Regis (RGS)

Hedge of the Net Investment in Foreign Subsidiaries:

        The Company has numerous investments in foreign subsidiaries, and the net assets of these subsidiaries are exposed to exchange rate volatility. The Company frequently evaluates its foreign currency exchange risk by monitoring market data and external factors that may influence exchange rate fluctuations. As a result, the Company may engage in transactions involving various derivative instruments to hedge assets, liabilities and purchases denominated in foreign currencies.

        During September 2006, the Company's cross-currency swap (which had a notional amount of $21.3 million and hedged a portion of the Company's net investment in its foreign operations) was settled, resulting in a cash outlay of $8.9 million. This cash outlay was recorded within investing activities within the Consolidated Statement of Cash Flows. The related cumulative tax-effected net loss of $7.9 million was recorded in accumulated other comprehensive income (AOCI) in fiscal year 2007. This amount will remain deferred within AOCI indefinitely, as the event which would trigger its release from AOCI and recognition in earnings is the sale or liquidation of the Company's international operations that the cross-currency swap hedged. The Company currently has no intent to sell or liquidate this portion of its business operations.

Hedge of the Net Investment in Foreign Subsidiaries:

        The Company has numerous investments in foreign subsidiaries, and the net assets of these subsidiaries are exposed to exchange rate
volatility. The Company frequently evaluates its foreign currency exchange risk by monitoring market data and external factors that may influence exchange rate fluctuations. As a result, the Company
may engage in transactions involving various derivative instruments to hedge assets, liabilities and purchases denominated in foreign currencies.

        During
September 2006, the Company's cross-currency swap (which had a notional amount of $21.3 million and hedged a portion of the Company's net investment in its foreign
operations) was settled, resulting in a cash outlay of $8.9 million. This cash outlay was recorded within investing activities within the Consolidated Statement of Cash Flows. The related
cumulative tax-effected net loss of $7.9 million was recorded in accumulated other comprehensive income (AOCI) in fiscal year 2007. This amount will remain deferred within AOCI
indefinitely, as the event which would trigger its release from AOCI and recognition in earnings is the sale or liquidation of the Company's international operations that the cross-currency swap
hedged. The Company currently has no intent to sell or liquidate this portion of its business operations.

Hedge of the Net Investment in Foreign Subsidiaries:

The Company has numerous investments in foreign subsidiaries, and the net assets of these subsidiaries are exposed to exchange rate volatility. The Company frequently evaluates its foreign currency exchange risk by monitoring market data and external factors that may influence exchange rate fluctuations. As a result, the Company may engage in transactions involving various derivative instruments to hedge assets, liabilities and purchases denominated in foreign currencies.

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During September 2006, the Company’s cross-currency swap (which had a notional amount of $21.3 million and hedged a portion of the Company’s net investment in its foreign operations) was settled, resulting in a cash outlay of $8.9 million. This cash outlay was recorded within investing activities within the Consolidated Statement of Cash Flows. Approximately $0.1 million of tax-effected gain related to this derivative was charged to the cumulative translation adjustment account during the twelve months ended June 30, 2007. The cumulative tax-effected net loss recorded in accumulated other comprehensive income (AOCI) related to the cross-currency swap was $7.9 million at June 30, 2007. This amount will remain deferred within AOCI indefinitely, as the event which would trigger its release from AOCI and recognition in earnings is the sale or liquidation of the Company’s international operations that the cross-currency swap hedged. The Company currently has no intent to sell or liquidate this portion of its business operations.

Hedge of the Net Investment in Foreign Subsidiaries:

The Company has a cross-currency swap with a notional amount of $21.3 million to hedge a portion of its net investments in its foreign operations. The purpose of this hedge is to protect against adverse movements in exchange rates.

The table below provides information about the Company’s net investments in foreign operations and derivative financial instruments by functional currency and presents such information in United States (U.S.) dollar equivalents. The table summarizes the Company’s exposure to foreign currency translation risk related to its net investments in its foreign subsidiaries along with the associated cross-currency instrument with a notional amount of $21.3 million to partially hedge the Company’s Euro foreign currency exposure related to its $66.3 million net foreign investment. The cross-currency swap hedged approximately 11 and nine percent of the Company’s net investments in total foreign operations at June 30, 2006 and 2005, respectively.

The cross-currency swap derivative financial instrument expires in fiscal year 2007. At June 30, 2006 and 2005, the Company’s net investment in this derivative financial instrument was in a $9.4 and $8.5 million loss position, respectively, based on its estimated fair value. See Note 5 to the Consolidated Financial Statements for further discussion.

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Hedge of the Net Investment in Foreign Subsidiaries:

The Company has a cross-currency swap with a notional amount of $21.3 million to hedge a portion of its net investments in its foreign operations.  The purpose of this hedge is to protect against adverse movements in exchange rates.  The cross-currency swap hedged approximately nine percent of the Company’s net investments in foreign operations at September 30, 2005 and June 30, 2005, respectively.

The Company’s cross-currency swap is recorded at fair value within other noncurrent liabilities in the Condensed Consolidated Balance Sheet.  At September 30, 2005 and June 30, 2005, the Company’s net investment in this derivative financial instrument was in an $8.1 and $8.5 million loss position, respectively, based on its estimated fair value.  The corresponding tax-effected offset is charged to the cumulative translation adjustment account, which is a component of accumulated other comprehensive income set forth under the caption shareholders’ equity in the Condensed Consolidated Balance Sheet.  For the quarter ended September 30, 2005, $0.1 million of tax-effected gain related to this derivative was charged to the cumulative translation adjustment account, respectively.  For the quarter ended September 30, 2004, $0.4 million of tax-effected loss related to this derivative was charged to the cumulative translation adjustment account, respectively.

For additional information, including a tabular presentation of the Company’s debt obligations and derivative financial instruments, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in the Company’s June 30, 2005 Annual Report on Form 10-K.  Other than the information included above, there have been no material changes to this information during the three months ended September 30, 2005.

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The Company has a cross-currency swap with a notional amount of $21.3 million to hedge a portion of its net investments in its foreign operations. The purpose of this hedge is to protect against adverse movements in exchange rates.

The table below provides information about the Company’s net investments in foreign operations and derivative financial instruments by functional currency and presents such information in United States (U.S.) dollar equivalents. The table summarizes the Company’s exposure to foreign currency translation risk related to its net investments in its foreign subsidiaries along with the associated cross-currency instrument with a notional amount of $21.3 million to partially hedge the Company’s Euro foreign currency exposure related to its $70.9 million net foreign investment. The cross-currency swap hedged approximately nine and seven percent of the Company’s net investments in total foreign operations at June 30, 2005 and 2004, respectively.

The cross-currency swap derivative financial instrument expires in fiscal year 2007. At June 30, 2005 and 2004, the Company’s net investment in this derivative financial instrument was in an $8.5 and $8.7 million loss position, respectively, based on its estimated fair value. See Note 5 to the Consolidated Financial Statements for further discussion.