ANNUAL REPORT

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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. 90
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2009 30.3.2.1. Effective interest and maturity schedule In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice. (in JPY millions) Currency Less than one year Cash and cash equivalents Between one and five years More than five years Total Weighted average interest rate EUR 45,500 - - 45,500 0.4 % JPY 17,446 - - 17,446 0.0 % USD 7,626 - - 7,626 0.2 % OTHERS 1,763 - - 1,763 0.1 % 72,335 - - 72,335 Finance leases EUR (46) - - (46) 0.0 % JPY (2,037) (2,115) (90) (4,242) 2.1 % USD - (444) - (444) 8.8 % OTHERS (168) (16) - (184) 10.0 % (2,251) (2,575) (90) (4,916) Senior debt Secured Term Fixed rate USD (13) (16) - (29) 9.5 % Variable rate EUR (40,057) - - (40,057) 7.2 % JPY (2,237) (8,248) - (10,485) 4.2 % USD (24) (43,086) - (43,110) 8.4 % OTHERS (114) (1,974) (121) (2,209) 5.6 % Revolver Fixed rate JPY (229) - - (229) 2.5 % Variable rate JPY (8,265) - - (8,265) 3.8 % USD (383) - - (383) 9.3 % OTHERS (489) - - (489) 5.1 % Bullet Variable rate JPY (733) (14,229) - (14,962) 4.8 % Unsecured Term Fixed rate JPY (724) (1,116) - (1,840) 3.3 % Variable rate JPY (240) (94) - (334) 3.6 % OTHERS (83) - - (83) 4.5 % Revolver Variable rate JPY (2,821) - - (2,821) 2.7 % Bullet Fixed rate JPY (1,100) - - (1,100) 4.5 % Variable rate JPY (3,164) - - (3,164) 2.6 % Other Fixed rate USD - (147) - (147) 11.0 % (60,676) (68,910) (121) (129,707) Subordinated debt Secured EUR (24,456) - - (24,456) 12.0 % JPY - (4,000) - (4,000) 5.7 % Unsecured USD - (2,761) - (2,761) 12.0 % (24,456) (6,761) - (31,217) Others EUR (4,380) (2,623) - (7,003) 7.3 % JPY (3,063) (469) (5,228) (8,760) 7.2 % USD - (1,085) (5,915) (7,000) 5.5 % OTHERS (408) - - (408) 8.1 % (7,851) (4,177) (11,143) (23,171) Total (22,899) (82,423) (11,354) (116,676) 30.3.2.2. Sensitivity analysis An increase (decrease) of the interest rate by 1% on the loans and borrowings would have increased (decreased) the interest expense by JPY 3,030 million and JPY 2,430 million for the fiscal years ended March 31, 2009 and 2008, respectively. This analysis assumed that all other variables, in particular currency exchange rates, remain constant. 91
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ANNUAL REPORT Year Ended March 31,
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PART I LETTER TO SHAREHOLDERS AND B
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Support to our portfolio companies
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The evolution of the book value of
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Consolidated Financial Statements F
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Asahi Tec Corporation • Headquart
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RHJI's purchase agreement to buy ce
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Honsel International Technologies S
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Niles Co., Ltd. • Headquarters: J
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Columbia Music Entertainment, Inc.
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Phoenix Resort K.K. • Headquarter
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Shaklee Global Group, Inc. • Indu
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PART II FINANCIAL STATEMENTS FOR TH
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FINANCIAL STATEMENTS FOR THE FISCAL
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ANNUAL REPORT

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