6-K 1 k01610e6vk.txt WACOAL HOLDINGS CORP. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of, June 2008 Commission File Number: 000-11743 WACOAL HOLDINGS CORP. (Translation of Registrant's Name into English) 29, Nakajima-cho, Kisshoin, Minami-ku Kyoto, Japan (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F X Form 40-F ----- ----- Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ----- Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders. Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ----- Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR. Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- N/A EXHIBIT INDEX
Exhibit Date Description of Exhibit ------- ------------ ---------------------------------------------- 1 June 3, 2008 Notice of the 60th Ordinary General Meeting of Shareholders to be Held in Kyoto, Japan on June 27, 2008
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WACOAL HOLDINGS CORP. (Registrant) By: /s/ Masaya Wakabayashi ------------------------------------ Masaya Wakabayashi General Manager, Corporate Planning Date: June 5, 2008 EXHIBIT 1 NOTICE OF THE 60TH ORDINARY GENERAL MEETING OF SHAREHOLDERS TO BE HELD IN KYOTO, JAPAN ON JUNE 27, 2008 (This is a translation from the original notice in the Japanese language dispatched to shareholders in Japan. The financial statements included in this Notice of the General Meeting of Shareholders are based upon accounting principles and practices generally accepted in Japan.) WACOAL HOLDINGS CORP. KYOTO, JAPAN Code Number: 3591 June 3, 2008 TO OUR SHAREHOLDERS WACOAL HOLDINGS CORP. 29, Nakajima-cho Kisshoin, Minami-ku Kyoto 601-8530, Japan Yoshikata Tsukamoto Representative Director NOTICE OF THE 60TH ORDINARY GENERAL MEETING OF SHAREHOLDERS This is to inform you that the Company's 60th ordinary general meeting of shareholders will be held as described below. You are cordially invited to attend the meeting. IF YOU ARE UNABLE TO ATTEND THE MEETING, WE WOULD LIKE TO REQUEST THAT YOU CAREFULLY EXAMINE THE REFERENCE MATERIALS SET FORTH BELOW AND MAIL YOUR BALLOT SHOWING YOUR CONSENT OR DISSENT SO THAT WE RECEIVE IT NO LATER THAN JUNE 26, 2008 (THURSDAY) at 5:30 p.m. Particulars 1. Date: Friday, June 27, 2008 at 10:00 a.m. 2. Place: The hall on the 10th floor of the Head Office of Wacoal Holdings Corp., located at 29, Nakajima-cho, Kisshoin, Minami-ku, Kyoto, Japan (on the west side of Nishi-Oji Station on the JR line) (Please refer to the map on the back of this notice.) 3. Purpose of Meeting: Matters to be reported: 1. Presentation of the Business Report, Consolidated Financial Statements for the 60th fiscal year from April 1, 2007 through March 31, 2008 and Audit Reports of the Independent Accountants and the Board of Statutory Auditors for the Consolidated Financial Statements 2. Presentation of the Financial Statements for the 60th fiscal year from April 1, 2007 through March 31, 2008 1 Matters to be resolved: Agenda Item No. 1: Election of eight directors Agenda Item No. 2: Election of one statutory auditor Agenda Item No. 3: Payment of officers' bonuses Agenda Item No. 4: Resolution regarding the amount and terms of stock acquisition rights to be issued to directors as stock options 4. Exercise of Voting Right (1) Exercise of Voting Right by Proxy If you are not able to attend the meeting, you can still exercise your voting right by appointing another shareholder who has a voting right to represent you at the meeting. Please note that such shareholder will be required to submit a document which certifies such appointment. (2) Amendments to the Supplementary Schedules and Reference Materials Please note that any amendments to the supplementary schedules or the reference materials will be posted and announced on the Company's website (http://www.wacoalholdings.jp/). ********** If you attend the meeting on the appointed date, please bring the ballot with you and submit it to the meeting receptionist. 2 SUPPLEMENTARY SCHEDULES ON MATTERS TO BE REPORTED BUSINESS REPORT FOR THE PERIOD FROM APRIL 1, 2007 THROUGH MARCH 31, 2008 1. STATUS OF GROUP BUSINESS (1) BUSINESS DEVELOPMENTS AND RESULTS (A) SUMMARY OF OPERATIONS During the fiscal year ended March 31, 2008 (fiscal year 2008), the Japanese economy generally experienced slow growth in the first half year, but growth in the corporate earnings was suspended in the second half of the year due to fluctuations in the stock and foreign exchange markets and other factors as a result of the sudden rise in the price of crude oil and the U.S. sub-prime mortgage crisis. Consumer activity mirrored these trends. Overseas, economic recovery in the U.S. has slowed, and the economic recovery in Europe has moderated somewhat, although China and other Asian economies continue to grow. The early spring low temperatures, prolonged rainy season and high summer temperatures affected the domestic women's fashion and clothing industry and business results were decreased. In this environment, our group (primarily Wacoal Corporation, which is the core operating entity in our group) sought to improve the strength of its products and endeavored to develop products focused on consumer needs. With respect to the Wacoal and Wing brand business departments, our core brassiere products showed favorable sales performance, but the overall sales of the Wacoal brand business department were below the levels of the same period in the prior fiscal year. This was largely due to the poor sales performance of our Style Science series products which have new features for the lower body that we are working to develop as our core products for the lower body. On the other hand, the Wing brand business department maintained the level of the same period of the prior fiscal year due to favorable sales of the other products. We are promoting our new growth strategy CAP21 (Corporate Activation Project 21) in order to achieve accelerated growth. As a part of our efforts in CAP21, we acquired 49% interest in Peach John Co., Ltd. ("Peach John") in June 2006. Peach John has achieved a breakthrough with its own catalog and Internet sales, and through sales at company stores across Japan, of innerwear, outerwear and other products. Peach John has many loyal customers, mainly young women and young career women. Following the capital alliance, Wacoal and Peach John utilized their respective know-how and broad customer base to develop their businesses synergistically, and in January 2008, with the aim of speeding up and strengthening such business development, Wacoal acquired the remaining 51% of Peach John through a stock swap, making Peach John a wholly owned 3 subsidiary. Wacoal exchanged 3.44 million shares of treasury stock and 3.26 million shares of newly issued stock in connection the stock swap. Additionally, in order to improve capital efficiency, Wacoal implemented a buyback and cancellation of 3.9 million of its own shares. Please note that for purposes of Wacoal's fiscal year 2008 consolidated financial statements, Peach John is treated as having become a consolidated subsidiary as of March 31, which means it is still treated as an equity-method affiliate for purposes of Wacoal's consolidated income statement. With regard to our overseas business, sales in the U.S. have been increasing over the last few years and the overall sales in overseas were slightly better than the prior fiscal year. In Asia, our business in China continues to show favorable expansion. As a result, consolidated sales for fiscal year 2008, according to U.S. Accounting Standards, were Y165,761 million, a 0.4% decrease compared to the prior fiscal year. In terms of profit, the operating income for fiscal year 2008 was Y13,540 million, a 5.0% increase compared to the prior fiscal year. Income before income taxes, equity in net income of affiliated companies and minority interests for fiscal year 2008 was Y14,353 million, a 3.1% increase compared to the prior fiscal year, and net income was Y4,966 million, a 45.0% decrease compared to the prior fiscal year. The reason for the significant decrease in net income was largely the result of a Y4,694 million write-down of our 49% interest in Peach John, which was acquired during the prior fiscal year as part of a capital alliance. This loss, which we accounted for using the equity method, was the result of a re-evaluation of the fair market value of Peach John's stock following the creation of a sound five-year business plan taking into account various changes in the business structure of the mail-order industry that are being brought on by the spread of the Internet and cellular phones. Regarding sales by business category, sales of textile goods for fiscal year 2008 were Y150,710 million, a 0.2% increase compared to the prior fiscal year. Other sales during fiscal year 2008 were Y15,051 million, a 6.3% decrease compared to the prior fiscal year. Regarding sales by location, Japan represented Y139,618 million, or 84.2%, of group sales, while Asia accounted for 4.6% and Europe and the U.S. accounted for 11.2%. Summary of operations by business segment of the Group is as follows. (i) Textile goods and related products In the spring, the Wacoal brand business department of Wacoal Corporation, which is our core operating company, launched LALAN in spring, our new campaign brassiere, which showed favorable sales performance. LALAN meets the needs of women of all bust sizes due to a unique design that is individually tailored to each size, 4 and we believe that our new-style of advertising campaign, which differs from traditional promotions that focus primarily on functionality, has reached new consumers beyond our existing customer base. Additionally, our switch in strategy from seasonal campaigns that promote new products to increasing the number and variety of LALAN series products each season has extended the sales period for our campaign products and resulted in an improvement in sales and stock clearance rates. Fall/winter season sales of Sugoi, our newly developed line of lingerie that utilizes new materials, largely exceeded our expectations. This was due to wide acceptance of the product's characteristics of being thinner, lighter and warmer than past products, as well as extensive media coverage of the product name, which gives the impression of a product that exceeds existing products in terms of image and functionality. On the other hand, sales of products from our Style Science brand category, which was introduced two years ago with new features for the lower body, was well below the sales levels of previous years. Our research shows that this was due to the fact that two years have passed since the release of the original Hip Walker, and in-store promotions have decreased. In addition, there has been a failure to capture new customers, and our attempts to encourage existing customers to buy replacement products have been ineffective. Due to poor sales performance of our Style Science series products, overall sales of our Wacoal brand business department were below the results of the previous fiscal year. In our Wing brand business department, as with our Wacoal brand, our core brassieres, particularly our standard products, performed well, as have girdles, body-suits and lingerie. On the other hand, sales of our Style Up Pants from our Style Science series have declined. Nevertheless, a Style Science product for men, the Cross-Walker, was developed and officially went on sale in department stores under the DAMS brand in February 2008 and in chain stores under the BROS brand name in April 2008. There has been a very favorable consumer response to both products, and we expect this line to expand in the future. With the scheduled introduction of special health checks and guidance aimed at preventing metabolic syndrome in April 2008 as a backdrop, we began selling Exwalker Style Science products at various locations, including gyms and corporate health insurance associations in January of this year. Although sales of our core lines of the Style Science series products aimed at women in fiscal year 2007 were disappointing, we believe that there are still good opportunities to capture new customers and encourage existing customers to continue purchasing these products by expanding our marketing channels and range of target customers and renewing our promotional strategies. Our specialty retail store business consists of Une Nana Cool, an independently operated subsidiary, our Wacoal Corporation direct retail store business for our Amphi, SUBITO and Sur La Plage brands, and our Wacoal Factory Stores chain of factory outlet stores. Une Nana Cool's new and existing stores, as well as LuncH, a new type of store concentrating on lingerie, are all performing well and have shown fiscal year profits for the first time. In addition, efforts to limit the opening of new stores and focus on increasing and improving the earnings of existing stores have led to improved results for our direct retail store business as well. 5 Sales of outerwear, our core products in our mail-order business catalogs, have been poor, but shoes and miscellaneous items have generally performed well with varying degrees of performance depending on the type or product. Sales from pamphlets placed in newspapers and from our online store have been favorable. Continuing from the previous period, we have improved our net results by revising our media costs and improving our inventory. As for our wellness business, net sales of our sports conditioning wear CW-X, our core sports related product, were down as a result of delivery adjustments for inventory regulation purposes and product returns from stores. There was growth in the sales of leg-related products associated with entry into a new type of business. However, overall sales were lower than the previous fiscal year due to the negative effects of weather on the performance of wet weather footwear and a reduction in department store sales of leggings. Sales of our semi-order innerwear business, Dubleve, were in line with those of the previous fiscal year due to a failure to sufficiently capture new customers as well as a decrease in the average purchase price per customer. Sales have been increasing in the U.S. over the last few years due to an increasing demand for luxury items and an increase in transactions with mid-level department stores that have not historically sold Wacoal products but that are repositioning themselves as up-scale department stores. However, decreased consumer confidence caused by the U.S. economic slowdown has led to sluggish store sales, and other factors, such as inventory adjustments, have also had an adverse effect, leading to sales levels that are up only slightly over the previous fiscal year. Earnings were down significantly due to decreased profitability and an increase in personnel costs brought on by an increase in the number of sales staff in connection with new store openings, as well as increases in other costs. In Asia, Wacoal's business in China continues to grow. In addition to the expansion of Wacoal brand products, we have begun to expand our youth orientated brand, Amphi, and in the fiscal year ending March 2009, we plan to increase sales through a three-brand structure, including the high value-added brand Salute. (ii) Others As for Nanasai Co., Ltd. ("Nanasai"), the sales in the rental business of mannequins and fixtures exceeded the sales of prior fiscal year due to an increase in the number of orders, however, the sales in the interior design and stores construction work were below the sales of prior fiscal year due to the income-oriented efforts made to survive the severe competition among competitors in competitive biddings. Furthermore, as for the house design business which was succeeded by Nanasai from Wacoal Corp. during the prior fiscal year, it was largely affected by the decrease in the number of housing constructions following the enforcement of the amended Building Standards Law. As a result, the overall sales remained the same as the prior fiscal year. In terms of profit, it showed improvement due to a thorough reduction of costs. 6 Segment Information by Type of Business (Millions of yen)
Textile goods and related products Others Total ----------------- ------- -------- Sales Y150,710 Y15,051 Y165,761 Percentage over the previous year 100.2% 93.7% 99.6%
(Notes) 1. Segment information is prepared based on the Consolidated Financial Statement Regulations. 2. Business classification is classified into textile goods and related products and others based on the type, quality, and resemblance in the sales market of such products. 3. Core products of respective businesses: - Textile goods and related products: innerwear (foundation, lingerie, nightwear and children's innerwear), outerwear, sportswear, hosiery, etc. - Others: mannequins, shop design and implementation, restaurant, culture, services, etc. (B) FINANCING The Company did not engage in any financing through the issuance of common stock or bonds during this fiscal year. (C) CAPITAL EXPENDITURES The total amount of capital expenditures during fiscal year 2008 was Y1,211 million, including expenditures for the maintenance and repair work of various buildings. (D) ACQUISITION OF SHARES AND EQUITY OR SHARE SUBSCRIPTION RIGHTS IN OTHER COMPANIES On January 10, 2008, we acquired the remaining 51% of the total number of issued shares in Peach John through a stock swap, in addition to our stockholding ratio of 49%, making Peach John a wholly owned subsidiary of our Company. 7 (2) CHANGES IN STATE OF ASSETS AND PROFIT AND LOSS (i) Changes in Results of Operations and State of Assets of the Group (Millions of yen, except per share amounts)
Fiscal year ended/as of March 31, --------------------------------------------- 2005 2006 2007 2008 --------- --------- --------- --------- Net sales Y 160,968 Y 164,122 Y 166,410 Y 165,761 Operating income 11,766 1,333 12,896 13,540 Net income 6,790 2,821 9,029 4,966 Net income (per share) 47.17 19.60 63.18 35.14 Total assets 226,196 242,296 250,266 241,619 Total shareholders' equity 175,746 186,475 193,278 185,113 Shareholders' equity (per share) 1,220.93 1,295.72 1,374.89 1,291.41
---------- (Note) 1. The above amounts are based on U.S. Accounting Standards. Therefore, operating income is shown instead of ordinary income. 2. Net income per share is calculated based on the number of average shares issued (excluding the number of shares held as treasury stock) during each fiscal year. 3. Shareholders' equity per share is calculated based on the number of shares issued (excluding the number of shares held as treasury stock) as of the end of the fiscal year. 4. Total shareholders' equity and shareholders' equity per share are calculated using the total number of shareholders' equity recorded on the consolidated balance sheet. (ii) Changes in Results of Operations and State of Assets of the Company (Millions of yen, except per share amounts)
Fiscal year ended/as of March 31, --------------------------------------------- 2005 2006 2007 2008 --------- --------- --------- --------- Operating income Y 128,243 Y 70,504 Y 6,005 Y 10,863 Ordinary income 5,919 6,256 2,132 6,937 Net income 3,098 2,877 1,516 2,123 Net income per share 21.33 19.81 10.60 15.02 Total assets 196,641 154,925 150,325 150,081 Net assets 162,637 151,976 145,434 147,562 Net assets per share 1,129.67 1,055.83 1,034.56 1,029.44
---------- (Note) 1. Net income per share is calculated based on the number of average shares issued (excluding the number of shares held as treasury stock) during each fiscal year, excluding the number of shares owned by the Company. 2. Net assets per share is calculated based on the number of shares issued (excluding the number of shares held as treasury stock) as of the fiscal year-end. 8 3. While our core businesses had been sales of textile goods and related products, they were replaced by income from lease and dividends, etc. due to the corporate split implemented on October 1, 2005. Therefore, such income is now stated as "Operating Income". (3) BUSINESS STRATEGIES The average age of our customers is on the rise as the population grows older. Meanwhile, there have been changes in purchasing behavior of innerwear, reflecting changes in the consumption behavior of young fashion consumers. In order to respond to these changes in the average age of our customer and diversification of consumers' values, we think it is necessary to create new added value and build up a means of communication. Further, such changes in the consumption behavior of young consumer create another low-end market and intensify competition among businesses. We are facing a major challenge regarding how we can succeed in such market conditions. Such changes are also impacting distribution channels and therefore, we have an urgent need to establish our operating bases in new channels as well as our existing channels, such as department stores, chain stores and shops which have supported our development over the years. As it is difficult to expect for a large expansion in the domestic consumer market on a long-term basis, we anticipate that it will be essential for us to expand business overseas for future growth. The significant challenges that we face now are to achieve further growth in the U.S. business which is our core overseas operation and to expand business or make new entries in China and other regions where high marketability is expected. Facing these challenges, while we concentrate our resources on areas where we are most competitive by selecting and focusing our business operations, we are promoting our new growth strategy CAP21 (Corporate Activation Project 21) in order to achieve accelerated growth by expanding our business operations by broadening the scope of such competitive areas. Your continued support and cooperation will be greatly appreciated. (4) MAIN SEGMENT
Business Segment Description of business ---------------- ------------------------------------------------- TEXTILE AND RELATED PRODUCTS Manufacture and wholesale of intimate apparel (particularly, foundation garments, lingerie, and nightwear for women's and children's underwear), outerwear, sportswear, hosiery and other textiles and related products, and direct sale to consumers of a portion of the products OTHERS Manufacture and sale of mannequins, interior design and construction work of stores, restaurant businesses, cultural projects, services and real estate business
(5) MAIN SALES OFFICES AND FACTORIES (a) Main Sales Offices and Factories of the Company 9 Head Office (Kyoto) (b) Main Sales Offices and Factories of Subsidiaries Wacoal Corp. (Kyoto), Peach John Co., Ltd. (Tokyo), Studio Five Corp. (Tokyo), Kyushu Wacoal Manufacturing Corp. (Nagasaki), Nanasai Co., Ltd. (Kyoto), Torica Inc. (Osaka), Wacoal International Corp. (U.S.), Wacoal America, Inc., Wacoal France S.A., Wacoal International Hong Kong Co., Ltd., Wacoal Hong Kong Co., Ltd., Vietnam Wacoal Corp., Wacoal Investment Co., Ltd. (Taiwan), Guangdong Wacoal Inc. (China) (6) EMPLOYEES (i) Employees within Group
Number Increased / (Decreased) Name of Business Segment Number of Employees from the end of Prior Fiscal Year ------------------------ ------------------- --------------------------------- Textile and other related products 13,011 139 Others 365 (2) Across the Company 165 7 ------ --- Total 13,541 144 ====== ===
---------- (Note) 1. The number of employees is the number of personnel at work (excludes the number of personnel seconded from our group to other groups, but includes the number of personnel seconded from other groups to our group). 2. Employees classified as "Across the Company" belong to management divisions which cannot be classified into any specific segment. 3. The number of employees does not include the number of temporary employees (the average number of temporary employees during the period, including temporary staff and part-time workers, was 1,337). (ii) Employees of the Company
Number of Number Increased / (Decreased) Employees from the end of Prior Fiscal Year Average Age Average Years of Service --------- --------------------------------- ----------- ------------------------ 62 9 44.8 21.5
---------- (Note) The number of employees is the number of personnel at work (excludes the number of personnel seconded from our group to other groups, but includes the number of personnel seconded from other groups to our group). 10 (7) PRINCIPAL SUBSIDIARIES
Shareholding Name of Company Location Stated Capital Ratio Main business Remarks --------------- -------------- -------------- ------------ ----------------------- ------- (Millions of yen) Wacoal Corp. Minami-ku, Y 5,000 100.0% Manufacture and sale of Kyoto garments Peach John Co., Ltd. Shibuya-ku, 90 100.0% Sale of garments Tokyo Nanasai Co., Ltd. Ukyo-ku, Kyoto 498 76.9% Manufacture and sale of mannequins and display fixtures; interior design and construction work of stores (Thousands of dollars) Wacoal International Corp. NY, U.S.A. $20,000 100.0% Investment in US subsidiaries *1 Wacoal America, Inc. NY, U.S.A. 2,062 100.0% Manufacture and sale of garments *2
---------- (Note) *1. Wacoal International Corp. is a wholly owned subsidiary of our subsidiary, Wacoal Corp. *2. Wacoal America Inc. is a wholly owned subsidiary of our subsidiary, Wacoal International Corp. 2. STOCK INFORMATION (1) TOTAL NUMBER OF SHARES AUTHORIZED TO BE ISSUED: 500,000,000 SHARES (2) TOTAL NUMBER OF ISSUED AND OUTSTANDING SHARES: 143,378,085 SHARES (Note) The total number of issued and outstanding shares was increased by 3,261,400 shares due to the implementation of the stock swap, and decreased by 3,900,000 shares due to the cancellation of shares. (3) TOTAL NUMBER OF SHARES HELD AS TREASURY STOCK: 35,998 SHARES (4) TOTAL NUMBER OF SHAREHOLDERS AS OF THE END OF THIS FISCAL YEAR: 10,447 (5) MAJOR SHAREHOLDERS:
Number of Shares Held by Name of Shareholder Shareholder Shareholding Ratio ------------------- ------------------------ ------------------ (Thousands of shares) (%) Hero & Co. 23,701 16.53 Meiji Yasuda Life Insurance Company 6,999 4.88
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Number of Shares Held by Name of Shareholder Shareholder Shareholding Ratio ------------------- ------------------------ ------------------ (Thousands of shares) (%) The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6,986 4.87 Mika Noguchi 6,701 4.68 Nippon Life Insurance Company 5,460 3.81 The Bank of Kyoto, Ltd. 4,264 2.97 The Shiga Bank, Ltd. 3,376 2.36 The Dai-ichi Mutual Life Insurance Company 3,212 2.24 Mitsubishi UFJ Trust and Banking Corporation 3,050 2.13 Tokyo Marine & Nichido Fire Insurance Co., Ltd. 2,568 1.79
---------- (Notes) The shareholding ratio is calculated based on the number of shares issued (excluding the number of shares held as treasury stock) as of the end of fiscal year. 3. OFFICERS (1) DIRECTORS AND AUDITORS (AS OF MARCH 31, 2008)
Position Name Responsibility Remarks -------- ------------------- ------------------------------ ------------------ Representative Director Yoshikata Tsukamoto Representative Director and President, Corporate Officer of Wacoal Corp. Senior Managing Director Shoichi Suezawa Managing Director Hideo Kawanaka Director, Senior Corporate Officer of Wacoal Corp. Director Yuzo Ito Director, Senior Corporate Officer of Wacoal Corp. Director Tatsuya Kondo Director, Senior Corporate Officer of Wacoal Corp. Director Tadashi Yamamoto Director, Managing Corporate Officer of Wacoal Corp.
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Position Name Responsibility Remarks -------- ------------------- ------------------------------ ------------------ Director Kazuo Inamori Chairman Emeritus of Kyocera *1 Corporation, Honorary Adviser of KDDI Corporation Director Mamoru Ozaki Advisor to Yazaki Corporation, *1 Outside Director of Fuji Kyuko Co., Ltd., Outside Director of Kikkoman Corporation Statutory Auditor Hajime Kotake *2 (Full-Time) Statutory Auditor Kimiaki Shiraishi Statutory Auditor of Wacoal Corp. (Full-Time) Statutory Auditor Yutaka Hasegawa Outside Statutory Auditor of *3 The Hyakugo Bank, Ltd. Statutory Auditor Tomoharu Kuda Certified Public Accountant *3, *4 Statutory Auditor Yoko Takemura Attorney-at-Law *3
---------- (Notes) *1. Mr. Kazuo Inamori and Mr. Mamoru Ozaki, Directors, are outside directors as prescribed in Item 15, Article 2 of the Company Act. *2 Mr. Hajime Kotake has many years of accounting experience at our Accounting Department with a respectable degree of finance and accounting knowledge. *3 Mr. Yutaka Hasegawa, Mr. Tomoharu Kuda and Ms. Yoko Takemura, Statutory Auditors, are outside statutory auditors as prescribed in Item 16, Article 2 of the Company Act. *4 Mr. Tomoharu Kuda is a public certified accountant with a considerable degree of finance and accounting knowledge. (2) REMUNERATIONS AND OTHER COMPENSATIONS PAID TO DIRECTORS AND STATUTORY AUDITORS Y272 million for 8 directors (of those, Y16 million for 2 outside directors) Y44 million for 5 statutory auditors (of those, Y19 million for 3 outside statutory auditors) ---------- (Notes) *1 The above amount includes Y40 million of officers' bonuses (Y40 million to directors) which is to be resolved at this Ordinary General Meeting of Shareholders. 13 *2 In addition to the above, we plan to pay Y28 million of accrued benefits associated with the termination of payment of retirement allowances determined by the resolution of the Ordinary General Meeting of Shareholders held on June 29, 2005 to 2 directors and 1 statutory auditor who are to retire at the conclusion of this Ordinary General Meeting of Shareholders. 14 (3) MAIN ACTIVITIES OF OUTSIDE DIRECTORS AND OUTSIDE STATUTORY AUDITORS
Category Name Main Activities ----------------- --------------- ------------------------------------------ Director Kazuo Inamori Mr. Inamori has attended the board of directors' meeting 10 times out of 15 held during fiscal year 2008 and has expressed his opinions on the proposals and/or discussions based on his comprehensive knowledge of overall management. Director Mamoru Ozaki Mr. Ozaki has attended the board of directors' meeting 13 times out of 15 held during fiscal year 2008 and has expressed his opinions on the proposals and/or discussions based on his comprehensive knowledge and experience of financial matters and/or Chinese business with broad social insight. Statutory Auditor Yutaka Hasegawa Mr. Hasegawa has attended the board of directors' meeting 14 times out of 15 and attended the board of statutory auditors' meeting 16 times out of 17 held during fiscal year 2008 and has expressed his opinions based on his comprehensive knowledge of financial matters. Statutory Auditor Tomoharu Kuda Mr. Kuda has attended all board of directors' meetings (10 times) and all board of statutory auditors' meetings (10 times) held during fiscal year 2008 since his assignment as statutory auditor on July 1, 2007 and has expressed his opinions on accounting and financial matters from a professional perspective. Statutory Auditor Yoko Takemura Ms. Takemura has attended all board of directors' meetings (15 times) and all board of statutory auditors' meetings (17 times) during fiscal year 2008 and has expressed her opinions from professional perspective as an attorney-at-law.
(4) MATTERS CONCERNING LIMITATION OF LIABILITY AGREEMENT We amended our Articles of Incorporation at the 57th Ordinary General Meeting of 15 Shareholders held on June 29, 2005 and at the 58th Ordinary General Meeting of Shareholders held on June 29, 2006 to provide a provision regarding a limitation of liability agreement to be executed with outside directors and outside statutory auditors. A summary of the limitation of liability agreement executed with all of our outside directors and outside statutory auditors follows: (Summary of Limitation of Liability Agreement) The Company has executed an agreement with all of its outside directors and outside statutory auditors to limit the liability for damages incurred due to negligence of duties stipulated in Paragraph 1, Article 427 of the Company Act, and the maximum amount of liability under such agreement is the amount as provided by law or regulation. 4. MATTERS CONCERNING ACCOUNTING AUDITORS (1) NAME OF ACCOUNTING AUDITOR Deloitte Touche Tohmatsu (2) REMUNERATIONS, ETC. Amount of remuneration payable to the Y 95,000,000 accounting auditor for this fiscal period: Total amount of money and other property benefits to be paid to Y147,528,000 the accounting auditor by the Company and its subsidiaries:
---------- (Notes) 1. The accounting audit agreement executed between the Company and its accounting auditor does not distinguish between remuneration for accounting under the Company Act and that for accounting under the Financial Instruments and Exchange Law, and they cannot be reliably distinguished. Therefore, the amount given above represents the total amount of the remunerations for both accountings. 2. Among our significant subsidiaries, Wacoal International Corp. and Wacoal America, Inc. are subject to audits by other auditing firms and not by our accounting auditor. (3) NON-AUDIT SERVICES We pay our accounting auditor fees incurred from consulting services for establishing our group's regulations and security measures, which are not included among the services specified under Paragraph 1, Article 2 of Certified Public Accountants Law of Japan. 16 (4) POLICY ON DETERMINATION OF DISMISSAL AND NON-REAPPOINTMENT OF ACCOUNTING AUDITOR Other than when in the interest of the Company, if the above accounting auditor violates and/or infringes the Company Act, the Certified Public Accountant Law or other law or ordinance, or commits any indecent act, the board of statutory auditors shall consider the dismissal or non-reappointment of said accounting auditor, and if the dismissal or non-reappointment is deemed appropriate, the board of statutory auditors shall decide "to dismiss or not to reappoint the accounting auditor" with the consent of all statutory auditors in accordance with the rules of the board of statutory auditors, or shall request the board of directors that the same be submitted as a proposal at the general meeting of shareholders, and the board of directors shall discuss the same. 5. SYSTEM AND POLICIES OF COMPANY (1) SYSTEM TO ENSURE APPROPRIATE BUSINESS CONDUCT (i) System to ensure that execution of duties by directors and/or employees is in compliance with the laws or regulations and the Articles of Incorporation - To ensure that all directors and employees of the group comply with the laws or regulations and the Articles of Incorporation and conducts business based on sound social norms, we have enacted Corporate Ethics: Wacoal's Code of Conduct and Code of Ethics for Corporate Officers and Employees. - Directors will take the initiative to ensure compliance and awareness of corporate ethics within the Group. - In order to improve our system of compliance and consider any compliance issues which may have a material impact on the Group, we have established a Corporate Ethics Committee, which seeks to increase awareness of and educate employees about corporate ethics. Our Representative Director and President acts as the chairperson, and our legal/compliance department is in charge of the committee. - We have established a system under which our legal/compliance department is promptly notified if the Company becomes aware that a director and/or employee of the group may have violated our Corporate Ethics: Wacoal's Code of Conduct or Code of Ethics for Corporate Officers and Employees, or of any other compliance issues. We have also established an internal alert system (a corporate ethics hotline). After being notified and/or alerted, the legal/compliance department perform an investigation and formulate preventive measures after discussions with the related department. If the issue is critical, the legal/compliance department will refer the matter to the corporate ethics committee and will report the results of its review to the board of directors and/or board of statutory auditors. 17 (ii) System concerning the Storage and Management of Information related to Execution of Duties by Directors - With the approval of our board of directors, we have enacted Document Management Rules pursuant to which we store the following documents (includes electromagnetic record) along with any related materials: Minutes of the general meeting of shareholders, minutes of board of directors, minutes of group management committees, documents for which a director is the final decision maker and any other documents prescribed in the Document Management Rules - The retention period for storage of the documents shall be ten (10) years. The storage of these documents shall be subject to the Document Management Rules, and the directors and statutory auditors shall have access to these documents at all times. (iii) Rules and Other Systems Concerning Loss and Risk Management - In order to understand management risk within the Group in general and to improve and/or strengthen our risk management system, we have established a Risk Management Committee, for which the director in charge of risk management acts as chairperson. - The Risk Management Committee prescribes risk management rules, subject to the approval of the board of directors, which forms the basis for our risk management system. The Risk Management Committee clarifies the responsibilities by risk category pursuant to these rules, and formulates a risk management system that thoroughly and/or comprehensively controls potential risk within the Group. - The Risk Management Committee regularly reports on the operations of the Group's risk management system to the board of directors. (iv) System to Ensure Effective Execution of Duties by Directors - In order to enhance appropriate decision-making by our directors, we will appoint several independent outside directors. - We will formulate a mid-term management plan to be shared by the directors and/or employees within the Group and will direct and confirm courses of action and business targets in the mid- to short-term that are consistent with such plan. - We will follow the business results of each Group company on a monthly basis and report back to the board of directors. In addition, by holding quarterly business meetings, we will confirm the business results and the 18 implementation of measures and policies, consider measures in the event targets are not achieved, and review such targets, as may be necessary. (v) System to Ensure Appropriate Business Conduct within Group Companies - We have enacted and manage our Group companies in accordance with our Group Management Rules, which prescribe basic policies regarding the management of Group companies and matters to be decided by our board of directors, as well as matters to be reported to the Company. - Any intercompany transaction must be fair and in compliance with laws or regulations, accounting principles and/or the tax system. - Our audit office will conduct internal audits (including an audit of the establishment and/or operation of our compliance system and risk management system) within the Group companies. The audit office will report the results of its audits to the board of directors and appropriate departments and will give guidance and/or advice on system formulation to Group companies to ensure the appropriate conduct of business. (vi) System Concerning Assistants to Statutory Auditors and Matters Concerning Independence of such Assistants from Directors - To assist the statutory auditors, we have established an office for our board of statutory auditors and will appoint assistants to assist them. - The statutory auditors will be consulted regarding the appointment, evaluation, relocation and discipline of such assistants, and their opinions will be respected. (vii) Reporting System of Directors and Employees to the Statutory Auditors, other Reporting Systems and other Systems to Ensure Effective Audit by Statutory Auditors - We will strive to conduct effective audits by our statutory auditors by causing the directors and the employees to report to the statutory auditors regarding the following matters in addition to statutory matters: Matters referred to the Group management committee Matters which may have a material impact on the Group Monthly and quarterly management conditions Results of internal audits Material violation of laws or regulations and/or our Articles of Incorporation The condition of our internal reporting/alerting system 19 Other significant matters - Half of the statutory auditors will be independent outside statutory auditors to enhance the transparency and neutrality of management. - The statutory auditors may order employees who belong to the audit office to perform any matters that are required to provide audit services. - The board of statutory auditors may consult legal counsel, certified public accountant, consultant or other outside advisor as it deems necessary. 20 (2) POLICY REGARDING DETERMINATION OF DISTRIBUTION OF EARNINGS Our basic policy regarding the distribution of profits to our shareholders is to pay steady dividends and increase our net income per share, all the while giving due consideration to the improvement of corporate value through active investment that will result in increased profitability. As for retained earnings, in light of the improvement of our corporate value, we have actively invested in developing new specialty retail stores, developing new points of contact with customers and actively investing in overseas businesses. We are also concentrating on new business investments, such as the entry into new markets, strategic business alliances and M&A activities. We hope that these efforts will benefit our shareholders by improving future profitability. We also intend to acquire treasury stock from time to time, and we will try to improve our capital efficiency and return profits to our shareholders. (3) BASIC POLICY REGARDING CONTROL OF JOINT STOCK CORPORATIONS (KABUSHIKI KAISHA) (i) Details of Basic Policy Since its establishment in 1949, the Company has strived to develop a domestic market for female innerwear (undergarments), penetrate the global market and establish the Company's business with the aim of creating a global company through a 50-year long-term management plan based on its business objectives of making women beautiful, assisting women in becoming more beautiful and helping women realize their desire to be beautiful. Moreover, as a leading female innerwear company, the Company has built up the Wacoal brand, which has become widely accepted by both domestic and international consumers. Because the Company's corporate value is primarily generated from (i) its strong market position and brand value in the intimate apparel market, which have been cultivated over a long period of time; (ii) its ability to develop highly functional, high value-added, attractive products based on the results of scientific human research with a mid- to long-term perspective; (iii) its superb product quality and support engineering staff, as well as its highly productive global manufacturing and supply systems employing superior sewing technology; (iv) its close relationship of trust with distributors in various sales channels, which link the Company with its customers; (v) the trust of its customers that has been achieved through direct communication and sales by the Company's beauty advisors, who are well-trained and have a great deal of sales experience; and (vi) its good social standing established through the promotion of various social events, such as the Remmama Project and Pink Ribbon, its corporate value and the common interests of its shareholders may be damaged if the above factors are not secured and enhanced in the mid-to long-term. Therefore, the Company believes that all personnel who play a decision-making role in the formulation of its financial and business policies should fully understand these points and be capable of understanding securing and enhancing the Company's corporate value and the common interests of its shareholders. 21 The Company has no objection to large-scale acquisitions of shares of the Company, if it benefits the Company's corporate value and the common interests of its shareholders. However, such large-scale acquisitions do not always benefit a company's corporate value or the common interests of its shareholders. For example, there are large-scale acquisitions of shares which, when viewed in light of their stated purpose and other factors, clearly prejudice corporate value and shareholders' common interests, and there are also large-scale acquisitions that force shareholders to sell their shares, as well as those that do not provide the target company's Board of Directors or its shareholders with sufficient time or information to consider the terms of the acquisition or to propose alternatives and those that require a target company to negotiate with the purchaser for more favorable terms than those initially proposed. In light of these circumstances, the Company believes that it is essential that it be ready to implement countermeasures in response to an acquisition of the Company's shares that is detrimental to its corporate value or its shareholders' common interests by establishing a system that enables its shareholders to determine whether or not to accept such an acquisition and that enables its Board of Directors to secure any necessary information and sufficient time to propose alternatives or to negotiate with the prospective purchaser on behalf of its shareholders. (ii) Specific Details of Efforts - Special efforts toward ensuring effective use of company assets, appropriate formation of group companies and realization of other basic policies In February 2004, the Company formulated its Mid-Term Management Plan 2004-06, under which the Company has continued to exert efforts to secure and enhance its corporate value and the common interests of its shareholders. In addition, the Company has been promoting CAP21 (Corporate Activation Project 21), a corporate activation project to implement mid- to long-term strategies to further enhance its corporate value, and it is considering expanding its business to achieve faster growth with an eye toward M&A and strategic business alliances, in addition to the reorganization and enhancement of its existing businesses under the holding company structure. In January 2007, the Company formulated its Mid-Term Management Plan 2007-09 and is promoting the goals of CAP21. - Efforts to prevent the decision-making of financial and business policies of the company from being controlled by inappropriate personnel in light of the basic policies At a meeting held on June 29, 2006 the Board of Directors resolved to adopt certain measures based on the Basic Policy (as defined below) pursuant to the resolutions adopted at the Company's general meeting of shareholders held on June 29, 2006 approving the amendment of its Articles of Incorporation. These amendments authorized the adoption of a basic policy for measures against the 22 acquisition of a substantial shareholding of the Company (i.e. defensive measures against takeovers) (the "Basic Policy on Defensive Measures against Takeovers") for the purposes of securing or enhancing corporate value and the common interests of shareholders, and adopted certain measures under the Basic Policy on Defensive Measures against Takeovers (the "Plan") in accordance with the amended Articles of Incorporation. The Plan enables its shareholders to determine whether or not to accept an acquisition of the Company's shares and enables its Board of Directors to secure any necessary information and sufficient time to propose alternatives or to negotiate with the prospective purchaser on behalf of its shareholders in order to prevent any acquisition of the Company's shares that is detrimental to its corporate value or its shareholders' common interests and to secure and enhance its corporate value and the common interests of its shareholders. The term "Purchase" as used in the Plan means a purchase or any similar act which falls under (i) or (ii) below: (i) the purchase of share certificates issued by the Company that results in 20% or greater ownership by a shareholder of such share certificates; or (ii) a public tender offer for share certificates issued by the Company that results in a combined ownership by the offeror and any of its affiliates of more than 20% of such share certificates. If a purchaser intends to launch a Purchase of the shares of the Company, such purchaser will be requested to submit to the Company a document describing the information required to consider the details of the Purchase, as well as an oath by such purchaser that such purchaser will follow the procedures prescribed by the Plan. Accordingly, the information provided by the purchaser, the opinion of the Board of Directors or any supporting materials, alternative proposals (if any) or other information and/or materials will be submitted to the Independent Committee, which consists of members who are independent from the management (one outside director and two independent experts), and the Independent Committee will evaluate and/or examine such information and/or materials. The Independent Committee will also evaluate and/or examine the terms and conditions of the Purchase, consider the alternatives presented by the Board of Directors, and negotiate with the purchaser or disclose information to the shareholders whenever necessary, after separately obtaining advice from independent experts. If the purchaser fails to follow the procedures as prescribed by the Plan or if the Purchase is deemed to fall under any of the requirements as prescribed by the Plan as a result of the examination of the terms and conditions of the Purchase or discussions and/or negotiations with the purchaser, the Independent Committee will advice the Board of Directors to implement a gratis allocation of share acquisition rights. The Board of Directors will 23 give the utmost respect to the advice provided by the Independent Committee and will resolve to implement the gratis allocation of the share acquisition rights. The Company will implement a gratis allocation of the shares acquisition rights to those shareholders, other than the Company, who are registered or recorded in the Company's final register of shareholders or register of beneficial shareholders as of the allocation date that is separately determined, at such rate, as separately determined, up to a maximum of two share acquisition rights for every one common stock of the Company held. The holder of share acquisition rights for the subscription of new shares (with terms that prohibit the purchaser from exercising such rights) is entitled to receive one share of the Company by paying the amount as determined by the Board of Directors in the resolution on the gratis allocation which shall be at least one yen (Y1) but not exceeding one-half (1/2) of the market value of one share of the Company. Also, the Company may acquire the share acquisition rights that are held by shareholders other than the purchaser, and in exchange, deliver one share of the Company for every share acquisition right. Promptly after passing such resolution, the Board of Directors will disclose the outline of such resolution and other information as deemed appropriate by the Board of Directors. As with the effective period of the Basic Policy on Defensive Measures against Takeovers, the effective period of the Plan will expire upon the conclusion of the ordinary general meeting of shareholders to be held in respect of the last fiscal year ending within three (3) years after the conclusion of this Ordinary General Meeting of Shareholders. However, the Plan may be changed or terminated to reflect the change made to the Basic Policy on Defensive Measures against Takeovers by and pursuant to the resolution of the general meetings of shareholders, if the change or termination of the Basic Policy on Defensive Measures against Takeovers is resolved by a general meeting of shareholders. Further, the Plan will be terminated if so resolved by the Board of Directors. There will be no direct, concrete impact on the shareholders by the Plan's introduction, if the gratis allocation of share acquisition rights is not implemented. On the other hand, if the Plan and the gratis allocation of share acquisition rights are both implemented, the shares held by the shareholders may be diluted if the procedures for the exercise of share acquisition rights are not followed. Provided, however, that no dilution will take place if the shares are provided in consideration of share acquisition rights acquired by the Company. 24 (iii) Judgment of Board of Directors as to Efforts under Item (ii) above and Reasons Thereof As stated in (ii) above, the Plan has was introduced in line with the Basic Policy for the purposes of securing or enhancing corporate value and the common interests of shareholders. In particular, highly rational fairness and/or objectivity is ensured under the Plan because (i) the Plan focuses on shareholders' intentions, (ii) the Plan establishes reasonably objective requirements, (iii) the Independent Committee shall consist of independent persons, (iv) the Plan may not be initiated unless a judgment by the Independent Committee is made, (v) the Independent Committee may obtain advice from independent experts at the expense of the Company, (vi) the effective period is prescribed as three (3) years, and (vii) the Plan may be terminated at any time by a general meeting of the shareholders or the Board of Directors. The Plan is formulated for the maintenance of corporate value and thus is in the common interests of the shareholders. It is not intended to maintain the status of the corporate officers of the Company. 25 CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2008 (Millions of yen)
ASSETS Item Amount ---- ------- CURRENT ASSETS 98,845 Cash and bank deposits 15,857 Time deposits and negotiable deposits 12,186 Marketable securities 12,614 Notes receivable 353 Accounts receivable-trade 22,337 Allowance for returns and doubtful receivables (3,145) Inventories 30,020 Deferred tax assets 5,411 Other current assets 3,212 TANGIBLE FIXED ASSETS 51,548 Land 20,711 Buildings and structures 58,575 Machinery and equipment 14,448 Construction in progress 99 Accumulated depreciation (42,285) OTHER ASSETS 91,226 Investments in affiliated companies 18,942 Investments 38,056 Goodwill 11,203 Other intangible assets 13,216 Prepaid pension costs 3,444 Deferred tax assets 1,462 Others assets 4,903 ------- TOTAL ASSETS 241,619 -------
LIABILITIES Item Amount ---- ------- CURRENT LIABILITIES 36,010 Short-term bank loans 5,572 Notes payable 1,935 Accounts payable-trade 9,394 Accounts payable 6,327 Accrued payroll and bonuses 6,645 Accrued corporate taxes, etc 3,872 Current portion of long-term debt 48 Other current liabilities 2,217 LONG-TERM LIABILITIES 18,145 Long-term debt 81 Reserve for retirement benefit 2,181 Deferred tax liability 14,527 Others 1,356 ------- TOTAL LIABILITIES 54,155 ------- MINORITY INTERESTS 2,351 -------
SHAREHOLDERS' EQUITY CAPITAL STOCK COMMON STOCK 13,260 ADDITIONAL PAID-IN CAPITAL 29,262 RETAINED EARNINGS 136,589 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 6,057 Foreign currency exchange adjustment 248 Unrealized gain on securities 5,295 Pension liability adjustment 514 TREASURY STOCK (55) ------- TOTAL SHAREHOLDERS' EQUITY 185,113 ------- TOTAL LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY 241,619 -------
Amounts less than Y1 million are rounded down to the nearest Y1 million. 26 CONSOLIDATED INCOME STATEMENT YEAR ENDED MARCH 31, 2008 (Millions of yen)
Item Amount ---- ---------------- Sales 165,761 Operating expenses Cost of sales 83,127 Selling and general administrative expenses 69,094 152,221 ------ ------- OPERATING INCOME 13,540 Other income and (expenses) Interest income 303 Interest expense (78) Dividend income 641 Gain on sale and exchange of marketable securities and/or investment securities 715 Valuation loss on investment in securities (923) Others (net) 155 813 ------ ------- INCOME BEFORE INCOME TAXES, EQUITY IN NET INCOME OF AFFILIATED COMPANIES AND MINORITY INTERESTS 14,353 Income taxes Current 5,577 Deferred 276 5,853 ------ ------- Income before equity in net income of affiliated 8,500 companies and minority interests Equity in net income of affiliated companies (3,392) Minority interests (142) ------- NET INCOME 4,966 -------
Amounts less than Y1 million are rounded down to the nearest Y1 million. 27 CONSOLIDATED SHAREHOLDERS' EQUITY STATEMENT YEAR ENDED MARCH 31, 2008
Shareholders' Equity ------------------------------------------------------------------------------------- Accumulated No. of Shares Additional other Held Outside Common Paid-in Retained comprehensive Treasury the Company Stock Capital Earnings income stock ------------- ----------- ----------- ----------- ------------- ----------- Thousand Item shares Million Yen Million Yen Million Yen Million Yen Million Yen ---- ------------- ----------- ----------- ----------- ------------- ----------- As of March 31, 2007 140,577 13,260 25,242 140,666 19,274 (5,164) Net income 4,966 Other comprehensive loss Foreign currency exchange adjustment (468) Net unrealized gain on securities (9,133) Pension liability adjustment (3,616) Cash dividends paid (Y22.0 per share) (3,093) Purchase of treasury stock (3,936) (6,015) Cancellation of treasury stock (5,950) 5,950 Issuance of new shares for stock swap* 3,261 4,474 Diminution of treasury stock for stock swap* 3,440 (454) 5,174 As of March 31, 2008 143,342 13,260 29,262 136,589 6,057 (55)
Amounts less than Y1 million are rounded down to the nearest Y1 million. * These figures are a result of the stock swap agreement with Peach John Co., Ltd. 28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES ON BASIC SIGNIFICANT MATTERS IN PREPARING CONSOLIDATED FINANCIAL STATEMENTS 1. STANDARD OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS According to the provision specified under Paragraph 1, Article 148 of the regulations for corporate accounting under the Company Act, the consolidated financial statements have been prepared based on terms, format and preparation methods based on the accounting standards generally accepted in the United States. However, consistent with the foregoing provision, some of descriptions and notes required under the accounting standards generally accepted in the United States are omitted. 2. MATTERS REGARDING THE SCOPE OF CONSOLIDATION (1) Number of consolidated subsidiaries: 38 (2) Major consolidated subsidiaries: Wacoal Corporation, Peach John Co., Ltd., Studio Five Corp., Kyushu Wacoal Manufacturing Corp., Nanasai Co., Ltd., Torica Co., Ltd., Wacoal International Corp., Wacoal America Inc., Wacoal France S.A., Wacoal International Hong Kong Co., Ltd., Wacoal Hong Kong Co., Ltd., Vietnam Wacoal Corp., Wacoal Investment Co., Ltd., and Wacoal China Co., Ltd. 3. MATTERS REGARDING THE APPLICATION OF THE EQUITY METHOD (1) Number of affiliates: 8 (2) Major affiliated companies: Shinyoung Wacoal Inc., Taiwan Wacoal Co, Ltd. and Thai Wacoal Public Co., Ltd. 4. MATTERS REGARDING STANDARD OF ACCOUNTING PROCEDURE (1) Valuation standard and method of Valuable Assets (i) Marketable and investment securities Based on the provisions of Financial Accounting Standards Board ("FASB") Standards No. 115, marketable securities and investment have been classified as securities available for sale and valued at a fair value. Gain/loss on the marketable securities is calculated at the acquisition cost using the moving average method. Moreover, unrealized valuation profit/loss is classified and included in other comprehensive income within shareholders' equity. (ii) Inventories 29 The average cost method was mainly used for goods, products and supplies, and the first-in first-out method was used for raw materials, with both valued at the lower of the cost or market accounting method. (2) Depreciation Method of Significant Depreciable Assets Depreciation method of fixed assets The constant percentage method was mainly used for depreciation of tangible fixed assets. The fixed amount method was used for depreciation of intangible assets. In accordance with FASB Standards No. 142 "Goodwill and Other Intangible Assets", assets for which durable years cannot be determined are not depreciated, but such assets undergo an impairment examination at least once a year. (3) Accounting basis of significant reserves (i) Allowance for bad debts In order to provide for bad debt losses in accounts receivable or loans receivable, for certain debts such as debts of particular concern, we consider the recoverability of individual accounts and declare the estimated unrecoverable amounts using the bad debt ratio for general accounts. (ii) Allowance for returns In order to clarify the corresponding relationship of sales and returns, consideration is given to prior returned goods and the estimated loss accompanying future returned goods is recorded. (iii) Reserve for retirement benefits In accordance with FASB Standards No. 87 "Employer's Accounting for Pensions" and FASB Standards No. 158 "Employer's Accounting for Defined Benefit Pension and Other Postretirement Plans", such amount is reserved in order to prepare for retirement benefits for employees, which is based on fair values of retirement pay liabilities and pension assets as of the end of the current year. (4) Other basic significant matters in preparing consolidated financial statements (i) Lease transaction Based on the provisions of FASB Standards No. 13, capital leases have been capitalized at fair value of the lease payments. (ii) Accounting procedure for consumption tax, etc. 30 Accounting procedure for consumption tax, etc. is based on the tax-excluded method. (iii) Matters concerning business year of consolidated subsidiaries The closing date of consolidated subsidiaries in Japan is consistent with the consolidated closing date except for Peach John Co., Ltd. and one other company. The closing date of Peach John Co., Ltd. and the other company is February 29 and the closing date of the overseas consolidated subsidiaries is December 31. Financial statements as of the closing date were used in the preparation of the consolidated financial statements. However, necessary adjustments are made for material transactions that took place during a period up to the consolidated closing date. (NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS) 1. Accumulated Depreciation of Tangible Fixed Assets: Y42,285 million 2. Accumulated Impairment Loss of Tangible Fixed Assets The accumulated impairment loss of tangible fixed assets is included in the accumulated depreciation on the consolidated balance sheet. (NOTES ON PER SHARE DATA) Shareholders' equity per share: Y1,291.41 Net income per share: Y 35.14
31 BALANCE SHEET AS OF MARCH 31, 2008 (Millions of yen)
ASSETS Item Amount ---- ------- CURRENT ASSETS 5,102 Cash and bank deposits 698 Marketable securities 2,898 Deferred income taxes 70 Others 1,434 FIXED ASSETS 144,979 TANGIBLE FIXED ASSETS 39,262 Buildings 19,000 Structures 435 Equipment and tools 1,575 Land 18,247 Others 4 INTANGIBLE FIXED ASSETS 588 Leasehold right 585 Others 2 INVESTMENT AND OTHER ASSETS 105,128 Investment securities 9,111 Stock of affiliated companies 95,542 Deferred tax assets 270 Others 205 ------- TOTAL ASSETS 150,081 -------
LIABILITIES Item Amount ---- ------- CURRENT LIABILITIES 2,069 Notes payable 4 Borrowings from affiliated companies 1,000 Accrued liability 824 Accrued expenses 13 Accrued corporate taxes, etc. 89 Accrued bonuses 76 Reserve for officers' bonuses 40 Others 21 LONG-TERM LIABILITIES 448 Others 448 ------- TOTAL LIABILITIES 2,518 -------
NET ASSETS SHAREHOLDERS' EQUITY 147,687 COMMON STOCK 13,260 ADDITIONAL PAID-IN CAPITAL 29,294 Capital reserve 29,294 RETAINED EARNINGS 105,187 Retained earnings reserve 3,315 Other retained earnings 101,872 Reserve of deferred gain on sales of fixed assets 2,075 General reserve 95,000 Retained earnings carried forward 4,797 TREASURY STOCK (54) DIFFERENCE OF APPRECIATION AND CONVERSION (124) OTHER SECURITIES VALUATION DIFFERENCE (124) ------- TOTAL NET ASSETS 147,562 ------- TOTAL LIABILITIES AND NET ASSETS 150,081 -------
Amounts less than Y1 million are rounded down to the nearest Y1 million. 32 STATEMENT OF INCOME YEAR ENDED MARCH 31, 2008 (Millions of yen)
Item Amount ---- -------------- Operating revenue Income from rent 4,052 Dividend income 6,518 Others 292 10,863 ----- Operating cost Cost of lease 2,031 2,031 ----- ------ Operating Gross Income 8,832 Selling and general administrative expenses 2,027 2,027 ----- ------ OPERATING INCOME 6,804 Non-operating income Interest income 82 Dividends received 33 Gain on sell of marketable securities 0 Others 46 162 ----- Non-operating expenses Interest expenses 13 Others 16 29 ----- ------ ORDINARY INCOME 6,937 Extraordinary gains Gains on sales of fixed assets 578 578 ----- Extraordinary loss Loss on sales of fixed assets 108 Impairment loss 32 Valuation loss of affiliate stock 4,888 5,029 ----- ------ PRE-TAX NET INCOME 2,486 Corporate tax, etc. Corporate tax, resident tax and enterprise tax 457 Adjustment of corporate tax, etc. (94) 362 ----- ------ NET INCOME 2,123 ------
Amounts less than Y1 million are rounded down to the nearest Y1 million. 33 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEAR ENDED MARCH 31, 2008 (Millions of Yen)
Difference of Shareholder's equity appreciation and -------------------------------------------------------------- conversion Additional ------------------------ paid-in Total capital Retained earnings difference --------- ------------------ Other of Retained Other Total securities appreciation Total Common Capital earnings retained Treasury shareholders' valuation and net stock reserve reserve earnings stock equity difference conversion assets ------ ---------- -------- -------- -------- ------------- ---------- ------------ ------- Balance as of March 31, 2007 13,260 25,273 3,315 108,791 (5,163) 145,476 (41) (41) 145,434 Changes during the fiscal year 2008 Transfer from reserve for deferred gain on sales of fixed assets -- -- -- Transfer from contingent reserve -- -- -- Dividends from surplus (3,092) (3,092) (3,092) Transfer to contingent reserve -- -- -- Net income 2,123 2,123 2,123 Acquisition of treasury stock (6,014) (6,014) (6,014) Cancellation of treasury stock (5,949) 5,949 -- -- Issuance of new shares for stock swap* 4,474 4,474 4,474 Diminution of treasury stock for stock swap* (454) 5,173 4,719 4,719 Net change of items other than shareholders' equity (83) (83) (83) Total changes during fiscal year 2008 -- 4,020 -- (6,918) 5,108 2,211 (83) (83) 2,127 Balance as of March 31, 2008 13,260 29,294 3,315 101,872 (54) 147,687 (124) (124) 147,562
Amounts less than Y1 million are rounded down to the nearest Y1 million. * These figures are a result of the stock swap agreement with Peach John Co., Ltd. 34 (Note) Breakdown of other retained earnings
Reserve for deferred gain on sales of Reserve for dividend Retained earnings fixed assets averaging Contingent reserve carried forward Total -------------------- -------------------- ------------------ ----------------- ------- Balance as of March 31, 2007 2,191 3,000 100,000 3,599 108,791 Changes during fiscal year 2008 Transfer from reserve for deferred gain on sales of fixed assets (116) 116 -- Transfer from contingent (8,000) 8,000 -- reserve Dividends from surplus (3,092) (3,092) Transfer to contingent reserve (3,000) 3,000 -- Net income 2,123 2,123 Acquisition of treasury stock Cancellation of treasury stock (5,949) (5,949) Issuance of new shares for stock swap* Diminution of treasury stock swap* Net change of items other than shareholders' equity Total changes during fiscal year 2008 (116) (3,000) (5,000) 1,197 (6,918) Balance as of March 31, 2008 2,075 -- 95,000 4,797 101,872
Amounts less than Y1 million are rounded down to the nearest Y1 million. * These figures are a result of the stock swap agreement with Peach John Co., Ltd. 35 NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS NOTES ON MATTERS RELATED TO SIGNIFICANT ACCOUNTING POLICIES 1. VALUATION STANDARDS AND METHOD OF ASSETS Valuation standards and method of marketable securities Stock of subsidiaries and affiliates are stated at cost based on the moving average method. Other securities with market value are stated using the market value method, based on market or other price on closing day for the end of the year, and securities without market value are stated at cost based on the moving average method. Furthermore, variance in valuation of other securities is based on method of directly including all shareholders' equity, and cost of sales is calculated based on the moving average method. 2. DEPRECIATION METHOD OF FIXED ASSETS (1) Depreciation method of tangible fixed assets Depreciation of tangible fixed assets is calculated based on the constant percentage method; provided, however, that depreciation of buildings (excluding facilities) acquired after April 1, 1998 is calculated based on the fixed amount method. Durable years for major items are as follows: Buildings and structures 5 to 50 years Machinery and vehicles: 2 to 4 years Equipment and tools 2 to 20 years (Change of Accounting Policies) From fiscal year 2008, following the revisions made to the Corporation Tax Law, we have changed to the depreciation method pursuant to the Corporation Tax Law with respect to the tangible fixed assets acquired on and after April 1, 2007. The effect of this change on the income statement is minor. (Additional Information) From fiscal year 2008, following the revisions made to the Corporate Tax Law, the Company depreciates the difference between 5% of the acquisition price and the memorandum price of the tangible fixed assets acquired on or before March 31, 2007 equally in five years from the fiscal year following the year in which the tangible fixed assets is depreciated to 5% of the acquisition price, in accordance with the depreciation method under the Corporate Tax Law before the revisions. Depreciation is recorded accordingly. The effect of such change on the income statement is minor. (2) Amortization method of intangible fixed assets 36 Amortization of intangible fixed assets is computed by the fixed amount method. 3. ACCOUNTING BASIS OF RESERVES (1) Accrued bonuses In order to provide bonuses to employees, accrued bonuses are reserved based on the anticipated amount to be paid. (2) Reserve for officers' bonuses In order to provide bonuses to officers, an amount for officers' bonuses is reserved based on the anticipated amount to be paid. 4. OTHER BASIC SIGNIFICANT MATTERS IN PREPARING FINANCIAL STATEMENTS (1) Processing method of lease transactions Finance lease transactions, other than those in which the ownership of the leased item is acknowledged to be transferred to the borrower, are pursuant to accounting procedures based on the method according to an ordinary lease transaction. (2) Accounting procedures for consumption tax, etc. Accounting procedures for consumption tax, etc. are as per the tax-excluded method. (Notes to the Balance Sheet) 1. Accumulated depreciation in tangible fixed assets: Y26,617 million 2. Short-term receivables from affiliates: Y 341 million Short-term payables to affiliates: Y 1,471 million 3. Liabilities on Guarantee The Company made the following guarantee for the borrowed indebtedness of other companies from financial institutions: Wacoal France Societe Anonyme: Y 206 million (Notes to the Statement of Income) Sales to affiliates: Y10,766 million Other operating transactions with affiliates: Y 93 million Non-operating transactions with affiliates: Y 13 million 37 (Notes to the Statements of Changes in Shareholders' Equity) 1. Number of issued shares as of the end of fiscal year ended March 31, 2008 Common Stock: 143,378,085 shares 2. Number of shares held as treasury stock as of the end of fiscal year ended March 31, 2008 Common Stock: 35,998 shares 3. Resolution regarding distribution of earnings made during fiscal year 2008
Aggregate Amount of Amount of Distribution per Distribution Share Resolution Type of Stock (million yen) (yen) Record Date Effective Date ---------- ------------- ------------- ---------------- -------------- -------------- At the Board of Common Stock 3,092 22.00 March 31, 2007 June 5, 2007 Directors' Meeting held on May 29, 2007
4. Resolution regarding distribution of earnings to be made after the end of fiscal year 2008
Aggregate Amount of Amount of Distribution per Source of Distribution Share Resolution Type of Stock Distribution (million yen) (yen) Record Date Effective Date ---------- ------------- ------------ ------------- ---------------- -------------- -------------- At the Board of Common Stock Retained 3,583 25.00 March 31, 2008 June 4, 2008 Directors' Meeting held Earnings on May 29, 2008
(Notes to Tax Effect) 1. Breakdown of deferred tax assets (millions of yen) Valuation loss on investment securities Y 440 Reserve for bonus payment 30 Excess over depreciation and amortization and impairment loss 1,024 Others 269 -------- Total deferred tax asset 1,765 2. Breakdown of deferred tax liabilities (millions of yen) Reserve for deferred gain on sales of fixed assets (Y1,424) Others (0) -------- Total deferred tax liability (1,424) Total net deferred tax asset 340
38 (Notes to Related Parties) 1. Subsidiaries and affiliates
Balance as of Transaction the fiscal Amount year-end Name of Company's Relationship with Nature of (millions of (millions of Attribute Company Interest Related Party Transaction yen) Item yen) --------- ------------ ----------- -------------------- -------------------- ------------ ---------- ------------- Subsidiary Wacoal Corp. 100% direct Holding of shares; Borrowings of money 1,000 Borrowings 1,000 dual appointments; (Note 1) from managerial guidance; affiliated lease of personal companies property and/or real estate Payment of interest 13 Accounts 5 (Note 1) payable Fee for 65 -- -- administrative management (Note 2) Receipt of dividends 5,900 -- -- Lease of personal 3,073 Accounts 325 property and/or receivable real estate (Note 3) Fee for management 292 -- -- guidance (Note 4) Business management 225 -- -- fee (Note 4)
Details and Policy on Determination of Transaction Terms (Note 1) The payment of debts and/or payment of interest are determined at the market rate. (Note 2) The payment of fees for administrative management is determined each fiscal year after negotiation with Wacoal Corp. based on the amount presented by Wacoal Corp. (Note 3) The price and other terms of the transaction are determined after price negotiation in view of market condition. (Note 4) The managerial guidance fees and/or business management fees are determined each fiscal year after negotiation. (Note 5) The transaction amount does not include consumption tax, etc., while the balance as of the year-end includes the consumption tax, etc. (NOTES ON PER SHARE DATA) Net assets per share: Y1,029.44 Net income per share: Y 15.02 39 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS May 13, 2008 Board of Directors Wacoal Holdings Corp. Deloitte Touche Tohmatsu Certified Public Accountants Representative Partner and Engagement Partner Yasuhiro Onishi (Seal) Representative Partner and Engagement Partner Hiroyuki Asaga (Seal) Representative Partner and Engagement Partner Akiyo Shimoida (Seal) Pursuant to Paragraph 4, Article 444 of the Company Act, we have examined the consolidated financial statement, i.e., the consolidated balance sheet, the consolidated income statement, the consolidated shareholders' equity statement and notes on consolidated financial statements of Wacoal Holdings Corp. for the consolidated accounting year from April 1, 2007 to March 31, 2008. Responsibility for preparation of the consolidated financial statements is borne by the Company's management, and our responsibility is limited to our opinions on such consolidated financial statement and from an independent standpoint. In the course of such audit, our examination was made in accordance with auditing standards generally accepted in Japan and all relevant auditing procedures were carried out as are normally required. Accounting standards require that we obtain reasonable assurance of the nonexistence of material false representations in the consolidated financial statements. Our audit was carried out based on a testing audit, and we also examined the representations in the consolidated financial statements as a whole, including the evaluation of accounting policies adopted by management, the method of application thereof, and estimates produced by management. As a result of our audit, we conclude that we have obtained a reasonable basis to express our opinion. We are of the opinion that the consolidated financial statements of the Company present fairly the financial position and the results of the operations of the corporate group comprised of the Company and its consolidated subsidiaries during the subject period in conformity with the accounting standards generally accepted in the United States (Please refer to Note 1 of the "Notes on Basic Significant Matters in Preparing Consolidated Financial Statements") pursuant to the Paragraph 1, Article 148 of the regulations for corporate accounting under the Company Act. Neither we, nor any of our engagement partners who have been engaged in the audit, have any interest in the Company required to be disclosed under the Certified Public Accountants Law of Japan. 40 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS May 13, 2008 Board of Directors Wacoal Holdings Corp. Deloitte Touche Tohmatsu Certified Public Accountants Representative Partner and Engagement Partner Yasuhiro Onishi (Seal) Representative Partner and Engagement Partner Hiroyuki Asaga (Seal) Representative Partner and Engagement Partner Akiyo Shimoida (Seal) Pursuant to Item 1, Paragraph 2, Article 436 of the Company Act, we have examined the balance sheet, the statement of income, statements of changes in shareholders' equity and notes as well as the supplementary statement of Wacoal Holdings Corp. for the 60th fiscal year from April 1, 2007 to March 31, 2008. The accounting parts of the business report and supplementary statement audited by us are those derived from the accounting books and records. Responsibility for preparation of the financial statements and supplementary statement is borne by the Company's management, and our responsibility is limited to our opinions on such financial statements and supplementary statement from an independent standpoint. In the course of such audit, our examination was made in accordance with auditing standards generally accepted in Japan and all relevant auditing procedures were carried out as are normally required. Accounting standards require that we obtain reasonable assurance of the nonexistence of material false representations in the financial statements and supplementary statement. Our audit was carried out based on a testing audit, and we also examined the representations in the financial statements and supplementary statement as a whole, including the evaluation of accounting policies adopted by management, the method of application thereof, and estimates produced by management. As a result of our audit, we conclude that we have obtained a reasonable basis to express our opinion. We are of the opinion that the financial statements and the supplementary statement of the Company present fairly the financial position and the results of the operations during the subject period in conformity with the accounting standards generally accepted in Japan. Neither we, nor any of our engagement partners who have been engaged in the audit, have any interest in the Company required to be disclosed under the Certified Public Accountants Law of Japan. 41 AUDIT REPORT We, the Board of Statutory Auditors, have received the reports of the audit procedures and results concerning the execution of duties by the Directors during the 60th fiscal year, from April 1, 2007 to March 31, 2008, prepared by each of the Statutory Auditors. After discussing the reports, we have prepared this Audit Report and report as follows: 1. PROCEDURES AND DETAILS OF THE AUDITS BY THE STATUTORY AUDITORS AND THE BOARD OF STATUTORY AUDITORS The Board of Statutory Auditors prescribed the principles of audit and the assignment of the business responsibilities, etc., received reports on the audits and results from each of the Statutory Auditors, received reports regarding the execution of duties by Directors and Accounting Auditor and requested reports whenever necessary. In conformity with the audit standards prescribed by the Board of Statutory Auditors and in accordance with the principles of audit and the assignment of the business responsibilities, etc., each of the Statutory Auditors have made efforts in communicating with the Directors, internal audit department and other employees and maintaining an environment for information gathering and auditing, attended meetings of the Board of Directors and other important meetings, received reports regarding the execution of duties by the Directors and employees, investigated the conduct of the business and the assets and properties of the Company at the head office and other principal offices and, whenever necessary, requested explanations. Furthermore, we have monitored and inspected the system to ensure that the execution of duties by Directors conform with the laws or regulations and the Articles of Incorporation, the details of the resolution of the Board of Directors concerning the establishment of a system as required by the provisions of Paragraphs 1 and 3, Article 100 of the Enforcement Regulations of the Company Act to ensure the appropriate business conduct by a joint stock corporation (Kabushiki Kaisha) as well as the system established pursuant to such resolution (internal control system). We have also examined the details of the basic policies (as stipulated in Item 1, Article 127 of the Enforcement Regulations of the Company Act) and each effort (as stipulated in Item 2 of said Article) as described in the business report. With respect to subsidiaries, we made efforts to communicate and exchange information with the directors and statutory auditors of the subsidiaries and, whenever necessary, requested reports on the business from such subsidiaries. Based on the above, we have examined the business report and its supplementary statements for the subject fiscal year. Furthermore, we have monitored and inspected whether the Accounting Auditor has maintained independence and whether the audits have been conducted appropriately, received reports from the Accounting Auditor on the execution of duties and requested explanations whenever necessary. The Accounting Auditor has reported to us that the "system to ensure the appropriate execution of duties" (matters stipulated in each Item of Article 159 of the regulations for corporate accounting under the Company Act) has been established pursuant to the "Quality Control Standard for Audits" (October 28, 2005 Business Accounting Council), and we requested explanations whenever necessary. Based on the above, we have examined the financial statements (the balance sheet, the statement of income, statements of changes in 42 shareholders' equity and notes) and its supplementary statement, as well as the consolidated financial statements (the consolidated balance sheet, the consolidated income statement, the consolidated shareholders' equity statement and notes) for the subject fiscal year. 2. RESULTS OF THE AUDIT (1) Results of the audit on the business report (i) The business report and its supplementary statement present fairly the Company's affairs in conformity with the applicable laws and regulations of Japan and the Company's Articles of Incorporation. (ii) With regard to the execution of duties by the Directors, there has been no misconduct nor material matters that would constitute a violation of any laws or regulations of Japan or the Company's Articles of Incorporation. (iii) In our opinion, the details of the resolution of the Board of Directors regarding the internal control system are fair and we have nothing to point out with regard to the execution of duties by Directors concerning such internal control system. (iv) We have nothing to point out with regard to the basic policies on the nature of personnel who should control the determination of financial and business policies of the Company as described in the business report. Furthermore, in our opinion, each effort as stated in the business report (pursuant to Item 2, Article 127 of the Enforcement Regulation of the Company Act) is in line with such basic policy, is not detrimental to the common interests of the shareholders of the Company and is not intended to maintain the status of corporate officer of the Company. (2) Results of the audit of the financial statements and the supplementary statement In our opinion, the audit procedures and audit results received from Deloitte Touche Tohmatsu, the Accounting Auditor, are appropriate. (3) Results of audit of consolidated financial statements In our opinion, the audit procedures and audit results received from Deloitte Touche Tohmatsu, the Accounting Auditor, are appropriate. May 16, 2008 Wacoal Holdings Corp. Board of Statutory Auditors Hajime Kotake (Seal) Full-time Statutory Auditor Kimiaki Shiraishi (Seal) Full-time Statutory Auditor Yutaka Hasegawa (Seal) 43 Statutory Auditor Tomoharu Kuda (Seal) Statutory Auditor Yoko Takemura (Seal) Statutory Auditor (Note) Mr. Yutaka Hasegawa, Mr. Tomoharu Kuda and Ms. Yoko Takemura, Statutory Auditors, are outside statutory auditors as stipulated by Item 16, Article 2 and Paragraph 3, Article 335 of the Company Act. 44 AGENDA AND REFERENCE MATERIALS AGENDA ITEM NO. 1: ELECTION OF EIGHT DIRECTORS The term of office of all eight (8) directors will expire at the conclusion of this Ordinary General Meeting of Shareholders, and it is therefore proposed that eight (8) directors be elected. The candidates for director are as follows:
Brief Personal History Company Candidate (including representation of shares owned No. Name (Date of Birth) other companies, if any) by Candidate --------- -------------------- ------------------------------------------ ------------ 1. Yoshikata Tsukamoto April 1972 (January 29, 1948) Joined the Company 1,337,136 November 1977 Appointed Director November 1981 Appointed Managing Director September 1984 Appointed Executive Vice President and Representative Director (acting) June 1987 Appointed President and Director (acting) June 2002 Appointed Corporate Officer October 2005 Appointed Representative Director and President, Corporate Officer (acting) of Wacoal Corp. Appointed (Representative Director of Wacoal Corp.; Chairman and Director of Wacoal International Corp.; Chairman and Director of Wacoal America Inc.) 2. Shoichi Suezawa March 1970 10,000 (June 13, 1947) Joined the Company June 1996 Appointed Director June 2002 Appointed Managing Director, Corporate Officer June 2003 Appointed Senior Corporate Officer April 2005 Appointed Supervisor of Corporate Staff June 2005 Appointed Senior Corporate Officer October 2005 Appointed Director Appointed Director and Senior Corporate Officer of Wacoal Corp.
45
Brief Personal History Company Candidate (including representation of shares owned No. Name (Date of Birth) other companies, if any) by Candidate --------- -------------------- ------------------------------------------ ------------ June 2006 Appointed Senior Managing Director (acting) (President and Director of Wacoal Investment Co., Ltd.) 3. Hideo Kawanaka April 1965 7,000 (June 25, 1942) Joined Isetan Co., Ltd. June 1992 Appointed Director of Isetan Co., Ltd Matsudo Branch Manager July 1993 Appointed Representative Director and President of West Japan Railway Isetan Ltd. June 2001 Appointed Corporate Officer and Managing Director, General Manager of Management and General Affairs of OMRON Corporation June 2004 Appointed Representative Director and Senior Manager, Sales Manager June 2007 Appointed Advisor to the Company June 2007 Appointed Senior Managing Director (acting) November 2007 Appointed Director and Senior Corporate Officer of Wacoal Corp. April 2008 Appointed Director and Vice President, Corporate Officer of Wacoal Corp. (acting) 4. Tadashi Yamamoto March 1976 6,000 (November 14, 1952) Joined the Company April 2002 Appointed General Manager of Human Resources Department June 2002 Appointed Corporate Officer October 2005 Appointed Corporate Officer of Wacoal Corp. April 2006 Appointed General Manager of Personnel and Administration Department of the Company Managing Corporate Officer (acting) of Wacoal Corp. June 2006 Appointed Director of Wacoal Corp. June 2006 Appointed Director (acting) April 2008 Appointed Director and Senior Corporate Officer (acting) of Wacoal Corp.
46
Brief Personal History Company Candidate (including representation of shares owned No. Name (Date of Birth) other companies, if any) by Candidate --------- -------------------- ------------------------------------------ ------------ 5. Tsuneo Shimizu March 1971 4,000 (October 30, 1948) Joined the Company June 2002 Appointed Corporate Officer, Osaka Branch (specialty store) Manager of Wacoal Brand Operation Division June 2005 Appointed Managing Corporate Officer and General Manager of Wacoal Brand Operation Division of Wacoal Corp. April 2006 Appointed Senior Corporate Officer of Wacoal Corp. June 2006 Appointed Director and Senior Corporate Officer of Wacoal Corp. April 2008 Appointed Director and Senior Corporate Officer, Assistant Manager of sales Control Department (acting) 6. Kazuo Inamori April 1959 0 (January 30, 1932) Established Kyoto Ceramic Co., Ltd. (currently Kyocera Corporation) May 1966 Appointed President and Representative Director of Kyoto Ceramic Co., Ltd. April 1984 Established The Inamori Foundation, Chairman (acting) June 1984 Established DDI Corporation (currently known as KDDI Corporation), Chairman and Representative Director June 1985 Appointed Chairman and Representative Director and President of Kyocera Corporation June 1997 Appointed Chairman Emeritus and Director of Kyocera Corporation June 1997 Appointed Chairman Emeritus and Director of DDI Corporation June 2001 Appointed Honorary Adviser (acting) of KDDI Corporation June 2005 Appointed Chairman Emeritus (acting) of Kyocera Corporation June 2005
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Brief Personal History Company Candidate (including representation of shares owned No. Name (Date of Birth) other companies, if any) by Candidate --------- -------------------- ------------------------------------------ ------------ Appointed Director (acting) of the Company 7. Mamoru Ozaki June 1991 0 (May 20, 1935) Appointed Commissioner of the National Tax Agency June 1992 Appointed Administrative Vice Minister of Finance May 1994 Appointed President of People's Finance Corporation October 1999 Appointed President of National Life Finance Corporation February 2003 Appointed Advisor to Yazaki Corporation (acting) July 2003 Appointed Advisor of the Company June 2005 Director of the Company (acting) 8. Atsushi Horiba September 1972 0 (February 5, 1948) Joined HORIBA, Ltd. June 1982 Appointed Director and General Manager of Overseas Business June 1989 Appointed Senior Managing Director and General Manager of Sales Division January 1992 Appointed Representative Director and President June 2005 Appointed Representative Director and Chairman and President (acting)
(Note) 1. There are no special interests between the candidates and the Company. 2. Mr. Kazuo Inamori, Mr. Mamoru Ozaki and Mr. Atsushi Horiba are the candidates for outside directors as required by the Company Act. 3. We recommend Mr. Kazuo Inamori as a candidate for outside director because he has extensive experience and knowledge in the business world as an entrepreneur and manager and we believe he can utilize his strong leadership skills and knowledge to help strengthen our management. His tenure of office as outside director would be for three (3) years following the conclusion of this Ordinary General Meeting of Shareholders. 4. We recommend Mr. Mamoru Ozaki as a candidate for outside director due to his long career (including in financial administration) and extensive professional knowledge, and we believe he can utilize his experience to enhance the transparency and objectivity of our management. 48 His tenure of office as outside director of the Company would be three (3) years following the conclusion of the Ordinary General Meeting of Shareholders. 5. We recommend Mr. Asutshi Horiba as a candidate for outside director due to his extensive experience as a manager and knowledge in overseas business development for companies in and outside Japan and we believe he can utilize his strong leadership skills and knowledge to help strengthen our overseas business development. 6. Limitation of Liability Agreement with Outside Directors In order to secure qualified personnel, our Articles of Incorporation prescribe that we may execute a limitation of liability agreement with outside directors to limit their liability for damages in certain instances, and Mr. Kazuo Inamori and Mr. Mamoru Ozaki, the candidates for outside director, have executed such limitation of liability agreement. We plan to execute a limitation of liability agreement with Mr. Atsushi Horiba, an outside director candidate. A summary of the limitation of liability agreement is as follows: - The maximum amount of liability for damages incurred due to negligence of duties by the outside director shall be the minimum liability amount as provided by Paragraph 1, Article 427 of the Company Act. - The limitation of liability shall be accepted only if the outside director executes his or her duties in good faith and the liability is not the result of gross negligence. AGENDA ITEM NO. 2: ELECTION OF ONE STATUTORY AUDITOR The term of officer of Statutory Auditor Mr. Hajime Kotake will expire at the conclusion of this Ordinary General Meeting of Shareholders. Accordingly, the election of one statutory auditor has been proposed. This agenda item has been approved by the board of statutory auditors. The candidate for statutory auditor is as follows:
Brief Personal History Company Candidate (including representation of other shares owned No. Name (Date of Birth) companies, if any) by Candidate --------- -------------------- ---------------------------------- ------------ 1. Yoshio Kawashima March 1974 2,000 (February 5, 1952) Joined the Company July 1997 Appointed full-time Manager of Finance Department June 2001 Appointed Business Management Group Manager of Overseas Business Division
49
Brief Personal History Company Candidate (including representation of other shares owned No. Name (Date of Birth) companies, if any) by Candidate --------- -------------------- ---------------------------------- ------------ April 2007 Audit Office Chief Manager April 2008 Audit Office General Manager (acting)
(Note) 1. There are no special interests between the candidate and the Company. AGENDA ITEM NO. 3: PAYMENT OF OFFICERS' BONUSES We propose that officers' bonuses of Y40 million in total be paid to our 6 current directors (excluding the outside directors) as of the end of the fiscal year in consideration of the business results of the fiscal year ended March 31, 2008. AGENDA ITEM NO. 4: RESOLUTION REGARDING THE AMOUNT AND TERMS OF STOCK ACQUISITION RIGHTS TO BE ISSUED TO DIRECTORS AS STOCK OPTIONS 1. Reason for Proposal The Company wishes to grant stock acquisition rights with an exercise price of one (1) yen per share to its directors (excluding outside directors) as a form of equity compensation, with the goal of providing directors with the opportunity, like shareholders of the Company, to participate in the benefits of increasing stock values as well as to bear the risks of declining stock values, so as to further encourage such directors' desire to serve and improve the Company. Under the Company Act (Law No. 86 of 2005), granting stock acquisition rights to directors is considered a form of remuneration, and we will therefore ask that shareholders approve the amount and terms of the stock acquisition rights to be granted. The Company decided to base the proposed amount and terms of the stock acquisition rights on the size of the Company, each director's degree of contribution and how each director conducts his or her duties. The Company believes that the terms of the proposal are appropriate, since the stock options will be granted with the aim of providing stock acquisition rights so that directors, like shareholders, will not only enjoy the benefit of increasing stock values but also bear the risk of decreasing stock values, as well as to further encourage their desire to serve and improve the Company. Furthermore, stock acquisition rights will not be issued to outside directors because outside directors are retained as part of the Company's corporate governance strategy in order to improve corporate value by increasing management transparency and ensuring fairness and independence. 2. Terms of the Proposal 50 (1) At the 57th ordinary general meeting of shareholders held on June 29, 2005, the remuneration of directors was limited to a maximum of Y350 million per year. In this proposal we would like to pay Y70 million per fiscal year of compensation to directors in the form of stock acquisition rights in addition to cash remuneration, to begin on the date of the ordinary general meeting of shareholders. (2) The proposed terms of the provision of stock acquisition rights as stock options to directors of the Company are as follows: (i) Total number of stock acquisition rights and total number of shares represented by the stock acquisition rights: The maximum number of shares that can be acquired through the exercise of stock acquisition rights during any one-year period beginning on the date of the ordinary general meeting of shareholders (an "Allocation Year") is 70,000 ordinary shares of the Company (the "Maximum Annual Acquired Shares"). If, following the conclusion of this Ordinary General Meeting of Shareholders, there is a stock split or a reverse stock split, the adjustment shall be made in accordance with the following calculation: Maximum Annual Acquired Shares after adjustment = Maximum Annual Acquired Shares before adjustment x stock split / reverse stock split ratio In addition, if it becomes appropriate to adjust the Maximum Annual Acquired Shares, the Company may do so to the extent reasonable. Any fractional shares as a result of the above adjustment will be rounded down to the nearest whole share. The maximum number of stock acquisition rights that can be issued in any Allocation Year (the "Maximum Annual Issuance") is calculated by dividing the Maximum Annual Acquired Shares of the Allocation Year, by the number of shares in a trading unit of the Company. (If, following the conclusion of this Ordinary General Meeting of Shareholders, there has been no adjustment to the number of Maximum Annual Acquired Shares due to a stock split, reverse stock split or other event, and the total number of shares in a trading unit remains at the current 1,000 shares, the Maximum Annual Issuance will be 70). However, if there is an adjustment to the number of shares in a trading unit in the middle of an Allocation Year and stock acquisition rights have already been issued for such Allocation Year, the Maximum Annual Issuance will be adjusted as follows: Maximum Annual Issuance after adjustment = ((Maximum Annual Acquired Shares immediately prior to the adjustment in the number of shares in a trading unit - the number of shares represented by stock acquisition rights already issued for such Allocation Year) / the new number of shares in a trading unit) + the number of stock acquisition rights already issued for such Allocation Year (ii) Class of shares represented by the stock acquisition rights and the number of shares represented by each share acquisition right 51 The stock acquisition rights will be for ordinary shares. The number of shares represented by each stock acquisition right ("Conversion Ratio") is the number of shares in a trading unit of the Company (currently, 1,000 shares) at the time such stock acquisition right is allocated. Furthermore, following the allocation of the stock acquisition rights, if the Company carries out a stock split or reverse stock split, the Conversion Ratio will be adjusted as follows: Conversion Ratio following adjustment = Conversion Ratio prior to adjustment x stock split / reverse stock split ratio In addition, if after the allocation of the stock acquisition rights it becomes appropriate to adjust the Conversion Ratio, the Company may do so to the extent reasonable. Any fractional shares as a result of the above adjustment will be rounded down to the nearest whole share. (iii) Amount capitalized upon exercise of stock acquisition rights The amount capitalized upon the exercise of each stock acquisition right shall be the amount obtained by multiplying (i) the exercise price of one (1) yen per share to be paid upon exercise of the stock acquisition rights and (ii) the Conversion Ratio. (iv) Exercise period for stock acquisition rights The stock acquisition rights will be exercisable from the date immediately following the grant date of the stock acquisition right for a period of not more than 20 years to be set by the board of directors of the Company. (v) Restriction on the acquisition of stock acquisition rights by transfer The acquisition of stock acquisition rights by transfer is subject to approval by resolution of the board of directors of the Company. (vi) Other conditions relating to the exercise of stock acquisition rights In principle, holders of stock acquisition rights may exercise their stock acquisition rights from the date immediately following their loss of status as director (including officers of a company that has adopted the committee system), auditor or executive officer of the Company during the period prescribed in (iv) above. Other stock acquisition right conditions shall be determined at a general meeting of shareholders or the board of directors of the Company where items regarding the offer stock acquisition rights will be determined. (3) There are currently eight directors, two of whom are outside directors. However, if the Agenda Item No.1 (Election of Eight Directors) is approved without amendment at this Ordinary General Meeting of Shareholders, the number of directors will be eight, three of whom will be outside directors. 52 (Additional Reference) In addition to introducing a proposal for a stock option plan for directors of the Company, upon resolution of the board of directors of the Company, we plan to issue stock acquisition rights with the same details as those outlined above to director's of the Company's subsidiary, Wacoal Corp., within one year from the conclusion of this Ordinary General Meeting of Shareholders. The Maximum Annual Acquired Shares will be 30,000 ordinary shares and the Maximum Annual Issuance will be 30. 53