ANNUAL REPORT
ANNUAL REPORT
ANNUAL REPORT
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<strong>ANNUAL</strong> <strong>REPORT</strong><br />
Year Ended<br />
March 31, 2009
TABLE OF CONTENT<br />
PART I Letter to Shareholders and Business Review 3<br />
PART II Financial Statements for the Fiscal Year Ended March 31, 2009 27<br />
PART III Corporate Governance 105<br />
PART IV Shareholders’ Information 123<br />
1
PART I<br />
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
LETTER TO SHAREHOLDERS<br />
July 22, 2009<br />
Dear Shareholders,<br />
During the past year, we and many others, have been caught in an economic downturn of an unprecedented severity and it is<br />
difficult to predict when it will end.<br />
The financial crisis gradually spread to the real economy across all industries, and confronted us and our portfolio companies<br />
with tremendous challenges. Yet our involvement with our portfolio companies as an industrial partner has proved to be<br />
efficient: we sold D&M Holdings Inc. at an attractive price amid financial market turbulence, yielding an absolute return of 120%<br />
on invested capital.<br />
The case of D&M Holdings demonstrates our hands-on approach and emphasizes our involvement as a manager in any venture<br />
we undertake, beyond the role of a mere financial investor.<br />
However, the economic downturn has significantly affected the financial performance of most of our portfolio companies. The<br />
impact of the economic recession on their financial performance and declining market valuations in their relevant industries,<br />
lead us to revisit the recoverable amounts of our investments in our non-consolidated financial statements, and to record an<br />
impairment charge of EUR 671 million. This impairment charge is in part driven by what we believe to be a conservative stance<br />
on the timing and the extent of the recovery of the global economy, and could therefore be partly or wholly reversed in the future<br />
if the reasons for recognising the impairment loss in our investments cease to be valid.<br />
The financial and economic crisis particularly caused enormous disruption in the global automotive industry. Sagging customer<br />
confidence and tightening consumer credit resulted in the near collapse of two of the largest US auto-manufacturers, which<br />
filed for bankruptcy protection. Our automotive assets, which account for more than 60% of the total invested capital, suffered<br />
the effects of severe and rapid volume declines.<br />
While Asahi Tec, Niles and Honsel all started to implement thorough restructuring plans to respond to collapsing demand,<br />
liquidity shortfalls were inevitable.<br />
Asahi Tec suffered from decreasing exports to emerging Asian economies and domestic demand for cars and trucks, and it was<br />
no longer able to support its US subsidiary Metaldyne which ultimately filed for protection under Chapter 11 in May 2009.<br />
Facing similar challenges, Niles successfully strengthened its capital structure, with one of its main stakeholders investing<br />
alongside us.<br />
Honsel also reached an agreement with RHJ International, its customers and its lenders, on a capital restructuring which<br />
involved a significant deleveraging of its balance sheet and the injection of new capital to allow for a significant operational<br />
restructuring.<br />
In all instances, the support from customers in the financial and operational restructuring of some of our automotive<br />
investments was essential to our decision to renew our commitment to these companies which are in many cases key parts of<br />
the car manufacturing supply chain. We now believe they are in a better position to weather the current economic downturn, and<br />
to emerge stronger when the global economy recovers.<br />
5
Support to our portfolio companies is made on a voluntary basis only and as a result of the merits of their respective individual<br />
business plans, that take a conservative view on the future and reflect current market reality. We remain prudent in our<br />
investment approach and need to be reassured of long-term returns before committing to new funding. A significant<br />
deleveraging of the balance sheet, stringent operational restructuring and the support of key customers are a prerequisite for<br />
any new capital injection from RHJ International.<br />
The intense focus on the existing portfolio companies does not mean we are not pursuing new investment opportunities. RHJ<br />
International remains determined to deploy most of its cash to create new investment platforms.<br />
With a strong cash position, which was recently strengthened by the partial sale of our stake in Commercial International Bank<br />
of Egypt, and a dedicated and committed team of investment professionals, we believe we are well positioned to take advantage<br />
of opportunities created by the market dislocation in the face of fundamental changes, particularly in, but not limited to, the<br />
European financial services sector. We remain disciplined and prudent in our aim to build strong investment platforms on which<br />
to grow, and have confidence in our capacity to create long-term shareholder value, in an ever-challenging environment.<br />
That same, continuous confidence of our shareholders is essential to implement our long-term strategy. I would therefore like<br />
to thank all of RHJ International’s shareholders for their continued interest and trust in the company in these turbulent times.<br />
I look forward to what we can accomplish over the next year and to welcoming you to our Annual General Meeting on<br />
September 15.<br />
Leonhard Fischer<br />
Chief Executive Officer<br />
6
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
BUSINESS REVIEW<br />
This Business Review presents a business and financial review<br />
of the Company’s activities for the fiscal years ended March 31,<br />
2008 and 2009. Unless otherwise noted herein, RHJ<br />
International SA, a Belgian limited company, is referred to as<br />
“RHJI” or “RHJ International”. RHJ International SA and its<br />
business are referred to collectively as the “Company”.<br />
RHJ International is a diversified holding company focused on<br />
creating long-term value for its shareholders by acquiring and<br />
operating businesses. It seeks to create sustainable competitive<br />
advantage by acting as a catalyst in industries that have a<br />
positive long-term outlook and that are undergoing fundamental<br />
changes. RHJ International generally acquires businesses that<br />
are under-managed but possess key strengths and strong<br />
growth potential, and adds management with global experience<br />
which it sources from its network of industrial executives. Given<br />
this strategy, RHJ International’s respective businesses are in<br />
various stages of operational improvement.<br />
Tec Corporation (“Asahi Tec”), Honsel International<br />
Technologies SA (“HIT”), Niles Co., Ltd. (“Niles”), D&M Holdings<br />
Inc. (“D&M”), Columbia Music Entertainment, Inc. (“CME”),<br />
Phoenix Resort K.K. (“Phoenix Seagaia Resort”) and Shaklee<br />
Global Group, Inc. (“Shaklee”), were contributed to the Company<br />
in connection with the initial offering and listing of its ordinary<br />
shares on Euronext Brussels in March 2005. The investments in<br />
U-shin Ltd. (“U-shin”) and SigmaXYZ Inc.("SigmaXYZ") were<br />
made during the fiscal years ended March 31, 2007 and 2009,<br />
respectively.<br />
The Company’s portfolio consists of five controlling ownership<br />
interests, three investments in associates and several noncontrolling<br />
minority ownership interests. The interests in Asahi<br />
Asahi Tec<br />
60.1%<br />
Honsel<br />
51%<br />
Niles<br />
77.3%<br />
CME<br />
25.5%<br />
Phoenix<br />
Seagaia<br />
Resort<br />
100%<br />
Associates<br />
Other<br />
Interests<br />
Cast Auto<br />
Parts<br />
Automotive Components<br />
Cast Auto<br />
Parts<br />
Electronics<br />
Media &<br />
Entertainment<br />
Hospitality<br />
Nutrition,<br />
Automotive,<br />
Other<br />
Financial<br />
Services &<br />
Other<br />
7
The evolution of the book value of the Company’s portfolio since March 31, 2008, can be summarized as follows:<br />
Evolution of book value<br />
(In JPY millions)<br />
Fiscal year ended March 31 2008 Additions Disposals<br />
Fair value<br />
adjustments<br />
Impairment 2009<br />
Investments in subsidiaries – At cost less impairment<br />
Asahi Tec 25,984 7,769 - - (19,753) 14,000<br />
CME 7,817 - - - (4,817) 3,000<br />
D&M 10,515 - (10,515) - - -<br />
HIT 32,993 - - - (32,993) -<br />
Niles 16,619 - - - - 16,619<br />
Phoenix Seagaia Resort 21,709 1,000 - - (17,209) 5,500<br />
115,637 8,769 (10,515) 0 (74,772) 39,119<br />
Investments in associates – At cost less impairment<br />
Shaklee 12,244 276 - - (6,050) 6,470<br />
SigmaXYZ - 1,085 - - - 1,085<br />
U-shin 8,038 - - - (4,838) 3,200<br />
20,282 1,361 0 0 (10,888) 10,755<br />
Other investments - At fair value 21,530 897 (9,030) (5,016) (2,299) 6,082<br />
Total investments 157,449 11,027 (19,545) (5,016) (87,959) 55,956<br />
Cash and cash equivalents (parent company only) 50,347 8,379 - - - 58,726<br />
Loans 2,361 2,584 - - - 4,945<br />
Total portfolio 210,157 21,990 (19,545) (5,016) (87,959) 119,627<br />
Book value per share (in JPY) 2,457 257 (229) (59) (1,028) 1,398<br />
(In EUR millions)<br />
Fiscal year ended March 31 2008 Additions Disposals<br />
Fair value<br />
adjustments<br />
Impairment 2009<br />
Investments in subsidiaries – At cost less impairment<br />
Asahi Tec 198.1 59.2 - - (150.6) 106.7<br />
CME 59.6 - - - (36.7) 22.9<br />
D&M 80.2 - (80.2) - - -<br />
HIT 251.5 - - - (251.5) -<br />
Niles 126.7 - - - - 126.7<br />
Phoenix Seagaia Resort 165.5 7.6 - - (131.2) 41.9<br />
881.6 66.9 (80.2) 0.0 (570.0) 298.2<br />
Investments in associates – At cost less impairment<br />
Shaklee 93.3 2.1 - - (46.1) 49.3<br />
SigmaXYZ - 8.3 - - - 8.3<br />
U-shin 61.3 - - - (36.9) 24.4<br />
154.6 10.4 0.0 0.0 (83.0) 82.0<br />
Other investments - At fair value 164.1 6.8 (68.8) (38.2) (17.5) 46.4<br />
Total investments 1,200.3 84.1 (149.0) (38.2) (670.6) 426.6<br />
Cash and cash equivalents (parent company only) 383.8 63.9 - - - 447.7<br />
Loans 18.0 19.7 - - - 37.7<br />
Total portfolio 1,602.2 167.6 (149.0) (38.2) (670.6) 912.0<br />
Book value per share (in EUR) 18.7 2.0 (1.7) (0.4) (7.8) 10.7<br />
The table above reflects the Company’s investments’ book values as reflected in the non-consolidated financial statements, except for<br />
the other investments which are reflected at fair market value.<br />
The Company believes that the non-consolidated financial statements provide for the most relevant measure of its liquidity and<br />
financial position as the consolidated financial statements are merely an aggregation of its consolidated subsidiaries that operate in<br />
diverse industries. Furthermore, the consolidated financial statements for the year ended March 31, 2009, include losses and<br />
negative equity contributions from certain consolidated subsidiaries that the Company and its shareholders will not be exposed to as<br />
there is no binding obligation to cover such losses. Except for a guarantee of up to JPY 3,400 million (EUR 26.1 million) on the debt of<br />
Phoenix Seagaia Resort, RHJI’s financial exposure from its investments is limited to the invested capital. This exposure is reflected by<br />
the book values reflected in the non-consolidated financial statements.<br />
8
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Investments and disposals<br />
The evolution in terms of total invested capital of the Company’s<br />
portfolio during the fiscal year ended March 31, 2009, can be<br />
summarized as follows:<br />
• The Company increased the capital of Asahi Tec by JPY 7,769<br />
million (EUR 59.2 million) for purposes of (a) curing a breach<br />
of covenants by its US based subsidiary Metaldyne (JPY<br />
1,800 million or EUR 13.7 million), (b) providing Metaldyne<br />
with additional liquidity (JPY 1,051 million or EUR 8 million)<br />
and (c) funding Metaldyne’s bond tender (JPY 4,918 million<br />
or EUR 37.5 million);<br />
• The Company subscribed to JPY 1,000 million (EUR 7.6<br />
million) of new shares of Phoenix Seagaia Resort to cover<br />
scheduled reimbursement of its debt as well as to provide<br />
liquidity for working capital requirements;<br />
• The Company invested JPY 1,085 million (EUR 8.3 million) in<br />
SigmaXYZ, a newly formed joint venture in IT consulting with<br />
Mitsubishi Corporation;<br />
• The Company acquired 457,000 additional existing shares of<br />
Shaklee for an aggregate consideration of JPY 276 million<br />
(EUR 2.1 million), increasing its ownership to 42.5 %;<br />
• The Company closed the sale of D&M to K.K. BCJ-2, a<br />
corporation owned by investment funds advised by Bain<br />
Capital Partners, LLC, for cash consideration of JPY 23,115<br />
million (EUR 176.2 million);<br />
• The Company disposed of a non-controlling minority<br />
investment for JPY 9,030 million (EUR 68.8 million), initially<br />
acquired for JPY 5,600 million (EUR 42.7 million). The other<br />
investments also include a new investment of JPY 730<br />
million (EUR 5.6 million).<br />
Fair value adjustments<br />
Other investments consist of several non-controlling ownership<br />
interests and certain undisclosed investments. The noncontrolling<br />
ownership interests are “available for sale financial<br />
assets”, and are reported at fair market value. The downward<br />
adjustment since March 31, 2008, is attributable to a decrease in<br />
the fair market value of the investment in Commercial<br />
International Bank (Egypt) SAE (“CIB”) by JPY 5,016 million (EUR<br />
38.2 million). Subsequent to year-end, on July 8, 2009, 63% of<br />
the stake in CIB was sold for cash consideration of JPY 5,235<br />
million (EUR 40.2 million).<br />
Impairment<br />
The Company prepares both consolidated and non-consolidated<br />
financial statements. The consolidated financial statements are<br />
prepared in accordance with International Financial Reporting<br />
Standards ("IFRS"), while the non-consolidated financial<br />
statements are prepared in accordance with Belgian Generally<br />
Accepted Accounting Principles (“Belgian GAAP”). An<br />
impairment review was carried out for both the consolidated and<br />
the non-consolidated financial statements. It should be noted<br />
that there are significant differences in the valuation approach,<br />
nature and outcome of these reviews resulting from divergent<br />
methodologies of determining an asset’s recoverable amount<br />
between IFRS and Belgian GAAP. IFRS defines the recoverable<br />
amount of an asset as the higher of (a) the asset’s fair value less<br />
cost to sell or (b) its value in use. The value in use is based on<br />
the discounted cash flows projected to be derived from the<br />
asset’s continuing use. Belgian GAAP requires the recognition of<br />
impairment of an asset if its carrying value is projected to<br />
permanently exceed its recoverable amount, which can be<br />
determined using undiscounted cash flow estimates.<br />
As a result, the impairment charges in the consolidated and the<br />
non-consolidated financial statements for the fiscal year ended<br />
March 31, 2009, are different, and amounted to JPY 123,259<br />
million (EUR 939.7 million) and JPY 87,959 million (EUR 670.6<br />
million), respectively.<br />
Non-consolidated Financial Statements<br />
The Company reviewed the carrying value of its investments as<br />
reflected in the non-consolidated financial statements for the<br />
fiscal year ended March 31, 2009, prepared in accordance with<br />
Belgian GAAP. In particular, the Company assessed whether the<br />
carrying value of each individual investment was in excess of their<br />
future recoverable amount. The assessment included a review<br />
and analysis of (a) publicly observed market prices for the publicly<br />
listed investments, (b) valuation multiples for groups of publicly<br />
listed, comparable companies, and with respect to the<br />
consolidated subsidiaries, (c) the projected financial performance<br />
based on budgets and business plans prepared by their respective<br />
managements. It should be noted that the future recoverable<br />
amount of the Company’s consolidated subsidiaries has been<br />
determined by applying currently applicable valuation multiples to<br />
the consolidated subsidiaries’ undiscounted projected earnings,<br />
and that the resulting amounts do not purport to indicate the<br />
current realizable value of the Company’s investments in<br />
consolidated subsidiaries.<br />
The impact of the economic recession on the consolidated<br />
subsidiaries’ financial performance, together with the Company’s<br />
stance, which it believes to be conservative, on the timing and the<br />
extent of the recovery of the global economy, and the current<br />
market valuations in general and in the industries relevant to the<br />
Company’s investments in particular, resulted in the recognition<br />
of impairment charges at March 31, 2009, of JPY 87,959 million<br />
(EUR 670.6 million) as reflected in the table on the previous page.<br />
The Company will continue to monitor the recoverable amount of<br />
its investments and in the event that the reasons underlying the<br />
recognition of the impairment are no longer valid, the impairment<br />
charges could be reversed in the future. In addition to the<br />
impairment above, the Company adjusted the carrying value in its<br />
subsidiary RHJI Services SA by JPY 6,937 million (EUR 52.9<br />
million) to reflect its net asset value of JPY 5,156 million (EUR 39.3<br />
million). RHJI Services SA is a management subsidiary that<br />
provides advisory services and engages in intra-group financing.<br />
9
Consolidated Financial Statements<br />
For purposes of preparing the consolidated financial statements, in accordance with IFRS, as of and for the fiscal year ended March<br />
31, 2009, and in light of the global economic downturn, the Company analyzed the performance of its consolidated businesses in order<br />
to determine whether or not there was any indication of impairment of their respective long-lived assets. The analysis included a<br />
review of the industry perspective, and the impact of lower than expected performance of certain portfolio companies on the<br />
recoverable amount of goodwill and other long-lived intangible assets. The analysis resulted in an aggregate impairment charge of<br />
JPY 123,259 million (EUR 939.7 million) for the fiscal year ended March 31, 2009. JPY 95,290 million (EUR 726.5 million) was<br />
attributable to goodwill and intangible assets and mainly related to Metaldyne and HIT in view of the significant global downturn of the<br />
automotive industry. Cumulative impairment of goodwill and intangible assets at March 31, 2009, amounted to JPY 136,491 million<br />
(EUR 1,040.6 million). Total intangible assets at March 31, 2009, amounted to JPY 50,808 million (EUR 387.3 million), compared to JPY<br />
161,245 million (EUR 1,229 million) at March 31, 2008. In addition to the impairment of goodwill and intangible assets, underutilized<br />
property, plant and equipment, mainly at Phoenix Seagaia Resort, HIT and Metaldyne, were written down by JPY 27,969 million (EUR<br />
213.2 million). Finally, the Company recognized an impairment charge of JPY 10,888 million (EUR 83 million) on its investments in<br />
Shaklee and U-shin.<br />
The impairment charges related to the consolidated subsidiaries can be broken down as follows:<br />
(In JPY millions)<br />
Fiscal year ended March 31 2009<br />
Asahi Tec HIT Niles CME<br />
Phoenix<br />
Seagaia<br />
Resort<br />
Property, plant and equipment 7,045 6,699 232 - 13,993 27,969<br />
Goodwill 30,849 6,957 9,770 3,247 - 50,823<br />
Intangible assets other than goodwill 14,892 25,186 - 4,398 (9) 44,467<br />
Total<br />
52,786 38,842 10,002 7,645 13,984 123,259<br />
All impairment charges referenced in the review of the consolidated subsidiaries’ individual results, relate to the impairment charges<br />
reflected in the Company’s consolidated financial statements for the fiscal year ended March 31, 2009 as reflected in the table above.<br />
The allocation of the Invested Capital (excluding cash) per industry as at<br />
March 31, 2009 is as follows:<br />
Automotive Components 60%<br />
Hospitality 10%<br />
Nutrition 11%<br />
Financial Services 9%<br />
Media 5%<br />
Other 5%<br />
10
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Cash and cash equivalents<br />
Non-consolidated cash flows for the parent holding company for the fiscal year ended March 31, 2009, can be summarized as follows:<br />
(In millions) JPY EUR<br />
Fiscal year ended March 31 2009 2008 2009 2008<br />
Net cash used in operating activities (7,015) (1,691) (53.5) (12.9)<br />
Net cash from (used in) investing activities 17,599 (21,299) 134.2 (162.4)<br />
Net cash used in financing activities (392) (2,329) (3.0) (17.8)<br />
Net increase (decrease) in cash and cash equivalents 10,192 (25,319) 77.7 (193.0)<br />
Cash and cash equivalents at the beginning of the fiscal year 50,347 79,887 383.8 609.0<br />
Effect of exchange rate fluctuation on cash held (1,813) (4,221) (13.8) (32.2)<br />
Cash and cash equivalents at the end of the fiscal year 58,726 50,347 447.7 383.8<br />
Non-consolidated cash-flows from investing activities reflected:<br />
• The proceeds from the sale of D&M and a non-controlling minority investment for JPY 32,145 million (EUR 245.1 million) in<br />
aggregate;<br />
• Additional investments in Asahi Tec, Phoenix Seagaia Resort and Shaklee of JPY 9,045 million (EUR 69 million);<br />
• Funding of the Company’s management subsidiary RHJI Services for JPY 4,158 million (EUR 31.7 million), used to, among other<br />
things, provide financing to certain consolidated subsidiaries;<br />
• The formation of SigmaXYZ for JPY 1,085 million (EUR 8.3 million);<br />
• A new non-controlling investment of JPY 730 million (EUR 5.6 million);<br />
• The repurchase of 627,247 of its own shares for JPY 536 million (EUR 3.5 million). The Company repurchased the shares to be<br />
allocated to the Company’s employees under its incentive compensation plan. At March 31, 2009, the Company held 1,145,004<br />
treasury shares. Subsequent to March 31, 2009, the Company bought an additional 1,122,085 shares as part of the purchase of 2%<br />
of total outstanding shares, announced on March 17, 2009.<br />
Total non-consolidated cash of JPY 58,726 million or EUR 447.7 million is predominantly invested in government and government<br />
backed securities in EUR, USD and JPY.<br />
11
Asahi Tec Corporation<br />
• Headquarters: Japan<br />
• Industry: Automotive Components – Cast Auto Parts Segment<br />
• Tokyo Stock Exchange ticker: 5606.T<br />
• Total Shares Outstanding: 476,717,658<br />
• RHJI ownership as of March 31, 2009: 60.1% (286,314,061 shares)<br />
• Contribution price per share (March 23, 2005): JPY 250<br />
• Closing share price on March 31, 2008: JPY 88<br />
• Closing share price on March 31, 2009: JPY 35<br />
Geographic distribution of revenue<br />
Overview of Activities<br />
Asahi Tec (www.asahitec.co.jp) primarily designs, manufactures<br />
and sells ductile iron cast auto parts for truck and construction<br />
machinery OEMs, aluminum casting parts for truck and<br />
passenger car OEMs and aluminum wheels for automobile<br />
OEMs. Asahi Tec also designs, manufactures and sells<br />
environmental systems, equipment and development<br />
technologies used by municipalities and electrical hardware and<br />
equipment used by electricity generators.<br />
Revenue by operating segment<br />
U.S. 36%<br />
Chassis 30%<br />
Japan 35%<br />
Powertrain 31%<br />
Europe 18%<br />
Asia (excl. Japan) 6%<br />
Americas (excl. U.S.) 5%<br />
Devices<br />
& Equipment 5%<br />
General Casting<br />
& Forging Parts 34%<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended March 31 (1)<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 218,815 315,768 1,668.2 2,407.3<br />
Gross profit 18,848 29,528 143.7 225.1<br />
Gross margin 8.6 % 9.4 % 8.6 % 9.4 %<br />
EBITDA 13,655 24,744 104.1 188.6<br />
EBITDA margin 6.2 % 7.8 % 6.2 % 7.8 %<br />
Operating loss (52,294) (25,074) (368.7) (191.2)<br />
Loss for the year (23,958) (41,059) (182.6) (313.0)<br />
(1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005.<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 5,350 6,530 40.8 49.8<br />
Financial debt 79,366 117,457 605.1 895.5<br />
12
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Despite a significant deleveraging of its balance sheet, unprecedented volume declines forced Asahi<br />
Tec’s US subsidiary Metaldyne into Chapter 11. Asahi Tec also suffered from collapsing demand and is<br />
likely to breach financial covenants during the fiscal year ending March 31, 2010<br />
Asahi Tec’s consolidated revenue fell by 30.7% from JPY 315,768<br />
million during the fiscal year ended March 31, 2008 to JPY<br />
218,815 million during the fiscal year ended March 31, 2009. The<br />
global economic recession had a severe impact on Japan’s<br />
export driven economy. Asahi Tec’s Asian activities experienced<br />
significant volume declines, particularly driven by decreased<br />
export of motorcycles to emerging markets and continuously<br />
falling domestic demand for cars and trucks. Despite increased<br />
sales of parts for construction machines and electric power<br />
transmission equipment, Asian consolidated sales fell by 39%<br />
compared to the previous year.<br />
In the US, the effect of the downturn was even more devastating.<br />
U.S. sales at Asahi Tec’s US based subsidiary Metaldyne fell by<br />
41.4%. Sagging customer confidence and the lack of credit<br />
availability resulted in continuously falling demand. Metaldyne’s<br />
main customers shut down production for several weeks in an<br />
attempt to respond to the contraction of the US auto market that<br />
ultimately resulted in Chrysler’s and General Motor’s filing for<br />
Chapter 11 bankruptcy protection.<br />
During the 2nd and 3rd quarter of the fiscal year ended March<br />
31, 2009, Metaldyne responded to the decreasing sales by<br />
continuous adjustment of its cost structure, and was able to<br />
significantly deleverage its balance sheet following the<br />
successful tender for most of its outstanding senior and senior<br />
subordinated bonds with an aggregate principal amount of USD<br />
361.3 million (JPY 35,621 million). Metaldyne reduced its<br />
outstanding debt from approximately USD 830.2 million (JPY<br />
82,529 million) at March 31, 2008, to USD 536.3 million (JPY<br />
52,878 million), including the cancellation, effective September<br />
26, 2008, of approximately USD 31.0 million (JPY 3,134 million) of<br />
secured subordinated notes pursuant to a debt cancellation<br />
agreement entered into between Chrysler Corporation<br />
("Chrysler") and Metaldyne. In addition, upon completion of the<br />
tender offer, Chrysler agreed to cancel the 97,098 Class C<br />
Preferred shares it held in Asahi Tec with a face value of JPY<br />
6,082 million. The bond tender was financed by a USD 50 million<br />
investment from Asahi Tec, funded by the Company’s<br />
subscription to newly issued shares of Asahi Tec for JPY 4,917<br />
million, increasing its ownership in Asahi Tec from 45.3% to<br />
60.18%. In addition, certain of Metaldyne’s leading customers<br />
provided Metaldyne with USD 60 million funding for the bond<br />
tender offer, in the form of loans to Metaldyne. From the total<br />
proceeds of USD 110 million, Metaldyne used USD 60.1 million<br />
to pay for the tendered bonds. Previously, on July 15, 2008, the<br />
Company, via a capital subscription of JPY 1,800 million in Asahi<br />
Tec, also funded a cure of Metaldyne’s breach of financial<br />
covenants at June 30, 2008. On October 14, 2008, a capital<br />
injection of JPY 1,051 million by the Company into Asahi Tec<br />
further supported Metaldyne’s liquidity.<br />
Throughout the fiscal year ended March 31, 2009, Asahi Tec and<br />
Metaldyne increased their efforts to maintain profitability<br />
through cost reductions, plant closures, successfully negotiated<br />
price revisions and other measures designed to contain the<br />
effects of continuously falling order volumes, but the<br />
combination of the unprecedented sales decline and increased<br />
material prices resulted in a gross profit of JPY 18,848 million<br />
for the fiscal year ended March 31, 2009, compared to JPY<br />
29,528 million a year earlier.<br />
The operating loss for the fiscal year ended March 31, 2009, of<br />
JPY 52,294 million, was negatively impacted by an impairment<br />
charge of JPY 49,309 million on certain property, plant and<br />
equipment and intangible assets, including goodwill, of<br />
Metaldyne in view of its deteriorated financial performance and<br />
the uncertainty around its ability to operate as a going concern<br />
that existed at March 31, 2009 (1) . Excluding impairment losses<br />
for both years, the operating loss for the fiscal year ended March<br />
31, 2009, amounted to JPY 2,985 million, compared to an<br />
operating profit of JPY 4,175 million for the previous fiscal year.<br />
The impairment losses were partly offset by the gain of JPY<br />
39,768 million on the redemption of bonds following the<br />
successful bond tender and the cancellation of debt by Chrysler,<br />
resulting in a net loss for the fiscal year ended March 31, 2009 of<br />
JPY 23,958 million, compared to JPY 41,059 million last year.<br />
Despite Asahi Tec’s continued support and the resulting<br />
reduction of Metaldyne’s indebtedness, Metaldyne’s financial<br />
performance was heavily affected by car production in the US<br />
that continued to fall beyond expectations. Faced with its own<br />
challenges, Asahi Tec was no longer in a position to further<br />
support Metaldyne, which on May 27, 2009, filed a voluntary<br />
petition to reorganize under Chapter 11 of the U.S. Bankruptcy<br />
Code, shortly after Chrysler, one of its main customers, also<br />
filed for protection under Chapter 11.<br />
Given that its assets and capital structure are completely<br />
ringfenced from Metaldyne, Asahi Tec will now focus on its own<br />
needs and opportunities. Without Metaldyne, which will be<br />
deconsolidated, Asahi Tec projects net sales of JPY 60,200<br />
million and an operating loss of JPY 300 million, based on its<br />
management forecast prepared under J-GAAP for the fiscal year<br />
ending March 31, 2010.<br />
Asahi Tec is likely to breach certain financial covenants under its<br />
credit agreements in the course of the fiscal year ending March<br />
31, 2010. Asahi Tec is currently seeking a waiver of covenants<br />
from its lenders. In the event that Asahi Tec were not successful<br />
in obtaining such a waiver, it would be in default of its<br />
obligations under its credit agreements, which would cast<br />
significant doubt on Asahi Tec’s ability to operate as a going<br />
concern.<br />
(1) The total impairment charge recorded in the consolidated financial statements for<br />
the fiscal year ended March 31, 2009, amounted to JPY 52,786 million as a result<br />
of an additional impairment loss of JPY 3,477 million recorded by the Company on<br />
goodwill resulting from the purchase price allocation.<br />
13
RHJI's purchase agreement to buy certain assets from Metaldyne was not retained by the bankruptcy<br />
court<br />
Given that Asahi Tec was not in a position to further support<br />
Metaldyne as it required focus on its own needs in a<br />
continuously challenging automotive industry, the Company<br />
entered into an agreement to purchase a majority of Metaldyne’s<br />
assets under a court-supervised sales process pursuant to<br />
Section 363 of the U.S. Bankruptcy Code.<br />
The purchase agreement was however not approved by the<br />
bankruptcy court and has terminated on July 27, 2009. Under<br />
the Section 363 process, interested parties will have an<br />
opportunity to submit better and higher offers for the Metaldyne<br />
assets. The Company may elect to participate in the sale auction<br />
scheduled to be held on August 5, 2009.<br />
To fund its continuing operations during the restructuring,<br />
Metaldyne has secured a USD 19.85 million debtor-inpossession<br />
(DIP) financing facility from certain customers. The<br />
DIP credit facility will be used for the company's normal working<br />
capital requirements, including employee wages and benefits,<br />
supplier payments, and other operating expenses during the<br />
reorganization process.<br />
14
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
15
Honsel International Technologies SA<br />
• Headquarters: Belgium<br />
• Industry: Automotive Components – Cast Auto Parts<br />
Segment<br />
• Privately Held<br />
• RHJI ownership as of March 31, 2009: 82 % (1)<br />
Overview of Activities<br />
HIT (www.honsel.com) is a leading European supplier of light<br />
metal products to the automotive and heavy truck industries. HIT<br />
principally designs, manufactures and sells aluminum and<br />
magnesium components and assemblies. HIT has four main<br />
product categories: engine, transmission, suspension and body<br />
components. HIT has a diverse customer base including a<br />
Geographic distribution of revenue<br />
variety of large automobile and truck OEM manufacturers and<br />
other large OEM suppliers that ship directly to vehicle<br />
manufacturers.<br />
HIT competes in the casting, machining and finishing phases of<br />
automotive light metal components manufacturing. HIT seeks to<br />
capitalize on key trends in the light metal casting segment of the<br />
industry including: demand for new materials and technologies<br />
that reduce the overall weight of vehicles, increased outsourcing<br />
of light metals components manufacturing by automobile OEMs,<br />
preference of automobile OEMs for full service global suppliers,<br />
increased demand for suppliers with the capability to design and<br />
engineer components and assemblies, and consolidation<br />
opportunities due to the largely regional and fragmented nature<br />
of the Light Metals Casting segment.<br />
Revenue by operating segment<br />
Die Casting 56%<br />
Europe 93%<br />
Permanent Mold<br />
Casting 17%<br />
Others 18%<br />
Americas 7%<br />
Rolling 1%<br />
Extrusion 8%<br />
Key Figures<br />
Condensed consolidated income statement for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 93,577 115,193 713.4 878.2<br />
Gross profit 1,246 10,454 9.5 79.7<br />
Gross margin 1.3 % 9.1 % 1.3 % 9.1 %<br />
EBITDA (2) 1,823 11,425 13.9 87.1<br />
EBITDA margin 1.9 % 9.9 % 1.9 % 9.9 %<br />
Operating loss (46,539) (380) (354.8) (2.9)<br />
Loss from continuing operations (49,267) (2,400) (375.6) (18.3)<br />
Profit (loss) from discontinued operations (net of income tax) 1,758 (2,768) 13.4 (21.1)<br />
Loss for the year (47,011) (5,207) (358.4) (39.7)<br />
(2) Adjusted for non-recurring restructuring costs<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 1,876 5,194 14.3 39.6<br />
Financial debt 71,631 61,322 546.1 467.5<br />
(1) Ownership in Honsel was reduced to 51 % following Honsel's capital restructuring, which was completed on July 22, 2009.<br />
16
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Plummeting sales and delayed cost rationalization result in standstill agreement<br />
Starting in August, 2008, and reaching its full scale towards the<br />
end of the calendar year 2008, the crisis in the European<br />
automotive industry caused HIT’s revenue to decrease from EUR<br />
878.2 million during the fiscal year ended March 31, 2008, to<br />
EUR 713.4 million for the fiscal year ended March 31, 2009. The<br />
revenue for the fiscal year ended March 31, 2009 included EUR<br />
50.2 million from Tafime, acquired in December 2007. Excluding<br />
Tafime for both fiscal years, revenue decreased by 29.8 %.<br />
HIT’s operating subsidiaries, hereafter collectively referred to as<br />
Honsel, were unable to adjust their variable costs quickly<br />
enough to adjust to the rapidly declining order volumes, and<br />
incurred higher than expected labor costs resulting from delays<br />
in the implementation of its restructuring program<br />
“Plan4Growth”. As a result, gross profit amounted to EUR 9.5<br />
million for the fiscal year ended March 31, 2009, compared to<br />
EUR 79.7 million during the previous fiscal year. In addition to<br />
the effects of declining demand and unachieved labor savings,<br />
increasing costs of energy, maintenance and waste disposal<br />
caused EBITDA, adjusted for EUR 49 million of non-recurring<br />
restructuring and other costs, to decrease from EUR 87.1<br />
million for the fiscal year ended March 31, 2008, to EUR 13.9<br />
million for the fiscal year ended March 31, 2009. Given the<br />
significantly deteriorated financial performance and the<br />
continuing weak economic outlook, HIT recorded an impairment<br />
loss on certain intangible assets and goodwill for the fiscal year<br />
ended March 31, 2009 of EUR 199 million. As a result of the<br />
under-utilization of certain manufacturing equipment, EUR 46.6<br />
million impairment losses were recognized on tangible assets.<br />
Excluding all impairment losses, the operating loss for the fiscal<br />
year ending March 31, 2009, amounted to EUR 109.2 million,<br />
compared to an operating loss of EUR 2.9 million a year earlier.<br />
The net loss for the fiscal year ended March 31, 2009, increased<br />
to EUR 358.4 million, compared to EUR 39.7 million for the fiscal<br />
year ended March 31, 2008. On December 29, 2008, HIT reached<br />
several agreements in view of the liquidity shortfall that resulted<br />
from collapsing demand. HIT’s lenders agreed to a standstill,<br />
originally until March 31, 2009, but extended twice and currently<br />
still in place. Furthermore, certain of HIT’s main customers<br />
provided for additional liquidity and compensation for reduced<br />
volumes. Finally, the Company provided a financing facility up to<br />
EUR 20 million, in the form of factoring - and sale and lease<br />
back arrangements.<br />
Proposed capital restructuring designed to allow Honsel to overcome the economic crisis and confirm<br />
its position as a key supplier of light metal components to the automotive industry<br />
During the standstill, the Company and a committee of HIT’s<br />
senior lenders agreed to a capital restructuring proposal that<br />
was approved by HIT’s lenders on May 25, 2009 and completed<br />
on July 22, 2009.<br />
As part of the restructuring, the Company invested EUR 50<br />
million in exchange for a controlling 51% stake in Honsel. The<br />
remaining 49% of the group is held by Honsel’s former senior<br />
term lenders following a debt-for-equity swap, which resulted in<br />
HIT’s and Honsel’s total outstanding secured term debt of<br />
approximately EUR 510 million being reduced to EUR 140<br />
million, consisting of EUR 110 million senior term loan and EUR<br />
30 million mezzanine term loan, all of which is held by Honsel’s<br />
former senior term lenders. Honsel’s other existing funding<br />
arrangements, including its EUR 40 million revolving credit<br />
facility, its EUR 20 million of factoring and leaseback financing<br />
from RHJI and EUR 30 million from certain of Honsel’s key<br />
customers and suppliers, will remain in place.<br />
In the event that Honsel would not be able to secure the<br />
financing of potential future liquidity needs, the Company further<br />
committed to a new secured backstop facility of EUR 10 million.<br />
Following the capital restructuring, the shares of Honsel are no<br />
longer held by HIT, but by a newly created holding company,<br />
Shelon Holdings Sarl, registered in Luxembourg, in which the<br />
Company holds 51 %.<br />
17
Niles Co., Ltd.<br />
• Headquarters: Japan<br />
• Industry: Automotive Components – Electronics Components<br />
Segment<br />
• Privately Held<br />
• RHJI ownership as of March 31, 2009: 96.4%<br />
Overview of Activities<br />
Niles (www.niles.co.jp) manufactures switches for automobiles.<br />
The switches serve as key components in many vehicle systems<br />
that are typically developed and assembled by larger, more<br />
diversified suppliers or by automobile OEMs themselves. Niles’<br />
main switch product categories include those related to the<br />
steering column, doors and power-train/pedal. Niles also<br />
manufactures sensors for automobiles. Niles’ customers are<br />
automobile OEMs, such as Nissan and General Motors, and<br />
suppliers to automobile OEMs. Niles seeks to capitalize on its<br />
production engineering capability, its quality control, and its<br />
ability to respond quickly to new design demands from its<br />
customers.<br />
Geographical distribution of revenue (single operating segment)<br />
Japan 75%<br />
US 17%<br />
Asia (excl.Japan) 8%<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended March 31 (1)<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 45,444 59,318 346.5 452.2<br />
Gross profit 6,040 10,278 46.0 78.4<br />
Gross margin 13.3 % 17.3 % 13.3 % 17.3 %<br />
EBITDA 2,846 6,299 21.7 48.0<br />
EBITDA margin 6.3 % 10.6 % 6.3 % 10.6 %<br />
Operating profit (loss) (1,265) 2,351 (9.6) 17.9<br />
Profit (loss) for the year (5,771) 1,887 (44.0) 14.4<br />
(1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005.<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 2,078 2,957 15.8 22.5<br />
Financial debt 28,326 27,741 215.9 211.5<br />
18
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Niles successfully strengthens its capital structure<br />
During the fiscal year ended March 31, 2009, Niles suffered from<br />
the US auto market slowdown that gradually expanded to Asia,<br />
forcing some of Niles’ main customers into reducing and even<br />
temporarily halting production. In addition to the downturn in the<br />
automotive industry, Niles saw demand for contact switches<br />
decrease in a challenging global cellular handset market. Niles’<br />
revenue for the fiscal year ended March 31, 2009, consequently<br />
decreased by 23.4 %, from JPY 59,318 million during the<br />
previous fiscal year, to JPY 45,444 million.<br />
Especially in the US, the volume decline was so significant that<br />
Niles’ US operations ran at negative gross profit margins,<br />
bringing down the overall gross profit margin from 17.3% during<br />
the fiscal year ended March 31, 2008 to 13.3% during the fiscal<br />
year ended March 31, 2009. Niles designed and started the<br />
implementation of a series of drastic short term restructuring<br />
measures focused on mitigating the impact from the volume<br />
shortfall on its financial performance. By the end of March 31,<br />
2009, Niles had significantly reduced headcount, cut salaries<br />
and bonuses, and limited capital expenditures. Notwithstanding<br />
those cost saving measures, Niles reported an operating loss of<br />
JPY 1,265 million for the fiscal year ended March 31, 2009,<br />
compared to an operating profit of JPY 2,351 million a year<br />
earlier. Consequently EBITDA for the fiscal year ended March<br />
31, 2009, amounted to JPY 2,846 million, down from JPY 6,299<br />
million a year earlier. In addition to the results reported in the<br />
table above, the Company recorded an impairment charge of<br />
JPY 9,770 million on goodwill recorded at the time of the initial<br />
contribution of Niles to RHJI.<br />
production levels that are not expected to significantly increase<br />
during the next twelve months.<br />
Despite the operational restructuring efforts, Niles faced a<br />
liquidity shortfall and engaged in discussions with the Company,<br />
its main customer and its lenders with a view to securing<br />
sufficient liquidity and strengthening its financial position. On<br />
May 20, 2009, Niles bolstered its capital structure through a<br />
total capital injection of JPY 6 billion of which JPY 3.5 billion was<br />
provided by the Company and JPY 2.5 billion by a third party,<br />
which resulted in the Company's ownership being reduced from<br />
96.4% to 77.3%. Part of the proceeds was used to repay JPY 2.5<br />
billion of short-term debt that was previously secured by a cash<br />
deposit from the Company. Furthermore, syndicate lenders<br />
agreed on a refinancing of the existing debt structure with new<br />
bullet loans maturing in June 2011.<br />
Further to the short term restructuring measures, Niles decided<br />
to (a) reduce its manufacturing footprint, mainly in the US, by<br />
transferring production to Japan and Thailand, (b) further<br />
reduce headcount and (c) scale down capital expenditure to<br />
19
Columbia Music Entertainment, Inc.<br />
• Headquarters: Japan<br />
• Industry: Media and Entertainment – Music Entertainment<br />
Segment<br />
• Tokyo Stock Exchange ticker: 6791.T<br />
• Total Shares Outstanding: 260,870,117<br />
• RHJI ownership as of March 31, 2009: 25.5% (66,503,000<br />
shares)<br />
• Contribution price per share (March 23, 2005): JPY 118<br />
• Closing share price on March 31, 2008: JPY 60<br />
• Closing share price on March 31, 2009: JPY 23<br />
Overview of Activities<br />
CME (www.columbia.co.jp) is engaged in music production and<br />
entertainment in Japan. Music production and entertainment is<br />
the production, marketing and distribution of music. CME seeks<br />
to capitalize on its substantial music catalog, which generates<br />
cash flow from the sale of its content and the continuous<br />
addition of content to the catalog to ensure it remains dynamic,<br />
both in the high-growth music genres such as Japanese-<br />
Pop/Rock as well as in Enka, Japanese country music. The<br />
Columbia brand name is one of the most widely recognized<br />
brand names in music entertainment in Japan, which helps<br />
attract new artists. CME has a strong national Japanese sales<br />
force and established relationships with leading retailers in<br />
Japan. CME also distributes music from third party labels<br />
providing both profits and additional marketing and retail<br />
strength to its operations.<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended March 31 (1)<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 18,170 18,569 138.5 141.6<br />
Gross profit 7,061 6,920 53.8 52.8<br />
Gross margin 38.9 % 37.3 % 38.9 % 37.3 %<br />
EBITDA (43) (984) (0.3) (7.5)<br />
EBITDA margin (0.2)% (5.3)% (0.2)% (5.3)%<br />
Operating loss (693) (1,508) (5.3) (11.5)<br />
Loss from continuing operations (707) (1,627) (5.4) (12.4)<br />
Profit from discontinued operations (net of income tax) 188 292 1.4 2.2<br />
Loss for the year (519) (1,335) (4.0) (10.2)<br />
(1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005.<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 1,832 2,506 14.0 19.1<br />
Financial debt 1,457 517 11.1 3.9<br />
20
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
The continuous contraction of CME’s music entertainment market requires further structural reform<br />
under a new management structure<br />
During the fiscal year ended March 31, 2009, CME reported<br />
revenue of JPY 18,170 million, compared to JPY 18,569 million a<br />
year earlier. Excluding sales from Creative Core, acquired in<br />
November 2007, and contributing for a full fiscal year for the<br />
first time, CME’s revenue for the fiscal year ended March 31,<br />
2009, amounted to JPY 15,046 million, down 11.2% compared to<br />
the previous fiscal year. Increased sales of CME’s custom sales<br />
business and the growing digital business were offset by<br />
decreasing sales from J-Pop titles as CME considerably reduced<br />
the number of J-Pop artists in an attempt to eliminate<br />
unprofitable business in a shrinking CD market.<br />
The operating loss of JPY 693 million during the fiscal year<br />
ended March 31, 2009, compared to JPY 1,508 million a year<br />
earlier, was favorably affected by the reversal of estimated<br />
royalty payments (JPY 456 million). CME’s net loss for the fiscal<br />
year ended March 31, 2009, amounted to JPY 519 million and<br />
included JPY 434 million restructuring costs associated with<br />
early termination of artist contracts and retirement allowances.<br />
business. Finally, CME is implementing a new voluntary<br />
retirement program and cutting back on its temporary work<br />
force to reduce staff by 78 people.<br />
In addition to the net loss reported in the table on the previous<br />
page, the Company reviewed the recoverable amount of certain<br />
intangible assets recorded in its consolidated financial<br />
statements following the purchase price allocation upon the<br />
contribution of CME in March 2005. In view of the deteriorated<br />
financial performance, the reduced scale of CME’s business and<br />
the uncertainty around the economic recovery and the impact<br />
thereof on CME’s business, the Company recorded an<br />
impairment charge of JPY 7,645 million in its consolidated<br />
income statement for the fiscal year ended March 31, 2009, on<br />
certain intangible assets recognized as a result of the initial<br />
purchase price allocation. This impairment charge is only<br />
recorded in the Company’s consolidated financial statements<br />
and not reflected in CME’s results shown in the table on the<br />
previous page.<br />
Throughout the fiscal year ended March 31, 2009, CME<br />
continued to implement cost rationalization measures to<br />
mitigate the effects of a declining CD market. Several structural<br />
reform measures were initiated and will continue to be<br />
implemented during the fiscal year ending March 31, 2010.<br />
Among such measures, the number of J-Pop artists was<br />
drastically reduced and the J-Pop organization was downsized<br />
accordingly. CME further sharpened its focus on historically<br />
profitable segments such as Enka music products and future<br />
growth areas such as digital music and the games business.<br />
CME rationalized its organizational structure to the scale of its<br />
business by consolidating its sales-and marketing organization<br />
and radically downsizing Creative Core’s educational software<br />
CME’s management expects to return to profitability and<br />
publicly disclosed forecasts for the fiscal year ending March 31,<br />
2010, prepared under J-GAAP, which included sales of JPY<br />
18,500 million, operating profit of JPY 100 million and net profit<br />
of JPY 400 million. The projected net income includes an early<br />
lease termination gain of JPY 590 million, associated with<br />
planned relocation of CME’s head office in September, 2009.<br />
21
Phoenix Resort K.K.<br />
• Headquarters: Japan<br />
• Industry: Hospitality Segment<br />
• Privately Held<br />
• RHJI ownership as of March 31, 2009: 100 %<br />
Overview of Activities<br />
Phoenix Seagaia Resort (www.seagaia.co.jp) is a resort complex<br />
located in Miyazaki Prefecture on Kyushu, the southernmost of<br />
the main islands of Japan. Miyazaki has a suitable climate for<br />
year-round outdoor activities. The principal assets of the<br />
Phoenix Seagaia Resort are situated in a historic 750-acre pine<br />
forest that extends over 10 kilometers along the Pacific Ocean<br />
coastline, which is just outside the city of Miyazaki and 20<br />
minutes from the airport. Phoenix Seagaia Resort includes golf<br />
courses, lodging facilities, renovated spa (onsen) and fitness<br />
facilities, one of the largest convention centers in Japan and a<br />
tennis club.<br />
Revenue by operating segment (single geographic segment)<br />
Hotel 76%<br />
Golf 21%<br />
Others 3%<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended March 31 (1)<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 12,327 14,478 94.0 110.4<br />
Gross profit 1,530 2,260 11.7 17.2<br />
Gross margin 12.4 % 15.6 % 12.4 % 15.6 %<br />
EBITDA 297 989 2.3 7.5<br />
EBITDA margin 2.4 % 6.8 % 2.4 % 6.8 %<br />
Operating loss (701) (112) (5.3) (0.9)<br />
Loss for the year (517) (547) (3.9) (4.2)<br />
(1) Excluding the effect of the purchase price allocation carried out in connection with the contribution of the ownership interests to the Company at March 31, 2005.<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 455 644 3.5 4.9<br />
Financial debt 7,144 7,777 54.5 59.3<br />
22
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
Reduced foreign travel and a weak domestic tourist market drive hotel occupancy significantly lower<br />
Phoenix Seagaia Resort recorded revenue of JPY 12,327 million<br />
for the fiscal year ended March 31, 2009, a decrease of 14.9%<br />
compared to the previous fiscal year. The global economic<br />
downturn resulted in deferred spending in all tourist market<br />
segments. The number of foreign visitors to Japan fell<br />
drastically and Phoenix Seagaia Resort was particularly exposed<br />
to the impact of the weak Korean Won on the number of Korean<br />
visitors. Phoenix Seagaia Resort also saw domestic travel<br />
reduced significantly as companies cut back on budgets for<br />
corporate events, which are critical to the occupancy of Phoenix<br />
Seagaia Resort’s five star hotel. The lower occupancy also<br />
resulted in a decreasing number of golf rounds.<br />
Phoenix Seagaia Resort started the implementation of a drastic<br />
cost rationalization program to mitigate the impact of low sales<br />
and to ensure compliance with the financial covenants under its<br />
credit agreements at March 31, 2009. The program reduced<br />
costs by approximately JPY 1,500 million on an annualized basis,<br />
and identified several additional actions to address the impact<br />
from a potential further decline of the resort’s occupancy rates.<br />
EBITDA for the fiscal year ended March 31, 2009, amounted to<br />
JPY 297 million, compared to JPY 989 million during the<br />
previous fiscal year. The decreased hotel occupancy and lower<br />
average daily rates account for most of the shortfall.<br />
Furthermore, the Ocean Dome contributed positively to Phoenix<br />
Seagaia Resort’s overall EBITDA for the first half of the previous<br />
fiscal year ended March 31, 2008. Although the Ocean Dome was<br />
loss making, the announcement of the closure had a beneficial,<br />
non-recurring impact on the number of visitors. The Ocean<br />
Dome was closed on October 1, 2007, and other attractions, such<br />
as the newly developed beach concept, have only gradually<br />
contributed to room sales and will need additional marketing to<br />
grow into key attraction points for the resort.<br />
At March 31, 2009, Phoenix Seagaia Resort reviewed the<br />
recoverable amount of its property, plant and equipment using<br />
the income approach, which revealed it to be below the carrying<br />
value by JPY 13,993 million. Of this impairment loss, JPY 13,640<br />
million is recognized on the asset values resulting from the<br />
initial purchase price allocation, and therefore only recorded in<br />
the Company’s consolidated financial statements.<br />
As a result of the deteriorated financial performance and in<br />
order to allow Phoenix Seagaia Resort to make scheduled<br />
repayments under its credit facility, the Company injected JPY<br />
300 million in June, 2008, JPY 400 million in September, 2008,<br />
and JPY 300 million in January, 2009. The Company expects to<br />
make further capital contributions to Phoenix Seagaia Resort<br />
during the fiscal year ending March 31, 2010, to the extent they<br />
will result in an equivalent reduction of the Company's exposure<br />
from the guarantee and the intra-group revolving credit facility.<br />
Phoenix Seagaia Resort refinances entire debt<br />
On September 29, 2008, Phoenix Seagaia Resort entered into an<br />
agreement with its lenders to amend certain terms and<br />
conditions of its existing credit facility of JPY 7,508 million. The<br />
term of the amended loan is 3 years. The amendment provides<br />
for quarterly repayments of JPY 195 million and a bullet<br />
payment of JPY 5,497 million on September 30, 2011. In addition<br />
to this amended loan agreement, the Company extended the<br />
revolving credit facility from JPY 500 million to JPY 1,000 million<br />
until September 30, 2011. The outstanding balance of this<br />
intragroup loan at March 31, 2009 amounted to JPY 400 million.<br />
March 31, 2009, Phoenix Seagaia Resort had already repaid JPY<br />
390 million of the guaranteed principal, and had outstanding<br />
financial indebtedness of JPY 7,144 million, compared to JPY<br />
7,777 at March 31, 2008.<br />
The Company guarantees the quarterly repayments and the total<br />
interest up to an aggregate amount of JPY 3,400 million. At<br />
23
Shaklee Global Group, Inc.<br />
• Industry: Consumer Products – Nutrition Products Segment<br />
• Jasdaq Stock Exchange ticker: 8205.Q<br />
• Total Shares Outstanding: 25,920,000<br />
• RHJI ownership as of March 31, 2009: 42.5% (10,531,000 shares)<br />
• Contribution price per share (March 23, 2005): JPY 1,269<br />
• Closing share price on March 31, 2008: JPY 709<br />
• Closing share price on March 31, 2009: JPY 635<br />
Overview of Activities<br />
Shaklee is a leading provider of premium quality and natural<br />
nutrition, personal care, household and air and water treatment<br />
products. Shaklee operates in the United States, Japan,<br />
Malaysia, Canada and Mexico. The United States is Shaklee’s<br />
largest market in terms of sales, with Japan as its second<br />
largest market. Shaklee uses a sales force of self-employed,<br />
independent distributors to sell its products and has over<br />
750,000 members and distributors.<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 24,685 27,322 188.2 208.3<br />
Operating profit 3,652 2,945 27.8 22.5<br />
EBITDA 4,241 3,499 32.3 26.7<br />
EBITDA margin 17.2 % 12.8 % 17.2 % 12.8 %<br />
Profit for the year 1,705 1,441 13.0 11.0<br />
Consolidated cash and financial debt for the fiscal year ended March 31<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 5,273 4,699 40.2 35.8<br />
Financial debt 18,529 18,177 141.3 138.6<br />
Shaklee's revenue for the fiscal year ended March 31, 2009<br />
amounted to JPY 24,685 million, 9.7% lower than the previous<br />
fiscal year virtually entirely due to appreciation of the JPY. At<br />
constant exchange rates, sales declined only 0.9%. Operating<br />
profit, for the fiscal year ended March 31, 2009 increased 24% to<br />
JPY 3,652 million from JPY 2,945 million principally due to tight<br />
management over selling and general administrative expenses<br />
in all markets. The profit for the fiscal year ended March 31,<br />
2009 increased 51.6% excluding JPY 120 million benefit from<br />
changes made to the U.S. Retiree Medical Benefit Plan<br />
compared to JPY 1,125 million for the previous fiscal year that<br />
excludes non-recurring pre-tax gains from changes to the U.S.<br />
pension plan of JPY 846 million partly offset by the accelerated<br />
amortization of an intangible asset relating to the purchase of<br />
technology and distribution rights.<br />
fiscal year ended March 31, 2009 to JPY 23,013 million for the<br />
fiscal year ending March 31, 2010. Operating profit in<br />
accordance with J-GAAP is projected to increase from JPY 3,086<br />
million for the fiscal year ended March 31, 2009, to JPY 3,132<br />
million, for the fiscal year ending March 31, 2010.<br />
Based on its management projections under J-GAAP, Shaklee<br />
expects revenue to decrease from JPY 24,685 million for the<br />
24
LETTER TO SHAREHOLDERS AND BUSINESS REVIEW<br />
U-shin Ltd.<br />
• Headquarters: Japan<br />
• Industry: Automotive Components - Electronics Components<br />
Segment<br />
• Tokyo Stock Exchange ticker: 6985.T<br />
• Total Shares Outstanding: 31,995,502<br />
• RHJI ownership as of March 31, 2009: 20.0% (6,400,000 shares)<br />
• Acquisition price per share (April 13, 2006): JPY 1,244<br />
• Closing share price on March 31, 2008: JPY 401<br />
• Closing share price on March 31, 2009: JPY 259<br />
Overview of Activities<br />
U-shin (www.u-shin-ltd.com) is a company engaged in<br />
manufacturing and sales of automobile components such as key<br />
sets, door locks, heater control panels and switches, various<br />
instruments for farm machinery, construction machinery and<br />
machine tools, other industrial machinery, and housing<br />
equipment such as locks for houses, hotels and buildings.<br />
Key figures<br />
Condensed consolidated income statement for the fiscal year ended February 28<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Revenue 70,772 77,963 539.5 594.4<br />
Operating profit 3,258 3,357 24.8 25.6<br />
EBITDA 7,343 7,584 56.0 57.8<br />
EBITDA margin 10.4 % 9.7 % 10.4 % 9.7 %<br />
Profit (loss) for the year (282) 339 (2.1) 2.6<br />
Consolidated cash and financial debt for the fiscal year ended February 28<br />
(In millions) JPY EUR<br />
2009 2008 2009 2008<br />
Cash 15,997 9,290 122.0 70.8<br />
Financial debt 24,888 22,472 189.7 171.3<br />
As U-shin’s fiscal year ends on November 30, the Company used<br />
financial information for the twelve months ended February 28,<br />
2009, compiled from publicly disclosed unaudited quarterly<br />
financial information, for the purposes of preparing the<br />
Company’s consolidated financial statements as of and for the<br />
fiscal year ended March 31, 2009. Financial information for the<br />
twelve months ended February 28, 2008, has been compiled on<br />
the same basis for comparative purposes.<br />
U-shin reported revenue of JPY 70,772 million for the twelve<br />
months ended February 28, 2009, compared to JPY 77,963<br />
million for the same period last year, as a result of difficult<br />
market conditions in both the automotive industry and the<br />
industrial equipment market. The net loss for the twelve months<br />
ended February 28, 2009 of JPY 282 million compared to a net<br />
profit of JPY 339 million for the same period a year earlier,<br />
which was favorably impacted by gains on the disposal of<br />
investment securities of JPY 1,136 million.<br />
Based on its management projections under J-GAAP, and<br />
following a difficult 1st quarter of the fiscal year ending<br />
November 30, 2009, U-shin lowered its outlook for the first half<br />
of the fiscal year, projecting revenue of JPY 24,000 million<br />
versus JPY 29,000 million previously. U-shin’s full year outlook<br />
includes revenue of JPY 60,000 million and a break-even net<br />
result.<br />
25
PART II<br />
FINANCIAL STATEMENTS FOR THE FISCAL YEAR<br />
ENDED MARCH 31, 2009
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL<br />
CONDITION AND RESULTS OF OPERATIONS FOR THE FISCAL<br />
YEARS ENDED MARCH 31, 2009 AND 2008<br />
INTRODUCTION<br />
Unless otherwise noted herein, RHJ International SA, a Belgian<br />
limited liability company, is referred to as “RHJI”. RHJ<br />
International SA and its businesses are referred to collectively<br />
as the “Company”.<br />
RHJI is a diversified holding company focused on creating longterm<br />
value for its shareholders by acquiring and operating<br />
businesses. RHJI has several controlling and non-controlling<br />
interests, operating in automotive components, consumer<br />
electronics, consumer products, hospitality and media and<br />
entertainment industries. At March 31, 2009, RHJI’s portfolio<br />
consisted of five controlling ownership interests, three<br />
investments in associates and several non-controlling minority<br />
ownership interests. The interests in Asahi Tec, HIT, Niles, CME,<br />
Phoenix Seagaia Resort and Shaklee, were contributed to RHJI<br />
on March 31, 2005 in connection with a private placement and a<br />
global offering of its ordinary shares on Euronext Brussels in<br />
March 2005. RHJI seeks to enhance the value of these<br />
businesses through strategic acquisitions and operating<br />
improvements through its industrial partnership approach.<br />
ACQUISITIONS<br />
New investments for the fiscal year ended March 31, 2009, can<br />
be summarized as follows:<br />
• On May 9, 2008, RHJI invested JPY 1,085 million in<br />
SigmaXYZ, a newly formed joint venture in ICT consulting<br />
with Mitsubishi Corporation;<br />
• RHJI increased the capital of Asahi Tec by JPY 7,769 million<br />
for purposes of (a) curing a breach of covenants by its US<br />
based subsidiary Metaldyne (JPY 1,800 million on July 15,<br />
2008), (b) providing Metaldyne with additional liquidity (JPY<br />
1,051 million on October 15, 2008) and (c) funding<br />
Metaldyne’s bond tender (JPY 4,918 million on November 25,<br />
2008);<br />
• On June 20, 2008, September 23, 2008 and in January , 2009,<br />
RHJI subscribed to new shares of Phoenix Seagaia Resort<br />
for an aggregate amount of JPY 1,000 million, in order to<br />
cover scheduled reimbursement of its debt as well as to<br />
provide liquidity for working capital requirements;<br />
• RHJI acquired 457,000 additional existing shares of Shaklee<br />
for an aggregate consideration of JPY 276 million, increasing<br />
its ownership to 42.5 %.<br />
28
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
DISPOSALS<br />
During the fiscal year ended March 31, 2009, the Company<br />
systematically reviewed various strategic alternatives for some<br />
of its holdings which resulted in the following disposals:<br />
• The Company disposed of a non-controlling minority<br />
investment for JPY 9,030 million (EUR 68.8 million), initially<br />
acquired for JPY 5,600 million;<br />
• On September 4, 2008, the Company closed the sale of D&M<br />
to K.K. BCJ-2, a corporation owned by investment funds<br />
advised by Bain Capital Partners, LLC, for cash<br />
consideration of JPY 23,115 million, yielding a capital gain of<br />
JPY 12,600 million.<br />
• Subsequent to March 31, 2009, on July 8, the company sold<br />
63% of its stake in CIB for JPY 5,235 million (EUR 40.2<br />
million), representing an absolute return of 107% to the<br />
initial purchase price.<br />
RESULTS OF OPERATIONS<br />
The consolidated income statement for the fiscal year ended<br />
March 31, 2009, reflected the impact of the economic downturn.<br />
The automotive industry was particularly hit by the lack of<br />
customer confidence and tightening consumer credit that<br />
resulted in the near collapse of two of the world’s largest car<br />
manufacturers, which filed for bankruptcy protection. The<br />
Company’s automotive assets suffered the effects of severe and<br />
rapid volume declines. Beside the steep decline in automotive<br />
sales, the Company’s other consolidated subsidiaries, Phoenix<br />
Seagaia Resort and CME, faced equally difficult market<br />
conditions and saw their sales decrease.<br />
For purposes of preparing the consolidated financial<br />
statements, in accordance with IFRS, as of and for the fiscal year<br />
ended March 31, 2009, and in light of the global economic<br />
downturn, the Company analyzed the performance of its<br />
consolidated businesses in order to determine whether or not<br />
there was any indication of impairment of their respective longlived<br />
assets. The analysis included a review of the industry<br />
perspective, and the impact of lower than expected performance<br />
of certain portfolio companies on the recoverable amount of<br />
goodwill and other long-lived intangible assets. The analysis<br />
resulted in an aggregate impairment charge of JPY 123,259<br />
million for the fiscal year ended March 31, 2009. JPY 95,290<br />
million was attributable to goodwill and intangible assets and<br />
mainly related to Metaldyne and HIT. Cumulative impairment of<br />
goodwill and intangible assets at March 31, 2009, amounted to<br />
JPY 136,491 million. Total intangible assets at March 31, 2009,<br />
amounted to JPY 50,808 million, compared to JPY 161,245<br />
million at March 31, 2008. In addition to the impairment of<br />
goodwill and intangible assets, underutilized property, plant and<br />
equipment, mainly at Phoenix Seagaia Resort, HIT and<br />
Metaldyne, were written down by JPY 27,969 million. Finally, the<br />
Company recognized an impairment charge of JPY 10,888<br />
million on its investments in Shaklee and U-shin.<br />
Revenue for the fiscal year ended March 31, 2009 amounted to<br />
JPY 397,300 million, compared to JPY 550,066 million for the<br />
previous fiscal year, a 27.8% decrease, illustrating the severity<br />
of the economic downturn that particularly affected the<br />
Company’s consolidated automotive subsidiaries.<br />
29
Gross profit for the fiscal year ended March 31, 2009 amounted<br />
to JPY 34,820 million, representing 8.8% of revenue, compared<br />
to 11.1% for the fiscal year ended March 31, 2008. The decrease<br />
in gross profit margin is driven by the significant decline in<br />
production volumes of the car manufacturers and the inability to<br />
reduce variable costs accordingly.<br />
Selling, general and administrative expenses amounted to JPY<br />
47,961 million for the fiscal year ended March 31, 2009,<br />
compared to JPY 52,878 million during the previous fiscal year.<br />
The selling, general and administrative expenses partly<br />
reflected the impact from ongoing restructuring efforts that<br />
were deployed towards the end of the fiscal year ended March<br />
31, 2009, including at the level of the Company’s operating cost<br />
structure, which is being gradually reduced to approximately<br />
JPY 3,500 million, compared to JPY 4,935 million for the fiscal<br />
year ended March 31, 2009.<br />
Other income and expenses amounted to JPY 11,041 million for<br />
the fiscal year ended March 31, 2009, compared to JPY 4,594<br />
million during the previous fiscal year. The increase mainly<br />
resulted from non-recurring restructuring expenses of JPY<br />
5,118 million at HIT and Metaldyne and JPY 1,403 million losses<br />
on disposal of certain of Metaldyne’s assets.<br />
Loss from operations for the fiscal year ending March 31, 2009<br />
of JPY 154,159 million, included amortization and impairment<br />
charges of JPY 123,259 million of which JPY 38,096 million were<br />
recognized in the consolidated financial statements only and<br />
which are not reflected in the individual consolidated<br />
subsidiaries’ income statements presented in Part I of this<br />
Annual Report. Excluding those non-cash charges for both<br />
periods, the operating loss of JPY 30,900 million for the fiscal<br />
year ended March 31, 2009, compared to an operating loss of<br />
JPY 4,662 million for the fiscal year ended March 31, 2008, again<br />
clearly reflecting the magnitude of the impact the economic<br />
recession had on the operating performance across all<br />
consolidated subsidiaries.<br />
As a result of the capital restructuring of Honsel, completed in<br />
July, 2009, and Metaldyne's filing for Chapter 11 bankruptcy<br />
protection, the Company will record significant gains associated<br />
with the waiver of Honsel’s debt and the deconsolidation of<br />
Metaldyne. These gains will be recorded in the fiscal year<br />
ending March 31, 2010, and are currently estimated at<br />
approximately JPY 57 billion or EUR 434.5 million.<br />
Net financial income of JPY 15,269 million for the fiscal year<br />
ended March 31, 2009, included (a) a gain of JPY 30,552 million<br />
following Metaldyne’s bond tender, (b) a gain of JPY 3,134<br />
million resulting from the agreement between Chrysler and<br />
Metaldyne to cancel USD 31.0 million of Metaldyne’s secured<br />
subordinated notes, (c) the gain of JPY 6,082 million from the<br />
cancelation of some of the preferred C shares at Asahi Tec and<br />
(d) a gain of JPY 3,370 million on the sale of a non-controlling<br />
minority investment. These gains were offset by financial costs<br />
including (a) net interest expense of JPY 19,154 million from<br />
consolidated subsidiaries, (b) net foreign exchange losses of JPY<br />
7,345 million, and (c) JPY 1,045 million of fair value adjustments<br />
on certain financial assets. Last year, financial costs amounted<br />
to JPY 32,881 million, and included (a) interest expense of JPY<br />
22,301 million, (b) foreign currency exchange losses of JPY 7,438<br />
million and (c) the write-off of previously deferred financing fees<br />
of JPY 2,526 million.<br />
Income tax benefit for the fiscal year ended March 31, 2009<br />
amounted to JPY 6,232 million, compared to JPY 186 million for<br />
the previous fiscal year, and mainly resulted from the reversal of<br />
deferred tax liabilities of JPY 7,761 million following the<br />
impairment of certain tangible and intangible assets.<br />
Discontinued operations reflect D&M and HIT’s Canadian<br />
operations. The result from D&M includes the net loss of JPY<br />
999 million from operations for the six months ended September<br />
30, 2008 and the gain on disposal of JPY 11,073 million. The gain<br />
on disposal as reflected in the Company’s consolidated income<br />
statement consists of the gain of JPY 12,600 million over the<br />
acquisition cost less JPY 1,527 million of income contributed by<br />
D&M to consolidated reserves from April 1, 2005 through the<br />
date of effective disposal. The gain from the liquidation of HIT’s<br />
Canadian subsidiary, Amcan, amounted to JPY 1,918 million. The<br />
breakdown of discontinued operations for the fiscal years ended<br />
March 31, 2009 and 2008 is as follows:<br />
(in JPY millions) 2009 2008<br />
Revenue 49,553 120,206<br />
Cost of sales (30,372) (76,140)<br />
Gross profit 19,181 44,066<br />
Selling, general and administrative expenses (17,948) (36,817)<br />
Other income (expenses) (1,502) (4,333)<br />
Gain on sale 12,991 -<br />
Profit from operations 12,722 2,916<br />
Net financial expense (729) (1,090)<br />
Share of loss of equity accounted investees<br />
(net of income tax)<br />
- (55)<br />
Profit before tax 11,993 1,771<br />
Income tax expense (1) (2,948)<br />
Profit (loss) for the period 11,992 (1,177)<br />
Basic and diluted earnings per share (in JPY) 142 (14)<br />
Loss for the period ended March 31, 2009 amounted to JPY<br />
131,271 million, of which JPY 116,043 million is attributable to<br />
the equity holders of the parent company, compared to JPY<br />
33,221 million for the fiscal year ended March 31, 2008. JPY<br />
10,598 million of losses attributable to the minority<br />
shareholders of HIT and Asahi Tec were attributed to the equity<br />
holders of the parent pursuant to the provisions of IAS 27 that<br />
prevent losses to be allocated to the minority shareholders,<br />
except if they would have a binding obligation to cover such<br />
losses.<br />
30
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
LIQUIDITY AND CAPITAL<br />
RESOURCES<br />
Debt<br />
Consolidated financial debt at March 31, 2009 amounted to JPY<br />
189,011 million, compared to JPY 228,148 million on March 31,<br />
2008. The decrease primarily resulted from (a) the successful<br />
bond tender at Metaldyne, reducing debt by JPY 30,422 million,<br />
net of customer loans, (b) the cancellation of JPY 3,133 million<br />
senior subordinated notes of Metaldyne held by Chrysler and (c)<br />
the cancellation of JPY 6,082 million of preferred shares of Asahi<br />
Tec, also held by Chrysler.<br />
Consolidated financial debt at March 31, 2009 and March 31,<br />
2008 can be summarized as follows:<br />
Asahi Tec<br />
At March 31, 2009, Asahi Tec had JPY 79,366 million in<br />
indebtedness outstanding, of which JPY 52,878 million at its US<br />
subsidiary Metaldyne. The decrease in total indebtedness by JPY<br />
38,091 million compared to March 31, 2008, mainly resulted<br />
from (a) Metaldyne’s successful tender for JPY 30,422 million,<br />
net of customer loans, (b) the cancellation of JPY 3,134 million<br />
senior subordinated notes of Metaldyne held by Chrysler and (c)<br />
the cancellation of JPY 6,082 million of preferred shares of Asahi<br />
Tec, also held by Chrysler.<br />
The bond tender was financed by a USD 50 million investment<br />
from Asahi Tec, funded by RHJI’s subscription to newly issued<br />
shares of Asahi Tec for JPY 4,917 million, increasing its<br />
ownership in Asahi Tec from 45.3% to 60.18%. In addition,<br />
certain of Metaldyne’s leading customers provided Metaldyne<br />
with USD 60 million funding for the bond tender offer, in the<br />
form of loans to Metaldyne. From the total proceeds of USD 110<br />
million, Metaldyne used USD 60.1 million to pay for the tendered<br />
bonds.<br />
Although as of March 31, 2009, Metaldyne was in compliance<br />
with the financial covenants of the term, revolving and letter of<br />
credit based or synthetic facilities, it defaulted on a payment of<br />
interest that fell due under its term loan and entered into a<br />
forbearance agreement with its lenders until May 30, 2009.<br />
Despite this forbearance agreement and Asahi Tec’s continued<br />
support and the resulting reduction of Metaldyne’s<br />
indebtedness, Metaldyne’s financial performance was heavily<br />
affected by car production in the US that continued to fall beyond<br />
expectations. Faced with its own challenges, Asahi Tec was no<br />
longer in a position to further support Metaldyne, which on May<br />
27, 2009, filed a voluntary petition to reorganize under Chapter<br />
11 of the U.S. Bankruptcy Code, shortly after Chrysler, one of its<br />
main customers, also filed for protection under Chapter 11.<br />
Excluding Metaldyne, Asahi Tec had JPY 26,488 million in<br />
indebtedness outstanding at March 31, 2009 compared to JPY<br />
34,929 million at March 31, 2008, the decrease mainly resulting<br />
from the above mentioned cancellation by Chrysler of preferred<br />
shares worth JPY 6,082 million. Asahi Tec’s indebtedness<br />
included (a) JPY 15,356 million senior credit facilities, (b) JPY<br />
4,000 million subordinated bank debt, (c) JPY 1,652 million<br />
leasing obligations and (d) JPY 5,203 million preferred securities<br />
classified as debt issued to former holders of Metaldyne notes.<br />
Excluding Metaldyne, Asahi Tec’s effective interest rates on its<br />
consolidated borrowings under its senior and subordinated<br />
credit facilities at March 31, 2009 were 2.75% and 4.66%<br />
respectively.<br />
Asahi Tec is likely to breach certain financial covenants under its<br />
credit agreements in the course of the fiscal year ending March<br />
31, 2010. Asahi Tec is currently seeking a waiver of covenants<br />
from its lenders. In the event that Asahi Tec were not successful<br />
in obtaining such a waiver, it would be in default of its obligations<br />
under its credit agreements, which would cast significant doubt<br />
on Asahi Tec’s ability to operate as a going concern.<br />
31
HIT<br />
At March 31, 2009, HIT had outstanding indebtedness of EUR<br />
546.1 million (JPY 71,631 million) compared to EUR 467.5 million<br />
(JPY 61,326 million) at March 31, 2008.<br />
The credit facilities at March 31, 2009, included EUR 317.5<br />
million senior and EUR 99.5 million mezzanine facilities, EUR<br />
33.4 million revolving facility and a EUR 90.8 million PIK<br />
(Payable in Kind) facility. On December 29, 2008, HIT reached<br />
several agreements in view of the liquidity shortfall that resulted<br />
from collapsing demand. HIT’s lenders agreed to a standstill,<br />
originally until March 31, 2009, but extended twice.<br />
Furthermore, certain of HIT’s main customers and a key<br />
supplier provided additional liquidity of EUR 30 million and<br />
compensation for reduced volumes. Finally, RHJI provided a<br />
secured financing facility up to EUR 20 million, in the form of<br />
factoring and sale and lease back arrangements.<br />
During the standstill, the Company and a committee of HIT’s<br />
senior lenders agreed to a capital restructuring proposal that<br />
was approved by HIT’s lenders on May 25, 2009 and was<br />
completed on July 15, 2009. As part of the restructuring, the<br />
Company invested EUR 50 million in exchange for a controlling<br />
51% stake in Honsel. The remaining 49% of the group is held by<br />
Honsel’s former senior term lenders following a debt-for-equity<br />
swap, which resulted in HIT’s total outstanding secured term<br />
debt of approximately EUR 507.8 million being reduced to EUR<br />
140 million, consisting of EUR 110 million senior term loan and<br />
EUR 30 million mezzanine term loan, all of which are held by<br />
Honsel’s former senior term lenders. Honsel’s existing EUR 40<br />
million revolving credit facility, as well as EUR 50 million of<br />
financing from the Company and certain of Honsel’s key<br />
customers and suppliers, remained in place.<br />
Niles<br />
At March 31, 2009, Niles had JPY 28,326 million of indebtedness<br />
outstanding on a consolidated basis, compared to JPY 27,741<br />
million a year earlier The credit facilities included senior term<br />
loans (JPY 10,455 million), revolving loans (JPY 7,997 million), an<br />
unsecured bullet loan (JPY 2,167 million), finance leases (JPY<br />
2,245 million), a bullet loan secured by a cash deposit from RHJI<br />
(JPY 2,500 million) and non-bank debt from a major stakeholder<br />
(JPY 2,500 million).<br />
On May 20, 2009, Niles bolstered its capital structure through a<br />
total capital injection of JPY 6,000 million of which JPY 3,500<br />
million was provided by the Company and JPY 2,500 million by<br />
the major stakeholder that had provided financing of JPY 2,500<br />
million previously. Part of the proceeds was used to repay JPY<br />
2,500 million of short-term debt that was secured by a cash<br />
deposit from RHJI, and the major stakeholder’s loan of JPY<br />
2,500 million. Furthermore, syndicate lenders agreed on a<br />
refinancing of the existing debt structure, of which JPY 7,566<br />
million was outstanding at March 31, 2009, with new bullet loans<br />
maturing in June 2011.<br />
The interest rates on Honsel’s new senior term are determined<br />
as Euribor plus 5%. According to the terms of the new senior<br />
credit, Honsel must ensure that, during a period of three years<br />
after the closing date, it has hedging arrangements in place to<br />
cause at least 66.66% of the outstanding amounts under the<br />
senior debt and the Customer Financing to bear interest at a<br />
fixed or capped rate.The new mezzanine facility will pay Euribor<br />
+ 5% cash interest and 5% PIK interest. Honsel may at any time<br />
during the life of the Mezzanine Facility elect to have all interest<br />
capitalized at the end of each interest period, provided that,<br />
following the exercise of such election, interest shall accrue at a<br />
fixed rate of 16.00% PIK per annum.<br />
32
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Phoenix Seagaia Resort<br />
On September 29, 2008, Phoenix Seagaia Resort entered into an<br />
agreement with its lenders to amend certain terms and<br />
conditions of its existing credit facility of JPY 7,508 million. The<br />
term of the amended loan is 3 years. The amendment provides<br />
for quarterly repayments of JPY 195 million and a bullet<br />
payment of JPY 5,497 million on September 30, 2011. In addition<br />
to this amended loan agreement, the Company extended the<br />
revolving credit facility from JPY 500 million to JPY 1,000 million<br />
until September 30, 2011. The outstanding balance of this intragroup<br />
loan at March 31, 2009 amounted to JPY 400 million. The<br />
Company guarantees the quarterly repayments and the total<br />
interest up to an aggregate amount of JPY 3,400 million. The<br />
interest rate is based on the three month Libor plus a margin<br />
ranging from 260 to 410 basis points, depending on the level of<br />
reported EBITDA. At March 31, 2009, Phoenix Seagaia had<br />
already repaid JPY 390 million of the guaranteed principal, and<br />
had outstanding financial indebtedness of JPY 7,144 million,<br />
compared to JPY 7,777 at March 31, 2008.<br />
More detailed information on the Company’s interest-bearing<br />
loans and borrowings is included in note 25 to the Consolidated<br />
Financial Statements.<br />
Cash Flows<br />
Consolidated cash flow from investing activities of continuing<br />
operations for the fiscal year ended March 31, 2009, included:<br />
a) the proceeds from the sale of assets, including D&M and a<br />
non-controlling minority investment (JPY 33,196 million);<br />
b) dividends received amounting to JPY 916 million;<br />
c) investments of JPY 3,153 million, including JPY 1,085 million<br />
in the newly formed joint venture in IT consulting with<br />
Mitsubishi Corporation; and<br />
d) net capital expenditures of JPY 22,885 million.<br />
Cash flow from financing activities for the fiscal year ended<br />
March 31, 2009, mainly reflected the:<br />
a) increase of HIT’s debt by JPY 7,711 million resulting from (a)<br />
liquidity provided by certain of its customers and (b) the full<br />
draw down of the revolving credit facility;<br />
b) new borrowings at Metaldyne of JPY 8,697 million, primarily<br />
from customers to fund the bond tender;<br />
c) draw down by CME of JPY 1,000 million on a revolving<br />
facility;<br />
d) the payment of JPY 6,203 million for Metaldyne tendered<br />
bonds;<br />
e) scheduled repayments of JPY 2,936 million by Asahi Tec;<br />
f) the repurchase of the Company’s own shares (JPY 536<br />
million).<br />
33
PRINCIPAL RISKS AND<br />
UNCERTAINTIES<br />
Risks associated with strategy and<br />
operations<br />
The Company, as any commercial enterprise, faces risks and<br />
uncertainties in its operations, financial performance, business<br />
strategy, structure and management.<br />
Strategic risk<br />
The availability of opportunities for additional acquisitions and<br />
investment is uncertain from time to time due to competition<br />
and macro-economic, political, social and market conditions.<br />
The Company may not be able to successfully execute the<br />
acquisition component of its business strategy because of<br />
difficulties in identifying, acquiring, integrating or financing<br />
acquisitions, or unanticipated problems, which could negatively<br />
affect the Company’s prospects, cause its growth to decline and<br />
increase its losses. The Company's ability to finance<br />
acquisitions and refinance existing debt of its portfolio holdings<br />
may be significantly impaired by the restricted availability of<br />
credit as a result of the global financial crisis. As the Company’s<br />
strategy also includes purchasing non-controlling or minority<br />
interests in public and private companies and making coinvestments<br />
in transactions led by third parties, such purchases<br />
or co-investments could be material and may involve relatively<br />
more risks due to its lack of control and may materially<br />
adversely affect the Company’s financial condition and results of<br />
operations.<br />
Operational risk<br />
The Company’s business strategy includes the acquisition of<br />
interests in financially distressed companies and the incurrence<br />
of significant levels of debt by such companies. Improving the<br />
performance of such companies typically takes time, the length<br />
of which may increase loss from operations and net loss. The<br />
Company has experienced losses from operations and net<br />
losses since incorporation and many of its portfolio holdings<br />
have experienced such losses in recent years. The Company<br />
may continue to incur losses and its businesses may continue to<br />
have risks associated with high levels of debt.<br />
Execution risk<br />
The Company may not be able to successfully implement its<br />
turnaround strategy for portfolio holdings that it owns or may<br />
acquire due to specific risks and uncertainties relating to each<br />
company and to circumstances arising from macro-economic,<br />
political, social and market conditions. For the fiscal year ended<br />
March 31, 2009, approximately 60% of RHJI’s total invested<br />
capital was attributable to four businesses in the automotive<br />
components industry and further volatility or weakness in that<br />
industry may continue to materially adversely affect the<br />
Company’s financial condition and results of operations.<br />
The Company also depends on a limited number of senior<br />
management and investment professionals and their departure<br />
from, or part-time commitment to, the Company, or the<br />
Company’s inability to attract or retain suitable executives could<br />
adversely affect the Company’s ability to execute its business<br />
strategies and growth.<br />
Other risks<br />
The Company and its portfolio holdings each face a combination<br />
of risks and uncertainties including (i) strategic risks related to<br />
macro-economic and market conditions, corporate and brand<br />
reputation, industry focus and business structure, (ii)<br />
operational risks (including in the highly competitive automotive<br />
components industry) related to competition, innovation,<br />
changing customer demand and customer satisfaction, supply<br />
and cost of raw materials, production and distribution,<br />
management resources, labor relations, intellectual property,<br />
product safety and liability, IT infrastructure, occupational health<br />
and safety, environmental protection, asset and data security<br />
and disaster recovery and (iii) financial risks related to levels of<br />
indebtedness, treasury, tax and audit, accuracy of forecasting<br />
and budgeting, timeliness of reporting, integration and<br />
compliance with accounting standards and use of financial<br />
management tools such as hedging or derivative strategies.<br />
The Company generally relies on the individual businesses’ risk<br />
assessment and monitoring programs to manage the exposure<br />
to these and other risks. These programs have been designed<br />
based on the specific nature and size of the individual<br />
businesses’ activity. While the Company monitors these<br />
programs and attempts to mitigate the negative effects from any<br />
of these risks through its representation on the businesses’<br />
Boards of Directors and through the implementation of certain<br />
reporting mechanisms, the Company may face negative<br />
consequences from inadequate risk assessment and ineffective<br />
control systems of risk detection and prevention at the level of<br />
each of the individual businesses.<br />
34
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Specific risks related to RHJI<br />
Interest rate risk<br />
Beside their negative impact in connection with the borrowing<br />
activities of the Company’s businesses described in note 30 to<br />
the consolidated financial statements, increasing interest rates<br />
may have a negative impact on the market valuation of certain<br />
Company assets due to their impact on discount rates and/or<br />
market multiples.<br />
Currency exchange rate risk<br />
Beside the translation and transaction risk arising from changes<br />
in currency exchange rates described in note 30 to the<br />
consolidated financial statements, RHJI’s Euro denominated<br />
share price is exposed to changes in the exchange rate between<br />
the Euro and the Japanese Yen as a significant portion of the<br />
Company’s assets are located in Japan and have book values<br />
denominated in Japanese Yen.<br />
Liquidity risk<br />
At March 31, 2009, RHJI had approximately JPY 58.7 billion<br />
available to pursue its business strategy and had no<br />
indebtedness. RHJI’s businesses have regular recourse to<br />
independent indebtedness by obtaining credit lines on their own<br />
merits. Except for an amount up to JPY 3,400 million related to<br />
the debt of Phoenix Seagaia Resort and certain pledges of<br />
shares as disclosed in note 25 to the consolidated financial<br />
statements and a commitment of EUR 10 million to fund a<br />
backstop credit facility to the benefit of Honsel, the businesses<br />
and their lenders generally do not benefit from any guarantee<br />
from RHJI. Although RHJI believes it can ensure sufficient<br />
liquidity to pursue its acquisition strategy, any shortage thereof<br />
might result in the disposal of certain businesses at unfavorable<br />
conditions.<br />
Risk related to the stock market<br />
Being listed on Euronext Brussels, RHJI is subject to Belgian<br />
legislation and regulation regarding, among others, financial,<br />
governance and other disclosure, internal controls and insider<br />
trading. As a result, it will continue to invest necessary<br />
resources to comply with evolving laws, regulations and<br />
standards and manage its risks related to its stock exchange<br />
Further information about risks is provided in note 30 to the<br />
Consolidated Financial Statements. The risks and uncertainties<br />
described in this Annual Report or in information available on<br />
RHJI’s website are not the only ones that the Company faces.<br />
There may be additional risks of which the Company is unaware,<br />
or risks that the directors now believe to be immaterial, but<br />
which could turn out to have a material adverse effect.<br />
35
CONSOLIDATED STATEMENT OF INCOME<br />
FOR THE FISCAL YEARS ENDED MARCH 31<br />
(in JPY millions) Note 2009 2008<br />
Continuing operations<br />
Revenue 9 397,300 550,066<br />
Cost of sales (362,480) (488,741)<br />
Gross profit 34,820 61,325<br />
Selling, general and administrative expenses (47,961) (52,878)<br />
Amortization of intangible assets 16 (6,718) (8,515)<br />
Impairment of property, plant, equipment and intangible assets 12 (123,259) (29,444)<br />
Other income and expenses 10 (11,041) (4,594)<br />
Loss from operations (154,159) (34,106)<br />
Finance income 13 53,969 5,869<br />
Finance expenses 13 (38,700) (32,881)<br />
Net financial income (expense) 13 15,269 (27,012)<br />
Share of profit (loss) of equity accounted investees (net of income tax) 17 (10,605) 858<br />
Loss before income tax (149,495) (60,260)<br />
Income tax benefit 14 6,232 186<br />
Loss from continuing operations (143,263) (60,074)<br />
Discontinued operations<br />
Profit (loss) from discontinued operations (net of income tax) 7 11,992 (1,177)<br />
Loss for the period (131,271) (61,251)<br />
Attributable to:<br />
Equity holders of the Company (116,043) (33,221)<br />
Minority interest (15,228) (28,030)<br />
Loss for the period (131,271) (61,251)<br />
Earnings per share (in JPY)<br />
Basic and diluted 24 (1,378) (390)<br />
Basic and diluted from continuing operations 24 (1,522) (369)<br />
36
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND<br />
EXPENSE FOR THE FISCAL YEARS ENDED MARCH 31<br />
(in JPY millions) Note 2009 2008<br />
Foreign exchange translation differences (8,165) (3,168)<br />
Cash flow hedges (1,064) 21<br />
Net change in fair value of available for sale financial assets (5,053) 6,646<br />
Net change in fair value of available for sale financial assets transferred to profit or loss (3,314) -<br />
Others (4) (31)<br />
Income tax on income and expense recognized directly in equity 14 327 (67)<br />
Income and expense recognized directly in equity (17,273) 3,401<br />
Loss for the period (131,271) (61,251)<br />
Total recognized income and expense for the period 23 (148,544) (57,850)<br />
Attributable to:<br />
Equity holders of the Company (129,236) (28,957)<br />
Minority interest (19,308) (28,893)<br />
Total recognized income and expense for the period (148,544) (57,850)<br />
37
CONSOLIDATED BALANCE SHEET AS AT MARCH 31<br />
(in JPY millions) Note 2009 2008<br />
Assets<br />
Property, plant and equipment 15 142,562 192,646<br />
Intangible assets 16 50,807 161,245<br />
Investments in equity accounted investees 17 12,305 22,321<br />
Other investments 18 5,857 23,003<br />
Deferred tax assets 19 4,998 3,934<br />
Others 3,967 2,579<br />
Total non-current assets 220,496 405,728<br />
Inventories 20 25,712 37,736<br />
Trade and other receivables 21 37,508 74,088<br />
Tax assets 1,109 1,141<br />
Cash and cash equivalents 22 72,336 72,523<br />
Others 456 774<br />
Total current assets 137,121 186,262<br />
Assets classified as held for sale - 81,034<br />
Total assets 357,617 673,024<br />
Equity<br />
Share capital 88,491 88,491<br />
Share premium 91,334 91,334<br />
Reserves 18,604 31,743<br />
Retained earnings (158,109) (44,670)<br />
Total equity attributable to equity holders of the Company 40,320 166,898<br />
Minority interest 7,146 38,328<br />
Total equity 23 47,466 205,226<br />
Liabilities<br />
Loans and borrowings 25 93,777 196,769<br />
Employee benefits 26 29,033 33,731<br />
Provisions 28 2,711 3,402<br />
Deferred tax liabilities 19 17,002 24,919<br />
Trade and other payables 29 1,040 1,776<br />
Others 2,255 3,050<br />
Total non-current liabilities 145,818 263,647<br />
Bank overdrafts 25 1 65<br />
Loans and borrowings 25 95,233 31,314<br />
Trade and other payables 29 61,708 97,536<br />
Provisions 28 5,829 3,611<br />
Tax liabilities 983 5,541<br />
Others 579 7,810<br />
Total current liabilities 164,333 145,877<br />
Liabilities classified as held for sale - 58,274<br />
Total liabilities 310,151 467,798<br />
Total equity and liabilities 357,617 673,024<br />
38
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
CONSOLIDATED STATEMENT OF CASH FLOWS<br />
FOR THE FISCAL YEARS ENDED MARCH 31<br />
(in JPY millions) Note 2009 2008<br />
Continuing operations<br />
Operating activities<br />
Loss from continuing operations (143,263) (60,074)<br />
Adjustments for:<br />
Depreciation 15 27,560 29,275<br />
Amortization of intangible assets 16 6,718 8,136<br />
Impairment losses on intangible assets 12 and 16 95,290 28,449<br />
Impairment losses on property, plant and equipment 12 and 15 27,969 -<br />
Gain on sale of available for sale financial assets (3,301) -<br />
Net financial expense 13 21,082 20,463<br />
Share of profit (loss) of equity accounted investees 17 10,605 (858)<br />
Loss on sale of property, plant and equipment 1,354 1,580<br />
Sale of discontinued operations - 1,837<br />
Equity-settled share-based payment transactions 27 1,109 841<br />
Income tax benefit 14 (6,232) (213)<br />
Debt extinguishments 25 (39,759) -<br />
Others 2,753 1,100<br />
Operating profit before changes in working capital 1,885 30,536<br />
Change in inventories 8,588 (1,132)<br />
Change in trade and other receivables 29,354 9,221<br />
Change in trade and other payables (33,855) (1,971)<br />
Change in employee benefits (1,417) (3,999)<br />
Other changes in working capital (3,730) 1,845<br />
Cash generated from the operations 825 34,500<br />
Interest paid (9,755) (16,354)<br />
Income tax benefit (3,283) (4,571)<br />
Net cash from (used in) operating activities (12,213) 13,575<br />
Investing activities<br />
Proceeds from sale of property, plant and equipment 728 1,060<br />
Proceeds from sale of subsidiary, net of cash disposed 7 23,115 132<br />
Proceeds from sale of investments 18 9,030 -<br />
Acquisition of property, plant and equipment 15 (22,323) (26,695)<br />
Acquisition of intangibles 16 (1,290) (291)<br />
Acquisition of investments (3,153) (2,208)<br />
Acquisition of subsidiary, net of cash acquired (36) (14,481)<br />
Dividends received 916 434<br />
Others 443 5<br />
Net cash from (used in) investing activities 7,430 (42,044)<br />
Financing activities<br />
Repayments of bonds (6,472) (759)<br />
Proceeds from (repayments of) borrowings 25 15,419 (269)<br />
Payment of finance lease liabilities 25 (1,489) (1,036)<br />
Payment of transaction costs (32) (2,648)<br />
Payment of dividends (8) (36)<br />
Repurchase of treasury shares 23 (536) (2,332)<br />
Others 804 1,926<br />
Net cash from (used in) financing activities 7,686 (5,154)<br />
Net increase (decrease) in cash and cash equivalents 2,903 (33,623)<br />
Cash and cash equivalents at April 1 72,458 106,570<br />
Effect of exchange rate fluctuations on cash held (3,026) (489)<br />
Cash and cash equivalents at March 31 72,335 72,458<br />
Discontinued operations 7<br />
Net cash from (used in) operating activities (6,037) 2,671<br />
Net cash used in investing activities (1,058) (10,922)<br />
Net cash from financing activities 7,288 5,200<br />
Net increase (decrease) in cash and cash equivalents 193 (3,051)<br />
Cash and cash equivalents at April 1 (181) 2,981<br />
Effect of exchange rate fluctuations on cash held (12) (111)<br />
Cash and cash equivalents at March 31 - (181)<br />
TOTAL<br />
Net increase (decrease) in cash and cash equivalents 3,096 (36,674)<br />
Cash and cash equivalents at April 1 72,277 109,551<br />
Effect of exchange rate fluctuations on cash held (3,038) (600)<br />
Cash and cash equivalents at March 31 22 72,335 72,277<br />
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS<br />
Contents<br />
Page<br />
1. Reporting entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41<br />
2. Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41<br />
3. Significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42<br />
4. Determination of fair values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52<br />
5. Use of estimates and judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53<br />
6. Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53<br />
7. Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57<br />
8. Acquisitions of subsidiaries and minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58<br />
9. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58<br />
10. Other income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59<br />
11. Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59<br />
12. Impairment of property, plant, equipment and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60<br />
13. Finance income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60<br />
14. Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61<br />
15. Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62<br />
16. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65<br />
17. Investments in equity accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68<br />
18. Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70<br />
19. Deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70<br />
20. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72<br />
21. Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73<br />
22. Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73<br />
23. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74<br />
24. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76<br />
25. Loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76<br />
26. Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80<br />
27. Share based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82<br />
28. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84<br />
29. Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85<br />
30. Financial risk management and related instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86<br />
31. Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94<br />
32. Capital commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94<br />
33. Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94<br />
34. Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94<br />
35. Group entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95<br />
36. Subsequent events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98<br />
37. Auditor’s fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98<br />
40
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
1. <strong>REPORT</strong>ING ENTITY<br />
RHJ International SA (“RHJI”) is a company incorporated under<br />
the laws of Belgium, having its registered offices at Avenue<br />
Louise, 326 at 1050 Brussels. The consolidated financial<br />
statements for the year ended March 31, 2009 comprise RHJI, its<br />
subsidiaries and its businesses accounted for under the equity<br />
method (together referred to as the “Company”).<br />
The Company is involved in the following businesses<br />
• Automotive<br />
- auto cast parts components with Asahi Tec Corporation<br />
("Asahi Tec") and Honsel International Technologies SA<br />
("HIT"); and<br />
- electronic components with Niles Co. Ltd. ("Niles") and<br />
U-shin Ltd. ("U-shin").<br />
• Media and entertainment with Columbia Music<br />
Entertainment, Inc. (“CME”) in the music industry.<br />
• Hospitality with Phoenix Resort KK (“Phoenix Seagaia<br />
Resort”).<br />
• Consumer products with Shaklee Global Group Inc.<br />
("Shaklee").<br />
• ICT consulting services with SigmaXYZ Inc. ("SigmaXYZ").<br />
The financial statements were authorized for issue by the Board<br />
of Directors on July 22, 2009.<br />
2. BASIS OF PREPARATION<br />
2.1. Statement of compliance<br />
The consolidated financial statements have been prepared in<br />
accordance with International Financial Reporting Standards<br />
(“IFRS”) as adopted by the European Union up to March 31,<br />
2009. The Company was not obliged to apply any European<br />
carve-outs from IFRS, meaning that the financial statements<br />
fully comply with IFRS. The Company has not applied any<br />
standards and interpretations issued up to March 31, 2009, but<br />
with an effective date after March 31, 2009. Certain amounts of<br />
the fiscal year ended March 31, 2008 have been reclassified to<br />
conform to the presentation of the fiscal year ended March 31,<br />
2009, resulting from new presentation requirements.<br />
The accounting standards applied in the consolidated financial<br />
statements for the year ended March 31, 2009 are consistent<br />
with those used to prepare the consolidated financial statements<br />
for the year ended March 31, 2008.<br />
2.2. Functional and presentation<br />
currency<br />
The financial statements are presented in Japanese Yen ("JPY")<br />
which is the functional currency of the Company, rounded to the<br />
nearest million.<br />
2.3. Basis of measurement<br />
The financial statements are prepared on the historical cost<br />
basis except for derivative financial instruments, investments<br />
held for trading and available for sale investments which are<br />
stated at fair value. The non-current assets held for sale are<br />
measured at the lower of their carrying value and fair value less<br />
cost to sell. Investments in equity instruments or derivatives<br />
linked to and to be settled by delivery of an equity instrument are<br />
stated at cost when such equity instrument does not have a<br />
quoted market price in an active market and for which other<br />
methods of reasonably estimating fair value are clearly<br />
inappropriate or unworkable. Recognized assets and liabilities<br />
that are hedged are stated at fair value in respect of the risk that<br />
is hedged.<br />
The accounting policies set out below have been applied<br />
consistently to all periods presented in the financial statements.<br />
The consolidated financial statements are presented before the<br />
effect of the profit appropriation of RHJI which will be proposed<br />
to the shareholders at the Annual Shareholders’ Meeting.<br />
41
3. SIGNIFICANT ACCOUNTING<br />
POLICIES<br />
3.1. Basis of consolidation<br />
3.1.1. Subsidiaries<br />
Subsidiaries are entities controlled by RHJI. Control exists when<br />
RHJI has the power, directly or indirectly, to govern the financial<br />
and operating policies of an entity so as to obtain benefits from<br />
its activities. Control is presumed to exist when RHJI, directly or<br />
indirectly through subsidiaries, owns more than half of the<br />
voting power of an entity unless in exceptional circumstances it<br />
can be clearly demonstrated that such ownership does not<br />
constitute control. In assessing control, potential voting rights<br />
that presently are exercisable or convertible are taken into<br />
account. Companies of which the Company holds, directly or<br />
indirectly, the majority of the voting rights are fully consolidated.<br />
Companies that are less than 50 % owned such as CME in which<br />
the Company has a de facto control (power to govern the<br />
financial and operating policies and obtain benefits from its<br />
activities), are consolidated using the same method.<br />
The financial statements of all subsidiaries are included in the<br />
consolidated financial statements from the date that control<br />
commences until the date that control ceases.<br />
3.1.2. Associates<br />
Associates are those entities in which RHJI has significant<br />
influence, but not control, over the financial and operating<br />
policies. Significant influence is presumed to exist when RHJI<br />
owns, directly or indirectly through subsidiaries, between 20 and<br />
50% of the voting power of an entity unless it can be clearly<br />
demonstrated that such ownership does constitute control, in<br />
which case, the associate is considered to be a subsidiary.<br />
The consolidated financial statements include the Company’s<br />
share of the total recognized gains and losses of associates on<br />
an equity accounted basis, from the date that significant<br />
influence commences until the date that significant influence<br />
ceases.<br />
When the Company’s share of losses exceeds its interest in an<br />
associate, the Company’s carrying amount is reduced to nil and<br />
recognition of further losses is discontinued except to the extent<br />
that the Company has incurred legal or constructive obligations<br />
or made payments on behalf of an associate.<br />
3.1.3. Joint ventures<br />
Jointly controlled entities are those enterprises over whose<br />
activities RHJI has joint control, established by contractual<br />
agreements. The Company records its interest in jointly<br />
controlled entities using the equity method from the date that<br />
joint control commences to the date that the joint control<br />
ceases.<br />
3.1.4. Transactions eliminated on consolidation<br />
Intragroup balances and any unrealized gains and losses or<br />
income and expenses arising from intragroup transactions, are<br />
eliminated in preparing the consolidated financial statements.<br />
Unrealized gains arising from transactions with associates are<br />
eliminated to the extent of RHJI’s interest in the entity.<br />
Unrealized losses are eliminated in the same way as unrealized<br />
gains, but only to the extent that there is no evidence of<br />
impairment.<br />
3.2. Foreign currency<br />
3.2.1. Foreign currency transactions<br />
Transactions in foreign currencies other than the functional<br />
currency are translated at the foreign exchange rate prevailing<br />
at the date of the transaction. Monetary assets and liabilities<br />
denominated in foreign currencies at the balance sheet date are<br />
translated at the foreign exchange rate ruling at that date.<br />
Foreign exchange differences arising from the settlement of<br />
foreign currency transactions or on translation of monetary<br />
assets and liabilities are recognized in the income statement.<br />
Non-monetary assets and liabilities that are measured in terms<br />
of historical cost in a foreign currency are translated using the<br />
exchange rate at the date of the transaction. Non-monetary<br />
assets and liabilities denominated in foreign currencies that are<br />
stated at fair value are translated at foreign exchange rates<br />
ruling at the dates the fair value was determined.<br />
Foreign currency differences arising on retranslation are<br />
recognized in profit or loss, except for differences arising on<br />
retranslation of available for sale equity instruments, a financial<br />
liability designated as a hedge of net investment in a foreign<br />
operation or qualifying cash flow hedges which are recognized<br />
directly in equity.<br />
3.2.2. Foreign operations<br />
The assets and liabilities of a foreign operation of the<br />
consolidated businesses with a functional currency other than<br />
the presentation currency of its parent are translated to<br />
applicable presentation currency at foreign exchange rates<br />
prevailing at the balance sheet date. The revenues and expenses<br />
of foreign operations are translated to applicable presentation<br />
currency at exchange rates at the dates of the transactions,<br />
which for translated to applicable presentation currency at<br />
foreign exchange rates prevailing at practical reasons are<br />
approximated by using average exchange rates for the period.<br />
The components of shareholders’ equity are translated at<br />
historical rates. All resulting exchange differences are<br />
recognized directly in the translation reserve, a separate<br />
component of equity.<br />
42
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
The translation reserve represents the difference between<br />
translating income statement items at average exchange rates<br />
and using the exchange rate at balance sheet date, and in<br />
respect of the opening balance of equity, the difference between<br />
translating at the rate at the balance sheet date of the previous<br />
period and using the rate at balance sheet date of the current<br />
period. These differences are released in the income statement<br />
upon disposal, in part or in full, of the investment in the related<br />
foreign operations, as an adjustment to the gain and loss on<br />
disposal.<br />
3.2.3. Exchange rates<br />
The following major exchange rates have been used in preparing<br />
the financial statements.<br />
100 JPY equals Closing rate Average rate<br />
2009 2008 2009 2008<br />
Euro ("EUR") 0.762 0.635 0.696 0.619<br />
US Dollar ("USD") 1.014 1.005 0.990 0.877<br />
3.3. Derivative financial instruments<br />
The Company uses derivative financial instruments to hedge its<br />
exposure to foreign exchange and interest rate risks arising<br />
from operational, financing and investment activities. The<br />
Company does not hold or issue derivative financial instruments<br />
for trading purposes. However, derivatives that do not qualify for<br />
hedge accounting are accounted for as trading instruments.<br />
Derivative financial instruments are recognized initially at cost.<br />
Subsequent to initial recognition, derivative financial<br />
instruments are stated at fair value. The gain or loss on<br />
remeasurement to fair value is recognized immediately in profit<br />
or loss. However, where derivatives qualify for hedge<br />
accounting, recognition of any resultant gain or loss depends on<br />
the nature of the item being hedged.<br />
The fair value of interest rate swaps is the estimated amount<br />
that the Company would receive or pay to terminate the swap at<br />
the balance sheet date, taking into account current interest<br />
rates and the current creditworthiness of the swap<br />
counterparties. The fair value of forward exchange contracts is<br />
their quoted market price at the balance sheet date, being the<br />
present value of the quoted forward price.<br />
3.4. Hedging<br />
3.4.1. Fair value hedges<br />
Where a derivative financial instrument hedges the changes in<br />
fair value of recognized assets or liabilities or an unrecognized<br />
firm commitment, any gain or loss on the hedging instrument is<br />
recognized in the income statement. The hedged item also is<br />
stated at fair value in respect of the risk being hedged, with any<br />
gain or loss being recognized in the income statement.<br />
3.4.2. Cash flow hedges<br />
Where a derivative financial instrument is designated as a hedge<br />
of the variability in cash flows of a recognized asset or liability,<br />
or a highly probable forecasted transaction, the effective part of<br />
any gain or loss on the derivative financial instrument is<br />
recognized directly in equity through the statement of changes<br />
in equity. The ineffective part of any gain or loss is recognized<br />
immediately in the income statement.<br />
When a hedging instrument expires or is sold, terminated or<br />
exercised, or the entity revokes designation of the hedge<br />
relationship but the hedged forecast transaction is still expected<br />
to occur, the cumulative gain or loss at that point remains in<br />
equity and is recognized in accordance with the above policy<br />
when the transaction occurs. If the hedged transaction is no<br />
longer expected to take place, the cumulative unrealized gain or<br />
loss recognized in equity is recognized immediately in the<br />
income statement.<br />
When the hedged item is a non-financial asset, the amount<br />
recognized in equity is transferred to the carrying amount of the<br />
asset when it is recognized. In other cases, the amount<br />
recognized in equity is transferred to profit and loss in the same<br />
period that the hedged item affects profit and loss.<br />
3.4.3. Derivatives<br />
The fair value of forward exchange contracts is based on their<br />
listed market price, if available. If a listed market price is not<br />
available, then fair value is estimated by discounting the<br />
difference between the contractual forward price and the<br />
current forward price for the residual maturity of the contract<br />
using a risk-free interest rate (based on government bonds).<br />
The fair value of interest rate swaps is based on broker quotes.<br />
Those quotes are tested for reasonableness by discounting<br />
estimated future cash flows based on the terms and maturity of<br />
each contract and using market interest rates, for a similar<br />
instrument at the measurement date.<br />
43
3.4.4. Non-derivative financial liabilities<br />
Fair value, which is determined for disclosure purposes, is<br />
calculated based on the present value of future principal and<br />
interest cash flows, discounted at the market rate of interest at<br />
the reporting date. In respect of the liability component of<br />
convertible notes, the market rate of interest is determined by<br />
reference to similar liabilities that do not have a conversion<br />
option.<br />
For finance leases the market rate of interest is determined by<br />
reference to similar lease agreements.<br />
3.5. Property, plant and equipment<br />
3.5.1. Owned assets<br />
Items of property, plant and equipment are stated at cost less<br />
accumulated depreciation (see below) and impairment losses<br />
(see below for accounting policy on impairment). Cost of an item<br />
of property, plant and equipment comprises its purchase price<br />
as well as any directly attributable costs (for example delivery<br />
and handling costs, installation and assembly costs) and the<br />
initial estimate of the costs of dismantling and removing the<br />
item if the Company is obliged to do so.<br />
Subsequent costs are only capitalized if it is probable that they<br />
will give rise to future economic benefits in excess of the<br />
originally assessed standard of performance of the asset or<br />
when it replaces a component that is accounted for separately.<br />
Costs incurred simply to restore or maintain the level of future<br />
economic benefits are expensed as incurred.<br />
Where parts of an item of property, plant and equipment have<br />
different useful lives, they are accounted for as separate items<br />
of property, plant and equipment.<br />
Borrowing costs related to acquisition, construction or<br />
production of qualifying assets are recognized in profit or loss as<br />
incurred.<br />
3.5.2. Leased assets<br />
Leases in terms of which the Company assumes substantially all<br />
the risks and rewards of ownership are classified as finance<br />
leases. Finance leases are capitalized at an amount equal to the<br />
lower of its fair value and the present value of the minimum<br />
lease payments at inception of the lease, less accumulated<br />
depreciation and impairment losses.<br />
An operating lease is a lease other than a finance lease. Rent<br />
expense for operating leases is recognized in the income<br />
statement on a straight-line basis over the lease term.<br />
3.5.3. Depreciation<br />
Depreciation is charged to the income statement from the date<br />
that the asset is available for use, on a straight-line basis over<br />
the estimated useful lives of each part of an item of property,<br />
plant and equipment. Land is not depreciated.<br />
The estimated useful lives are as follows:<br />
Buildings<br />
Machineries and equipments<br />
Fixtures and fittings<br />
3.6. Intangible assets<br />
3 - 60 years<br />
1 - 20 years<br />
1 - 20 years<br />
3.6.1. Goodwill<br />
All business combinations are accounted for by applying the<br />
purchase method. Goodwill resulting from acquisition of<br />
subsidiaries, associates and joint ventures represents the<br />
difference between the cost of the acquisition and the acquirer’s<br />
interest in the fair value of the acquired identifiable assets,<br />
liabilities and contingent liabilities recognized.<br />
Goodwill is stated at cost less any accumulated impairment<br />
losses. Goodwill is not amortized but is tested at least annually<br />
for impairment. In respect of associates, the carrying amount of<br />
goodwill is included in the carrying amount of the investment in<br />
the associate.<br />
Goodwill is expressed in the currency of the subsidiary to which<br />
it relates and is translated to Japanese Yen using the year end<br />
exchange rate.<br />
Negative goodwill arising on an acquisition is recognized directly<br />
in the income statement.<br />
3.6.2. Research and development<br />
Expenditure on research activities, undertaken with the prospect<br />
of gaining new scientific or technical knowledge and<br />
understanding, is recognized in the income statement as an<br />
expense as incurred.<br />
The periodic lease payments should be split into two<br />
components: the interest charge for the period and the<br />
reduction of the lease liability. The interest charge should be<br />
determined so that a constant periodic rate of interest is<br />
recognized on the outstanding balance of the liability. The asset<br />
under a finance lease should be depreciated over the shorter of<br />
the estimated useful life of the asset or the lease term, unless it<br />
is reasonable certain that the Company will obtain ownership by<br />
the end of the lease term.<br />
44
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Expenditure on development activities, whereby research<br />
findings are applied to a plan or design for the production of new<br />
or substantially improved products and processes, is capitalized<br />
if the product or process is technically and commercially<br />
feasible and the Company has sufficient resources to complete<br />
development. The expenditure capitalized includes the cost of<br />
materials, direct labor and an appropriate proportion of<br />
overheads. Other development expenditure is recognized in the<br />
income statement as an expense as incurred. Capitalized<br />
development expenditure is stated at cost less accumulated<br />
amortization and impairment losses.<br />
3.6.3. Other intangible assets<br />
Other intangible assets that are acquired are stated at cost less<br />
accumulated amortization (see below) and impairment losses<br />
(see below for accounting policy on impairment).<br />
Expenditure on internally generated goodwill and brands is<br />
recognized in the income statement as an expense as incurred.<br />
Subsequent expenditure on capitalized intangible assets is<br />
capitalized only when it increases the future economic benefits<br />
embodied in the specific asset to which it relates. All other<br />
expenditure is expensed as incurred.<br />
3.6.4. Amortization<br />
Amortization is charged to the income statement on a straightline<br />
basis over the estimated useful lives. The estimated useful<br />
lives are as follows:<br />
Softwares<br />
Trademarks and patents<br />
Tradenames<br />
Customer relationships<br />
Customer contracts<br />
Intellectual properties<br />
Capitalized development costs<br />
Other rights and agreements<br />
1 - 7 years<br />
7 - 20 years<br />
indefinite<br />
8 - 25 years<br />
8 - 15 years<br />
3 - 10 years<br />
5 - 9 years<br />
4 - 15 years<br />
Trade names are determined to have an indefinite useful life,<br />
because the products are expected to last for the duration of the<br />
related consolidated businesses and are expected to retain their<br />
current trade names.<br />
3.7. Investments<br />
3.7.1. Investments in securities<br />
The Company owns various non-controlling or minority interests<br />
in public companies. The Company has not identified, and in the<br />
future, may decide not to identify, all the private and public<br />
companies in which it acquires non-controlling interests due to<br />
confidentiality, competitive or strategic concerns. All or some of<br />
the unidentified investments may be material to the Company,<br />
individually or in aggregate.<br />
Investments are classified as held-to-maturity when the<br />
Company has a positive intent and ability to hold debt securities<br />
to maturity.<br />
3.7.2. Financial instruments<br />
Financial instruments held for trading are classified as current<br />
assets and are stated at fair value, with any resultant gain or<br />
loss recognized in the income statement.<br />
Other financial instruments held by the Company are classified<br />
as being available for sale and are stated at fair value, with any<br />
resultant gain or loss being recognized directly in equity, except<br />
for impairment losses and, in the case of monetary items such<br />
as debt securities, foreign exchange gains and losses. When<br />
these investments are derecognized, the cumulative gain or loss<br />
previously recognized directly in equity is recognized in profit or<br />
loss. Where these investments are interest-bearing, interest<br />
calculated using the effective interest method is recognized in<br />
profit or loss.<br />
The fair value of financial instruments classified as held for<br />
trading and available for sale is their quoted bid price at the<br />
balance sheet date.<br />
Financial instruments classified as held for trading or availablefor-sale<br />
investments are recognized/derecognized on the date<br />
the Company commits to purchase/sell the investments. Heldto-maturity<br />
securities are recognized / derecognized on the day<br />
they are transferred to/by the Company.<br />
3.8. Investment properties<br />
Investment properties are properties which are held either to<br />
earn rental income or for capital appreciation or for both.<br />
All investment properties are stated at cost, less accumulated<br />
depreciation and any accumulated impairment losses.<br />
Depreciation charge is charged to the income statement on a<br />
straight-line basis over the estimated useful lives of each part of<br />
the property. The estimated useful lives are those used as<br />
required for owner-occupied property carried at cost.<br />
45
3.9. Inventories<br />
Inventories are stated at the lower of cost and net realizable<br />
value. Net realizable value is the estimated selling price in the<br />
ordinary course of business, less the estimated costs of<br />
completion and selling expenses.<br />
The cost of inventories is based on the weighted average<br />
principle and includes expenditure incurred in acquiring the<br />
inventories and bringing them to their existing location and<br />
condition. In the case of manufactured inventories and work in<br />
progress, cost includes the direct cost of materials, direct<br />
manufacturing expenses and an appropriate, systematically<br />
allocated share of overheads, based on normal operating<br />
capacity.<br />
3.10. Trade and other receivables<br />
Trade and other receivables are stated at their cost less<br />
impairment losses. An estimate is made for doubtful receivables<br />
based on a review of all outstanding amounts at each balance<br />
sheet date. Impairment losses are recorded during the year in<br />
which they are identified.<br />
3.11. Cash and cash equivalents<br />
Cash and cash equivalents comprise cash balances and call<br />
deposits. Bank overdrafts repayable on demand are included as<br />
cash and cash equivalents for the purpose of the cash-flow<br />
statement if and when they form an integral part of the entity’s<br />
cash management.<br />
3.12. Impairment<br />
3.12.1. Methodology<br />
The carrying amounts of the Company’s assets, other than<br />
inventories and deferred tax assets, are reviewed at each<br />
balance sheet date to determine whether there is any indication<br />
of impairment. If any such indication exists, the asset’s<br />
recoverable amount is estimated.<br />
For goodwill, assets that have an indefinite useful life and<br />
intangible assets that are not yet available for use, the<br />
recoverable amount is estimated at each balance sheet date.<br />
An impairment loss is recognized whenever the carrying amount<br />
of an asset or its cash-generating unit exceeds its recoverable<br />
amount. Impairment losses are recognized in the income<br />
statement.<br />
Impairment losses recognized in respect of cash-generating<br />
units are allocated first to reduce the carrying amount of any<br />
goodwill allocated to cash-generating units (group of units) and<br />
then to reduce the carrying amount of the other assets in the<br />
unit (group of units) on a pro rata basis.<br />
3.12.2. Calculation of recoverable amount<br />
The recoverable amount of the Company’s investments in heldto-maturity<br />
securities and receivables carried at amortized cost<br />
is calculated as the present value of estimated future cash<br />
flows, discounted at the original effective interest rate (i.e., the<br />
effective interest rate computed at initial recognition of these<br />
financial assets). Receivables with a short duration are not<br />
discounted.<br />
The recoverable amount of other assets is the greater of their<br />
fair value less cost to sell and value in use. In assessing value in<br />
use, the estimated future cash flows are discounted to their<br />
present value using a pre-tax discount rate that reflects current<br />
market assessments of the time value of money and the risks<br />
specific to the asset. For an asset that does not generate largely<br />
independent cash inflows, the recoverable amount is<br />
determined for the cash-generating unit to which the asset<br />
belongs.<br />
3.12.3. Reversals of impairment<br />
A previously recognized impairment loss is reversed if there has<br />
been a change in the estimates used to determine the<br />
recoverable amount.<br />
An impairment loss is reversed only to the extent that the<br />
asset’s carrying amount does not exceed the carrying amount<br />
that would have been determined, net of depreciation or<br />
amortization, if no impairment loss had been recognized.<br />
An impairment loss recognized for goodwill shall not be<br />
reversed in a subsequent period.<br />
3.13. Share capital<br />
When share capital recognized as equity is repurchased, the<br />
amount of the consideration paid, including directly attributable<br />
costs, is recognized as a change in equity. Repurchased shares<br />
are classified as treasury shares and presented as a deduction<br />
from total equity.<br />
Dividends are recognized as a liability in the period in which they<br />
are declared.<br />
Transaction costs related to the issuance of shares are<br />
accounted for as a deduction from equity, net of any tax effects.<br />
46
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
3.14. Loans and borrowings<br />
Loans and borrowings are recognized initially at fair value less<br />
attributable transaction costs. Subsequent to initial recognition,<br />
borrowings are stated at amortized cost with any difference<br />
between cost and redemption value being recognized in the<br />
income statement over the period of the borrowings on an<br />
effective interest basis.<br />
3.15. Employee benefits<br />
3.15.1. Defined contribution plans<br />
Obligations for contributions to defined contribution pension<br />
plans are recognized as an expense in the income statement as<br />
incurred.<br />
3.15.2. Defined benefit plans<br />
The net obligation in respect of defined benefit pension plans,<br />
recognized in the balance sheet, is calculated as the present<br />
value of the defined benefit obligation (future benefit that<br />
employees have earned in return for their service in the current<br />
and prior periods), adjusted for the unrecognized actuarial gains<br />
and losses and less any past service costs not yet recognized<br />
and the fair value of any plan assets. The discount rate is the<br />
yield at the balance sheet date on high quality credit rated bonds<br />
that have maturity dates approximating to the terms of the<br />
obligations. The calculation is performed by a qualified actuary<br />
using the projected unit credit method.<br />
When the benefits of a plan are improved, the portion of the<br />
increased benefit relating to past service by employees is<br />
recognized as an expense in the income statement on a straightline<br />
basis over the average period until the benefits become<br />
vested. To the extent that the benefits vest immediately, the<br />
expense is recognized immediately in the income statement.<br />
In respect of actuarial gains and losses, to the extent that any<br />
cumulative unrecognized actuarial gain or loss exceeds 10% of<br />
the greater of the present value of the defined benefit obligation<br />
and the fair value of plan assets, that portion will be recognized<br />
in the income statement over the expected average remaining<br />
working lives of the employees participating in the plan.<br />
Otherwise, the actuarial gain or loss is not recognized.<br />
Where the calculation results in a benefit to the Company, the<br />
recognized asset is limited to the net total of any unrecognized<br />
actuarial losses and past service costs and the present value of<br />
any future refunds from the plan or reductions in future<br />
contributions to the plan.<br />
3.15.3. Other post-retirement obligations<br />
Some consolidated businesses provide post-retirement<br />
healthcare benefits to their retirees. The entitlement to these<br />
benefits is usually based on the employee remaining in service<br />
up to retirement age. The expected costs of these benefits are<br />
accrued over the period of employment, using an accounting<br />
methodology similar to that for defined benefit pension plans<br />
and determined by independent qualified actuaries.<br />
3.15.4. Equity and equity-related compensation<br />
benefits<br />
The Company operates a number of share-based compensation<br />
plans, allowing Company employees to acquire shares in their<br />
respective companies. In addition, certain members of the<br />
Company’s management team and other employees received<br />
RHJI ordinary shares from a significant shareholder of the<br />
Company in the context of the initial public offering.<br />
The fair value of stock options and share grants is measured at<br />
grant date and spread over the period during which the<br />
employees become unconditionally entitled to the options or<br />
shares granted. The fair value of the options is measured using<br />
a Black-Scholes-Merton model, taking into account the terms<br />
and conditions upon which the options were granted. The fair<br />
value of share grants is measured using the Finnerty model to<br />
reflect transferability restrictions resulting from certain terms<br />
and conditions upon which the shares were granted.<br />
The amount recognized as an expense is adjusted to reflect the<br />
actual number of stock options and shares that vest.<br />
3.15.5. Termination benefits<br />
Termination benefits are recognized as an expense when the<br />
Company is demonstrably committed, without realistic<br />
possibility of withdrawal, to a formal detailed plan to either<br />
terminate employment before the normal retirement date, or to<br />
provide termination benefits as a result of an offer made to<br />
encourage voluntary redundancy. Termination benefits for<br />
voluntary redundancies are recognized as an expense if the<br />
Company has made an offer of voluntary redundancy, it is<br />
probable that the offer will be accepted, and the number of<br />
acceptances can be estimated reliably.<br />
3.15.6. Bonuses<br />
Bonuses received by employees and management of the<br />
Company are recognized as an expense in the year the related<br />
service is provided.<br />
47
3.16. Provisions<br />
A provision is recognized in the balance sheet when the<br />
Company has a present legal or constructive obligation as a<br />
result of a past event, and it is probable that an outflow of<br />
economic benefits will be required to settle the obligation and a<br />
reliable estimate can be made of the amount of the obligation. If<br />
the effect is material, provisions are determined by discounting<br />
the expected future cash flows at a pre-tax rate that reflects<br />
current market assessments of the time value of money and,<br />
where appropriate, the risks specific to the liability.<br />
3.16.1. Warranties<br />
A provision for warranties is recognized when the underlying<br />
products or services are sold. The provision is based on<br />
historical warranty data and a weighting of all possible<br />
outcomes against their associated probabilities.<br />
3.16.2. Restructuring<br />
A provision for restructuring is recognized when the Company<br />
has approved a detailed and formal restructuring plan, and the<br />
restructuring has either commenced or has been announced<br />
publicly. Future operating costs are not provided for.<br />
3.16.3. Site restoration<br />
In accordance with the applicable legal requirements, a<br />
provision for site restoration in respect of contaminated land is<br />
recognized when the land is contaminated.<br />
3.16.4. Onerous contracts<br />
A provision for onerous contracts is recognized when the<br />
expected benefits to be derived by the Company from a contract<br />
are lower than the unavoidable cost of meeting its obligations<br />
under the contract. The provision is measured at the present<br />
value of the lower of the expected cost of terminating the<br />
contract and expected net cost of continuing with the contract.<br />
Before a provision is established, the Company recognizes any<br />
impairment loss on the assets associated with the contract.<br />
3.17. Trade and other payables<br />
Trade and other payables are stated at cost.<br />
transferred to the buyer, recovery of the consideration is<br />
probable, the associated costs and possible return of goods can<br />
be estimated reliably, there is no continuing management<br />
involvement with the goods, and the amount of revenue can be<br />
measured reliably. Revenue from services rendered is<br />
recognized in the income statement in proportion to the stage of<br />
completion of the transaction at the balance sheet date. The<br />
stage of completion is assessed by reference to surveys of work<br />
performed.<br />
3.18.2. Construction contracts<br />
Contract revenue includes the initial amount agreed in the<br />
contract plus any variations in contract work, claims and<br />
incentive payments to the extent that it is probable that they will<br />
result in revenue and can be measured reliably. As soon as the<br />
outcome of a construction contract can be estimated reliably,<br />
contract revenue and expenses are recognized in profit or loss in<br />
proportion to the stage of completion of the contract. The stage<br />
of completion is assessed by reference to surveys of work<br />
performed. When the outcome of a construction contract cannot<br />
be estimated reliably, contract revenue is recognized only to the<br />
extent of contract costs incurred that are likely to be<br />
recoverable. An expected loss on a contract is recognized<br />
immediately in profit or loss.<br />
3.18.3. Government grants<br />
Government grants are recognized in the balance sheet initially<br />
as deferred income when there is reasonable assurance that<br />
they will be received and that the Company will comply with the<br />
conditions attaching to them. Grants that compensate the<br />
Company for expenses incurred are recognized as revenue in<br />
the income statement on a systematic basis in the same periods<br />
in which the expenses are incurred. Grants that compensate the<br />
Company for the cost of an asset are recognized in the income<br />
statement as other operating income on a systematic basis over<br />
the useful life of the asset.<br />
3.18.4. Royalties<br />
Royalties are recognized as revenue when it is probable that the<br />
economic benefits associated with the transaction will flow to<br />
the Company and can be measured reliably. The income is<br />
recognized in accordance with the substance of the relevant<br />
agreement.<br />
3.18. Revenue<br />
3.18.1. Goods sold and services rendered<br />
Revenue from the sale of goods is measured at the fair value of<br />
the consideration received or receivable net of returns, trade<br />
discounts and volume rebates. Revenue is recognized when the<br />
significant risks and rewards of ownership have been<br />
48
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
3.19. Expenses<br />
3.19.1. Employee benefits<br />
Short-term employee benefits including short-term<br />
compensated absences are expensed in the period in which the<br />
employees rendered the related services.<br />
3.19.2. Lease payments<br />
Payments made under operating leases are recognized in the<br />
income statement on a straight-line basis over the term of the<br />
lease. Lease incentives received are recognized in the income<br />
statement as an integral part of the total lease expense.<br />
Minimum lease payments related to finance leases are<br />
apportioned between the finance charge and the reduction of the<br />
outstanding liability. The finance charge is allocated to each<br />
period during the lease term so as to produce a constant<br />
periodic rate of interest on the remaining balance of the liability.<br />
3.19.3. Finance income and expenses<br />
Finance income and expenses comprise interest payable on<br />
borrowings calculated using the effective interest rate method,<br />
dividends on redeemable preference shares, interest receivable<br />
on funds invested, dividend income, foreign exchange gains and<br />
losses and gains and losses on hedging instruments that are<br />
recognized in the income statement.<br />
Interest income is recognized in the income statement as it<br />
accrues, using the effective interest method. Dividend income is<br />
recognized in the income statement on the date the entity’s right<br />
to receive payments is established. The interest expense<br />
component of finance lease payments is recognized in the<br />
income statement using the effective interest method.<br />
3.20. Income taxes<br />
Income tax comprises current and deferred tax. Income tax is<br />
recognized in the income statement except to the extent that it<br />
relates to items recognized directly in equity, in which case it is<br />
recognized in equity.<br />
Current tax is the expected tax payable on the taxable income<br />
for the year, using tax rates enacted or substantially enacted at<br />
the balance sheet date, and any adjustment to tax payable in<br />
respect of previous years.<br />
Deferred tax is provided using the balance sheet liability<br />
method, providing for temporary differences between the<br />
carrying amounts of assets and liabilities for financial reporting<br />
purposes and the amounts used for taxation purposes. The<br />
following temporary differences are not provided for:<br />
• The initial recognition of goodwill;<br />
• The initial recognition of assets or liabilities in a transaction<br />
other than a business combination that affect neither<br />
accounting nor taxable profit;<br />
• Differences relating to investments in subsidiaries to the<br />
extent that the Company is able to control the timing of the<br />
reversal of the temporary difference and it is probable that<br />
the temporary difference will not reverse in the foreseeable<br />
future.<br />
The deferred tax assets and liabilities are offset if there is a<br />
legally enforceable right to offset current tax liabilities and<br />
assets, and they relate to income taxes levied by the same tax<br />
authority on the same taxable entity.<br />
The amount of deferred tax provided is based on the expected<br />
manner of realization or settlement of the carrying amount of<br />
assets and liabilities, using tax rates enacted or substantively<br />
enacted at the balance sheet date.<br />
A deferred tax asset is recognized only to the extent that it is<br />
reviewed at each reporting date and probable that future taxable<br />
profits will be available against which the asset can be utilized.<br />
Deferred tax assets are reduced to the extent that it is no longer<br />
probable that the related tax benefit will be realized.<br />
Additional income taxes that arise from the distribution of<br />
dividends are recognized at the same time as the liability to pay<br />
the related dividend.<br />
49
3.21. Segment reporting<br />
A segment is a distinguishable component of the Company that<br />
is engaged either in providing related products or services<br />
(business segment), or in providing products or services within a<br />
particular economic environment (geographical segment), which<br />
is subject to risks and returns that are different from those of<br />
other segments. The Company is a diversified holding company<br />
engaged in various industries and has chosen a segment<br />
reporting format based on the businesses it is managing.<br />
Segment assets and liabilities include those operating assets<br />
and liabilities that are directly attributable to a segment or can<br />
be allocated to a segment on a reasonable basis.<br />
3.22. Non-current assets held for<br />
sale and discontinued operations<br />
A discontinued operation is a component of the Company’s<br />
business that represents a separate major line of business or<br />
geographical area of operations or is a subsidiary acquired<br />
exclusively with a view to resale. Classification as a discontinued<br />
operation occurs upon disposal or when the operation meets the<br />
criteria to be classified as held for sale, if earlier. A disposal<br />
group that is to be abandoned may also qualify.<br />
Immediately before classification as held for sale, the<br />
measurement of all assets and liabilities in the disposal group is<br />
brought up-to-date in accordance with applicable IFRSs. On<br />
initial classification as held for sale, non-current assets and<br />
disposal groups are recognized at the lower of carrying amount<br />
and fair value less cost to sell. Impairment losses on initial<br />
classification as held for sale are included in profit or loss. The<br />
same applies to gains and losses on subsequent<br />
remeasurement.<br />
3.23. Recently issued standards and<br />
interpretations not yet adopted<br />
To the extent that new IFRS requirements are expected to be<br />
applicable in the future, they have been summarized hereafter.<br />
For the year ended March 31, 2009, they have not been applied in<br />
preparing the consolidated financial statements.<br />
IFRS 8 Operating Segments introduces the ‘management<br />
approach’ to segment reporting. IFRS 8, which becomes<br />
mandatory for RHJI’s March 31, 2010 financial statements, will<br />
require the disclosure of segment information based on the<br />
internal reports regularly reviewed by RHJI’s Executive<br />
Management in order to assess each segment’s performance<br />
and to allocate resources to them. Currently RHJI presents<br />
segment information in respect of its geographical and business<br />
segments. RHJI does not expect that IFRS 8 will trigger a<br />
material change to our current segment reporting.<br />
Revised IAS 23 Borrowing Costs removes the option to expense<br />
borrowing costs and requires that an entity capitalizes<br />
borrowing costs directly attributable to the acquisition,<br />
construction or production of a qualifying asset as part of the<br />
cost of that asset. The revised IAS 23 will become mandatory for<br />
RHJI’s March 31, 2010 financial statements and will constitute a<br />
change in accounting policy for RHJI. In accordance with the<br />
transitional provisions RHJI will apply the revised IAS 23 to<br />
qualifying assets for which capitalization of borrowing costs<br />
commences on or after the effective date of the standard. We do<br />
not expect any material impact.<br />
IFRIC 13 Customer Loyalty Programs addresses the accounting<br />
by entities that operate, or otherwise participate in, customer<br />
loyalty programs for their customers. It relates to customer<br />
loyalty programs under which the customer can redeem credits<br />
for awards such as free or discounted goods or services. IFRIC<br />
13, which becomes mandatory for RHJI’s March 31, 2010<br />
financial statements, is not expected to have any material<br />
impact.<br />
Revised IAS 1 Presentation of Financial Statements (2007)<br />
introduces the term total comprehensive income, which<br />
represents changes in equity during a period other than those<br />
changes resulting from transactions with owners in their<br />
capacity as owners. Total comprehensive income may be<br />
presented in either a single statement of comprehensive income<br />
(effectively combining both the income statement and all nonowner<br />
changes in equity in a single statement), or in an income<br />
statement and a separate statement of comprehensive income.<br />
Revised IAS 1, which becomes mandatory for RHJI’s March 31,<br />
2010 consolidated financial statements, is not expected to have<br />
an impact on the presentation of the consolidated financial<br />
statements. RHJI plans to continue to provide total<br />
comprehensive income in an income statement and a separate<br />
single statement of other comprehensive income for its March<br />
31, 2010 consolidated financial statements.<br />
Amendments to IAS 32 Financial Instruments : Presentation and<br />
IAS 1 Presentation of Financial Statements – Puttable Financial<br />
Instruments and Obligations Arising on Liquidation requires<br />
puttable instruments, and instruments that impose on the entity<br />
an obligation to deliver to another party a pro rata share of the<br />
net assets of the entity only on liquidation, to be classified as<br />
equity if certain conditions are met. The amendments, which<br />
become mandatory for RHJI’s March 31, 2010 consolidated<br />
financial statements, with retrospective application required, are<br />
not expected to have any material impact.<br />
Revised IFRS 3 Business Combinations (2008) incorporates the<br />
following changes that are likely to be relevant to RHJI’s<br />
operations :<br />
• The definition of a business has been broadened, which is<br />
likely to result in more acquisitions being treated as<br />
business combinations.<br />
• Contingent consideration will be measured at fair value, with<br />
subsequent changes therein recognized in profit or loss.<br />
50
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
• Transaction costs, other than share and debt issue costs,<br />
will be expensed as incurred.<br />
• Any pre-existing interest in the acquiree will be measured at<br />
fair value with the gain or loss recognized in profit or loss.<br />
• Any non-controlling (minority) interest will be measured at<br />
either fair value, or at its proportionate interest in the<br />
identifiable assets and liabilities of the acquiree, on a<br />
transaction-by-transaction basis.<br />
Revised IFRS 3, which becomes mandatory for RHJI’s March 31,<br />
2011 consolidated financial statements, will be applied<br />
prospectively and, will therefore have no impact on prior<br />
periods.<br />
Amended IAS 27 Consolidated and Separate Financial<br />
Statements (2008) requires accounting for changes in ownership<br />
interests by RHJI in a subsidiary, while maintaining control, to<br />
be recognized as an equity transaction. When RHJI loses control<br />
of a subsidiary, any interest retained in the former subsidiary<br />
will be measured at fair value with the gain or loss recognized in<br />
profit or loss. The amendments to IAS 27, which become<br />
mandatory for RHJI’s March 31, 2011 consolidated financial<br />
statements will be applied prospectively and will therefore have<br />
no impact on prior periods.<br />
Amendment to IFRS 2 Share-based Payment – Vesting<br />
Conditions and Cancellations clarifies the definition of vesting<br />
conditions, introduces the concept of non-vesting conditions,<br />
requires non-vesting conditions to be reflected in grant-date fair<br />
value and provides the accounting treatment for non-vesting<br />
conditions and cancellations. The amendments to IFRS 2, that<br />
will become mandatory for RHJI’s 2010 consolidated financial<br />
statements, with retrospective application, are not expected to<br />
have any material impact.<br />
IFRIC 15 Agreements for the Construction of Real Estate<br />
concludes that revenues for real estate construction projects<br />
will have to be recognized using the completed contract method<br />
in many cases, except for specific situations where the<br />
percentage of completion method of revenue recognition can be<br />
applied. This is the case when a contract relates to the sale of<br />
assets, but during the construction of these assets revenue<br />
recognition criteria are met on a continuous basis (in relation to<br />
the completed part of the project). IFRIC 15, which becomes<br />
mandatory for RHJI’s 2010 consolidated financial statements,<br />
with retrospective application, is not expected to have any<br />
material impact.<br />
IFRIC 16 Hedges of a Net Investment in a Foreign Operation<br />
discusses a number of issues in relation to hedging currency<br />
risks on foreign operations (net investment hedges). IFRIC 16<br />
specifically confirms only that the risk from differences between<br />
the functional currencies of the Company and the subsidiary can<br />
be hedged. Additionally, currency risks can only be hedged by<br />
every (direct or indirect) parent company, as long as the risk is<br />
only hedged once in the consolidated financial statements. IFRIC<br />
16 also determines that the hedge instrument of a net<br />
investment hedge can be held by every group company, except<br />
for foreign operation itself. IFRIC 16, which becomes mandatory<br />
for RHJI’s March 31, 2011 consolidated financial statements,<br />
with prospective application, is not expected to have any<br />
material impact.<br />
IFRIC 17 Distributions of Non-cash Assets to Owners addresses<br />
the treatment of distributions in kind to shareholders. Outside<br />
the scope of IFRIC 17 are distributions in which the assets being<br />
distributed are ultimately controlled by the same party or parties<br />
before and after the distribution (common control transactions).<br />
A liability has to be recognized when the dividend has been<br />
appropriately authorized and is no longer at the discretion of the<br />
entity, to be measured at the fair value of the non-cash assets to<br />
be distributed. IFRIC 17, which becomes mandatory for RHJI’s<br />
March 31, 2011 consolidated financial statements, with<br />
prospective application, is not expected to have any material<br />
impact.<br />
IFRIC 18 Transfers of Assets from Customers addresses the<br />
accounting by access providers for property, plant and<br />
equipment contributed to them by customers. Recognition of the<br />
assets depends on who controls it. When the asset is recognized<br />
by the access provider, it is measured at fair value upon initial<br />
recognition. The timing of the recognition of the corresponding<br />
revenue depends on the facts and circumstances. IFRIC 18,<br />
which becomes mandatory for RHJI’s March 31, 2011<br />
consolidated financial statements, with prospective application,<br />
is not expected to have any material impact .<br />
Amendments to IFRS 1 First-time Adoption of IFRSs and IAS 27<br />
Consolidated and Separate Financial Statements – Cost of an<br />
Investment in a Subsidiary, Jointly-controlled Entity or Associate<br />
(endorsed by the European Union) revises, amongst others, the<br />
accounting for ‘pre-acquisition dividends’ received from<br />
participating interests. Those dividends should be recognized as<br />
revenue, but such dividends may imply an indicator for the<br />
impairment of the participating interest. The amendment, which<br />
becomes mandatory for RHJI’s March 31, 2011 consolidated<br />
financial statements, with prospective application, is not<br />
applicable for the Company.<br />
Amendment to IAS 39 Financial Instruments : Recognition and<br />
Measurement – Eligible Hedged Items provides additional<br />
guidance concerning specific positions that qualify for hedging<br />
(‘eligible hedged items’). The amendment to IAS 39, which<br />
becomes mandatory for RHJI’s March 31, 2011 consolidated<br />
financial statements, with retrospective application, is not<br />
expected to have any material impact .<br />
Improvements to IFRSs (2008) is a collection of minor<br />
improvements to existing standards. This collection, which<br />
becomes mandatory for RHJI’s March 31, 2011 consolidated<br />
financial statements, is not expected to have any material<br />
impact.<br />
51
4. DETERMINATION OF FAIR<br />
VALUES<br />
A number of the Group’s accounting policies and disclosures<br />
require the determination of fair value, for both financial and<br />
non-financial assets and liabilities. Fair values have been<br />
determined for measurement and disclosure purposes based on<br />
the following methods. Where applicable, further information<br />
about the assumptions made in determining fair values is<br />
disclosed in the notes specific to that asset or liability.<br />
4.1. Property, plant and equipment<br />
The fair value of property, plant and equipment recognized as a<br />
result of a business combination is based on market values.<br />
The market value of property is the estimated amount for which<br />
a property could be exchanged on the date of valuation between<br />
a willing buyer and a willing seller in an arm’s length<br />
transaction after proper marketing wherein the parties had each<br />
acted knowledgeably, prudently and without compulsion. The<br />
market value of items of plant, equipment, fixtures and fittings is<br />
based on the quoted market prices for similar items.<br />
4.2. Intangible assets<br />
4.3. Inventories<br />
The fair value of inventories acquired in a business combination<br />
is determined based on its estimated selling price in the<br />
ordinary course of business less the estimated costs of<br />
completion and sale, and a reasonable profit margin based on<br />
the effort required to complete and sell the inventories.<br />
4.4. Investments in equity and debt<br />
securities<br />
The fair value of financial assets at fair value through profit or<br />
loss, held-to-maturity investments and available for sale<br />
financial assets is determined by reference to their quoted bid<br />
price at the reporting date. The fair value of held-to-maturity<br />
investments is determined for disclosure purposes only.<br />
4.5. Trade and other receivables<br />
The fair value of trade and other receivables, excluding<br />
construction work in progress, is estimated as the present value<br />
of future cash flows, discounted at the market rate of interest at<br />
the reporting date.<br />
The fair value of patents and trademarks acquired in a business<br />
combination is based on the discounted estimated royalty<br />
payments that have been avoided as a result of the patent or<br />
trademark being owned. The fair value of other intangible assets<br />
is based on the discounted cash flows expected to be derived<br />
from the use and eventual sale of the assets.<br />
52
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
5. USE OF ESTIMATES AND<br />
JUDGMENTS<br />
The preparation of its financial statements in conformity with<br />
IFRS requires the Company to make judgments, estimates and<br />
assumptions that affect the application of policies and reported<br />
amounts of assets and liabilities, income and expenses.<br />
The estimates and associated assumptions are based on<br />
historical experience and various other factors that are believed<br />
to be reasonable in the circumstances, the results of which form<br />
the basis of making the judgments about carrying values of<br />
assets and liabilities that are not readily apparent from other<br />
sources. Actual results may differ from these estimates.<br />
The estimates and underlying assumptions are reviewed on an<br />
ongoing basis. Revisions to accounting estimates are recognized<br />
in the period in which the estimate is revised if the revision<br />
affects only that period or in the period of the revision and future<br />
periods if the revision affects both current and future periods.<br />
6. SEGMENT <strong>REPORT</strong>ING<br />
Segment information is presented with respect to the<br />
Company’s business and geographical segments. The primary<br />
format, business segments, is based on the Company’s<br />
management and internal reporting structure.<br />
6.1. Business segments<br />
The Company comprises the following main business segments:<br />
• Asahi Tec;<br />
• CME;<br />
• HIT;<br />
• Niles; and<br />
• Phoenix Seagaia Resort.<br />
In particular, information about significant areas of estimation<br />
uncertainty and critical judgments in applying accounting<br />
policies that have the most significant effect on the amount<br />
recognized in the financial statements are described in the<br />
following notes:<br />
• Note 8 – Acquisitions<br />
• Note 15 – Measurement of the recoverable amount for<br />
property, plant and equipment of cash-generating units<br />
• Note 16 – Measurement of the recoverable amount for<br />
intangible assets of cash-generating units<br />
• Note 19 – Utilization of tax losses<br />
• Note 26 – Measurement of defined benefit obligations<br />
• Note 27 – Measurement of share-based payments<br />
• Note 28 – Provisions<br />
• Note 30 – Valuation of financial instruments<br />
• Note 33 – Contingencies.<br />
53
(in JPY millions) 2009<br />
Asahi Tec CME HIT Niles<br />
Phoenix<br />
Corporate<br />
Seagaia<br />
Headquarters<br />
Resort<br />
Consolidation<br />
entries<br />
Continuing Discontinued<br />
operations operations<br />
Total<br />
Revenue 218,815 18,170 102,527 45,444 12,327 2,599 (2,582) 397,300 - 397,300<br />
Gross profit (loss) 18,848 7,061 1,364 6,089 1,441 55 (38) 34,820 - 34,820<br />
Loss from operations (55,936) (9,300) (54,540) (11,164) (14,800) (8,189) (230) (154,159) - (154,159)<br />
Net financial income (expense) 29,623 15 (9,494) (1,968) (455) (4,012) 1,560 15,269 - 15,269<br />
Share of profit (loss) of equity accounted<br />
investees (net of income tax)<br />
408 - - - - (11,013) - (10,605) - (10,605)<br />
Income tax benefit (expense) (1,567) (29) 6,512 (2,446) 3,843 (81) - 6,232 - 6,232<br />
Profit from discontinued operations (net of<br />
income tax)<br />
- - - - - - - - 11,992 11,992<br />
Minority interest (63) - 530 13 - - 14,574 15,054 174 15,228<br />
Profit (loss) for the period attributable to<br />
equity holders of the Company<br />
(27,535) (9,314) (56,992) (15,565) (11,412) (23,295) 15,904 (128,209) 12,166 (116,043)<br />
Non-current assets 97,590 6,771 57,371 24,581 12,649 76,025 (54,491) 220,496 - 220,496<br />
Current assets 40,363 6,763 11,887 14,480 1,304 68,040 (5,716) 137,121 - 137,121<br />
Total assets 137,953 13,534 69,258 39,061 13,953 144,065 (60,207) 357,617 - 357,617<br />
Equity attributable to equity holders of the<br />
Company<br />
1,942 1,114 (42,247) (4,554) 3,454 138,226 (57,615) 40,320 - 40,320<br />
Minority interest 1,132 - 1,187 392 - - 4,435 7,146 - 7,146<br />
Non-current liabilities 97,434 6,127 16,538 16,809 7,678 1,231 1 145,818 - 145,818<br />
Current liabilities 37,445 6,293 93,780 26,414 2,821 4,608 (7,028) 164,333 - 164,333<br />
Total equity and liabilities 137,953 13,534 69,258 39,061 13,953 144,065 (60,207) 357,617 - 357,617<br />
Cash flow from operating activities (672) (1,006) (2,615) 2,060 (361) (11,247) 1,628 (12,213) (6,037) (18,250)<br />
Cash flow from investing activities (15,405) (432) (9,965) (3,547) (525) 16,808 20,496 7,430 (1,058) 6,372<br />
Cash flow from financing activities 15,237 763 8,940 708 697 2,212 (20,871) 7,686 7,288 14,974<br />
Net change in cash and cash equivalents (840) (675) (3,640) (779) (189) 7,773 1,253 2,903 193 3,096<br />
Cash and cash equivalents at the beginning<br />
of the period<br />
6,465 2,506 6,234 2,957 644 53,652 - 72,458 (181) 72,277<br />
Effect of exchange rate fluctuations on cash held (276) 1 (720) (100) - (678) (1,253) (3,026) (12) (3,038)<br />
Cash and cash equivalents at the end of the<br />
period<br />
5,349 1,832 1,874 2,078 455 60,747 - 72,335 - 72,335<br />
Depreciation of property, plant and<br />
equipment<br />
14,147 141 8,498 3,633 1,071 70 - 27,560 - 27,560<br />
Amortization of intangible assets 2,658 1,471 2,155 378 29 27 - 6,718 - 6,718<br />
Impairment<br />
Property, plant and equipment 7,045 - 6,699 232 13,993 - - 27,969 - 27,969<br />
Intangible assets 42,264 4,398 28,593 - (9) 20,044 - 95,290 - 95,290<br />
Capital expenditure 9,194 182 9,965 3,693 525 54 - 23,613 - 23,613<br />
Number of employees (Full Time Equivalent) 8,217 459 4,071 3,405 1,551 54 - 17,757 - 17,757<br />
54
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
(in JPY millions) 2008<br />
Asahi Tec CME HIT Niles<br />
Phoenix<br />
Corporate<br />
Seagaia<br />
Headquarters<br />
Resort<br />
Consolidation<br />
entries<br />
Continuing Discontinued<br />
operations operations<br />
Total<br />
Revenue 315,772 18,569 141,933 59,318 14,478 4,103 (4,107) 550,066 - 550,066<br />
Gross profit (loss) 29,527 7,133 12,874 10,309 1,694 510 (722) 61,325 - 61,325<br />
Profit (loss) from operations (25,277) (2,707) (461) 2,414 (710) (6,401) (964) (34,106) - (34,106)<br />
Net financial expense (10,618) (62) (10,808) (1,548) (403) (1,064) (2,509) (27,012) - (27,012)<br />
Share of profit of equity accounted<br />
investees (net of income tax)<br />
204 - - - - - 654 858 - 858<br />
Income tax benefit (expense) (2,849) (816) 8,317 (558) (3,567) (341) - 186 - 186<br />
Loss from discontinued operations<br />
(net of income tax)<br />
- - - - - - - - (1,177) (1,177)<br />
Minority interest (267) - (56) (90) - - 29,050 28,637 (607) 28,030<br />
Profit (loss) for the period attributable to<br />
equity holders of the Company<br />
(38,807) (3,585) (3,008) 218 (4,680) (7,806) 26,231 (31,437) (1,784) (33,221)<br />
Non-current assets 186,883 12,420 107,775 26,219 27,285 181,880 (136,734) 405,728 - 405,728<br />
Current assets 67,378 9,032 30,896 23,208 1,813 60,645 (6,709) 186,263 81,033 267,296<br />
Total assets 254,261 21,452 138,671 49,427 29,098 242,525 (143,443) 591,991 81,033 673,024<br />
Equity attributable to equity holders of the<br />
Company<br />
48,680 6,969 6,247 1,572 13,870 235,920 (146,360) 166,898 - 166,898<br />
Minority interest 1,291 - 2,053 490 - - 34,494 38,328 - 38,328<br />
Non-current liabilities 138,558 6,519 95,999 9,259 12,120 1,192 - 263,647 - 263,647<br />
Current liabilities 65,732 7,964 34,373 38,106 3,108 5,413 (8,819) 145,877 58,274 204,151<br />
Total equity and liabilities 254,261 21,452 138,672 49,427 29,098 242,525 (120,685) 614,750 58,274 673,024<br />
Cash flow from operating activities 9,772 (1,339) 8,544 3,892 763 (4,343) (3,714) 13,575 2,671 16,246<br />
Cash flow from investing activities (14,814) (1,164) (19,694) (4,056) (330) (21,169) 19,181 (42,046) (10,922) (52,968)<br />
Cash flow from financing activities 3,182 (170) 12,305 (1,672) (823) 1,684 (19,660) (5,154) 5,200 46<br />
Net change in cash and cash equivalents (1,860) (2,673) 1,155 (1,836) (390) (23,828) (4,193) (33,625) (3,051) (36,676)<br />
Cash and cash equivalents at the beginning<br />
of the period<br />
8,721 5,233 4,992 4,869 1,034 81,721 - 106,570 2,981 109,551<br />
Effect of exchange rate fluctuations on cash held (396) (54) 87 (76) - (4,241) 4,193 (487) (111) (598)<br />
Cash and cash equivalents at the end of the<br />
period<br />
6,465 2,506 6,234 2,957 644 53,652 - 72,458 (181) 72,277<br />
Depreciation of property, plant and<br />
equipment<br />
16,005 239 9,103 3,875 1,183 57 - 30,462 - 30,462<br />
Amortization of intangible assets 4,371 1,288 2,824 269 47 1 - 8,800 - 8,800<br />
Impairment<br />
Property, plant and equipment 547 - - 23 437 - - 1,007 - 1,007<br />
Intangible assets 29,249 197 - - (2) - - 29,444 - 29,444<br />
Capital expenditure 13,906 168 8,265 4,519 330 273 - 27,461 - 27,461<br />
Number of employees (Full Time Equivalent) 10,585 528 4,611 4,018 1,575 50 - 21,367 - 21,367<br />
55
The table below reconciles (a) the profit (loss) of the consolidated subsidiaries as reported in Part I of the present Annual Report and<br />
excluding the effect of the initial purchase price allocation resulting from the contribution of the consolidated subsidiaries to RHJI in<br />
March 2005, with (b) the profit (loss) reported on the previous table by business segment.<br />
(in JPY millions) 2009<br />
Asahi Tec CME HIT (1) Niles<br />
Phoenix<br />
Corporate<br />
Seagaia<br />
Headquarters<br />
Resort<br />
Consolidation<br />
entries<br />
Continuing Discontinued<br />
operations operations<br />
Total<br />
Revenue 218,815 18,170 102,527 45,444 12,327 2,599 (2,582) 397,300 - 397,300<br />
Loss from operations (52,294) (693) (50,990) (1,265) (701) (8,189) (230) (114,362) - (114,362)<br />
Effect of purchase price allocation (3,642) (8,607) (3,550) (9,899) (14,099) - - (39,797) - (39,797)<br />
Loss from operations (55,936) (9,300) (54,540) (11,164) (14,800) (8,189) (230) (154,159) - (154,159)<br />
(in JPY millions) 2008<br />
Asahi Tec CME HIT (1) Niles<br />
Phoenix<br />
Corporate<br />
Seagaia<br />
Headquarters<br />
Resort<br />
Consolidation<br />
entries<br />
Continuing Discontinued<br />
operations operations<br />
Total<br />
Revenue 315,772 18,569 141,933 59,318 14,478 4,103 (4,107) 550,066 - 550,066<br />
Profit (loss) from operations (25,074) (1,508) (461) 2,351 (112) (6,401) (964) (32,169) - (32,169)<br />
Effect of purchase price allocation (203) (1,199) - 63 (598) (1,937) - (1,937)<br />
Profit (loss) from operations (25,277) (2,707) (461) 2,414 (710) (6,401) (964) (34,106) - (34,106)<br />
(1) The EUR denominated revenue and losses have been translated using the average foreign exchange rate for purposes of preparing the consolidated financial statements.<br />
The results as reflected in Part I of the Annual Report were translated for convenience using the exchange rate at fiscal year ends.<br />
6.2. Geographical segments<br />
The Company is primarily managed on a worldwide basis, but operates in four principal geographical areas, Japan, Asia, Europe and<br />
North America. Segment assets and liabilities include items directly attributable to a segment as well as those than can be allocated<br />
on a reasonable basis. In presenting information on the basis of geographical segments, segment information is based on the<br />
geographical location of the assets.<br />
(in JPY millions) Japan Europe Americas Asia Eliminated Consolidated<br />
Revenue 140,376 135,538 105,442 20,263 (4,319) 397,300<br />
Segment assets 58,616 222,642 53,179 26,879 (3,699) 357,617<br />
Capital expenditure 6,002 6,082 7,003 4,565 (39) 23,613<br />
Net debt 58,072 12,342 52,786 5,158 (11,683) 116,675<br />
Number of employees (Full Time Equivalent) 5,634 4,844 3,624 3,655 - 17,757<br />
2009<br />
2008<br />
Revenue 174,879 190,407 170,892 37,072 (23,184) 550,066<br />
Segment assets 187,046 417,832 111,427 35,001 (78,282) 673,024<br />
Capital expenditure 6,713 10,302 5,692 5,789 (1,035) 27,461<br />
Net debt 60,385 17,221 85,349 7,100 (14,430) 155,625<br />
Number of employees (Full Time Equivalent) 6,302 5,598 5,280 4,187 - 21,367<br />
56
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
7. DISCONTINUED OPERATIONS<br />
7.1. Fiscal year ended March 31,<br />
2008<br />
CME recognized an additional gain of JPY 292 million resulting<br />
from the disposal of its CD/DVD pressing business.<br />
HIT’s Canadian subsidiary, which continued to suffer losses as a<br />
result of a continuously weak demand from North American car<br />
manufacturers, went into receivership in October 2007 and in<br />
liquidation in May 2008 and was classified as discontinued<br />
operations. The loss after tax from discontinued operations for<br />
the fiscal year ended March 31, 2008, amounted to JPY 3,415<br />
million.<br />
At March 31, 2008, RHJI classified D&M as a current asset held<br />
for sale in its consolidated financial statements as it had entered<br />
into a formal process to divest its controlling stake in D&M. The<br />
classification followed the Company’s assessment of the<br />
probability of a sale after having received several non-binding<br />
offers in March 2008. On June 20, 2008, the Company entered<br />
into a binding agreement with an investment fund advised by<br />
Bain Capital, LLC to tender its shares in D&M at JPY 510 per<br />
share or JPY 23,115 million in aggregate. In accordance with the<br />
provisions of IFRS on non-current assets held for sale, D&M was<br />
presented as discontinued operations in the consolidated<br />
financial statements for the fiscal year ended March 31, 2008.<br />
7.2. Fiscal year ended March 31,<br />
2009<br />
On September 4, 2008, the Company completed the sale of D&M.<br />
The result from D&M includes the net loss of JPY 999 million<br />
from operations for the six months ended September 30, 2008<br />
and the gain on disposal of JPY 11,073 million. The gain on<br />
disposal as reflected in the Company’s consolidated income<br />
statement consists of the gain of JPY 12,600 million over the<br />
acquisition cost less JPY 1,527 million of income contributed by<br />
D&M to consolidated reserves from April 1, 2005 through the<br />
date of effective disposal. The gain from the liquidation of HIT’s<br />
Canadian operations, initiated in May 2008, amounted to JPY<br />
1,918 million.<br />
7.3. Result of discontinued<br />
operations<br />
The breakdown of discontinued operations for the fiscal years<br />
ended March 31, 2009 and 2008 is as follows :<br />
(in JPY millions) Note 2009 2008<br />
Revenue 9 49,553 120,206<br />
Cost of sales (30,372) (76,140)<br />
Gross profit 19,181 44,066<br />
Selling, general and administrative<br />
expenses<br />
(17,948) (36,817)<br />
Other income (expenses) (1,502) (4,333)<br />
Gain on sale 12,991 -<br />
Profit from operations 12,722 2,916<br />
Net financial expense (729) (1,090)<br />
Share of loss of equity accounted<br />
investees (net of income tax)<br />
7.4. Effect of the disposals on the<br />
financial position<br />
- (55)<br />
Profit before tax 11,993 1,771<br />
Income tax expense (1) (2,948)<br />
Profit (loss) for the period 11,992 (1,177)<br />
Attributable to:<br />
Equity holders of the Company 12,166 (1,784)<br />
Minority interest (174) 607<br />
Profit (loss) for the period 11,992 (1,177)<br />
Basic and diluted earnings per share<br />
(in JPY) 142 (14)<br />
The disposal of D&M has impacted the financial position as follows:<br />
(in JPY millions) 2009<br />
Cash flow from (used in) discontinued operations<br />
Cash and cash equivalents at the beginning of the period (181)<br />
Net cash used in operating activities (6,037)<br />
Net cash from investing activities 1,712<br />
Net cash from financing activities 7,288<br />
Effect of exchange rate fluctuations on cash held (12)<br />
Cash and cash equivalents at the date of the disposal 2,770<br />
Consideration received, satisfied in cash 23,115<br />
Cash disposed of (2,770)<br />
Net cash inflow 20,345<br />
57
8. ACQUISITIONS OF SUBSIDIARIES AND MINORITY INTERESTS<br />
8.1. Fiscal year ended March 31, 2008<br />
On December 14, 2007, HIT completed the acquisition of Tafime, a high-end supplier of high-pressure die-cast aluminum and<br />
thermoplastic injection components based in Madrid, Spain. The purchase price of JPY 14,163 million (EUR 90 million) was allocated to<br />
specific assets and liabilities based on their estimated fair values as of the acquisition date, with JPY 7,987 million (EUR 50.7 million)<br />
recorded as goodwill. The estimated fair values of assets and liabilities as of the acquisition date were based on preliminary estimates<br />
of fair value and were subject to subsequent revisions. The purchase price for the acquisition of Tafime was partly funded by a capital<br />
increase at HIT of JPY 5,337 million, which was fully subscribed by the Company and which resulted in additional goodwill of JPY 2,972<br />
million. The allocation of the purchase price for the acquisition of Tafime was finalized during the fiscal year ended March 31, 2009 and<br />
resulted in a reduction of goodwill of JPY 4,975 million, including JPY 985 million resulting from exchange rate fluctuations.<br />
CME acquired 100% of TDK core, renamed Creative Core, from TDK Corporation. Creative Core is engaged in the production and sale<br />
of music, game and educational software and was acquired to diversify CME’s activity and support further growth.<br />
Following the acquisition in February 2006 of 66% of Techno-Metal, formerly known as Mitsubishi Fuso Techno-Metal, and in<br />
accordance with the stock purchase agreement, Asahi Tec purchased the remaining 34% of Techno-Metal on August 29, 2007 for an<br />
amount of JPY 1,670 million.<br />
8.2. Fiscal year ended March 31, 2009<br />
RHJI increased the capital of Asahi Tec by JPY 7,769 million for purposes of (a) curing a breach of covenants by its US based subsidiary<br />
Metaldyne (JPY 1,800 million on July 15, 2008), (b) providing Metaldyne with additional liquidity (JPY 1,051 million on October 15, 2008),<br />
and (c) funding Metaldyne's bond tender (JPY 4,918 million on November 25, 2008). The additional paid in capital in Asahi Tec resulted<br />
in additional goodwill of JPY 1,685 million.<br />
On June 20, 2008, September 23, 2008 and January 29, 2009, RHJI subscribed to new shares of Phoenix Seagaia Resort for an<br />
aggregate amount of JPY 1,000 million, in order to cover scheduled reimbursements of its debt as well as to provide liquidity for<br />
working capital requirements.<br />
9. REVENUE<br />
(in JPY millions) Continuing operations Discontinued operations Consolidated<br />
2009 2008 2009 2008 2009 2008<br />
Sales 395,060 547,781 49,553 120,206 444,613 667,987<br />
Construction contract revenue 2,145 1,658 - - 2,145 1,658<br />
Property rental income 95 84 - - 95 84<br />
Other revenue - 543 - - - 543<br />
Total 397,300 550,066 49,553 120,206 446,853 670,272<br />
58
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
10. OTHER INCOME AND<br />
EXPENSES<br />
(in JPY millions) 2009 2008<br />
Restructuring costs (5,504) (2,874)<br />
Write-down of inventories (2,729) (75)<br />
Loss on disposal of<br />
Property, plant and equipment (1,764) (1,532)<br />
Intangible assets - (2)<br />
R&D expenses (1,635) (340)<br />
Gain on disposal of property, plant and<br />
equipment<br />
410 -<br />
Provisions - (118)<br />
Write-down of trade receivables (150) (1)<br />
Others 331 348<br />
Total (11,041) (4,594)<br />
The restructuring costs of JPY 5,504 million and JPY 2,874<br />
million for the years ended March 31, 2009 and 2008 related to<br />
the following subsidiaries:<br />
(in JPY millions) 2009 2008<br />
HIT (4,947) (1,924)<br />
Asahi Tec (542) (950)<br />
Niles (15) -<br />
Total (5,504) (2,874)<br />
The loss on disposal of property, plant and equipment of JPY<br />
1,764 million and JPY 1,532 million for the years ended March<br />
31, 2009 and 2008 related to the following subsidiaries:<br />
11. PERSONNEL EXPENSES<br />
(in JPY millions) Note 2009 2008<br />
Wages and salaries 77,242 91,955<br />
Compulsory social security<br />
contributions<br />
11,011 13,207<br />
Other personnel costs 5,036 10,763<br />
Contributions to defined<br />
contribution plans<br />
Expenses related to defined<br />
benefit plans<br />
Equity-settled share-based<br />
payment transactions<br />
26 1,069 2,040<br />
26 1,948 1,103<br />
27 1,109 841<br />
Others 1,059 377<br />
Total 98,474 120,286<br />
Personnel expenses are included in the following line items of<br />
the income statement:<br />
(in JPY millions) 2009 2008<br />
Cost of sales 77,101 95,150<br />
Selling, general and administrative<br />
expenses<br />
21,373 25,136<br />
Total 98,474 120,286<br />
At March 31, 2009 and 2008, the total number of employees was<br />
as follows:<br />
(In units) 2009 2008<br />
Employees and management 5,485 10,460<br />
Workers 12,588 11,587<br />
Total 18,073 22,047<br />
(in JPY millions) 2009 2008<br />
Asahi Tec (1,601) (1,263)<br />
Niles (78) (242)<br />
Others (85) (27)<br />
Total (1,764) (1,532)<br />
59
12. IMPAIRMENT OF PROPERTY, PLANT, EQUIPMENT AND<br />
INTANGIBLE ASSETS<br />
For the fiscal year ended March 31, 2009 and March 31, 2008, the impairment charges related to the following subsidiaries:<br />
(in JPY millions) 2009 2008<br />
Property,<br />
plant and<br />
equipment<br />
Intangible<br />
Goodwill assets other<br />
than goodwill<br />
Total<br />
Property,<br />
plant and<br />
equipment<br />
Intangible<br />
Goodwill assets other<br />
than goodwill<br />
Asahi Tec 7,045 30,849 14,892 52,786 - 11,773 17,476 29,249<br />
CME - 3,247 4,398 7,645 - - 197 197<br />
HIT 6,699 6,957 25,186 38,842 - - - -<br />
Niles 232 9,770 - 10,002 - - - -<br />
Phoenix Seagaia Resort 13,993 - (9) 13,984 - - (2) (2)<br />
Total 27,969 50,823 44,467 123,259 0 11,773 17,671 29,444<br />
Total<br />
13. FINANCE INCOME AND<br />
EXPENSES<br />
13.1. Recognized in profit or loss<br />
(in JPY millions) 2009 2008<br />
Debt extinguishment 39,759 -<br />
Foreign exchange gains<br />
Unrealized 3,881 847<br />
Realized 4,446 1,678<br />
Gain on sale of available for sale<br />
financial assets<br />
3,301 -<br />
Interest income 1,761 2,971<br />
Others 821 373<br />
Finance income 53,969 5,869<br />
Interest expenses (19,154) (22,301)<br />
Foreign exchange loss<br />
Unrealized (6,181) (3,288)<br />
Realized (9,491) (4,150)<br />
Impairment loss on financial assets (1,298) -<br />
Fair value adjustment on financial<br />
assets<br />
(1,045) -<br />
Loss on sale of financial assets (333) -<br />
Others (1,198) (3,142)<br />
Finance expenses (38,700) (32,881)<br />
Net financial income (expense) 15,269 (27,012)<br />
13.2. Recognized directly in equity<br />
(in JPY millions) 2009 2008<br />
Foreign currency translation differences (8,165) (3,168)<br />
Net change in fair value of available for<br />
sale financial assets<br />
Net change in fair value available for sale<br />
financial assets transferred to profit or loss<br />
Attributable to:<br />
Recognized in :<br />
(5,057) 6,646<br />
(3,314) -<br />
Cash flow hedges (1,064) 21<br />
Others - (31)<br />
Income tax on income and expense<br />
recognized directly in equity<br />
327 (67)<br />
Total (17,273) 3,401<br />
Equity holders of the Company (13,193) 4,264<br />
Minority interest (4,080) (863)<br />
Finance income (expense) recognized<br />
directly in equity, net of income tax<br />
(17,273) 3,401<br />
Fair value reserve (8,367) 6,732<br />
Hedging reserve (652) 16<br />
Translation reserve (4,174) (2,484)<br />
Total (13,193) 4,264<br />
60
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
14. INCOME TAX BENEFIT<br />
14.1. Income tax benefit in the income statement<br />
(in JPY millions) Note 2009 2008<br />
Current tax benefit (expense)<br />
Current year (1,531) (4,486)<br />
Adjustment for prior years 2 (45)<br />
Total (1,529) (4,531)<br />
Deferred tax benefit (expense)<br />
Origination and reversal of temporary differences 13,517 (3,309)<br />
Increase (reduction) of tax rate (318) 4,011<br />
Recognition of previously unrecognized tax losses (3,564) 4,037<br />
Change in unrecognized deductible temporary differences (1,874) (22)<br />
Total 7,761 4,717<br />
Total income tax benefit excluding tax on sale of discontinued operations and share of income tax of<br />
equity accounted investees<br />
6,232 186<br />
Income tax benefit from continuing operations 6,233 3,134<br />
Income tax expense from discontinued operations 7 (1) (2,948)<br />
Total income tax benefit in the income statement 6,232 186<br />
14.2. Reconciliation of effective tax rate<br />
(In JPY millions) 2009 2008<br />
Loss for the period 131,271 61,251<br />
Total income tax benefit (expense) 6,232 (991)<br />
Loss before tax 137,503 60,260<br />
Income tax using the corporation tax rate 35.9 % 49,383 38.8 % 23,358<br />
Non-deductible expenses (1.1)% (1,483) (20.9)% (12,580)<br />
Tax exempt income 5.4 % 7,483 0.2 % 126<br />
Tax incentives - - (6.7)% (4,037)<br />
Effect of tax losses utilized (22.5)% (30,929) 6.1 % 3,684<br />
Current year losses for which no deferred tax asset was recognized (6.4)% (8,769) (17.8)% (10,741)<br />
Recognition of previously unrecognized tax losses (2.7)% (3,747) - -<br />
Change of tax rate (2.5)% (3,502) 4.9 % 2,949<br />
Others (1.6)% (2,204) (4.3)% (2,573)<br />
Total 4.5 % 6,232 0.3 % 186<br />
61
14.3. Income tax recognized directly in equity<br />
(in JPY millions) 2009 2008<br />
Cash flow hedges 327 (67)<br />
Income tax on income and expense recognized directly in equity 327 (67)<br />
15. PROPERTY, PLANT AND EQUIPMENT<br />
15.1. Costs, depreciation and impairment loss<br />
(In JPY millions) 2009<br />
Land and Machineries and<br />
buildings equipments<br />
Fixtures and<br />
fittings<br />
Under<br />
construction<br />
Others<br />
Total<br />
Costs<br />
Opening balance 288,163 186,916 70,997 8,972 9,504 564,552<br />
Acquisitions through business combinations 39 2,204 - - - 2,243<br />
Additions 1,928 7,903 4,670 6,721 1,101 22,323<br />
Transfer to investment property (380) - - (4) - (384)<br />
Reclassifications 794 2,981 1,904 (7,427) 1,748 -<br />
Disposals (758) (6,956) (3,491) (490) (1,705) (13,400)<br />
Effect of exchange rates (5,224) (14,197) (2,643) (958) (1,092) (24,114)<br />
Others 132 (201) (84) (42) (319) (514)<br />
Closing balance 284,694 178,650 71,353 6,772 9,237 550,706<br />
Depreciation and impairment loss<br />
Opening balance (207,046) (102,562) (57,883) (12) (4,403) (371,906)<br />
Depreciation charge for the period (2,758) (17,682) (5,231) - (1,889) (27,560)<br />
Impairment losses (15,593) (10,816) (798) (40) (722) (27,969)<br />
Reclassifications (520) 435 89 - (4) -<br />
Disposals 334 5,124 2,991 - 812 9,261<br />
Effect of exchange rates 943 7,481 1,411 - 594 10,429<br />
Others 322 (949) (11) 2 237 (399)<br />
Closing balance (224,318) (118,969) (59,432) (50) (5,375) (408,144)<br />
Carrying amount at March 31, 2009 60,376 59,681 11,921 6,722 3,862 142,562<br />
62
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
(in JPY millions) 2008<br />
Land and Machineries and<br />
buildings equipments<br />
Fixtures and<br />
fittings<br />
Under<br />
construction<br />
Others<br />
Total<br />
Costs<br />
Opening balance 287,954 193,784 73,292 8,133 10,523 573,686<br />
Acquisitions through business combinations 476 3,245 163 - - 3,884<br />
Additions 1,923 6,358 5,769 12,311 1,168 27,529<br />
Revaluations (14) - - - - (14)<br />
Transfer to investment property - - - (271) - (271)<br />
Transfer to assets held for sale or discontinued<br />
operations<br />
175 (8,963) (3,164) (595) (1,769) (14,316)<br />
Reclassifications - 5,698 536 (6,245) 11 -<br />
Disposals (954) (4,865) (4,553) (574) (231) (11,177)<br />
Effect of exchange rates (1,868) (8,826) (989) (627) (502) (12,812)<br />
Others 471 485 (57) (3,160) 304 (1,957)<br />
Closing balance 288,163 186,916 70,997 8,972 9,504 564,552<br />
Depreciation and impairment losses<br />
Opening balance (199,831) (93,826) (58,303) (200) (5,012) (357,172)<br />
Depreciation charge for the period (3,504) (19,654) (5,632) - (1,672) (30,462)<br />
Impairment losses (619) (365) (10) (13) - (1,007)<br />
Transfer to assets held for sale or discontinued<br />
operations<br />
(4,250) 5,020 2,147 174 1,729 4,820<br />
Disposals 599 2,991 3,227 - 99 6,916<br />
Effect of exchange rates 590 3,461 700 - 99 4,850<br />
Others (31) (189) (12) 27 354 149<br />
Closing balance (207,046) (102,562) (57,883) (12) (4,403) (371,906)<br />
Carrying amount at March 31, 2008 81,117 84,354 13,114 8,960 5,101 192,646<br />
63
15.2. Leased assets<br />
At March 31, 2009 and 2008, property, plant and equipment<br />
comprised leased assets amounting to JPY 2,894 million and JPY<br />
2,290 million, respectively, net of depreciation.<br />
15.3. Impairment losses<br />
An impairment test was performed on the carrying values of<br />
certain property, plant and equipment, for which an indication of<br />
impairment existed at March 31, 2009.<br />
Following review of the recoverable amount, the Company<br />
recorded an impairment loss of JPY 27,969 million, broken down<br />
by consolidated subsidiary as follows :<br />
(in JPY millions) 2009 2008<br />
Asahi Tec 7,045 603<br />
HIT 6,699 -<br />
Niles 232 -<br />
Phoenix Seagaia Resort 13,993 404<br />
Total 27,969 1,007<br />
The calculations of the value in use have been based on<br />
judgments, estimates and assumptions. The calculations are<br />
particularly sensitive to above key assumptions. Any change in<br />
interest rates, risk premiums, long-term growth rates and<br />
actual operating performance, could have a material adverse<br />
impact on the concluded recoverable amounts.<br />
A decrease of the growth rate by 1% and an increase of the<br />
discount rate by 1% would result in the following additional<br />
impairment charges as follows:<br />
(in JPY millions)<br />
Growth rate Discount rate<br />
Asahi Tec 275 892<br />
HIT - -<br />
Phoenix Seagaia Resort 1,200 2,163<br />
Total 1,475 3,055<br />
The recoverable amounts were determined using the income<br />
approach, based on the following assumptions:<br />
• Cash-flows were projected based on the consolidated<br />
subsidiaries' managements 5-year business plan. For the<br />
calculation of the terminal or residual value for the period<br />
beyond the discrete projections, the Company used the<br />
Gordon Growth Model and applied a long-term growth rate<br />
of 2.5% for Asahi Tec's US based subsidiary Metaldyne,<br />
between (2.0)% and 2.5% for HIT, and 0.5% for Phoenix<br />
Seagaia Resort.<br />
• The present value of estimated future cash flows and<br />
residual cash flows was determined using the weighted<br />
average cost of capital (WACC) of a group of comparable,<br />
publicly traded companies. The calculation utilized (a) a peer<br />
group average as pretax required cost of debt and (b) the<br />
industry debt-to-capital ratio and the observed median of<br />
betas in the group. The resulting WACC, which was used in<br />
the analysis, was between 15.0% and 16% for Asahi Tec's US<br />
based subsidiary Metaldyne, between 7.9% and 11.4% for<br />
HIT, and 7.0% for Phoenix Seagaia Resort.<br />
64
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
16. INTANGIBLE ASSETS<br />
16.1. Costs, amortization and impairment loss<br />
(in JPY millions) 2009<br />
Goodwill<br />
Patents and<br />
trademarks<br />
Development<br />
costs<br />
Software Others Total<br />
Costs<br />
Opening balance 91,290 132,345 2,320 5,269 618 231,842<br />
Acquisitions through business combinations 1,685 - - - - 1,685<br />
Additions - - 1,000 243 47 1,290<br />
Reclassifications (3,990) 3,990 - - - -<br />
Disposals (801) (388) (129) (89) (22) (1,429)<br />
Effect of exchange rates (3,991) (15,331) (737) 75 (2) (19,986)<br />
Others 9 (59) (1) 162 - 111<br />
Closing balance 84,202 120,557 2,453 5,660 641 213,513<br />
Amortization and impairment losses<br />
Opening balance (11,061) (56,173) (596) (2,603) (164) (70,597)<br />
Amortization charge for the period (1) (4,782) (162) (1,386) (387) (6,718)<br />
Impairment losses (50,823) (43,854) (611) (2) - (95,290)<br />
Disposals 388 - 127 294 20 829<br />
Effect of exchange rates 732 7,965 165 89 2 8,953<br />
Others 59 153 1 (96) - 117<br />
Closing balance (60,706) (96,691) (1,076) (3,704) (529) (162,706)<br />
Carrying amount at March 31, 2009 23,496 23,866 1,377 1,956 112 50,807<br />
(in JPY millions) 2008<br />
Goodwill<br />
Patents and<br />
trademarks<br />
Development<br />
costs<br />
Software Others Total<br />
Costs<br />
Opening balance 92,485 149,186 4,719 6,151 2,590 255,131<br />
Acquisitions through business combinations 12,776 - - 698 6 13,480<br />
Additions - 109 617 427 23 1,176<br />
Disposals - - (397) (20) - (417)<br />
Transfer to assets held for sale or discontinued<br />
operations<br />
(7,248) (10,975) (2,618) (1,713) (1,079) (23,633)<br />
Effect of exchange rates (6,830) (6,526) (2) (207) (34) (13,599)<br />
Others 107 551 1 (67) (888) (296)<br />
Closing balance 91,290 132,345 2,320 5,269 618 231,842<br />
Amortization and impairment losses<br />
Opening balance (621) (37,322) (1,288) (2,640) (140) (42,011)<br />
Amortization charge for the period - (7,173) (260) (1,337) (30) (8,800)<br />
Impairment losses (11,773) (17,671) - - - (29,444)<br />
Disposals - - 397 33 92 522<br />
Transfer to assets held for sale or discontinued<br />
operations<br />
- 3,273 533 1,320 - 5,126<br />
Effect of exchange rates 1,351 3,072 - 14 - 4,437<br />
Others (18) (352) 22 7 (86) (427)<br />
Closing balance (11,061) (56,173) (596) (2,603) (164) (70,597)<br />
Carrying amount at March 31, 2008 80,229 76,172 1,724 2,666 454 161,245<br />
65
16.2. Impairment losses<br />
16.2.1. Analysis<br />
In accordance with IAS 36 (Impairment of Assets), the Company reviewed the carrying values of its intangible assets at March 31, 2009<br />
and 2008. As a result the Company recorded impairment charges of JPY 95,290 million and JPY 29,444 million, respectively.<br />
The impairment charge for the fiscal year ended March 31, 2009 and March 31, 2008 mainly related to goodwill and intangible assets<br />
such as patents, tradename and trademark and certain customer relationships.<br />
For the fiscal year ended March 31, 2009 and March 31, 2008, the impairment related to the following subsidiaries:<br />
(in JPY millions) 2009 2008<br />
Goodwill<br />
Intangible<br />
assets other<br />
than goodwill<br />
Total<br />
Goodwill<br />
Intangible<br />
assets other<br />
than goodwill<br />
Asahi Tec 30,849 14,892 45,741 11,773 17,476 29,249<br />
CME 3,247 4,398 7,645 - 197 197<br />
HIT 6,957 25,186 32,143 - - -<br />
Niles 9,770 - 9,770 - - -<br />
Phoenix Seagaia Resort - (9) (9) - (2) (2)<br />
Total 50,823 44,467 95,290 11,773 17,671 29,444<br />
Total<br />
16.2.2. Impairment testing for cash generating<br />
units containing goodwill<br />
Goodwill is allocated to the Company’s cash generating units<br />
(“CGU”). Except for Metaldyne and HIT, the Company identified<br />
its operating segments as primary business segments as<br />
disclosed in note 6 to the consolidated financial statements as<br />
CGU’s. For Metaldyne, goodwill has been allocated to its<br />
operating segments, which were identified as CGU’s at the time<br />
of the acquisition of Metaldyne by Asahi Tec. HIT identified its<br />
two main geographical business segments as CGU's.<br />
Goodwill at March 31, 2009 and 2008 can be broken down by<br />
CGU as follows :<br />
(in JPY millions) 2009 2008<br />
Asahi Tec<br />
Asahi Tec 1,110 3,986<br />
Metaldyne<br />
Chassis North America - 4,315<br />
European components 2,206 8,108<br />
Vibration control products - 2,384<br />
Sintered products 1,401 11,150<br />
Powertrain - 4,031<br />
CME 1,621 4,868<br />
HIT - -<br />
Europe 10,669 23,909<br />
Americas 4,626 5,844<br />
Niles 1,863 11,634<br />
Total 23,496 80,229<br />
Goodwill decreased from JPY 80,229 million to JPY 23,496<br />
million due to the following:<br />
(in JPY millions) 2009<br />
Opening balance 80,229<br />
Impairment losses (50,823)<br />
Final purchase price allocation of Tafime (3,990)<br />
Effect of exchange rates (3,259)<br />
Additional goodwill at Asahi 1,685<br />
Disposals during the period (413)<br />
Others (67)<br />
Closing balance 23,362<br />
The Company determined the potential impairment of its CGU's<br />
containing goodwill by comparing their carrying value, including<br />
goodwill, with their recoverable amount. The assessment of the<br />
recoverable amount included a review and analysis of (a)<br />
publicly observed market prices for the publicly listed<br />
consolidated subsidiaries, (b) valuation multiples for groups of<br />
publicly listed, comparable companies and (c) the projected<br />
financial performance based on budgets and business plans<br />
prepared by the consolidated subsidiaries' respective<br />
managements.<br />
The Company retained the value in use to determine the<br />
recoverable amount of the CGU's containing goodwill. The fair<br />
value of the Company's publicly listed subsidiaries resulted in<br />
lower amounts and could not be reliably determined for the<br />
privately held subsidiaries. The value in use for each of Asahi<br />
Tec, HIT, Niles, CME and Metaldyne's CGU's was determined by<br />
discounting their future cash flows, based on the subsidiaries'<br />
66
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
managements 5 year business plans. For the calculation of the terminal or residual value for the period beyond the discrete<br />
projections, the Company used the Gordon Growth Model. The resulting residual values were validated by comparing the implied<br />
EBITDA valuation multiples with currently applicable market multiples.<br />
The present value of estimated future cash flows and residual cash flows was determined using the WACC of a group of comparable<br />
publicly traded companies. The calculation utilized (a) a peer group average as pre-tax required cost of debt, except for CME for which<br />
the effective interest rate on its debt was used as a proxy for the cost of debt and (b) the industry debt-to-capital ratio and the<br />
observed median of betas in the group.<br />
The main assumptions used in determining the recoverable amount of the various CGU's can be summarized as follows:<br />
(In %) 2009 2008<br />
Growth rate WACC Growth rate WACC<br />
Asahi Tec 0.0 7.1 1.6 8.5<br />
CME 1.0 11.0 4.0 6.2<br />
HIT 1.0 8.9 1.0 8.8<br />
Metaldyne 2.5 21.0 3.0 12.5<br />
Niles 0.0 8.3 0.5 6.4<br />
The calculations of the value in use have been based on judgments, estimates and assumptions. The calculations are particularly<br />
sensitive to above key assumptions. Any change in interest rates, risk premiums, long-term growth rates and actual operating<br />
performance, could have a material adverse impact on the concluded recoverable amounts. The conclusions of the income based<br />
approach were corroborated by the market multiple approach for comparable publicly traded companies.<br />
16.2.3. Impairment testing for intangible assets other than goodwill<br />
In view the economic downturn and its impact on the consolidated subsidiaries’ projected future cash flows, an impairment test has<br />
been performed on certain intangible assets.<br />
The Company recorded an aggregate impairment charge of JPY 44,467 million on certain intangible assets of HIT (JPY 25,186 million),<br />
Metaldyne (JPY 14,892 million) and CME (JPY 4,398 million). The impairment charges related to various intangible assets and resulted<br />
from the calculation of their value in use, which was determined using the Gordon Growth model. The main assumptions can be<br />
summarized as follows :<br />
CME<br />
HIT<br />
2009 2008<br />
Growth rate WACC Growth rate WACC<br />
Between 0%<br />
and (7.0)%<br />
Between 2.5%<br />
and (2.0)%<br />
Metaldyne 2.5%<br />
Between 7.9%<br />
and 11.4%<br />
Between 15.0%<br />
and 21.0%<br />
9.0% 0% 9.0%<br />
3%<br />
- -<br />
Between 12.0%<br />
and 13.5%<br />
67
The calculations of the value in use have been based on judgments, estimates and assumptions. The calculations are particularly<br />
sensitive to above the growth rate and WACC used. Any change in interest rates, risk premiums, long-term growth rates and actual<br />
operating performance, could have a material adverse impact on the concluded recoverable amounts.<br />
A decrease of the growth rate by 1% and an increase of the discount rate by 1% would result in the following additional impairment<br />
charges:<br />
(in JPY millions)<br />
Goodwill<br />
Intangible assets other<br />
than goodwill<br />
Total<br />
Growth<br />
rate<br />
WACC<br />
Growth<br />
rate<br />
WACC<br />
Growth<br />
rate<br />
Asahi Tec - - - - - -<br />
CME 60 119 109 107 169 226<br />
HIT 6,664 6,789 123 660 6,787 7,449<br />
Metaldyne 443 943 207 543 649 1,486<br />
Niles 953 1,811 - - 953 1,811<br />
Total 8,120 9,662 439 1,310 8,558 10,972<br />
WACC<br />
17. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES<br />
17.1. Financial informations<br />
RHJI, through its wholly owned subsidiary RHJ Shaklee Holding S.A., holds a 42.5% equity investment in Shaklee, a provider of<br />
premium quality and natural nutrition, personal care, household and air and water treatment products. Shaklee is listed on the<br />
Jasdaq Securities Exchange, Inc. under the ticker 8205. During the fiscal year ended March 31, 2009, RHJI acquired 457,000 additional<br />
existing shares of Shaklee for an aggregate consideration of JPY 276 million, increasing its total ownership from 40.7%.<br />
RHJI holds a 20.0% ownership interest in U-shin, a Japanese manufacturer of electromechanical components for automobiles. U-shin<br />
is listed on the Tokyo Stock Exchange, Inc. under the ticker 6985.T. As U-shin’s fiscal year ends on November 30, the Company used<br />
financial information for the twelve months ended February 28, 2009 and 2008, compiled from publicly disclosed quarterly financial<br />
information, for purposes of preparing the Company’s consolidated financial statements as of and for the fiscal year ended March 31,<br />
2009 and 2008.<br />
RHJI holds 49.9% ownership interest in SigmaXYZ, a Japanese ICT consulting venture with Mitsubishi Corporation.<br />
The summary financial information (100%) is as follows:<br />
(in JPY millions) Shaklee SigmaXYZ U-shin<br />
March 31,<br />
2009<br />
March 31,<br />
2008<br />
March 31,<br />
2009<br />
March 31,<br />
2008<br />
February 28,<br />
2009<br />
February 28,<br />
2008<br />
Assets<br />
Non-current 19,725 21,325 1,015 - 24,712 30,819<br />
Current 11,725 11,163 374 - 43,614 44,517<br />
Equity and liabilities<br />
Equity 4,139 5,229 417 - 30,653 33,854<br />
Non-current liabilities 19,360 20,258 193 - 13,907 12,976<br />
Current liabilities 7,951 7,001 779 - 23,766 28,506<br />
Revenue 24,685 27,322 1,152 - 70,772 77,963<br />
Profit (loss) for the year 1,705 1,441 (1,529) - (282) 339<br />
68
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
17.2. Changes during the year<br />
(in JPY millions) 2009 2008<br />
Opening balance 22,321 21,633<br />
Acquisitions 1,361 -<br />
Net results 283 858<br />
Impairment losses (10,888) -<br />
Dividends (352) -<br />
Effect of exchange rates (298) (12)<br />
Others (122) (158)<br />
Closing balance 12,305 22,321<br />
The share of loss of equity accounted investees of JPY 10,605 million is split as follows:<br />
(in JPY millions)<br />
Profit (loss)<br />
for the period<br />
Impairment<br />
loss<br />
Shaklee 725 (6,050) (5,325)<br />
SigmaXYZ (763) - (763)<br />
U-shin (56) (4,838) (4,894)<br />
Equity accounted investees at Asahi Tec 377 - 377<br />
Total 283 (10,888) (10,605)<br />
Total<br />
17.3. Goodwill and impairment of goodwill<br />
The goodwill relating to equity accounted investees is as follows:<br />
(in JPY millions) Note Shaklee SigmaXYZ U-shin<br />
March 31,<br />
2009<br />
March 31,<br />
2008<br />
March 31,<br />
2009<br />
March 31,<br />
2008<br />
March 31,<br />
2009<br />
For purposes of the goodwill impairment test, the Company recognized impairment loss on Shaklee and U-shin for the fiscal year<br />
ended March 31, 2009 for respectively JPY 6,050 million and JPY 2,330 million. In addition to the goodwill impairment, the Company<br />
recognized an impairment on its financial asset held in U-shin for JPY 2,508 million during the fiscal year ended March 31, 2009.<br />
The recoverable amount of RHJI's investments in Shaklee and U-shin was based on the estimation of their fair value, which was<br />
determined by applying publicly observed valuation multiples on their current and projected earnings, derived from their publicly<br />
disclosed forecasts for the fiscal year ending March 31, 2010.<br />
March 31,<br />
2008<br />
Investment 12,520 12,244 1,085 - 8,038 8,038<br />
Equity as of acquisition date 5,139 5,139 2,000 - 28,538 28,538<br />
Ownership 35 42.5% 40.7% 49.0% - 20.0% 20.0%<br />
Goodwill 4,102 10,152 87 - - 2,330<br />
69
18. OTHER INVESTMENTS<br />
(in JPY millions) 2009 2008<br />
Available for sale financial assets 5,636 19,654<br />
Cash guarantees and deposits 104 104<br />
Derivatives used for hedging 117 141<br />
Others - 3,104<br />
Total 5,857 23,003<br />
The available for sale financial assets are recorded at fair market value for the fiscal year ended March 31, 2009 and March 31, 2008<br />
and the details are as follows:<br />
(in JPY millions) 2009 2008<br />
Commercial International Bank of Egypt ("CIB") 5,353 10,369<br />
Others undisclosed investments 283 9,285<br />
Total 5,636 19,654<br />
The Company’s exposure to credit, currency and interest rate risks related to other investments is disclosed in note 30. During the<br />
fiscal year ended March 31, 2009, RHJI disposed of a non-controlling minority investment for JPY 9,030 million, initially acquired for<br />
JPY 5,600 million. At March 31, 2008, this investment was recorded at a fair value that equaled the ultimate selling price.<br />
19. DEFERRED TAX ASSETS AND LIABILITIES<br />
19.1. Recognized deferred tax assets and liabilities<br />
Deferred tax assets and liabilities are attributable to the following:<br />
(in JPY millions) 2009 2008<br />
Assets Liabilities Net Assets Liabilities Net<br />
Property, plant and equipment (172) (11,933) (12,105) 2,243 (26,028) (23,785)<br />
Intangible assets 6 (10,560) (10,554) 90 (21,595) (21,505)<br />
Other investments 1 (19) (18) 30 (30) -<br />
Inventories 426 (46) 380 529 (331) 198<br />
Loans and borrowings 1 - 1 13 (81) (68)<br />
Employee benefits 3,037 - 3,037 8,659 - 8,659<br />
Provisions 165 - 165 769 (54) 715<br />
Other items 4,762 (2,172) 2,590 3,838 (1,262) 2,576<br />
Tax value of loss carry-forwards 4,500 - 4,500 12,225 - 12,225<br />
Total 12,726 (24,730) (12,004) 28,396 (49,382) (20,985)<br />
Set off of tax (7,728) 7,728 - (24,462) 24,462 -<br />
Net tax assets (liabilities) 4,998 (17,002) (12,004) 3,934 (24,920) (20,985)<br />
70
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
19.2. Movement in temporary differences during the period<br />
(in JPY millions) 2009<br />
Opening<br />
balance<br />
Change in the<br />
consolidation<br />
scope<br />
Effect of<br />
exchange rates<br />
Recognized<br />
in profit<br />
or loss<br />
Recognized<br />
in equity<br />
Closing<br />
balance<br />
Property, plant and equipment (23,785) (643) 871 11,070 382 (12,105)<br />
Intangible assets (21,505) (1,138) 802 10,311 976 (10,554)<br />
Other investments - - - (97) 79 (18)<br />
Inventories 198 - 30 163 (11) 380<br />
Loans and borrowings (68) - 7 62 - 1<br />
Employee benefits 8,659 - (66) (5,556) - 3,037<br />
Provisions 715 - (11) (539) - 165<br />
Other items 2,575 88 92 (343) 178 2,590<br />
Tax value of loss carry-forwards 12,226 - (399) (7,312) (15) 4,500<br />
Net tax assets (liabilities) (20,985) (1,693) 1,326 7,759 1,589 (12,004)<br />
(in JPY millions) 2008<br />
Opening<br />
balance<br />
Change in the<br />
consolidation<br />
scope<br />
Effect of<br />
exchange rates<br />
Recognized<br />
in profit<br />
or loss<br />
Recognized<br />
in equity<br />
Other<br />
movements<br />
Closing<br />
balance<br />
Property, plant and equipment (31,793) 874 1,330 5,804 - - (23,785)<br />
Intangible assets (30,538) 2,746 1,571 4,716 - - (21,505)<br />
Other investments (761) 148 - 595 18 - -<br />
Inventories 687 (1,089) (35) 635 - - 198<br />
Loans and borrowings - - (14) (54) - - (68)<br />
Employee benefits 9,508 (2,808) (140) 2,099 - - 8,659<br />
Provisions 1,885 (1,044) (5) (121) - - 715<br />
Other items 7,517 (1,530) (1,109) (1,084) (54) (1,165) 2,575<br />
Tax value of loss carry-forwards 20,629 (186) (344) (7,873) - - 12,226<br />
Net tax assets (liabilities) (22,866) (2,889) 1,254 4,717 (36) (1,165) (20,985)<br />
19.3. Unrecognized deferred tax assets<br />
Deferred tax assets have not been recognized in respect of the following items:<br />
(in JPY millions) 2009 2008<br />
Deductible temporary differences 12,103 6,554<br />
Tax losses 29,696 42,640<br />
Total 41,799 49,194<br />
71
The decrease of the unrecognized deferred tax assets from JPY<br />
49,194 million as of March 31, 2008 to JPY 41,799 million as of<br />
March 31, 2009 is mainly due to :<br />
(in JPY millions) 2009<br />
Deductible<br />
temporary<br />
differences<br />
Tax losses<br />
Total<br />
Opening balance 6,554 42,640 49,194<br />
Utilization - (11,168) (11,168)<br />
Additions 4,831 (919) 3,912<br />
Effect of exchange<br />
rates<br />
1,133 1,033 2,166<br />
Recognition (415) (1,890) (2,305)<br />
Closing balance 12,103 29,696 41,799<br />
The decrease of the tax losses carried forward from JPY 146,614<br />
million as of March 31, 2008 to JPY 97,707 million as of March<br />
31, 2009 is mainly due to :<br />
(in JPY millions) 2009<br />
Opening balance 149,614<br />
Effect of exchange rates (2,727)<br />
Tax losses expired during the period (28,345)<br />
Tax losses utilized following debt extinguishment at Metaldyne (28,522)<br />
Legal restructuring at HIT (10,421)<br />
Additions for the period 18,257<br />
Others (149)<br />
Closing balance 97,707<br />
19.4. Tax losses<br />
At March 31, 2009, RHJI and its subsidiaries had net operating<br />
losses in aggregate of approximately JPY 97,707 million, which<br />
are available to be offset against future taxable income. These<br />
losses, if not utilized, will expire as follows :<br />
(in JPY millions) 2009 2008<br />
Less than one year 5,291 28,345<br />
Between one and five years 13,286 18,159<br />
More than five years 79,130 103,110<br />
Total 97,707 149,614<br />
20. INVENTORIES<br />
(in JPY millions) 2009 2008<br />
Gross Allowance Net Gross Allowance Net<br />
Raw materials and consumables 9,582 (50) 9,532 14,613 (6) 14,607<br />
Work in progress 5,898 (864) 5,034 10,146 (883) 9,263<br />
Finished goods 11,504 (358) 11,146 14,039 (173) 13,866<br />
Total 26,984 (1,272) 25,712 38,798 (1,062) 37,736<br />
Inventories are stated net of allowances, which amounted to JPY 1,272 million and JPY 1,062 million at March 31, 2009 and 2008,<br />
respectively.<br />
72
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
21. TRADE AND OTHER<br />
RECEIVABLES<br />
(in JPY millions) Note 2009 2008<br />
Trade receivables and<br />
prepayments<br />
33,584 65,915<br />
Other receivables 3,924 8,173<br />
Total 30 37,508 74,088<br />
Trade receivables are shown net of impairment losses which<br />
amounted to JPY 381 million and JPY 372 million at March 31,<br />
2009 and 2008, respectively.<br />
The decrease of trade receivables and prepayments is mainly<br />
due to the decrease of revenue and the foreign exchange impact<br />
of USD and EUR versus JPY at March 31, 2009.<br />
Certain consolidated businesses have entered into factoring<br />
agreements with financial institutions whereby trade receivables<br />
are sold. As of March 31, 2009 and 2008, JPY 12,360 million and<br />
JPY 13,422 million worth of receivables were sold under these<br />
agreements and derecognized accordingly as no financial risk is<br />
retained.<br />
22. CASH AND CASH<br />
EQUIVALENTS<br />
(in JPY millions) 2009 2008<br />
Cash at bank and at hand 20,594 19,911<br />
Term deposits 50,472 52,612<br />
Others 1,270 -<br />
Cash and cash equivalents 72,336 72,523<br />
Bank overdrafts (1) (65)<br />
Cash and cash equivalents in the<br />
statement of cash flows<br />
72,335 72,458<br />
Further information on the Company’s exposure to credit,<br />
interest rate and foreign currency risks related to cash and cash<br />
equivalents is disclosed in note 30.<br />
The construction contracts in progress included in the trade<br />
receivables represented a total amount of JPY 991 million and<br />
JPY 1,242 million for the years ended March 31, 2009 and 2008<br />
respectively.<br />
Further information on the Company’s exposure to credit-and<br />
foreign currency risks related to trade and other receivables is<br />
disclosed in note 30.<br />
73
23. EQUITY<br />
23.1. Reconciliation of movement in equity<br />
(in JPY millions)<br />
Share<br />
capital<br />
Attributable to equity holders of the Company<br />
Reserve for<br />
Share Translation<br />
treasury<br />
premium reserve<br />
shares<br />
Fair value<br />
reserve<br />
Other<br />
reserves<br />
Retained<br />
earnings<br />
Minority<br />
interest<br />
Balance at April 1, 2007 88,491 91,334 3,263 - 2,113 24,011 (12,287) 196,925 64,177 261,102<br />
Share-based payments - - - - - - 838 838 326 1,164<br />
Purchase of treasury shares - - - (2,329) - - - (2,329) - (2,329)<br />
Total recognized income and<br />
expense<br />
Total<br />
Total<br />
equity<br />
- - (2,484) - 6,732 16 (33,221) (28,957) (28,893) (57,850)<br />
Scope changes - - 312 - (5) 101 - 408 2,867 3,275<br />
Dividends - - - - - - - - (256) (256)<br />
Others - - - - - 13 - 13 107 120<br />
Balance at March 31, 2008 88,491 91,334 1,091 (2,329) 8,840 24,141 (44,670) 166,898 38,328 205,226<br />
Balance at April 1, 2008 88,491 91,334 1,091 (2,329) 8,840 24,141 (44,670) 166,898 38,328 205,226<br />
Share-based payments - - - - - - 1,285 1,285 126 1,411<br />
Purchase of treasury shares - - - (536) - - - (536) - (536)<br />
Reclassifications - - - - - (1,319) 1,319 - - -<br />
Total recognized income and<br />
expense<br />
- - (4,174) - (8,367) (652) (116,043) (129,236) (19,308) (148,544)<br />
Scope changes - - 2,208 - (48) (251) - 1,909 (11,992) (10,083)<br />
Dividends - - - - - - - - (8) (8)<br />
Balance at March 31, 2009 88,491 91,334 (875) (2,865) 425 21,919 (158,109) 40,320 7,146 47,466<br />
23.2. Share capital and share premium<br />
At March 31, 2009, the share capital of RHJI amounted to EUR<br />
664,424,086 and is represented by 85,545,547 shares without<br />
nominal value. All shares are listed on Euronext Brussels, have<br />
the same rights and par accounting value and are fully paid up.<br />
Each share entitles the holder to one voting right.<br />
The Board of Directors is expressly authorized, in the event of a<br />
public takeover bid for the securities of RHJI, to increase RHJI’s<br />
capital, in accordance with Article 607 of the Belgian Companies<br />
Code. Such authority was granted for a period of five years<br />
commencing April 26, 2005. If the Board of Directors decides to<br />
increase the capital of RHJI pursuant to its authority under this<br />
Article, such increase will be deducted from the remaining part<br />
of the authorized capital, which amounted to EUR 663,955,470<br />
(JPY 88,429 million) at March 31, 2009.<br />
The Extraordinary Shareholders' meeting held on September 16,<br />
2008, renewed the general share buy-back authorization for an<br />
18 month period beginning on September 16, 2008 as well as the<br />
share-buy back authorization for "serious and imminent harm"<br />
circumstances, under which the Board of Directors is authorized<br />
to purchase own shares for a period of three years from the date<br />
of publication of an extract of the minutes of the Extraordinary<br />
Shareholders' meeting.<br />
Based on transparency declarations received by RHJI in<br />
accordance with Belgian rules and RHJI’s Articles of<br />
Association, five shareholders have notified RHJI of their<br />
holdings (see Shareholders’ Information, p. 124).<br />
23.3. Translation reserve<br />
The translation reserve comprises all foreign currency exchange<br />
differences arising from the translation of the financial<br />
statements of foreign operations.<br />
23.4. Reserve for treasury shares<br />
The reserve for the Company's own shares comprises the cost of<br />
the Company's shares held by RHJI. At March 31, 2009, RHJI<br />
held 1,145,004 shares of its own shares compared to 1,323,513<br />
shares as at March 31, 2008. During the fiscal year ended<br />
March 31, 2009, RHJI purchased 627,247 of its treasury shares<br />
and distributed 805,756 shares as a result of certain share<br />
grants and the vesting of restricted stock units granted to<br />
certain employees on October 1, 2007.<br />
74
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
23.5. Fair value reserve<br />
The fair value reserve comprises the gains or losses on available<br />
for sale financial assets, except for impairment losses and<br />
foreign exchange gains and losses, until the financial assets are<br />
derecognized.<br />
23.6. Hedging reserve<br />
As at March 31, 2009, and 2008, the hedging reserve is included<br />
in the consolidation reserves for respectively JPY (573) million<br />
and JPY 21 million. The hedging reserve comprises the effective<br />
portion of the accumulated net change in the fair value of the<br />
cash flow hedging instruments related to hedged transactions<br />
that have not yet occurred.<br />
23.7. Minority interest<br />
23.7.1. Breakdown by portfolio company<br />
(in JPY millions) 2009 2008<br />
Asahi Tec 5,935 16,365<br />
CME 844 5,206<br />
D&M - 12,671<br />
HIT - 3,396<br />
Niles 271 576<br />
Others 96 114<br />
Total 7,146 38,328<br />
23.7.2. Movement during the period<br />
(in JPY millions) 2009 2008<br />
Opening balance 38,328 64,177<br />
Share of net loss of subsidiaries (25,826) (28,030)<br />
Exit from consolidation scope<br />
D&M<br />
Balance at the beginning of the<br />
period<br />
(12,671) -<br />
Share of net loss during the period 518 -<br />
Asahi Tec - (638)<br />
HIT (181) -<br />
Impact of IAS 27 10,598 -<br />
Exchange losses (3,938) (681)<br />
Changes in ownership 343 3,505<br />
Others (25) (5)<br />
Closing balance 7,146 38,328<br />
In accordance with IAS 27, losses attributable to minority<br />
interest of HIT and Metaldyne for respectively JPY 6,210 million<br />
and JPY 4,388 million were attributed to the equity holders of the<br />
Company as losses can't be allocated to minority interest,<br />
except if they would have a binding obligation to cover such<br />
losses.<br />
75
24. EARNINGS PER SHARE<br />
The calculation of basic and diluted earnings per share is based on the loss for the period attributable to shareholders of the Company<br />
and the weighted average number of shares outstanding during the year, net of treasury shares.<br />
(in JPY millions) 2009 2008<br />
Continuing<br />
operations<br />
Discontinued<br />
operations<br />
Total<br />
Continuing<br />
operations<br />
Discontinued<br />
operations<br />
Profit (loss) for the period (143,263) 11,992 (131,271) (60,074) (1,177) (61,251)<br />
Total<br />
Less share of minority interest in the profit (loss) for the<br />
period<br />
Profit (loss) for the period attributable to shareholders of<br />
the Company<br />
(15,054) (174) (15,228) (28,637) 607 (28,030)<br />
(128,209) 12,166 (116,043) (31,437) (1,784) (33,221)<br />
Issued ordinary shares at April 1, net of treasury shares 84,222,034 84,222,034 84,222,034 85,545,547 85,545,547 85,545,547<br />
Weighted effect of treasury shares<br />
Acquired during the period (381,249) (381,249) (381,249) (445,091) (445,091) (445,091)<br />
Distributed during the period 376,805 376,805 376,805 - - -<br />
Weighted average number of ordinary shares as at March<br />
31, net of treasury shares<br />
84,217,590 84,217,590 84,217,590 85,100,456 85,100,456 85,100,456<br />
Basic and diluted profit (loss) per share (in JPY) (1,522) 144 (1,378) (369) (21) (390)<br />
25. LOANS AND BORROWINGS<br />
Consolidated indebtedness outstanding consisted of borrowings under (1) senior credit facilities, (2) subordinated credit facilities, (3)<br />
term loans from non-banker lenders, (4) other secured and unsecured bank loans and (5) finance leases. At March 31, 2009, JPY<br />
129,707 million of borrowings were outstanding under the senior credit facilities compared to JPY 155,356 million at March 31, 2008.<br />
The facilities generally contain a number of financial covenants, other customary terms and conditions and/or are collaterized by<br />
certain assets of the business and shares of the subsidiaries. The subordinated debt amounted to JPY 31,217 million at March 31,<br />
2009 compared to JPY 57,572 million at March 31, 2008. The subordinated debt generally has secondary claims over the same<br />
collateral as provided for the senior credit facilities, in addition to requiring the consolidated businesses to comply with the same kind<br />
of covenants.Term loans from non-banker lenders and other secured and unsecured bank loans amounted to JPY 23,171 million at<br />
March 31, 2009 compared to JPY 9,810 million at March 31, 2008. Obligations under finance leases amounted to JPY 4,916 million at<br />
March 31, 2009 compared to JPY 5,410 million at March 31, 2008.<br />
(in JPY millions) 2009 2008<br />
Non-current Current Total Non-current Current Total<br />
Bank loans (including bank overdrafts) 75,792 85,132 160,924 184,853 28,075 212,928<br />
Finance lease liabilities 2,665 2,251 4,916 3,292 2,118 5,410<br />
Other loans and borrowings 15,320 7,851 23,171 8,624 1,186 9,810<br />
Total 93,777 95,234 189,011 196,769 31,379 228,148<br />
This note provides information about the contractual terms of the Company’s loans and borrowings. For more information about the<br />
Company’s exposure to interest rate and foreign currency risk, see note 30.<br />
76
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
The loans and borrowings are as follows:<br />
(in JPY millions) 2009 2008<br />
Non-current Current Total Non-current Current Total<br />
Asahi Tec 73,601 5,765 79,366 110,128 7,329 117,457<br />
CME 217 1,240 1,457 297 220 517<br />
HIT 2,639 68,992 71,631 73,439 137 73,576<br />
Niles 9,824 18,502 28,326 4,722 23,019 27,741<br />
Phoenix Seagaia Resort 6,411 733 7,144 7,106 671 7,777<br />
RHJI and its management companies - 2 2 3 3 6<br />
RHJ Shaklee Holding 1,085 - 1,085 1,074 - 1,074<br />
Total 93,777 95,234 189,011 196,769 31,379 228,148<br />
25.1. Bank loans<br />
25.1.1. Terms and debt repayment schedule<br />
Bank loans are payable as follows:<br />
(in JPY millions) 2009 2008<br />
Senior credit<br />
facilities<br />
Subordinated<br />
credit facilities<br />
Total<br />
Senior credit<br />
facilities<br />
Subordinated<br />
credit facilities<br />
Less than one year 60,676 24,456 85,132 28,075 - 28,075<br />
Between one and five years 68,910 6,761 75,671 75,292 27,478 102,770<br />
More than five years 121 - 121 51,989 30,094 82,083<br />
Total 129,707 31,217 160,924 155,356 57,572 212,928<br />
Total<br />
25.1.2. Asahi Tec<br />
At March 31, 2009, Asahi Tec had JPY 79,367 million in<br />
indebtedness outstanding, of which JPY 52,878 million at its US<br />
subsidiary Metaldyne. The decrease in total indebtedness by JPY<br />
38,090 million compared to March 31, 2008, mainly resulted<br />
from (a) Metaldyne’s successful tender for JPY 30,422 million,<br />
net of customer loans, (b) the cancellation of JPY 3,134 million<br />
senior subordinated notes of Metaldyne held by Chrysler and (c)<br />
the cancellation of JPY 6,082 million of preferred shares of Asahi<br />
Tec, also held by Chrysler.<br />
The bond tender was financed by a USD 50 million investment<br />
from Asahi Tec, funded by RHJI’s subscription to newly issued<br />
shares of Asahi Tec for JPY 4,917 million, increasing its<br />
ownership in Asahi Tec from 45.3% to 60.18%. In addition,<br />
certain of Metaldyne’s leading customers provided Metaldyne<br />
with USD 60 million funding for the bond tender offer, in the<br />
form of loans to Metaldyne. From the total proceeds of USD 110<br />
million, Metaldyne used USD 60.1 million to pay for the tendered<br />
bonds.<br />
Although at March 31, 2009, Metaldyne was in compliance with<br />
the financial covenants of the term, revolving and synthetic<br />
facilities, it defaulted on a payment of interest that fell due<br />
under its term loan and entered into a forbearance agreement<br />
with its lenders until May 30, 2009. Despite this forbearance<br />
agreement and Asahi Tec’s continued support and the resulting<br />
reduction of Metaldyne’s indebtedness, Metaldyne’s financial<br />
performance was heavily affected by car production in the US<br />
that continued to fall beyond expectations. Faced with its own<br />
challenges, Asahi Tec was no longer in a position to further<br />
support Metaldyne, which on May 27, 2009, filed a voluntary<br />
petition to reorganize under Chapter 11 of the U.S. Bankruptcy<br />
Code, shortly after Chrysler, one of its main customers, also<br />
filed for protection under Chapter 11.<br />
Excluding Metaldyne, Asahi Tec had JPY 26,488 million in<br />
indebtedness outstanding at March 31, 2009 compared to JPY<br />
34,929 million at March 31, 2008, the decrease mainly resulting<br />
from the above mentioned cancellation by Chrysler of preferred<br />
shares worth JPY 6,082 million. Asahi Tec’s indebtedness<br />
included (a) JPY 15,356 million senior credit facilities, (b) JPY<br />
4,000 million subordinated bank debt, (c) JPY 1,652 million<br />
leasing obligations and (d) JPY 5,203 million preferred securities<br />
classified as debt issued to former holders of Metaldyne notes.<br />
77
Excluding Metaldyne, Asahi Tec’s effective interest rates on its<br />
consolidated borrowings under its senior and subordinated<br />
credit facilities at March 31, 2008 were 2.75% and 4.66%<br />
respectively. Asahi Tec is likely to breach certain financial<br />
covenants under its credit agreements in the course of the fiscal<br />
year ending March 31, 2010. Asahi Tec is currently seeking a<br />
waiver of covenants from its lenders. In the event that Asahi Tec<br />
were not successful in obtaining such a waiver, it would be in<br />
default of its obligations under its credit agreements, which<br />
would cast significant doubt on Asahi Tec’s ability to operate as a<br />
going concern.<br />
25.1.3. HIT<br />
At March 31, 2009, HIT had outstanding indebtedness of EUR<br />
546.1 million (JPY 71,631 million) compared to EUR 467.5 million<br />
(JPY 73,576 million) at March 31, 2008. The credit facilities at<br />
March 31, 2009, included EUR 317.5 million senior and EUR 99.5<br />
million mezzanine facilities, EUR 33.4 million revolving facility<br />
and a EUR 90.8 million PIK (Payable in Kind) facility. On<br />
December 29, 2008, HIT reached several agreements in view of<br />
the liquidity shortfall that resulted from collapsing demand.<br />
HIT’s lenders agreed to a standstill, originally until March 31,<br />
2009, but extended twice. Furthermore, certain of HIT’s main<br />
customers and a key supplier provided for additional liquidity of<br />
EUR 30 million and compensation for reduced volumes. Finally,<br />
RHJI provided secured financing up to EUR 20 million, in the<br />
form of factoring -and sale and lease back arrangements.<br />
During the standstill, the Company and a committee of HIT’s<br />
senior lenders agreed to a capital restructuring proposal that<br />
was approved by HIT’s lenders on May 25, 2009 and closed in<br />
July 2009. As part of the restructuring, the Company invested<br />
EUR 50 million in exchange for a controlling 51% stake in<br />
Honsel. The remaining 49% of the group is held by Honsel’s<br />
former senior term lenders following a debt-for-equity swap,<br />
which resulted in HIT’s total outstanding secured term debt of<br />
approximately EUR 507.8 million being reduced to EUR 140<br />
million, consisting of EUR 110 million senior term loan and EUR<br />
30 million mezzanine term loan, all of which are held by<br />
Honsel’s former senior term lenders. Honsel’s existing EUR 40<br />
million revolving credit facility, as well as EUR 50 million of<br />
financing from the Company and certain of Honsel’s key<br />
customers and suppliers, remained in place.<br />
The interest rates on Honsel’s new senior term are determined<br />
as Euribor plus 5%. According to the terms of the new senior<br />
credit, Honsel must ensure that, during a period of three years<br />
after the closing date, it has hedging arrangements in place to<br />
cause at least 66 and 2/3% of the outstanding amounts under<br />
the senior debt and the Customer Financing to bear interest at a<br />
fixed or capped rate. The new mezzanine facility will pay Euribor<br />
+ 5% cash interest and 5% PIK interest. Honsel may at any time<br />
during the life of the Mezzanine Facility elect to have all interest<br />
capitalized at the end of each interest period, provided that,<br />
following the exercise of such election by the Company, interest<br />
shall accrue at a fixed rate of 16.00% PIK per annum.<br />
25.1.4. Niles<br />
At March 31, 2009, Niles had JPY 28,326 million of indebtedness<br />
outstanding on a consolidated basis, compared to JPY 27,741<br />
million a year earlier. The credit facilities included senior term<br />
loans (JPY 10,455 million), revolving loans (JPY 7,997 million), an<br />
unsecured bullet loan (JPY 2,167 million), finance leases (JPY<br />
2,245 million), a bullet loan secured by a cash deposit from RHJI<br />
(JPY 2,500 million) and non-bank debt from a major stakeholder<br />
(JPY 2,500 million).<br />
On May 20, 2009, Niles bolstered its capital structure through a<br />
total capital injection of JPY 6,000 million of which JPY 3,500<br />
million was provided by the Company and JPY 2,500 million by<br />
the major stakeholder that had provided financing of JPY 2,500<br />
million previously. Part of the proceeds was used to repay JPY<br />
2,500 million of short-term debt that was secured by a cash<br />
deposit from RHJI, and the major stakeholder’s loan of JPY<br />
2,500 million. Furthermore, syndicate lenders agreed on a<br />
refinancing of the existing debt structure, of which JPY 7,566<br />
million was outstanding at March 31, 2009, with new bullet loans<br />
maturing in June 2011.<br />
At March 31, 2009, the effective interest rate on Niles' senior<br />
credit facilities amounted to 3.03%.<br />
25.1.5. Phoenix Seagaia Resort<br />
On September 29, 2008, Phoenix Seagaia Resort entered into an<br />
agreement with its lenders to amend certain terms and<br />
conditions of its existing credit facility of JPY 7,508 million. The<br />
term of the amended loan is 3 years. The amendment provides<br />
for quarterly repayments of JPY 195 million and a bullet<br />
payment of JPY 5,497 million on September 30, 2011. In addition<br />
to this amended loan agreement, the Company extended the<br />
revolving credit facility from JPY 500 million to JPY 1,000 million<br />
until September 30, 2011. The outstanding balance of this intragroup<br />
loan at March 31, 2009 amounted to JPY 400 million. The<br />
Company guarantees the quarterly repayments and the total<br />
interest up to an aggregate amount of JPY 3,400 million. The<br />
interest rate is based on the three month Libor plus a margin<br />
ranging from 260 to 410 basis points, depending on the level of<br />
reported EBITDA. At March 31, 2009, Phoenix Seagaia Resort<br />
had already repaid JPY 390 million of the guaranteed principal,<br />
and had outstanding financial indebtedness of JPY 7,144 million,<br />
compared to JPY 7,777 at March 31, 2008.<br />
The effective interest rate on Phoenix Seagaia Resort's credit<br />
facility was 5.04% at March 31, 2009.<br />
78
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
25.2. Finance lease liabilities<br />
Finance leases are payable as follows:<br />
(in JPY millions) 2009 2008<br />
Note<br />
Minimum<br />
lease<br />
payments<br />
Under the terms of the lease agreements, no contingent rents are payable.<br />
Interest<br />
Principal<br />
Minimum<br />
lease<br />
payments<br />
Interest<br />
Principal<br />
Less than one year 2,340 89 2,251 2,249 131 2,118<br />
Between one and five years 2,662 87 2,575 3,206 123 3,083<br />
More than five years 92 2 90 213 4 209<br />
Total 30 5,094 178 4,916 5,668 258 5,410<br />
25.3. Other loans and borrowings<br />
Other loans and borrowings are payable as follows:<br />
(in JPY millions) 2009 2008<br />
Non-bank debt is broken down as follows :<br />
Non-bank<br />
debts<br />
Others<br />
Total<br />
Non-bank<br />
debts<br />
Less than one year 2,798 5,053 7,851 282 904 1,186<br />
Between one and five years 2,691 1,486 4,177 120 (1,423) (1,303)<br />
More than five years 11,143 - 11,143 10,517 (590) 9,927<br />
Total 16,632 6,539 23,171 10,919 (1,109) 9,810<br />
(in JPY millions) 2009 2008<br />
Loans from customers 11,038 -<br />
Preferred shares 5,203 10,487<br />
Others 391 432<br />
Total 16,632 10,919<br />
Others<br />
Total<br />
25.4. Collateralized assets<br />
Various credit facilities are secured by asset collateral. The carrying value as at March 31, 2009 and 2008 of collateralized assets is as follows:<br />
(in JPY millions) 2009 2008<br />
Non-current Current Total Non-current Current Total<br />
Asahi Tec 43,260 23,503 66,763 79,149 36,597 115,746<br />
CME - - - - 45 45<br />
HIT 56,340 11,886 68,226 51,806 30,674 82,480<br />
Niles 10,220 3,224 13,444 10,615 5,479 16,094<br />
Phoenix Seagaia Resort 10,349 226 10,575 10,764 291 11,055<br />
Total 120,169 38,839 159,008 152,334 73,086 225,420<br />
The decrease of assets that have been collateralized mainly resulted from the foreign exchange impact of JPY 12,838 million and the<br />
debt extinguishment at Metaldyne of JPY 38,966 million.<br />
79
The outstanding borrowings at March 31, 2009 and 2008, for<br />
which these assets have been collateralized are as follows :<br />
(in JPY millions) 2009 2008<br />
Asahi Tec 62,442 104,054<br />
HIT 64,513 77,265<br />
Niles 14,575 14,197<br />
Phoenix Seagaia Resort 7,144 7,777<br />
Total 148,674 203,293<br />
RHJI has pledged certain of its shares in certain businesses as<br />
collateral for these businesses’ respective senior credit<br />
facilities. The following shareholdings (presented as a<br />
percentage of RHJI’s ownership) were pledged as at March 31,<br />
2009 and March 31, 2008 :<br />
Pledge shareholdings 2009 2008<br />
Asahi Tec 100.0% 98.7%<br />
HIT 100.0% 100.0%<br />
Phoenix Seagaia Resort 100.0% 100.0%<br />
Shaklee 25.1% 25.1%<br />
26. EMPLOYEE BENEFITS<br />
26.1. Defined contribution plans<br />
The consolidated businesses have various defined contribution<br />
plans and the expenses recognized during the fiscal year ended<br />
March 31, 2009 are as follows :<br />
(in JPY millions) 2009 2008<br />
Asahi Tec 686 1,666<br />
CME 91 106<br />
Niles 270 268<br />
Corporate headquarters 22 -<br />
Total 1,069 2,040<br />
The expense is recognized in the following line items in the<br />
income statement :<br />
(in JPY millions) 2009 2008<br />
Cost of sales 779 1,612<br />
Selling, general and administrative<br />
expenses<br />
290 428<br />
Total 1,069 2,040<br />
26.2. Defined benefit obligations and<br />
other post-retirement obligations<br />
26.2.1. Liability for defined benefit obligations and<br />
other post-retirement obligations<br />
The consolidated businesses have various plans for providing<br />
benefits to retired employees, including defined benefit and<br />
defined contribution pension and retirement plans.<br />
(in JPY millions) 2009 2008<br />
Present value of unfunded obligations 18,024 20,728<br />
Present value of funded obligations 42,804 47,355<br />
Total present value of obligations 60,828 68,083<br />
Fair value of plan assets (27,527) (35,276)<br />
Actuarial gains losses (3,690) 1,630<br />
Recognized liability for defined<br />
benefit obligations<br />
29,611 34,437<br />
Total employee benefits 29,611 34,437<br />
The Company contributes to different defined benefit plans that<br />
provide pension and medical benefits for employees upon<br />
retirement. These plans entitle a retired employee to receive a<br />
portion of his final salary for each year of service and to the<br />
reimbursement of certain medical costs.<br />
80
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
26.2.2.Present value of the defined benefit<br />
obligations<br />
The movement of the present value is as follows:<br />
(in JPY millions) 2009 2008<br />
Opening balance 68,083 88,134<br />
Actuarial gains (6,359) (3,216)<br />
Current service costs and interest 3,970 4,330<br />
Benefits paid by the plans (3,200) (3,757)<br />
Effect of exchange rates (1,671) (6,690)<br />
Plan participants' contributions (1,077) (1,084)<br />
Exit from consolidation scope - (5,977)<br />
Reclassification to held for sale - (2,249)<br />
Others 1,082 (1,408)<br />
Closing balance 60,828 68,083<br />
26.2.3. Plan assets<br />
26.2.3.1. Present value of plan assets<br />
The plan assets comprise :<br />
(in JPY millions) 2009 2008<br />
Equity securities 13,230 20,689<br />
Government bonds 6,679 10,468<br />
Cash 3,639 1,920<br />
Corporate bonds 2,997 794<br />
Insurance contracts 982 1,073<br />
Others - 332<br />
Total 27,527 35,276<br />
26.2.4. Expense recognized in profit or loss<br />
(in JPY millions) 2009 2008<br />
Current service cost 1,118 1,380<br />
Interest on obligation 2,852 3,328<br />
Expected return on plan assets (2,421) (2,859)<br />
Others 399 (746)<br />
Total 1,948 1,103<br />
The expense is recognized in the following line items in the<br />
income statement<br />
(in JPY millions) 2009 2008<br />
Cost of sales 1,275 725<br />
Selling, general and administrative<br />
expenses<br />
673 378<br />
Total 1,948 1,103<br />
26.2.5. Principal actuarial assumptions at March 31<br />
The weighted average rates utilized for the benefit obligations<br />
are as follows:<br />
2009 2008<br />
Discount rate 4.1 % 4.3 %<br />
Expected return on plan assets 3.3 % 3.8 %<br />
Future salary increases 2.7 % 2.6 %<br />
26.2.3.2. Movement of plan assets<br />
(in JPY millions) 2009 2008<br />
Opening balance 35,276 44,330<br />
Expected return on plan assets (2,421) (2,859)<br />
Benefits paid by the plans (3,200) (3,757)<br />
Actuarial (gains) losses (1,969) 1,005<br />
Contributions paid into the plans 2,154 2,336<br />
Effect of exchange rates (849) (4,236)<br />
Exit from consolidation scope - (1,284)<br />
Others (1,464) (259)<br />
Closing balance 27,527 35,276<br />
81
26.2.6. Historical information<br />
(in JPY millions) 2009 2008 2007 2006<br />
Present value of the defined benefit obligation 60,828 68,083 88,134 44,996<br />
Fair value of plan assets (27,527) (35,276) (44,330) (15,571)<br />
Deficit in the plan 33,301 32,807 43,804 29,425<br />
Experience adjustments arising on plan liabilities 91 (104) (25) 293<br />
Experience adjustments arising on plan assets (210) (124) (173) 323<br />
The Company expects JPY 2,089 million in contribution to be paid to the funded defined benefit plans and JPY 2,499 million of benefits<br />
to be paid for the unfunded plans during the fiscal year ending March 31, 2010.<br />
27. SHARE BASED PAYMENTS<br />
27.1. RHJ International<br />
At March 31, 2005, a significant shareholder of RHJI granted<br />
2,018,030 shares of RHJI to certain members of the Company’s<br />
management and other employees. IFRS 2 was applied to<br />
1,198,086 shares as they were granted as consideration for<br />
future services. These shares vest over 5 years and are subject<br />
to a 5 year lock-up. In accordance with IFRS 2, the fair values of<br />
the stock options and the shares granted as consideration for<br />
future services have been determined at the date they have been<br />
granted and recognized as employee expenses over the period in<br />
which they will be earned. At March 31, 2009, 144,447 share<br />
grants were outstanding, of which 28,890 were unvested.<br />
On October 1, 2007, the Board of Directors approved a long-term<br />
share-based incentive plan. The purpose of the plan is to serve<br />
the interests of RHJI and its affiliates by attracting and retaining<br />
exceptional employees, consultants and independent<br />
contractors, aligning their interests with the interests of RHJI’s<br />
shareholders and reinforcing the creation of long-term value.<br />
Awards under the plan are made in the form of restricted stock<br />
units (“RSU”), which shall be vested at such times, in such<br />
manner and subject to such terms and conditions contained in<br />
the relevant award agreement. For each RSU which vests, the<br />
participant shall receive one share of RHJI or, in the sole and<br />
plenary discretion of the Board, a cash amount equal to the fair<br />
market value of such share as of the vesting date. During the<br />
fiscal year ended March 31, 2008, 1,174,277 RSU’s were granted,<br />
of which 513,333 to the Company’s Chief Executive Officer, Mr.<br />
Fischer. 512,744 of the awarded RSU’s vest linearly over a period<br />
of 4 years. Following a decision by the Board of Directors on<br />
October 22, 2008, the vesting of Mr. Fischer's 513,333 restricted<br />
stock units, was accelerated, subject to a lock-up that restricts<br />
the transfer of the shares for a four-year period. On September<br />
16, 2008, the Company also granted 90,000 RHJI shares to Mr.<br />
Fischer, free and clear of any restrictions.<br />
The fair value of the share grants and the RSU’s at the date of<br />
grant, has been determined using the Finnerty model, reflecting<br />
an illiquidity discount resulting from the transfer restrictions<br />
following provisions of certain lock-up agreements. The total<br />
fair value of the share grants and the RSU’s was calculated,<br />
using a share volatility of approximately 27% and risk free<br />
interest rates based on the EUR swap rates ranging from 3.29%<br />
to 5.1%, depending on the lifetime of the different grants.<br />
Calculated fair value of the share grants and the RSU’s<br />
amounted to JPY 1,873 million and JPY 1,770 million,<br />
respectively. Expense recognized during the fiscal year ended<br />
March 31, 2009 for the share grants and the RSU’s amounted to<br />
JPY 979 million.<br />
82
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
27.2. Consolidated subsidiaries<br />
Certain consolidated businesses have stock option plans for directors and employees. The stock options are subject to vesting over 1<br />
to 8 years and have a life-time of up to 10 years.<br />
Asahi Tec<br />
Outstanding<br />
at April 1,<br />
2008<br />
Granted<br />
during the<br />
year<br />
Forfeited<br />
during the<br />
year<br />
Exercised<br />
during the<br />
year<br />
Transferred<br />
to held<br />
for sale<br />
Effect of<br />
foreign<br />
exchange<br />
Outstanding<br />
at March 31,<br />
2009<br />
Exercisable<br />
at March 31,<br />
2009<br />
Weighted average exercise price (in JPY) 226 - 265 - - - 218 202<br />
Number of options 6,084,742 - (1,053,691) - - - 5,031,051 2,959,381<br />
Fair value amount (in JPY millions) 1,230 - (222) - - - 1,008 629<br />
CME<br />
Weighted average exercise price (in JPY) 112 74 117 - - - 112 112<br />
Number of options 10,580,000 50,000 (150,000) - - - 10,480,000 8,828,000<br />
Fair value amount (in JPY millions) 714 2 (8) - - - 708 628<br />
HIT<br />
Weighted average exercise price (in JPY) 1,573 - - - - (262) 1,311 1,311<br />
Number of options 733,001 - - - - - 733,001 417,800<br />
Fair value amount (in JPY millions) 1,153 - - - - (192) 961 548<br />
Niles<br />
Weighted average exercise price (in JPY) 419 - 423 186 - - 429 429<br />
Number of options 1,461,050 - (198,700) (55,000) - - 1,207,350 1,207,350<br />
Fair value amount (in JPY millions) 162 - (21) 0 - - 141 141<br />
Phoenix Seagaia Resort<br />
Weighted average exercise price (in JPY) 155,794 - - - - - 155,794 155,794<br />
Number of options 3,961 - - - - - 3,961 3,961<br />
Fair value amount (in JPY millions) - - - - - - - -<br />
Fair values and recognized expense with respect to stock options and shares granted are as follows:<br />
(in JPY millions) 2009 2008<br />
Asahi Tec 95 194<br />
CME 35 60<br />
HIT - 76<br />
Niles - 7<br />
Total 130 337<br />
The fair value of granted stock options was calculated using the Black-Scholes-Merton method. The following indicates the range of<br />
assumptions used for the different stock options granted:<br />
83
2009 2008<br />
From To From To<br />
Share volatility 30.0 % 64.0 % 41.0 % 64.0 %<br />
Risk free interest rate 0.3 % 1.9 % 0.3 % 4.5 %<br />
Forfeiture rate 0.0 % 52.0 % 0.0 % 14.7 %<br />
Life-time 50.0 % 100.0 % 50.0 % 100.0 %<br />
Dividend yield 0.0 % 0.0 % 0.0 % 0.0 %<br />
28. PROVISIONS<br />
28.1. Details of provisions<br />
(in JPY millions) 2009 2008<br />
Non-current Current Total Non-current Current Total<br />
Restructuring - 4,123 4,123 8 1,511 1,519<br />
Warranties 45 749 794 52 854 906<br />
Onerous contracts 103 120 223 216 310 526<br />
Environment 482 - 482 384 6 390<br />
Taxation claims - 74 74 - 19 19<br />
Others<br />
Early retirement obligations 835 278 1,113 967 322 1,289<br />
Long-term service award accrual 739 - 739 762 24 786<br />
Union contract related compensation 276 - 276 736 - 736<br />
Others 231 485 716 277 565 842<br />
Total 2,711 5,829 8,540 3,402 3,611 7,013<br />
28.2. Movement of provisions<br />
(in JPY millions) 2009 2008<br />
Opening balance 7,013 8,867<br />
Made during the period 6,106 4,056<br />
Used during the period (2,787) (2,200)<br />
Reversed during the period (765) (2,158)<br />
Transfer to liabilities held for sale or discontinued operations - (1,151)<br />
Effect of exchange rates (1,027) (401)<br />
Closing balance 8,540 7,013<br />
84
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
29. TRADE AND OTHER PAYABLES<br />
(in JPY millions) 2009 2008<br />
Non-current 1,040 1,776<br />
Current<br />
Trade payables<br />
Suppliers 33,665 68,456<br />
Accrued expenses 5,739 3,810<br />
Advances received 4,084 2,541<br />
Other payables<br />
Remuneration, social security and pension 5,815 9,059<br />
Accrued interests 4,349 3,418<br />
Acquisition of property, plant and equipment 1,778 3,444<br />
Accrued royalties 1,453 2,600<br />
Derivatives used for hedging 1,028 502<br />
Wage tax payables and VAT 624 611<br />
Allowance for sales return 547 607<br />
Reserve for loss contracts 209 187<br />
Others 2,417 2,301<br />
Total 62,748 99,312<br />
The Company’s exposure to credit, currency and interest rate risks related to trade and other payables is disclosed in note 30.<br />
85
30. FINANCIAL RISK MANAGEMENT AND RELATED INSTRUMENTS<br />
Exposures to a variety of financial risks and market risks arise in the normal course of the Company’s business. As a diversified<br />
holding company, the Company faces a combination of risks resulting from the commercial activities of its portfolio holdings and<br />
specific risks as a diversified holding company. The portfolio holdings are exposed to risks related to the level of indebtedness such as<br />
liquidity and interest rate risk and risks inherent to the nature of their commercial activities such as credit risk and foreign currency<br />
exchange risk. As a holding Company, RHJI is further exposed to risks associated with general, economic and market conditions, such<br />
as the risk of fluctuating interest rates and currency exchange rates, liquidity risk and risks related to the stock market, all of which<br />
may have a significant effect on the value of the Company’s assets.<br />
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.<br />
For purposes of managing the risks associated with the Company’s portfolio holdings, the Company generally relies on the individual<br />
businesses’ risk assessment and monitoring programs to manage the exposure to these and other risks. These programs have been<br />
designed based on the specific nature and size of the individual businesses’ activity. While the Company monitors these programs and<br />
attempts to mitigate the negative effects from any of these risks through its representation on the businesses’ Boards of Directors<br />
and through the implementation of certain reporting mechanisms, the Company may face negative consequences from inadequate<br />
risk assessment and ineffective control systems of risk detection and prevention at the level of each of the individual businesses.<br />
This note presents information about the Company’s exposure to each of the above risks.<br />
30.1.Credit risk<br />
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its<br />
contractual obligations, and arises principally from the Company’s trade receivables.<br />
30.1.1. Trade receivables<br />
The Company’s credit risk is primarily attributable to its trade receivables. The Company’s exposure to credit risk is influenced mainly<br />
by the individual characteristics of each customer. The demographics of the Company’s customer base, including the default risk of<br />
the industry and country in which customers operate, has less of an influence on credit risk.<br />
The amounts presented on the balance sheet are the amounts, net of allowances for doubtful accounts, estimated by the management<br />
of the respective consolidated businesses based on the prior credit loss experience and the current economic environment.<br />
The Company’s largest customers accounted for approximately 21% and 24% of trade accounts receivables as of March 31, 2009 and<br />
2008, respectively. At March 31, 2009 and 2008 respectively, the largest customer of the Company accounted for approximately 7 %<br />
and 9% of total trade receivables.<br />
The table below shows the outstanding balance of and revenue from the five major customers as of and for the fiscal year ended<br />
March 31,<br />
(in JPY millions) 2009 2008<br />
Rating Balance Revenue Rating Balance Revenue<br />
Nissan Motor Co BBB 2,510 23,507 BBB + 6,461 29,053<br />
Mitsubishi Fuso Truck and Bus Corporation<br />
(1)<br />
1,428 29,702<br />
(1)<br />
3,768 35,246<br />
Chrysler CC 1,141 22,582 CC 992 37,331<br />
Ford CCC - 981 24,477 B 1,104 33,171<br />
ZF Group<br />
(1)<br />
906 20,916<br />
(1)<br />
1,258 30,585<br />
(1) No rating available<br />
86
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
As of March 31, 2009, the total trade and other receivables and revenue for the top 5 customers are broken down by subsidiary as<br />
follows:<br />
(in JPY millions) 2009<br />
(1) Not applicable<br />
Trade and<br />
other<br />
receivables<br />
Top 5<br />
customers<br />
balance<br />
In % Revenue Top 5<br />
customers<br />
revenue<br />
Asahi Tec 19,843 6,258 31.5% 218,815 123,413 56.4%<br />
CME 3,348 846 25.3% 18,170 5,283 29.1%<br />
HIT 6,043 1,871 31.0% 102,527 38,642 37.7%<br />
Niles 5,793 3,387 58.5% 45,444 34,829 76.6%<br />
Phoenix Seagaia Resort 735 193 26.3% 12,327 1,448 11.7%<br />
Total portfolio companies 35,762 12,555 35.1% 397,283 203,615 51.3%<br />
Corporate headquarters 1,746<br />
(1) (1)<br />
17<br />
(1) (1)<br />
Total 37,508 12,555 33.5% 397,300 203,615 51.2%<br />
In %<br />
30.1.2. Global exposure to credit risk<br />
RHJI’s functional currency is the Japanese Yen cash and cash equivalents are maintained in EUR, USD and JPY, and invested primarily<br />
in time deposits, certificates of deposits, direct obligations of the US Treasury and European Zone Government securities for which the<br />
RHJI has defined minimum ratings in order to preserve capital and maintain liquidity.<br />
The credit risk on derivative financial instruments is limited because the counterparties to the derivatives are major international<br />
financial institutions with high credit ratings assigned by international credit rating agencies.<br />
The carrying amount of financial assets represents the maximum credit exposure of the Company. The carrying amount is presented<br />
net of impairment losses recognized. The table below shows the maximum exposure to credit risk at balance sheet date:<br />
(in JPY millions) 2009 2008<br />
Non-current<br />
Gross<br />
Impairment<br />
Net carrying<br />
amount<br />
Gross<br />
Impairment<br />
Net carrying<br />
amount<br />
Available for sale financial assets 5,636 - 5,636 19,654 - 19,654<br />
Held-to-maturity investments - - - - - -<br />
Other financial investments 1,990 (1,258) 732 2,102 - 2,102<br />
Trade and other receivables 3,062 (700) 2,362 1,808 (216) 1,592<br />
Cash guarantees and deposits 104 - 104 104 - 104<br />
Hedging instruments 117 - 117 141 - 141<br />
10,909 (1,958) 8,951 23,809 (216) 23,593<br />
Current<br />
Available for sale financial assets 45 - 45 284 - 284<br />
Other financial investments 402 - 402 286 - 286<br />
Trade and other receivables 37,889 (381) 37,508 74,460 (372) 74,088<br />
Hedging instruments 8 - 8 266 - 266<br />
Cash and cash equivalents 72,336 - 72,336 72,523 - 72,523<br />
110,680 (381) 110,299 147,819 (372) 147,447<br />
Total 121,589 (2,339) 119,250 171,628 (588) 171,040<br />
87
The maximum exposure to credit risk for current trade and other receivables at March 31, 2009 by geographic region was:<br />
(in JPY millions) 2009<br />
Japan 16,840<br />
Europe 9,108<br />
Americas 9,481<br />
Asia 2,064<br />
Others 15<br />
Total 37,508<br />
The maximum exposure to credit risk for current trade and other receivables at March 31, 2009 by type of counterparty was:<br />
(in JPY millions) 2009<br />
OEM 28,361<br />
End-user customers 3,952<br />
Wholesale customers 3,446<br />
Others 1,749<br />
Total 37,508<br />
30.1.3. Impairment losses<br />
An allowance for impairment is established when there is objective evidence that the group will not be able to collect all amounts due<br />
according to the original terms of the receivables. The allowances for doubtful accounts are estimated by the management of the<br />
respective consolidated businesses based on the prior credit loss experience and the current economic environment.<br />
The allowance for impairment recognized during the period per classes of financial assets was as follows:<br />
(in JPY millions) 2009 2008<br />
Trade<br />
receivable<br />
and<br />
prepayments<br />
Other<br />
receivable<br />
Other<br />
financial<br />
assets<br />
Total<br />
Trade<br />
receivable<br />
and<br />
prepayments<br />
Other<br />
receivable<br />
Opening balance (588) - - (588) (1,974) (1) (1,975)<br />
Impairment losses (259) (331) (1,258) (1,848) (51) - (51)<br />
Reversal of write-off on doubtful accounts 29 - - 29 639 - 639<br />
Derecognition 47 - - 47 19 1 20<br />
Collection from customers - - - - 95 - 95<br />
Effect of movement in exchange rates 21 - - 21 - - -<br />
Transfer to assets held for sale or<br />
discontinued operations<br />
Total<br />
- - - - 684 - 684<br />
Closing balance (750) (331) (1,258) (2,339) (588) - (588)<br />
The aging of current trade and other receivables at March 31, 2009 was:<br />
(in JPY millions) 2009<br />
Not past due 34,348<br />
Past due 0 - 30 days 1,921<br />
Past due 31 - 120 days 805<br />
Past due 121 - 365 days 289<br />
Past due more than 1 year 145<br />
Total 37,508<br />
88
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
30.2. Liquidity risk<br />
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to<br />
managing liquidity is to ensure, as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both<br />
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.<br />
The contractual maturities of non-derivative financial liabilities, and related derivative financial assets and liabilities are as follows<br />
(interest included):<br />
(in JPY millions) 2009 2008<br />
Non-derivative financial liabilities<br />
Contractual<br />
cash-flows<br />
Less than<br />
one<br />
year<br />
Between<br />
one and five<br />
years<br />
More than<br />
five<br />
years<br />
Contractual<br />
cash-flows<br />
Less than<br />
one<br />
year<br />
Between<br />
one and five<br />
years<br />
More than<br />
five<br />
years<br />
Bank loans (231,815) (31,121) (163,034) (37,660) (209,754) (28,653) (100,184) (80,917)<br />
Finance lease liabilities (5,094) (2,340) (2,662) (92) (5,668) (2,249) (3,206) (213)<br />
Other loans (12,021) (2,947) (3,845) (5,229) (2,434) (544) (1,860) (30)<br />
Trade and other payables (65,002) (61,708) (2,505) (790) (99,312) (97,536) (1,252) (524)<br />
Derivative financial liabilities<br />
Foreign exchange derivatives<br />
(313,933) (98,116) (172,046) (43,771) (317,168) (129,982) (106,502) (81,684)<br />
Inflow - - - - 12 12 - -<br />
Outflow - - - - (9) (9) - -<br />
Interest rate derivatives<br />
Inflow 286 286 - - - - - -<br />
Outflow (735) (735) - - - - - -<br />
Commodity derivatives<br />
Inflow 8 8 - - - - - -<br />
Outflow (142) (142) - - - - - -<br />
(583) (583) - - 3 3 - -<br />
Total (314,516) (98,699) (172,046) (43,771) (317,165) (128,979) (106,502) (81,684)<br />
At March 31, 2009, RHJI had JPY 58,726 million available to pursue its business strategy and had no indebtedness at the parent<br />
company level. RHJI’s businesses have access to financing by obtaining credit lines on their own merits. Except for a guarantee of up<br />
to JPY 3,400 million certain pledges of shares as disclosed in note 25 to the consolidated financial statements and a commitment of<br />
JPY 1,300 million (EUR 10 million) to fund a backstop facility to the benefit of Honsel, the businesses and their lenders generally do not<br />
benefit from any guarantee from RHJI.<br />
89
30.3. Market risk<br />
The Company’s overall risk management policy focuses on the unpredictability of financial markets and seeks to minimize potential<br />
adverse effects on the Company’s financial performance. Derivative financial instruments can be used to hedge exposure to<br />
fluctuations in foreign exchange rates, commodity prices and interest rates.<br />
The following table provides an overview of the derivative financial instruments outstanding at year-end by maturity bucket. The<br />
amounts included in this table are the notional amounts:<br />
(in JPY millions) 2009 2008<br />
Foreign currency<br />
Less than<br />
one<br />
year<br />
Between<br />
one and five<br />
years<br />
More than<br />
five<br />
years<br />
Less than<br />
one<br />
year<br />
Between<br />
one and five<br />
years<br />
More than<br />
five<br />
years<br />
Forward exchange contracts 1,973 250 - 7,160 - -<br />
Interest rate<br />
Interest rate swap 10,756 - - 698 20,023 -<br />
Purchased caps 19,741 - - - 23,684 -<br />
Commodities<br />
Forward purchase contracts for<br />
aluminum<br />
946 - - 3,360 - -<br />
Forward sales contracts for aluminum - - - - - -<br />
Total 33,416 250 - 11,218 43,707 -<br />
30.3.1. Commodity risk<br />
Certain consolidated businesses procure raw materials, most significantly aluminum, through a combination of contract<br />
commitments and spot market purchases. They are exposed to commodity risk, which is moderated through the use of customer<br />
contracts that typically provide for sales price adjustments related to changes in the cost of light metal alloys. For HIT primarily, the<br />
selling prices are however only adjusted periodically and as a result, HIT is exposed to changes in aluminum prices within the<br />
contracts’ price indexation periods. Accordingly, HIT hedges a significant portion of its aluminum purchases by entering into forward<br />
purchase and sales contracts on the London Metal Exchange. As of March 31, 2009, HIT had forward purchase contracts for notional<br />
amounts of JPY 946 million. The corresponding fair values of these contracts, designated as cash flow hedges for which hedge<br />
accounting is applied, amounted - JPY 134 million. As of March 31, 2008, HIT had forward purchase contracts for notional amounts of<br />
JPY 3,360 million. The corresponding fair values of these contracts, designated as cash flow hedges for which hedge accounting is<br />
applied, amounted JPY 135 million.<br />
30.3.2. Interest rate risk<br />
The Company is exposed to changes in interest rates primarily as a result of the borrowing activities of its consolidated businesses,<br />
which include borrowings used to maintain liquidity and to fund business operations and acquisitions. These borrowings consist<br />
primarily of floating rate debt. The Company intends to maintain a balanced mix of fixed and floating rate borrowings, and accordingly<br />
has entered into derivative transactions to manage the exposure associated with the floating rate borrowings. All the derivative<br />
transactions, JPY 30,497 million in aggregate at March 31, 2009, compared to JPY 44,405 million at March 31, 2008, are accounted for<br />
as cash flow hedges with a fair value of - JPY 449 million.<br />
90
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
30.3.2.1. Effective interest and maturity schedule<br />
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective<br />
interest rates at the balance sheet date and the periods in which they reprice.<br />
(in JPY millions) Currency Less than<br />
one<br />
year<br />
Cash and cash equivalents<br />
Between<br />
one and five<br />
years<br />
More than<br />
five<br />
years<br />
Total<br />
Weighted<br />
average<br />
interest rate<br />
EUR 45,500 - - 45,500 0.4 %<br />
JPY 17,446 - - 17,446 0.0 %<br />
USD 7,626 - - 7,626 0.2 %<br />
OTHERS 1,763 - - 1,763 0.1 %<br />
72,335 - - 72,335<br />
Finance leases<br />
EUR (46) - - (46) 0.0 %<br />
JPY (2,037) (2,115) (90) (4,242) 2.1 %<br />
USD - (444) - (444) 8.8 %<br />
OTHERS (168) (16) - (184) 10.0 %<br />
(2,251) (2,575) (90) (4,916)<br />
Senior debt<br />
Secured<br />
Term<br />
Fixed rate USD (13) (16) - (29) 9.5 %<br />
Variable rate EUR (40,057) - - (40,057) 7.2 %<br />
JPY (2,237) (8,248) - (10,485) 4.2 %<br />
USD (24) (43,086) - (43,110) 8.4 %<br />
OTHERS (114) (1,974) (121) (2,209) 5.6 %<br />
Revolver<br />
Fixed rate JPY (229) - - (229) 2.5 %<br />
Variable rate JPY (8,265) - - (8,265) 3.8 %<br />
USD (383) - - (383) 9.3 %<br />
OTHERS (489) - - (489) 5.1 %<br />
Bullet<br />
Variable rate JPY (733) (14,229) - (14,962) 4.8 %<br />
Unsecured<br />
Term<br />
Fixed rate JPY (724) (1,116) - (1,840) 3.3 %<br />
Variable rate JPY (240) (94) - (334) 3.6 %<br />
OTHERS (83) - - (83) 4.5 %<br />
Revolver<br />
Variable rate JPY (2,821) - - (2,821) 2.7 %<br />
Bullet<br />
Fixed rate JPY (1,100) - - (1,100) 4.5 %<br />
Variable rate JPY (3,164) - - (3,164) 2.6 %<br />
Other<br />
Fixed rate USD - (147) - (147) 11.0 %<br />
(60,676) (68,910) (121) (129,707)<br />
Subordinated debt<br />
Secured<br />
EUR (24,456) - - (24,456) 12.0 %<br />
JPY - (4,000) - (4,000) 5.7 %<br />
Unsecured<br />
USD - (2,761) - (2,761) 12.0 %<br />
(24,456) (6,761) - (31,217)<br />
Others EUR (4,380) (2,623) - (7,003) 7.3 %<br />
JPY (3,063) (469) (5,228) (8,760) 7.2 %<br />
USD - (1,085) (5,915) (7,000) 5.5 %<br />
OTHERS (408) - - (408) 8.1 %<br />
(7,851) (4,177) (11,143) (23,171)<br />
Total (22,899) (82,423) (11,354) (116,676)<br />
30.3.2.2. Sensitivity analysis<br />
An increase (decrease) of the interest rate by 1% on the loans and borrowings would have increased (decreased) the interest expense<br />
by JPY 3,030 million and JPY 2,430 million for the fiscal years ended March 31, 2009 and 2008, respectively.<br />
This analysis assumed that all other variables, in particular currency exchange rates, remain constant.<br />
91
30.3.3. Foreign currency risk<br />
The Company is exposed to market risk from changes in currency exchanges that could impact the results of operations and the<br />
financial position. The Company is exposed to both translation as well as transaction risk. The translation risk is the risk that the<br />
consolidated financial statements are affected by changes in the prevailing exchange rates of the various currencies of the businesses<br />
or their subsidiaries relative to the Japanese Yen. Transaction risk is the risk that the currency structure of the costs and liabilities<br />
deviates to some extent from the currency structure of the sales proceeds and assets.<br />
Beside the translation and transaction risk arising from changes in currency exchange rates described above, RHJI’s Euro<br />
denominated share price is exposed to changes in the exchange rate between the EUR and the JPY as a significant portion of the<br />
Company’s assets is located in Japan and have book values denominated in JPY. The Company does not hedge this exposure. RHJI’s<br />
functional currency is the JPY. Cash and cash equivalents are maintained in EUR, USD and JPY.<br />
The functional currency of the five consolidated businesses headquartered in Japan is the JPY. The EUR is the functional currency for<br />
HIT. Companies that transact a material amount of business and have material assets and liabilities in currencies other than their<br />
functional currency include Asahi Tec through its acquisition of Metaldyne (USD), HIT (USD, Brazilian Real and Mexican Peso) and<br />
Niles (USD). These companies manage their exposures through normal operating and financing activities and, when appropriate, use<br />
forward foreign exchange contracts. Derivative financial instruments are not used for speculative purposes, and are accounted for as<br />
cash flow hedges. The total notional amount and fair value of cash flow hedges at March 31, 2009 was JPY 2,223 million and JPY 236<br />
million, respectively.<br />
A strengthening of JPY against USD and EUR at March 31, 2009, of respectively 28.2% and 22.4% based on the historical volatility of<br />
those currencies against JPY would have increased (decreased) equity and profit or loss by the amounts shown below. The historical<br />
volatility was calculated as 95% of the daily standard deviation over the two years ended March 31, 2009. This analysis assumed that<br />
all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for fiscal year ended<br />
March 31, 2008.<br />
A weakening of the JPY against the USD and the EUR would have had the equal but opposite effect on the amounts shown below.<br />
(in JPY millions) 2009 2008<br />
Equity<br />
Profit or<br />
(Loss)<br />
Equity<br />
Profit or<br />
(Loss)<br />
USD 2,557 4,746 (2,502) 9,125<br />
EUR 9,893 15,160 (3,548) 2,391<br />
92
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
30.3.4. Fair values<br />
30.3.4.1. Comparison of fair values and carrying amounts<br />
The fair values together with the carrying amounts shown in the balance sheet are as follows:<br />
(In JPY millions) 2009 2008<br />
Carrying<br />
amount<br />
Fair<br />
value<br />
Carrying<br />
amount<br />
Available for sale financial assets 5,681 5,681 19,938 19,938<br />
Held-to-maturity investments - - - -<br />
Other financial assets 1,134 1,134 3,390 3,390<br />
Trade and other receivables 39,869 39,869 74,088 74,088<br />
Cash and cash equivalents 72,336 72,336 72,523 72,523<br />
Interest rate swaps:<br />
Assets - - - -<br />
Liabilities (449) (449) (15) (15)<br />
Forward exchange contracts:<br />
Assets 8 8 406 406<br />
Liabilities (579) (579) (68) (68)<br />
Secured bank loans (159,599) (159,599) (144,727) (144,727)<br />
Unsecured bond issues (2,908) (357) (41,574) (21,113)<br />
Redeemable preference shares (4,177) (4,435) (10,487) (10,487)<br />
Finance lease liabilities (4,916) (4,916) (5,410) (5,410)<br />
Loans from associates (3,177) (3,177) (297) (297)<br />
Dividends on redeemable preference shares (1,026) (1,090) (1,045) (1,045)<br />
Unsecured bank facilities (11,841) (11,841) (10,629) (10,629)<br />
Trade and other payables (65,002) (65,002) (99,312) (99,312)<br />
Bank overdraft (1) (1) (65) (65)<br />
Fair<br />
value<br />
(134,647) (132,418) (143,284) (122,823)<br />
Unrecognized gains 2,229 20,461<br />
30.3.4.2. Estimation of fair values<br />
The following summarizes the major methods and assumptions used in estimating the fair values of financial instruments reflected in<br />
the above table.<br />
Fair value of available for sale securities is primarily obtained from quoted market prices. The carrying amount of both trade accounts<br />
receivable and payable approximates fair value due to their short-term nature. The fair value of long-term loans and borrowings is<br />
estimated based on the discounted amount of the future cash flows. The fair value of finance lease liabilities is estimated based on the<br />
discounted cash flows using the current borrowing rates for similar liabilities. The fair value of foreign currency interest rate swaps is<br />
based on quoted prices or appropriate valuation methods.<br />
93
31. OPERATING LEASES<br />
Non-cancellable operating lease rentals are payable as follows:<br />
(In JPY millions) 2009 2008<br />
Less than one year 1,519 1,390<br />
Between one and five years 2,125 2,071<br />
More than five years 146 106<br />
Total 3,790 3,567<br />
The operating leases are mainly long-term rental contracts of<br />
cars, machinery and equipment. Under the terms of the lease<br />
agreements, no contingent rents are payable. At March 31, 2009<br />
and 2008, Metaldyne had an outstanding payable of JPY 2,663<br />
and JPY nil million, respectively, related to a sale-and-leaseback<br />
transaction in addition to the operating lease payments.<br />
Future minimum lease payments for property leased out under<br />
operating leases, is as follows:<br />
(In JPY millions) 2009 2008<br />
Less than one year 4,863 4,235<br />
Between one and five years 9,681 12,154<br />
More than five years 5,551 6,028<br />
Total 20,095 22,417<br />
32. CAPITAL COMMITMENTS<br />
As at March 31, 2009 and 2008, Asahi Tec and HIT had aggregate<br />
commitments to purchase capital equipment amounting to<br />
respectively JPY 9,858 and JPY 2,502 million.<br />
33. CONTINGENCIES<br />
At March 31, 2009, the Company is subject to claims and<br />
litigation in the ordinary course of its business but does not<br />
believe that any such claim or litigation will have a material<br />
impact on the financial results of the Company.<br />
34. RELATED PARTIES<br />
34.1. Identity of related parties<br />
The Company has related party relationships with its<br />
consolidated businesses and business accounted for under the<br />
equity method (see note 35), with its Directors and Senior<br />
Management, and with Ripplewood Holdings LLC and affiliates.<br />
34.2. Transactions with directors<br />
and senior management<br />
Total remuneration of executive management is included in<br />
“Personnel expenses” (see note 11). During the fiscal year<br />
ended March 31, 2009, and pursuant to his agreement with RHJI,<br />
the Chief Executive Officer, Mr. Fischer, received aggregate fixed<br />
compensation of JPY 14 million, variable compensation related<br />
to his performance for the fiscal year ended March 31, 2008, of<br />
JPY 216 million, and other remuneration, including private<br />
aircraft usage pursuant to his employment agreement, of JPY<br />
109 million. Subsequent to the fiscal year-end, the Board of<br />
Directors awarded Mr. Fischer a bonus of JPY 219 million<br />
related to his performance for the fiscal year ended March 31,<br />
2009. Awards made to Mr. Fischer under RHJI's equity-based<br />
compensation plan are described in note 27.<br />
The compensation of the members of RHJI's executive management,<br />
other than Mr. Fischer can be broken down as follows:<br />
(In JPY millions) 2009 2008<br />
Aggregate fixed compensation 231 327<br />
Aggregate variable compensation 206 498<br />
Aggregate other remuneration in the form of<br />
pensions, insurance coverage and other<br />
fringe benefits, including allowances<br />
The members of RHJI’s executive management other than<br />
Mr. Fischer were awarded 177,880 restricted stock units under the<br />
equity-based compensation plan adopted by the Board of Directors,<br />
on October 1, 2007. Terms and conditions of the restricted stock<br />
unit plan are described in note 27. Total share-based compensation<br />
expense associated with the awards to the members of executive<br />
management, other than Mr. Fischer, amounted to JPY 103 and 84<br />
million for respectively the fiscal years ended March 31, 2009 and<br />
2008. On April 1, 2009, as part of the bonus award for the fiscal<br />
year ended March 31, 2009, the members of RHJI's executive<br />
management were awarded a further 563,380 restricted stock units<br />
under the same equity-based compensation plan.<br />
Non-executive directors received benefits of JPY 192 million and<br />
JPY 190 million for the fiscal year ended March 31, 2009 and<br />
2008, respectively.<br />
34.3. Other related party<br />
transactions<br />
23 29<br />
Total 460 854<br />
As at March 31, 2009 and 2008, net payables of JPY 14 million<br />
and JPY 104 million, respectively, to Ripplewood Holdings LLC<br />
("Ripplewood") were outstanding as a result of operating costs<br />
and out of pocket expenses. A total expense of JPY 105 million<br />
was recognized from Ripplewood during the fiscal year ended<br />
March 31, 2009, compared to JPY 239 million during the fiscal<br />
year ended March 31, 2008. The transactions with Ripplewood<br />
are at arm's length.<br />
94
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
35. GROUP ENTITIES<br />
35.1. Fully consolidated subsidiaries<br />
Country of<br />
incorporation<br />
Direct<br />
interest<br />
ownership<br />
Indirect<br />
interest<br />
ownership<br />
Asahi Tec Corporation Japan 60.1 % -<br />
Asahi Service Co., Ltd. Japan - 60.1 %<br />
Asahi Tec Aluminium (Thailand) Co., Ltd. Thailand - 60.1 %<br />
Asahi Tec Environmental Solutions Corporation Co., Ltd Japan - 60.1 %<br />
Asahi Tec Metals (Thailand) Co., Ltd. Thailand - 60.1 %<br />
Asahi Tec Service Co., Ltd. Japan - 60.1 %<br />
Asahi Tec Tohoku Sales Co., Ltd. Japan - 60.1 %<br />
ER Acquisition Corp. USA - 60.1 %<br />
GMTI Holding Company USA - 60.1 %<br />
Guangzhou Asahi Dongling Research & Development Co., Ltd. China - 30.7 %<br />
Halyard Aviation Services, Inc. USA - 60.1 %<br />
Hoei Industrial Co., Ltd. Japan - 37.4 %<br />
Holzer Limited United Kingdom - 60.1 %<br />
MascoTech Saturn Holdings Inc. USA - 60.1 %<br />
MASG Disposition, Inc. USA - 60.1 %<br />
MASX Energy Services Group, Inc. USA - 60.1 %<br />
Metaldyne (Suzhou) Automotive Components Co., Ltd. China - 60.1 %<br />
Metaldyne Asia, Inc. USA - 60.1 %<br />
Metaldyne Chassis Manufacturing (Hangzhou) Co., Ltd. China - 60.1 %<br />
Metaldyne Company LLC USA - 60.1 %<br />
Metaldyne Componentes Automotivos do Brasil Ltda Brazil - 60.1 %<br />
Metaldyne Driveline Co., LLC USA - 60.1 %<br />
Metaldyne DuPage Die Casting Corporation USA - 60.1 %<br />
Metaldyne Engine Co., LLC USA - 60.1 %<br />
Metaldyne Engine Espana, S.L. Spain - 60.1 %<br />
Metaldyne Engine Holdings, S.L. Spain - 60.1 %<br />
Metaldyne Europe S.a.r.l. Luxembourg - 60.1 %<br />
Metaldyne Europe, Inc. USA - 60.1 %<br />
Metaldyne GmbH Germany - 60.1 %<br />
Metaldyne Grundstucks GbR Germany - 57.0 %<br />
Metaldyne Holdings LLC USA - 60.1 %<br />
Metaldyne Hong Kong Limited Hong Kong - 60.1 %<br />
Metaldyne Industries Limited India - 30.7 %<br />
Metaldyne Intermediate Holdco, Inc. USA - 60.1 %<br />
Metaldyne International (UK) Ltd United Kingdom - 60.1 %<br />
Metaldyne International Deutschland GmbH Germany - 60.1 %<br />
Metaldyne International France SAS France - 60.1 %<br />
Metaldyne International Holdings B.V. Netherlands - 60.1 %<br />
Metaldyne International Sales, Inc. Barbados - 60.1 %<br />
Metaldyne International Spain, S.L. Spain - 60.1 %<br />
Metaldyne Korea Limited Korea - 60.1 %<br />
Metaldyne Lester Precision Die Casting, Inc. USA - 60.1 %<br />
Metaldyne Light Metals Company, Inc. USA - 60.1 %<br />
Metaldyne Machining and Assembly Company, Inc. USA - 60.1 %<br />
Metaldyne Machining and Assembly Mfg. Co. (Canada) Ltd. Canada - 60.1 %<br />
Metaldyne Mauritius Limited Mauritius - 60.1 %<br />
Metaldyne Mexico, S.A. de C.V. Mexico - 60.1 %<br />
Metaldyne Netherlands Holdings B.V. Netherlands - 60.1 %<br />
95
Country of<br />
incorporation<br />
Direct<br />
interest<br />
ownership<br />
Indirect<br />
interest<br />
ownership<br />
Metaldyne Nurnberg GmbH Germany - 60.1 %<br />
Metaldyne Oslavany, spol. S.r.o. Czech Republic - 60.1 %<br />
Metaldyne Precision Forming - Fort Wayne, Inc. USA - 60.1 %<br />
Metaldyne Services, Inc USA - 60.1 %<br />
Metaldyne Sintered Components Espana, S.L. Spain - 60.1 %<br />
Metaldyne Sintered Components Holdings, S. de R.L. de C.V. Mexico - 60.1 %<br />
Metaldyne Sintered Components Mexico, S.de.R.L. de C.V. Mexico - 60.1 %<br />
Metaldyne Sintered Components of Indiana, Inc. USA - 60.1 %<br />
Metaldyne Sintered Components Services, S.de.R.L. de C.V. Mexico - 60.1 %<br />
Metaldyne Sintered Components St. Marys, Inc. (Formerly known as Windfall Products, Inc.) USA - 60.1 %<br />
Metaldyne Sintered Components, LLC USA - 60.1 %<br />
Metaldyne Tubular Products, Inc. USA - 60.1 %<br />
Metaldyne U.S. Holding Co. USA - 60.1 %<br />
Metaldyne Zell GmbH & Co. KG Germany - 58.9 %<br />
Metaldyne Zell Verwaltungs GmbH Germany - 60.1 %<br />
MetaldyneLux Holding S.a.r.l Luxembourg - 60.1 %<br />
MetaldyneLux S.a.r.l Luxembourg - 60.1 %<br />
NC-M Chassis Systems, LLC USA - 60.1 %<br />
Precision Headed Products, Inc. USA - 60.1 %<br />
Punchcraft Company USA - 60.1 %<br />
R.J. Simpson Private Limited India - 60.1 %<br />
Simpson Industries, Ltda Brazil - 60.1 %<br />
Stahl Industries, Inc. USA - 60.1 %<br />
Techno-Metal Co., Ltd. Japan - 60.1 %<br />
W.C. McCurdy Co. USA - 60.1 %<br />
Windfall Specialty Powders, Inc. USA - 60.1 %<br />
Columbia Music Entertainment Inc. (1) Japan 25.5 % -<br />
C2 Design Japan - 25.5 %<br />
CME, Inc. USA - 25.5 %<br />
Columbia Artist management Japan - 25.5 %<br />
Columbia Songs Inc. Japan - 25.5 %<br />
Creative Core Japan - 25.5 %<br />
SLG, LLC USA - 25.5 %<br />
Honsel International Technologies SA Belgium 82.0 % -<br />
Fonderie Lorraine S.A.S France - 82.0 %<br />
Honsel AG Germany - 81.2 %<br />
Honsel Beteiligungsverwaltungs GmbH Germany - 82.0 %<br />
Honsel Geschäftsführungs GmbH Germany - 82.0 %<br />
Honsel Services US Inc. USA - 82.0 %<br />
Honsel S.R.L. Romania - 82.0 %<br />
Magal Industria e Comercio LTDA Brazil - 53.3 %<br />
Tafime Mexico S.A. Mexico - 82.0 %<br />
Tafime S.L. Spain - 82.0 %<br />
Niles Co., Ltd. Japan 96.4 % -<br />
Akita Niles Co.,Ltd. Japan - 96.4 %<br />
Ami Co.,Ltd. Japan - 96.4 %<br />
Fuji Electronics Industries Co.,Ltd. Japan - 96.3 %<br />
Fuzhou Niles Electronic Co., Ltd. China - 49.2 %<br />
(1) In addition to the direct ownership of 25.5 % of CME, RHJI controls the voting of another 24.1 % of outstanding shares<br />
96
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Country of<br />
incorporation<br />
Direct<br />
interest<br />
ownership<br />
Indirect<br />
interest<br />
ownership<br />
Jonan Industrial Co.,Ltd. Japan - 96.4 %<br />
Micro Craft , Inc. USA - 96.4 %<br />
Niles (Thailand) Co., Ltd. Thailand - 96.4 %<br />
Niles Personnel Service Co.,Ltd. Japan - 96.4 %<br />
Niles America Michigan ,Inc. USA - 96.4 %<br />
Niles America Wintech ,Inc. USA - 96.4 %<br />
Niles Americas Corporation USA - 96.4 %<br />
Niles CTE Electronic Co.,Ltd. Taiwan - 49.2 %<br />
Niles Europe S.A.S. France - 96.4 %<br />
Nitto Manufacturing Co.,Ltd. Japan - 84.1 %<br />
Phoenix Resort KK Japan 100.0 % -<br />
Kogen Country Club Japan - 100.0 %<br />
RHJI Services SA Belgium 100.0 % -<br />
Cartica Management LLC USA - 30.0 %<br />
Arecon AG Switzerland 50.0 % -<br />
Honsel Holdings III LP Cayman 57.9 % -<br />
Japan Casting Holdings II Ltd. Cayman 100.0 % -<br />
Japan Casting Holdings IV Ltd. Cayman 100.0 % -<br />
RHJ International Japan Inc. Japan 100.0 % -<br />
RHJ Shaklee Holding Belgium 100.0 % -<br />
RHJ US Management Inc. USA 100.0 % -<br />
RHJI Swiss Management GmbH Switzerland 100.0 % -<br />
Ripplewood Nippon Columbia Holdings Ltd. Cayman 100.0 % -<br />
Yoyogi Animation Holdings Japan 100.0 % -<br />
35.2. Equity accounted investees<br />
Country of<br />
incorporation<br />
Ownership<br />
interest direct<br />
Shaklee Global Group Inc. Japan 42.5 %<br />
SigmaXYZ Inc. Japan 49.0 %<br />
U-shin Ltd. Japan 20.0 %<br />
97
36. SUBSEQUENT EVENTS<br />
36.1. Asahi Tec<br />
On May 27, 2009, Asahi Tec’s US subsidiary Metaldyne filed a<br />
voluntary petition to reorganize under Chapter 11 of the U.S.<br />
Bankruptcy Code, shortly after Chrysler, one of its main<br />
customers, also filed for protection under Chapter 11. Given that<br />
Asahi Tec was not in a position to further support Metaldyne as it<br />
required focus on its own needs in a continuously challenging<br />
automotive industry, RHJI entered into an agreement to purchase<br />
a majority of Metaldyne’s assets under a court-supervised sales<br />
process pursuant to Section 363 of the U.S. Bankruptcy Code. The<br />
purchase agreement was however not approved by the bankruptcy<br />
court and has terminated on July 27, 2009. Under the Section 363<br />
process, interested parties will have an opportunity to submit<br />
better and higher offers for the Metaldyne assets. The Company<br />
may elect to participate in the sale auction scheduled to be held on<br />
August 5, 2009. To fund its continuing operations during the<br />
restructuring, Metaldyne has secured a USD 19.85 million debtorin-possession<br />
(DIP) financing facility from certain customers. The<br />
DIP credit facility will be used for the company's normal working<br />
capital requirements, including employee wages and benefits,<br />
supplier payments, and other operating expenses during the<br />
reorganization process.<br />
At the date of Metaldyne's filing for bankruptcy protection under<br />
Chapter 11, Metaldyne will be deconsolidated, resulting in a gain<br />
of JPY 8,494 million that will be recorded in the profit or loss for<br />
the fiscal year ending March 31, 2010.<br />
36.2. HIT<br />
On July 22, 2009, the capital restructuring that was agreed by<br />
RHJI and HIT’s lenders on May 25, 2009, was successfully<br />
completed. As part of the restructuring, RHJI invested EUR 50<br />
million in exchange for a controlling stake in Honsel AG, HIT’s<br />
operating subsidiary. The remaining stake of 49% is held by<br />
Honsel’s former senior lenders following a debt-for-equity<br />
swap, which resulted in HIT’s total outstanding debt of<br />
approximately EUR 510 million being reduced to EUR 140<br />
million, consisting of EUR 110 million senior term loan and EUR<br />
30 million mezzanine term loan, all of which is held by Honsel’s<br />
former senior term lenders. Honsel’s existing EUR 40 million<br />
revolving credit facility, as well as EUR 50 million of financing<br />
from RHJI, certain of Honsel’s key customers and alone<br />
supplier, remained in place. RHJI also committed to a new<br />
senior backstop facility of EUR 10 million.<br />
36.3. Niles<br />
On May 20, 2009, Niles bolstered its capital structure through a<br />
total capital injection of JPY 6,500 million, of which JPY 3,500<br />
million was provided by RHJI and JPY 2,500 million by a major<br />
stakeholder, which resulted in RHJI’s ownership in Niles to be<br />
reduced from 96.4% to 77.3%. Part of the proceeds was used to<br />
repay JPY 2.5 billion of short-term debt that was previously<br />
secured by a cash deposit from the Company. Furthermore,<br />
syndicate lenders agreed on a refinancing of the existing debt<br />
structure with new bullet loans maturing in June 2011.<br />
36.4. Commercial International Bank<br />
On July 8, 2009, RHJI announced that it had entered into an<br />
agreement to sell 63% of its stake in CIB for a total cash<br />
consideration of USD 53.1 million, representing a capital gain of<br />
107% to its initial purchase price. As part of a consortium led by<br />
Ripplewood Holdings L.LC., a leading U.S.-based private equity<br />
firm, RHJI had acquired its stake in February of 2006. In addition to<br />
the sale of its stake in CIB, RHJI also disposed of a minority interest<br />
for total cash proceeds of EUR 15.9 million, yielding a capital gain of<br />
EUR 7.5 million and representing an absolute return of 90%.<br />
36.5. Others<br />
On July, 13, 2009, RHJI announced that it was in negotiations<br />
with General Motors Corporation ("GM") over the acquisition of a<br />
majority stake in GM's European subsidiary Adam Opel GmbH,<br />
which includes Vauxhall in the UK.<br />
37. AUDITOR'S FEE<br />
RHJI’s statutory auditor, KPMG Réviseurs d’Entreprises, and a<br />
number of KPMG member firms, received fees amounting to<br />
JPY 633 million and JPY 950 million for respectively fiscal years<br />
ended March 31, 2009 and 2008 for the following services:<br />
(In JPY millions) 2009 2008<br />
KPMG Réviseurs d'Entreprises<br />
Audit 40 47<br />
Audit related services 7 3<br />
KPMG Network<br />
47 50<br />
Audit 459 640<br />
Audit related services 116 29<br />
Tax related services 6 182<br />
Other services 5 49<br />
586 900<br />
Total 633 950<br />
98
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
DIRECTORS' <strong>REPORT</strong> ON THE CONSOLIDATED FINANCIAL<br />
STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
The Directors’ report on the consolidated financial statements for the fiscal year ended March 31, 2009, prepared in accordance with<br />
the Belgian Companies Code is available on request from RHJI’s registered office and on its website (www.rhji.com). All information<br />
contained in this Directors Report listed below, is presented in the different sections of this Annual Report:<br />
• Business and financial review of the consolidated financial statements for the years ended March 31, 2009 and 2008<br />
(Part I, page 7-25);<br />
• Material events subsequent to March 31, 2009 (Part II, note 36, page 98);<br />
• Principal risks and uncertainties (Part II, page 34-35);<br />
• Risk management and the use of derivatives financial instruments (Part II, note 30, page 86);<br />
• Disclosure required by article 34 of the Belgian Royal Decree of 14 November 2007 (Part III, page 118).<br />
99
AUDITOR'S <strong>REPORT</strong> ON THE CONSOLIDATED FINANCIAL<br />
STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
STATUTORY AUDITOR’S <strong>REPORT</strong><br />
TO THE GENERAL MEETING OF<br />
SHAREHOLDERS OF RHJ<br />
INTERNATIONAL SA ON THE<br />
CONSOLIDATED FINANCIAL<br />
STATEMENTS FOR THE YEAR<br />
ENDED MARCH 31, 2009<br />
In accordance with legal and statutory requirements, we report<br />
to you on the performance of our audit mandate. This report<br />
includes our opinion on the consolidated financial statements<br />
together with the required additional comment.<br />
Unqualified audit opinion on the consolidated<br />
financial statements<br />
We have audited the consolidated financial statements of RHJ<br />
International SA (“the company”) and its subsidiaries (jointly “the<br />
group”), prepared in accordance with International Financial<br />
Reporting Standards, as adopted by the European Union, and<br />
with the legal and regulatory requirements applicable in<br />
Belgium. These consolidated financial statements comprise the<br />
consolidated balance sheet as of March 31, 2009 and the<br />
consolidated statements of income, recognized income and<br />
expense and cash flows for the year then ended, as well as the<br />
summary of significant accounting policies and the other<br />
explanatory notes. The total of the consolidated balance sheet<br />
amounts to JPY 357,617 million and the consolidated income<br />
statement shows a loss for the period of JPY 131,271 million.<br />
The board of directors of the company is responsible for the<br />
preparation of the consolidated financial statements. This<br />
responsibility includes: designing, implementing and<br />
maintaining internal control relevant to the preparation and fair<br />
presentation of consolidated financial statements that are free<br />
from material misstatement, whether due to fraud or error;<br />
selecting and applying appropriate accounting policies; and<br />
making accounting estimates that are reasonable in the<br />
circumstances.<br />
Our responsibility is to express an opinion on these consolidated<br />
financial statements based on our audit. We conducted our<br />
audit in accordance with International Standards on Auditing,<br />
legal requirements and auditing standards applicable in<br />
Belgium, as issued by the “Institut des Réviseurs<br />
d’Entreprises/Instituut der Bedrijfsrevisoren”. Those standards<br />
require that we plan and perform the audit to obtain reasonable<br />
assurance whether the consolidated financial statements are<br />
free from material misstatement.<br />
In accordance with these standards, we have performed<br />
procedures to obtain audit evidence about the amounts and<br />
disclosures in the consolidated financial statements. The<br />
procedures selected depend on our judgment, including the<br />
assessment of the risks of material misstatement of the<br />
consolidated financial statements, whether due to fraud or<br />
error. In making those risk assessments, we have considered<br />
internal control relevant to the group’s preparation and fair<br />
presentation of the consolidated financial statements in order to<br />
design audit procedures that are appropriate in the<br />
circumstances but not for the purpose of expressing an opinion<br />
on the effectiveness of the group’s internal control. We have<br />
also evaluated the appropriateness of the accounting policies<br />
used, the reasonableness of accounting estimates made by the<br />
company and the presentation of the consolidated financial<br />
statements, taken as a whole. Finally, we have obtained from<br />
management and responsible officers of the company the<br />
explanations and information necessary for our audit. We<br />
believe that the audit evidence we have obtained provides a<br />
reasonable basis for our opinion.<br />
In our opinion, the consolidated financial statements give a true<br />
and fair view of the group’s net worth and financial position as of<br />
March 31, 2009 and of its results and cash flows for the year<br />
then ended in accordance with International Financial Reporting<br />
Standards, as adopted by the European Union, and with the legal<br />
and regulatory requirements applicable in Belgium.<br />
Additional comment<br />
The preparation of the directors’ report on the consolidated<br />
financial statements and its content are the responsibility of the<br />
board of directors.<br />
100
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Our responsibility is to supplement our report with the following<br />
additional comment, which does not modify our audit opinion on<br />
the financial statements:<br />
• The directors’ report on the consolidated financial<br />
statements includes the information required by law and is<br />
consistent with the consolidated financial statements. We<br />
are, however, unable to comment on the description of the<br />
principal risks and uncertainties which the group is facing,<br />
and on its financial situation, its foreseeable evolution or the<br />
significant influence of certain facts on its future<br />
development. We can nevertheless confirm that the matters<br />
disclosed do not present any obvious inconsistencies with<br />
the information that we became aware of during the<br />
performance of our mandate.<br />
Brussels, July 22, 2009<br />
KPMG Réviseurs d’Entreprises<br />
Statutory auditor<br />
represented by<br />
Benoit Van Roost<br />
Réviseur d’Entreprises<br />
101
CONDENSED NON-CONSOLIDATED FINANCIAL STATEMENTS FOR<br />
THE FISCAL YEAR ENDED MARCH 31, 2009<br />
In accordance with Article 105 of the Belgian Companies Code, the non-consolidated accounts are presented below in a condensed<br />
version. The full version of the non-consolidated annual accounts, along with the related Directors’ Report and the Statutory Auditors’<br />
Report, as they will be presented at the Annual Shareholders’ Meeting, are available on request from RHJI’s registered office and on<br />
its website (www.rhji.com). The Statutory Auditor has expressed an unqualified opinion on these annual accounts.<br />
Condensed non-consolidated balance sheet as at March 31<br />
(In JPY millions) 2009 2008<br />
Assets<br />
Tangible fixed assets 78 95<br />
Intangible fixed assets 19 31<br />
Financial fixed assets 61,647 157,450<br />
Total non-current assets 61,744 157,576<br />
Trade and other receivables 943 1,389<br />
Short-term investments 51,979 23,590<br />
Cash and cash equivalents 6,989 28,293<br />
Others 46 418<br />
Total current assets 59,957 53,690<br />
Total assets 121,701 211,266<br />
Equity<br />
Issued capital 88,491 88,491<br />
Share premium 104,604 104,604<br />
Reserves 18,145 18,416<br />
Retained earnings (91,041) (1,722)<br />
Total equity 120,199 209,789<br />
Current liabilities<br />
Trade and other payables 850 1,019<br />
Others 652 458<br />
Total current liabilities 1,502 1,477<br />
Total equity and liabilities 121,701 211,266<br />
102
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009<br />
Condensed non-consolidated income statement for the fiscal year ended<br />
March 31<br />
(In JPY millions) 2009 2008<br />
Revenue<br />
Other operating income 2 1<br />
Cost of sales<br />
Services and other goods (6,298) (3,923)<br />
Depreciation and amortization (34) (31)<br />
Other operating expenses (8) (2)<br />
Operating loss (6,338) (3,955)<br />
Financial income 9,071 4,234<br />
Financial expenses (13,284) (5,916)<br />
Net financing costs (4,213) (1,682)<br />
Extraordinary expenses (78,748) (21)<br />
Loss before tax (89,299) (5,658)<br />
Income tax expense (20) (20)<br />
Loss for the year (89,319) (5,678)<br />
The appropriation of the loss for the year is as follows:<br />
(In JPY millions)<br />
Loss for the year (89,319) (5,678)<br />
Profit (loss) carried forward from last year (1,722) 3,956<br />
Retained earnings (91,041) (1,722)<br />
103
104
PART III<br />
CORPORATE GOVERNANCE
106
CORPORATE GOVERNANCE<br />
The Belgian Corporate Governance Committee formed by the Belgian Banking, Finance and Insurance Commission (“CBFA”),<br />
Euronext Brussels and the Federation of Belgian Enterprises published on December 9, 2004 a Code on Corporate Governance, as<br />
amended and restated on March 12, 2009, which is a code of best practice containing recommendations and applying to listed<br />
companies on a non-binding basis. In accordance with the Code, RHJI adopted a Corporate Governance Charter which may be viewed<br />
on RHJI’s website at www.rhji.com (1) . The Corporate Governance Charter describes the main aspects of the rules and practices under<br />
which RHJI operates and by which shareholders can expect RHJI to operate.<br />
This section summarizes the corporate governance structure of RHJI and provides certain factual information that the Belgian Code<br />
on Corporate Governance recommends to be included in this Annual Report (2) . The section also contains some information required by<br />
Article 34 of the Belgian Royal Decree of 14 November 2007 concerning the obligations of listed issuers to disclose information.<br />
(1) The current Corporate Governance Charter of RHJI was adopted before the publication of the new version of the Belgian Code on Corporate Governance. While the Charter is<br />
substantially in compliance with the new version of the Belgian Code on Corporate Governance (subject to what is said in footnote 2 below), it is however being reviewed and<br />
will be subject to some adjustments to take into account this new version. References, in this “Corporate Governance” section, to the “Belgian Code on Corporate<br />
Governance” are to such Code in its December 2004 version.<br />
(2) This “Corporate Governance” section does not yet reflect new recommendations contained in the new version of the Belgian Code on Corporate Governance. Such<br />
recommendations are being reviewed and will be reflected, as appropriate, in the next Annual Report (relating to the fiscal year ending March 31, 2010).<br />
107
BOARD OF DIRECTORS<br />
POWERS AND RESPONSIBILITIES<br />
In accordance with the Belgian Companies Code, RHJI is<br />
administered by a Board of Directors with full powers and<br />
authority to undertake any action, except where specific powers<br />
are reserved for action at a Shareholders’ Meeting, either by law<br />
or pursuant to RHJI’s Articles of Association. Among others, the<br />
Board of Directors approves RHJI’s strategy as recommended by<br />
the Investment and Strategy Committee, reviews and approves<br />
the annual and six-month financial statements and presents to<br />
the Annual Shareholders’ Meeting an evaluation of RHJI’s<br />
financial situation. The Board of Directors appoints the Chief<br />
Executive Officer and members of the Board’s Committees. The<br />
Board of Directors may assign a special mandate to one or more<br />
Directors, but all other Board decisions must be taken by the<br />
Board of Directors as a whole. The Board has delegated the daily<br />
management of RHJI to its Chief Executive Officer, Mr. Fischer<br />
(see section “Chief Executive Officer” hereunder), and certain<br />
responsibilities for mergers & acquisitions to the Investment and<br />
Strategy Committee (see “Board Committees” hereunder).<br />
COMPOSITION<br />
Board members are appointed by the shareholders at a<br />
Shareholders’ Meeting upon proposal by the Board of Directors.<br />
RHJI’s Articles of Association provide that the Board of Directors<br />
must have at least seven and at most twelve directors. RHJI’s<br />
Articles of Association also provide that as long as Mr. Collins,<br />
together with his affiliates, owns, directly or indirectly, at least<br />
5% of RHJI’s outstanding shares, he will have the right to<br />
present a pool of two candidates, from which the Shareholders’<br />
Meeting must select one, but may select both, for election to the<br />
Board of Directors. The Nomination and Remuneration<br />
Committee (see “Nomination and Remuneration Committee”)<br />
nominates the other candidates for election to the Board of<br />
Directors.<br />
To qualify as an independent director, such person must comply<br />
with the conditions set forth in Article 526ter of the Belgian<br />
Companies Code.<br />
FUNCTIONING<br />
The Board of Directors is a collegial body. It deliberates if a<br />
majority of its members are present or represented (except in<br />
the case of force majeure, for which the quorum is three<br />
directors present or represented).<br />
The Board of Directors meets as regularly and as frequently as<br />
required by RHJI’s interests.<br />
In accordance with the Belgian Companies Code (Article 523), any<br />
director with a conflicting interest must bring this to the notice of<br />
both the statutory auditor (see “Statutory Auditor” below) and his<br />
fellow directors and may not take part in related deliberations.<br />
During the fiscal year ended March 31, 2009, the Board of<br />
Directors held 13 meetings, in addition to periodic updates from<br />
executive management. Major topics considered by the Board of<br />
Directors during the fiscal year included, among others: financial<br />
statements and reports relating thereto for the fiscal year ended<br />
March 31, 2009, operations and performance of the Company;<br />
new investments; incentive compensation plan and renewal of<br />
the waiver granted to Mr. Collins as then co-Chief Executive<br />
Officer, with respect to his outside activities (see below). The<br />
conflict of interest procedure provided by Article 523 of the<br />
Belgian Companies Code was applied four times (please refer to<br />
the statutory report of the Board of Directors on the nonconsolidated<br />
financial statements dated July 22, 2009 of RHJ<br />
International SA, which is published separately from this Annual<br />
Report and may be viewed on RHJI’s website at www.rhji.com).<br />
Directors attended all meetings, except that Mr. Daniel did not<br />
attend one meeting, Mr. Sillem did not attend two meetings, Lord<br />
Jacob Rothschild did not attend one meeting, Mr. König did not<br />
attend one meeting, Mr. Döpfner did not attend one meeting and<br />
Mr. Golub did not attend six meetings.<br />
108
CORPORATE GOVERNANCE<br />
The following table sets forth the current members of the Board<br />
of Directors. Each director serves for a three-year term ending<br />
on the date of the Annual Shareholders’ Meeting in September<br />
2011 which will approve the non-consolidated financial<br />
statements relating to the fiscal year ending in March 2011.<br />
Directors may be reappointed. Biographies of each director are<br />
available here below and may be viewed on RHJI’s website at<br />
www.rhji.com .<br />
Name Age Title<br />
D. Ronald Daniel (3) (4) 79 Chairman of the Board of<br />
Directors and Chairman<br />
of the Nomination and<br />
Remuneration Committee<br />
Timothy C. Collins (4) 52 Chairman of the Investment<br />
and Strategy Committee<br />
Leonhard Fischer (4) 46 Chief Executive Officer<br />
Mathias Döpfner (3) 46 Director<br />
D. Ronald Daniel – Chairman of the Board of Directors and of the<br />
Nomination and Remuneration Committee :<br />
Mr. Daniel, a director since April 1, 2005, has been a<br />
management consultant for 47 years, including 12 years as<br />
McKinsey & Company’s managing partner. Prior to joining<br />
McKinsey, Mr. Daniel served in the United States Navy.<br />
From 1989 through 2004, Mr. Daniel was the Treasurer of<br />
Harvard University, a member of the Harvard Corporation and a<br />
member of the Harvard Board of Overseers. He also was<br />
Chairman of the Harvard Management Company (which<br />
oversees Harvard’s endowment) and Chairman of the Board of<br />
Fellows of the Harvard Medical School.<br />
Mr. Daniel is also a member of the Board of Trustees of<br />
Thirteen/WNET, of Rockefeller University and of Brandeis<br />
University. He is a member of the Council on Foreign Relations,<br />
an Honorary Trustee of the Brookings Institution and Chairman<br />
Emeritus of the Wesleyan University Board of Trustees.<br />
Mr. Daniel has a B.A. in Mathematics from Wesleyan University<br />
and an M.B.A. from Harvard Business School. He also holds an<br />
Honorary Doctor of Humane Letters from Wesleyan University.<br />
Harvey Golub 70 Director<br />
Gerd Häusler 58 Director<br />
Björn König (1) (2) 47 Director<br />
Jun Makihara (1) (2) (3) 51 Director<br />
Jeremy W. Sillem (1) (2) 59 Chairman of the Audit<br />
and Compliance Committee<br />
(1) Independent director pursuant to Article 526ter of the Belgian Companies Code.<br />
(2) Member of the Audit and Compliance Committee.<br />
(3) Member of the Nomination and Remuneration Committee.<br />
(4) Member of the Investment and Strategy Committee<br />
Timothy C. Collins – Director and Chairman of the Investment<br />
and Strategy Committee:<br />
A director with RHJI since the company's formation in June 2004,<br />
Mr. Collins was appointed on January 2009 as Chairman of the<br />
Investment and Strategy Committee. Mr. Collins was co-Chief<br />
Executive Officer of RHJI from May 2007 (when Mr. Fischer joined<br />
the company) until December of 2008. He was RHJI's Chief<br />
Executive Officer from its formation in June 2004 until May 2007.<br />
Mr. Collins founded Ripplewood Holdings LLC in 1995 and<br />
currently serves as its Senior Managing Director and Chief<br />
Executive Officer. From 1990 to 1995, Mr. Collins managed the<br />
New York office of Onex Corporation, a Toronto-based holding<br />
company engaged in acquiring companies in a variety of<br />
industries. Previously, Mr. Collins held positions at Lazard Frères<br />
& Company, Booz, Allen & Hamilton and Cummins Engine<br />
Company. Mr. Collins is a director of Commercial International<br />
Bank and RSC Equipment Rental which are publicly traded<br />
portfolio companies of Ripplewood, as well as a director of<br />
various privately held Ripplewood portfolio companies.<br />
He is involved in several not-for-profit and public sector<br />
activities, including the Trilateral Commission, Yale Divinity<br />
School Advisory Board, Yale School of Organization and<br />
Management Board of Advisors, the Board of Overseers of the<br />
Weill Cornell Medical College and is a member of the Council on<br />
Foreign Relations. Mr. Collins is also a Trustee of the Carnegie<br />
Hall Society.<br />
Mr. Collins has a B.A. in Philosophy from DePauw University and<br />
an M.B.A. from Yale University’s School of Organization and<br />
Management.<br />
109
Leonard Fischer – Director and Chief Executive Officer:<br />
Leonhard Fischer was appointed Chief Executive Officer in<br />
January 2009. He was co-Chief Executive Officer of RHJI since<br />
May 2007 and is a member of the Board of Directors since<br />
September 18, 2007.<br />
Prior to joining RHJI, Mr. Fischer was Chief Executive Officer of<br />
Winterthur Group from 2003 to 2006, an insurance subsidiary of<br />
Credit Suisse, and a member of the Executive Board of Credit<br />
Suisse Group from 2003 to March 2007. Mr. Fischer joined Credit<br />
Suisse Group from Allianz AG, where he had been a Member of<br />
the Management Board and Head of the Corporates and Markets<br />
Division since 2001. Previously, he had been with Dresdner Bank<br />
AG as a member of the Executive Board since 1998 and with JP<br />
Morgan in Frankfurt since 1987.<br />
Mr. Fischer holds an M.A. in Finance from the University of<br />
Georgia and a Business Management Degree from the University<br />
of Bielefeld.<br />
He is also on the Supervisory Boards of the Deutsche Presse<br />
Agentur and the Leipziger Verlags- und Druckereigesellschaft,<br />
as well as being a member of the European Publishers Council.<br />
He holds Honorary Offices at the American Academy, the Aspen<br />
Institute, and on the American Jewish Committee.<br />
Dr. Döpfner studied Musicology, German, and Theatrical Arts in<br />
Frankfurt and Boston.<br />
Björn König – Director:<br />
Mr. König, a director since April 1, 2005, is currently an adviser<br />
to private equity and alternative asset management groups.<br />
Mr. König has several years of experience as an investor in<br />
limited partnerships and has served as an advisor in the<br />
establishment of a number of limited partnerships.<br />
Mr. König has a B.S. in Business Administration from the<br />
University of Stockholm, Sweden.<br />
Harvey Golub – Director:<br />
Mr. Golub has been a director of RHJI since September 2006.<br />
Mr. Golub is the Non-Executive Chairman of Ripplewood<br />
Holdings, LLC. He serves as Non-Executive Chairman of the<br />
Boards of Campbell Soup Company and the Reader’s Digest<br />
Association. Mr. Golub also serves on the Boards of the Lincoln<br />
Center for the Performing Arts, the American Enterprise<br />
Institute, and the New York Presbyterian Hospital, and as a<br />
member of the Advisory Board of Miller Buckfire & Co., LLC.<br />
Previously, Mr. Golub has served on the Board of Dow Jones &<br />
Company.<br />
Mr. Golub served as the Chief Executive Officer and Chairman of<br />
the Board of American Express from 1993 until he retired in<br />
2001.<br />
Prior to joining American Express in 1991, he was a senior<br />
partner with McKinsey & Co.<br />
Mr. Golub attended Cornell University from 1956 to 1958, and<br />
received a B.S. degree from the New York University in 1961.<br />
Mathias Döpfner – Director:<br />
Dr. Döpfner was appointed as a director of RHJI on September<br />
16, 2008. He is currently Chairman and Chief Executive Officer of<br />
Axel Springer AG in Berlin, which he joined in 1998 as Editor-in-<br />
Chief of Die Welt. He has been a Member of the Management<br />
Board there since the year 2000.<br />
Mathias Döpfner has held several different positions in media<br />
companies during his career. Amongst others, as Editor-in-Chief<br />
of the Wochen Post and the Hamburger Morgenpost<br />
newspapers. Since 2006 he has been a member of the Board of<br />
Directors at Time Warner, Inc.<br />
Jun Makihara – Director:<br />
Mr. Makihara, a director since April 1, 2005, is currently the<br />
Chairman of Neoteny Co., Ltd., an early stage venture<br />
investment firm in Japan. From 1981 to 2000, Mr. Makihara was<br />
with Goldman, Sachs & Co. where he served in various<br />
capacities, including as a Managing Director in New York in<br />
Investment Banking from 1998 to 2000, as a Managing Director<br />
in Tokyo as co-head of Equities and co-branch manager from<br />
1995 to 1998 and as co-head of Investment Banking in Tokyo<br />
from 1992 to 1995. Mr. Makihara is a director of Monex Group,<br />
Inc. and the Japan Society.<br />
Mr. Makihara has an B.A. from Harvard College in Economics<br />
and an M.B.A. from Harvard Business School.<br />
Gerd Häusler – Director:<br />
Mr. Gerd Häusler joined RHJI in October 2008 as a director and a<br />
senior advisor after having served the previous two years at<br />
Lazard as a Vice-Chairman and Managing Director in their<br />
Financial Institutions Group and their Sovereign Debt Advisory<br />
practice.<br />
Between 2001 and 2006 he was counselor and director of the<br />
International Capital Markets Department of the IMF<br />
responsible for all financial markets-related work and is<br />
credited with the creation of the Global Financial Stability<br />
Report; he also represented the Fund at the Financial Stability<br />
Forum. Before, Mr. Häusler was a Member of the Board of<br />
Managing Directors at Dresdner Bank AG in Frankfurt (1996 to<br />
2000) and Chairman of Dresdner Kleinwort Benson in London<br />
110
CORPORATE GOVERNANCE<br />
(1997 to 2000). He spent the first 18 years of his career at<br />
Deutsche Bundesbank, the last two of them (1994-1996) on the<br />
Executive Board and the Central Bank Council. He has served as<br />
an outside director on the board of various companies and has<br />
been a member of the Group of Thirty, a think tank, since 1996.<br />
Mr. Häusler studied Law and Economics at the Universities of<br />
Frankfurt and Geneva.<br />
Jeremy W. Sillem – Director and Chairman of the Audit and<br />
Compliance Committee :<br />
Mr. Sillem, a director since April 1, 2005, is the Managing<br />
Partner and Co-Founder of Spencer House Partners LLP. Prior<br />
to establishing Spencer House Partners, he was the Chairman of<br />
Bear, Stearns International Limited, the European arm of the<br />
New York based investment bank, from May 2000 until January<br />
2004. Prior to joining Bear Stearns, Mr. Sillem spent a 28 year<br />
career with Lazard LLC and its predecessor entities, during five<br />
year of which he was Chief Executive of Lazard Capital Markets<br />
in London.<br />
Currently, Mr. Sillem is Chairman of the World Trust Fund, a<br />
London Stock Exchange-listed investment company; a director<br />
of Martin Currie (Holdings) Limited, a privately held equities<br />
fund manager; a director of Harbourmaster Capital (Holdings)<br />
Limited, a privately held European-based credit manager; and a<br />
director of Checkmate Mortgages Limited, due to start trading in<br />
2009 in the UK mortgage distribution sector.<br />
COMPENSATION<br />
The following compensation was paid to directors for their<br />
services as directors during the fiscal year ended March 31,<br />
2009.<br />
Each of RHJI’s non-executive directors (except as mentioned<br />
below and other than the Chairman of the Board of Directors)<br />
was paid an amount of EUR 100,000. The Chairman has been<br />
paid an amount of EUR 250,000. In addition, the Chairman of the<br />
Audit and Compliance Committee (see “Audit and Compliance<br />
Committee”) has been paid an amount of EUR 60,000 and<br />
members of that Committee have been paid an amount of EUR<br />
40,000. The Chairman of the Nomination and Remuneration<br />
committee (see “Nomination and Remuneration Committee”)<br />
has been paid an amount of EUR 40,000 and members of that<br />
Committee have been paid an amount of EUR 25,000. Pursuant<br />
to the Corporate Governance Charter of RHJI, the Chairman of<br />
the Investment and Strategy Committee (see “Investment and<br />
Strategy Committee”) is paid an annual retainer of EUR 60,000<br />
and members of such Committee are paid an annual retainer of<br />
EUR 40,000.<br />
No benefits were granted to directors for their services as<br />
directors.<br />
Directors who are (Leonhard Fischer) or were (Timothy C.<br />
Collins) members of RHJI’s executive management do not<br />
receive any compensation for their services as directors or<br />
members of any Board Committees.<br />
He is also a member of the Hoegh Capital Partners Hedge Fund<br />
Advisory Committee, the Advisory Board of Partners Capital<br />
Investment Group, the Investment Committee of Brasenose<br />
College Oxford and serves as an Advisory Director of Reform,<br />
the London based public policy think tank. From 1994 to 2004 he<br />
was a member of the International Capital Markets Committee<br />
of the New York Stock Exchange.<br />
Mr. Sillem has a M.A. in Philosophy, Politics and Economics<br />
from Oxford University.<br />
111
BOARD COMMITTEES<br />
The RHJI Board of Directors has created the following Board Committees : the Audit and Compliance Committee, the Nomination and<br />
Remuneration Committee and the Investment and Strategy Committee. The Board of Directors has adopted formal charters for such<br />
committees. Amendments to key principles with respect to the composition and core tasks of such committees, as set out in their<br />
respective charters, may be made by the Board of Directors.<br />
AUDIT AND COMPLIANCE<br />
COMMITTEE<br />
The Audit and Compliance Committee must consist of at least<br />
three non-executive directors, all of whom must be independent<br />
and none of whom may be the Chairman of the Board of<br />
Directors. Directors may be appointed to the Audit and<br />
Compliance Committee for terms of up to three years and may<br />
be re-appointed.<br />
The Audit and Compliance Committee’s role is to assist and<br />
advise the Board of Directors regarding, among others, (i) the<br />
quality and integrity of RHJI’s financial statements, (ii) the<br />
relationship with RHJI’s statutory auditor, (iii) risk management,<br />
(iv) compliance with legal and regulatory requirements, (v)<br />
compliance with internal codes of conduct and other policies and<br />
(vi) potential conflicts of interests of Mr. Collins (see section<br />
“Mr. Collins as Director and Chairman of the Investment and<br />
Strategy Committee”).<br />
The Audit and Compliance Committee currently consists of<br />
Messrs. Sillem, König and Makihara.<br />
During the fiscal year ended March 31, 2009, the Audit and<br />
Compliance Committee held six meetings. Major topics<br />
considered by the Committee during the fiscal year were:<br />
financial statements and reports relating to the fiscal years<br />
ended March 31, 2008 and 2009, risk management systems and<br />
controls, relationship with the statutory auditor, reporting<br />
framework in accordance with new Belgian requirements and<br />
renewal of the waiver granted to Mr. Collins as then co-Chief<br />
Executive Officer with respect to his outside activities and under<br />
the Code of Business Conduct and Ethics for the period<br />
beginning on February 20, 2008 until February 28, 2009 (see<br />
below). Committee members attended all meetings of the Audit<br />
and Compliance Committee during the fiscal year except that<br />
Mr. Makihara did not attend one meeting.<br />
NOMINATION AND REMUNERATION<br />
COMMITTEE<br />
The Nomination and Remuneration Committee must consist of<br />
at least three non-executive directors, a majority of whom must<br />
be independent. Directors may be appointed to the Nomination<br />
and Remuneration Committee for terms of up to three years and<br />
may be re-appointed (but no member of the Committee shall<br />
serve for consecutive terms collectively exceeding nine years).<br />
The Nomination and Remuneration Committee’s role is to assist<br />
and advise the Board of Directors regarding, among others, (i)<br />
the size and composition of, and appointment to, the Board of<br />
Directors, (ii) the size and composition of, and appointment to,<br />
the committees of the Board of Directors, (iii) appointment of<br />
members of senior management and (iv) the remuneration<br />
policy, evaluation and strategy for directors and personnel.<br />
The Nomination and Remuneration Committee currently<br />
consists of Messrs. Daniel, Döpfner and Makihara.<br />
During the fiscal year ended March 31, 2009, the Nomination and<br />
Remuneration Committee held 4 meetings. Major topics<br />
considered by the Committee during the fiscal year were: senior<br />
management compensation and long-term incentives and<br />
appointment of Board members. Committee members attended<br />
all meetings of the Nomination and Remuneration Committee<br />
during the fiscal year.<br />
The Belgian Code on Corporate Governance recommends the<br />
establishment of an internal audit function. An experienced<br />
internal audit professional based in the Tokyo office provides<br />
guidance and support to the Company’s portfolio company<br />
operations in Japan. Currently, the internal audit activities do<br />
not cover Honsel, but the Audit and Compliance Committee will<br />
continue to monitor the Company’s internal audit function based<br />
on the Company’s evolving size and needs.<br />
112
CORPORATE GOVERNANCE<br />
INVESTMENT AND STRATEGY<br />
COMMITTEE<br />
The Investment and Strategy Committee is a new committee of<br />
the Board of Directors, which has been established as of<br />
January 2009.<br />
The Investment and Strategy Committee must consist of at least<br />
three executive or non-executive directors. Directors may be<br />
appointed to the Investment and Strategy Committee for terms<br />
of up to three years and may be re-appointed.<br />
The key responsibilities of the Investment and Strategy<br />
Committee include:<br />
(i) approval of any acquisition in which the purchase price<br />
payable by RHJI, together with any other commitment made<br />
by RHJI, does not exceed 100 million and any disposal in<br />
which the sale price or book value of the sold assets<br />
(whichever is the highest), together with any other form of<br />
payment does not exceed 100 million;<br />
(ii) approval of any financing activity related to an acquisition<br />
mentioned in (i);<br />
(iii) providing recommendations to the Board of Directors<br />
regarding any acquisition (including any related financing<br />
activity) or disposal in excess of 100 million;<br />
(iv) in consultation with the Nomination and Remuneration<br />
Committee, jointly recommending, to the Board of Directors,<br />
individuals for appointment as Chief Executive Officer, Chief<br />
Financial Officer and General Counsel;<br />
(v) defining and preparing the strategic options and proposals<br />
(including alliances, spin-offs or mergers, investments,<br />
acquisitions, divestitures, capital structure and secondary<br />
listings) that may contribute to the development of RHJI, for<br />
recommendations to the Board of Directors.<br />
The Investment and Strategy Committee currently consists of<br />
Messrs. Collins, Daniel and Fischer. Mr. Collins is Chairman of<br />
the Investment and Strategy Committee.<br />
During the fiscal year ended March 31, 2009, the Investment and<br />
Strategy Committee held no meetings as it was established in<br />
January 2009.<br />
MR. COLLINS AS DIRECTOR AND<br />
CHAIRMAN OF THE INVESTMENT<br />
AND STRATEGY COMMITTEE<br />
TIME COMMITMENT<br />
Under the terms of RHJI’s agreement with Mr. Collins, he is only<br />
required to spend as much of his aggregate business time and<br />
attention as is required to fulfill his functions as RHJI’s director<br />
and Chairman of the Investment and Strategy Committee. Mr.<br />
Collins continues to be obligated under the terms of certain<br />
existing private equity partnership agreements to devote<br />
business time and attention to such partnerships. In addition, in<br />
the future he also may create funds or other investment entities<br />
that could require a substantial portion of his business time and<br />
attention. Such partnerships, funds or other investment entities<br />
may potentially compete, from time to time, with the interests of<br />
RHJI.<br />
COMPENSATION<br />
During the fiscal year ended March 31, 2009, Mr. Collins<br />
received a compensation of EUR 100,000 as then co-Chief-<br />
Executive Officer of RHJI. He did not receive any other element<br />
of compensation, such as any bonus or any participation in<br />
executive benefit plans and programs established by RHJI. Mr.<br />
Collins did not receive any shares, share warrants, share<br />
options or any other right to acquire shares of RHJI during the<br />
fiscal year ended March 31, 2009. Mr. Collins will not be paid for<br />
his function as member and Chairman of the Investment and<br />
Strategy Committee.<br />
TERM AND TERMINATION<br />
The initial term of Mr Collins’ agreement with RHJI expires in<br />
March 2010. At the end of the initial term, the agreement will<br />
automatically renew for successive one year terms, unless<br />
notice is given by RHJI to Mr. Collins that it does not intend to<br />
renew the current term, no later than 30 days prior to the<br />
expiration thereof. Mr. Collins’ agreement may be terminated<br />
by the Board of Directors at any time, with or without cause. No<br />
severance will be paid to Mr. Collins upon termination except as<br />
may be required by law. Upon termination of the agreement, Mr.<br />
Collins will receive payment for any accrued compensation and<br />
unreimbursed expenses. In addition, Mr. Collins will resign from<br />
RHJI’s Board of Directors, the Investment and Strategy<br />
Committee and any committee thereof, and any Board of<br />
Directors (and committee thereof) of any companies owned<br />
directly or indirectly by RHJI.<br />
If Mr. Collins is terminated prior to March 23, 2010, unless the<br />
termination was for cause, Mr. Collins will no longer be subject<br />
pursuant to his agreement with RHJI to restrictions on transfers<br />
of RHJI’s ordinary shares held by him, as described below.<br />
Cause is narrowly defined as (1) willful and continued failure to<br />
113
substantially perform duties (other than due to physical or<br />
mental illness) after written notice from the Board of Directors<br />
or (2) conviction of, or plea of nolo contendere to, a felony.<br />
In the event Mr. Collins is subject to the so-called “golden<br />
parachute” excise tax under Section 4999 of the U.S. Internal<br />
Revenue Code upon any termination, RHJI will pay him an<br />
additional amount to place him in the same after-tax position<br />
that he would have been in had no excise tax been imposed.<br />
RESTRICTIONS ON SHARE TRANSFERS<br />
At the time of RHJI’s initial public offering in March 2005, Mr.<br />
Collins agreed with RHJI that he could not transfer, pledge,<br />
assign, hypothecate or otherwise dispose of RHJI’s ordinary<br />
shares (including by way of any hedging or similar transaction<br />
that would result in the reduction or elimination of the downside<br />
risk in respect of their investment in such shares), subject to<br />
some limited exceptions. The lock-up agreement with RHJI ends<br />
on March 23, 2010. Mr. Collins will be released from the terms<br />
of any lock-up agreement with RHJI in the event of any<br />
termination of his agreement with RHJI, other than for a cause,<br />
prior to March 23, 2010.<br />
NEW OPPORTUNITIES<br />
Mr. Collins has agreed that he will use reasonable efforts to<br />
provide additional acquisition opportunities to RHJI that are<br />
consistent with RHJI’s strategy, although Mr. Collins will not<br />
have any obligation to allocate any particular opportunity to<br />
RHJI.<br />
On March 23, 2005, RHJI’s Board of Directors adopted a<br />
resolution waiving the specific provisions of the RHJI’s Code of<br />
Business Conduct and Ethics (see “Code of Business Conduct<br />
and Ethics Code”) that would apply to the outside activities of Mr.<br />
Collins, as a member of the Board of Directors and as then Chief<br />
Executive Officer. The resolution was valid for a period ending on<br />
the first anniversary date of such resolution. RHJI’s Board of<br />
Directors had subsequently renewed the above waiver on a<br />
yearly basis and, lastly, on March 5, 2009 approved a waiver for<br />
the fiscal year ending March 31, 2010.<br />
On an annual basis, the Board of Directors will continue to<br />
determine whether to renew the above waiver, after a thorough<br />
review of Mr. Collins’ activities outside RHJI. Any resolution<br />
renewing the waiver shall only be validly adopted if it has been<br />
approved by at least three-quarters of RHJI’s independent<br />
directors present or represented at the relevant meeting of the<br />
Board of Directors.<br />
In addition, the procedure required by Article 523 of the Belgian<br />
Companies Code applies to the renewal of such waiver.<br />
MR. FISCHER AS CHIEF EXECUTIVE<br />
OFFICER<br />
Mr. Fischer has been co-Chief Executive Officer of RHJI since<br />
May 2007. Since January 1, 2009, Mr. Leonhard Fischer is sole<br />
Chief Executive Officer and, as such, carries out the daily<br />
management of RHJI. Mr. Fischer is engaged full-time with the<br />
Company for an indefinite term.<br />
DELEGATION OF AUTHORITY<br />
The Board of Directors has delegated to Mr. Fischer the powers<br />
typically exercised by a Chief Executive Officer, which consists of<br />
general executive authority over RHJI’s affairs arising in the<br />
ordinary course of business. The authority delegated to the Chief<br />
Executive Officer is intended to be within the limits of the daily<br />
management of RHJI’s business within the meaning of the<br />
Belgian Companies Code. At any time the Board of Directors will<br />
have the power to withdraw or modify the authority it has<br />
delegated or terminate the agreement (see below) with the Chief<br />
Executive Officer with or without cause.<br />
Mr. Fischer is authorized to sub-delegate, under his own<br />
responsibility, one or more specific powers falling within the<br />
scope of day-to-day management to employees of the Company<br />
or any other person of his choice. However, he may not subdelegate<br />
the daily management as a whole to anybody.<br />
As part of his daily management powers, Mr. Fischer has<br />
authority to cause the Company to, among others, incur or grant<br />
any form of financing; grant any form of collateral; effect any<br />
treasury management transaction, investment or disinvestment<br />
transaction, hedging transaction, renting or leasing transaction;<br />
enter into any (including consultancy) services agreement (as a<br />
provider or beneficiary of the services); initiate or defend legal<br />
proceedings, provided (i) the amount of such financing,<br />
collateral, treasury management transaction, investment or<br />
disinvestment transaction, hedging transaction, renting or<br />
leasing transaction, services agreement or legal proceedings<br />
does not exceed EUR 25 million and (ii) such financing,<br />
collateral, hedging transaction or services agreement are for<br />
purposes other than M&A activity or such investment or<br />
disinvestment transaction does not qualify as M&A activity. The<br />
following will not qualify as “M&A activity”: any (i) investment<br />
into or (ii) disinvestment of, a shareholding in a company when<br />
such shareholding represents (together with any such shares<br />
already, directly or indirectly, (i) held or (ii) disinvested,<br />
respectively, by the Company) less than 10% of all shares<br />
outstanding of such company.<br />
114
CORPORATE GOVERNANCE<br />
Mr. Fischer has no authority over any matters that are reserved<br />
for the Board of Directors or the Shareholders’ Meeting<br />
pursuant to law or the Company’s Articles of Association or that<br />
are within the duties of any committee of the Board of Directors.<br />
Without prejudice to the day-to-day management powers of<br />
Mr. Fischer, Mr. Fischer has specific representation powers to<br />
hire, dismiss and determine the terms of employment of any<br />
employee, including any member of the Company’s senior<br />
management (other than the Chief Executive Officer, Chief<br />
Financial Officer and General Counsel).<br />
COMPENSATION<br />
Mr. Fischer receives an annual salary of EUR 100,000 and is<br />
eligible to an annual bonus, that for each of the fiscal years<br />
ended March 31, 2009 and 2008 amounted to EUR 1.5 million. In<br />
connection with his appointment as co-Chief Executive Officer in<br />
2007, entities controlled by Mr. Collins granted Mr. Fischer<br />
282,000 shares of RHJI. These shares are subject to a lock-up<br />
agreement that ends on May 1, 2010 on substantially similar<br />
terms as described for Mr. Collins above. The Company has also<br />
granted 513,333 shares to Leonhard Fischer, for which vesting<br />
was accelerated, further to a board decision, to October 22,<br />
2008, subject to a lock-up that restricts the transfer of shares<br />
for a four years period without consent of the RHJI Board of<br />
Directors. On September 16, 2008, RHJI has also granted to Mr.<br />
Fischer 90,000 shares of RHJI (free and clear of any<br />
restrictions). The compensation expense for the Company<br />
associated with the grant of 90,000 shares to Mr. Fischer and the<br />
vesting of the 513,333 shares amounted to JPY 145 million (EUR<br />
1 million). for the fiscal year ended March 31, 2009. Mr. Fischer<br />
participates in executive benefit plans and programs of RHJI and<br />
is also eligible for private aircraft usage pursuant to his<br />
employment agreement.<br />
TERMINATION AND CERTAIN OTHER TERMS<br />
Mr. Fischer’s employment agreement with the Company<br />
provides for customary non-compete, non-solicitation and no<br />
hire restrictions. The agreement may be terminated by either<br />
party, with or without cause. No severance will be paid to Mr.<br />
Fischer upon termination except as required by law and<br />
pursuant to the non-competition clause if enforced by the<br />
Company. Upon termination of the agreement, Mr. Fischer will<br />
receive payment for any accrued compensation and<br />
unreimbursed expenses. In addition, Mr. Fischer will resign<br />
from any position at the Board of Directors (and committee<br />
thereof) of RHJI and any companies owned directly or indirectly<br />
by RHJI, as applicable.<br />
115
OTHER MEMBERS OF EXECUTIVE MANAGEMENT<br />
COMPOSITION OF EXECUTIVE<br />
MANAGEMENT<br />
The following table sets forth information as to the individuals<br />
who, in addition to RHJI’s Chief Executive Officer, comprised<br />
RHJI’s executive management during the fiscal year ended<br />
March 31, 2009.<br />
Name Age Function at RHJI<br />
Anthony Barone 60 Executive Vice President<br />
Arnaud Denis 37 Investor Relations Director<br />
Jean-Marc Roelandt 44 Chief Financial Officer<br />
Rüdiger Schmid-Kühnhöfer 35 General Counsel<br />
Richard Shirrefs 53 Executive Vice President<br />
COMPENSATION<br />
Pursuant to the terms of the agreements entered into by RHJI<br />
and/or its affiliates with the members of RHJI’s executive<br />
management, other than Mr. Fischer, the aggregate following<br />
compensation paid to such members for services during the<br />
fiscal year ended March 31, 2009 was:<br />
• an aggregate compensation of JPY 231 million (EUR 1.6<br />
million) for services;<br />
• an aggregate bonus (based on performance and paid at the<br />
discretion of the Board of Directors) of JPY 206 million (EUR<br />
1.4 million);<br />
• aggregate other remuneration in the form of pensions,<br />
insurance coverage and other fringe benefits, including<br />
allowances, of JPY 23 million (EUR 0.2 million).<br />
The members of RHJI’s executive management, other than Mr.<br />
Fischer, were awarded a total of 741,260 restricted stock units<br />
(“RSU”) under the equity-based compensation plan adopted by<br />
the Board of Directors, on September 18, 2007 (see “Equitybased<br />
Compensation Plan” below). Total share-based<br />
compensation expense associated with the RSU’s awarded on<br />
October 1, 2007 and recorded in the consolidated income<br />
statement in accordance with IFRS, amounted to JPY 103 million<br />
(EUR 3.2 million) for the fiscal year ended March 31, 2009.<br />
177,880 RSU’s were awarded on October 1, 2007 and 563,380<br />
RSU’s were awarded on April 1, 2009. The awarded RSU per<br />
individual member of RHJI’s executive management are as<br />
follows:<br />
Name<br />
Number of restricted stock units<br />
Anthony Barone 213,183<br />
Arnaud Denis 13,684<br />
Jean-Marc Roelandt 177,971<br />
Rüdiger Schmid-Kühnhöfer 123,239<br />
Richard Shirrefs 213,183<br />
Total 741,260<br />
116
CORPORATE GOVERNANCE<br />
OTHER TERMS<br />
RHJI’s executive management is generally subject to customary<br />
non-compete, non-solicitation and no hire restrictions. The<br />
agreements may be terminated at any time by RHJI. Generally<br />
no severance will be paid to members of RHJI’s executive<br />
management upon termination, except as required by law.<br />
EQUITY-BASED COMPENSATION PLAN<br />
The adoption of any equity-based compensation plan is subject<br />
to approval by RHJI’s Board of Directors. While the Belgian Code<br />
on Corporate Governance recommends that such equity-based<br />
compensation plan be submitted to the approval of the<br />
shareholders, any equity-based compensation granted to the<br />
members of executive management is (along with other<br />
compensation granted to them) disclosed in the Annual Report<br />
of RHJI and RHJI believes that this provides information for<br />
shareholders to assess whether the level and structure of the<br />
remuneration of the members of executive management is such<br />
that qualified professionals can be attracted to, motivated and<br />
retained by RHJI, taking into account the global nature of RHJI’s<br />
business and competitive environment in which it operates. RHJI<br />
further believes that the process whereby executive<br />
remuneration requires the approval of the Board of Directors,<br />
upon recommendation of the Nomination and Remuneration<br />
Committee, is designed to ensure that such remuneration is fair<br />
and equitable.<br />
RESTRICTION ON SHARE TRANSFERS<br />
At the time of RHJI’s initial public offering in March 2005, in<br />
addition to Mr. Collins, other members of RHJI’s executive<br />
management, who were granted shares by a significant<br />
shareholder at that time, agreed with RHJI that until March 23,<br />
2010, each of them would not transfer, pledge, assign,<br />
hypothecate or otherwise dispose of RHJI’s ordinary shares<br />
(including by way of any hedging or similar transaction that<br />
would result in the reduction or elimination of the downside risk<br />
in respect of their investment in such shares), subject to some<br />
limited exceptions.<br />
On September 18, 2007, the Board of Directors has approved a<br />
long-term share-based incentive plan. The purpose of the plan<br />
is to serve the interests of RHJI and its affiliates by attracting<br />
and retaining exceptional employees, consultants and<br />
independent contractors, aligning their interests with the<br />
interests of RHJI’s shareholders and reinforcing the creation of<br />
long-term value.<br />
Awards under the plan are made in the form of restricted stock<br />
units, which shall be vested at such times, in such manner and<br />
subject to such terms and conditions contained in the relevant<br />
award agreement. For each restricted stock unit which vests,<br />
the participant shall receive one share of RHJI or, in the sole and<br />
plenary discretion of the Board, a cash amount equal to the fair<br />
market value of such share as of the vesting date.<br />
117
RHJI SHARES HELD BY<br />
DIRECTORS<br />
AND EXECUTIVE MANAGEMENT<br />
DISCLOSURE REQUIRED BY<br />
ARTICLE 34 OF THE BELGIAN<br />
ROYAL DECREE OF 14<br />
NOVEMBER 2007<br />
As of June 30, 2009:<br />
• All directors and executive management as a group<br />
beneficially own approximately 9.54% of RHJI’s total<br />
outstanding ordinary shares (which excludes 7.14 % non<br />
beneficially held by Mr. Collins (see “Shareholding<br />
Structure”));<br />
• All directors and executive management as a group (other<br />
than Mr. Collins) beneficially own approximately 1.46 %;<br />
• Executive management as a group beneficially own<br />
approximately 1.20 %.<br />
Article 34 of the Belgian Royal Decree of 14 November 2007<br />
requires disclosing certain types of elements when these may be<br />
susceptible to have an adverse effect on the ability of a third<br />
party to launch a public take-over bid on RHJI.<br />
According to this provision, RHJI discloses the following:<br />
• see Article 8 of RHJI’s Articles of Association (as published<br />
on www.rhji.com) on the ability of the Board of Directors to<br />
increase the share capital of RHJI under certain conditions;<br />
• see Article 12 of RHJI’s Articles of Association (as published<br />
on www.rhji.com) on the ability of the Board of Directors to<br />
cause RHJI to acquire and dispose of its own shares under<br />
certain conditions.<br />
118
CORPORATE GOVERNANCE<br />
STATUTORY AUDITOR<br />
SHAREHOLDERS’ MEETING<br />
Under Belgian law, the statutory auditor is appointed by a<br />
resolution adopted by a simple majority vote at a Shareholders’<br />
Meeting. The statutory auditor is appointed for renewable terms<br />
of three years. During their term of office, the statutory auditor<br />
can be removed only by a Shareholders’ Meeting for just cause.<br />
KPMG Reviseurs d’Entreprises/Bedrijfsrevisoren (represented<br />
by Mr. Benoit Van Roost, partner) is RHJI’s statutory auditor.<br />
KPMG was appointed, in connection with the audit of the nonconsolidated<br />
financial statements specifically, until the Annual<br />
Shareholders’ Meeting of September, 2010. KPMG was<br />
appointed, in connection with the audit of the consolidated<br />
financial statements, until the Annual Shareholders’ Meeting of<br />
September 2011.<br />
The Shareholders’ Meeting determines the remuneration of<br />
RHJI’s statutory auditor for his services in connection with the<br />
audit of RHJI’s financial statements. During the fiscal year<br />
ended March 31, 2009, the aggregate annual fee for these<br />
services has been JPY 42 million (EUR 0.3 million), excluding<br />
value-added tax and outlays. Information about total<br />
remuneration received by KPMG and certain of KPMG’s member<br />
firms in lieu of audit and other services is presented in note 37<br />
to the Consolidated Financial Statements.<br />
RHJI holds its Annual Shareholders’ Meeting on the third<br />
Tuesday of September of each year. If such day is a legal public<br />
holiday, the meeting will be held on the following working day. At<br />
this meeting, the Board of Directors and the statutory auditor’s<br />
report on the management and RHJI’s financial situation at the<br />
end of the previous fiscal year. RHJI’s shareholders then vote on<br />
the approval of the statutory annual accounts, the allocation of<br />
the profit or loss, the appointment, if necessary, of new directors<br />
or statutory auditor, and the release from liability of the<br />
directors and the statutory auditor (see “Statutory Auditor”) for<br />
the previous fiscal year. The Board of Directors or the statutory<br />
auditor may convene an Extraordinary Shareholders’ Meeting at<br />
any time RHJI’s interests so require. Shareholders representing<br />
one-fifth of RHJI’s total issued share capital may also convene<br />
an Extraordinary Shareholders’ Meeting.<br />
Shareholders representing one-fifth of RHJI’s total issued share<br />
capital may also move to include an item of business in the<br />
agenda for a Shareholders’ Meeting. While the Belgian Code on<br />
Corporate Governance provides that the level of shareholding to<br />
that effect should not exceed 5% of the total issued share<br />
capital, the one-fifth threshold adopted by RHJI is in compliance<br />
with the Belgian Companies Code. In addition, RHJI encourages<br />
participation at shareholders’ meeting and promotes proxy<br />
voting. Time is always allocated for questions during the<br />
Shareholders’ Meetings.<br />
Notices of all Shareholders’ Meetings contain the agenda of the<br />
meeting and the Board of Directors’ recommendations on the<br />
matters to be voted upon and are published in accordance with<br />
the Belgian Companies Code and posted on RHJI’s website at<br />
www.rhji.com.<br />
Except as described below, no quorum is required for a<br />
Shareholders’ Meeting and decisions are taken upon a simple<br />
majority vote of the shares present in person or represented by<br />
proxy. Each ordinary share is entitled to one vote.<br />
Resolutions relating to amendments of RHJI’s Articles of<br />
Association are subject to special quorum and majority<br />
requirements. Specifically, any resolution on these matters<br />
requires the presence in person or by proxy of shareholders<br />
holding an aggregate of at least 50% of RHJI’s total issued share<br />
capital and, generally, the approval by at least 75% of the shares<br />
present in person or represented by proxy at the meeting (and,<br />
in some cases, such as, among others, a modification to RHJI’s<br />
corporate purposes or legal form, a majority of at least 80%). If a<br />
quorum is not present, a second meeting must be convened.<br />
At the second meeting, the quorum requirement does not apply.<br />
The special majority requirement, however, will continue to<br />
apply.<br />
119
BUSINESS CONDUCT<br />
AND ETHICS CODE<br />
DEALING<br />
AND DISCLOSURE CODE<br />
RHJI’s Code of Business Conduct and Ethics summarizes the<br />
values, principles and business practices that guide its business<br />
conduct. The Business Conduct and Ethics Code sets out a set of<br />
basic principles regarding the minimum requirements which<br />
each of RHJI’s employees, officers, members of executive<br />
management, directors, advisors and consultants are expected<br />
to become familiar with and to apply as guiding principles in the<br />
daily performance of their job responsibilities.<br />
In addition to general principles, there are specific provisions<br />
which address various legal and ethical compliance issues,<br />
including, among others, conflicts of interest (including conflicts<br />
of interest not covered by Article 523 of the Belgian Companies<br />
Code), outside directorships and other outside activities,<br />
business gifts and entertainment, whether offered or received,<br />
competition and fair dealing, discrimination and harassment,<br />
health and safety, confidentiality and personal data protection<br />
and protection of proprietary information. The Business Conduct<br />
and Ethics Code also provide procedures for addressing<br />
complaints concerning auditing issues.<br />
The Business Conduct and Ethics Code encourage the reporting<br />
of any possible unethical or illegal conduct and sets forth<br />
specific compliance procedures. This includes the opportunity<br />
for all complaints to be brought anonymously.<br />
The Business Conduct and Ethics Code is intended to<br />
supplement RHJI’s other policies including the Dealing and<br />
Disclosure Code (see “Dealing and Disclosure Code”) and RHJI’s<br />
general commitment to comply with applicable laws, and is not<br />
intended to replace those laws.<br />
RHJI’s Dealing and Disclosure Code applies to all of RHJI’s<br />
employees (including officers and members of executive<br />
management) and directors, as well as to the other persons and<br />
entities (including, to the extent indicated in the Code, to the<br />
companies controlled by RHJI) indicated therein.<br />
The purpose of the Dealing and Disclosure Code is to ensure<br />
that such persons and entities do not abuse, nor place<br />
themselves under suspicion of abusing, and maintain the<br />
confidentiality of price sensitive information that they may have<br />
or may be thought to have, especially in periods leading up to an<br />
announcement of financial results or of price sensitive events or<br />
decisions. To this end, the Dealing and Disclosure Code sets out<br />
minimum standards to be followed. In particular, subject to<br />
special clearance that can only be granted in very limited<br />
circumstances, covered persons may not deal in RHJI’s ordinary<br />
shares during a closed period or a prohibited period. A closed<br />
period is defined substantially as the period preceding the<br />
publication of periodical financial results, beginning on the last<br />
day of the period covered by such results and ending on the date<br />
of such publication. A prohibited period is a period that RHJI’s<br />
General Counsel or RHJI’s Board of Directors has determined as<br />
a sensitive period. The Dealing and Disclosure Code also<br />
provides that directors and certain members of executive<br />
management (and certain persons associated to them) must<br />
comply with the Belgian law requirement to notify their<br />
transactions in RHJI shares (or other financial instruments<br />
linked to such shares) to the CBFA in accordance with applicable<br />
Belgian rules and the guidance published by the CBFA. The<br />
Dealing and Disclosure Code is not intended to replace the<br />
applicable laws prohibiting insider dealing and disclosure of<br />
price sensitive information.<br />
120
CORPORATE GOVERNANCE<br />
121
122
PART IV<br />
SHAREHOLDERS’ INFORMATION
All outstanding ordinary shares of RHJI have been listed on NYSE-Euronext Brussels and have been part of the BEL Mid Index since<br />
July 1, 2005 and the PRIVATE EQUITY NXT Index since February 2008.<br />
Share Code<br />
RHJI<br />
ISIN Code:<br />
BE0003815322<br />
Reuters Code<br />
RHJI.BR<br />
Bloomberg Code:<br />
RHJI.BB<br />
Number of shares 85,545,547<br />
Market Capitalization (30/06/2009)<br />
EUR 389 million<br />
124
SHAREHOLDERS’ INFORMATION<br />
SHARE PRICE<br />
SHAREHOLDING STRUCTURE<br />
Fiscal Year Ending March 31,<br />
In EUR 2009 2008<br />
Highest Closing Price 8.48 15.50<br />
Lowest Closing Price 2.50 7.16<br />
Fiscal Year-End Share Price 2.69 7.16<br />
Number of Shares<br />
Average daily volumes traded 137,620 94,126<br />
Stock Market Capitalization EUR 230 million EUR 612 million<br />
The share capital of RHJI amounts to 664,424,086 EUR and is<br />
represented by 85,545,547 shares without nominal value. All<br />
shares are listed on NYSE-Euronext Brussels, have the same<br />
rights and par accounting value and are fully paid up. Each share<br />
entitles the holder to one voting right.<br />
Based on transparency declarations received by RHJI in<br />
accordance with Belgian rules and RHJI’s Articles of<br />
Association, five shareholders have notified RHJI of their<br />
holdings as of June 30, 2009.<br />
Percentages indicated hereunder relate to the voting rights<br />
attached to the total number of outstanding shares issued by<br />
RHJI.<br />
• Timothy C. Collins and related entities: 15.22% (13,021,992<br />
shares) (includes 7.12% of non-beneficially held shares).<br />
In accordance with Belgian rules, 15.22% represents a<br />
combination of shares beneficially owned by Mr. Collins directly<br />
or through entities related with Mr. Collins (8.11%) and shares<br />
(held in entities related with Mr. Collins on behalf of certain<br />
other investors) over which Mr. Collins is deemed to have voting<br />
rights (7.12%) but not beneficial ownership.<br />
• BlackRock Group: 8.41% (7,193,000 shares)<br />
• Davis Selected Advisors LP: 5.66% (4,840,741 shares)<br />
• Third Avenue Management LLC: 4.60% (3,934,399 shares)<br />
• Bank of America Corporation: 2.99% (2,599,672 shares)<br />
125
FINANCIAL CALENDAR AND INVESTOR RELATIONS<br />
Shareholders and investors wishing to obtain copies of this Annual Report or other information on RHJI can contact:<br />
Arnaud Denis<br />
Investor Relations Director<br />
Tel. +32 (0)2 643 60 13<br />
Fax +32 (0)2 648 99 38<br />
E-Mail : investor-relations@rhji.com<br />
When accessing RHJI’s website on www.rhji.com, you will find a PDF version of this Annual Report, the non-consolidated financial<br />
statements and the related directors’ report and auditors’ report, press releases, stock price and other information on RHJ<br />
International, in English and French.<br />
Date<br />
Event<br />
• Tuesday, September 15, 2009<br />
Annual Shareholders’ Meeting<br />
• Between August 1 and August 19, 2009<br />
Trading Update<br />
• Monday, November 30, 2009 Half-Year Results 2009 (Period Ending September 30, 2009)<br />
• Between February 1 and February 17, 2009<br />
Trading Update<br />
• Wednesday, June 30, 2010 Preliminary Full-Year Results 2009 (Fiscal Year Ending March 31, 2010)<br />
• Tuesday, September 21, 2010<br />
Annual Shareholders’ Meeting<br />
126
NOTES<br />
127
128<br />
NOTES
Co-ordination and Production : IPAC - Corporate & Financial Communication<br />
Printing : Deloge
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Avenue Louise 326<br />
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