ANNUAL REPORT

30.3. Market risk
The Company’s overall risk management policy focuses on the unpredictability of financial markets and seeks to minimize potential
adverse effects on the Company’s financial performance. Derivative financial instruments can be used to hedge exposure to
fluctuations in foreign exchange rates, commodity prices and interest rates.
The following table provides an overview of the derivative financial instruments outstanding at year-end by maturity bucket. The
amounts included in this table are the notional amounts:
(in JPY millions) 2009 2008
Foreign currency
Less than
one
year
Between
one and five
years
More than
five
years
Less than
one
year
Between
one and five
years
More than
five
years
Forward exchange contracts 1,973 250 - 7,160 - -
Interest rate
Interest rate swap 10,756 - - 698 20,023 -
Purchased caps 19,741 - - - 23,684 -
Commodities
Forward purchase contracts for
aluminum
946 - - 3,360 - -
Forward sales contracts for aluminum - - - - - -
Total 33,416 250 - 11,218 43,707 -
30.3.1. Commodity risk
Certain consolidated businesses procure raw materials, most significantly aluminum, through a combination of contract
commitments and spot market purchases. They are exposed to commodity risk, which is moderated through the use of customer
contracts that typically provide for sales price adjustments related to changes in the cost of light metal alloys. For HIT primarily, the
selling prices are however only adjusted periodically and as a result, HIT is exposed to changes in aluminum prices within the
contracts’ price indexation periods. Accordingly, HIT hedges a significant portion of its aluminum purchases by entering into forward
purchase and sales contracts on the London Metal Exchange. As of March 31, 2009, HIT had forward purchase contracts for notional
amounts of JPY 946 million. The corresponding fair values of these contracts, designated as cash flow hedges for which hedge
accounting is applied, amounted - JPY 134 million. As of March 31, 2008, HIT had forward purchase contracts for notional amounts of
JPY 3,360 million. The corresponding fair values of these contracts, designated as cash flow hedges for which hedge accounting is
applied, amounted JPY 135 million.
30.3.2. Interest rate risk
The Company is exposed to changes in interest rates primarily as a result of the borrowing activities of its consolidated businesses,
which include borrowings used to maintain liquidity and to fund business operations and acquisitions. These borrowings consist
primarily of floating rate debt. The Company intends to maintain a balanced mix of fixed and floating rate borrowings, and accordingly
has entered into derivative transactions to manage the exposure associated with the floating rate borrowings. All the derivative
transactions, JPY 30,497 million in aggregate at March 31, 2009, compared to JPY 44,405 million at March 31, 2008, are accounted for
as cash flow hedges with a fair value of - JPY 449 million.
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