at department stores, suspension and termination of store remodeling and downsizing that accompanied the economic deterioration. There was also a downward pressure on price, as competition through auctions intensified. As a result of the foregoing, net sales to external customers for this segment decreased 22.9% from ¥9,729 million for fiscal 2009 to ¥7,502 million for fiscal 2010.

     Operating Cost and Expenses. Operating cost and expenses for our Nanasai Business segment decreased 17.0% from ¥11,101 million for fiscal 2009 to ¥9,214 million for fiscal 2010, primarily due to a decrease in cost of sales, which offset an increase in selling, general and administrative expenses.

     Operating Loss. As a result of the foregoing, the operating loss from our Nanasai Business segment was ¥643 million for fiscal 2010, as compared to ¥66 million for fiscal 2009. The operating margin worsened to -7.5% for fiscal 2010, as compared to -0.6% for fiscal 2009, because the rate of decrease in operating costs and expenses was not sufficient to offset the rate of decrease in net sales, despite our cost-cutting efforts.

     Other

     Net Sales to External Customers. Net sales for our Other Business segment as a percentage of our total net sales increased to 6.0%, as compared to 0.7% for fiscal 2009. This significant increase was principally due to our August 2009 acquisition of a 100% interest in Lecien, whose accounts were consolidated for the rest of fiscal 2010. Lecien’s sales for fiscal 2010, however, were below its sales for fiscal 2009 due to the severe conditions of general merchandisers, which are Lecien’s core sales channel. Sales from the Art/Hobby business, which handles embroidery thread and fabrics for handicrafts, remained broadly at the same level for fiscal 2009 mainly due to the steady performance of the sales of domestically-made printing fabrics. As a result of the foregoing, net sales to external customers for this segment increased 783.3% from ¥1,103 million for fiscal 2009 to ¥9,743 million for fiscal 2010.

     Operating Cost and Expenses. Operating cost and expenses for our Other Business segment increased 379.4% from ¥2,505 million for fiscal 2009 to ¥12,008 million for fiscal 2010, primarily due to increases in cost of sales and selling, general and administrative expenses associated with our acquisition of Lecien.

     Operating Loss. As a result of the foregoing, the operating loss from our Other Business segment was ¥94 million for fiscal 2010, as compared to an operating profit of ¥254 million for fiscal 2009. The operating margin worsened to -0.8% for fiscal 2010, as compared to 9.2% for fiscal 2009, because the rate of decrease in operating costs and expenses was not sufficient to offset the rate of decrease in net sales. Inclusion of Lecien, with a lower operating margin, as a consolidated subsidiary contributed to the decrease in the operating margin.

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 increased 0.2% to ¥136,337 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 79.1% of total consolidated sales for fiscal 2009.

     Wacoal Brand. The overall fiscal 2009 sales performance of our main product of brassieres, including LALAN, which is our new campaign brassiere, were 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 fiscal 2009 sales of lingerie for fiscal 2009 were lower than for fiscal 2008 even though the sales performance of Sugoi exceeded the fiscal 2008 figures. In contrast to this, the fiscal 2009 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. Outside Japan, our net sales for fiscal 2009 in the United States fell below net sales for fiscal 2008 due to weak economic conditions and consumer confidence. Our sales in China, on the other hand, increased considerably for fiscal 2009, primarily to due the strong performance of AMPHI and Salute as part of our business expansion initiatives in China.

     Wing Brand. The overall fiscal 2009 sales of the core Wing brand 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, sales of girdle pants for fiscal 2009 were significantly lower compared to sales for fiscal 2008.

     Licensed Brands. Weakness in our sales in the United States was compounded by less business for Donna Karan products because the relevant license agreement was terminated in December 2008.

     Outerwear and Sportswear

     In our outerwear and sportswear business, sales for fiscal 2009 increased 73.7% to ¥15,498 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 we categorize in this product segment, performed strongly for fiscal 2009. While fiscal 2009 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 for fiscal 2009 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 innerwear 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 58.2% to ¥6,270 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.

     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. The number of Peach John retail stores increased to 28, as of March 31, 2009, from 23, as of March 31, 2008; the increase in the number included new store openings at outlet malls for the first time by Peach John. We completed renewal projects at several retail stores, and made efforts to improve net sales through Peach John’s retail stores by developing products sold only at those retail stores. As a result of the foregoing, net sales for fiscal 2009 at the retail stores increased as compared to net sales for fiscal 2008.

     Catalogue and Online Sales Business

     Sales of our Wacoal Brand outerwear and innerwear products were strong for fiscal 2009. Sales through our Wacoal Web Store were also strong primarily due to an increase in the number of Cross-Walker product purchases made by men. As a result, net sales generated by our catalogue and online business for fiscal 2009 increased as compared to net sales for fiscal 2008. Catalog sales through Peach John for fiscal 2009 were broadly at the same level as catalog sales for fiscal 2008. Although we received an increased number of orders through Peach John’s website as a result of our marketing efforts and improvement in usability, online sales through Peach John for fiscal 2009 remained broadly at the same level as its online sales for fiscal 2008.

     Other Businesses

     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.

     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 (Loss) Income, Net

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

     Net Income Attributable to Wacoal Holdings Corp.

     Net income attributable to Wacoal Holdings Corp. was ¥5,230 million for fiscal 2009, an increase of ¥264 million compared to ¥4,966 million for fiscal 2008. Net income attributable to Wacoal Holdings Corp. 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.

     Segment Information

     Wacoal Business (Domestic)

     Net Sales to External Customers. Net sales for our Wacoal Business (Domestic) segment as a percentage of our total net sales decreased to 72.1%, as compared to 76.2% for fiscal 2008. During fiscal 2009, the global financial crisis affected many of the world’s largest economies, including that of Japan. The economic downturn and deteriorating employment conditions resulted in stagnant consumer spending, especially starting in the second half of fiscal 2009. Many services sectors suffered significant declines in sales, including department stores and general merchandisers. As a result of the foregoing, net sales to external customers for this segment decreased 1.7% from ¥126,355 million for fiscal 2008 to ¥124,228 million for fiscal 2009.

     Operating Cost and Expenses. Operating cost and expenses for our Wacoal Business (Domestic) segment increased 0.7% from ¥117,724 million for fiscal 2008 to ¥118,523 million for fiscal 2009, primarily due to an increase in selling, general and administrative expenses. The increase in selling, general and administrative expenses, in turn, was primarily due to the increase in net periodic benefit costs caused by the significant increase in the actuarial loss with respect to pension plans.

     Operating Profit. As a result of the foregoing, the operating profit from our Wacoal Business (Domestic) segment was ¥7,470 million for fiscal 2009, as compared to ¥10,115 million for fiscal 2008. The operating margin decreased to 5.9% for fiscal 2009, as compared to 7.9% for fiscal 2008, because the rate of decrease in operating costs and expenses was not sufficient to offset the rate of decrease in net sales. The slower rate of decrease in operating costs and expenses was primarily attributable to stagnant sales through department stores and general merchandisers, which generally yield a greater operating margin for us than other distribution channels.

     Wacoal Business (Overseas)

     Net Sales to External Customers. Net sales for our Wacoal Business (Overseas) segment as a percentage of our total net sales decreased to 13.0%, as compared to 15.8% for fiscal 2008.

•

United States. Our net sales in the United States represented 61.3% of net sales for this segment for fiscal 2009, compared to 66.5% for fiscal 2008. In the United States, net 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.

•

Asia (Excluding Japan). Our net sales in Asia outside of Japan (including China, Hong Kong and Singapore) represented 33.8% of net sales for this segment for fiscal 2009, compared to 29.3% for fiscal 2008. Against this trend in Asia, net 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.

•

Europe. Net sales in Europe represented 4.9% of net sales for this segment in fiscal 2009, compared to 4.2% in fiscal 2008.

•

Foreign Currency. The average noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York was ¥100.85 for fiscal 2009, as compared to ¥113.61 for fiscal 2008. Approximately 70% of the decrease in net sales to external customers for this segment is attributable to the significant strengthening of yen against the U.S. dollars and other currencies of the markets in which we sell our products.

     As a result of the foregoing, net sales to external customers for this segment decreased 14.6% from ¥26,142 million for fiscal 2008 to ¥22,323 million for fiscal 2009.

     Operating Cost and Expenses. Operating cost and expenses for our Wacoal Business (Overseas) segment decreased 8.8% from ¥29,503 million for fiscal 2008 to ¥26,903 million for fiscal 2009, primarily due to decreases in cost of sales and selling, general and administrative expenses. These decreases, in turn, were primarily due to the decrease in net sales in the United States.

     Operating Profit. As a result of the foregoing, the operating profit from our Wacoal Business (Overseas) segment was ¥1,568 million for fiscal 2009, as compared to ¥2,901 million for fiscal 2008. The operating margin for this segment decreased to 5.5% for fiscal 2009, as compared to 9.0% for fiscal 2008. The decrease in the operating margin was primarily due to the greater rate of decrease in net sales as compared to the rate of decrease in operating cost and expenses in the United States, as well as to the operating loss in China primarily as a result of increases in advertisement costs attributable to our greater publicity efforts.

     Peach John Business

     Because we acquired a 100% interest in Peach John in January 2008 prior to which the company was not our consolidated subsidiary, the Peach John Business segment was created starting for fiscal 2009. As a result, we have no comparative data for this segment for fiscal 2008.

     Net Sales to External Customers. Net sales for our Peach John Business segment as a percentage of our total net sales was 8.6% for fiscal 2009. Net sales to external customers for this segment were ¥14,893 million for fiscal 2009.

     Operating Cost and Expenses. Operating cost and expenses for our Peach John Business segment were ¥13,995 million for fiscal 2009.

     Operating Profit. As a result of the foregoing, the operating profit from our Peach John Business segment was ¥903 million for fiscal 2009. The operating margin was 6.1% for fiscal 2009.

     Nanasai Business

     Net Sales to External Customers. Net sales for our Nanasai Business segment as a percentage of our total net sales decreased to 5.6%, as compared to 7.3% for fiscal 2008. Sales decreased primarily due to large-scale renovation of department stores in the metropolitan area, as well as suspension, termination or scaling back of remodeling plans following the global economic slowdown. There was also a downward pressure on price, as competition through auctions intensified. As a result of the foregoing, net sales to external customers for this segment decreased 19.6% from ¥12,099 million for fiscal 2008 to ¥9,729 million for fiscal 2009.

     Operating Cost and Expenses. Operating cost and expenses for our Nanasai Business segment decreased 16.3% from ¥13,268 million for fiscal 2008 to ¥11,101 million for fiscal 2009, primarily due to decreases in cost of sales and selling, general and administrative expenses. These decreases were primarily attributable to the decrease in net sales.

     Operating Loss. As a result of the foregoing, the operating loss from our Nanasai Business segment was ¥66 million for fiscal 2009, as compared to an operating profit of ¥283 million for fiscal 2008. The operating margin worsened to -0.6% for fiscal 2009, as compared to 2.1% for fiscal 2008, because the rate of decrease in operating costs and expenses was not sufficient to offset the rate of decrease in net sales.

     Other

     Net Sales to External Customers. Net sales for our Other Business segment as a percentage of our total net sales increased to 0.7%, as compared to 0.7% for fiscal 2008. As a result of the foregoing, net sales to external customers for this segment decreased 5.3% from ¥1,165 million for fiscal 2008 to ¥1,103 million for fiscal 2009.

     Operating Cost and Expenses. Operating cost and expenses for our Other Business segment decreased 4.4% from ¥2,619 million for fiscal 2008 to ¥2,506 million for fiscal 2009, primarily due to decreases in cost of sales and selling, general and administrative expenses.

     Operating Profit. As a result of the foregoing, the operating profit from our Other Business segment was ¥254 million for fiscal 2009, as compared to ¥241 million for fiscal 2008. The operating margin increased slightly to 9.2% for fiscal 2009, as compared to 8.4% for fiscal 2008.

Critical Accounting Policies and Estimates

     Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. 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 with product returns, sales movements and the size of inventory 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. If we record lower than expected earnings and our deferred tax assets become unrecoverable, however, a valuation allowance must be recorded against the amount that is not likely to be recovered, and this may have a negative impact on our profit and loss.

     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 2010, 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 total of unrealized holding losses for the securities each of which had an unrealized holding loss of ¥100 million or more for each quarter (up to three quarters) was as follows:

Period during which fair value was below

carrying value

(as of March 31, 2010)

Over three

Over six

Up to three

months, up to

months, up to

months

six months

nine months

(in million yen)

Carrying value, less fair value

—

—

312

     Following the end of fiscal 2010, however, the fair value of these securities not subject to impairment charges for fiscal 2010 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 ¥960 million in the first quarter of fiscal 2011 in respect of all marketable securities we hold.

     Valuation of Intangible Assets and Goodwill

     Under ASC 350, “Intangible — Goodwill and Other”, 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 that 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;
	•		significant negative industry or economic trends; and
	•		significant changes in risk-adjusted discount rates.

     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.

     Goodwill

     Significant assumptions used in this analysis include: future cash flows and the risk-adjusted discount rate. Future cash flows are based on the management’s cash flow projections for the future five years, after which future cash flows are estimated using the perpetuity growth rate of zero. The management’s cash flow projections are developed using estimates for expected future revenue growth rates, profit margins and working capital levels of the reporting units.

     In its determination of the fair value of goodwill, we utilize a discounted cash flow analysis as well as other relevant valuation approaches, including those based on the stock price and market capitalization of the acquired entity and asset and liability structure of the reporting units.

     On March 31, 2010, we evaluated the recoverability of goodwill and concluded that there was no impairment in the carrying value of goodwill for any of our reporting units. We calculated a risk-adjusted discount rate of 4.8%, which represented the weighted average cost of capital (WACC), using the Capital Asset Pricing Model. The amount of goodwill allocated to the reporting unit was ¥11,203 million. The percentage by which the fair value exceeded the carrying value as of the March 31, 2010 test was approximately 1.5%.

     The calculation of the fair value involves certain management judgments and was based on our best estimates and projections at the time of our review, and the value may be different if other assumptions are used. In future periods we may be required to record an impairment loss based on the impairment test performed, which may significantly affect our results of operations at that time. Due to the potential impact of the risk-adjusted discount rate on the fair value, we performed a sensitivity analysis: A 0.5% increase in the risk-adjusted discount rate to the cash flows would result in an impairment of ¥1,559 million, and a 0.5% decrease in the risk-adjusted discount rate to the cash flows would result in the recoverable amounts that would exceed the book value by ¥2,644 million.

     Trademark

     In its determination of the fair value of trademark, we utilize the relief-from-royalty-method and incorporate relevant unobservable inputs. Significant assumptions used in this analysis include future cash flows, the risk-adjusted discount rate and the rate of royalty. Future cash flows are based on the management’s cash flow projections for the future five years, after which future cash flows are estimated using the perpetuity growth rate of zero. The management’s cash flow projections are developed using estimates for expected future revenue growth rates, profit margins and working capital levels of the reporting units.

     On March 31, 2010, we evaluated the recoverability of trademark and concluded that there was no impairment in the carrying value of trademark. We used a risk-adjusted discount rate of 7.8% based on a WACC of 4.8% and an inherent risk spread of trademark of 3.0%. The rate of royalty used for valuation was 3.0%, which was based on the royalty ratio used in the actual transaction with a third party.

     Customer Relationships

     In its determination of the fair value of customer relationships, we utilize the excess earnings method and incorporate relevant unobservable inputs. Significant assumptions used in this analysis include: future cash flows, the risk-adjusted discount rate and the percentage of orders that we expect to receive from the customers existed at the point of acquisition. Future cash flows are based on the management’s cash flow projections for the future five years, after which future cash flows are estimated using the perpetuity growth rate of zero. The management’s cash flow projections are developed using estimates for expected future revenue growth rates, profit margins and working capital levels of the reporting units.

     On March 31, 2010, we evaluated the recoverability of customer relationship assets and concluded that there was an impairment in the carrying value of customer relationships. We used a risk-adjusted discount rate of 4.8%, which represented the WACC, using the Capital Asset Pricing Model. The percentage of orders that we expect to receive from the customers existed at the point of acquisition was estimated based on the historical trend of the percentage of sales to the pre-acquisition customers.

     Impairment of Long-Lived Assets

     The carrying values of long-lived assets that we hold and use are evaluated for impairment whenever there is an event or change in circumstances that indicates that such assets have been impaired or that the carrying amounts of such assets might not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows we expect will result from the use and eventual disposition of the asset. That assessment shall be based on the carrying amount of the asset at the date it is tested for recoverability, whether in use or under development. The impairment loss is measured as the amount by which the carrying amount of a long lived asset exceeds its fair value.

     In accordance with the guidance for the impairment or disposal of property, plant and equipment, property, plant and equipment held and used with a carrying amount of ¥45 million were written down to their fair value of ¥22 million, because certain company residences were temporarily idled and fair value of these assets was below their book value at March 31, 2010. We measured fair value based on the market price under recent market transactions. We recorded an impairment charge on property, plant and equipment of ¥23 million for fiscal 2010.

     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, 2010, the discount rate used for the contributory retirement plan was 2.3%. 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 2010, 2.5% for fiscal 2009 and 2.5% for fiscal 2008. The estimated long-term rate of return is based on an asset allocation of equity securities of 33%, debt securities of 48% and other investments of 19%.

     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%				0.5%				0.5%				0.5%
		decrease				increase				decrease				increase
Discount rate
Effect on periodic benefit costs			(103	)			107				(1,103	)			1,146
Effect on benefit obligation			1,650				(1,545	)			17,666				(16,542	)
Expected long-term rate of return on plan assets
Effect on periodic benefit costs			135				(135	)			1,445				(1,445	)
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

     In December 2007, the FASB issued new accounting guidance for business combinations. This guidance established 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 established disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. In April 2009, the FASB issued an amendment to the revised business combination guidance. This amended and clarified the revised guidance 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. The revised guidance and amendment became 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 adopted this guidance from the first quarter beginning April 1, 2009, and accounted for our acquisition of Lecien under this guidance. For further information on this guidance and other recent accounting pronouncements, see Note 1, “Summary of Significant Accounting Policies: Recent Accounting Pronouncements”, in our consolidated financial statements included in this annual report.

B. Liquidity and Capital Resources.

     Our main source of liquidity is net cash flows from operations which allows us to secure working capital, make capital investments and pay dividends without relying on substantial borrowings or other financing from outside of the group. However, as of March 31, 2010 we had credit facilities at financial institutions totaling ¥29,331 million, with an outstanding balance of ¥8,129 million, including borrowings by Lecien of ¥3,487 million and borrowing by Nanasai of ¥2,200 million.

     In general, all of our credit facilities have automatically renewed terms, and we are not aware of any issues with respect to any of our lenders that could cause these facilities to become unavailable. Even if any of our subsidiaries loses access to funds from such credit facilities, we believe that it is possible for companies in our group to provide funds. Our borrowing requirements are not affected by seasonality.

     We are not aware of any restrictions on the transfers of funds from a subsidiary to a parent company in the form of a cash dividend, 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 2010, 2009 and 2008 were as follows:

		Fiscal year ending March 31,
		2010				2009				2008
		(in millions)
Net cash provided by operating activities		¥	9,449			¥	8,168			¥	14,225
Net cash (used in) provided by investing activities			(2,698	)			(4,714	)			3,590
Net cash used in financing activities			(5,438	)			(7,448	)			(9,400	)

     Fiscal 2010 Compared to Fiscal 2009

     Cash Provided by Operating Activities. Net cash provided by operating activities increased slightly by ¥1,281 million from ¥8,168 million for fiscal 2009 to ¥9,449 million for fiscal 2010. This was primarily due to substantial progress achieved in cost-reduction efforts and to a decrease in inventory, despite a decrease in net sales. Cash inflows from operating activities consisted mainly of cash received from customers and cash outflows are mainly payments for production costs, selling, general and administrative expenses, and income taxes. For fiscal 2010, cash inflows from cash received from customers decreased due to a decrease in net sales. This decrease was more than offset by a decrease in cash outflows achieved through cost reductions and efforts to keep inventory levels lower. In addition, despite a small increase in selling, general and administrative expenses, cash outflows for payments relating to such expenses decreased as a result of successful cost-cutting efforts that resulted in reduced personnel and publicity expenses. The increase in selling, general and administrative expenses, despite the decrease in cash outflows, was primarily attributable to increases in non-cash items, such as depreciation and amortization

and liability for termination and retirement benefits. Cash outflow for payments of income taxes decreased, due to the decrease in taxable income.

     Net Cash Used in Investing Activities. Net cash used in investing activities decreased by ¥2,016 million from ¥4,714 million for fiscal 2009 to ¥2,698 million for fiscal 2010. This was primarily due to an increase in proceeds from the sale and redemption of marketable securities of ¥5,007 million which was partially offset by increase in payments to acquire marketable securities of ¥2,407 million and an increase in capital expenditures of ¥1,636 million.

     Net Cash Used in Financing Activities. Net cash used in financing activities decreased by ¥2,010 million from ¥7,448 million for fiscal 2009 to ¥5,438 million for fiscal 2010. This was primarily due to a decrease of ¥2,389 million in treasury stock purchases.

Capital Expenditures

     Capital expenditures were ¥3,998 million for fiscal 2010, ¥2,362 million for fiscal 2009 and ¥1,211 million for fiscal 2008. 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 ¥1,755 million for fiscal 2010, ¥1,846 million for fiscal 2009 and ¥1,678 million for fiscal 2008. These payments primarily comprised of payments for information technology-related investments.

     For fiscal 2011 we expect to spend approximately ¥530 million for office maintenance and repair and ¥120 million for investments in information technology and our retail sales space in China. Although we currently do not have any concrete plans, we 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 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, and in fiscal 2008, we sold overseas corporate housing units and other property with a book value of ¥211 million.

Cash Dividends

     On May 11, 2010, our board of directors approved a fiscal year-end dividend of ¥100 per five shares of common stock to our shareholders on record as of March 31, 2010, and dividends in a total amount of ¥2,828 million were paid on June 7, 2010. 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

     We repurchased 309,472 shares of common stock during fiscal 2010 from shareholders who held shares constituting less than one unit and requested that such shares be repurchased, as well as from dissenting shareholders in our share exchange with Lecien who requested that their shares be repurchased. See “Item 10.B. Memorandum and Articles of Association—Capital Stock—Distribution of Surplus—Unit Share System”. On February 22, 2010, our board of directors approved by resolution repurchases of up to 750 thousand shares of common stock up to a total purchase amount of ¥794 million. Pursuant to this board of directors resolution, we had repurchased 740 thousand shares of common stock for a total purchase price of ¥784 million as of February 23, 2010. In addition, also on February 22 we purchased 93 thousand shares of common stock for a total purchase price of ¥98 million from our subsidiaries Wacoal Corp. and Torica Co., Ltd.

C. Research and Development, Patents and Licenses, etc.

     For more than 40 years, since the establishment of our Human Science Research Center, we have aimed to achieve harmony between the human body and clothing. In particular, we have conducted research into women’s body in order to accurately understand the Japanese woman’s physique. 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 also working on 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 applying new sales methods at that time. From 1995 to 1998 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.

     Our research and development activities for fiscal 2010 have been very fruitful as we have been able to succeed in producing new products by improving and building on our existing products. For example, we conducted research into the relationship between aging and changes in the physical form of the body, and determined and announced the law of this relationship. In addition, since fiscal 2007, we have continued our research and development in men’s innerwear, and have continued to make progress in implementing the measurement of the male body and improved the organization of our monitoring and data collection system.

     The cost of research and development for fiscal 2010 was approximately ¥778 million, compared to ¥768 million for fiscal 2009 and ¥766 million for fiscal 2008. We expect to maintain a similar level of research and development expenditures for fiscal 2011.

D. Trend Information.

     The recent global economic downturn has affected many of the world’s largest economies, including those of Japan and the United States, where we generated most of our sales in recent years. Although some signs of economic recovery have appeared following the recent implementation of economic stimulus measures, the pace of recovery in Japan and the U.S. continues to be slow. While it is difficult to anticipate macroeconomic trends, we expect that a recovery in consumer spending will still take time. In Japan, our main sales channels (i.e., department stores, general merchandisers and specialty retail stores) continue to perform poorly, and we expect that the difficult economic conditions will continue for fiscal 2011.

     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 merchandisers, we plan to achieve certain growth by continuing to develop high value-added products focusing on our campaign brassiere LALAN and our high-function bottom innerwear from the Style Science series. In addition, we are working to expand and increase market awareness of those business areas that continue to grow, such as our specialty retail stores, wellness business and men’s innerwear business.

     The U.S. market will remain an important market for fiscal 2011 but we expect that sales in the United States will continue to decrease as a result of the economic downturn. Although we continue to feel the impact of lower sales due to the termination of the Donna Karan licensed brands, we are making efforts to recover our sales by growing our existing Wacoal Brand products as well as our b.tempt’d by Wacoal product, and also by actively expanding our business into the surrounding countries of the United States.

     We expect that our business in China will continue to expand for fiscal 2011 and we plan to maintain this expansion by accelerating new store openings using our three brand system. For inland areas of China, we will concentrate on further improving our Wacoal brand awareness and sales. We will also concentrate on improving market penetration of the Wacoal brand from the coastal to inland areas of China through proactive promotions. In addition, we plan to launch our Peach John business and also open our first Peach John retail store in China for fiscal 2011.

     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 9 to the consolidated financial statements.

     The following table summarizes our contractual obligations as of March 31, 2010:

						Less than				1-3				3-5				More than
		Total				1 year				years				years				5 years
		(millions of yen)
Long-term debt obligations			137				62				75				—				—
Capital (Finance) lease obligations			51				46				5				—				—
Operating lease obligations			3,032				688				1,226				336				782
Purchase obligations			5,291				5,291				—				—				—
Total			8,511				6,087				1,306				336				782

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 (Jan 29, 1948)		President and Representative Director		Apr 1972		Joined Wacoal Corp.
				Nov 1977		Director
				Nov 1981		Managing Director
				Sep 1984		Executive Vice President
				Sep 1984 — present		Representative Director
				Jun 1987 — present		President
				Jun 2002		Corporate Officer
Hideo Kawanaka (June 25, 1942)		Director and Executive Vice President		Apr 1965		Joined Isetan Co., Ltd.
				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
Tadashi Yamamoto (Nov 14, 1952)		Director		Mar 1976		Joined Wacoal Corp.
				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
Ikuo Otani (Nov 20, 1953)		Director		Mar 1976		Joined Wacoal Corp.
				June 2001		Corporate Officer and Manager of Business Management
				June 2006		Director and Corporate Officer, and Supervisor of Business Management, of Wacoal Corp.
				Apr 2008		Director and Corporate Officer, and General Manager of Corporate Planning Division, of Wacoal Corp.
				Apr 2010 — present		Director and Corporate Officer, and Supervisor of Accounting, of Wacoal Corp.
				Jun 2010 — present		General Manager of Corporate Planning Department 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*
Mamoru Ozaki** (May 20, 1935)		Director		Jun 1991		Commissioner of National Tax Agency
				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
				Jun 2005 — present		Director
Morio Ikeda (Dec 25, 1936)		Director		Apr 1961		Joined Shiseido Co., Ltd.
				Apr 1990		Director and Chief of Secretary’s Office
				Apr 1995		Managing Director
				Jun 1997		Representative Senior Managing Director
				Jun 2000		Representative Director and Executive Vice President
				Jun 2001		Representative Director and President
				Jun 2005		Chairman and Director
				Jun 2006 — present		Senior Advisor
				Jun 2010 — present		Director
Atsushi Horiba** (Feb 5, 1948)		Director		Sep 1972		Joined HORIBA, Ltd.
				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
Kimiaki Shiraishi (Mar 20, 1950)		Standing Corporate Auditor		Aug 1976		Joined Wacoal Corp.
				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 (Feb 5, 1952)		Standing Corporate Auditor		Mar 1974		Joined Wacoal Corp.
				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

		Position(s) and
Name		Office(s) with
(Date of		Wacoal				Business Experience and Position(s) and Office(s)
Birth)		Holdings		Date		with Wacoal Holdings*
Akira Katayanagi (Feb 4, 1946)		Corporate Auditor		Apr 1968		Joined Mitsubishi Bank Ltd.
				Jun 1995		Director and manager of Loan Department 1
				Apr 1996		Director of The Bank of Tokyo-Mitsubishi, Ltd.
				Feb 2000		Managing Director and Deputy Branch Manager of Nihonbashi Branch
				May 2001		Managing Director and Deputy Branch Office Manager of Osaka Branch Office
				Jun 2003		Representative Director and President of DC Card Co., Ltd.
				Apr 2007		Representative Director and Vice President of Mitsubishi UFJ NICOS Co., Ltd.
				Jun 2008 — present		Representative Director and Chairman of Mitsubishi UFJ NICOS Co., Ltd.
				Jun 2010 — present		Corporate Auditor
Tomoharu Kuda** (Dec 7, 1946)		Corporate Auditor		Sep 1972		Joined Deloitte Haskins & Sells
				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
Yoko Takemura** (Apr 7, 1952)		Corporate Auditor		Apr 1990		Registered as lawyer (Tokyo), joins Miyake Imai Ikeda law firm.
				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 2011. The term as corporate auditor for Ms. Takemura expires in June 2013, the terms as corporate auditor for Messrs. Shiraishi and Kuda expire in June 2011, the term as corporate auditor for Mr. Kawashima expires in June 2012 and the term as corporate auditor for Mr. Katayanagi expires in June 2014.

B. Compensation.

Cash Compensation

     Aggregate compensation, including bonuses, paid by us in fiscal 2010 to our directors and corporate auditors was ¥318 million. Of this total, ¥263 million was paid to our directors (including ¥28 million to our three outside directors) and ¥55 million was paid to our corporate auditors (including ¥22 million to our three outside corporate auditors).

     Starting with its annual securities report for the year ended March 31, 2010 filed with the Ministry of Finance, a Japanese listed company is required to disclose the individual compensation of any director, executive officer or corporate auditor if it is ¥100 million or more. For fiscal 2010, Yoshikata Tsukamoto, our President and Representative Director, received compensation in the amount of ¥173.66 million, comprised of ¥132 million in base salary, ¥20 million as a cash bonus and ¥21.66 million in stock options.

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 was ¥339 million at March 31, 2010 and ¥339 million at March 31, 2009.

Stock Option Plans

     We currently have the four stock option plans under which there are outstanding options for a total of 102,000 shares of our common stock:

	•		First Stock Acquisition Rights: On September 1, 2008, we granted to five directors of Wacoal Holdings stock acquisition rights to acquire for an exercise price of ¥1 per share a total of 40,000 shares of our common stock, of which 36,000 remain outstanding as of July 12, 2010. These rights became fully vested on September 2, 2008. Each person was granted a right to acquire an amount ranging from 4,000 to 19,000 shares of common stock.
	•		Second Stock Acquisition Rights: On September 1, 2008, we granted to five directors of Wacoal stock acquisition rights to acquire for an exercise price of ¥1 per shares a total of 17,000 shares of our common stock, of which 17,000 remain outstanding as of July 12, 2010. These rights became fully vested on September 2, 2008. Each person was granted a right to acquire an amount ranging from 3,000 to 4,000 shares of common stock.
	•		Third Stock Acquisition Rights: On September 1, 2009, we granted to four directors of Wacoal Holdings stock acquisition rights to acquire for an exercise price of ¥1 per share a total of 35,000 shares of our common stock, of which 35,000 remain outstanding as of July 12, 2010. These rights became fully vested on September 2, 2009. Each person was granted a right to acquire an amount ranging from 4,000 to 20,000 shares of common stock.
	•		Fourth Stock Acquisition Rights: On September 1, 2009, we granted to four directors of Wacoal stock acquisition rights to acquire for an exercise price of ¥1 per share a total of 14,000 shares of our common stock, of which 14,000 shares are outstanding as of July 12, 2010. These rights became fully vested on September 2, 2009. Each person was granted a right to acquire an amount ranging from 3,000 to 4,000 shares of common stock.

     All 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 December 2009, the Tokyo Stock Exchange introduced a listed company rule that requires that a listed company have at least one “independent officer”, which is defined as an outside director or corporate auditor with respect to whom there is no risk of a conflict of interest with general shareholders. Each listed company was required to submit a report on independent officers with the Tokyo Stock Exchange by March 31, 2010 disclosing whether the company had any independent officer, along with other related information. To the extent any company did not have an independent officer at that time, the company was required to select one at the general shareholders meeting related to the fiscal year that ended on or after March 1, 2010. In our report on independent officers submitted to the Tokyo Stock Exchange on March 31, 2010, we identified Messrs. Mamoru Ozaki and Atsushi Horiba, both of whom are outside directors (along with Mr. Kazuo Inamori, who retired in June 2010), and Tomoharu Kuda and Yoko Takemura, both of whom are outside corporate auditors (along with Yutaka Hasegawa who retired in June 2010), as independent officers for the following reasons:

	•		Mamoru Ozaki: Mr. Ozaki is the former Commissioner of the National Tax Agency and Administrative Vice-Minister of Finance. We first retained him as advisor in July 2003 related to finance and China. We believe that Mr. Ozaki, with his broad insight into social issues, is qualified to serve as an outside director for us, as we seek to take on greater corporate social responsibility. Also, because he is capable of providing advice from the perspective of an individual who has never been employed by us, we believe that he is capable of serving us as an independent officer.
	•		Atsushi Horiba: We believe Mr. Horiba, with his experience and insight into domestic and overseas business development, is qualified to serve as an outside director for us, as we seek to strengthen our overseas business presence. Also, because he is capable of providing advice from the perspective of an individual who has never been employed by us, we believe that he is capable of serving us as an independent officer.
	•		Tomoharu Kuda: Mr. Kuda was the former representative partner of Deloitte Touche Tohmatsu, our auditing firm, until he left the firm in June 2007. Since July 2007, he has been serving us as an outside corporate auditor. We believe Mr. Kuda meet the requirements for an independent officer, as he had never participated in the audit of the Company during his career at Deloitte Touche Tohmatsu, is independent and neutral with respect to general shareholders and has been serving as a corporate auditor with both supervisory and advisory function based on expert knowledge in accounting/finance gained in his career as a certified public accountant.
	•		Yoko Takemura: We believe Ms. Takemura, with her legal expertise as a lawyer and years of experience in commercial affairs, is qualified to serve as an outside corporate auditor for us. Also, because she is capable of providing advice from the perspective of an individual who has never been employed by us, we believe that she is capable of serving us as an independent officer.

     For further information regarding the new independent officer requirement, please see “Item 16G. Corporate Governance”.

     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: Ikuo Otani, chair of the committee, Mamoru Ozaki, Mitsuo Yamamoto, Tomoki Nakamura 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, 2010, 2009 and 2008:

														Asia (other
		Total				Japan				Americas1				than Japan)				Europe
March 31, 2010:
Wacoal Business (Domestic)			7,453				7,453				—				—				—
Wacoal Business (Overseas)			6,277				—				1,596				4,643				38
Peach John Business			467				456				—				11				—
Nanasai Business			263				262				—				1				—
Other			1,154				419				3				732				—
Total			15,614				8,590				1,599				5,387				38
March 31, 2009:
Wacoal Business (Domestic)			7,471				7,471				—				—				—
Wacoal Business (Overseas)			6,206				—				1,665				4,505				36
Peach John Business			463				453				—				10				—
Nanasai Business			271				271				—				—				—
Other			65				65				—				—				—
Total			14,476				8,260				1,665				4,515				36
March 31, 2008:
Wacoal Business (Domestic)			7,381				7,381				—				—				—
Wacoal Business (Overseas)			5,460				—				1,401				4,024				35
Peach John Business			379				379				—				—				—
Nanasai Business			255				255				—				—				—
Other			66				66				—				—				—
Total			13,541				8,081				1,401				4,024				35