annual report...annual report 2010 - part i letter to shareholders 5 part ii our business 9 part iii...

A N N U A L R E P O R TY e a r e n d e d D e c e m b e r 3 1 , 2 0 1 0

HIGHLIGHTS AND RECENT DEVELOPMENTS

I Transformation from an industrial holding company into a financial services group: EUR 357 million of investments in financial services made or agreed up to April 30, 2011; EUR 137 million of disposals provisionally agreed.

I Acquisition in July 2010 of Kleinwort Benson, banking and financial services group, for EUR 256.1 million.

I Acquisition in October 2010 of KBC Asset Management Limited in Dublin for EUR 23.7 million, extending Kleinwort Benson’s asset management product offering.

I Agreement by Kleinwort Benson in March 2011 to acquire Close Brothers Offshore Group (for cash consideration of EUR 34 million), which will increase Kleinwort Benson’s private wealth assets under management from EUR 5.5 billion to approximately EUR 8.1 billion. The acquisition will be primarily financed through Kleinwort Benson.

I Filing for insolvency by Honsel AG in October 2010: non-consolidated carrying value of EUR 52.8 million written off; EUR 30.6 million of intercompany loans outstanding for which recovery will depend on the outcome of the insolvency proceedings.

I Improvement in trading and successful refinancing at Asahi Tec.

I Agreement in February 2011 regarding the sale of RHJI’s 77.9% stake in Niles for EUR 137 million, subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence.

I Japan earthquake: Asahi Tec and Niles facilities in Japan structurally unaffected although impacted by power outages and interrupted production by Japanese customers and suppliers. Phoenix Seagaia Resort’s facilities were not directly affected by the earthquake, but depressed occupancy levels cast doubt on it as a going concern. The non-consolidated carrying value of EUR 46.8 million has been written off, and impairment charges of EUR 39.1 million were recorded in the consolidated financial statements.

Annual Report 2010 -

PA R T I

Letter to Shareholders 5PA R T I I

Our Business 9PA R T I I I

Financial Statements for the Fiscal Year Ended December 31, 2010 2 9

PA R T I V

Corporate Governance 1 4 3PA R T V

Shareholders’ Information 1 6 3

Annua l Repo r t 2010 -

PA R T I

L e t t e r t o S h a r e h o l d e r s

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

PA R T I I

O u r B u s i n e s s

Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0Business Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2

PA R T I I I

F i n a n c i a l S t a t e m e n t s f o r t h e F i s c a l Ye a r E n d e d D e c e m b e r 3 1 , 2 0 1 0

Management Discussion & Analysis . . . . . . . . . . . . . . . . . . . . . . . . 3 0Principal Risks and Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 4 9Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 7Auditor’s Report on the Consolidated Financial Statements . . 1 3 8Condensed Non-Consolidated Financial Statements . . . . . . . . . 1 4 0

PA R T I V

C o r p o r a t e G o v e r n a n c e

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 6Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 0Other Members of the Executive Management . . . . . . . . . . . . . . 1 5 3RHJI Shares Held by Directors & Executive Management . . . . . 1 5 6Internal Control & Risk Management Systems . . . . . . . . . . . . . . . 1 5 6Disclosure Required by Art. 34 of the Belgian Royal Decree of 14/11/2007 . . . . . . . . . . . . . . . . . . . 1 5 8Statutory Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 8Shareholders’ Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 9Business Conduct & Ethics Code . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 9Dealing and Disclosure Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 0

PA R T V

S h a r e h o l d e r s ’ I n f o r m a t i o n

Share Price Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4Shareholding Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4Financial Calendar and Investor Relations . . . . . . . . . . . . . . . . . . 1 6 5

TA B L E O F C O N T E N T S

‘ I am confident that we are well prepared to capitalize on growth opportunities in financial services and that we will be able to deliver solid value to our shareholders over the long term. ’


PA R T I

Letter to Shareholders 5

April 27, 2011

Dear Shareholders,

The purchase of Kleinwort Benson from Commerzbank AG for EUR 256 mill ion on July 1, 2010 accelerated the transformation of RHJ International into a financial services group based on an independent merchant banking model.

We see significant opportunities in financial services under the Kleinwort Benson brand. Clients today are inclined towards high quality, independent institutions with an advisory and partnership model. A client-centric approach is essential. We aim to revitalise the independent merchant banking model, adopting a conservative banking approach with a principal investor point of view. RHJ International will develop its independent merchant banking model based on three pillars: Banking, Asset Management and Merchant Banking.

The purchase of KBC Asset Management Limited in Dublin in October 2010 for EUR 23.7 mill ion strengthened the Asset Management business, adding EUR 3.6 bill ion to assets under management. KBC Asset Management Limited (Dublin) has been renamed Kleinwort Benson Investors. The more recent agreement in March 2011 for Kleinwort Benson Bank to acquire Close Brothers Offshore Group, comprising private banking, fund administration, fund management, trust and asset management businesses, will further increase private wealth assets under management to EUR 8.1 bill ion. It will also further strengthen Kleinwort Benson’s banking

proposition in terms of l iquidity and capital base. Depending on regulatory approvals, we expect to complete this purchase by the end of July.

Operational improvements at Kleinwort Benson are underway and should progressively lead to strengthening financial performance. A focus on costs, together with the effect of efficiency programmes initiated in June has begun to show results, leading to lower expenses for the six months ended December 31.

Thanks to Kleinwort Benson’s very sound balance sheet, we are well positioned to cope with the tightening regulatory and changing business environment.

Industrial Portfol io

Before the recent earthquake, Asahi Tec Corporation was benefitting from increasing production volumes and from the refinancing of its debt. The manufacturing facilities of Asahi Tec and Niles, including one facility located in the badly affected Fukushima prefecture, did not suffer structural damage following the Tohoku earthquake which struck Northern Japan on Friday, March 11, 2011. Production was resumed, albeit at reduced capacity because of interrupted customer production and intermittent power supply. Following the recent agreement to sell the 77.9% stake in Niles to Valeo, we continue to work on completing the transaction during the first half of 2011.

Phoenix Seagaia Resort’s facil ities, located on the South-East Pacific coast line of Japan, have not been directly affected by the earthquake, but depressed occupancy casts doubt on it as a going concern.

L E T T E R T O S H A R E H O L D E R S

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Honsel AG filed for insolvency in October 2010 having failed to reach agreement with all stakeholders on a sustainable restructuring plan to allow for the continuation of the company. Despite efforts by Honsel’s management to address operating issues, Honsel’s financial performance remained under pressure and resulted in a liquidity shortfall.

Excluding Niles, financial services and the industrial portfolio now represent 65% and 35%, respectively, of RHJ International’s book value of EUR 494.4 mill ion, excluding cash. We will continue to seek opportunities to exit gradually our industrial investments over time with a view to capitalising on growth opportunities in financial services.

In 2010, we took the necessary steps, including the appointment of new senior management, to succeed as an independent merchant bank. We received excellent feedback from our clients. We would like to thank our dedicated employees for the full commitment they have shown, and our shareholders for their continued support. We anticipate further progress in the transformation of the business in the months ahead.

I look forward to welcoming you at our Annual Shareholders Meeting on June 21, 2011.

Leonhard Fischer Chief Executive Officer

7

Let te r to Shareho lders

STRATEGy . . . . . . . . . . . . . . . . . . . . . . . . . 1 0BUSINESS REVIEW . . . . . . . . . . . 1 2


PA R T I I

Our Business 9

RHJ International («RHJI») completed the purchase of Kleinwort Benson Private Bank Limited and Kleinwort Benson Channel Islands Holdings Limited (together «Kleinwort Benson») from Commerzbank AG on July 1, 2010. The total cash consideration was EUR 256.1 mill ion. A refocusing of Kleinwort Benson’s business was launched soon after. The acquisition has accelerated RHJI’s transformation into a dynamic financial services group.

RHJI sees significant medium-term opportunities for a merchant banking strategy with a strong client-centric approach to banking. Clients today are more inclined towards high quality, independent institutions with an advisory and partnership model. This model offers substantial upside for the refocused RHJI.

RHJI will exploit these growth areas by developing its independent merchant banking model based on three pillars: Banking with Kleinwort Benson and its Wealth Management, Fiduciary and Execution business; Asset Management with Kleinwort Benson Investors and

its multi-asset and specialised investment strategies (Environmental and Dividend Plus); and Merchant Banking, participating in, for example, co-investment opportunities alongside clients and institutional investors. Kleinwort Benson, with its well-known and trusted brand is the cornerstone of this strategy.

As demonstrated by the agreement to sell the 77.9% stake in Niles to Valeo, the remaining industrial investments will be sold in order to concentrate exclusively on RHJI’s financial services strategy.

The proceeds of the industrial divestments and its strong financial position should help RHJI expand organically and by bolt-on acquisitions, under the Kleinwort Benson brand. There is no intention to venture into higher risk investment banking activities such as primary underwriting of debt or equity securities, both of which would absorb additional capital.

R H J I N T E R N AT I O N A L’ S I N D E P E N D E N T M E R C H A N T B A N k M O D E L

WealthManagement& Execution

Services

AssetManagement

MerchantBanking

Clients Service Markets & Regions

Operationalexcellence

• High Net Worth Individuals• Institutional Investors

Efficient structure with strong client focusLean cost base, freeing up resources to drive growthRationalised IT architecture with compelling client proposition

• Wealth structuring & fund solutions• Fixed income brokerage, advisory and origination, transition management

• UK, Channel Islands bank with domestic and international clients

• Global distribution

• International

• Niche product high alpha funds

• Fee based strategic advice• Investment ideas• Principal and co-investing

• Institutional• Distributors• Private investors

• Corporates & Government clients• High Net Worth Individuals («HNWI») and Ultra HNWI and Institutional Investors• Sovereign wealth funds

•••

Kleinwort Benson Group : the independent Merchant Bank

S T R AT E G Y

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B A N k I N GKleinwort Benson has a banking heritage dating back to 1786 and an established reputation in private banking, fund administration and wealth management in the UK and Channel Islands.

Maintaining a strong and conservatively managed capital base remains a key principle of Kleinwort Benson and RHJI, underpinning a low-risk, highly client-centric business model. With a tier 1 ratio in excess of 20% at December 2010, Kleinwort Benson continued to exceed strongly its minimum capital requirements. Kleinwort Benson maintains high liquidity through the nature of its deposits base and a significant portfolio of marketable securities. This sound financial position allows Kleinwort Benson to pursue further or even accelerate the bank’s growth initiatives.

Over the medium-term, Kleinwort Benson expects to benefit from improving operating efficiency and re-focusing of its business. The business will be developed onshore and offshore, as already demonstrated in the latter case by the announced acquisition of Close Brothers Offshore Group.

A S S E T M A N A G E M E N TThe strategy to strengthen Kleinwort Benson’s asset management capabilities was demonstrated by the purchase in October 2010 of KBC Asset Management Limited (Dublin) for EUR 23.7 mill ion.

Now renamed Kleinwort Benson Investors, this is a high quality asset management firm managing discretionary assets for institutional clients. Kleinwort Benson Investors offers multi-asset strategy products,

predominantly for its Irish home market as well as two specialist equity strategies in growth areas for domestic and international clients: environmental and dividend oriented equities. Based in Dublin, Kleinwort Benson Investors serves clients in Ireland, Asia and North America.

M E R C H A N T B A N k I N GKleinwort Benson will develop a demand-driven strategic and tactical advisory business for corporate and government clients, building on the experience of its senior executive team and the Kleinwort Benson heritage. RHJI will also look internationally for investment opportunities to invest alongside clients and institutional investors.

In October 2010, RHJI strategically aligned itself with Timothy Collins and Ripplewood Holdings LLC by merging its activities with those of Ripplewood and by acquiring a 13 per cent interest in the general partner of Ripplewood Partners II, L.P., a private equity fund managed by Ripplewood. Ripplewood will now focus exclusively on the existing fund investments and new investments will be made in conjunction with the merchant banking activities.

1 1

Our Bus iness

RHJI changed its year-end to December from March and changed the accounting currency from JPy to EUR. Therefore the past financial year comprised nine months only, from April 1, 2010 to December 31, 2010.

Following the recent agreement to sell the 77.9% stake in Niles to Valeo, RHJI continues to work to complete

the transaction during the first half of 2011. Excluding Niles, the portfolio consists of investments in financial services and a legacy portfolio of industrial investments representing 65% and 35%, respectively, of a total book value of EUR 494.4 mill ion, excluding cash.

R H J I n t e r n a t i o n a l P o r t f o l i o

1. Kleinwort Benson Group is the holding company of Kleinwort Benson Private Bank Ltd., Kleinwort Benson Channel Islands Holdings Ltd and Kleinwort Benson Investors (Dublin).

Ownership

13%

Ownership

Asahi Tec

Name

54%

43%

22%

100%

Shaklee

SigmaXYZ

Phoenix Seagaia Resort

TOTAL

Name

100%

Book Value(EUR m)

Book Value(EUR m)

111.2

51.4

8.6

-

171.2

4.5

5.8

19.3

2.3

Kleinwort Benson Group (1)

Ripplewood

Arecon

Quirin Bank

Other

28%

NA

323.2TOTAL

50%

291.3

(General Partner interest)

‘Legacy’ industrial investments Financial services investments

B U S I N E S S R E V I E W

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The evolution of the book value of RHJI’s portfolio since March 31, 2010, can be summarized as follows:

E v o l u t i o n o f B o o k V a l u e ( 1 )

( 1 ) On a non-conso l ida ted bas i s(2 ) P ro fo rma the p roceeds f rom the sa le o f N i l es and i nc lud ing the loan por t fo l i o . The sa le o f N i l es i s no t comp le ted and i s sub jec t to

c los ing ad jus tments , i nc lud ing po ten t i a l remed ia t ion cos ts a r i s i ng f rom the ou tcome o f env i ronmenta l due d i l i gence(3 ) I nc lud ing ne t cash he ld a t management subs id ia r i es , depos i t s > 3 months and i nves tment secu r i t i es

(In EUR millions)

Ownership March 31, 2010 Additions Disposals Fair value

adjustments Impairment December 31, 2010

Investments in financial services

Arecon 50% 5.8 - - - - 5.8

kleinwort Benson Group 100% - 291.3 - - - 291.3

Quirin 27.8% 19.3 - - - - 19.3

Ripplewood (General Partner interest) 13.0% - 4.5 - - - 4.5

Other 2.1 0.2 - - - 2.3

27.2 296.0 0.0 0.0 0.0 323.2

Investments in legacy industrial portfolio

Asahi Tec 54.5% 111.2 - - - - 111.2

Honsel 51% 52.8 - - - (52.8) -

Phoenix Seagaia Resort 100% 46.8 - - - (46.8) -

Shaklee 42.7% 51.4 - - - - 51.4

SigmaXYZ 21.8% 8.6 - - - - 8.6

270.8 - - - (99.6) 171.2

Total investments 298.0 296.0 0.0 0.0 (99.6) 494.4

Pro Forma cash and cash equivalents (2)

Cash and cash equivalents (3) 421.9 - (358.4) - - 63.5

Assets held for sale (Niles) 159.8 - - - (22.8) 137.0

581.7 0.0 (358.4) 0.0 (22.8) 200.5

Loans 32.7 22.9 (7.6) 0.0 - 48.0

Total portfolio 912.4 318.9 (366.0) 0.0 (122.4) 742.9

Book value per share (in EUR) 10.7 3.7 (4.3) 0.0 (1.4) 8.7

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Our Bus iness

I n v e s t m e n t s a n d d i s p o s a l sChanges to the investments during the financial year ended December 31, 2010:

• In July, 2010, completed the acquisition of Kleinwort Benson;

• In October, 2010, completed the acquisition of KBC Asset Management Limited (Dublin);

• In October, 2010, strategic alignment with Timothy Collins and Ripplewood Holdings LLC;

• The total loan portfolio of EUR 48 mill ion mainly included EUR 32.1 mill ion of loan facilities granted to Honsel, EUR 10 mill ion related to the acquisition of Ripplewood, a revolving loan of EUR 2 mill ion to Phoenix Seagaia Resort, and the remaining EUR 2.7 mill ion loan granted to Asahi Tec’s former subsidiary Metaldyne;

• The carrying value of the investment in Honsel at the time of its fi l ing for insolvency in October was EUR 52.8 mill ion and was written off. In addition EUR 20 mill ion credit facil ities and EUR 12.1 mill ion of leasing and factoring facilities were outstanding at December 31, 2010. The outstanding balance was further reduced after the year-end and the recovery of the outstanding balance of EUR 30.6 mill ion depends on the outcome of the insolvency proceedings. In accordance with the intercreditor agreement governing Honsel’s financial debt, the backstop and liquidity facil ities of EUR 20 mill ion in aggregate rank behind the revolving credit facil ity and the customer and supplier debt of EUR 70 mill ion in aggregate, but ahead of the senior term loan of EUR 110 mill ion and the mezzanine debt of EUR 30 mill ion.

P o s t b a l a n c e s h e e t e v e n t s :• On February 23, 2011, RHJI announced the sale of

its 77.9% ownership interest in Niles for JPy 15.5 bill ion (EUR 137 mill ion) cash, subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence. The carrying value of the investment in Niles as at December 2010, was adjusted to reflect the selling price pre closing adjustments. RHJI continues to work to complete the sale during the first half of 2011.

• On March 10, 2011 Kleinwort Benson agreed to acquire Close Brothers Offshore Group for £29.1 mill ion (EUR 34 mill ion), subject to adjustments related to the net assets of the business on completion. The acquisition will be primarily financed through Kleinwort Benson. The completion of the

transaction is subject to approval by the relevant regulatory bodies and is expected to be completed by the end of July.

Assuming the proceeds from the sale of Niles (pre closing adjustments), RHJI’s pro forma cash position at December 31, 2010, amounted to approximately EUR 200 mill ion.

I m p a i r m e n tRHJI prepares both consolidated and non-consolidated financial statements. The consolidated financial statements are prepared in accordance with IFRS, while the non-consolidated financial statements are prepared in accordance with Belgian Generally Accepted Accounting Principles («Belgian GAAP»). An impairment review was carried out for both the consolidated and the nonconsolidated financial statements (1).

N o n - c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t sAt December 31, 2010, RHJI made impairments of EUR 122.4 mill ion:

• The carrying value of EUR 52.8 mill ion of the investment in Honsel was written off following Honsel’s fi l ing for insolvency on October 25, 2010;

• The carrying value of EUR 46.8 mill ion of the investment in Phoenix Seagaia was written off because of the uncertainty as to its ability to continue as a going concern;

• The carrying value of EUR 159.8 mill ion in Niles was reduced by EUR 22.8 mill ion as a result of the agreement to sell its stake to Valeo for EUR 137 mill ion. The sale has not been completed and the selling price is subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence;

• The carrying value of RHJI’s subsidiary RHJI Services was reduced by EUR 10.6 mill ion to reflect its net asset value of EUR 49.8 mill ion. RHJI Services is a management subsidiary that provides advisory services and engages in intergroup financing.

RHJI also reviewed the carrying value of other investments as reflected in the non-consolidated financial statements for the financial year ended December 31, 2010, prepared in accordance with Belgian GAAP. In particular, we assessed whether the future recoverable amount of each individual investment was in excess of its carrying value (2). The assessment included a review and analysis of (a) publicly observed market prices for the publicly listed investments,

(1 ) The re a re d i f f e rences i n the va lua t ion approach , na tu re and ou tcome o f these rev iews resu l t i ng f rom d i f f e ren t methodo log ies o f de te rm in ing an asse t ’s recove rab le amount be tween IFRS and Be lg ian GAAP. I FRS de f i nes the recove rab le amount o f an asse t as the h ighe r o f ( a ) the asse t ’s f a i r va lue l ess cos ts to se l l o r (b ) i t s va lue i n use . The va lue i n use i s based on the d i scoun ted cash f l ows p ro jec ted to be de r i ved f rom an asse t ’s con t i nu ing use . Be lg ian GAAP requ i res the recogn i t i on o f impa i rment o f an asse t i f i t s ca r r y ing va lue i s p ro jec ted to pe rmanen t l y exceed i t s recove rab le amount , wh ich a re de te rm ined us ing und iscoun ted cash f l ows and/o r ea r n ings es t imates .

(2 ) The fu tu re recove rab le amount o f the conso l ida ted subs id ia r i es has been de te rm ined by app l y ing cu r ren t l y app l i cab le va lua t ion mu l t ip l es to the conso l ida ted subs id ia r i es ’ und iscoun ted p ro jec ted ea r n ings , and tha t the resu l t i ng amounts do no t pu rpor t to i nd ica te the cu r ren t f a i r va lue o r i n t r i ns i c va lue o f the RHJ In te r na t iona l ’s i nves tments i n conso l ida ted subs id ia r i es . )

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(b) valuation multiples for groups of publicly listed, comparable companies, and with respect to the consolidated subsidiaries, (c) the projected financial performance based on budgets and business plans prepared by their respective managements.

Based on the above analysis, the future recoverable amount of each individual investment, with the exception of Honsel, Phoenix Seagaia Resort, Niles, and RHJI Services, was found to be in excess of its carrying values. However, we remain cautious on the global economic outlook and have not reversed any of the previous impairment charges, given the current economic uncertainty, the volatil ity of the financial markets and the potential adverse consequences of the earthquake in Japan.

C o n s o l i d a t e d f i n a n c i a l s t a t e m e n t sFor the consolidated financial statements, in accordance with IFRS, we carefully analysed the performance of the consolidated businesses in order to assess whether there was any indication of impairment of the respective long-lived assets. The analysis included a review of the industry perspective, and of the impact of the expected performance of certain portfolio companies on the recoverable amount of tangible assets, goodwill and other long-lived intangible assets. The analysis resulted in an impairment charge of EUR 39.1 mill ion for the fiscal year ended December 31, 2010, on Phoenix Seagaia Resort’s property because of the uncertainty as to its ability to continue as a going concern. More information on the methodology used to assess the estimated recoverable amount of Phoenix Seagaia Resort’s assets is provided in note 16 to the Consolidated Financial Statements.

B u s i n e s s R e v i e w f o r t h e f i n a n c i a l y e a r e n d e d D e c e m b e r 3 1 , 2 0 1 0The following business review is based on the individual companies’ consolidated financial information prepared in accordance with International Financial Reporting Standards («IFRS») and presented in their respective currency. Conversion into Euros has been done in accordance with IAS 21 using the following exchange rates:

EUR/JPY EUR/GBP

Closing exchange rate (assets and liabil it ies) 108.648 0.861

Average exchange rate (income and expenses) 113.250 0.846

1 5

Our Bus iness

The consolidated results include Kleinwort Benson and Kleinwort Benson Investors for respectively 6 and 3 months ended December 31, 2010.

k e y f i g u r e s

Condensed consolidated income statement and assets as of and for the six months ended

( 1 ) P ro fo rma unaud i ted conso l ida ted f i nanc ia l i n fo rmat ion p repa red fo r compara t i ve pu rposes(2 ) Exc lud ing asse ts under management a t A recon and Qu i r i n and i nc lud ing depos i t s and i nves t i ng ac t i v i t i es a r i s i ng f rom c l i en t

d i sc re t iona ry and adv i so ry mandates(3 ) Asse ts under Management p lus l oans

(In EUR millions)

December 31, 2010

December 31, 2009 (1)

Operating income 49.9 47.8

Operating costs (52.5) (57.4)

Impairment of intangible assets - (31.2)

Share in profit ( loss) of equity accounted investees 0.2 (0.5)

Operating loss before tax (2.4) (41.3)

Tax (0.5) (0.2)

Operating loss after tax (2.9) (41.5)

Assets under Management (2) 9,255 9,681

Assets under Control (3) 9,828 10,346

F I N A N C I A L S E R V I C E S

1 6


k L E I N W O R T B E N S O N Headquarters : London Activities : Wealth Management RHJI ownership : 100% Acquisition price : EUR 256.1 mill ion

Consolidated by RHJI since July 1, 2010

O v e r v i e w o f a c t i v i t i e sKleinwort Benson (www.kleinwortbenson.com) is one of the most historic names in British private banking with roots dating back to the 1790s. Providing a range of bespoke wealth management services to private individuals, Kleinwort Benson offers its clients advice and solutions which are completely tailored to their individual wealth planning needs. With an offering spanning investment management, tax and banking, trust and fiduciary services Kleinwort Benson provides its clients with a truly holistic service. Operating from its headquarters in the City of London and offices across the UK and Channel Islands, and via a range of networks across the globe, Kleinwort Benson is always able to be close to its clients wherever in the world they are.

Kleinwort Benson is also a leading provider of Fund Administration services. One of the first major banks to have established in the Channel Islands nearly 50 years ago, it is consistently ranked as one of the top ten providers of administration and custodian services there, working with fund managers across a wide range of traditional and alternative asset classes.

k e y f i g u r e s

Condensed consolidated income statement for the six months ended

( 1 ) P ro fo rma unaud i ted conso l ida ted f i nanc ia l i n fo rmat ion p repa red i n accordance w i th UK GAAP fo r compara t i ve pu rposes

Kleinwort Benson recorded operating income of £33.8 mill ion in the six months ended December 31, 2010, down £0.9 mill ion or 3% from £34.7 mill ion in the same period a year earlier. Total Assets under Control («AuC»), which includes deposits, loans and investing activities, reduced to £5.3 bill ion on December 31, 2010 from £5.6 bill ion on December 31, 2009.

The decline in AuC was principally caused by lower banking deposits arising from the new standalone credit rating following the acquisition, and from the migration of the Channel Islands banking license from Jersey to Guernsey. This reduction in the deposit book, combined with lower interest income in the current low interest rate environment, led to reduced operating income. Since the acquisition of Kleinwort Benson was completed, the reduction in the deposit book has largely stabilised.

Fees and margins from investing activities and trust administration held up during the period. Despite the protracted sale process, fewer than expected investment mandates were lost, although Kleinwort Benson may see some outflows in the months ahead before the investment being made in the business becomes effective.

A focus on costs and the effect of efficiency programmes initiated in June 2010 have begun to show results. This partly led to lower operating costs of £36.4 mill ion for the six months ended December 31, 2010, compared to £43.2 mill ion for the comparable period in 2009. Headcount reduced 7% year on year, with further annualised restructuring cost benefits stil l to come through. Total expenses for the six months ended December 31, 2010 included an investment of

(In millions) GBP EUR

December 31, 2010

December 31, 2009 (1)

December 31, 2010

December 31, 2009 (1)

Operating income 33.8 34.7 39.9 41.0

Operating costs (36.4) (43.2) (43.0) (51.0)

Impairment of intangible assets - (26.4) - (31.2)

Operating loss before tax (2.6) (34.9) (3.1) (41.2)

Tax (0.4) (0.1) (0.5) (0.1)

Operating loss after tax (3.0) (35.0) (3.5) (41.4)

Assets under Management 4,768 4,978 5,539 5,783

Assets under Control 5,261 5,550 6,112 6,448

1 7

Our Bus iness

£2.6 mill ion in developing new revenue lines. Excluding this investment, Kleinwort Benson achieved break-even during the second half of 2010, compared to a loss of £8.5 mill ion (before impairment of intangible assets) for the comparable period of 2009.

The impairment charge of £26.4 mill ion recorded during the six months ended December 2009 related to software costs incurred in establishing a new operating platform for the Bank. The operating platform was originally part of a wider IT strategy being pursued by the previous owners.

Maintaining a strong and conservatively managed capital base remains a key principle of Kleinwort Benson and RHJI, underpinning a low-risk highly client-centric business model. With a Tier 1 ratio of over 20% at December 2010, Kleinwort Benson continued to exceed strongly its minimum capital requirements. Kleinwort Benson maintains high liquidity through a significant portfolio of marketable securities funded by a stable

deposit base. The mortgage loan book continued to perform well with provisions for bad and doubtful debts representing less than 0.3% of the total loan book at December 31, 2010.

This sound financial position gives the flexibil ity to pursue further or even accelerate growth initiatives. In order to grow AuC, an important part of the strategy is to increase the number of top level private bankers. In January 2011 Sally Tennant was appointed Chief Executive Officer. She joined from Lombard Odier Darier Hentsch, the Swiss private bank, where she was Chief Executive Officer of its London-based private banking operation. In a career spanning over thirty years in private banking and wealth management, Sally has held significant management roles in highly regarded organisations.

1 8


k L E I N W O R T B E N S O N I N V E S T O R S Headquarters : Dublin Activities : Asset Management RHJI ownership : 100% Acquisition price : EUR 23.7 mill ion

Consolidated by RHJI since October 1, 2010

O v e r v i e w o f a c t i v i t i e s Kleinwort Benson Investors (www.kleinwortbensoninvestors.com), based in Dublin, London and New york, has been offering investment management services for over thirty years and is a leading provider of innovative niche investment strategies to clients in the US, UK, Europe and Asia. Their three core areas of expertise are environmental equity strategies, dividend-oriented equity strategies and multi-asset strategies. These products are made available directly to institutional clients such as pension funds, corporate, local authorities, foundations and endowments as well as being distributed to retail and high net worth investors through other financial services groups.

k e y f i g u r e s

Condensed consolidated income statement for the three months ended

( 1 ) P ro fo rma unaud i ted conso l ida ted f i nanc ia l i n fo rmat ion p repa red i n accordance w i th I FRS fo r compara t i ve pu rposes

Since the acquisition, Kleinwort Benson Investors recorded operating income of EUR 4.4 mill ion during the three months ended December 31, 2010, an increase of 2% compared to the same period a year earlier. The income statement for the three months ended December 31, 2009, has been adjusted to reflect the sale of KBI’s UK subsidiary and to exclude non-recurring transactions with KBC Group, its former owner.

Assets under Management decreased from EUR 3.9 bill ion at December 31, 2009 to EUR 3.7 bill ion at December 31, 2010. Since the change of control, business development activities in North America, Europe and the UK have been intensified and the company has recently been awarded new investment mandates, which are expected to be funded during the first half of 2011.

(In EUR millions)

December 31, 2010

December 31, 2009 (1)

Operating income 4.4 4.3

Operating costs (4.2) (4.4)

Operating profit ( loss) before tax 0.2 (0.1)

Tax (0.1) -

Operating profit ( loss) after tax 0.1 (0.1)

Assets under Management 3,716 3,898

1 9

Our Bus iness

While RHJI changed its financial year-end, the consolidated subsidiaries have not changed their financial year-end and have prepared financial statements for the nine months ended December 31, 2010 for the sole purpose of preparing the Company’s consolidated financial statements. Comparative key numbers presented below for the nine months ended December 31, 2009 were extracted from unaudited pro forma financial statements which were only prepared for indicative comparative purposes.

L E G A C Y P O R T F O L I O

2 0


A S A H I T E C C O R P O R AT I O N Headquarters : Japan Industry : Automotive components Cast auto parts segment Tokyo stock exchange ticker : 5606.T Total shares outstanding : 526,013,014 RHJI ownership as of December 31, 2010 : 54.5% (286,314,061 shares) Contribution price per share in March 2005 : JPy 250 Closing price : March 31, 2010 : JPy 47 : December 31, 2010 : JPy 33

O v e r v i e w o f a c t i v i t i e sAsahi Tec (www.asahitec.co.jp) primarily designs, manufactures and sells ductile iron cast auto parts for truck and construction machinery OEMs, aluminum casting parts for truck and passenger car OEMs and aluminum wheels for automobile OEMs. Asahi Tec also designs, manufactures and sells electric power, equipment and development technologies used by electrical hardware and equipment used by electricity generators.

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Condensed consolidated income statement for the period ended

Consolidated cash and cash equivalents and loans and borrowings as of

M a r k e t r e c o v e r y a n d s u s t a i n e d f o c u s o n c o s t e f f i c i e n c y r e s t o r e s p r o f i t a b i l i t yAsahi Tec’s consolidated revenue increased to JPy 56,258 mill ion for the nine months ended December 31, 2010, compared to JPy 38,684 mill ion for the same period a year earlier. The 45.4% increase was driven by a general recovery of domestic customer demand and strong export sales to emerging Asian markets, especially during the first half of 2010. The pace of recovery slowed during the third quarter of 2010 as the appreciating JPy dampened export demand. Furthermore, domestic demand was supported by certain government incentive programs, which

also ended during the third quarter of 2010. However, performance of Asahi Tec’s Iron Forging & Casting division remained strong, and was only partly offset by slightly decreasing orders of equipment for the construction of power lines.

The increased consolidated revenue resulted in an operating profit of JPy 2,047 mill ion during the nine months ended December 31, 2010, compared to an operating

(In millions) JPY EUR

December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

Revenue 56,258 38,684 496.8 307.2

Gross profit 7,174 2,534 63.3 20.1

Gross margin 12.8% 6.6% 12.8% 6.6%

EBITDA 4,938 1,570 43.6 12.5

EBITDA margin 8.8% 4.1% 8.8% 4.1%

Operating profit ( loss) 2,047 (1,797) 18.3 (14.3)

Profit ( loss) for the period 4,138 (1,665) 36.5 (13.2)


December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Cash and cash equivalents 3,622 2,764 33.3 21.9

Loans and borrowings 14,084 24,089 129.6 191.3

2 1

Our Bus iness

loss of JPy 1,797 mill ion during the same period a year earlier. Asahi Tec’s profitability also improved through a sustained focus on cost reduction and manufacturing efficiencies. Asahi Tec will maintain its focus on cost management and will expand its manufacturing capability in low cost countries in order to satisfy robust demand in Thailand, China and India.

Asahi Tec’s net profit of JPy 4,138 mill ion for the nine months ended December 31, 2010, included a gain of JPy 3,901 mill ion following the conversion of the Class C Preferred shares as explained below, and a loss of JPy 720 mill ion resulting from the sale of the non-core Environmental Solutions business.

While the impact of the earthquake and the nuclear accident on Asahi Tec’s financial position and results is currently under review, projections prepared under J-GAAP prior to the earthquake led Asahi Tec’s management to confirm its previous forecasts, including projected revenue and net income for the year ending March 31, 2011 of JPy 74,000 mill ion and JPy 50 mill ion, respectively, compared to JPy 58,241 mill ion and JPy -421 mill ion for the year ended March 31, 2010.

A s a h i Te c r e d u c e s a n d r e f i n a n c e s i t s f i n a n c i a l d e b t The improved profitability enabled Asahi Tec to generate positive free cash flow and to reduce its net debt from JPy 21,325 mill ion at March 31, 2010 to JPy 10,462 mill ion at December 31, 2010. The decrease also partly resulted from the conversion of the Class C Preferred shares held by Masco Corporation. Under an agreement approved by Asahi Tec’s lenders and the General Meeting of Shareholders, Masco Corporation agreed to convert its Class C Preferred shares into common shares by February 28, 2011, in exchange for a reduction in the conversion price. On November 4, 2010, Asahi Tec announced that the conversion of the Class C Preferred shares into 49,295,356 common shares had been completed. The Class C Preferred shares were previously recorded as a hybrid instrument with a liability component. As a result of the conversion, the liability component of JPy 5,783 mill ion was removed and replaced by the fair value of the common shares as a component of equity for JPy 1,882 mill ion. The resulting gain of JPy 3,901 mill ion was recorded as

income at December 31, 2010. The conversion of the Class C Preferred shares led to the dilution of RHJI’s stake from 60.1% to 54.5%.

At December 31, 2010, Asahi Tec complied with all financial covenants under its credit agreements and successfully refinanced its senior and subordinated debt on February 22, 2011. The total facil ity consists of senior loan credit facil ities of JPy 11 bill ion, maturing in September 2015 and a subordinated credit facil ity of JPy 4 bill ion maturing in March 2016. The facilities are subject to various covenants and bear variable interest, depending on the overall gross leverage.

The loan granted by RHJI in February of 2008 to Asahi Tec’s former subsidiary Metaldyne is being repaid as scheduled. The outstanding balance at December 31, 2010 amounted to EUR 2.7 mill ion, which will be repaid in two remaining quarterly installments, the last one on May 15, 2011.

C l a i m f r o m t h e P B G COn November 22, 2010, Asahi Tec announced that the Pension Benefit Guaranty Corporation («PBGC») had filed a lawsuit against it in federal court in the U.S. The PBGC is a US entity that administers and enforces the pension plan termination insurance program under the US Employee Retirement Income Security Act of 1974 and its complaint relates to the pension plan of Metaldyne Corporation («Metaldyne»), which was Asahi Tec’s U.S. subsidiary and which fi led a petition for reorganisation proceedings under Chapter 11 of the U.S. Bankruptcy Code in May 2009.

According to the complaint, the PBGC, as statutory trustee of the pension plan termination insurance program of Metaldyne, alleges that the pension plan of Metaldyne had unfunded benefits and other pension-related liabilities, and that Asahi Tec as a member

of Metaldyne’s «controlled group» is responsible for such liabilities. The amounts of the claims are (i) approximately $135.2 mill ion in alleged unfunded pension liabilities for the termination of the pension plan, plus interest accrued thereon to the date of payment, (i i) approximately $40.4 mill ion in alleged termination premiums, plus interest accrued thereon to the date of payment and (i i i) PBGC’s litigation and related costs.

Asahi Tec believes the litigation to be without merit and intends to vigorously defend itself.

2 2


P H O E N I X S E A G A I A R E S O R T k . k . Headquarters : Japan Industry : Hospitality segment Privately held RHJI ownership as of December 31, 2010 : 100.0 %

O v e r v i e w o f a c t i v i t i e sPhoenix Seagaia Resort (www.seagaia.co.jp) is a resort complex located in Miyazaki Prefecture on Kyushu, the southernmost of the main islands of Japan. Miyazaki has a suitable climate for year-round outdoor activities. The principal assets of the Phoenix Seagaia Resort are situated in a historic 750-acre pine forest that extends over 10 kilometers along the Pacific Ocean coastline, which is just outside the city of Miyazaki and 20 minutes from the airport. Phoenix Seagaia Resort includes golf courses, lodging facilities, renovated spa (onsen) and fitness facilities, one of the largest convention centers in Japan and a tennis club.

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F i n a n c i a l r e s u l t s u n d e r p r e s s u r e f o l l o w i n g s e v e r a l n a t u r a l e v e n t sDespite a promising start to the year, driven by increased golf memberships, Phoenix Seagaia Resort’s revenue for the nine months ended December 31, 2010 was negatively affected by the outbreak of foot-and-mouth-disease in the Miyazaki prefecture in April 2010. Revenue for the nine months ended December 31, 2010 amounted to JPy 7,367 mill ion, compared to JPy 8,258 mill ion during the same period a year earlier. The outbreak resulted in restricted travel to Miyazaki until the end of August 2010, which resulted in multiple cancellations of hotel bookings, banquets and several other events.

The decrease in sales also partly resulted from the sale of the Kitago hotel and golf course on March 31, 2010.

Kitago contributed JPy 577 mill ion during the nine months ended December 31, 2009. Excluding Kitago, revenue for the nine months ended December 31, 2010 decreased by JPy 314 mill ion or 4.1 % compared to the same period a year earlier.

Since December 31, 2010, Phoenix Seagaia Resort’s operating performance suffered from a bird flu epidemic in January and, more recently, from a volcanic eruption.

Net debt at December 31, 2010 amounted to JPy 5,183 mill ion, compared to JPy 5,211 mill ion at March 31, 2010. Phoenix Seagaia Resort’s senior indebtedness of JPy 5,537 mill ion is repayable in two remaining quarterly installments of JPy 178 mill ion each and a bullet payment in September 2011. The quarterly


December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

Revenue 7,367 8,258 65.1 65.6

Gross profit 753 1,438 6.6 11.4

Gross margin 10.2% 17.4% 10.2% 17.4%

EBITDA 251 675 2.2 5.4

EBITDA margin 3.4% 8.2% 3.4% 8.2%

Operating profit ( loss) (4,843) 223 (42.8) 1.8

Loss for the period (4,919) (70) (43.4) (0.6)


December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Cash and cash equivalents 354 667 3.3 5.3


2 3

Our Bus iness

repayments and total variable interest are guaranteed by RHJI. The amount of the outstanding guaranteed indebtedness at December 31, 2010 is estimated at JPy 593 mill ion. RHJI also granted a JPy 1,000 mill ion revolving credit facil ity to Phoenix Seagaia Resort, of which JPy 200 mill ion was drawn at December 31, 2010.

At September 30, 2010, Phoenix Seagaia Resort was in compliance with the financial covenants under its senior credit agreement. However, as a result of the consequences of the natural events on the results for the year ending March 31, 2011, it is unlikely that Phoenix Seagaia Resort will be in compliance

with financial covenants at March 31, 2011. If Phoenix Seagaia Resort fails to comply with financial covenants and is not successful in obtaining covenant waivers, or does not succeed in refinancing its senior debt by September 30, 2011, it would be in default of its obligations under its senior credit agreement, which casts significant doubt on its ability to operate as a going concern. As a result, the operating loss of JPy 4,843 mill ion included an impairment charge of JPy 4,435 mill ion to reflect Phoenix Seagaia Resort’s assets at their estimated recoverable amounts.

2 4


S H A k L E E G L O B A L G R O U P, I N C . Headquarters : Japan Industry : Consumer products - Nutrition products segment Jasdaq stock exchange ticker : 8205.Q Total shares outstanding : 25,920,000 RHJI ownership as of December 31, 2010 : 42.5 % (10,531,000 shares) Contribution price per share in March 2005 : JPy 1,269 Closing price March 31, 2010 : JPy 635 December 31, 2010 : JPy 436

k e y f i g u r e s ( 1 )



( 1 ) Pub l i c l y ava i l ab le f i nanc ia l i n fo rmat ion p repa red under J -GAAP.


December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

Revenue 16,642 17,567 146.9 139.5

Operating profit 2,850 2,956 25.2 23.5

EBITDA 3,942 4,136 34.8 32.8

EBITDA margin 23.7% 23.5% 23.7% 23.5%

Profit for the period 1,134 2,742 10.0 21.8


December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Cash and cash equivalents 6,870 6,810 63.2 54.1


2 5

Our Bus iness

S I G M A X Y Z I N C . Headquarters : Japan Industry : Information and Communication Technology (ICT) consulting services Privately held RHJI ownership as of December 31, 2010 : 21.8 % (980 shares) Total shares outstanding : 4,500 Acquisition price per share : JPy 1,000,000

k e y f i g u r e s




December 31, 2010

December 31, 2009

December 31, 2010

December 31, 2009

Revenue 4,315 1,748 38.1 13.9

Operating loss (434) (1,628) (3.8) (12.9)

EBITDA (284) (1,494) (2.5) (11.9)

EBITDA margin (6.6%) (85.5%) (6.6%) (85.5%)

Loss for the period (437) (1,640) (3.9) (13.0)


December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Cash and cash equivalents - 381 - 3.0

Loans and borrowings 429 72 3.9 0.6

2 6


2 7

Our Bus iness

MANAGEMENT DISCUSSION & ANALySIS . . . . . . . . . . . . . . . . . . 3 0PRINCIPAL RISKS AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . 3 6CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 4 9NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6DIRECTORS’ REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 7AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . 1 3 8CONDENSED NON-CONSOLIDATEDFINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 0


PA R T I I I

Financial Statements for the Fiscal Year Ended December 31, 2010 2 9

I N T R O D U C T I O NUnless otherwise noted herein, RHJ International SA, a Belgian limited liability company, is referred to as «RHJI». RHJ International SA and its business are referred to collectively as the «Company».

RHJI is transforming itself into a dynamic financial services group with a strong client-centric approach. RHJI believes that clients today are more inclined towards high quality, independent institutions with an advisory and partnership model. RHJI will exploit these growth areas by developing its independent merchant banking model based on three pillars: Banking with Kleinwort Benson and its Wealth Management, Fiduciary and Execution business; Asset Management with Kleinwort Benson Investors and its multi-asset and specialised investment strategies (Environmental and Dividend Plus); and Merchant Banking, participating in, for example, co-investment opportunities alongside clients and institutional investors.

RHJI will gradually exit its industrial investments and exploit growth opportunities in financial services under the Kleinwort Benson brand. Up and until March 31, 2011, RHJI made or agreed investments in financial services of EUR 357 mill ion and agreed to sell Niles for EUR 137 mill ion. Excluding Niles, the Company’s portfolio at December 31, 2010 consisted of investments in financial services and a legacy portfolio of industrial investments representing 65% and 35%, respectively, of a total book value of EUR 494.4 mill ion, excluding cash.

A C Q U I S I T I O N S New investments for the fiscal year ended December 31, 2010, can be summarized as follows:

• On July 1, 2010, the Company completed the acquisition of Kleinwort Benson for EUR 251.9 mill ion, excluding post closing adjustments. The final purchase price was EUR 256.1 mill ion.

• On October 11, 2010, the Company completed the acquisition of KBC Asset Management Limited (Dublin) for EUR 23.7 mill ion. This business has now been renamed Kleinwort Benson Investors Dublin Limited («Kleinwort Benson Investors»).

• On October 15, 2010, the Company strategically aligned itself with Timothy Collins and Ripplewood Holdings LLC («Ripplewood»), by merging its investment activities and those of Ripplewood and by acquiring a 13% interest in the general partner of Ripplewood Partners II, L.P. (the «Fund»), a private equity fund under management by Ripplewood. Ripplewood will now focus exclusively on the existing fund investments and new investments are intended to be made in conjunction with the merchant banking activities of the Company or its affi l iates. The aggregate consideration amounted to EUR 15 mill ion, part of which was funded by an intra-group loan of EUR 10 mill ion.

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S O F F I N A N C I A L C O N D I T I O N A N D R E S U LT S O F O P E R AT I O N S F O R T H E F I S C A L Y E A R S E N D E D D E C E M B E R 3 1 A N D M A R C H 3 1 , 2 0 1 0

3 0


P O S T B A L A N C E S H E E T E V E N T S• On February 23, 2011, RHJI announced the sale of

its 77.9% ownership interest in Niles for JPy 15.5 bill ion (EUR 137 mill ion) cash, subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence. The carrying value of the investment in Niles as at December 31, 2010, was adjusted to reflect the selling price pre closing adjustments. RHJI continues to work to close the transaction during the first half of 2011.

• On March 10, 2011 Kleinwort Benson agreed to acquire Close Brothers Offshore Group for £29.1 mill ion (EUR 34 mill ion), subject to adjustments related to the net assets of the business on completion. The acquisition will be primarily financed through Kleinwort Benson. The completion of the transaction is subject to approval by the relevant regulatory bodies and is expected to be completed by the end of July.

• On March 11, 2011, Northern Japan was struck by the Tohoku earthquake. The manufacturing facilities of Asahi Tec and Niles, including one facility in the badly affected Fukushima prefecture, did not suffer material structural damage. Production was resumed, albeit at reduced capacity because of interrupted customer and supplier production and intermittent power supply. Phoenix Seagaia Resort’s facil ities, located on the South-east Pacific coast line of japans, have not been directly affected by the earthquake.

R E S U LT S O F O P E R AT I O N SWhen comparing the Company’s consolidated results of operations for the financial years ended December 31, 2010 and March 31, 2010, the following should be noted:

• The Company changed its year-end from March 31 to December 31, therefore the financial year ended December 31, 2010 comprises only nine months;

• Kleinwort Benson was included in the Company’s consolidated financial statements for the six months ended December 31, 2010 following the completion of the acquisition on July 1, 2010;

• Kleinwort Benson Investors was included in the Company’s consolidated financial statements for the three months ended December 31, 2010 following the completion of the acquisition on October 11, 2010;

• The results of Honsel for the fiscal year ended March 31, 2010 and for the period up and until its fi l ing for insolvency were presented as discontinued operations;

• The results of Niles for the fiscal years ended December 31, 2010 and March 31, 2010 were presented as discontinued operations following the classification of Niles as a non-current asset held for sale;

• The Company’s accounting currency changed from JPy to EUR on April 1, 2010. The financial statements for the financial year ended March 31, 2010, were translated from JPy into EUR based on the exchange rate on April 1, 2010 (EUR/JPy = 125.93). The financial statements for the financial year ended December 31, 2010 of foreign subsidiaries which have accounting currencies other than EUR , were translated into EUR in accordance with IAS 21, based on the following exchange rates:

Net operating income from financial services is almost entirely attributable to Kleinwort Benson and Kleinwort Benson Investors.

Revenue from industrial investments for the financial year ended December 31, 2010 related to Asahi Tec and Phoenix Seagaia Resort and reflected the recovery of production volumes in the automotive industry and the impact of the strengthened JPy on the translation into EUR of JPy denominated revenues.

Gross profit from industrial investments for the nine months ended December 31, 2010 amounted to EUR 70.2 mill ion, EUR 2.6 mill ion higher than for the entire 12 months of the previous fiscal year. The gross margin increased from 12.2% for the year ended March 31, 2010 to 12.5% for the year ended December 31, 2010, reflecting the increased sales of Asahi Tec and its improved operating efficiency.

EUR/JPY EUR/GBP

Closing exchange rate (assets and liabil it ies) 108.648 0.861

Average exchange rate (income and expenses) 113.250 0.846

3 1

F inanc ia l Sta tements fo r the F isca l Year Ended December 31, 2010

Selling, general and administrative expenses amounted to EUR 153.4 mill ion for the year ended December 31, 2010, and reflected the consolidation of Kleinwort Benson and Kleinwort Benson Investors. The Company incurred non-recurring expenses of EUR 22.7 mill ion related to (a) the acquisitions of Kleinwort Benson and Kleinwort Benson Investors, which required significant costs associated with the regulatory approval process, (b) the insolvency of Honsel, and (c) the divestment of Niles. The Company is committed to further reducing its fixed operating costs, which are estimated at approximately EUR 20 mill ion for the fiscal year ending December 31, 2011.

Loss from operations of EUR 79.9 mill ion included an impairment charge of EUR 39.1 mill ion related to Phoenix Seagaia Resort’s property to reflect its estimated recoverable value in view of the uncertainty of the company’s ability to continue as a going concern.

Net finance income of EUR 24.3 mill ion for the year ended December 31, 2010 mainly included the gain of EUR 34.5 mill ion related to the conversion of Asahi Tec’s Class C Preferred shares and fair value adjustments on financial assets of EUR 2.4 mill ion, partly offset by (a) the loss of EUR 6.4 mill ion on the sale of Asahi Tec’s environmental business, (b) net interest expense of EUR 4.4 mill ion and (c) net foreign currency exchange losses of EUR 1.6 mill ion. The net financing income of EUR 64.3 mill ion for the year ended March 31, 2010, also included a gain of EUR 48.3 mill ion resulting from the cancellation of certain of Asahi Tec’s Class C Preferred shares. No Class C Preferred shares are outstanding at December 31, 2010.

Share of profit of equity accounted investees amounted to EUR 4.8 mill ion, and mainly included the share in Shaklee’s profit for EUR 4.2 mill ion.

Discontinued operations for the year ended December 31, 2010, mainly related to Honsel and Niles.

During the six months ended September 30, 2010, Honsel saw its order volumes increase in line with the general recovery of the global market of parts for

passenger cars and trucks. Despite increased sales, the equity support provided by the Company in the midst of the economic downturn and considerable efforts by Honsel’s management to address operating issues in manufacturing in conjunction with new product launches, Honsel continued to incur significant losses which ultimately caused a liquidity shortfall. Several attempts to reach agreement with all stakeholders on a sustainable restructuring plan to allow for the continuation of the company failed and Honsel fi led for insolvency on October 25, 2010. Honsel was deconsolidated as of the date of the insolvency fi l ing and its results were presented as discontinued operations in the Company’s consolidated financial statements for the years ended December 31, 2010 and March 31, 2010. The net loss reported by Honsel up and until the insolvency fi l ing amounted to EUR 141.7 mill ion, and was partly offset by a gain on disposal of EUR 39.5 mill ion reducing previously recorded losses from Honsel to the amount of the Company’s equity investment of EUR 52.8 mill ion.

The sale of Niles was announced on February 23, 2011. Niles was presented as an asset held for sale at December 31, 2010, and its results for the years ended December 31, 2010 and March 31, 2010, were presented as discontinued operations accordingly. Niles’ operating results for the year ended December 31, 2010, amounted to a profit of EUR 7.5 mill ion. The result on disposal will be recorded in the year ending December 31, 2011, and will reflect the ultimate selling price, including closing price adjustments and potential remediation costs arising from the outcome of environmental due diligence.

3 2


The results of discontinued operations for the years ended December 31, 2010, and March 31, 2010, can be summarized as follows:

(1 ) The p rev ious l y repor ted d i scon t inued opera t ions fo r the yea r ended March 31 , 2010 , i nc luded Co lumb ia Mus ic En te r ta inment , Meta ldyne and U-Sh in and were a l so res ta ted to i nc lude N i l es and Honse l .

(In EUR millions) December 31, 2010 March 31, 2010

Honsel Niles Total Previously reported (1) Honsel Niles Total

Revenue 353.6 328.9 682.5 206.2 561.7 329.5 1,097.4

Cost of sales (354.0) (264.9) (618.9) (148.8) (541.5) (266.6) (956.9)

Gross profit (loss) (0.4) 64.0 63.6 57.4 20.2 62.9 140.5

Sell ing, general and administrative expenses (23.0) (40.5) (63.5) (38.1) (43.1) (43.3) (124.5)

Amortization of intangible assets (3.2) (1.2) (4.4) (10.2) (4.4) (2.8) (17.4)

Impairment of property, plant and equipment and intangible assets (110.7) (0.8) (111.5) - (13.1) - (13.1)

Other income and expense 3.9 (3.7) 0.2 1.8 (2.9) (1.5) (2.6)

Gain on deconsolidation 39.5 - 39.5 85.9 - - 85.9

Net finance income (costs) (10.7) (9.6) (20.3) (7.4) 439.9 (6.9) 425.6

Share of profit of equity accounted investees (net of income tax) - - 0.0 1.0 - - 1.0

Profit (loss) before income tax (104.6) 8.2 (96.4) 90.4 396.6 8.4 495.4

Income tax benefit (expense) 2.4 (0.7) 1.7 (2.0) 13.8 14.7 26.5

Profit (loss) for the period (102.2) 7.5 (94.7) 88.4 410.4 23.1 521.9

Profit ( loss) for the period attributable to

Owners of the Company (31.1) 5.6 (25.5) 78.4 309.1 17.7 405.2

Non-controll ing interests (71.1) 1.9 (69.2) 10.0 101.3 5.4 116.7

(102.2) 7.5 (94.7) 88.4 410.4 23.1 521.9

3 3


L I Q U I D I T Y A N D C A P I TA L R E S O U R C E SThe consolidation of Kleinwort Benson Group at December 31, 2010 significantly affected the Company’s financial position, resulting in total consolidated assets of EUR 3,025.9 mill ion, compared to EUR 1,959.8 mill ion at March 31, 2010. Total assets related to financial services at December 31, 2010 amounted to EUR 1,871.1 mill ion, and included loans and advances to banks and customers of EUR 1,122.1 mill ion, cash of EUR 19.1 mill ion and high quality marketable securities of EUR 604.9 mill ion. The purchase price for Kleinwort Benson was provisionally allocated to the fair value of its assets and liabilities, which resulted in the recognition of intangible assets of EUR 18.1 mill ion, net of deferred taxes. The intangible assets relate to Kleinwort Benson’s brand name and its customer relations. The provisional purchase price allocation is subject to potential revisions until twelve months after the completion of the acquisition. Kleinwort Benson’s assets are primarily funded by customer deposits with limited reliance on wholesale funding. Kleinwort Benson’s total equity amounted to EUR 242 mill ion at December 31, 2010, with a Tier 1 ratio of 35%. Kleinwort Benson Investors also has a highly liquid balance sheet with total assets of EUR 21.2 mill ion, of which EUR 16.8 mill ion is in cash and it has a significant capital buffer in excess of regulatory requirements.

Total consolidated financial indebtedness of the Company’s industrial investments amounted to EUR 189.6 mill ion, compared to EUR 562.8 mill ion at March 31, 2010. The decrease resulted from the deconsolidation of Honsel and the presentation of Niles’ assets and liabilities as a single line item in accordance with IFRS 5 Non-current Assets Held for Sale. The consolidated financial indebtedness of the industrial portfolio companies can be summarized as follows:

A s a h i Te cAt December 31, 2010, Asahi Tec had outstanding indebtedness of EUR 129.6 mill ion compared to EUR 191.3 mill ion at March 31, 2010. The decrease in total indebtedness by EUR 61.7 mill ion mainly resulted from the conversion of the Class C Preferred shares held by Masco Corporation. Under an agreement approved by Asahi Tec’s lenders and the General Meeting of Shareholders, Masco Corporation agreed to convert its Class C Preferred shares into common shares by February 28, 2011, in exchange for a reduction in the conversion price. On November 4, 2010, Asahi Tec announced that the conversion of the Class C Preferred shares into 49,295,356 common shares had been completed. The Class C Preferred shares were previously recorded as a hybrid instrument with a liability component. As a result of the conversion, the liability component of EUR 53.2 mill ion (JPy 5,783 mill ion) was removed and replaced by the fair value of the common shares as a component of equity for EUR 17.3 mill ion (JPy 1,882 mill ion). The resulting gain of EUR 34.4 mill ion (JPy 3,901 mill ion) was recorded as

income at December 31, 2010. The conversion of the Class C Preferred shares led to the dilution of RHJI’s stake from 60.1% to 54.5%.

At December 31, 2010, Asahi Tec’s indebtedness included JPy 9,840 mill ion senior credit facil ities and JPy 4,000 mill ion subordinated bank debt, which were successfully refinanced on February 22, 2011. The total new facility consists of senior loan credit facil ities of JPy 11 bill ion, maturing in September 2015 and a subordinated credit facil ity of JPy 4 bill ion maturing in March 2016. The facilities are subject to various covenants and bear variable interest, depending on the overall gross leverage.

At December 31, 2010, the effective interest rate on Asahi Tec’s secured credit facil ities was 3.09%

P h o e n i x S e a g a i a R e s o r tAt December 31, 2010, Phoenix Seagaia Resort’s outstanding senior indebtedness amounted to EUR 51 mill ion (JPy 5,537 mill ion), which is to be repaid in 2 remaining quarterly installments of EUR 1.6 mill ion (JPy 178 mill ion) each and a bullet payment of EUR 47.87 mill ion (JPy 5,027) mill ion in September 2011. The quarterly installments and total interest are guaranteed by RHJI. The amount of the outstanding guaranteed indebtedness is currently estimated at approximately EUR 3 mill ion (JPy 333 mill ion) after one quarterly payment having been made at March 31, 2011. The Company also granted a JPy 1,000 mill ion revolving credit facil ity to Phoenix Seagaia Resort, of which JPy 200 mill ion was drawn at December 31, 2010. On March 31, 2011, the outstanding balance under the revolving credit facil ity increased to JPy 500 mill ion.

Phoenix Seagaia Resort’s senior credit facil ity is subject to certain covenants. As a result of the consequences of the natural events on the results for the year ending March 31, 2011, Phoenix Seagaia Resort is l ikely to report a breach of such financial covenants at March 31, 2011. If Phoenix Seagaia Resort fails to comply with financial covenants and is not successful in obtaining covenant waivers, or does not succeed in refinancing its senior debt by September 30, 2011, it would be in default of its obligations under its senior credit agreement, which would cast significant doubt on its ability to operate as a going concern.

At December 31, 2010, the effective interest rate on Phoenix Seagaia Resort’s secured credit facil ities was 4.29%

More detailed information on the Company’s interest-bearing debt and borrowings is included in note 21 to the Consolidated Financial Statements.

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C a s h F l o w sConsolidated cash flow from operations for the year ended December 31, 2010, included the decrease in Kleinwort Benson’s deposit base.

Consolidated cash flow from investing activities for the fiscal year ended December 31, 2010, included:

• EUR 696 mill ion cash acquired, net of the purchase price paid for Kleinwort Benson and Kleinwort Benson Investors;

• net investment in securities of EUR 44.7 mill ion;• net capital expenditures of EUR 22.9 mill ion; • proceeds of EUR 18.5 mill ion from the sale of Asahi

Tec’s environmental business; and• loans granted to Honsel for EUR 10 mill ion, partly

offset by the collection of EUR 4 mill ion from Metaldyne.

The loans provided to Honsel include backstop and liquidity facil ities, a factoring and a sale and lease back facility. The aggregate outstanding amount of these facilities amounted to EUR 32.1 mill ion at December 31, 2010, compared to EUR 35.1 mill ion at the time of the insolvency fi l ing. Since December 31, 2010, the outstanding balance was further reduced to EUR 30.6 mill ion. In accordance with the intercreditor agreement governing Honsel’s financial debt, the backstop and liquidity facil ities of EUR 20 mill ion in aggregate rank behind the revolving credit facil ity and the customer and supplier debt of EUR 70 mill ion in aggregate, but ahead of the senior term loan of EUR 110 mill ion and the mezzanine debt of EUR 30 mill ion. The currently outstanding balance under the non-recourse factoring facilities amounts to EUR 3.5 mill ion, of which EUR 2.3 mill ion relate to one foreign subsidiary of Honsel which continued to operate as a going concern. The receivable under the leasing arrangement with Honsel’s subsidiary Tafime Mexico currently amounts to EUR 7.1 mill ion and is anticipated to be fully recovered.

Cash flow from financing activities of operations for the financial year ended December 31, 2010, mainly related to the net repayment of debt of Asahi Tec and Phoenix Seagaia Resort.

3 5


R I S k S R E L AT E D T O R H J I A S A H O L D I N G C O M PA N Y

S t r a t e g i c r i s kRHJI is transforming itself from a diversified industrial holding company into an active and dynamic financial services firm. The cornerstone of this transformation is the acquisition of Kleinwort Benson, a wealth management franchise and fiduciary business. Under Kleinwort Benson’s brand, the Company intends to add incremental new business and broaden its product offerings, focusing on wealth management (including fiduciary), specialized asset management and financial advisory services while maintaining a strong and liquid balance sheet. RHJI will gradually exit its industrial investments over time with a view to supporting Kleinwort Benson’s growth strategy and adding fee-earning, non capital intensive financial services business.

The Company, as any commercial enterprise, faces and accepts risks and uncertainties in order to generate return for its shareholders. The Board of Directors has overall responsibil ity for identifying and managing those risks and for maintaining appropriate internal controls. The Company is active in different business segments as it is transforming itself from a diversified holding company into an active and dynamic financial services firm. The risks faced by the Company in its different segments of activity and the main principles of the Company’s approach to risk mitigation and management are set out below.

K e y R i s k a n d u n c e r t a i n t y D e s c r i p t i o n R i s k m i t i g a t i o n a n d m a n a g e m e n t

P R I N C I PA L R I S k S A N D U N C E R TA I N T I E S

The Board of Directors has created the Investment and Strategy Committee, which has, among others, responsibil ity for defining and preparing strategic options and proposals (including all iances, spin-offs or mergers, investments, acquisitions, divestitures, capital structure and secondary listings) that may contribute to the development of RHJI, for recommendations to the Board of Directors.

Further information on the Company’s Investment and Strategy Committee is provided in Part IV Corporate Governance of this Annual Report.

The availability of opportunities for additional acquisitions and investment in financial services is uncertain from time to time due to competition and macro-economic, political, social and market conditions. The Company may not be able to successfully execute the acquisition component of its business strategy because of difficulties identifying, acquiring, integrating or financing acquisitions, or unanticipated problems, which could negatively affect the Company’s prospects. RHJI’s ability to finance acquisitions will also largely depend on its ability to sell its industrial investments. The opportunity to sell such investments may be affected, among others, by restricted availability of credit, necessary to refinance the debt at the level of the industrial portfolio companies and, for potential acquirers, to partly or wholly finance the purchase price.

The Company’s strategy also includes purchasing non-controll ing or minority interests in public and private companies and making co-investments in transactions led by third parties, such purchases or co-investments could be material and may involve relatively more risks due to its lack of control and may materially adversely affect the Company’s financial condition and results of operations.

3 6


M a r k e t r i s kThe Company is exposed to losses resulting from movements in interest rates and foreign currency exchange rates.


The Company’s senior management monitors the impact of foreign currency exchange rates on the valuation of its subsidiaries with a different functional currency than the Euro, and enters into currency hedges from time to time.

The Company does not hedge the potential negative impact of increasing interest rates on the market valuation of its assets.

Beside their negative impact in connection with the borrowing activities of the Company’s businesses described in note 21 to the consolidated financial statements, increasing interest rates may have a negative impact on the market valuation of certain Company assets due to their impact on discount rates and/or market multiples.

Beside the translation and transaction risk arising from changes in currency exchange rates described in note 39 to the consolidated financial statements, RHJI’s Euro denominated share price is exposed to changes in the exchange rate between the Euro and the Japanese yen as a significant portion of the Company’s assets is located in Japan and has book values denominated in Japanese yen. Following the acquisition of Kleinwort Benson, RHJI’s Euro denominated stock price is also exposed to changes in the exchange rate between the Euro and the Pound Sterling.

3 7


L i q u i d i t y r i s kThe Company requires sufficient liquid resources to support Kleinwort Benson’s growth strategy and expanding its financial services business.


At December 31, 2010, assuming the pro forma proceeds from the sale of Niles, RHJI had approximately EUR 200 mill ion cash available to pursue its business strategy and had no indebtedness. RHJI’s industrial portfolio companies have regular recourse to independent indebtedness by obtaining credit l ines on their own merits. Except for an amount of approximately JPy 600 mill ion related to the debt of Phoenix Seagaia Resort, certain pledges of shares as disclosed in note 21 to the consolidated financial statements, and certain support to Kleinwort Benson, the businesses and their lenders generally do not benefit from any guarantee from RHJI.

Any shortage of l iquid resources might result in the disposal of certain industrial portfolio holdings at unfavorable conditions.

3 8


R e g u l a t i o n , t a x , l e g i s l a t i o n a n d s t o c k m a r k e tThe Company is publicly listed and operates in a regulated environment. Changes in regulation, legislation or the basis for taxation, could materially affect its performance.


The Company maintains a corporate structure with specialized skills in order to ensure compliance with applicable laws and regulations. Central legal and tax functions monitors developments in legal and taxation regimes relevant to the Company’s activities, and liaise regularly with the relevant authorities.

In an exceedingly rigorous, post credit crunch regulatory environment, the Company was approved by the regulatory authorities as the new controller of Kleinwort Benson in the different jurisdictions it operates in. The Company and its respective individual regulated entities maintain a conservative balance sheet and a high Tier 1 capital ratio. The Company closely monitors regulatory developments and engages in dialogue with the regulatory authorities on a regular basis, and believes it is well placed to respond to regulatory change.

Being listed on Euronext Brussels, RHJI is subject to Belgian legislation and regulation regarding, among others, financial, governance and other disclosure, internal controls and insider trading. As a result, it will continue to invest necessary resources to comply with evolving laws, regulations and standards and manage its risks related to its stock exchange.

RHJI is a financial holding company under the supervision of the Financial services Authority («FSA») in the UK, and is subject to the regulatory capital regime.

3 9


C r e d i t r i s kThe risk of loss resulting from the non-payment by a debtor of a loan or other line of credit.

R I S k S R E L AT E D T O R H J I ’ S F I N A N C I A L S E R V I C E S B U S I N E S SAs a result of the ongoing transformation and the acquisition of Kleinwort Benson, the Company is exposed to certain specific risks associated with financial services. The Company’s major investments in financial services are organized under the direct ownership of Kleinwort Benson Group Limited («Kleinwort Benson Group»), a wholly owned holding company incorporated in the UK. Kleinwort Benson Group adopted a risk governance structure aimed at developing an effective, proactive, cross-disciplinary approach to enterprise-wide risk management built upon an invigorated risk-culture. Subject to approval by the FSA, the structure includes a Strategic Risk Committee at the level of Kleinwort Benson Group, to which tasks are delegated by the boards of Kleinwort Benson Bank Limited, Kleinwort Benson Channel Islands Holdings Limited and Kleinwort Benson Investors Dublin Ltd, with a view to (i) providing oversight and guidance for all risks arising across the business, and (i i) ensuring that sensible risks are taken in alignment with approved risk strategy in a properly controlled environment in accordance with Kleinwort Benson Group’s risk. As part of its normal business Kleinwort Benson accepts and is exposed to the following principal risks:

appetite


Kleinwort Benson Group maintains detailed credit policies for customer lending, covering all aspects of credit risk management including, inter-alia, credit strategy, delegated approval authority, underwriting criteria including collateral quality and provisioning.

Kleinwort Benson Group’s offering to clients includes a range of loan facilities. Failure to recover amounts lent or the interest and fees associated with the loans could result in bad debt charges.

4 0


C o u n t e r p a r t y r i s kThe failure or default of one or more financial institutions could materially affect Kleinwort Benson Group’s financial position. Settlement risk arises due to the failure of counterparty to honor its obligations to deliver cash, securities or other assets as contractually agreed and the potential for loss in attempting to complete the trade.


Maximum limits for credit exposure to banks are determined for different categories of credit quality based on the probability of default and the quality of collateral.

Credit and country risk policy for counterparty lending is governed by Treasury Management policies defining limits based on local regulatory rules and credit ratings and requiring documentation of the qualitative rationale for selecting individual counterparties. Country risk exposure is restricted to selected countries.

Concentration risk is further mitigated by policies limiting large exposures.

Settlement limits have been set in accordance with a limit matrix approved at Board level.

Material amounts of customer deposits are client monies placed with other financial institutions.

The expansion of the fixed income business may give rise to a risk at the time of the settlement of transactions and trades.

4 1


M a r k e t r i s kKleinwort Benson Group’s activities are exposed to losses arising from changes to foreign currency exchange and interest rates. Other market risk factors, such as equity risk and commodity risk are actively avoided by not holding proprietary equity and commodity positions.


Market risk for interest rate and foreign exchange exposure is governed by Treasury Management policies covering all aspects of risk management including, inter alia, dealing policy, interest rate and foreign exchange risk limits.

Interest rate and foreign exchange rate exposures are subject to daily independent monitoring and reporting and are restricted to certain Value at Risk limits and sensitivity.

Market risk exposure is restricted to currencies of certain major countries. Exceptions require prior approval from the appropriate Board. The firm will not actively trade interest rates and foreign exchange rates for the group’s own account.

Kleinwort Benson Group may take strategic views on interest rates and may create interest exposure to reflect those views. It also takes foreign exchange risk as the result of customer foreign exchange activity, and may hold these positions without immediately hedging with the foreign exchange market.

4 2


O p e r a t i o n a l r i s kKleinwort Benson Group faces operational risk arising from deficiencies in internal controls, human errors, physical systems failures, and other business execution risks as well as external events.


Kleinwort Benson Group has very limited appetite for the creation of operational risk. Risk policies and procedures have been developed under the supervision of the group’s Boards to prevent operational risks occurring, or restrict their adverse impact where full prevention would be uneconomical. The effectiveness of these policies and procedures is validated through the Enterprise-wide Risk Committee and the Operational Risk Framework. The Enterprise-wide Risk Committee must ensure that there is comprehensive coverage of all risks arising from the business model and functional capabilities of the firm with the degree of oversight proportionate to the perceived risk in the underlying processes. Initiatives to improve processes and to reduce or avoid unwanted operational risk losses include:

a) Data collection on loss events to enable timely reporting on incidents, impact and trends,

b) Management review of loss reporting to ensure remediation and lessons learned, and

c) Regular assessment by Internal Audit to ensure process weaknesses are identified and reported and that remedial action plans are devised and implemented.

Operational risk is inherent to Kleinwort Benson Group’s activities and includes risk of loss resulting from IT system failure, fraud, negligence and process deficiencies. A low appetite for operational risk is essential in preserving the group’s reputation and competiveness. The development and the maintenance of a robust infrastructure and the retention of experienced personnel are critical in managing the operational risk in a highly regulated banking environment.

4 3


L i q u i d i t y a n d f u n d i n g r i s kLiquidity risk arises upon the inability to meet payment obligations as they fall due.


Kleinwort Benson’s Group’s core client base is a mix of corporate and retail clients of considerable high net worth with a relative large size of individual deposits and/or assets under management. Kleinwort Benson Group’s reliance on wholesale funding is therefore limited. The group ensures that a prudent level of l iquidity is achieved by holding sufficient immediately available cash and liquid assets. Furthermore, it maintains an adequately diversified deposit base in terms of both maturities and range.

The group employs a mismatch approach within different time bands on a maturity ladder. Liquidity limits are defined per maturity band and expressed as a percentage of the total deposit l iability.

A number of company specific and industry-wide stress tests were applied with the results determining liquidity policies and buffers including contingency funding plans under adverse scenarios.

The primary driver for l iquidity risk arises through the taking of deposits that are often repayable on demand or at short notice and using these deposits to fund credit facil ities to borrowers and place money in the market over longer periods.

4 4


R e g u l a t i o n , t a x , l e g i s l a t i o n a n d s t o c k m a r k e tKleinwort Benson Group operates in a highly regulated environment. Changes in regulation or the basis of taxation could materially affect the group’s financial position and performance.


Kleinwort Benson Group actively monitors regulatory developments and engages in dialogue with regulatory authorities on a regular basis. The group and its regulated entities maintain a conservative model with a strong, well capitalized balance sheet, and believe they are well placed to react to regulatory change.

Kleinwort Benson Group maintains compliance manuals, setting out standards to ensure that business is conducted in accordance with all applicable laws, rules, codes and standards required by regulators, respecting the principles of integrity and fair dealing at all times. Compliance is an independent function within Kleinwort Benson reporting to the Chief Executive Officer, the Chief Risk Officer and the Chairman of the Strategic Risk Committee.

A more intensive approach to supervision by the applicable regulatory authorities following the credit crisis could lead to a greater degree of regulatory intervention in the financial services industry generally. Significant changes to the regulatory and legislative environment are being introduced, including amendments to the regulatory capital regime («Basel III»), changes to the type and levels of l iquidity and revisions to remuneration codes. These and other expected changes may apply to Kleinwort Benson’s operations and may result in increased uncertainty.

4 5


R e p u t a t i o n a l r i s kReputation risk is the risk of a decline in the group’s reputation from the point of view of its stakeholders, including clients, staff, regulators and the general public, leading to a loss of profitability, l iquidity or capital.


Kleinwort Benson group maintains a Reputational Risk policy which defines forbidden and sensitive activities, and which provides escalation procedures as necessary. Client acceptance procedures are in place to identify high risk clients. Furthermore, Kleinwort Benson Group developed various plans to ensure adequate liquidity and capital under different stress test, including a run on the bank in the event that clients question the bank’s reputation and withdraw a significant amount of funds.

Reputational risk can directly result from any action or association that directly damages the reputation of the firm, e.g. any adverse impact of a connection with any sensitive business or industry or with a high profile client. Reputational risk further arises from damages to the group’s reputation caused by losses in other risk categories, such as the loss resulting from operational failures.

4 6


R I S k S R E L AT E D T O R H J I ’ S L E G A C Y P O R T F O L I O O F I N D U S T R I A L A S S E T S

The Company’s industrial portfolio holdings each face a combination of risks and uncertainties, which may impair the Company’s ability to exit its industrial investments and which therefore, may negatively affect the Company’s ability to execute its turn-around strategy.

The Company may face negative consequences from inadequate risk assessment and ineffective control systems of risk detection and prevention at the level of each business.


The Company generally relies on the individual business’ risk assessment and monitoring programs to manage the exposure to these and other risks. These programs have been designed based on the specific nature and size of the individual businesses’ activities. The Company monitors these programs and attempts to mitigate the negative effects from any of these risks by maintaining operational and financial discipline through its Internal Audit function, its representation on the businesses’ Boards of Directors, and through the implementation of certain reporting mechanisms.

The industrial portfolio holdings are exposed to following risks:

• Strategic risk related to macro-economic and market conditions, brand reputation, industry focus and business structure;

• Operational risks, including in the highly competitive automotive components industry, related to competition, innovation, changing customer demand and customer satisfaction;

• Supply and cost of raw material, production and distribution, management resources, labor relations, intellectual property, product safety and liability, IT infrastructure, occupational health and safety, environmental protection, asset and data security, disaster recovery;

• Financial risks related to the level of indebtedness, treasury tax and audit, accuracy of forecasting and reporting, timeliness of reporting, compliance with accounting standards, and the use of financial management tools such as hedging or derivative strategies.

• Interruption of operations as well as customers’ and suppliers’ operations resulting from a number of potential causes, including labor difficulties and strikes, natural disasters, weather, fire , vandalism, civil disturbances, war, political unrest, public health concerns, mechanical failures, any of which could impair or prevent the ability to provide services or manufacture products.

4 7


4 8


(In EUR millions) Note December 31, 2010

March 31, 2010

Assets

Cash and balances with banks 10 131.1 489.6

Derivative assets held for risk management 0.6 0.1

Loans and receivables due from credit institutions and customers 11 1,122.7 -

Investment securit ies 12 626.9 3.0

Investments in equity accounted investees 13 109.3 107.4

Inventories 14 64.2 136.6

Current tax assets 2.8 3.4

Trade receivables, accrued income and other assets 15 202.9 262.0

Property, plant and equipment 16 309.5 725.6

Intangible assets 17 57.0 196.7

Deferred tax assets 26 20.4 35.4

Assets held for sale 9 378.5 -

Total assets 3,025.9 1,959.8

Equity and liabilities

Share capital 604.6 642.7

Share premium 40.5 2.3

Reserves 18 189.7 202.4

Retained earnings (losses) (191.8) (124.7)

Equity attributable to owners of the Company 643.0 722.7

Non-controll ing interests 19 100.5 104.3

Total equity 743.5 827.0

Derivative l iabil it ies held for risk management 1.6 4.9

Bank overdrafts 0.3 0.4

Loans and deposits due to credit institutions and customers 21 1,673.6 517.4

Debt securit ies issued 22 - 45.0

Finance lease l iabil it ies 23 6.9 19.7

Deferred tax l iabil it ies 26 7.1 39.0

Employee benefits 27 52.4 130.8

Provisions 24 36.5 43.0

Tax l iabil it ies 7.1 9.2

Trade payables, accrued expenses and other l iabil it ies 25 174.7 323.4

Liabil it ies held for sale 9 322.2 -

Total liabilities 2,282.4 1,132.8

Total equity and liabilities 3,025.9 1,959.8

C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N A S AT

4 9



March 31, 2010 (1)

Income statement

Financial services

Interest income 15.5 -

Interest expense (4.6) -

Net interest income 29 10.9 0.0

Commission and fee income 39.5 -

Commission and fee expense (3.4) -

Net commission and fee income 30 36.1 0.0

Net financial income 31 0.8 0.0

Net operating income from financial services 47.8 0.0

Industrial investments

Revenue 32 562.0 553.0

Cost of sales (491.8) (485.4)

Gross profit from industrial investments 70.2 67.6

Sell ing, general and administrative expenses (153.4) (115.2)

Research and development expense (0.8) (2.4)

Amortization of intangible assets (2.3) (3.1)

Impairment of property, plant and equipment and intangible assets 34 (39.2) (5.9)

Impairment of f inancial assets 35 - (0.3)

Other income and expense from industrial investments 36 (2.2) (7.2)

Profit (loss) from operations (79.9) (66.5)

Finance income 52.2 66.1

Finance costs (27.9) (57.3)

Net finance income 37 24.3 8.8

Share of profit of equity accounted investees (net of income tax) 13 4.8 8.9

Profit (loss) before income tax (50.8) (48.8)

Income tax benefit (expense) 38 (1.5) 28.8

Profit ( loss) from discontinued operations (net of income tax) 8 (94.7) 521.9

Profit (loss) for the period (147.0) 501.9

C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E F O R T H E Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 0

5 0


( 1 ) Res ta ted to p resen t Honse l and N i l es as d i scon t inued opera t ions .


March 31, 2010 (1)

Other comprehensive income

Foreign currency translation differences for foreign operations, before tax 9.8 0.6

Cash flow hedges

Effective portion of changes in fair value, before tax 0.8 1.1

Fair value reserve of financial assets available-for-sale

Net change in fair value, before tax (0.5) 0.1

Net amount transferred to profit or loss, before tax - (3.4)

Actuarial gains and losses 3.9 -

Income tax on other comprehensive income (0.2) (0.4)

Discontinued operations (net of income tax) 2.9 11.0

Other comprehensive income for the period (net of income tax) 16.7 9.0

Total comprehensive income for the period (130.3) 510.9


Owners of the Company

Continuing operations (66.6) (21.6)

Discontinued operations (25.5) 405.2

(92.1) 383.6

Non-controll ing interests

Continuing operations 14.3 1.6


(54.9) 118.3

(147.0) 501.9

Total comprehensive income for the period attributable to

Owners of the Company



(84.7) 385.1

Non-controll ing interests

Continuing operations 22.5 2.9


(45.6) 125.8

(130.3) 510.9

Earnings per share (in units)

Basic and diluted



20 (1.1) 4.6

5 1


5 2


(In EUR millions) Share capital

Share premium Reserves Retained

earnings

Non-controlling

interests

Total equity

Balance at April 1, 2009 702.7 725.3 143.7 (1,251.5) 56.7 376.9

Profit or loss - - - 383.6 118.3 501.9


Foreign exchange translation differences - - 3.5 - 6.3 9.8

Cash flow hedges - - 2.4 - 2.1 4.5

Fair value reserve on available-for-sale financial assets - - 0.1 - - 0.1

Fair value reserve on available-for-sale financial assets transferred to profit or loss - - (3.5) - - (3.5)

Income tax on other comprehensive income - - (1.0) - (0.9) (1.9)

Transactions with owners, recorded directly in equity

Capital reduction (60.0) (723.0) 60.0 723.0 - 0.0

Share-based payment transactions - - 2.3 3.8 - 6.1

Purchase of own shares - - (5.3) - - (5.3)

Exit from consolidation scope - - 15.5 - (19.9) (4.4)

Entry in consolidation scope - - - - 0.5 0.5

Change in percentage of ownership - - (15.1) 16.4 (58.7) (57.4)

Dividends - - - - (0.3) (0.3)

Other - - (0.2) - 0.2 0.0

Balance at March 31, 2010 642.7 2.3 202.4 (124.7) 104.3 827.0

Adoption of EUR as functional currency (38.1) 38.1 - - - 0.0

Balance at April 1, 2010 604.6 40.4 202.4 (124.7) 104.3 827.0

Profit or loss - - (15.0) (77.1) (54.9) (147.0)


Foreign exchange translation differences - - 1.9 - 7.9 9.8

Net gain (loss) on hedges of net investments in foreign operations, net of tax

Cash flow hedges - - 0.4 - 0.4 0.8

Fair value reserve on available-for-sale financial assets - - (0.5) - - (0.5)

Defined benefit plan actuarial gains, net of tax - - 3.9 - - 3.9

Income tax on other comprehensive income - - (0.1) - (0.1) (0.2)

Discontinued operations (net of income tax) - - 1.8 - 1.1 2.9

Transactions with owners, recorded directly in equity

Share-based payment transactions - - (10.3) 5.7 - (4.6)

Purchase of own shares - - (2.9) - - (2.9)

Distribution of own shares - - 7.8 - - 7.8

Exit from consolidation scope - - 0.5 - 30.2 30.7

Change in percentage of ownership - - (0.2) 4.7 11.9 16.4

Other - 0.1 - (0.4) (0.3) (0.6)

Balance at December 31, 2010 604.6 40.5 189.7 (191.8) 100.5 743.5

C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y

5 3



March 31, 2010 (1)

Continuing operations

Operating activities

Profit (loss) from continuing operations (52.3) (20.0)

Adjustments for:

Depreciation and amortization 16 & 17 32.5 41.9

Net impairment loss on intangible assets 17 & 34 - (0.1)

Net impairment loss on property, plant and equipment 16 & 34 39.2 6.0

Net impairment loss on financial assets 35 - 0.3

Net gain on investment securit ies at fair value through profit or loss - 1.8

Foreign exchange (6.0) 13.8

Net finance expense (6.2) 8.8

Share of profit of equity accounted investees 35 (4.8) (8.9)

Net loss on sale of property, plant and equipment 0.6 3.8

Sale of discontinued operations - (27.6)

Equity-settled share-based payment transactions 5.3 0.6

Income tax benefit (expense) 38 1.5 (28.8)

Gain on conversion of preferred shares (34.4) -

Other non-cash items 3.1 3.8

(21.5) (4.6)

Change in derivative assets held for risk management 1.0 -

Change in loans and receivables due from credit institutions and customers 140.0 -

Change in inventories (8.5) 9.0

Change in trade receivables and other assets (287.5) (36.7)

Change in trading l iabil it ies (0.2) -

Change in derivative l iabil it ies held for risk management 0.5 -

Change in loans and deposits from credit institutions and customers (271.3) -

Change in employee benefits (2.2) (4.0)

Change in provisions (6.0) -

Change in trade payables and other l iabil it ies 13.8 35.8

Interest paid (10.8) (7.8)

Interest received 16.9 3.2

Income tax received (2.8) (2.3)

Income tax paid (0.4) 2.0

Net cash used in operating activities (439.0) (5.4)

C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W F O R T H E Y E A R E N D E D AT D E C E M B E R 3 1 , 2 0 1 0

5 4




March 31, 2010 (1)

Investing activities

Acquisit ion of investment securit ies (235.6) -

Proceeds from sale of investment securit ies 190.9 -

Acquisit ion of property, plant and equipment (23.5) (16.0)

Proceeds from sale of property, plant and equipment 0.8 8.7

Acquisit ion of subsidiaries (279.3) -

Cash and cash equivalents acquired 975.3 -

Proceeds from sale of subsidiary, net of cash disposed 18.5 20.0

Acquisit ion of investments (0.3) (21.2)

Proceeds from sale of investments - 96.8

Acquisit ion of intangibles (0.2) (0.3)

Repayments of granted loans 4.0 8.8

Loans granted (10.0) -

Payment of capital increase in discontinued operations - (90.3)

Dividends received 1.5 2.9

Other (0.3) 0.3

Net cash from investing activities 641.8 9.7

Financing activities

Repayments of loans and borrowings (40.0) (26.7)

Payment of f inance lease l iabil it ies (2.0) (3.3)

Payment of transaction costs (8.9) (6.7)

Payment of dividends - (0.1)

Purchase of own shares (2.9) (5.3)

Other 2.6 -

Net cash used in financing activities (51.2) (42.1)

Cash and cash equivalents at the beginning of the period 457.9 512.6

Net increase (decrease) in cash and cash equivalents 151.6 (37.8)

Effect of exchange rate f luctuations (15.7) (16.9)

Cash and cash equivalents at the end of the period 10 593.8 457.9

Discontinued operations


Net cash from operating activit ies 33.5 33.3

Net cash used in investing activit ies (25.3) (94.2)

Net cash from financing activit ies 9.9 30.1

Effect of exchange rate f luctuations 4.7 0.3

Cash and cash equivalents at the end of the period 54.1 31.3

TOTAL


Net increase (decrease) in cash and cash equivalents 169.7 (68.6)

Effect of exchange rate f luctuations (11.0) (16.6)

Cash and cash equivalents at the end of the period 10 647.9 489.2

5 5


C O N T E N T S Page

1. Reporting entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7 2. Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7 3. Significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 4. Use of estimates and judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 5. Maturity of assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3 6. Operating segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5 7. Acquisitions of subsidiaries and non-controll ing interests . . . . . . . . . . . . . . . . . 7 6 8. Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 9. Assets and liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 10. Cash and balances with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 11. Loans and receivables due from credit institutions and customers . . . . . . . . . . . 8 2 12. Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3 13. Investments in equity accounted investees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4 14. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6 15. Trade receivables, accrued income and other assets . . . . . . . . . . . . . . . . . . . . . 8 7 16. Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8 17. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 0 18. Capital and Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3 19. Non-controll ing interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5 20. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6 21. Loans and deposits due to credit institutions and customers . . . . . . . . . . . . . . 9 7 22. Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 23. Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 24. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9 25. Trade payables, accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . 1 0 0 26. Deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1 27. Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 3 28. Share based payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 6 29. Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8 30. Net commission and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8 31. Net financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8 32. Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 9 33. Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 0 34. Impairment of property, plant and equipment and intangible assets . . . . . . . . . 1 1 1 35. Impairment of financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 2 36. Other income and expense from industrial investments . . . . . . . . . . . . . . . . . . 1 1 2 37. Net finance income from industrial investments . . . . . . . . . . . . . . . . . . . . . . . . 1 1 3 38. Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 4 39. Financial risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 6 40. Assets under management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 8 41. Capital management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 9 42. Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 0 43. Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 0 44. List of consolidated subsidiaries and equity accounted investees . . . . . . . . . . 1 3 2 45. Subsequent events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6 46. Auditor’s fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3 6

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

5 6


1 . R E P O R T I N G E N T I T YRHJ International SA («RHJI») is a Company domiciled in Belgium. The consolidated financial statements of RHJI as at and for the nine months ended December 31, 2010 comprise RHJI, its subsidiaries and its businesses accounted for under the equity method (together referred to as the «Company»).

The consolidated financial statements of the Company as at and for the year ended December 31, 2010 are available upon request from RHJI’s registered office at Avenue Louise, 326 at 1050 Brussels or at www.rhji.com.

The Company is involved in the following businesses:

• Financial services- wealth management and fiduciary business with

Kleinwort Benson («Kleinwort Benson»);- private banking with Quirin Bank AG («Quirin»);- fund origination and management with Arecon AG

(«Arecon») and Belvall Capital SA («Belvall»); and- asset management with Kleinwort Benson

Investors («Kleinwort Benson Investors» or «KBI»).

• Other- auto cast parts components with Asahi Tec

Corporation («Asahi Tec»);- electronic components with Niles Co. Ltd.

(«Niles»);- hospitality with Phoenix Resort KK («Phoenix

Seagaia Resort»);- consumer products with Shaklee Global Group

Inc. («Shaklee»); and- ICT consulting services with Sigmaxyz Inc.

(«Sigmaxyz»).

2 . B A S I S O F P R E PA R AT I O N

2 . 1 . S t a t e m e n t o f c o m p l i a n c eThe Company’s accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards («IFRS») as issued by the International Accounting Standards Board («IASB») and endorsed by the European Union («EU»). The Company’s application of IFRS results in no differences between IFRS as issued by the IASB and IFRS as endorsed by the EU. The financial statements have been authorized for issue by the Board of Directors on April 27, 2011.

2 . 2 . C h a n g e i n f u n c t i o n a l c u r r e n c yAs a result of the Company’s transformation and given the European focus on the further development of its financial services strategy, the Company’s functional currency changed from JPy to EUR effective April 1, 2010.

5 7


3 . S I G N I F I C A N T A C C O U N T I N G P O L I C I E SExcept as described in section 3.1, and as a result of changes due to the adoption of the revised version of IFRS 3 «Business Combination», the amended version of IAS 27 «Consolidated and Separate Financial Statements» and the «improvements to IFRS 2009», the Company has applied the same accounting policies in its consolidated financial statements for the nine months ended December 31, 2010 as were applied in its consolidated financial statements as at and for the fiscal year ended March 31, 2010.

3 . 1 . P r e s e n t a t i o n o f f i n a n c i a l s t a t e m e n t sAs a result of the change in nature of its activities resulting from the Company’s transformation into a financial services firm and the acquisition of Kleinwort Benson, the Company has decided to change the format of its financial statements in order to fit with a presentation more commonly used by banks. The impact on the presentation is only relating to classification and there were no significant restatements for the comparative periods presented in the financial position, the comprehensive income and the cash flow statement.

The reclassifications for comparative purposes of the consolidated financial position (assets, equity and liabilities) and income statement are as follows:

(In millions) Published in JPY

Translated in EUR New account description in EUR

Current Non-current Current Non-current

Assets

Property, plant and equipment 91,375 725.6 Property, plant and equipment 725.6

Intangible assets 24,775 196.7 Intangible assets 196.7

Investments in equity accounted investees 13,520 107.4 Investments in equity

accounted investees 107.4

Other investments, including derivatives 248 307 2.0 2.4 {

Investment securit ies 3.0

Trade receivables, accrued income and other assets 1.3

Derivative assets held for risk management 0.1

Trade and other receivables 30,980 1,176 246.0 9.3 Trade receivables, accrued income and other assets 255.3

Tax assets 433 4,462 3.4 35.4 { Deferred tax assets 35.4

Current tax assets 3.4

Inventories 17,197 136.6 Inventories 136.6

Cash and cash equivalents 61,657 489.6 Cash and balances with central banks 489.6

Others 660 5.4 Trade receivables, accrued income and other assets 5.4

Total assets 110,515 136,275 877.6 1,082.2 Total assets 1,959.8

5 8




Current Non-current Current Non-current

Equity and liabilities

Share capital 80,937 642.7 Share capital 642.7

Share premium 293 2.3 Share premium 2.3

Reserves 25,486 202.4 Reserves 202.4

Retained earnings (15,702) (124.7) Retained earnings (losses) (124.7)

Non-controll ing interests 13,126 104.3 Non-controll ing interests 104.3

Loans and borrowings 23,040 50,258 183.0 399.1 {Loans and deposits due to credit institutions and customers

517.4

Debt securit ies issued 45.0

Finance lease l iabil it ies 19.7

Employee benefits 390 16,088 3.1 127.7 Employee benefits 130.8

Provisions 3,126 2,283 24.8 18.2 Provisions 43.0

Tax l iabil it ies 1,153 4,917 9.2 39.0 { Deferred tax l iabil it ies 39.0

Current tax l iabil it ies 9.2

Trade and other payables 40,390 935 320.7 7.5 {Trade payables, accrued expenses and other l iabil it ies 323.3

Derivative l iabil it ies held for risk management 4.9

Bank overdrafts 57 0.4 Bank overdrafts 0.4

Others 13 0.1 Trade payables, accrued expenses and other l iabil it ies 0.1

Total equity and liabilities 68,156 178,634 541.2 1,418.6 Total equity and liabilities 1,959.8


Restated in JPY


Income statement

Revenue 181,872 69,642 553.0 Revenue 553.0

Cost of sales (162,897) (61,123) (485.4) Cost of sales (485.4)

Sell ing, general and administrative expenses (25,395) (14,510) (115.2) Sell ing, general and

administrative expenses (115.2)

Amortization of intangible assets (1,303) (396) (3.1) Amortization of intangible

assets (3.1)

Impairment of property, plant, equipment and intangible assets

(2,386) (741) (5.9)Impairment of property, plant and equipment and intangible assets

(5.9)

Other income (expenses) (1,765) (1,206) (9.6) {Other income and expense from industrial investments (7.2)

Research and development expenses (2.4)

Finance income 67,417 8,325 66.1 Finance income 66.1

Finance costs (11,820) (7,253) (57.6) { Finance costs (57.3)

Impairment of f inancial assets (0.3)

Share of profit ( loss) of equity accounted investees (net of income tax)

1,126 1,126 8.9Share of profit of equity accounted investees (net of income tax)

8.9

Income tax benefit 7,220 3,624 28.8 Income tax benefit 28.8

Profit from discontinued operations (net of income tax) 11,138 65,721 521.9 Profit from discontinued

operations (net of income tax) 521.9

Profit for the period 63,207 63,207 501.9 Profit for the period 501.9

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3 . 2 . B a s i s o f c o n s o l i d a t i o n3 . 2 . 1 . S u b s i d i a r i e sSubsidiaries are entities controlled by RHJI. Control exists when RHJI has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control is presumed to exist when RHJI, directly or indirectly through subsidiaries, owns more than half of the voting power of an entity unless in exceptional circumstances it can be clearly demonstrated that such ownership does not constitute control. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.

Losses applicable to the non-controll ing interests in a subsidiary are allocated to the non-controll ing interests even if doing so causes the non-controll ing interests to have a deficit balance.

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controll ing interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

The financial statements of all subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

3 . 2 . 2 . A s s o c i a t e sAssociates are those entities in which RHJI has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when RHJI owns, directly or indirectly through subsidiaries, between 20 and 50% of the voting power of an entity unless it can be clearly demonstrated that such ownership does constitute control, in which case, the associate is considered to be a subsidiary.

The consolidated financial statements include the Company’s share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

When the Company’s share of losses exceeds its interest in an associate, the Company’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of an associate.

3 . 2 . 3 . J o i n t v e n t u r e sJointly controlled entities are those enterprises over whose activities RHJI has joint control, established by contractual agreements. The Company records its interest in jointly controlled entities using the equity method from the date that joint control commences to the date that the joint control ceases.

3 . 2 . 4 . Tr a n s a c t i o n s e l i m i n a t e d o n c o n s o l i d a t i o nIntragroup balances and any unrealized gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements.

Unrealized gains arising from transactions with associates are eliminated to the extent of RHJI’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3 . 3 . F o r e i g n c u r r e n c y3 . 3 . 1 . F o r e i g n c u r r e n c y t r a n s a c t i o n sTransactions in foreign currencies other than the functional currency are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising from the settlement of foreign currency transactions or on translation of monetary assets and liabilities are recognized in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at foreign exchange rates ruling at the dates the fair value was determined.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on retranslation of available for sale equity instruments, a financial l iability designated as a hedge of net investment in a foreign operation or qualifying cash flow hedges which are recognized in other comprehensive income.

3 . 3 . 2 . F o r e i g n o p e r a t i o n sThe assets and liabilities of a foreign operation of the consolidated businesses with a functional currency other than the presentation currency of its parent are translated to applicable presentation currency at foreign exchange rates prevailing at the reporting date. The revenues and expenses of foreign operations are translated to applicable presentation currency at

6 0


exchange rates at the dates of the transactions, which for practical reasons are approximated by using average exchange rates for the period. The components of shareholders’ equity are translated at historical rates. All resulting exchange differences are recognized directly in the translation reserve, a separate component of equity.

The translation reserve represents the difference between translating the statement of comprehensive income items at average exchange rates and using the

exchange rate at the reporting date, and in respect of the opening balance of equity, the difference between translating at the rate at the reporting date of the previous period and using the rate at the reporting date of the current period. These differences are released in profit or loss upon disposal, in part or in full, of the investment in the related foreign operations, as an adjustment to the gain and loss on disposal.

3 . 3 . 3 . E x c h a n g e r a t e s

The fol lowing major exchange rates have been used in preparing the f inancial statements.

3 . 4 . D e r i v a t i v e f i n a n c i a l i n s t r u m e n t sThe Company uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. The Company does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

Derivative financial instruments are recognized initially at cost. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognized immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. The fair value of forward exchange contracts is their quoted market price at the reporting date, being the present value of the quoted forward price.

The fair value of forward exchange contracts is based on their l isted market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

Derivatives may be embedded in another contractual arrangement (a «host contract»). The Company accounts for embedded derivatives separately from the host contract when the host contract is itself not carried at fair value through profit or loss, and the characteristics of the embedded derivative are not clearly and closely related to the host contract.

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Company’s entity and counterparty when appropriate.

3 . 5 . H e d g i n g3 . 5 . 1 . F a i r v a l u e h e d g e sWhere a derivative financial instrument hedges the changes in fair value of recognized assets or liabilities or an unrecognized firm commitment, any gain or loss on the hedging instrument is recognized in profit or loss. The hedged item also is stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in profit or loss.

1 EUR equals Closing rate Average rate

December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

British Pound ("GBP") 0.86 0.89 0.85 0.89

Japanese Yen ("JPY") 108.65 125.93 113.25 131.18

Swiss Franc ("CHF") 1.25 1.43 1.35 1.50

Thai Baht ("THB") 40.17 43.60 40.90 47.67

US Dollar ("USD") 1.34 1.35 1.31 1.41

6 1


3 . 5 . 2 . C a s h f l o w h e d g e sWhere a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognized asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognized in other comprehensive income and presented as fair value reserve. The ineffective part of any gain or loss is recognized immediately in profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is stil l expected to occur, the cumulative gain or loss at that point remains in equity and is recognized in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealized gain or loss previously recognized in other comprehensive income is recognized immediately in profit or loss.

When the hedged item is a non-financial asset, the amount recognized in other comprehensive income is transferred to the carrying amount of the asset when it is recognized. In other cases, the amount recognized in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.

3 . 6 . P r o p e r t y , p l a n t a n d e q u i p m e n t3 . 6 . 1 . O w n e d a s s e t sItems of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see below for accounting policy on impairment). Cost of an item of property, plant and equipment comprises its purchase price as well as any directly attributable costs (for example delivery and handling costs, installation and assembly costs) and the initial estimate of the costs of dismantling and removing the item if the Company is obliged to do so.

Subsequent costs are only capitalized if it is probable that they will give rise to future economic benefits in excess of the originally assessed standard of performance of the asset or when it replaces a component that is accounted for separately. Costs incurred simply to restore or maintain the level of future economic benefits are expensed as incurred.

Where parts of an item of property, plant and equipment have different useful l ives, they are accounted for as separate items of property, plant and equipment.

Borrowing costs related to acquisition, construction or production of qualifying assets are capitalized as part of the cost of that asset.

3 . 6 . 2 . L e a s e d a s s e t sLeases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.

The periodic lease payments should be split into two components: the interest charge for the period and the reduction of the lease liability. The interest charge should be determined so that a constant periodic rate of interest is recognized on the outstanding balance of the liability. The asset under a finance lease should be depreciated over the shorter of the estimated useful l ife of the asset or the lease term, unless it is reasonable certain that the Company will obtain ownership by the end of the lease term.

An operating lease is a lease other than a finance lease. Rent expense for operating leases is recognized in profit or loss on a straight-line basis over the lease term.

3 . 6 . 3 . D e p r e c i a t i o nDepreciation is charged to profit or loss from the date that the asset is available for use, on a straight-line basis over the estimated useful l ives of each part of an item of property, plant and equipment. Land is not depreciated.

The estimated useful l ives are as follows:

3 . 6 . 4 . F a i r v a l u eThe fair value of property, plant and equipment recognized as a result of a business combination is based on market values.

The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a will ing buyer and a will ing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate.

(In years)

Buildings 3 - 60

Machineries and equipments 1 - 20

Fixtures and fitt ings 1 - 206 2


3 . 7 . I n t a n g i b l e a s s e t s3 . 7 . 1 . G o o d w i l lFrom 1 April 2010 the Group has applied IFRS 3 Business Combinations (2008) in accounting for business combinations. The change in accounting policy has been applied prospectively and has had no material impact on earnings per share.

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

For acquisitions, the Group measures goodwill at the acquisition date as:

The fair value of the consideration transferred; plus the recognised amount of any non-controll ing interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is not amortized but is tested at least annually for impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the equity accounted investees.

Goodwill is expressed in the currency of the subsidiary to which it relates and is translated to EUR Japanese yen using the year-end exchange rate.

Negative goodwill arising on an acquisition is recognized in profit or loss.

3 . 7 . 2 . R e s e a r c h a n d d e v e l o p m e n tExpenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes:

Cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other

development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

3 . 7 . 3 . O t h e r i n t a n g i b l e a s s e t sOther intangible assets that are acquired are stated at cost less accumulated amortization (see below) and impairment losses (see below for accounting policy on impairment).

Expenditure on internally generated goodwill and brands is recognized in profit or loss as incurred.

Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

3 . 7 . 4 . A m o r t i z a t i o nAmortization is charged to profit or loss on a straight- line basis over the estimated useful l ives. The estimated useful l ives are as follows:

Trade names are determined to have an indefinite useful l ife, because the products are expected to last for the duration of the related consolidated businesses and are expected to retain their current trade names.

3 . 7 . 5 . F a i r v a l u eThe fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method, whereby the subject asset is valued after deducting a fair return on all other assets that are part of creating the related cash flows. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

(In years)

Softwares 1 - 7

Trademarks and patents 7 - 20

Tradenames Indefinite

Customer relationships 8 - 25

Customer contracts 8 - 15

Intellectual properties 3 - 10

Capitalized development costs 5 - 9

Other rights and agreements 4 - 15 6 3


3 . 8 . I n v e s t m e n t s3 . 8 . 1 . I n v e s t m e n t s i n s e c u r i t i e sThe Company owns various non-controll ing interests in public companies.

Debt securities and equity shares are initially measured at fair value plus incremental direct transaction costs and subsequently accounted for as fair value through profit or loss. Equity shares are included in the balance sheet at market value, or if shares are not readily transferable, at directors’ valuation.

Investments are classified as held-to-maturity when the Company has a positive intent and ability to hold debt securities to maturity.

3 . 8 . 2 . F i n a n c i a l i n s t r u m e n t sR e c o g n i t i o nThe company initially recognises loans and advances, and deposits on the date that they are originated. All other financial assets and liabilities (including assets and liabilities designated at fair value through profit or loss) are initially recognised on the trade date at which the company becomes party to the contractual provisions of the instrument.

D e r e c o g n i t i o nThe company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

The company derecognises a financial l iability when its contractual obligations are discharged or cancelled or expire.

O f f s e t t i n gFinancial assets and liabilities are set off and the net amount presented in the balance sheet when, and only when, the company has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards.

F a i r v a l u e m e a s u r e m e n tThe determination of fair values of financial assets and financial l iabilities is based on quoted market prices or dealer price quotations for financial instruments traded in active markets. For all other financial instruments fair value is determined by using valuation techniques. Valuation techniques include net present value techniques, the discounted cash flow method, comparison to similar instruments for which market observable prices exist, and valuation models. The company uses widely recognised valuation models on determining the fair value of common financial

instruments like options and interest rate and currency swaps. For these financial instruments, inputs into models are market observable.Fair value changes on other derivatives held for risk management purposes, and other financial assets and liabilities carried at fair value through profit and loss, are presented in net gains/losses from financial instruments carried at fair value in the profit or loss account.

D e s i g n a t i o n a t f a i r v a l u e t h r o u g h p r o f i t o r l o s sThe company has designated financial assets at fair value through profit or loss when either:

• the assets are managed, evaluated and reported internally on a fair value basis;

• the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or

• the asset contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract.

Note 39 sets out the amount of each class of financial asset or liability that has been designated at fair value through profit or loss. A description of the basis for each designation is set out in the note for the relevant asset or liability class.

A v a i l a b l e - f o r - s a l eAvailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified as financial assets held at fair value through profit or loss, held-to-maturity financial assets or loans and receivables. The Company’s unlisted investments are classified as available-for-sale financial assets.

Subsequent to initial recognition, available-for-sale financial assets are measured at fair value, with any resultant gain or loss being recognised directly in equity (in the fair value reserve), except in the case of monetary items such as debt securities, for impairment losses and foreign exchange gains and losses.

When an investment is derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest bearing, interest calculated using the effective interest method is recognised in profit or loss.

3 . 8 . 3 . F i n a n c i a l g u a r a n t e e sFinancial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial guarantees are given to credit institutions, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantee liabilities are recognised initially at their fair value and initial fair value is amortised over the

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l ife of the financial guarantee. The financial guarantee is subsequently carried at the higher of this amortised amount and present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included in other liabilities.

Any increase in the liability relating to guarantees is reported in the consolidated income statement within other expenses.

3 . 9 . I n v e s t m e n t p r o p e r t i e sInvestment properties are properties which are held either to earn rental income or for capital appreciation or for both.

All investment properties are stated at cost, less accumulated depreciation and any accumulated impairment losses.

Depreciation charge is charged to profit or loss on a straight-line basis over the estimated useful l ives of each part of the property. The estimated useful l ives are those used as required for owner-occupied property carried at cost.

The cost of Investment properties is based on the weighted average costs principle and includes expenditure incurred to acquire

3 . 1 0 . I n v e n t o r i e sInventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the weighted average costs principle and includes expenditure incurred to acquire and to bring them to their existing location and condition. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories.

In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Cost also may include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories.

The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.

3 . 1 1 . C o n s t r u c t i o n w o r k i n p r o g r e s sConstruction work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress bill ings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Company’s contract activities based on normal operating capacity.

Construction work in progress is presented as part of trade and other receivables in the statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress bill ings. If progress bill ings exceed costs incurred plus recognised profits, then the difference is presented as deferred income in the statement of financial position.

3 . 1 2 . Tr a d e a n d o t h e r r e c e i v a b l e sTrade and other receivables are stated at their cost less impairment losses. An estimate is made for doubtful receivables based on a review of all outstanding amounts at each reporting date. Impairment losses are recorded during the year in which they are identified.

The fair value of trade and other receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

3 . 1 3 . C a s h a n d b a l a n c e s w i t h b a n k sCash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial assets with original maturities of less than three months, which are subject to insignificant risk of changes in their fair value, and are used by the Group in the management of its short-term commitments.

Cash and cash equivalents are carried at amortised cost in the statement of financial position

Bank overdrafts repayable on demand are included as cash and cash equivalents for the purpose of the statement of cash-flow if and when they form an integral part of the entity’s cash management.

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.

3 . 1 4 . L o a n s a n d a d v a n c e sLoans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Company does not intend to sell immediately or in the near term.

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Loans and advances are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortized cost using the effective interest method, except when the Company chooses to carry the loans and advances at fair value through profit or loss.

3 . 1 5 . I m p a i r m e n t3 . 1 5 . 1 . M e t h o d o l o g yThe carrying amounts of the Company’s assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For goodwill, assets that have an indefinite useful l ife and intangible assets that are not yet available for use, the recoverable amount is estimated at each reporting date.

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the «cash-generating unit, or CGU»).

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

3 . 1 5 . 2 . C a l c u l a t i o n o f r e c o v e r a b l e a m o u n tThe recoverable amount of the Company’s investments in held- to-maturity securities and receivables carried at amortized cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

3 . 1 5 . 3 . R e v e r s a l s o f i m p a i r m e n tA previously recognized impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

An impairment loss recognized for goodwill shall not be reversed in a subsequent period.

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3 . 1 6 . S h a r e c a p i t a lWhen share capital recognized as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognized as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity.

Dividends are recognized as a liability in the period in which they are declared.

Transaction costs related to the issuance of shares are accounted for as a deduction from equity, net of any tax effects.

3 . 1 7 . L o a n s a n d b o r r o w i n g sLoans and borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in profit or loss over the period of the borrowings on an effective interest basis.

3 . 1 8 . N o n - d e r i v a t i v e f i n a n c i a l l i a b i l i t i e sFair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar l iabilities that do not have a conversion option. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

3 . 1 9 . E m p l o y e e b e n e f i t s3 . 1 9 . 1 . D e f i n e d c o n t r i b u t i o n p l a n sObligations for contributions to defined contribution pension plans are recognized as an expense in profit or loss as incurred.

3 . 1 9 . 2 . D e f i n e d b e n e f i t p l a n sThe net obligation in respect of defined benefit pension plans is calculated as the present value of the defined benefit obligation (future benefit that employees have earned in return for their service in the current and prior periods), adjusted for the unrecognized actuarial gains and losses and less any past service costs not yet recognized and the fair value of any plan assets. The discount rate is the yield at the reporting date on high quality credit rated bonds that have maturity dates approximating to the terms of the obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

The Group’s obligations are denominated in the same currency in which the benefits are expected to be paid.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in profit or loss on a straight- line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in profit or loss.

In respect of actuarial gains and losses, to the extent that any cumulative unrecognized actuarial gain or loss exceeds 10% of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion will be recognized in profit or loss over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognized.

Where the calculation results in a benefit to the Company, the recognized asset is l imited to the net total of any unrecognized actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan.

3 . 1 9 . 3 . E q u i t y a n d e q u i t y - r e l a t e d c o m p e n s a t i o n b e n e f i t sThe Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed using the projected unit credit method. Any actuarial gains and losses are recognised in profit or loss in the period in which they arise.

The Company operates a number of share-based compensation plans, allowing employees to acquire/receive shares in their respective companies.

The grant-date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and nonmarket vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. The fair value of the amount payable to employees in

6 7


respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expenses in profit or loss.

The fair value of the options is measured using a Black-Scholes-Merton model, taking into account the terms and conditions upon which the options were granted.

The fair value of the employee share grants is measured using various methods (Finnerty and/or Chaffee) to determine the discount from the Company’s publicly quoted market price resulting from transfer restrictions.

Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatil ity (based on weighted average historic volatil ity adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

The amount recognized as an expense is adjusted to reflect the actual number of stock options and shares that vest.

3 . 1 9 . 4 . Te r m i n a t i o n b e n e f i t sTermination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibil ity of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

3 . 1 9 . 5 . B o n u s e sBonuses received by employees and management of the Company are recognized as an expense in the year the related service is provided.

3 . 2 0 . P r o v i s i o n sA provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material,

provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

3 . 2 0 . 1 . W a r r a n t i e sA provision for warranties is recognized when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

3 . 2 0 . 2 . R e s t r u c t u r i n gA provision for restructuring is recognized when the Company has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Future operating costs are not provided for.

3 . 2 0 . 3 . S i t e r e s t o r a t i o nIn accordance with the applicable legal requirements, a provision for site restoration in respect of contaminated land or building is recognized when the asset is contaminated.

3 . 2 0 . 4 . O n e r o u s c o n t r a c t sA provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with the contract.

3 . 2 1 . Tr a d e a n d o t h e r p a y a b l e sTrade and other payables are stated at cost.

3 . 2 2 . R e v e n u e3 . 2 2 . 1 . G o o d s s o l d a n d s e r v i c e s r e n d e r e dRevenue from the sale of goods is measured at the fair value of the consideration received or receivable net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with

6 8


the goods, and the amount of revenue can be measured reliably. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.

3 . 2 2 . 2 . C o n s t r u c t i o n c o n t r a c t sContract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognized in profit or loss in proportion to the stage of completion of the contract. The stage of completion is assessed by reference to surveys of work performed. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognized immediately in profit or loss.

3 . 2 2 . 3 . G o v e r n m e n t g r a n t sGovernment grants are recognized initially as deferred income when there is reasonable assurance that they will be received and that the Company will comply with the conditions attaching to them. Grants that compensate the Company for expenses incurred are recognized as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Company for the cost of an asset are recognized in profit or loss as other operating income on a systematic basis over the useful l ife of the asset.

3 . 2 2 . 4 . R o y a l t i e sRoyalties are recognized as revenue when it is probable that the economic benefits associated with the transaction will flow to the Company and can be measured reliably. The income is recognized in accordance with the substance of the relevant agreement.

3 . 2 2 . 5 . F e e s a n d c o m m i s s i o n s i n c o m e a n d e x p e n s eFees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate.

Commissions charged to clients on securities transactions are credited to the profit or loss account and collected as they fall due.

Portfolio asset management fees in excess of commission already charged are accounted for on an accrual basis.

Investment management fees are recognized as the related services are performed.

Fees from structured products transactions are credited to the profit or loss account as they fall due.

3 . 2 2 . 6 . I n t e r e s t i n c o m e a n d e x p e n s eInterest income and expense are recognized in the profit or loss account using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial instrument, but not the future credit losses.

The effective interest rate is established on initial recognition of the financial asset and liability and is not revised subsequently. Interest income and expense presented in the statement of comprehensive income include interest on financial assets and liabilities at amortized cost on an effective interest rate basis.

3 . 2 3 . E x p e n s e s3 . 2 3 . 1 . E m p l o y e e b e n e f i t sShort-term employee benefits including short-term compensated absences are expensed in the period in which the employees rendered the related services.

3 . 2 3 . 2 . L e a s e p a y m e n t sPayments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized in profit or loss as an integral part of the total lease expense.

Minimum lease payments related to finance leases are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

3 . 2 3 . 3 . F i n a n c e i n c o m e a n d e x p e n s e sFinance income and expenses comprise interest payable on borrowings calculated using the effective interest rate method, dividends on redeemable preference shares, interest receivable on funds invested, dividend income, foreign exchange gains and losses and gains and losses on hedging instruments that are recognized in profit or loss.

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Interest income is recognized in profit or loss as it accrues, using the effective interest method. Dividend income is recognized in profit or loss on the date the entity’s right to receive payments is established. The interest expense component of finance lease payments is recognized in profit or loss using the effective interest method.

Gains and losses resulting from changes in the Company’s ownership in consolidated subsidiaries are recognized in other comprehensive income.

3 . 2 4 . I n c o m e t a xIncome tax comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized in other comprehensive income, in which case it is recognized in other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:

• initial recognition of goodwill;• initial recognition of assets or liabilities in a

transaction other than a business combination that affect neither accounting nor taxable profit;

• investments in subsidiaries to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognized only to the extent that it is reviewed at each reporting date and probable that future taxable profits will be available against which the asset can be util ized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Additional income taxes that arise from the distribution of dividends are recognized at the same time as the liability to pay the related dividend.

3 . 2 5 . O p e r a t i n g s e g m e n tAn operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. All operating segments’ operating results are reviewed regularly by RHJI’s CEO to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

3 . 2 6 . D i s c o n t i n u e d o p e r a t i o n sA discontinued operation is a component of the Company’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as discontinued operation, the comparative statement of comprehensive income is restated as if the operation had been discontinued from the start of the comparative period. A disposal group that is to be abandoned may also qualify.

Immediately before classification as held for sale, the measurement of all assets and liabilities in the disposal group is brought up-to-date in accordance with applicable IFRSs. On initial classification as held for sale, non-current assets and disposal groups are recognized at the lower of carrying amount and fair value less cost to sell. Impairment losses on initial classification as held for sale are included in profit or loss. The same applies to gains and losses on subsequent remeasurement.

3 . 2 7 . E a r n i n g s p e r s h a r eThe Company presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

7 0


3 . 2 8 . R e c e n t l y i s s u e d s t a n d a r d s a n d i n t e r p r e t a t i o n s n o t y e t a d o p t e dA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2010, and have not been applied in preparing these consolidated financial statements:

IFRS 9 Financial Instruments is intended to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 deals with classification and measurement of financial assets and financial l iabilities. This standard is the first phase in the replacement of IAS 39 and will become mandatory for the Company’s 2013 consolidated financial statements, with retrospective application. The Company does not plan to adopt this standard early and the extent of the impact has not yet been determined.

IAS 24 Related Party Disclosures (revised 2009) amends the definition of a related party and modifies certain related party disclosure requirements for government related entities. The amendments which become mandatory for the Company’s 2011 consolidated financial statements are not expected to have a significant impact on the consolidated financial statements.

Amendments to IFRIC 14 IAS 19 – The Limit on a Defined Benefit Assets, Minimum Funding Requirements and their Interaction remove unintended consequences arising from the treatment of prepayments where there is a minimum funding requirement. These amendments result in prepayments of contributions in certain circumstances being recognised as an asset rather than an expense. The amendments which become mandatory for the Company’s 2011 consolidated financial statements are not expected to have a significant impact on the consolidated financial statements.

Improvements to IFRSs 2010 is a collection of minor improvements to existing standards. This collection, which becomes mandatory for the Company’s 2011 consolidated financial statements, is not expected to have a material impact on the Group’s consolidated financial statements.

3 . 2 9 . I m p a c t o f c h a n g e s i n a c c o u n t i n g p o l i c i e s3 . 2 9 . 1 . R e v i s e d I F R S 3 : B u s i n e s s C o m b i n a t i o n sRevised IFRS 3 Business Combinations (2008) incorporates the following changes that are likely to be relevant to the Company’s operations:

• The definition of a business has been broadened, which is likely to result in more acquisitions being treated as business combinations;

• Contingent consideration will be measured at fair value, with subsequent changes therein recognized in profit or loss;

• Transaction costs, other than share and debt issue costs, will be expensed as incurred;

• Any pre-existing interest in the acquire will be measured at fair value with the gain or loss recognized in profit or loss;

• Any non-controll ing interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquire, on a transaction-by-transaction basis.

The company adopted the revised standard as of April 1, 2010 with no material effect on its financial result or financial position.

3 . 2 9 . 2 . I A S 2 7 : C o n s o l i d a t e d a n d S e p a r a t e F i n a n c i a l S t a t e m e n t sAmended IAS 27 Consolidated and Separate Financial Statements (2008) requires

• accounting for changes in ownership interests by the accounting for changes in ownership interests by the Company in a subsidiary, while maintaining control, to be recognized as an equity transaction;

• when the Company loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in profit or loss; and

• that total comprehensive income is attributed to the parent and to the non-controll ing interests even if this results in a debit balance on non-controll ing interests.

3 . 2 9 . 3 . I m p r o v e m e n t s t o I F R S 2 0 0 9The Company adopted the improvement as of April 1, 2010 with no material effect on its financial result or financial position. 7 1


4 . U S E O F E S T I M AT E S A N D J U D G M E N T SThe preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:

• Note 7 - Acquisitions of subsidiaries• Note 24 - Provisions• Note 26 - Util isation of tax losses• Note 27 - Measurement of defined benefit

obligations• Note 28 - Measurement of share-based payments• Note 34 - Measurement of the recoverable amount

for property, plant and equipment and intangible assets of cash-generating units including goodwill

• Note 35 - Measurement of the recoverable amount for financial assets of cash-generating units

• Note 39 - Valuation of financial instruments• Note 42 - Contingencies

7 2


5 . M AT U R I T Y O F A S S E T S A N D L I A B I L I T I E S(In EUR millions) December 31, 2010 March 31, 2010

Less than 1

year

Between 1 and 5

years

More than 5 years

TotalLess

than 1 year

Between 1 and 5

years

More than 5 years

Total

Financial assets

Cash and balance with bank 131.1 - - 131.1 489.6 - - 489.6

Derivative financial instruments (Held for risk management) 0.6 - - 0.6 0.1 - - 0.1

Loans and receivables due from credit institutions 466.5 89.6 - 556.1 - - - 0.0

Loans and receivables due from customers 187.5 334.5 44.6 566.6 - - - 0.0

Debt and other fixed income securit ies (Designated at fair value through profit or loss)

304.5 295.6 - 600.1 - - - 0.0

Available for sale investments in equity securit ies and other investments

0.1 10.9 125.1 136.1 3.0 - 107.4 110.4

Other assets

Trade receivables and prepayments 111.2 - - 111.2 240.9 0.1 - 241.0

Other receivables

Accrued income 10.0 - - 10.0 - - - 0.0

Settlement balances 2.1 - - 2.1 - - - 0.0

Fee debtors 0.1 - - 0.1 - - - 0.0

Consumption tax and VAT receivables 1.8 - - 1.8 3.4 - - 3.4

Income tax receivable 1.0 - - 1.0 - - - 0.0

Other 40.7 0.9 2.3 43.9 11.8 9.2 - 21.0

Deferred tax assets - 20.4 - 20.4 - 35.4 - 35.4

Employee benefits 7.3 - - 7.3 - - - 0.0

Assets classified as held for sale 377.9 0.6 - 378.5 - - - 0.0

Other 437.5 21.3 0.2 459.0 1,058.9 - - 1,058.9

Total 2,079.9 773.8 172.2 3,025.9 1,807.7 44.7 107.4 1,959.8

7 3



Less than 1

year

Between 1 and 5

years

More than 5 years

TotalLess

than 1 year

Between 1 and 5

years

More than 5 years

Total

Financial l iabilities

Derivative financial instruments (Held for risk management) 1.6 - - 1.6 4.9 - - 4.9

Deposits and loans due to credit institutions 181.4 - - 181.4 467.3 33.6 0.4 501.3

Deposits and loans due to customers 1,478.2 1.2 - 1,479.4 4.1 - - 4.1

Other loans (from suppliers,…) 10.8 - 2.3 13.1 12.0 - - 12.0

Debt securit ies issued - - - 0.0 - - 45.0 45.0

Other liabilities

Trade payables and advances received 117.9 - - 117.9 213.9 - 7.4 221.3

Accrued expenses and deferred income 26.7 - - 26.7 1.5 - - 1.5

Finance lease l iabil it ies 3.7 3.2 - 6.9 10.0 9.7 - 19.7

Settlement balances 4.2 - - 4.2 - - - -

Other amounts payable 2.4 0.2 6.9 9.5 54.2 - - 54.2

Employee benefit obligations 1.1 9.8 41.5 52.4 3.1 15.0 112.7 130.8

Provisions 8.1 26.3 2.1 36.5 24.8 - 18.2 43.0

Tax l iabil it ies - 7.1 - 7.1 9.2 39.0 - 48.2

Remuneration, social security and pension 15.7 - - 15.7 40.8 - - 40.8

Acquisit ion of property, plant and equipment 7.8 - - 7.8 6.0 - - 6.0

Liabil it ies classified as held for sale 322.2 - - 322.2 - - - 0.0

Total 2,181.8 47.8 52.8 2,282.4 851.8 97.3 183.7 1,132.8

7 4


6 . O P E R AT I N G S E G M E N T SThe Company has four reportable segments, each offering different products and services, and being managed separately because of the different nature of their activities and the different geographical areas they operate in. he Company’s CEO reviews internal management reports and evaluates the financial performance of each reportable segment on at least a monthly basis.

The Company comprises the following reportable segments:

• Industrial investments - Asahi Tec; - Phoenix Seagaia Resort; - Shaklee; and - SigmaXyZ.

• Financial services investments

• Investment activity of RHJI

• Corporate activity of RHJI and its management subsidiaries.

(In EUR millions) December 31, 2010

Net operating

income from financial services

RevenueAmortization

and depreciation

Impairment Net finance income

Segment profit (loss)

before tax

Segment assets

Segment liabilities


Asahi Tec - 496.8 (25.5) - 18.8 36.5 493.7 301.1

Phoenix Seagaia Resort - 65.1 (5.8) (39.2) (1.5) (43.5) 117.3 76.4

Shaklee - - - - 1.3 4.3 58.5 8.8

Sigmaxyz - - - - - (0.8) - -

Financial services 49.9 - (0.7) - - (2.9) 1,871.1 1,564.1

Investment activity - - - - - (22.7) - -

Corporate - - (0.3) - 7.5 (22.7) 760.3 27.6

Discontinued operations - 682.5 (44.6) (111.5) 19.2 (94.7) 378.5 322.2

Consolidation entries (2.1) 0.1 - - (1.8) (0.5) (653.5) (17.8)

Total 47.8 1,244.5 (76.9) (150.7) 43.5 (147.0) 3,025.9 2,282.4

(In EUR millions) March 31, 2010

Net operating

income from financial services

RevenueAmortization

and depreciation

Impairment Net finance income

Segment profit (loss)

before tax

Segment assets

Segment liabilities


Asahi Tec - 463.9 (34.1) (6.0) (10.3) 4.8 459.5 338.5

Phoenix Seagaia Resort - 89.1 (7.2) 0.1 (3.1) 8.5 108.9 69.9

Shaklee - - - - - 1.5 63.4 8.6

Sigmaxyz - - - - - (0.4) - -

Financial services - - - - - (0.1) - -

Corporate - 18.2 (0.6) - 0.3 (52.7) 982.6 39.3

Discontinued operations - 1,097.4 (103.7) (13.1) 529.2 545.9 824.9 717.1

Consolidation entries - (18.2) - - 3.8 (5.6) (479.5) (40.6)

Total 0.0 1,650.4 (145.6) (19.0) 519.9 501.9 1,959.8 1,132.8

7 5


7 . A C Q U I S I T I O N S O F S U B S I D I A R I E S A N D N O N - C O N T R O L L I N G I N T E R E S T S

7 . 1 . F i s c a l y e a r e n d e d M a r c h 3 1 , 2 0 1 0

NilesOn May 20, 2009, Niles reinforced its capital structure through a capital injection of JPy 6,000 mill ion (EUR 47.6 mill ion), of which JPy 3,500 mill ion (EUR 27.8 mill ion) was provided by the Company and JPy 2,500 mill ion (EUR 19.8 mill ion) by a third party.

BelvallIn June 2009, RHJI invested EUR 0.8 mill ion to acquire a controll ing 50% stake in Belvall.

HonselOn July 22, 2009, as part of the financial restructuring of Honsel, the Company invested EUR 52.8 mill ion in exchange for a controll ing stake of 51% in Honsel. The remaining 49% was held by Honsel’s former senior lenders as a result of a debt-for-equity swap. Following the capital restructuring, the shares in Honsel were no longer held by Honsel International Technologies («HIT»), but by a newly created holding company, Shelon Holdings SA («Shelon»), registered in Luxembourg.

The investment in HIT was fully written off at March 31, 2009.

QuirinOn September 11, 2009, the Company acquired a 20% ownership interest in Quirin for cash consideration of EUR 11.3 mill ion. In December 2009, the Company subscribed to another 4,585,711 shares for EUR 8 mill ion in a private placement, increasing its share to 27.8%.

7 . 2 . F i s c a l y e a r e n d e d D e c e m b e r 3 1 , 2 0 1 0

Kleinwort BensonOn July 1, 2010, the Company completed the acquisition of Kleinwort Benson Private Bank Limited and Kleinwort Benson Channel Islands Holdings Limited (together ‘Kleinwort Benson’) from Commerzbank AG for total cash consideration of EUR 251.9 mill ion, excluding post closing adjustments. The final purchase price was EUR 256.1 mill ion. Kleinwort Benson offers a diverse range of private banking services to its customers, including investment management, deposit taking, and lending as well as private and corporate fiduciary services.

Kleinwort Benson Investors DublinOn October 11, 2010, the Company announced the completion of the acquisition of KBC Asset Management Limited in Dublin, demonstrating Kleinwort Benson’s strategy to strengthen its asset management. The business was renamed to Kleinwort Benson Investors Dublin Limited. It manages discretionary assets for global institutional clients and offers multi-asset strategy products, predominantly for its Irish home market as well as two specialist equity strategies in strong growth areas for domestic and international clients: environmental and dividend-oriented equities.

RipplewoodOn October 15, the Company strategically aligned itself with Timothy Collins and Ripplewood Holdings LLC («Ripplewood»), by merging its investment activities and those of Ripplewood and by acquiring a 13 per cent interest in the general partner of Ripplewood Partners II, L.P. (the «Fund»), a private equity fund under management by Ripplewood. The acquired interest consists of the right to receive carried interest and return of direct investment capital associated with the Fund’s existing portfolio investments which include 3W Power Holdings Ltd., Aircell Inc., Delavau LLC, Hostess Brands Inc. and RSC Equipment Rental Inc. Ripplewood will now focus exclusively on the existing fund investments, and new investments will be done In conjunction with the merchant banking activities of RHJI or its affi l iates. Mr. Collins is a member of the Company’s Board of Directors and was the founder and owner, directly or through affi l iates, of Ripplewood. The aggregate cash consideration paid by the Company for all assets amounted to EUR 15 mill ion. In the event that the Company’s share of proceeds resulting from payments of carried interest and return of direct investment capital were less than the aggregate purchase price of EUR 15.0 mill ion, the Company has a claw-back, up to the total future proceeds received by Mr. Collins from the Fund. Ripplewood Holdings is consolidated as a subsidiary, while the interest in the general partner of the fund is accounted for as an available-for-sale financial asset, reported at fair value.

7 6


7 . 3 . P u r c h a s e p r i c e a l l o c a t i o nThe purchase price for Kleinwort Benson and Kleinwort Benson Investors was allocated to the estimated fair values of its assets and liabilities as of the respective completion dates. The estimated fair values of assets and liabilities were based on preliminary estimates of

fair value and are subject to subsequent revisions until twelve months after the completion of the acquisition in accordance with IFRS 3 Business Combinations. The provisional allocation of the purchase price can be summarized as follows:

The net assets acquired are for each investment broken down as follows :

The purchase price for Kleinwort Benson was partly allocated to its brand name and its customer relations:

• The estimated fair value of the brand name of GBP 14.9 mill ion or EUR 18.1 mill ion was measured using the royalty relief valuation methodology. This valuation methodology measures the fair value using a cost savings concept, which is based on the notion that, if the entity did not own the asset, then it would need to pay a royalty to a third party for use of that asset. The fair value of the brand name was estimated based on the present value of the royalty

payments that the Company is saving by owning it, based on a royalty rate of 1.5%. The rate was based on market data for royalty arrangements involving similar transactions and assets. The projected cost savings over a period of five years were discounted using a Weighted Average Cost of Capital («WACC») of 10.96%, and a terminal value was determined based on a growth rate of 1%. The WACC was determined based on a group of comparable publicly traded companies.

(In EUR millions) Note Kleinwort Benson

Kleinwort Benson

Investors

Ripplewood Holdings

Purchase price 256.1 23.7 0.6

Net asset value after fair value adjustments 238.0 16.6 0.6

Goodwill to be allocated 18.1 7.1 0.0

Brand 18.1 - -

Customer relations 5.7 - -

Deferred tax l iabil ity (5.7) - -

Residual goodwill 17 0.0 7.1 0.0

(In EUR millions) Kleinwort Benson

Kleinwort Benson

Investors

Ripplewood Holdings

Cash and balances with banks - 17.9 0.4

Derivative assets held for risk management 1.2 - -

Loans and receivables due from credit institutions and customers 1,810.0 - -

Investment securit ies 284.5 - 1.0

Trade receivables, accrued income and other assets 51.4 3.8 2.0

Property, plant and equipment 1.4 0.7 0.4

Deferred tax assets - 0.4 -

Total assets 2,148.5 22.8 3.8

Derivative l iabil it ies held for risk management 0.9 - -

Loans and deposits due to credit institutions and customers 1,840.0 - 2.5

Employee benefits - 0.2 -

Tax l iabil it ies (0.9) - -

Trade payables, accrued expenses and other l iabil it ies 70.5 6.0 0.7

Total liabilities 1,910.5 6.2 3.2

Net assets acquired 238.0 16.6 0.6

7 7


• The estimated fair value of the customer relations of GBP 4.7 mill ion or EUR 5.7 mill ion was measured using the multi-period excess earnings method. Fair value was determined by estimating the cash flows that are expected to be generated by the customer relations and deducting cash flows attributable to all of the assets that contribute to cash flows, such as the brand name and the assembled workforce. The resulting cash flows over the customer relations’ estimated life time of ten years, were discounted using a WACC of 10.22%.

The fair value of the intangible assets is based on estimated projected earnings and cash flows, which may vary from actuals. Furthermore, the fair value is determined using certain assumptions with respect to the WACC and the growth rate. An increase and decrease of the WACC by 1% would change the fair value of the intangible assets, net of taxes by EUR -1.5 mill ion and EUR 1.9 mill ion, respectively. An increase and decrease of the growth rate by 1% would change the fair value of the intangible assets, net of taxes by EUR 0.9 mill ion and EUR -0.7 mill ion, respectively.

If the acquisitions would have occurred on April 1, 2010 and excluding non-recurring costs, the income statement for the period ended December 31, 2010 , would have been affected as follows:

The transaction costs amounted to EUR 8.9 mill ion and were recorded in selling, general and administrative expenses in the profit and loss statement.

8 . D I S C O N T I N U E D O P E R AT I O N S

8 . 1 . F i s c a l y e a r e n d e d M a r c h 3 1 , 2 0 1 0

MetaldyneOn May 27, 2009, Metaldyne filed for a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code and the Company deconsolidated Metaldyne as of the date of fi l ing. Metaldyne’s operating results for the period between April 1, 2009 and May 27, 2009 were presented as discontinued operations in the Company’s consolidated statement of comprehensive income for the fiscal year ended March 31, 2010. The result of discontinued operations also included a gain of EUR 79.3 mill ion resulting from the deconsolidation of Metaldyne and the elimination of Metaldyne’s negative equity included in the Company’s equity at March 31, 2009.

Columbia Music EntertainmentOn January 21, 2010, the Company announced the sale of its 25.5% ownership interest in CME to Faith Inc., a Japanese corporation which develops and licenses sound format for cellular phones, software tone generator for computers and game consoles, and music download technology. The common and preferred shares of CME owned by the Company were sold at a price of JPy 31.37 and JPy 38.46 per share, respectively. Total cash proceeds from this transaction amounted to EUR 20 mill ion yielding a consolidated gain of EUR 5.2 mill ion.

U-shinDuring February and March 2010, the Company sold its interest in U-shin for total cash proceeds of EUR 27.4 mill ion yielding a consolidated gain of EUR 1.4 mill ion.

8 . 2 . F i s c a l y e a r e n d e d D e c e m b e r 3 1 , 2 0 1 0

HonselOn October 25, 2010, the Company announced that its fifty-one percent subsidiary, Honsel, had filed for insolvency in Germany, having failed to reach agreement with all stakeholders on a sustainable restructuring plan to allow for the continuation of the company. As part of a restructuring in July 2009, the Company invested EUR 50.0 mill ion into Honsel in exchange for a 51% stake, with the remaining 49% being held by Honsel’s senior term lenders. During the first half of 2011, Honsel continued to incur significant operating losses. Despite the equity support provided by RHJI in the midst of the economic downturn and considerable efforts by Honsel’s management to address operating issues in manufacturing in conjunction with new product launches, Honsel’s financial performance remained under pressure and resulted in a liquidity shortfall. Honsel was deconsolidated as of the date of the insolvency fi l ing and its results were presented as


Net operating income 22.5

Loss for the period (2.7)

7 8


discontinued operations in the Company’s consolidated financial statements for the years ended December 31, 2010 and March 31, 2010. The net loss reported by Honsel up and until the insolvency fi l ing amounted to EUR 141.7 mill ion, and was partly offset by a gain on disposal of EUR 39.5 mill ion reducing previously recorded losses from Honsel to the amount of the Company’s equity investment of EUR 52.8 mill ion.

In addition EUR 20 mill ion credit facil ities and EUR 12.1 mill ion of leasing and factoring facilities were outstanding at December 31, 2010. The outstanding balance was further reduced after the year-end and the recovery of the outstanding balance of EUR 30.6 mill ion depends on the outcome of the insolvency proceedings. In accordance with the intercreditor agreement governing Honsel’s financial debt, the backstop and liquidity facil ities of EUR 20 mill ion in aggregate rank

behind the revolving credit facil ity and the customer and supplier debt of EUR 70 mill ion in aggregate, but ahead of the senior term loan of EUR 110 mill ion and the mezzanine debt of EUR 30 mill ion.

NilesOn February 23, 2011, the Company announced that it entered into an agreement to sell its 77.9% ownership in Niles to Valeo for a total cash consideration of JPy 15.5 bill ion (EUR 137 mill ion), subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence. As a result, the assets and liabilities relating to Niles have been reclassified in accordance with IFRS 5 to assets and liabilities held for sale and the results from the operations have been presented as discontinued operations.

8 . 3 . R e s t a t e m e n t o f t h e s t a t e m e n t o f i n c o m e


(In EUR millions) December 31, 2010 March 31, 2010 (1)

Honsel Niles Total Previously reported Honsel Niles Total

Revenue 353.6 328.9 682.5 206.2 561.7 329.5 1,097.4

Cost of sales (354.0) (264.9) (618.9) (148.8) (541.5) (266.6) (956.9)

Gross profit (loss) (0.4) 64.0 63.6 57.4 20.2 62.9 140.5

Sell ing, general and administrative expenses (23.0) (40.5) (63.5) (38.1) (43.1) (43.3) (124.5)

Amortization of intangible assets (3.2) (1.2) (4.4) (10.2) (4.4) (2.8) (17.4)

Impairment of property, plant and equipment and intangible assets (110.7) (0.8) (111.5) - (13.1) - (13.1)

Other income and expense 3.9 (3.7) 0.2 1.8 (2.9) (1.5) (2.6)

Gain on deconsolidation 39.5 - 39.5 85.9 - - 85.9

Net finance income (costs) (10.7) (9.6) (20.3) (7.4) 439.9 (6.9) 425.6

Share of profit of equity accounted investees (net of income tax) - - 0.0 1.0 - - 1.0

Profit (loss) before income tax (104.6) 8.2 (96.4) 90.4 396.6 8.4 495.4

Income tax benefit (expense) 2.4 (0.7) 1.7 (2.0) 13.8 14.7 26.5

Profit (loss) for the period (102.2) 7.5 (94.7) 88.4 410.4 23.1 521.9


Owners of the Company (31.1) 5.6 (25.5) 78.4 309.1 17.7 405.2

Non-controll ing interests (71.1) 1.9 (69.2) 10.0 101.3 5.4 116.7

(102.2) 7.5 (94.7) 88.4 410.4 23.1 521.9

7 9


8 . 4 . I m p a c t o f t h e d i s c o n t i n u e d o p e r a t i o n s o n a s s e t s a n d l i a b i l i t i e s


8 . 5 . C a s h f l o w o f t h e d i s c o n t i n u e d o p e r a t i o n s


(In millions) March 31, 2010

Published in JPY

Translated in EUR

Honsel in EUR

Niles in EUR

Restated

(1) in EUR

Current Non-current Current Non-

current Total

Assets

Property, plant and equipment - 91,375 - 725.6 725.6 (269.5) (143.5) 312.6

Intangible assets - 24,775 - 196.7 196.7 (150.3) (19.1) 27.3

Investments in equity accounted investees - 13,520 - 107.4 107.4 - - 107.4

Other investments, including derivatives 248 307 2.0 2.4 4.4 (0.2) (0.8) 3.4

Trade and other receivables 30,980 1,176 246.0 9.3 255.3 (58.8) (59.7) 136.8

Tax assets 433 4,462 3.4 35.4 38.8 - (17.6) 21.2

Inventories 17,197 - 136.6 - 136.6 (30.6) (49.5) 56.5

Cash and cash equivalents 61,657 - 489.6 - 489.6 (5.2) (26.2) 458.2

Other - 660 - 5.4 5.4 - (2.9) 2.5

Total assets 110,515 136,275 877.6 1,082.2 1,959.8 (514.6) (319.3) 1,125.9

Liabilities

Loans and borrowings 23,040 50,258 183.0 399.1 582.1 (200.4) (135.8) 245.9

Employee benefits 390 16,088 3.1 127.7 130.8 (52.0) (34.1) 44.7

Provisions 3,126 2,283 24.8 18.2 43.0 (34.2) (4.2) 4.6

Tax l iabil it ies 1,153 4,917 9.2 39.0 48.2 (27.9) (17.6) 2.7

Trade and other payables 40,390 935 320.7 7.5 328.2 (110.3) (81.3) 136.6

Bank overdrafts 57 - 0.4 - 0.4 - - 0.4

Other - 13 - 0.1 0.1 - - 0.1

Total liabilities 68,156 74,494 541.2 591.6 1,132.8 (424.8) (273.0) 435.0


Honsel Niles Total CME Honsel Metaldyne Niles Total

Cash and cash equivalents at the beginning of the period 5.2 26.1 31.3 14.6 14.9 15.8 16.5 61.8

Cash generated during the period

Net cash from operating activit ies (17.3) 50.8 33.5 8.6 (21.7) 11.8 34.6 33.3

Net cash from investing activit ies (9.2) (10.3) (19.5) (4.7) (35.4) (2.4) (4.7) (47.2)

Net cash from financing activit ies 26.9 (17.0) 9.9 (3.0) 47.4 5.9 (20.2) 30.1

Effect of exchange rate 0.2 4.5 4.7 (0.1) (0.2) 0.3 0.1 0.1

Cash and cash equivalents at the date of the disposal or deconsolidation 5.8 54.1 59.9 15.5 5.2 31.3 26.1 78.4

Consideration received, satisfied in cash - - - 20.0 - - - 20.0

Cash disposed or deconsolidated of (5.8) (54.1) (59.9) (15.5) - (31.3) - (46.9)

Net cash inflow (outflow) (5.8) (54.1) (59.9) 4.5 0.0 (31.3) 0.0 (26.9)

8 0


9 . A S S E T S A N D L I A B I L I T I E S H E L D F O R S A L EThe assets and liabilities held for sale relating to Niles are broken down as follows:

9 . 1 . A s s e t s c l a s s i f i e d a s h e l d f o r s a l e

9 . 2 . L i a b i l i t i e s c l a s s i f i e d a s h e l d f o r s a l e

1 0 . C A S H A N D B A L A N C E S W I T H B A N k S

1 0 . 1 . B r e a k d o w n o f c a s h a n d c a s h b a l a n c e s w i t h b a n k s

1 0 . 2 . R e c o n c i l i a t i o n w i t h t h e s t a t e m e n t o f c a s h f l o w


Cash and balances with banks 54.1

Investment securit ies 0.6

Inventories 62.7

Current tax assets 0.6

Trade receivables, accrued income and other assets 72.6

Property, plant and equipment 147.0

Intangible assets 21.1

Deferred tax assets 19.8

Total assets 378.5


Loans and deposits from credit institutions and customers 129.4

Finance lease l iabil it ies 9.8

Deferred tax l iabil it ies 17.6

Employee benefits 39.9

Provisions 5.4

Tax l iabil it ies 3.2

Trade payables, accrued expenses and other l iabil it ies 116.9

Total liabilities 322.2


March 31, 2010

Cash in hand 91.9 84.4

Term accounts less than three months 2.0 405.2

Money market placements 37.2 -

Total 131.1 489.6


March 31, 2010

Cash and balances with banks 131.1 458.3

Loans and advances to credit institutions less than three months

465.9 -

Loans and deposits from credit institutions repayable on demand (2.9) -

Bank overdrafts (0.3) (0.4)

Cash and balances with banks held for sale 54.1 31.3

Total 647.9 489.2

8 1


1 1 . L O A N S A N D R E C E I VA B L E S D U E F R O M C R E D I T I N S T I T U T I O N S A N D C U S T O M E R S

1 1 . 1 . D e t a i l o f l o a n s a n d a d v a n c e s

1 1 . 2 . M a t u r i t y o f l o a n s a n d a d v a n c e s

Included in the above are loans totall ing EUR nil before provisions, EUR nil after interest provisions on which interest has been suspended.

There are no subordinated amounts included in the above.

1 1 . 3 . C a t e g o r i e s o f l o a n s a n d a d v a n c e s t o c u s t o m e r s


March 31, 2010

Credit institutions 556.1 -

Retail customers 443.6 -

Corporate customers 123.0 -

Total 1,122.7 0.0


Less than

3 months

Between 3 months

and 1 year

Between 1 year

and 5 years

More than 5 years

TotalLess than

3 months

Between 3 months

and 1 year

Between 1 year

and 5 years

More than 5 years

Total

Loans and advances due from credit institutions

465.9 0.6 89.6 - 556.1 - - - - -

Loans and advances due from customers 85.4 102.1 334.5 44.6 566.6 - - - - -

Total 551.3 102.7 424.1 44.6 1,122.7 0.0 0.0 0.0 0.0 0.0


Gross amount

Impairment allowance

Carrying amount

Gross amount

Impairment allowance

Carrying amount

High net worth individuals

Mortgages 429.3 (1.5) 427.8 - - 0.0

Other loans 15.8 - 15.8 - - 0.0

Corporate customers

Other loans 123.0 - 123.0 - - 0.0

Total 568.1 (1.5) 566.6 0.0 0.0 0.0

8 2


1 2 . I N V E S T M E N T S E C U R I T I E S

The movement since March 31, 2010 of the financial assets at fair value through profit or loss is as follows:

Available-for-sale financial assets


March 31, 2010

Financial assets at fair value through profit or loss

Investment securit ies - Corporate bonds 429.5 -

Investment securit ies - Debt securit ies 77.1 -

Investment securit ies - Assets-backed securit ies 93.5 -

Available-for-sale financial assets

Debt securit ies - 3.0

Equity securit ies 23.9 -

Other investments 2.9 -

Total 626.9 3.0


Issued by banks

Issued by non-banks

Issued by banks

Issued by non-banks

Opening balance - 3.0 - 3.0

Scope changes 415.6 19.4 - -

Acquisit ions 279.2 87.1 - -

Maturit ies (167.3) (14.4) - -

Other 3.0 1.3 - -

Closing balance 530.5 96.4 0.0 3.0


CostGross

unrealized gains

Gross unrealized

lossesImpairments Fair value Cost

Gross unrealized

gains

Gross unrealized

lossesImpairments Fair value

Debt securit ies - - - - - 3.0 - - - 3.0

Equity securit ies 23.7 0.2 - - 23.9 - - - - -

Other investments 3.8 - (0.6) (0.3) 2.9 - - - - -

Total 27.5 0.2 (0.6) (0.3) 26.8 3.0 0.0 0.0 0.0 3.0


March 31, 2010

Opening balance 3.0 3.0

Scope changes 3.7 -

Disposals (0.4) -

Additions 20.7

Net change in fair value recognized in equity (0.2) -

Closing balance 26.8 3.0

8 3


1 3 . I N V E S T M E N T S I N E Q U I T Y A C C O U N T E D I N V E S T E E S

1 3 . 1 . F i n a n c i a l i n f o r m a t i o nInvestments in equity accounted investees at December 31, 2010 of EUR 109.3 mill ion are broken down as follows:

The summary of the latest available financial information (100%) is as follows:


March 31, 2010

Arecon 6.0 5.9

Equity accounted investees held by Asahi Tec 11.4 11.3

Quirin 18.8 18.6

Shaklee 71.5 69.2

Sigmaxyz 1.6 2.4

Total 109.3 107.4

Arecon Quirin


December 31, 2009

December 31, 2010

December 31, 2009

Assets

Loans - - 222.7 213.8

Bonds and securit ies 0.9 0.8 163.5 145.2

Cash 0.6 0.3 5.3 7.4

Other assets 0.5 0.6 13.3 9.5

Equity and liabil it ies

Equity 0.5 0.4 42.2 41.2

Deposits 0.8 0.7 346.0 327.2

Other l iabil it ies 0.7 0.6 16.6 7.4

Revenue 1.6 1.1 37.1 29.6

Profit ( loss) from operations 0.1 0.3 (0.3) (7.2)

Profit ( loss) for the period 0.1 0.2 0.5 (7.7)

Shaklee Sigmaxyz


March 31, 2010

December 31, 2010

March 31, 2010

Assets

Non-current 137.9 138.6 8.6 7.8

Current 117.5 103.8 13.9 7.1

Equity and liabil it ies

Equity 42.0 40.1 4.3 7.2

Non-current l iabil it ies 153.8 139.0 1.1 1.2

Current l iabil it ies 59.6 63.3 17.1 6.5

Revenue 153.2 186.1 39.7 21.0

Profit ( loss) for the period 10.4 22.6 (4.0) (16.0)

8 4


1 3 . 2 . C h a n g e s d u r i n g t h e p e r i o d

The share of profit (loss) of equity accounted investees of EUR 4.8 mill ion for the fiscal year ended December 31, 2010 and EUR 8.9 mill ion for the fiscal year ended March 31, 2010 are split as follows:

1 3 . 3 . G o o d w i l l a n d i m p a i r m e n t o f g o o d w i l lThe goodwill relating to the equity accounted investees is as follows:

For the fiscal year ended December 31, 2010, the recoverable amount of RHJI’s investments in equity accounted investees was based on the estimation of their fair value, which was determined by applying publicly observed valuation multiples on their current and projected earnings.


March 31, 2010


Acquisit ions - 19.3

Disposals - (25.3)

Profit for the period 4.8 8.9

Reclassification of Arecon - 5.8

Dividends (1.4) (2.5)

Effect of exchange rates (1.8) 3.9

Others 0.3 (0.4)



Profit (loss) for the period

Impairment loss Total

Profit (loss) for the period

Impairment loss Total

Arecon 0.1 - 0.1 0.1 - 0.1

Quirin 0.1 - 0.1 (0.7) - (0.7)

Shaklee 4.3 - 4.3 11.8 - 11.8

Sigmaxyz (0.8) - (0.8) (3.5) - (3.5)

Equity accounted investees at Asahi Tec 1.1 - 1.1 1.2 - 1.2

Total 4.8 - 4.8 8.9 - 8.9

Note Arecon Quirin Shaklee Sigmaxyz


March 31, 2010

December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Investment 5.8 5.8 19.3 19.3 99.4 99.4 8.6 8.6

Ownership 44 50.0% 50.0% 27.8% 27.8% 42.7% 42.7% 21.8% 21.8%

Goodwill 5.7 5.7 8.8 8.8 32.6 32.6 0.7 0.7

8 5


1 4 . I N V E N T O R I E S

The decrease of inventories from EUR 136.6 mill ion at March 31, 2010 to EUR 64.2 mill ion at December 31, 2010 mainly related to

• the deconsolidation of Honsel for EUR - 30.6 mill ion;• the inventories held for sale at Niles for EUR - 49.5 mill ion; and• the foreign exchange impact on the inventories held by Asahi Tec for EUR 8.9 mill ion.


Gross Allowance Net Gross Allowance Net

Raw materials and consumables 17.3 (0.1) 17.2 47.3 (0.2) 47.1

Work in progress 21.7 (1.5) 20.2 34.4 (1.4) 33.0

Finished goods 28.3 (1.5) 26.8 57.9 (1.4) 56.5

Total 67.3 (3.1) 64.2 139.6 (3.0) 136.6

8 6


1 5 . T R A D E R E C E I VA B L E S , A C C R U E D I N C O M E A N D O T H E R A S S E T S

Included in other receivables and other assets is EUR 19.1 mill ion due from Kleinwort Benson’s former parent, Commerzbank AG, in respect of indemnities given to cover a proportion of the maximum expected costs incurred in settling specific claims against the Company from business concluded in prior periods.

The other significant components of the other receivables and other assets relate to

• Employee benefits for EUR 7.3 mill ion as at December 31, 2010 and nil as at March 31, 2010;

• Investment property for EUR 5.2 mill ion as at December 31, 2010 and EUR 4.8 mill ion as at March 31, 2010; and

• Accrued interest for EUR 5.2 mill ion as at December 31, 2010 and nil as at March 31, 2010.

The trade receivables and prepayments of EUR 111.0 mill ion and EUR 213.9 mill ion for the years ended December 31, 2010 and March 31, 2010 represent the major credit risk for the Company’s industrial investments. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

The amounts presented for the years ended December 31, 2010 and March 31, 2010 are the amounts, net of allowances for doubtful accounts, estimated by the management of the respective consolidated businesses based on the prior credit loss experience and the current economic environment. The balances relating to non-industrial investments amounted to EUR 12.6 mill ion as at December 31, 2010 and EUR 8.3 mill ion as at March 31, 2010.

The trade receivables and prepayments compared to the revenue for the major five customers are split by industrial subsidiary as follows:

The Company’s major five customers in terms of trade receivables and prepayments and revenue are broken down by subsidiary as follows :


March 31, 2010

Trade receivables and prepayments 111.0 213.9

Other receivables and other assets 91.9 48.1

Total 202.9 262.0


Total balance

Balance of major five customers

Total revenue

Revenue of major

five customers

Total balance

Balance of major five customers

Total revenue

Revenue of major

five customers

Asahi Tec 92.9 45.1 496.8 268.8 101.4 38.6 463.9 257.9

Honsel - - - - 45.8 18.1 561.7 319.0

Niles - - - - 52.0 39.1 329.5 281.1

Phoenix Seagaia Resort 5.5 1.4 65.1 2.3 6.4 1.6 89.1 2.4

Total 98.4 46.5 561.9 271.1 205.6 97.4 1,444.2 860.4

December 31, 2010 March 31, 2010

Trade receivables

and prepayments

Revenue

Trade receivables

and prepayments

Revenue

Asahi Tec 48.5% 54.1% 38.1% 55.6%

Honsel - - 39.5% 56.8%

Niles - - 75.2% 85.3%

Phoenix Seagaia Resort 25.5% 3.5% 25.0% 2.7%

8 7


1 6 . P R O P E R T Y, P L A N T A N D E Q U I P M E N T

1 6 . 1 . C o s t s , d e p r e c i a t i o n a n d i m p a i r m e n t l o s s

.

(In EUR millions)Land

and buildings

Machineries and

equipment

Fixtures and

fittings

Under construction Other Total

Costs

Balance at April 1, 2009 2,260.7 1,418.6 566.6 53.8 73.4 4,373.1

Additions 2.4 23.2 13.8 17.9 4.7 62.0

Disposals (126.9) (38.1) (38.9) (6.8) (8.7) (219.4)

Reclassifications 0.1 9.9 7.0 (19.5) 2.5 0.0

Acquisit ions through business combinations (73.0) (378.5) (28.4) (18.7) (16.2) (514.8)

Effect of exchange rates (1.5) (8.7) 0.6 (0.4) (0.7) (10.7)

Others 2.5 (0.8) (0.4) (0.9) - 0.4

Balance at March 31, 2010 2,064.3 1,025.6 520.3 25.4 55.0 3,690.6

Balance at April 1, 2010 2,064.3 1,025.6 520.3 25.4 55.0 3,690.6

Additions 9.7 6.9 11.4 10.2 0.9 39.1

Disposals (2.9) (2.7) (5.5) (1.2) (0.1) (12.4)

Acquisit ions through business combinations 1.1 0.4 0.2 - 0.4 2.1

Transferred to assets held for sale (161.4) (163.4) (276.4) (2.4) (1.6) (605.2)

Exit from the consolidation scope (126.3) (380.7) (51.0) (16.9) (44.4) (619.3)

Effect of exchange rates 322.3 107.2 74.1 1.3 1.6 506.5

Others 5.6 (0.5) (5.5) (1.8) (1.2) (3.4)

Balance at December 31, 2010 2,112.4 592.8 267.6 14.6 10.6 2,998.0

Amortization and impairment losses

Balance at April 1, 2009 (1,781.3) (944.7) (471.9) (0.4) (42.7) (3,241.0)

Depreciation for the period (17.7) (57.5) (29.2) (0.8) (7.7) (112.9)

Impairment losses (1.5) (6.8) (1.0) (0.2) (1.1) (10.6)

Disposals 103.2 27.8 34.7 0.8 6.5 173.0

Acquisit ions through business combinations 15.7 182.2 14.6 - 4.8 217.3

Effect of exchange rates 0.3 7.3 0.7 - 1.0 9.3

Others (1.4) 1.2 (0.5) 0.3 0.3 (0.1)

Balance at March 31, 2010 (1,682.7) (790.5) (452.6) (0.3) (38.9) (2,965.0)

Balance at April 1, 2010 (1,682.7) (790.5) (452.6) (0.3) (38.9) (2,965.0)

Depreciation for the period (10.3) (16.8) (18.5) - (1.4) (47.0)

Impairment losses (39.9) - - - - (39.9)

Disposals 0.7 2.3 4.2 - 0.1 7.3

Transferred to assets held for sale 79.0 124.2 253.7 - 1.3 458.2

Exit from the consolidation scope 33.7 251.7 29.9 - 31.4 346.7

Effect of exchange rates (280.1) (93.7) (68.6) - (1.2) (443.6)

Others (5.5) 0.1 (0.4) - 0.6 (5.2)

Balance at December 31, 2010 (1,905.1) (522.7) (252.3) (0.3) (8.1) (2,688.5)

Carrying amount

Balance at March 31, 2010 381.6 235.1 67.7 25.1 16.1 725.6

Balance at December 31, 2010 207.3 70.1 15.3 14.3 2.5 309.5

8 8


The presentation of Niles as discontinued operations in the statement of comprehensive income, affected depreciation and impairment for the period as follows:

Property, plant and equipment is broken down by subsidiary as follows:

1 6 . 2 . I m p a i r m e n t l o s s e sAn impairment test was performed on the carrying values of certain property, plant and equipment, for which an indication of impairment existed at December 31, 2010. Following review of the recoverable amount, the Company recorded an impairment of EUR 39.2 mill ion for the fiscal year ended December 31, 2010 compared to EUR 5.9 mill ion for the fiscal year ended March 31, 2010. The impairment loss was recorded on the following subsidiaries:

The impairment loss of EUR 39.1 mill ion on Phoenix Seagaia Resort’s property, plant and equipment resulted from the uncertainty around its ability to continue as a going concern. The recoverable amount of Phoenix Seagaia Resort’s facil ities was determined as a value in use by discounting the estimated future cash flows.

The cash flows were derived from Phoenix Seagaia Resort’s management projections. The present value of of estimated future cash flows was determined using a WACC of a group of comparable publicly traded companies. The WACC also included a company specific risk premium of 11% to reflect the potential risk of default resulting from the uncertainty around Phoenix Seagaia Resort’s ability to refinance its senior debt in September 30, 2011. The resulting WACC amounted to 10.6%.

The calculations of the value in use have been based on judgments, estimates and assumptions. The calculations are particularly sensitive to above the growth rate and WACC used. Any change in interest rates, risk premiums, long-term growth rates and actual operating performance, could have a material adverse impact on the concluded recoverable amounts. A decrease of the growth rate by 1% and an increase of the WACC by 1% would result in an additional impairment charge of EUR 7.9 mill ion.


Land and

buildings

Machineries and

equipment

Fixtures and

fittings

Under construction Other Total

Depreciation for the period (2.2) (5.6) (8.4) - (0.8) (17.0)

Impairment losses (0.7) - - - - (0.7)

Total (2.9) (5.6) (8.4) 0.0 (0.8) (17.7)


Gross Depreciation Impairment Net Gross Depreciation Impairment Net

Asahi Tec 898.1 (647.9) (12.5) 237.7 751.3 (521.8) (11.2) 218.3

Honsel - - - 0.0 611.0 (293.6) (47.9) 269.5

kleinwort Benson 8.7 (0.3) - 8.4 - - - 0.0

Niles - - - 0.0 524.9 (378.6) (2.8) 143.5

Phoenix Seagaia Resort 2,086.4 (582.2) (1,443.1) 61.1 1,799.3 (497.1) (1,209.8) 92.4

RHJI and its management companies 4.8 (2.5) - 2.3 4.1 (2.2) - 1.9

Total 2,998.0 (1,232.9) (1,455.6) 309.5 3,690.6 (1,693.3) (1,271.7) 725.6


March 31, 2010

Asahi Tec (0.1) (6.0)

Phoenix Seagaia Resort (39.1) 0.1

Total (39.2) (5.9)

8 9


1 7 . I N TA N G I B L E A S S E T S

1 7 . 1 . C o s t s , a m o r t i z a t i o n a n d i m p a i r m e n t l o s s

(In EUR millions) GoodwillBrand and customer relations

Patents and trademarks

Development costs

Software Other Total

Costs

Balance at April 1, 2009 668.6 - 957.3 19.5 44.9 5.1 1,695.4

Additions - - 1.8 5.9 1.2 - 8.9

Disposals (3.7) - (13.3) (0.5) (2.3) (1.6) (21.4)

Reclassifications - - - - - - 0.0

Scope changes (349.8) - (487.0) - (14.6) (2.0) (853.4)

Effect of exchange rates (8.2) - (20.0) (0.4) - - (28.6)

Others (2.8) - 0.8 - 0.3 - (1.7)

Balance at March 31, 2010 304.1 0.0 439.6 24.5 29.5 1.5 799.2

Balance at April 1, 2010 304.1 - 439.6 24.5 29.5 1.5 799.2

Additions - - - - 0.8 - 0.8

Transferred to assets held for sale (90.1) - (23.2) - (17.9) (0.7) (131.9)

Exit from the consolidation scope (169.0) - (394.0) (24.5) (4.0) - (591.5)

Acquisit ions through business combinations 7.1 23.8 - - 0.2 - 31.1

Effect of exchange rates 1.4 - 5.1 - 4.3 0.2 11.0

Disposals - - (8.0) - (0.2) - (8.2)

Balance at December 31, 2010 53.5 23.8 19.5 0.0 12.7 1.0 110.5

Amortization and impairment losses

Balance at April 1, 2009 (482.1) - (767.8) (8.5) (29.4) (4.2) (1,292.0)

Amortization for the period - - (4.5) (0.8) (4.9) (0.1) (10.3)

Impairment losses (6.5) - (1.4) (0.5) - - (8.4)

Reversal of impairment losses - - 0.1 - - - 0.1

Disposals 1.7 - 10.0 0.3 0.7 0.2 12.9

Scope changes 308.5 - 349.9 9.4 2.9 670.7

Effect of exchange rates 3.5 - 18.0 0.5 0.1 22.1

Others 2.5 - (0.5) 0.5 (0.1) 2.4

Balance at March 31, 2010 (172.4) 0.0 (396.2) (9.0) (23.6) (1.3) (602.5)

Balance at April 1, 2010 (172.4) - (396.2) (9.0) (23.6) (1.3) (602.5)

Amortization for the period - - (1.3) - (2.1) (0.1) (3.5)

Exit from the consolidation scope 58.6 - 370.7 9.0 2.9 - 441.2

Disposals - - 4.5 - 0.2 - 4.7

Transferred to assets held for sale 77.6 - 18.5 - 14.7 0.5 111.3

Effect of exchange rates - - (1.4) - (3.2) (0.1) (4.7)

Balance at December 31, 2010 (36.2) 0.0 (5.2) 0.0 (11.1) (1.0) (53.5)

Carrying amount

Balance at March 31, 2010 131.7 - 43.4 15.5 5.9 0.2 196.7

Balance at December 31, 2010 17.3 23.8 14.3 0.0 1.6 0.0 57.0

9 0


The presentation of Niles as discontinued operations in the statement of comprehensive income, affected depreciation and impairment for the period as follows:

The decrease of goodwill from EUR 131,7 mill ion as at March 31, 2010 to EUR 17.3 mill ion as at December 31, 2010 is mainly due to

• the deconsolidation of Honsel for EUR - 110.4 mill ion;• the transfer to assets held for sale of Niles for EUR - 12.5 mill ion; • the effect of exchange rate on the goodwill recorded on Asahi Tec for EUR 1.4 mill ion; and • the additional goodwill of EUR 7.1 mill ion resulting from the acquisition of Kleinwort Benson Investors.

The intangible assets are broken down by subsidiary as follows:


Goodwill

Brand and

customer relations

Patents and

trademarks

Development costs Software Other Total

Amortization for the period - - (0.3) - (0.8) (0.1) (1.2)

Impairment losses - - - - - - 0.0

Total 0.0 0.0 (0.3) 0.0 (0.8) (0.1) (1.2)


Goodwill Intangible assets other than goodwill

Gross Impairment Net Gross Amortization Impairment Net

Asahi Tec 46.4 (36.2) 10.2 29.4 (12.9) (1.2) 15.3

kleinwort Benson 7.1 - 7.1 23.8 - - 23.8

Phoenix Seagaia Resort - - 0.0 3.2 (2.7) - 0.5

RHJI and its management companies - - 0.0 0.6 (0.5) - 0.1

Total 53.5 (36.2) 17.3 57.0 (16.1) (1.2) 39.7


Goodwill Intangible assets other than goodwill

Gross Impairment Net Gross Amortization Impairment Net

Asahi Tec 45.0 (36.2) 8.8 32.5 (13.8) (1.1) 17.6

Honsel 169.0 (58.6) 110.4 422.6 (85.6) (297.1) 39.9

Niles 90.1 (77.6) 12.5 35.4 (15.7) (12.9) 6.8

Phoenix Seagaia Resort - - 0.0 4.0 (2.3) (1.1) 0.6

RHJI and its management companies - - 0.0 0.6 (0.5) - 0.1

Total 304.1 (172.4) 131.7 495.1 (117.9) (312.2) 65.0

9 1


1 7 . 2 . I m p a i r m e n t l o s s e s1 7 . 2 . 1 . A n a l y s i sIn accordance with IAS 36 (Impairment of Assets), the Company reviewed the carrying values of its intangible assets at December 31, 2010 and March 31, 2010. As a result the Company recorded net impairment charges

of EUR nil for the fiscal year ended December 31, 2010 and a reversal of impairment of EUR 0.1 mill ion after the restatement of Honsel and Niles as discontinued operations for the fiscal year ended March 31, 2010.

For the fiscal years ended December 31, 2010 and March 31, 2010, the impairment related to the following subsidiary:

(1 ) Res ta ted to p resen t Honse l and N i l es as d i scon t inued opera t ions .

1 7 . 2 . 2 . I m p a i r m e n t t e s t i n g f o r c a s h g e n e r a t i n g u n i t s c o n t a i n i n g g o o d w i l lFor the purpose of impairment testing, goodwill is allocated to the Company’s cash generating units («CGU») which represent the lowest level within the

Company at which the goodwill is monitored for internal management purposes which is not higher than the level of the Company’s operating segments.

Goodwill at December 31, 2010 and March 31, 2010 can be broken down by CGU as follows:

The Company determined the potential impairment of its CGU’s containing goodwill by comparing their carrying value, including goodwill, with their recoverable amount. The assessment of the recoverable amount included a review and analysis of (a) publicly observed market prices for the publicly listed consolidated subsidiaries, (b) valuation multiples for groups of publicly listed, comparable companies and (c) the projected financial performance based on budgets and business plans prepared by the consolidated subsidiaries’ respective managements.

The Company retained the value in use to determine the recoverable amount of the CGU’s containing goodwill. The fair value of the Company’s publicly

listed subsidiaries resulted in lower amounts and could not be reliably determined for the privately held subsidiaries. The value in use for Asahi Tec CGU’s was determined by discounting their future cash flows, based on management’s 5 year business plans. For the calculation of the terminal or residual value for the period beyond the discrete projections, the Company used the Gordon Growth Model. The resulting residual values were validated by comparing the implied EBITDA valuation multiples with currently applicable market multiples.


Goodwill

Intangible assets

other than goodwill

Total Goodwill

Intangible assets

other than goodwill

Total

Phoenix Seagaia Resort - - - - (0.1) (0.1)

Total 0.0 0.0 0.0 0.0 (0.1) (0.1)


March 31, 2010

Asahi Tec 10.2 8.8

Honsel

Europe - 80.8

Americas - 29.6

kleinwort Benson

kleinwort Benson Investors 7.1 -

Niles - 12.5

Total 17.3 131.7

9 2


The present value of estimated future cash flows and residual cash flows was determined using the WACC of a group of comparable publicly traded companies. The calculation util ized (a) a peer group average as pre-tax required cost of debt and (b) the industry debt-to-capital ratio and the observed median of betas in the group.

The conclusions of the income based approach were corroborated by the market multiple approach for comparable publicly traded companies.

The main assumptions used in determining the recoverable amount of Asahi Tec’s goodwill can be summarized as follows:

An increase of 1.0% of the WACC and a decrease of 1.0% of the growth rate would have no impact on the recoverable amount goodwill as at December 31, 2010 and March 31, 2010.

1 7 . 2 . 3 . I m p a i r m e n t t e s t i n g f o r i n t a n g i b l e a s s e t s o t h e r t h a n g o o d w i l lCompared to March 31, 2010, the intangible assets other than goodwill have decreased significantly due to the deconsolidation of Honsel and the presentation of Niles as an asset held for sale. As at December 31, 2010, they are broken down as follows:

• Asahi Tec : Patents and trademarks for EUR 14.3 mill ion and software for EUR 1.0 mill ion;

• Kleinwort Benson : Brand and customer relations for EUR 23.7mill ion and software for EUR 0.1 mill ion; and

• Phoenix Seagaia Resort : Software for EUR 0.5 mill ion.

Based on the impairment test performed, the Company concluded that there was no impairment at December 31, 2010.

1 8 . C A P I TA L A N D R E S E R V E S

1 8 . 1 . S h a r e c a p i t a l a n d s h a r e p r e m i u mAt December 31, 2010, the share capital of RHJI amounted to EUR 604,562,379, represented by 85,585,547 shares without nominal value. All shares are listed on Euronext Brussels, have the same rights and par accounting value and are fully paid up. Each share entitles the holder to one voting right.

1 8 . 2 . B r e a k d o w n o f t h e c o n s o l i d a t e d r e s e r v e s

(In %) December 31, 2010

March 31, 2010

Growth rate - -

WACC 9.5 7.1


March 31, 2010

Translation reserve (12.0) (0.2)

Reserve for own shares (5.1) (10.0)

Available reserve 190.5 200.9

Fair value reserve 0.5 -

Hedging reserve - (0.8)

Other 15.8 12.5

Total 189.7 202.4

9 3


The consolidated reserves have decreased from EUR 202.4 mill ion as of March 31, 2010 to EUR 197.1 mill ion as of December 31, 2010 due to the following changes:

1 8 . 3 . Tr a n s l a t i o n r e s e r v eThe translation reserve comprises all foreign currency exchange differences arising from the translation of the financial statements of foreign operations.

1 8 . 4 . R e s e r v e f o r o w n s h a r e sThe reserve for the Company’s own shares comprises the cost of the Company’s shares held by RHJI. At December 31, 2010, RHJI held 581,342 own shares compared to 1,416,347 own shares as at March 31, 2010. During the fiscal year ended December 31, 2010, the movement in the number of shares is as follows:

During the fiscal year ended March 31, 2010, the Company purchased 479,960 shares at EUR 6.05 per share or EUR 9.2 mill ion in aggregate. The distributions resulted from certain share grants and the vesting of restricted stock units granted to certain employees.

1 8 . 5 . F a i r v a l u e r e s e r v eThe fair value reserve comprises the gains or losses on available for sale financial assets, except for impairment losses and foreign exchange gains and losses, until the financial assets are derecognized.

1 8 . 6 . H e d g i n g r e s e r v eThe hedging reserve comprises the effective portion of the accumulated net change in the fair value of the cash flow hedging instruments related to hedged transactions that have not yet occurred.

(In EUR millions) Translation reserve

Reserve for own shares

Available reserve

Fair value reserve

Hedging reserve Other Total

Opening balance (0.2) (10.0) 200.9 - (0.8) 12.5 202.4

Foreign exchange translation differences 3.2 - - - - - 3.2

Cash flow hedges - - - - 0.5 - 0.5

Income tax - - - - (0.2) - (0.2)

Share-based payment transactions - - (10.4) - - - (10.4)

Distribution of own shares - 4.9 - - - - 4.9

Exit from consolidation scope (15.0) - - 0.5 - - (14.5)

Actuarial gains and losses on defined benefit plan - - - - - 3.9 3.9

Other - - - - 0.5 (0.6) (0.1)

Closing balance (12.0) (5.1) 190.5 0.5 0.0 15.8 189.7

(In units) December 31, 2010

March 31, 2010

Opening balance 1,416,347 1,145,004

Additions 479,960 1,344,424

Distributions (1,314,965) (1,073,081)

Closing balance 581,342 1,416,347

9 4


1 9 . N O N - C O N T R O L L I N G I N T E R E S T SThe breakdown of the non-controll ing interests by subsidiary is as follows:

The movement during the period is:


March 31, 2010

Asahi Tec 87.7 53.0

Belvall 0.2 0.4

Honsel - 40.0

Niles 12.6 10.1

Others - 0.8

Total 100.5 104.3


March 31, 2010


Share of profit ( loss) for the period of consolidated subsidiaries (54.9) 118.3

Entry in the consolidation scope of Belvall - 0.5

Exits from consolidation scope

CME

Balance at the beginning of the period - (6.7)

Share of profit during the period - (10.0)

Others - 0.3

Metaldyne

Share of profit during the period - (3.5)

Honsel 30.2 -

Exchange losses 8.6 6.3

Changes in ownership 12.4 (58.5)

Others (0.1) 0.9

Closing balance 100.5 104.3 9 5


2 0 . E A R N I N G S P E R S H A R EThe calculation of basic and diluted earnings per share is based on the profit (loss) for the period attributable to shareholders of the Company and the weighted average number of ordinary shares outstanding during the year, net of own shares.



Continuing operations

Discontinued operations Total Continuing

operationsDiscontinued

operations Total

Profit ( loss) for the period (52.3) (94.7) (147.0) (20.0) 521.9 501.9

Less share of non-controll ing interests in the profit ( loss) for the period

14.3 (69.2) (54.9) 1.6 116.7 118.3

Profit (loss) for the period attributable to shareholders of the Company

(66.6) (25.5) (92.1) (21.6) 405.2 383.6

Issued ordinary shares at the beginning of the period, net of own shares

84,129,200 84,129,200 84,129,200 84,400,543 84,400,543 84,400,543

Weighted effect of own shares

Acquired during the period (53,329) (53,329) (53,329) (1,209,836) (1,209,836) (1,209,836)

Distributed during the period 763,371 763,371 763,371 394,921 394,921 394,921

Weighted average number of ordinary shares at the end of the period, net of own shares

84,839,242 84,839,242 84,839,242 83,585,628 83,585,628 83,585,628

Basic and diluted profit (loss) per share (in EUR) (0.8) (0.3) (1.1) (0.3) 4.9 4.6

9 6


2 1 . L O A N S A N D D E P O S I T S D U E T O C R E D I T I N S T I T U T I O N S A N D C U S T O M E R S

The senior and subordinated credit facil ities are broken down by subsidiary as follows:

The decrease of the senior and subordinated credit facil ities from EUR 477.1 mill ion as at March 31, 2010 to EUR 176.2 mill ion at December 31, 2010 mainly resulted from the deconsolidation of Honsel for EUR - 170.2 mill ion and the reclassification of Niles to liabilities held for sale for EUR - 124.1 mill ion.

Niles’ senior and subordinated credit facil ities presented as liabilities held for sale of EUR 123.9 mill ion as at December 31, 2010 are broken down by maturity as follows:

• EUR 122.5 mill ion in less than one year;• EUR 6.6 mill ion between one and five years; and • EUR 0.2 mill ion more than five years.

As at December 31, 2010, all the financial covenants were complied with.

The credit facil ities are secured by assets for a total amount of EUR 472.2 mill ion as at December 31, 2010 compared to EUR 1,033.7 mill ion as at March 31, 2010.

The decrease of EUR 561.5 mill ion is mainly due to

• the deconsolidation of Honsel for EUR - 512.8 mill ion;

• the transfer to held for sale of Niles for EUR - 103.0 mill ion; and

• the effect of exchange rates for EUR 66.5 mill ion.


March 31, 2010

Credit institutions

Senior credit facil it ies 176.2 398.5

Subordinated credit facil it ies - 78.6

Money market deposits 2.0 -

Loans due to customers and suppliers - 30.0

Deposits from

Retail customers 537.9 -

Corporate customers 941.5 -

Other 16.0 10.3

Total 1,673.6 517.4


Non-current Current Total Non-current Current Total

Asahi Tec

Senior - 90.3 90.3 - 104.8 104.8

Subordinated - 36.8 36.8 31.5 - 31.5

Honsel

Senior - - 0.0 110.0 13.8 123.8

Subordinated - - 0.0 33.8 12.6 46.4

Niles

Senior - - 0.0 99.0 24.9 123.9

Subordinated - - 0.0 - 0.2 0.2


Senior - 49.1 49.1 41.2 5.3 46.5

Total 0.0 176.2 176.2 315.5 161.6 477.1 9 7


The following table summarizes the different collaterized assets by subsidiary:

The maturity of loans and deposits due to credit institutions and customers are as follows:

The deposits due to credit institutions and customers are classified as follows:

RHJI has pledged certain of its shares in certain businesses as collateral for these businesses’ respective senior credit facil ities. The following shareholdings (presented as a percentage of RHJI’s ownership) were pledged as at December 31, 2010 and March 31, 2010:


Cash and cash

equivalents

Property, plant and

equipmentInventories

Other assets

TotalCash

and cash equivalents

Property, plant and

equipmentInventories

Other assets

Total

Asahi Tec 12.0 243.7 60.6 52.4 368.7 15.3 201.7 53.1 51.9 322.0

Honsel - - - - 0.0 4.9 269.5 30.6 207.8 512.8

Niles - - - - 0.0 - 82.5 4.1 16.4 103.0

Phoenix Seagaia Resort 1.5 102.0 - - 103.5 3.6 92.3 - - 95.9

Total 13.5 345.7 60.6 52.4 472.2 23.8 646.0 87.8 276.1 1,033.7


Less than

3 months

Between 3 months

and 1 year

Between 1 year

and 5 years

More than

5 yearsTotal

Less than

3 months

Between 3 months

and 1 year

Between 1 year

and 5 years

More than

5 yearsTotal

Due to credit institutions - - - - 0.0 - - - - 0.0

Due to customers 1,396.8 81.4 1.2 - 1,479.4 - - - - 0.0

Total 1,396.8 81.4 1.2 - 1,479.4 0.0 0.0 0.0 0.0 0.0


March 31, 2010

High net worth individuals

Term deposits 286.5 -

Other 198.4 -

Corporate customers

Term deposits 373.9 -

Other 620.6 -

Total 1,479.4 0.0

Pledge shareholdings December 31, 2010

March 31, 2010

Asahi Tec 100.0% 100.0%

Honsel 100.0% 100.0%

Phoenix Seagaia Resort 100.0% 100.0%

Shaklee 25.1% 25.1%

9 8


2 2 . D E B T S E C U R I T I E S I S S U E D

The conversion of the preferred C shares at Asahi Tec into share capital has reduced the Company’s ownership from 60.1 % as at March 31, 2010 to 54.5 % as at December 31, 2010.

The gain on conversion of preferred C schares of EUR 34.4 mill ion has been recorded as finance income as described in note 37.

2 3 . F I N A N C E L E A S E L I A B I L I T I E SFinance leases are payable as follows:

Under the terms of the lease agreements, no contingent rents are payable.

2 4 . P R O V I S I O N S

The above includes a provision for capital markets losses of EUR 2.1 mill ion and certain provisions for the cost of legal proceedings arising from business undertaken by Kleinwort Benson in prior periods. These costs have been indemnified by the previous parent undertaking, Commerzbank AG to approximately 90% of the expected maximum value of any such claims, as discussed in note 15.


March 31, 2010

Asahi Tec's preferred C shares - 45.0

Total 0.0 45.0


Less than

1 year

Between 1 and 5

years

More than

5 yearsTotal

Less than

1 year

Between 1 and 5

years

More than

5 yearsTotal

Asahi Tec 3.4 2.6 - 6.0 3.3 4.4 - 7.7

Honsel - - - 0.0 0.1 - - 0.1

Niles - - - 0.0 6.5 5.2 11.7

Phoenix Seagaia Resort 0.2 0.7 - 0.9 0.1 0.1 - 0.2

Total 3.6 3.3 0.0 6.9 10.0 9.7 0.0 19.7


March 31, 2010

Restructuring 4.6 10.0

Legal proceedings 19.6 -

Warranties 0.2 7.0

Environment 5.8 4.3

Onerous contracts 3.4 2.2

Capital market losses 2.1 -

Other 0.8 19.5

Total 36.5 43.0

9 9


The provisions have decreased from EUR 43.0 mill ion as of March 31, 2010 to EUR 36.5 mill ion as of December 31, 2010 due to the following changes:

2 5 . T R A D E PAYA B L E S , A C C R U E D E X P E N S E S A N D O T H E R L I A B I L I T I E S

The decrease of the trade payables from EUR 323.4 mill ion at March 31, 2010 to EUR 174.5 mill ion at December 31, 2010 mainly related to

• the deconsolidation of Honsel for EUR - 110.3 mill ion;

• the liabilities held for sale at Niles for EUR - 81 mill ion; and

• the liabilities from Kleinwort Benson and KB Investors (Dublin) of respectively EUR 28.8 mill ion and EUR 2.5 mill ion.

The other l iabilities of EUR 35.0 mill ion mainly related to:

• Remuneration liabilities for EUR 13.2 mill ion at December 31, 2010 compared to EUR 40.8 milion at March 31, 2010;

• Acquisition of property, plant and equipment for EUR 6.0 mill ion at December 31, 2010 compared to EUR 5.2 milion at March 31, 2010; and

• Settlement balances for EUR 4.2 mill ion at December 31, 2010 compared to nil at March 31, 2010

(In EUR millions) Restructuring Legal proceedings Warranties Environment Onerous

contracts

Capital market losses

Other Total

Opening balance 10.0 - 7.0 4.3 2.2 - 19.5 43.0

Additions 0.4 - 2.3 0.9 - - 0.1 3.7

Util izations (2.3) (0.1) (1.9) - (0.2) (0.4) - (4.9)

Reversals - - (0.1) - - (0.7) (0.5) (1.3)

Scope changes

Acquisit ion of kleinwort Benson

6.6 19.7 - - 3.6 3.4 0.8 34.1

Discontinued operations of Honsel and held for sale of Niles

(10.0) - (7.8) - (2.2) - (19.5) (39.5)

Effect of exchange rate - - 0.7 0.7 - - 0.4 1.8

Other (0.1) - - (0.1) - (0.2) - (0.4)

Closing balance 4.6 19.6 0.2 5.8 3.4 2.1 0.8 36.5


March 31, 2010

Trade payables and accrued expenses 139.5 228.8

Other l iabil it ies 35.0 94.6

Total 174.5 323.41 0 0


2 6 . D E F E R R E D TA X A S S E T S A N D L I A B I L I T I E S

2 6 . 1 . N e t d e f e r r e d t a x l i a b i l i t i e s

2 6 . 2 . R e c o g n i z e d d e f e r r e d t a x a s s e t s a n d l i a b i l i t i e sDeferred tax assets and liabilities are attributable to the following:

2 6 . 3 . M o v e m e n t i n t e m p o r a r y d i f f e r e n c e s d u r i n g t h e p e r i o d


March 31, 2010

Deferred assets 20.4 35.4

Deferred l iabil it ies (7.1) (39.0)

Net deferred tax assets (liabilities) 13.3 (3.6)


Assets Liabilities Net Assets Liabilities Net

Property, plant and equipment 5.0 (29.1) (24.1) 5.9 (69.6) (63.7)

Intangible assets - (12.3) (12.3) - (16.7) (16.7)

Inventories 1.1 - 1.1 2.6 - 2.6

Employee benefits 8.9 (0.3) 8.6 14.4 - 14.4

Provisions 1.7 - 1.7 3.7 (0.7) 3.0

Other items 2.4 (8.0) (5.6) 2.2 (9.2) (7.0)

Tax value of loss carry-forwards 43.9 - 43.9 63.8 - 63.8

Set off of tax (42.6) 42.6 0.0 (57.2) 57.2 0.0

Total 20.4 (7.1) 13.3 35.4 (39.0) (3.6)


Opening balance

Transferred to held

for sale

Scope changes

Effect of exchange

rates

Recognized in profit

or loss

Recognized in other

comprehensive income

Closing balance

Property, plant and equipment (63.7) 16.1 28.2 (5.7) 1.0 - (24.1)

Intangible assets (16.7) 1.8 1.7 (0.9) 1.8 - (12.3)

Inventories 2.6 (0.3) (1.1) 0.2 (0.3) - 1.1

Employee benefits 14.4 (2.6) (3.1) 1.7 (1.4) (0.4) 8.6

Provisions 3.0 - (1.0) 0.3 (0.6) - 1.7

Other items (7.0) (2.2) 0.1 (0.6) 4.0 0.1 (5.6)

Tax loss carry-forwards 63.8 (15.0) (11.0) 8.3 (2.2) - 43.9

Net tax assets (liabilities) (3.6) (2.2) 13.8 3.3 2.3 (0.3) 13.3

1 0 1


The scope changes of EUR 13.8 mill ion are split as follows:

• deconsolidation of Honsel for EUR 22.2 mill ion ; • entry of Kleinwort Benson in the consolidation scope for EUR - 6.8 mill ion; and• deconsolidation of Asahi Tec’s subsidiariy sold during the fiscal year ended December 31, 2010 for EUR - 1.6

mill ion.

The amount of deferred tax recognized in profit or loss of EUR 2.3 mill ion included the contribution of Niles for EUR 2.1 mill ion.

2 6 . 4 . U n r e c o g n i z e d d e f e r r e d t a x a s s e t sDeferred tax assets have not been recognized in respect of the following items:

The unrecognized deferred tax assets mainly related to tax losses considered not to be recoverable by the Company’s management in a foreseeable future. The breakdown by subsidiary is as follows:


Opening balance

Scope changes

Effect of

exchange rates

Recognized in profit

or loss

Recognized in other

comprehensive income

Closing balance

Property, plant and equipment (96.1) 23.2 1.2 8.1 (0.1) (63.7)

Intangible assets (83.8) 64.2 0.4 2.5 - (16.7)

Inventories 3.0 (2.2) (0.3) 2.1 - 2.6

Employee benefits 24.1 (12.9) (0.5) 3.7 - 14.4

Provisions 1.4 (0.1) - 1.7 - 3.0

Other items 20.4 (32.7) (0.1) 4.7 0.7 (7.0)

Tax loss carry-forwards 35.7 (10.3) (0.5) 38.9 - 63.8

Net tax assets (liabilities) (95.3) 29.2 0.2 61.7 0.6 (3.6)


March 31, 2010

Deductible temporary differences 71.5 71.5

Tax losses 365.9 313.9

Total 437.4 385.4


March 31, 2010

Asahi Tec 239.5 211.8

Honsel - 8.1

kleinwort Benson 14.0 -

Niles 52.1 52.1

Phoenix Seagaia Resort 25.1 20.6

RHJI and its management companies 106.7 92.8

Total 437.4 385.4

1 0 2


2 6 . 5 . Ta x l o s s e sAt December 31, 2010, the Company had net operating losses in aggregate of EUR 1,014.6 mill ion, which are available to be offset against future taxable income. These losses, if not util ized, will expire as follows:

The tax losses are available for carry forward in the following tax jurisdictions:

At March 31, 2010, Honsel and Niles contributed in the tax losses carried forward for respectively EUR 59.8 mill ion and EUR 97.9 mill ion. The tax losses of Niles at December 31, 2010 represent a total amount of EUR 127.7 mill ion.

The increase of the tax losses carried forward from EUR 1,007.2 mill ion as of March 31, 2010 to EUR 1,014.6 mill ion as of December 31, 2010 is mainly due to

2 7 . E M P L O Y E E B E N E F I T SThe consolidated businesses have various plans for providing benefits to retired employees, including defined benefit and defined contribution pension and retirement plans.

2 7 . 1 . D e f i n e d c o n t r i b u t i o n p l a n sThe Company has various defined contribution plans and the expenses recognized during the fiscal year ended December 31, 2010 are as follows:


The expense is recognized in the following line items in the statement of comprehensive income


2 7 . 2 . D e f i n e d b e n e f i t o b l i g a t i o n sThe Company has different defined benefit obligations split as follows between the consolidated subsidiaries :


March 31, 2010

Less than one year 18.7 18.9

Between one and five years 58.0 55.9

More than five years 937.9 932.4

Total 1,014.6 1,007.2


March 31, 2010

Japan 630.3 594.2

Belgium 313.9 271.0

United kingdom 50.0 -

Thailand 20.1 15.7

United States - 66.5

Other 0.3 59.8

Total 1,014.6 1,007.2


Opening balance 1,007.2

Additions 52.2

Transferred to assets held for sale (127.7)

Acquisit ions through business combinations 39.1

Prior year tax adjustment 10.6

Effect of exchange rates 108.2

Payment of dividends (10.3)

Uti l izations (9.8)

Exit from the consolidation scope (59.8)

Others 4.9

Closing balance 1,014.6


March 31, 2010 (1)

Asahi Tec 1.4 (0.1)

kleinwort Benson (3.0) -

Corporate headquarters (0.1) (0.5)

Total (1.7) (0.6)


March 31, 2010 (1)

Cost of sales 1.1 (0.4)


Total (1.7) (0.6)


March 31, 2010

Asahi Tec 41.5 36.8

kB Investors 1.1 -

Honsel - 52.0

Niles - 34.1

Phoenix Seagaia Resort 9.8 7.9

Total 52.4 130.8

1 0 3


2 7 . 2 . 1 . L i a b i l i t y f o r d e f i n e d b e n e f i t o b l i g a t i o n s

The Company makes contributions to different defined benefit plans that provide pension and medical benefits for employees upon retirement. These plans entitle a retired employee to receive a portion of his final salary for each year of service and to the reimbursement of certain medical costs.

2 7 . 2 . 2 . P r e s e n t v a l u e o f t h e d e f i n e d b e n e f i t o b l i g a t i o n sThe movement of the present value is as follows:

2 7 . 2 . 3 . P l a n a s s e t sThe plan assets comprise :

The movement of the plan assets is as follows:

The expenses recognized in the statement of comprehensive income are broken down as follows :


The expense is recognized in the following line items in the statement of comprehensive income



March 31, 2010

Present value of unfunded obligations 59.3 126.8

Present value of funded obligations 65.0 45.2

Total present value of obligations 124.3 172.0

Fair value of plan assets (63.3) (29.2)

Actuarial gains (16.0) (11.9)

Recognized defined benefit obligations

Assets (7.4) -

Liabil it ies 52.4 130.8

Net recognized liability for defined benefit obligations 45.0 130.8


March 31, 2010


Exit from consolidation scope (54.9) (312.6)

Transferred to l iabil it ies held for sale (36.9) -

Benefits paid by the plans (8.6) (12.5)

Current service costs and interest 7.6 10.4

Effect of exchange rates 8.6 4.4

Acquired through business combination 35.4 -

Plan participants' contributions - (3.1)

Actuarial (gains) losses (1.3) 1.5

Others 2.4 0.9



March 31, 2010

Equity securit ies 24.7 9.5

Government bonds 18.4 6.9

Cash 1.4 2.1

Corporate bonds 7.2 2.3

Insurance contracts 9.0 8.4

Property occupied 2.6 -

Total 63.3 29.2


March 31, 2010


Transferred to l iabil it ies held for sale (2.9) (190.0)

Benefits paid by the plans (0.3) (5.6)

Contributions paid into the plans 1.9 3.2

Actuarial (gains) losses 3.6 2.3

Expected return on plan assets 1.8 0.7

Effect of exchange rates 0.8 0.1

Acquired through business combination 28.3 -

Others 0.9 -



March 31, 2010 (1)

Current service cost (4.3) (4.8)

Interest on obligation (3.2) (2.4)


Others (0.1) (1.3)

Total (5.2) (7.9)


March 31, 2010 (1)

Cost of sales (3.1) (5.4)


Total (5.2) (7.9)

1 0 4


The weighted average rates util ized for actuarial purposes are as follows:


The historical value of the plan assets since 2008 is

(1 ) Res ta ted to p resen t CME, Honse l , Meta ldyne and N i l es as d i scon t inued opera t ions .

The experience adjustments on plan assets and liabilities are

(1 ) Res ta ted to p resen t CME, Honse l , Meta ldyne and N i l es as d i scon t inued opera t ions .

The Company expects payments to be made during the fiscal year ending December 31, 2011 as follows:

(In %) December 31, 2010

March 31, 2010 (1)

Discount rate 2.6 1.0


Future salary increases 4.6 4.2


March 31, 2010 (1)

March 31, 2009 (1)

March 31, 2008 (1)

Present value of the defined benefit obligation 123.2 89.6 93.7 96.9

Fair value of plan assets (63.3) (30.6) (30.0) (39.8)

Deficit in the plan 59.9 59.0 63.7 57.1


March 31, 2010 (1)

March 31, 2009 (1)

March 31, 2008 (1)

Plan l iabil it ies 6.4 0.5 1.2 (0.4)

Plan assets (2.7) 7.9 7.2 -


March 31, 2010

Contribution to be paid to the funded defined benefit plans 3.2 5.7

Benefits to be paid for the unfunded plans 4.7 6.7

Total 7.9 12.4

1 0 5


2 8 . S H A R E B A S E D PAY M E N T S

2 8 . 1 . R H J I n t e r n a t i o n a lRHJI has several long-term share based incentive plans with a view to serving the interests of RHJI and its affi l iates by attracting and retaining exceptional employees, consultants and independent directors, aligning their interests with the interests of RHJI’s shareholders and reinforcing the creation of long-term value.

2 8 . 1 . 1 . S h a r e g r a n t sDuring the fiscal year ended March 31, 2010, 859,569 shares of RHJI were granted to certain members of the Company’s management and certain employees as special bonus received in connection with the acquisition of Kleinwort Benson. Total fair value of the granted shares amounted to EUR 2.2 mill ion and was recognized as share based compensation expense in the fiscal year ended March 31, 2010. The shares vested upon grant and are subject to a lock-up varying from four to ten years.

During the fiscal year ended December 31, 2010, 221,853 shares of RHJI were granted to certain employees recruited by Kleinwort Benson. Total fair value of the granted shares amounted to EUR 1.0 mill ion and was recognized as share based compensation expense in the fiscal year ended December 31, 2010. The shares vested upon grant and are subject to a lock-up of four years.

2 8 . 1 . 2 . R e s t r i c t e d S t o c k U n i t sOn September 18, 2007, the Board of Directors approved a long-term share based incentive plan under which awards are made in the form of restricted stock units («RSUs»), which shall be vested at such times, in such manner and subject to such terms and conditions contained in the relevant award agreement. For each RSU which vests, the participant shall receive one share of RHJI or at the option of the Company and subject to the beneficiary’s consent, a cash amount equal to the fair value of such share as of the vesting date. The beneficiary may also request, subject to the Company’s consent, that a portion of the RSUs vest in cash in order to satisfy any tax liabilities that may become due upon or after such vesting.

On April 1, 2010, 436,107 RSUs were granted as remuneration for services performed during the fiscal year ended March 31, 2010. During the fiscal year ended December 31, 2010, 118,322 RSUs were forfeited.

On November 11, 2010, 311,813 RSUs were granted to KB Investors’ employees as a retention bonus, subject to a 5-year lock-up, and a continued employment condition up and until the expiry of the lock-up.

On December 16, 2010, 1,889,407 RSUs were awarded as remuneration for services performed during the fiscal year ended December 31, 2010. The RSUs vest rateably over 4 years.

In addition to the scheduled vesting, the Board of Directors decided to accelerate the vesting of 488,556 RSUs granted to certain members of the Company’s executive management. More information on the accelerated vesting can be found in note 43 on Related Parties.

(In units)

Outstanding and

unvested at April 1,

2010

Granted during

the period

Forfeited during

the period

Vested during

the period

Outstanding and

unvested at December 31,

2010

Share grants - 221,853 - - 221,853

RSU 1,942,403 2,637,327 (118,322) (1,105,193) 3,356,215

1 0 6


2 8 . 2 . C o n s o l i d a t e d s u b s i d i a r i e sCertain consolidated businesses have stock option plans for directors and employees. The stock options are subject to vesting over 1 to 8 years and have a life-time up to 2018.

The strike prices of Asahi Tec’s stock option plans are between JPy 145 (or EUR 1.3) and JPy 313 (or EUR 2.9) compared to a stock price as at December 31, 2010 of JPy 33 (or EUR 0,3).

The vesting and the life time remain unchanged compared to March 31, 2010 and are as follows:

The fair value of granted stock options was calculated using the Black-Scholes-Merton method. The following indicates the range of assumptions used for the different stock options granted:

Outstanding at April 1,

2010

Forfeited during

the period

Outstanding at December 31,

2010

Exercisable at December 31,

2010

Asahi Tec

Weighted average exercise price (in EUR) 1.7 2.5 1.9 1.8

Number of options 4,659,569 (713,293) 3,946,276 3,451,617

Fair value amount (in EUR mill ions) 7.4 (1.3) 7.3 6.6

Niles

Weighted average exercise price (in EUR) 3.4 1.8 4.3 4.3

Number of options 1,121,550 (154,600) 966,950 966,950

Fair value amount (in EUR mill ions) 1.1 - 1.6 1.6


Weighted average exercise price (in EUR) 1,237.1 - 1,433.9 1,433.9

Number of options 3,961 - 3,961 3,961

Fair value amount (in EUR mill ions) - - - -

(In years) December 31, 2010 March 31, 2010

Between And Weighted average Between And Weighted

average

Vesting 3.0 7.8 6.1 3.0 7.8 6.1

Life time 7.0 9.0 8.1 7.0 9.0 8.1

December 31, 2010

March 31, 2010

From To From To

Share volati l i ty 56.0% 58.1% 52.1% 53.8%

Risk free interest rate 0.8% 1.9% 1.3% 1.3%

Forfeiture rate 10.0% 52.0% 6.7% 35.0%

Life-time (in years) 50.0% 100.0% 50.0% 100.0%

Dividend yield 0.0% 0.0% 0.0% 0.0%

1 0 7


2 9 . N E T I N T E R E S T I N C O M E

3 0 . N E T C O M M I S S I O N A N D F E E I N C O M E

3 1 . N E T F I N A N C I A L I N C O M E


March 31, 2010

Loans and receivables due from

Credit institutions 5.1 -

Customers 6.0 -

Debt and other fixed income securit ies 3.3 -

Derivative financial instruments 1.1 -

Interest income 15.5 0.0

Deposits by credit institutions (0.1) -

Customer accounts (0.5) -

Loans and receivables from

Credit institutions (2.1) -

Customers (0.9) -

Derivative financial instruments (1.0) -

Interest expense (4.6) 0.0

Net interest income 10.9 0.0


March 31, 2010

Asset management fees 12.3 -

Corporate commissions 3.5 -

Financial advisory fees 3.3 -

Investment product fees 3.6 -

Brokerage 1.3 -

Trust and other fiduciary activit ies 12.1 -

Other 3.4 -

Commission and fee income 39.5 0.0

Brokerage (2.1) -

Other (1.3)

Commission and fee expense (3.4) 0.0

Net commission and fee income 36.1 0.0


March 31, 2010

Net trading income 0.9 -

Net income from derivatives held for risk management

Interest rate (0.3) -

Net income from investment securit ies at fair value through profit or loss

Debt securit ies 0.1 -

Corporate bonds (0.7) -

Net income from other financial assets 0.5 -

Net income from foreign exchange 0.7 -

Other (0.4) -

Total 0.8 0.0

1 0 8


3 2 . R E V E N U E


(In EUR millions) Continuing operations Discontinued operations Total

December 31, 2010

March 31, 2010 (1)

December 31, 2010

March 31, 2010 (1)

December 31, 2010

March 31, 2010 (1)

Sales 556.1 529.0 682.5 1,097.4 1,238.6 1,626.4

Construction contract revenue 5.9 24.0 - 5.9 24.0

Total 562.0 553.0 682.5 1,097.4 1,244.5 1,650.4

1 0 9


3 3 . P E R S O N N E L E X P E N S E S


Personnel expenses are included in the following line items of the statement of comprehensive income:


At December 31, 2010 and March 31, 2010, the total number of employees was as follows:


At December 31, 2010 and March 31, 2010, the geographical segmentation of the headcount was as follows:



March 31, 2010 (1)

Wages and salaries (138.8) (105.6)

Compulsory social security contributions (15.0) (12.2)

Contributions to defined contribution plans 27 (1.7) (0.6)

Expenses related to defined benefit plans 27 (5.2) (7.9)

Equity-settled share payment transactions 28 (5.3) (6.0)

Other (0.8) -

Total (166.8) (132.3)


March 31, 2010 (1)

Cost of sales (87.7) (84.3)


Total (166.8) (132.3)


March 31, 2010 (1)

Employees and management

Asahi Tec 377 383

Belvall 14 -

kleinwort Benson 620 -

kB Investors 61 -

Phoenix Seagaia Resort 880 942

RHJI and its management companies 52 48

2,004 1,373

Workers and other

Asahi Tec 4,039 3,592

Phoenix Seagaia Resort 639 648

RHJI and its management companies 1 1

4,679 4,241

Total 6,683 5,614


March 31, 2010 (1)

Japan 3,034 3,239

Asia 2,915 2,347

Europe 89 28

North America 25 -

United kingdom 620 -

Total 6,683 5,614

1 1 0


3 4 . I M PA I R M E N T O F P R O P E R T Y, P L A N T A N D E Q U I P M E N T A N D I N TA N G I B L E A S S E T SAn impairment test was performed on the carrying values of certain property, plant and equipment, for which an indication of impairment existed at December 31, 2010. Following review of the recoverable amount, the Company recorded an impairment loss of EUR 39.2

mill ion for the fiscal year ended December 31, 2010 compared to EUR 5.9 mill ion for the fiscal year ended March 31, 2010. More information on the nature of the impairment loss is provided in note 16.

The impairment loss was recorded on the following subsidiaries:



March 31, 2010 (1)

Property, plant and equipment (39.2) (6.0)

Intangible assets - 0.1

Total (39.2) (5.9)


Property, plant and

equipmentGoodwill

Intangible assets

other than goodwill

TotalProperty, plant and

equipmentGoodwill

Intangible assets

other than goodwill

Total

Asahi Tec (0.1) - - (0.1) (6.0) - - (6.0)

Phoenix Seagaia Resort (39.1) - - (39.1) - - 0.1 0.1

Total (39.2) 0.0 0.0 (39.2) (6.0) 0.0 0.1 (5.9)

1 1 1


3 5 . I M PA I R M E N T O F F I N A N C I A L A S S E T S

3 5 . 1 . R o l l f o r w a r d

3 5 . 2 . I m p a i r m e n t l o s s b y c a t e g o r y o f a s s e t s

3 5 . 3 . A m o u n t f o r e a c h c l a s s o f f i n a n c i a l a s s e t s

3 6 . O T H E R I N C O M E A N D E X P E N S E F R O M I N D U S T R I A L I N V E S T M E N T S



March 31, 2010

Opening balance (0.3) 0.0

Acquired through business combination (1.8) -

Charge for the period - (0.3)

Release during the period 0.1 -

Closing balance (2.0) (0.3)


March 31, 2010

Loans and receivables due from customers (1.7) -

Other (0.3) (0.3)

Total (2.0) (0.3)


March 31, 2010

Loans and receivables due from customers (1.7) -

Investments in equity accounted investees and other investments (0.3) (0.3)

Total financial assets (2.0) (0.3)


March 31, 2010 (1)

Write-offs and impairment on receivables (0.4) (3.2)

Restructuring charges (0.1) -

Gain on disposals of property, plant and equipment 0.1 3.4

Loss on disposals of property, plant and equipment (2.2) (7.2)

Other 0.4 (0.2)

Total (2.2) (7.2)

1 1 2


3 7 . N E T F I N A N C E I N C O M E F R O M I N D U S T R I A L I N V E S T M E N T S

3 7 . 1 . R e c o g n i z e d i n p r o f i t o r l o s s


Conversion of preferred sharesOn June 3, 2010, Asahi Tec reached an agreement with Masco Corporation according to which Masco Corporation agreed to convert its Class C Preferred shares into common shares by February 28, 2011 in exchange for a reduction of the conversion price. The Class C Preferred shares were issued at the time of the acquisition of Metaldyne.

The Class C Preferred shares, which had a liquidation preference of approximately EUR 70.1 mill ion, were recorded as a hybrid instrument with a liability component of EUR 45.9 mill ion at March 31, 2010. As a result of the conversion, the liability component was removed and replaced by the fair value of the common shares as a component of equity. The resulting gain of 34.4 mill ion was recorded as finance income at December 31, 2010. The conversion of the Class C Preferred shares led to the dilution of RHJI’s stake from 60.1% to 54.5%. The agreement was approved by Asahi

Tec’s lenders and the General Meeting of shareholders on June 16 and June 25, 2010 respectively.

Loss on disposal of f inancial assetsThe loss on disposal of financial assets of EUR 6.4 mill ion during the fiscal year ended December 31, 2010 related to the sale of Asahi Tec Environmental Solution Coo, Ltd by Asahi Tec.

3 7 . 2 . R e c o g n i z e d i n o t h e r c o m p r e h e n s i v e i n c o m e



March 31, 2010 (1)

Fair value adjustment on financial assets 2.6 -

Conversion of preferred shares 34.4 -

Forward exchange contract income 2.4 -

Gain on dilution - 3.5

Foreign exchange gains

Realized 6.7 18.5

Unrealized 3.0 4.5

Gain on sale of f inancial assets - 29.4

Interest income 2.8 5.1

Other 0.3 5.1

Finance income 52.2 66.1

Interest expenses (7.2) (12.1)

Loss on disposal of f inancial assets (6.4) -

Foreign exchange loss

Realized (7.9) (22.3)

Unrealized (3.2) (18.9)

Fair value adjustment on financial assets - (1.8)

Forward exchange contract income (2.2) -

Other (1.0) (2.2)

Finance costs (27.9) (57.3)

Total 24.3 8.8


March 31, 2010 (1)

Foreign exchange translation differences 9.8 0.6

Net change in fair value of available-for-sale financial assets

(0.5) 0.1

Net change in fair value available-for-sale financial assets transferred to profit or loss

- (3.4)

Cash flow hedges 0.8 1.1

Income tax on other comprehensive income (0.2) (0.4)

Discontinued operations (foreign exchange translation differences, net of income tax)

2.9 11.0

Total 12.8 9.0

Attributable to:

Equity holders of the Company

Fair value reserve (0.5) (3.4)

Hedging reserve 0.3 2.4

Translation reserve 3.7 2.5

Non-controll ing interests 9.3 7.5

Finance income recognized in other comprehensive income, net of income tax

12.8 9.0

1 1 3


3 8 . I N C O M E TA X B E N E F I T

3 8 . 1 . I n c o m e t a x b e n e f i t i n t h e s t a t e m e n t o f c o m p r e h e n s i v e i n c o m e


3 8 . 2 . R e c o n c i l i a t i o n o f e f f e c t i v e t a x r a t e

The tax impact on exempt income of EUR 15.1 mill ion for the fiscal year ended December 31, 2010 mainly related to:

• the gain on conversion of Asahi Tec’s preferred C shares for EUR 13.3 mill ion; and • the net result from equity accounted investees for EUR 1.3 mill ion.

The tax impact on exempt income of EUR 187.2 mill ion for the fiscal year ended March 31, 2010 mainly related to:

• the gain on debt extinguishment at Honsel for EUR 102.9 mill ion;• the gain on dilution in Honsel and Sigmaxyz for EUR 41.9 mill ion; • the gain on deconsolidation of Metaldyne for EUR 27.0 mill ion; and • the gain on disposal of CIB, CME and U-shin for EUR 12.4 mill ion.


March 31, 2010 (1)

Current tax benefit (expense)

Current year (1.5) (2.6)

Adjustment for prior years 0.2 (0.3)

Total (1.3) (2.9)

Deferred tax benefit (expense)

Impact of temporary differences (10.5) 203.5

Recognition of previously unrecognized tax losses 0.9 5.4

Change in unrecognized deductible temporary differences 9.4 (177.2)

Total (0.2) 31.7

Total income tax benefit (expense) excluding tax on sale of discontinued operations and share of income tax of equity accounted investees (1.5) 28.8

Income tax benefit (expense) from continuing operations (1.5) 28.8

Income tax benefit from discontinued operations 8 1.7 26.6

Total income tax benefit in the statement of comprehensive income 0.2 55.4


Profit (loss) for the period (147.0) 501.9

Income tax benefit 0.2 55.4

Profit (loss) before income tax (147.2) 446.5

Income tax using the average corporate tax rate 31.3% 46.0 29.7% (132.7)

Non-deductible expenses (22.8%) (33.5) 13.6% (60.6)

Tax exempt income 10.3% 15.1 (41.9%) 187.2

Effect of tax losses uti l ized 0.4% 0.6 (5.9%) 26.4

Current year losses for which no deferred tax asset was recognized (7.2%) (10.6) 5.6% (24.9)

Recognition of previously unrecognized tax losses - % - (11.0%) 49.1

Change of tax rate (1.6%) (2.4) 2.0% (8.8)

Change in unrecognized temporary differences (9.9%) (14.5) (4.5%) 19.9

Others (0.3%) (0.5) 0.0% (0.2)

Total 0.1% 0.2 (12.4%) 55.4

1 1 4


3 8 . 3 . I n c o m e t a x e x p e n s e r e c o g n i z e d i n o t h e r c o m p r e h e n s i v e i n c o m e



March 31, 2010 (1)

Cash flow hedges (0.2) (0.4)

Income tax expense recognized in other comprehensive income (0.2) (0.4)

1 1 5


3 9 . F I N A N C I A L R I S k M A N A G E M E N T

R i s k m a n a g e m e n t a n d c o n t r o lThe Company, as any commercial enterprise, faces and accepts risks and uncertainties in order to generate return for its shareholders. The Board of Directors has overall responsibility for identifying and managing those risks and for maintaining appropriate internal controls. The Company is active in different business segments as it is transforming itself from a diversified holding company into an active and dynamic financial services firm.

As a result of this ongoing transformation and the acquisition of Kleinwort Benson, the Company is exposed to certain specific risks associated with financial services. The Company’s major investments in financial services are organized under the direct ownership of Kleinwort Benson Group Limited («Kleinwort Benson Group»), a wholly owned holding company incorporated in the UK. Kleinwort Benson Group adopted a risk governance structure aimed at developing an effective, proactive, cross-disciplinary approach to enterprise-wide risk management built upon an invigorated risk-culture. The structure includes a Strategic Risk Committee at the level of Kleinwort Benson Group, to which tasks are delegated by the

boards of Kleinwort Benson Bank Limited, Kleinwort Benson Channel Islands Holdings Limited and Kleinwort Benson Investors Dublin Ltd, with a view to (i) providing oversight and guidance for all risks arising across the business, and (i i) ensuring that sensible risks are taken in alignment with approved risk strategy in a properly controlled environment in accordance with Kleinwort Benson Group’s risk appetite. The banking activities undertaken by the Company result in exposure to a number of risks that are mainly credit, l iquidity, market (interest rate and foreign currency) and operational risk.

The industrial portfolio holdings are exposed to risks related to the level of indebtedness such as liquidity and interest rate risk and risks inherent to the nature of their commercial activities such as credit risk and foreign currency exchange risk. As a holding Company, RHJI is further exposed to risks associated with general, economic and market conditions, such as the risk of fluctuating interest rates and currency exchange rates, l iquidity risk and risks related to the stock market, all of which may have a significant effect on the value of the Company’s assets.

3 9 . 1 . C l a s s i f i c a t i o n o f f i n a n c i a l a s s e t s a n d l i a b i l i t i e s3 9 . 1 . 1 . F i n a n c i a l a s s e t sFinancial assets and liabilities are classified based on four recognition principles: at fair value through profit or loss, available-for-sale, loans and receivables and other amortised cost. The Company’s classification of its principal financial assets and liabilities at December 31, 2010 is summarised below:


Financial assets at fair value

through profit or

loss

Available-for-sale

Loans and

receivablesTotal

Financial assets at fair value

through profit or

loss

Available-for-sale

Loans and

receivablesTotal

Cash and balances with banks - - 131.1 131.1 - - 489.6 489.6

Derivative financial instruments (Held for risk management)

0.6 - - 0.6 0.1 - - 0.1

Loans and receivables due from credit institutions

- - 556.1 556.1 - - - 0.0

Loans and receivables due from customers - - 566.6 566.6 - - - 0.0

Debt and other fixed income securit ies (Designated at fair value through profit or loss)

600.1 - - 600.1 1.3 - - 1.3

Available for sale investments in equity securit ies and other investments

109.3 26.8 - 136.1 107.4 1.7 - 109.1

Total 710.0 26.8 1,253.8 1,990.6 108.8 1.7 489.6 600.1

1 1 6


3 9 . 1 . 2 . F i n a n c i a l l i a b i l i t i e s

3 9 . 2 . C r e d i t r i s k o f f i n a n c i a l a s s e t sCredit risk is encapsulated by the financial loss arising from the failure of a customer or counterparty to settle financial obligations to the Group as they fall due. Kleinwort Benson Group’s offering to clients includes a range of loan facilities. Failure to recover amounts lent or the interest and fees associated with the loans could result in bad debt charges. Kleinwort Benson Group maintains detailed credit policies for customer lending, covering all aspects of credit risk management including, inter-alia, credit strategy, delegated approval authority, underwriting criteria including collateral quality and provisioning.

The Company’s credit risk associated with its legacy portfolio of industrial assets is primarily attributable to

its trade receivables. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. The amounts presented on the statement of financial position are the amounts, net of allowances for doubtful accounts, estimated by the management of the respective consolidated businesses based on the prior credit loss experience and the current economic environment. More information on trade receivables is provided in note 15.


Financial l iabilities at

fair value through profit

or loss

Other amortised cost Total

Financial l iabilities at

fair value through profit

or loss

Other amortised cost Total

Derivative financial instruments (Held for risk management) 1.4 0.2 1.6 4.9 - 4.9

Bank overdraft - 0.3 0.3 - 0.4 0.4

Loans and deposits due to credit institutions - 178.2 178.2 - 485.4 485.4

Loans and deposits due to customers - 1,479.4 1,479.4 - 20.0 20.0

Other loans - 16.0 16.0 - 12.0 12.0

Debt securit ies issued - - - - 45.0 45.0

Total 1.4 1,674.1 1,675.5 4.9 562.8 567.7

1 1 7


3 9 . 2 . 1 . C r e d i t r i s k b y f i n a n c i a l a s s e t c l a s sThe following is a breakdown of the credit risk borne by each class of financial asset at December 31, 2010.

Credit risk in the above table is defined as follows.

i ) Impaired f inancial instruments Impaired financial instruments are financial instruments for which the Company determines that it is probable

that it will be unable to collect all principal and interest due according to the contractual terms of the financial instrument agreement(s).

i i ) Past due but not impaired f inancial instruments Financial instruments where contractual interest or principal payments are past due but the Company believes

that impairment is not appropriate on the basis of the level of security/capital available and/or the stage of collection of amounts owed to the Group.

All certificates of deposit, bonds and loans to banks held at December 31, 2010 had an external rating (source: Moody’s) no less than A1 grade (March 31, 2010 : external rating (source: Moody’s) no less than Aa3 grade).


Individually impaired

Collectively impaired

Past due but not impaired

Neither past due nor

impaired

Total credit

risk

Total carrying value

Cash and balances with banks - - - 131.1 131.1 131.1

Financial assets designated at fair value through profit or loss - - - 600.1 600.1 600.1

Derivatives used for hedging purposes - - - 0.6 0.6 0.6

Available-for-sale financial assets - - - 6.1 6.1 6.1

Loans and receivables due from credit institutions - - - 556.1 556.1 556.1

Loans and receivables due from customers - 6.5 6.2 553.9 566.6 566.6

Investments in equity accounted investees and other investments - - - 130.0 130.0 130.0

Total financial assets 0.0 6.5 6.2 1,977.9 1,990.6 1,990.6


Individually impaired

Collectively impaired

Past due but not impaired

Neither past due nor

impaired

Total credit

risk

Total carrying value

Cash and balances with banks - - - 489.6 489.6 489.6

Derivatives used for hedging purposes - - - 0.1 0.1 0.1

Available-for-sale financial assets - - - 3.0 3.0 3.0

Investments in equity accounted investees and other investments - - - 107.4 107.4 107.4

Total financial assets 0.0 0.0 0.0 600.1 600.1 600.11 1 8


3 9 . 2 . 2 . G e o g r a p h i c a l c o n c e n t r a t i o n o f f i n a n c i a l a s s e t sThe following table identifies the geographical concentrations of credit risk associated with the Company’s financial services activities at December 31, 2010.

3 9 . 2 . 3 . C o n c e n t r a t i o n o f f i n a n c i a l a s s e t s b y s e c t o rThe following table identifies the concentrations of credit risk by sector associated with the Company’s financial services activities at December 31, 2010.


United Kingdom Europe Asia America Rest of the

world Total

Cash and balances with banks 27.9 64.7 37.5 1.0 - 131.1

Financial assets designated at fair value through profit or loss 283.2 258.0 - 43.4 15.5 600.1

Derivative used for hedging purposes 0.2 0.4 - - - 0.6

Loans and advances due from

Credit institutions 331.8 222.6 1.2 0.1 0.4 556.1

Customers 461.8 37.6 18.6 26.2 22.4 566.6

Available-for-sale financial assets - - - - 6.1 6.1

Investments in equity accounted investees and other investments 2.8 26.1 84.6 16.5 - 130.0

Total 1,107.7 609.4 141.9 87.2 44.4 1,990.6


United Kingdom Europe Asia America Rest of the

world Total

Cash and balances with banks - 435.7 53.7 0.2 - 489.6

Derivative used for hedging purposes - 0.1 - - - 0.1

Available-for-sale financial assets - - 3.0 - - 3.0

Investments in equity accounted investees and other investments - 24.5 82.9 - - 107.4

Total 0.0 460.3 139.6 0.2 0.0 600.1


Corporate Government Credit institutions

High net worth individuals Total

Cash and balances with banks 26.9 - 104.2 - 131.1

Financial assets designated at fair value through profit and loss 9.9 74.3 515.9 - 600.1

Derivative assets used for hedging purposes - - 0.6 - 0.6


Credit institutions - - 556.1 - 556.1

Customers 123.0 - - 443.6 566.6

Available-for-sale financial assets 1.3 - - 4.8 6.1

Investments in equity accounted investees and other investments 111.2 - 18.8 - 130.0

Total 272.3 74.3 1,195.6 448.4 1,990.6

1 1 9


3 9 . 2 . 4 . C r e d i t q u a l i t y b y f i n a n c i a l a s s e t c l a s sThe following is a breakdown of the credit quality of financial assets associated with the Company’s financial services activities at December 31, 2010.


Corporate Government Credit institutions

High net worth individuals Total

Cash and balances with banks - - 489.6 - 489.6

Derivative used for hedging purposes - - 0.1 - 0.1

Available-for-sale financial assets 3.0 - - - 3.0

Investments in equity accounted investees and other investments 88.8 - 18.6 - 107.4

Total 91.8 0.0 508.3 0.0 600.1


Internal rating External rating

Low risk (Grades

A-B)

Fair risk (Grade C)

Impaired loans

(Grade D)

Amounts owed by

fellow group undertakings

Total AAA to AA3 A1 to A3 Other Total

Cash and balances with banks 97.8 33.3 - - 131.1 81.0 16.8 33.3 131.1

Financial assets designated at fair value through profit or loss

600.1 - - - 600.1 565.5 18.7 15.9 600.1

Derivatives used for hedging purposes 0.6 - - - 0.6 - - 0.6 0.6

Available-for-sale financial assets 4.9 1.2 - - 6.1 - - 6.1 6.1


550.3 - - 5.8 556.1 520.4 - 35.7 556.1

Loans and receivables due from customers 314.4 244.7 7.5 - 566.6 - - 566.6 566.6

Investments in equity accounted investees and other investments

130.0 - - - 130.0 - - 130.0 130.0

Total financial assets 1,698.1 279.2 7.5 5.8 1,990.6 1,166.9 35.5 788.2 1,990.6


Internal rating External rating

Low risk (Grades

A-B)

Fair risk (Grade C)

Impaired loans

(Grade D)

Amounts owed by

fellow group undertakings

Total AAA to AA3 A1 to A3 Other Total

Cash and balances with banks 489.6 - - - 489.6 489.6 - - 489.6

Derivatives used for hedging purposes 0.1 - - - 0.1 - - 0.1 0.1

Available-for-sale financial assets 3.0 - - - 3.0 - - 3.0 3.0


107.4 - - - 107.4 - - 107.4 107.4

Total financial assets 600.1 0.0 0.0 0.0 600.1 489.6 0.0 110.5 600.1

1 2 0


3 9 . 3 . L i q u i d i t y r i s k o f f i n a n c i a l a s s e t s a n d l i a b i l i t i e sThe table below summarises the residual contractual maturities of financial assets and liabilities associated with the Company’s financial services activities. It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.


Carrying amount

Gross nominal

inflow (outflow)

Less than 1 month

Between 1 and 3 months

Between 3 and 12

months

Between 1 and 3

years

Between 3 and 5

years

More than 5 years

Contractual cash-flows

Financial assets

Non-derivative assets

Cash and balances with banks 131.1 131.1 131.1 - - - - - 131.1


Credit institutions 556.1 530.4 440.2 - 0.6 0.3 89.3 - 530.4

Customers 566.6 569.2 75.6 17.4 102.2 200.4 134.7 38.9 569.2

Financial assets designated at fair value through profit or loss 600.1 610.1 5.0 59.2 237.4 245.9 62.6 - 610.1

Available-for-sale financial assets 6.1 7.0 - - - 5.7 - 1.3 7.0


130.0 130.0 - - - - - 130.0 130.0

Total 1,990.0 1,977.8 651.9 76.6 340.2 452.3 286.6 170.2 1,977.8

Derivative assets

Interest rate swaps used for hedging 0.6 0.6 0.3 - 0.3 - - - 0.6

Total 0.6 0.6 0.3 0.0 0.3 0.0 0.0 0.0 0.6

Total financial assets 1,990.6 1,978.4 652.2 76.6 340.5 452.3 286.6 170.2 1,978.4


Non-derivative l iabil it ies

Bank overdrafts 0.3 (0.3) (0.3) - - - - - (0.3)

Due to credit institutions 178.2 (178.2) (9.1) (129.0) (40.1) - - - (178.2)

Due to customers 1,479.4 (1,479.7) (1,161.5) (233.2) (80.2) (3.5) (1.3) - (1,479.7)

Other loans 16.0 (16.0) - - (16.0) - - - (16.0)

Total 1,673.9 (1,674.2) (1,170.9) (362.2) (136.3) (3.5) (1.3) 0.0 (1,674.2)

Derivative l iabil it ies

Interest rate swaps used for hedging 0.2 (0.2) (0.2) - - - - - (0.2)

Forward exchange contracts used for hedging 1.2 (1.2) (0.9) - (0.3) - - - (1.2)

Other forward contracts 0.2 (0.2) - - (0.2) - - - (0.2)

Total 1.6 (1.6) (1.1) 0.0 (0.5) 0.0 0.0 0.0 (1.6)

Total financial l iabilities 1,675.5 (1,675.8) (1,172.0) (362.2) (136.8) (3.5) (1.3) 0.0 (1,675.8)

1 2 1


The above tables show the undiscounted cash flows on the financial assets and liabilities associated with the Company’s financial services activities on the basis of their earliest possible contractual maturity. The expected cash flows on these instruments vary significantly from this analysis. For example, demand deposits from customers are expected to maintain a stable balance.

The gross nominal inflow/(outflow) disclosed in the previous table is the contractual, undiscounted cash flow on the financial l iability. The disclosure for derivatives shows a net amount for derivatives that are settled, but a gross inflow and outflow amount for derivatives that have simultaneous gross settlement (e.g. forward exchange contracts).


Carrying amount

Gross nominal

inflow (outflow)

Less than 1 month

Between 1 and 3 months

Between 3 and 12

months

Between 1 and 3

years

Between 3 and 5

years

More than 5 years

Contractual cash-flows

Financial assets

Non-derivative assets

Cash and balances with banks 489.6 489.6 489.6 - - - - - 489.6

Available-for-sale financial assets 3.0 3.0 - - 3.0 - - - 3.0

Investments in equity accounted investees 107.4 107.4 - - - - - 107.4 107.4

Total 600.0 600.0 489.6 0.0 3.0 0.0 0.0 107.4 600.0

Derivative assets

Forward exchange contracts used for hedging 0.1 0.1 0.1 - - - - - 0.1

Total 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.1

Total financial assets 600.1 600.1 489.7 0.0 3.0 0.0 0.0 107.4 600.1


Non-derivative l iabil it ies

Financial l iabil it ies measured at amortized cost:

Bank overdrafts 0.4 (0.4) (0.4) - - - - - (0.4)

Due to customers 30.0 (30.0) - - (10.0) (20.0) - - (30.0)

Loans and borrowings (or debt instrument issued) 532.4 (532.4) - - (453.8) (33.6) - (45.0) (532.4)

Total 562.8 (562.8) (0.4) 0.0 (463.8) (53.6) 0.0 (45.0) (562.8)

Derivative l iabil it ies

Interest rate swaps used for hedging 1.5 (1.5) (1.5) - - - - - (1.5)

Forward exchange contracts used for hedging 3.4 (3.4) - - (3.4) - - - (3.4)

Total 4.9 (4.9) (1.5) 0.0 (3.4) 0.0 0.0 0.0 (4.9)

Total financial l iabilities 567.7 (567.7) (1.9) 0.0 (467.2) (53.6) 0.0 (45.0) (567.7)

1 2 2


3 9 . 4 . F a i r v a l u e s o f f i n a n c i a l a s s e t s a n d l i a b i l i t i e sThe following table summarises the carrying amounts and fair values of the financial assets and liabilities associated with the Company’s financial services activities.

Loans and receivables due from and to credit institutionsLoans and receivables due from credit institutions include inter-bank placements and items in the course of collection. The fair value of floating rate placements and overnight deposits is estimated as their carrying amount. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity.

Loans and receivables due from and to customersLoans and receivables due from customers are net of provisions for impairment. The estimated fair value of loans and receivables represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to determine fair value.

Other f inancial assets and l iabil i t ies The fair value of other assets and liabilities has been estimated as the carrying value due to the short maturities on the amounts held.

3 9 . 5 . V a l u a t i o n m e t h o d s o f f i n a n c i a l i n s t r u m e n t s a t f a i r v a l u eThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: input other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

• Level 3: input for the asset or liability that are not based on observable market data (unobservable inputs).


Carrying amount

Fair value

Carrying amount

Fair value

Financial assets

Cash and balances with banks 131.1 131.1 489.6 489.6

Derivatives used for hedging purposes 0.6 0.6 0.1 0.1


Credit institutions 556.1 556.1 - -

Customers 566.6 566.9 - -

Financial assets designated at fair value through profit or loss 600.1 600.1 - -

Available-for-sale financial assets 6.1 6.1 3.0 3.0

Investments in equity accounted investees and other investments 130.0 130.0 107.4 107.4

Total financial assets 1,990.6 1,990.9 600.1 600.1


Derivatives used for hedging purposes 1.6 1.6 4.9 4.9

Financial l iabil it ies measured at amortised cost:

Bank overdrafts 0.3 0.3 0.4 0.4

Due to credit institutions 132.3 132.3 - -

Due to customers 1,479.4 1,479.4 30.0 30.0

Loans and borrowings (or debt instrument issued) 59.9 60.2 532.4 532.4

Total financial l iabilities 1,673.5 1,673.8 567.7 567.7

1 2 3


3 9 . 6 . F o r e i g n c u r r e n c y r i s kThe Company is exposed to market risk from changes in currency exchange rates that could impact the results of operations and the financial position. The Company is exposed to both translation as well as transaction risk. The translation risk is the risk that the consolidated financial statements are affected by changes in the prevailing exchange rates of the various currencies of the businesses or their subsidiaries relative to the JPy and GBP. Transaction risk is the risk that the currency structure of the costs and liabilities deviates to some extent from the currency structure of the sales proceeds and assets.

Beside the translation and transaction risk arising from changes in currency exchange rates described above, RHJI’s EUR denominated share price is exposed to changes in the exchange rate between the EUR and the JPy as a significant portion of the Company’s assets is located in Japan and has book values denominated in JPy. Following the completion of the acquisition of Kleinwort Benson on July 1, 2010, RHJI’s EUR denominated share price is further exposed to changes in the exchange rate between the EUR and the GBP.

As a result of the Company’s transformation and given the European focus on the further development of the

financial services strategy, RHJI’s functional currency is the EUR since April 1, 2010.

Cash and cash equivalents are maintained in EUR, GBP, JPy, USD and CHF.

For financial services activities, when granting loans, booking deposits or taking positions in investments denominated in a foreign currency, the Company incurs foreign exchange risk if those positions are not closed by either investing or refinancing those positions in the respective currency, or by contracting cross currency swaps or foreign exchange forward contracts. The open foreign exchange position (defined as the present value of the future cash flows discounted with the foreign interest rates) is taken into account for foreign exchange risk controll ing.

The open currency positions of the Company’s banking operations are monitored daily against pre-set limits. The Company’s currency exposure as at December 31, 2010 and comparative period are stated in EUR equivalent as follows:


Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assets

Financial assets designated at fair value through profit or loss

429.5 170.6 - 600.1 - - - -

Derivatives used for hedging purposes - 0.6 - 0.6 - 0.1 - 0.1

Available-for-sale financial assets 1.0 5.1 - 6.1 - 3.0 - 3.0

Total 430.5 176.3 0.0 606.8 0.0 3.1 0.0 3.1


Derivatives used for hedging purposes - 1.6 - 1.6 - 4.9 - 4.9

Total 0.0 1.6 0.0 1.6 0.0 4.9 0.0 4.9


EUR GBP JPY USD Other

Assets 391.3 1,368.8 136.0 309.8 89.0

Liabil it ies (213.3) (976.2) (280.3) (315.9) (102.5)

Gross currency exposure 178.0 392.5 (144.3) (6.1) (13.5)

Open forward exchange contracts (notional amounts) (138.4) - - - (0.2)

Net exposure 39.6 392.5 (144.3) (6.1) (13.7)

1 2 4


A strengthening of EUR against GBP, JPy or USD at December 31, 2010, of 10,0% would have increased (decreased) equity and profit (loss) for the period by the amounts shown below. The analysis is performed on

the same basis for fiscal year ended March 31, 2010. A weakening of the GBP, JPy or USD against the EUR would have had the equal but opposite effect on the amounts shown below.

3 9 . 7 . I n t e r e s t r a t e r i s kInterest rate risk arises in the balance sheet as a result of fixed and variable rate assets and liabilities. Exposure to interest rate movements arises when a mismatch is created between interest rate sensitive assets and liabilities.

For the legacy industrial holdings, the Company is exposed to changes in interest rates primarily as a result of borrowing activities of its consolidated businesses, which include borrowings used to maintain liquidity and to fund the business operations and acquisitions. These borrowings consist mainly of floating rate debt.

Interest rate mismatches associated with the Company’s financial services activities are monitored daily. The exposure to movements in interest rates is monitored in basis point values to a given rise in interest rates. The given rise in interest rates is calculated as one hundred basis points (1.00%). Positions are monitored both individually and on an aggregated basis. Positions are monitored against approved limits. These limits have been assigned and approved on an individual currency and total position basis.

The future principal and interest cash flows of each asset and liability are included based on their present value. The present value of future cash flows of interest bearing assets and liabilities are sensitive to changes in interest rates and thus this sensitivity represents the direction and degree of change in the value of a cash flow for a given change in the underlying interest rate.

This approach to market risk exposure has the effect of showing the aggregated potential profit or loss, which the Company would be exposed to if interest rates were to rise or fall by one hundred basis points. On such a basis points move, the value of any profits or losses would not be immediately recognised in the financial accounts. The value represents the potential gain or loss that would be realised over the life of the assets and liabilities if the move in interest rates were affected and all interest rates and positions remained static for their remaining life.


EUR GBP JPY USD Other

Assets - - 114.1 15.7 15.4

Liabil it ies - - (437.8) (1.1) (31.5)

Gross currency exposure 0.0 0.0 (323.7) 14.6 (16.1)

Open forward exchange contracts (notional amounts) - - - - 15.9

Net exposure 0.0 0.0 (323.7) 14.6 (0.2)


EquityProfit (loss)

for the period

EquityProfit (loss)

for the period

GBP 26.6 (0.5) - -

JPY 22.3 0.1 18.3 4.7

USD (0.1) - (0.2) (1.1)

1 2 5


An increase in the interest rate of 100 basis points would have increased the interest expense by EUR 4.2 mill ion and EUR 9,2 mill ion for the fiscal years ended December 31, 2010 and March 31, 2010 respectively.


Contractual maturities

Carrying amount

Less than 3

months

Between 3 and 12

months

Between 1 and 5

years

More than 5 years

Non interest bearing

Total


Fixed rate 0.6 - 0.6 - - - 0.6

Variable rate 555.5 465.9 - 89.6 - - 555.5

Loans and receivables due from customers

Variable rate 566.6 85.3 102.1 334.5 44.7 - 566.6

Total loans and receivables due from credit institutions and customers 1,122.7 551.2 102.7 424.1 44.7 0.0 1,122.7

Loans and deposits due to credit institutions

Variable rate 194.2 101.2 93.0 - - - 194.2

Loans and deposits due to customers

Fixed rate 108.6 102.2 5.2 1.2 - - 108.6

Variable rate 1,370.8 1,294.6 76.2 - - - 1,370.8

Total loans and deposits due to credit institutions and customers 1,673.6 1,498.0 174.4 1.2 0.0 0.0 1,673.6


Contractual maturities

Carrying amount

Less than 3

months

Between 3 and 12

months

Between 1 and 5

years

More than 5 years

Non interest bearing

Total

Loans and receivables due from credit institutions - - - - - - 0.0

Loans and receivables due from customers - - - - - - 0.0

Total loans and receivables due from credit institutions and customers 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Loans and deposits due to credit institutions

Fixed rate 3.5 1.2 - 1.9 0.4 - 3.5

Variable rate 473.6 441.9 - 31.7 - - 473.6

Loans and deposits due to customers

Variable rate 30.0 - - - - 30.0 30.0

Other loans and deposits

Variable rate 10.3 - 2.0 8.3 - - 10.3

Total loans and deposits due to credit institutions and customers 517.4 443.1 2.0 41.9 0.4 30.0 517.4

1 2 6


The amounts and weighted average interest rates relating to the loans and receivables or deposits with credit institutions, customers and other third parties are as follows:


Loans and receivables

due from

Loans and deposits due to

Loans and receivables

due from

Loans and deposits due to

AmountWeighted

average interest rate

Amount

Weighted average interest

rate

AmountWeighted


AmountWeighted


Credit institutions

Fixed rate

JPY - - - - - - 3.1 2.9%

USD 0.6 0.0% - - - - 0.1 8.5%

Other - - - - - - 0.3 2.5%

Variable rate

EUR 12.9 3.2% - - - - 167.5 6.5%

GBP 232.9 1.8% 4.9 0.0% - - - -

JPY 0.2 15.2% 163.7 3.5% - - 283.7 3.6%

USD 252.2 0.3% - - - - - -

Other 57.3 0.2% 12.5 3.2% - - 22.4 3.5%

Customers

Fixed rate

EUR - - 20.8 0.5% - - 30.0 4.2%

GBP - - 87.1 0.8% - - - -

USD - - 0.6 0.1% - - - -

Other - - 0.1 4.3% - - - -

Variable rate

EUR 17.2 2.2% 175.2 0.3% - - - -

GBP 508.4 0.8% 811.0 0.5% - - - -

JPY 14.5 0.4% 0.8 0.1% - - - -

USD 22.9 2.8% 309.7 0.3% - - - -

Other 3.6 2.9% 74.1 0.2% - - - -

Other

Fixed rate

EUR - - - - - - - -

JPY - - 2.2 0.6% - - 2.0 0.6%

USD - - 10.9 2.3% - - 8.3 2.0%

1,122.7 1.0% 1,673.6 0.8% 0.0 0.0 517.4 4.5%

1 2 7


4 0 . A S S E T S U N D E R M A N A G E M E N T

4 0 . 1 . C a t e g o r i e s o f c l i e n t s

4 0 . 2 . C a t e g o r i e s o f a s s e t s


March 31, 2010

Wholesale 1,725.6 -

Retail 3,910.0 -

Charity 528.4 -

Corporate 1,122.9 -

Pension 1,955.5 -

Other 12.4 -

Total 9,254.8 0.0


March 31, 2010

Fixed income 861.0 -

Equities 1,790.7 -

Mixed funds 1,311.5 -

Sustainable and responsible investments 836.0 -

Dividend plus 1,247.8 -

Multi-asset 1,660.1 -

Private wealth management 1,193.5 -

Other 354.5 -

Total 9,254.8 0.0

1 2 8


4 1 . C A P I TA L M A N A G E M E N T

( 1 ) Da ta i nc ludes K le inwor t Benson Bank ( i nc lud ing F i xed i ncome bus iness ) , K le inwor t Benson Channe l I s l ands Bank and Channe l I s l ands non-bank ac t i v i t i es .

The Company’s policy is to maintain a capital base which preserves investor and creditor confidence and to sustain future development of the business. Since the Company has a degree of flexibil ity regarding its capital usage and associated regulatory requirement, due to the liquid nature of its asset base, management believes it would be able to maintain suitable Tier 1 and solvency ratios even in the event of stresses to the profit or loss account.

The impact of the level of capital on shareholders’ return is also recognised and the Company recognises the need to maintain a balance between the higher returns that might be possible with greater gearing and

the advantages and security afforded by a sound capital position, especially in the light of the current market conditions.

The capital adequacy and capital resources of the financial services subsidiaries are managed and monitored in accordance with the regulatory capital requirements of the FSA. The Company must at all times monitor and demonstrate the compliance with the relevant regulatory capital requirements of the FSA. The Company has put in place processes and controls, including a range of detailed stress testing scenarios, to monitor and manage the Company’s capital adequacy.

(In EUR millions) December 31, 2010 (1)

Capital - Tier 1 241

Total assets 1,785

Risk Weighted Assets - Credit Risk 554

Risk Weighted Assets - Market Risk 5

Risk Weighted Assets - Operational Risk 139

Risk Weighted Assets - Total 698

Tier 1 ratio 34.5%

1 2 9


4 2 . C O M M I T M E N T S A N D C O N T I N G E N C I E SKleinwort Benson entered into a lease agreement for new offices. RHJ International has guaranteed the lease commitment up to GBP 13.7 mill ion through cash collateral for a bank guarantee issued on behalf of Kleinwort Benson Bank to the benefit of the lessor.

On November 22, 2010, Asahi Tec announced that the Pension Benefit Guaranty Corporation («PBGC») had filed a lawsuit against it in federal court in the U.S. The PBGC is a US entity that administers and enforces the pension plan termination insurance program under the US Employee Retirement Income Security Act of 1974 and its complaint relates to the pension plan of Metaldyne Corporation («Metaldyne»), which was Asahi Tec’s U.S. subsidiary and which fi led a petition for reorganisation proceedings under Chapter 11 of the U.S. Bankruptcy Code in May 2009.

According to the complaint, the PBGC, as statutory trustee of the pension plan termination insurance program of Metaldyne, alleges that the pension plan of Metaldyne had unfunded benefits and other pension-related liabilities, and that Asahi Tec as a member of Metaldyne’s «controlled group» is responsible for such liabilities. The amounts of the claims are (i) approximately $135.2 mill ion in alleged unfunded pension liabilities for the termination of the pension plan, plus interest accrued thereon to the date of payment, (i i) approximately $40.4 mill ion in alleged termination premiums, plus interest accrued thereon to the date of payment and (i i i) PBGC’s litigation and related costs.

Asahi Tec believes the litigation to be without merit and intends to vigorously defend itself.

At December 31, 2010, the Company is subject to other claims and litigation in the ordinary course of business, but does not believe that any such claims or litigation will have a material impact on its financial results.

4 3 . R E L AT E D PA R T I E SThe Company has related party relationships with its subsidiaries and businesses accounted for under the equity method, and with its directors and senior management.

Transactions with senior management

During the fiscal year ended December 31, 2010, the Company’s Board of Directors decided to:

• grant Mr. Fischer, the Company’s Chief Executive Officer, a bonus of EUR 2.5 mill ion in cash;

• accelerate the vesting of 264,085 unvested restricted stock units («RSUs») granted to Mr. Fischer pursuant to an award dated April 1, 2009;

• grant Mr. Fischer, the Company’s Chief Executive Officer, 348,432 RSUs as remuneration for services performed during the fiscal year ended December 31, 2010;

• grant a bonus of EUR 2.35 mill ion to certain members of the Company’s executive management other than Mr. Fischer;

• accelerate the vesting of 224,471 unvested RSUs granted to certain members of the Company’s executive management other than Mr. Fischer pursuant to an award dated April 1, 2009.

• grant 296,167 RSUs to certain members of the Company’s executive management other than Mr. Fischer as remuneration for services performed during the fiscal year ended December 31, 2010.

The shares delivered to Mr. Fischer and certain other members of the Company’s executive management pursuant to the accelerated vesting, are subject to a lock-up of 3 years and a claw-back, mirroring the terms of the Company’s Incentive Compensation Plan, in the event of termination of their employment with the Company for cause or as a result of their voluntary resignation prior to April 1, 2011.

The acceleration of the unvested RSUs did not increase their fair value as determined at the initial grant date. The accelerated vesting of the unvested RSUs therefore only resulted in the immediate recognition of the initial fair value of the granted RSUs which amounted to EUR 470,731 and to EUR 300,391 with respect to Mr. Fischer and the other members of executive management, respectively. Except for the immediate recognition of the fair value of the unvested RSUs, the acceleration of the granted RSUs did not result in any additional cost for the Company compared to the fair value which would have been recognized otherwise.

1 3 0


The compensation of Mr. Fischer and the other members of RHJI’s executive management recognised as personnel expense during the fiscal years ended December 31 and March 31, 2010, can be broken down as follows:

(1 ) The compos i t i on o f the execu t i ve management o the r than Mr. F i sche r changed compared to March 31 , 2010 fo l l ow ing the appo in tment o f Mar tha Boecken fe ld as Ch ie f F inanc ia l O f f i ce r.

Non-executive directors received benefits of EUR 0.9 mill ion and EUR 1.27 mill ion for the fiscal year ended December 31 and March 31, 2010, respectively.

Acquisit ion of RipplewoodOn October 15, the Company strategically aligned itself with Timothy Collins and Ripplewood Holdings LLC («Ripplewood»), by merging its activities and those of Ripplewood and by acquiring a 13 per cent interest in the general partner of Ripplewood Partners II, L.P. (the «Fund»), a private equity fund under management by Ripplewood. The acquired interest consists of the right to receive carried interest and return of direct investment capital associated with the Fund’s existing portfolio investments which include 3W Power Holdings Ltd., Aircell Inc., Delavau LLC, Hostess Brands Inc. and RSC Equipment Rental Inc. Ripplewood will now focus exclusively on the existing fund investments, and new investments will be done In conjunction with the merchant banking activities of RHJI or its affi l iates. Mr. Collins is a member of the Company’s Board of Directors and was the founder and owner, directly or through affi l iates, of Ripplewood.

The aggregate cash consideration paid by the Company for all assets amounted to EUR 15 mill ion. In the event that the Company’s share of proceeds resulting

from payments of carried interest and return of direct investment capital were less than the aggregate purchase price of EUR 15 mill ion, the Company has a claw-back, up to the total future proceeds received by Mr. Collins from the Fund.

Mr. Collins who served as Ripplewood’s Senior Managing Director and Chief Executive Officer, entered into a consulting agreement with the Company. Mr. Collins is subject to an exclusivity undertaking, pursuant to which he will not engage in any other private equity business nor provide investment advice or corporate finance advice to, or investment management services for, third parties during the term of the consulting agreement and for a period of 6 months thereafter, with a minimum of 3 years from the start of the consulting agreement. At December 31, 2010, EUR 75,151 was paid to Mr. Collins, pursuant to this consulting agreement.

The decision by the Board of Directors has been taken in accordance with the provisions of Article 523 of the Belgian Companies Code on conflict of interests.

L. Fischer Other members of executive management (1)

( In EUR millions) December 31, 2010

March 31, 2010

December 31, 2010

March 31, 2010

Fixed compensation 0.1 0.1 0.8 0.8

Variable compensation 2.5 2.5 2.4 1.2

Other remuneration in the form of pensions, insurance coverage and other fringe benefits, including allowances 1.1 1.5 0.1 0.3

Share-based compensation expense 0.5 1.3 0.6 0.4

Total 4.2 5.4 3.9 2.7

1 3 1


4 4 . L I S T O F C O N S O L I D AT E D S U B S I D I A R I E S A N D E Q U I T Y A C C O U N T E D I N V E S T E E S

4 4 . 1 . O w n e r s h i p i n t e r e s t i n f u l l y c o n s o l i d a t e d s u b s i d i a r i e sDecember 31, 2010 March 31, 2010

Country of incorporation Direct Indirect Direct Indirect

Asahi Tec Corporation Japan 54.5% 60.1%

Asahi Service Co., Ltd. Japan 54.5% 60.1%

Asahi Tec Aluminium (Thailand) Co., Ltd. Thailand 54.5% 60.1%

Asahi Tec Environmental Solutions Corporation Co., Ltd Japan - 60.1%

Asahi Tec Metals (Thailand) Co., Ltd. Thailand 54.5% 60.1%

Asahi Tec Service Co., Ltd. Japan 54.5% 60.1%

Asahi Tec TDM Co., Ltd. Japan 54.5% -

Asahi Tec Tohoku Sales Co., Ltd. Japan 54.5% 60.1%

Guangzhou Asahi Dongling Research & Development Co., Ltd. China 27.8% 30.6%

Hoei Industrial Co., Ltd. Japan 32.8% 38.0%

Techno-Metal Co., Ltd. Japan 54.5% 60.1%

Kleinwort Benson Group Ltd. (formerly KB Financial Services Holdings Ltd.) United Kingdom 100.0% -

Borrrowdale Nominees Limited Channel Islands 100.0% -

Corporate Directors (No. 1) Limited Channel Islands 100.0% -

Corporate Directors (No. 2) Limited Channel Islands 100.0% -

Corporate Secretaries (Jersey) Limited Channel Islands 100.0% -

Corporate Services (Guernsey) Limited Channel Islands 100.0% -

European Properties Inc Limited (TP 6050) United kingdom 100.0% -

Fenchurch Fiduciares Limited Channel Islands 100.0% -

Fenchurch Finance Limited Channel Islands 100.0% -

Fenchurch International Holdings Limited Channel Islands 100.0% -

Fenchurch Nominees (Singapore) Pte. Channel Islands 100.0% -

Fenchurch Nominees Limited United kingdom 100.0% -

Fenchurch Nominees Limited Channel Islands 100.0% -

Fenchurch Trust Limited Channel Islands 100.0% -

Frank Nominees Limited United kingdom 100.0% -

Guernsey Nominees Limited Channel Islands 100.0% -

Hilary Nominees Limited Channel Islands 100.0% -

k. B. (C. I.) Nominees Limited Channel Islands 100.0% -

kB Farmland Trust (Managers) Limited (TP 5091) United kingdom 87.5% -

kB Financial Services (TP 5090) United kingdom 100.0% -

kB Investors Dublin Ltd Ireland 100.0% -

kB Trustess Limited (TP 5092) United kingdom 100.0% -

kB Unit Trusts Limited (TP 5094) United kingdom 100.0% -

kB(CI)IML Papers Channel Islands 100.0% -

kB(CI)L Papers Channel Islands 100.0% -

kB(J)SL Papers Channel Islands 100.0% -

1 3 2




kBCIHL Papers Channel Islands 100.0% -

kBIM General Nominees Limited United kingdom 100.0% -

kBIM Standby Nominees Limited United kingdom 100.0% -

kBPB Nominees Limited United kingdom 100.0% -

kleinwort Benson (Channel Islands) Limited Channel Islands 100.0% -

kleinwort Benson (CI) Business Services Limited Channel Islands 100.0% -

kleinwort Benson (CI) Corporate Services Limited Channel Islands 100.0% -

kleinwort Benson (CI) Fund Services Limited Channel Islands 100.0% -

kleinwort Benson (CI) Investment Management Limited Channel Islands 100.0% -

kleinwort Benson (CI) Pension Trustees Limited Channel Islands 100.0% -

kleinwort Benson (CI) Trustees Limited Channel Islands 100.0% -

kleinwort Benson (Guernsey) Corporate Services Limited Channel Islands 100.0% -

kleinwort Benson (Guernsey) Limited Channel Islands 100.0% -

kleinwort Benson (Guernsey) Services Limited Channel Islands 100.0% -

kleinwort Benson (Guernsey) Trustees (1997) Limited Channel Islands 100.0% -

kleinwort Benson (Guernsey) Trustees Limited Channel Islands 100.0% -

kleinwort Benson (Jersey) Asset Managers Limited Channel Islands 100.0% -

kleinwort Benson (Jersey) Services Limited Channel Islands 100.0% -

kleinwort Benson (Jersey) Trustees (1997) Limited Channel Islands 100.0% -

kleinwort Benson (Jersey) Trustees Limited Channel Islands 100.0% -

kleinwort Benson (Uk) Trustees Limited Channel Islands 100.0% -

kleinwort Benson Bank Ltd. United kingdom 100.0% -

kleinwort Benson Channel Islands Holding Ltd. Channel Islands 100.0% -

kleinwort Benson Channel Islands Holdings Limited Channel Islands 100.0% -

kleinwort Benson Custodian Services Limited Channel Islands 100.0% -

kleinwort Benson Euklid Limited Channel Islands 100.0% -

kleinwort Benson Fund Managers Ltd Ireland 100.0% -

kleinwort Benson International Trustees Limited Channel Islands 100.0% -

kleinwort Benson Investors International Ltd Ireland 100.0% -

knowlfa Limited Channel Islands 100.0% -

Langbourn Nominees Limited United kingdom 100.0% -

Langdale Nominees Limited Channel Islands 100.0% -

Norman Nominees Limited United kingdom 100.0% -

Orbis Tax Services Limited Channel Islands 100.0% -

Property Nominees (Channel Islands) Limited Channel Islands 100.0% -

R. B. Nominees Limited United kingdom 100.0% -

Robert Benson Lonsdale & Co (TP 6048) United kingdom 100.0% -

West Nominees Limited Channel Islands 100.0% -

Westbourne Properties Limited Channel Islands 100.0% -

1 3 3




Niles Co., Ltd. Japan 77.9% 77.9%

Akita Niles Co.,Ltd. Japan 77.9% 77.9%

Ami Co.,Ltd. Japan 77.9% 77.9%

Fuzhou Niles Electronic Co., Ltd. China 39.7% 39.7%

Guangzhou Niles Electronics Co.,Ltd China 77.9% 77.9%

Guangzhou Niles Trading Co.,Ltd China 77.9% 77.9%

Jonan Industrial Co.,Ltd. Japan 77.9% 77.9%

Micro Craft , Inc. USA 77.9% 77.9%

Niles (Thailand) Co., Ltd. Thailand 77.9% 77.9%

Niles America Michigan ,Inc. USA 77.9% 77.9%

Niles America Wintech ,Inc. USA 77.9% 77.9%

Niles Americas Corporation USA 77.9% 77.9%

Niles CTE Electronic Co.,Ltd. Taiwan 77.9% 39.7%

Niles Europe S. A .S. France 77.9% 77.9%

Niles Personnel Service Co.,Ltd. Japan 77.9% 77.9%

Nitto Manufacturing Co.,Ltd. Japan 68.0% 68.0%

Phoenix Resort KK Japan 100.0% 100.0%

kogen Country Club Japan 100.0% 100.0%

Shelon Holdings SA Luxemburg - 51.1%

Fonderie Lorraine S.A.S France - 51.1%

Honsel AG Germany - 50.7%

Honsel Beteil igungsverwaltungs GmbH Germany - 51.1%

Honsel Geschäftsführungs GmbH Germany - 51.1%

Honsel S.R.L. Romania - 51.1%

Magal Industria e Comercio LTDA Brazil - 33.2%

Shelon Beteil igungsverwaltungs S.A. & Co kG Germany - 48.5%

Shelon GmbH Germany - 51.1%

Tafime Mexico S.A. Mexico - 51.1%

Tafime S.L. Spain - 51.1%

1 3 4


4 4 . 2 . O w n e r s h i p d i r e c t i n t e r e s t i n e q u i t y a c c o u n t e d i n v e s t e e s



Asahi Tec Japan Casting II I L.P. Cayman 100.0% 100.0%

Asahi Tec Japan Casting IV L.P. Cayman 100.0% 100.0%

Belvall Holdings SA Luxemburg 75.0% 50.0%

Honsel Holdings II I LP Cayman 57.9% 57.9%

Honsel International Technologies SA Belgium 81.8% 81.8%

Japan Casting Holdings II Ltd. Cayman 100.0% 100.0%

Japan Casting Holdings IV Ltd. Cayman 100.0% 100.0%

Kleinwort Benson Advisers AG Switzerland 100.0% -

KM Godo Kaisha Inc. Japan - 100.0%

RHJI International Japan Inc. Japan 100.0% 100.0%

RHJ Shaklee Holding SA Belgium 100.0% 100.0%

RHJ US Management Inc. USA 100.0% 100.0%

RHJI Services SA Belgium 100.0% 100.0%

RHJI Swiss Holdings I GmbH Switzerland 100.0% -

RHJI Swiss Holding II GmbH Switzerland 100.0% -

RHJI Swiss Management GmbH Switzerland 100.0% 100.0%

RHJI UK Management Ltd. United Kingdom 100.0% -

RHJI US Holdings Corp. USA 100.0% -

Ripplewood Nippon Columbia Holdings Ltd. Cayman 100.0% 100.0%

Ripplewood Nippon Columbia Partners Ltd. Cayman 100.0% 100.0%

December 31, 2010

March 31, 2010

Arecon AG Switzerland 50.0% 50.0%

Quirin Bank AG Germany 27.8% 27.8%

Shaklee Global Group Inc. Japan 42.7% 42.7%

SigmaXYZ Inc. Japan 21.8% 21.8%

1 3 5


4 5 . S U B S E Q U E N T E V E N T SNilesOn February 23, 2011, RHJI announced the sale of its 77.9% ownership interest in Niles for JPy 15.5 bill ion (EUR 137 mill ion) cash, subject to closing adjustments, including potential remediation costs arising from the outcome of environmental due diligence. The carrying value of the investment in Niles as at December 31, 2010, was adjusted to reflect the selling price pre closing adjustments. RHJI continues to work to close the transaction during the first half of 2011.

Close Brothers Offshore GroupOn March 10, 2011 Kleinwort Benson agreed to acquire Close Brothers Offshore Group for £29.1 mill ion (EUR 34 mill ion), subject to adjustments related to the net assets of the business on completion. The acquisition will be primarily financed through Kleinwort Benson. The completion of the transaction is subject to approval by the relevant regulatory bodies and is expected to be completed by the end of July.

Japan earthquakeOn March 11, 2011, Northern Japan was struck by the Tohoku earthquake. The manufacturing facilities of Asahi Tec and Niles, including one facility in the badly affected Fukushima prefecture, did not suffer material structural damage. Production was resumed, albeit at reduced capacity because of interrupted customer and supplier production and intermittent power supply. Phoenix Seagaia Resort’s facil ities, located on the South-east Pacific coast line of japans, have not been directly affected by the earthquake.

4 6 . A U D I T O R ’ S F E ERHJI’s statutory auditor, KPMG Réviseurs d’Entreprises, and a number of KPMG member firms, received fees amounting to EUR 3.4 mill ion and EUR 5,1 mill ion for respectively for the period ended at December 31, 2010 and fiscal year ended March 31, 2010 for the following services:


March 31, 2010

KPMG Réviseurs d'Entreprises

Audit 0.3 0.2

Audit related services 0.1 0.1

0.4 0.3

KPMG Network

Audit 2.5 2.2

Audit related services 0.3 2.5

Tax related services 0.1 0.1

Other services 0.1 -

3.0 4.8

Total 3.4 5.1

1 3 6


The Directors’ report on the consolidated financial statements for the fiscal year ended December 31, 2010, prepared in accordance with the Belgian Companies Code is available on request from RHJI’s registered office and on its website (www.rhji.com). All information contained in this Directors Report l isted below, is presented in the different sections of this Annual Report :

• Business and financial review of the consolidated financial statements for the year ended December 31, 2010 (Part II, page 15);

• Material events subsequent to December 31, 2010 (Part III, Note 45, page 136);• Principal risks and uncertainties (Part III, page 36);• Risk management and the use of derivative financial instruments (Part III, note 39, page 116);• Disclosure required by article 34 of the Belgian Royal Decree of 14 November 2007 (Part IV, page 158);• Disclosure required by article 119 of the Belgian Companies Code;• Disclosure on Corporate Governance required by the law of April 6, 2010 (Part IV, page 150).

D I R E C T O R S ’ R E P O R T O N T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S F O R T H E F I S C A L Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 0

1 3 7


S TAT U T O R Y A U D I T O R ’ S R E P O R T T O T H E G E N E R A L M E E T I N G O F S H A R E H O L D E R S O F R H J I N T E R N AT I O N A L S A O N T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S F O R T H E Y E A R E N D E D D E C E M B E R 3 1 , 2 0 1 0

In accordance with legal and statutory requirements, we report to you on the performance of our audit mandate. This report includes our opinion on the consolidated financial statements together with the required additional comment.

U n q u a l i f i e d a u d i t o p i n i o n o n t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s , w i t h e m p h a s i s o f m a t t e r p a r a g r a p h sWe have audited the consolidated financial statements of RHJ International SA (“the company”) and its subsidiaries (jointly “the group”), prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium. These consolidated accounts comprise the consolidated statement of financial position as of December 31, 2010 and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, as well as the summary of significant accounting policies and the other explanatory information. The total of the consolidated statement of financial position amounts to EUR 3.025,9 mill ion and the consolidated statement of comprehensive income shows a loss for the period of EUR 130,3 mill ion.

B o a r d o f d i r e c t o r ’s r e s p o n s i b i l i t y f o r t h e C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sThe board of directors of the company is responsible for the preparation of the consolidated financial statements. This responsibil ity includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

A u d i t o r ’s r e s p o n s i b i l i t yOur responsibil ity is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing, legal requirements and auditing standards applicable in Belgium, as issued by the “Institut des Réviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we have considered internal control relevant to the company’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control. We have also evaluated the appropriateness of the accounting policies used, the reasonableness of accounting estimates made by the company and the presentation of the consolidated financial statements, taken as a whole. Finally, we have obtained from management and responsible officers of the company the explanations and information necessary for our audit.

We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.

A U D I T O R ’ S R E P O R T O N T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S F O R P E R I O D E N D E D D E C E M B E R 3 1 , 2 0 1 0

1 3 8


O p i n i o nIn our opinion, the consolidated financial statements give a true and fair view of the group’s net worth and financial position as of December 31, 2010 and of its results and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, and with the legal and regulatory requirements applicable in Belgium.

Without qualifying our opinion, we draw attention on the following matters:

• The directors’ report describes the uncertainties affecting the recovery of the receivables on Honsel for EUR 20 mill ion within the context of the ongoing insolvency proceeding in Germany. According to Management, the final outcome of this procedures cannot be reliably estimated and will depend on the completion of the insolvency proceeding.

• The note 45 to the consolidated financial statements describes (a) the implications of the recent events that have affected Japan for the different subsidiaries of the Company operating in this country and (b) the uncertainties surrounding the production capacity of the customers and suppliers of these subsidiaries.

A d d i t i o n a l c o m m e n t The preparation of the directors’ report on the consolidated financial statements and its content are the responsibil ity of the board of directors.

Our responsibil ity is to supplement our report with the following additional comment, which does not modify our audit opinion on the financial statements:

• The directors’ report on the consolidated financial statements includes the information required by law and is consistent with the consolidated financial statements. We are, however, unable to comment on the description of the principal risks and uncertainties which the group is facing, and on its financial situation, its foreseeable evolution or the significant influence of certain facts on its future development. We can nevertheless confirm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate. In addition, we do not express an opinion whether internal controls operated effectively during the financial year ended December 31, 2010.

Brussels, April 27, 2011

KPMG Réviseurs d’EntreprisesStatutory auditor represented by

Olivier MacqRéviseur d’Entreprises

1 3 9


In accordance with Article 105 of the Belgian Companies Code, the non-consolidated accounts are presented below in a condensed version. The full version of the non-consolidated annual accounts, along with the related Directors’ Report and the Statutory Auditors’ Report, as they will be presented at the Annual Shareholders’ Meeting, are available on request from RHJI’s registered office and on its website (www.rhji.com). The Statutory Auditor has expressed an unqualified opinion on these annual accounts.

C o n d e n s e d n o n - c o n s o l i d a t e d b a l a n c e s h e e t a s a t


March 31, 2010

Assets

Tangible fixed assets 0.4 0.5

Intangible fixed assets 0.1 0.1

Financial f ixed assets 691.9 506.0

Trade and other receivables 19.7 0.7

Total non-current assets 712.1 507.3

Trade and other receivables 7.7 7.3

Short-term investments 11.4 405.9

Cash and cash equivalents 40.0 13.3

Others - 0.4

Total current assets 59.1 426.9

Total assets 771.2 934.2

Equity

Issued capital 604.6 642.7

Share premium 145.9 107.7

Reserves

Legal reserve 1.6 1.7

Reserves not available for distribution 3.6 9.1

Reserves available for distribution 205.7 200.8

Retained earnings (211.6) (43.3)

Total equity 749.8 918.7

Current liabilities

Trade and other payables 19.4 4.5

Others 2.0 11.0

Total current liabilities 21.4 15.5

Total equity and liabilities 771.2 934.2

C O N D E N S E D N O N - C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S F O R T H E P E R I O D E N D E D D E C E M B E R 3 1 , 2 0 1 0

1 4 0


C o n d e n s e d n o n - c o n s o l i d a t e d i n c o m e s t a t e m e n t f o r t h e p e r i o d e n d e d

The appropriation of the loss for the period is as follows:

Effective April 1,2010, RHJI’s functional currency changed from JPy to EUR. As a result, the issued capital decreased by EUR 38,1 mill ion from EUR 642,7 mill ion as at March 31, 2010 to EUR 604,6 as at December 31, 2010 and the share premium increased by EUR 38,1 mill ion from EUR 107,7 mill ion as at March 31, 2010 to EUR 145,8 mill ion as at December 31, 2010.


March 31, 2010

Revenue

Other operating income 0.1 0.1

Cost of sales

Services and other goods (35.6) (29.2)

Depreciation, amortization and impairment (0.1) (0.2)

Other operating expenses - (0.1)

Operating loss (35.6) (29.4)

Financial income 5.5 18.4

Financial expenses (3.9) (36.0)

Net financing costs 1.6 (17.6)

Extraordinary income (expenses) (134.3) 3.7

Loss before tax (168.3) (43.3)

Income tax expense - -

Loss for the period (168.3) (43.3)


March 31, 2010

Loss carried forward from last period (43.3) (722.9)

Share capital reduction - 722.9

Loss for the period (168.3) (43.3)

Retained earnings (211.6) (43.3)

1 4 1


BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 6BOARD COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 0EXECUTIVE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 3RHJI SHARES HELD By DIRECTORS & EXECUTIVE MANAGEMENT . . . . . . . . . . . 1 5 6INTERNAL CONTROL & RISK MANAGEMENT SySTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 6DISCLOSURE REQUIRED By ART. 34 OFTHE BELGIAN ROyAL DECREE OF 14/11/2007 . . . . 1 5 8STATUTORy AUDITOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 8SHAREHOLDERS’ MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 9BUSINESS CONDUCT & ETHICS CODE . . . . . . . . . . . . . . . . 1 5 9DISCLOSURE CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 0


PA R T I V

Corporate Governance 1 4 3

1 4 4


The Belgian Corporate Governance Committee formed by the Belgian Banking, Finance and Insurance Commission («CBFA», the Financial Services and Markets Authority as of today, «FMSA»), Euronext Brussels and the Federation of Belgian Enterprises published on December 9, 2004 a Code on Corporate Governance, as amended and restated on March 12, 2009, which is a code of best practice containing recommendations and applying to listed companies on a non-binding basis (and may be accessed at www.corporategovernancecommittee.be). In accordance with the Code, RHJI adopted a Corporate Governance Charter which may be viewed on RHJI’s website at www.rhji.com. The Corporate Governance Charter describes the main aspects of the rules and practices under which RHJI operates and by which shareholders can expect RHJI to operate.

This section summarizes the corporate governance structure of RHJI and provides certain factual information that the Belgian Code on Corporate Governance recommends to be included in this Annual Report. The section also contains some information required by Article 34 of the Belgian Royal Decree of 14 November 2007 concerning the obligations of l isted issuers to disclose information.

C O R P O R AT E G O V E R N A N C E

1 4 5

Corporate Governance

P O W E R S A N D R E S P O N S I B I L I T I E SIn accordance with the Belgian Companies Code, RHJI is administered by a Board of Directors with full powers and authority to undertake any action, except where specific powers are reserved for action at a Shareholders’ Meeting, either by law or pursuant to RHJI’s Articles of Association. Among others, the Board of Directors approves RHJI’s strategy as recommended by the Investment and Strategy Committee, reviews and approves the annual and six-month financial statements and presents to the Annual Shareholders’ Meeting an evaluation of RHJI’s financial situation. The Board of Directors appoints the Chief Executive Officer and members of the Board’s Committees. The Board of Directors may assign a special mandate to one or more Directors, but all other Board decisions must be taken by the Board of Directors as a whole. The Board has delegated the daily management of RHJI to its Chief Executive Officer, Mr. Fischer (see section «Mr. Fischer as Chief Executive Officer» below), and certain responsibil ities for mergers and acquisitions to the Investment and Strategy Committee (see section «Board Committees» below).

C O M P O S I T I O NBoard members are appointed by the shareholders at a Shareholders’ Meeting upon proposal by the Board of Directors. RHJI’s Articles of Association provide that the Board of Directors must have at least seven and at most twelve directors. RHJI’s Articles of Association also provide that as long as Mr. Collins, together with his affi l iates, owns, directly or indirectly, at least 5% of RHJI’s outstanding shares, he will have the right to present a pool of two candidates, from which the Shareholders’ Meeting must select one, but may select both, for election to the Board of Directors. The Nomination and Remuneration Committee (see section «Nomination and Remuneration Committee») nominates the other candidates for election to the Board of Directors. To qualify as an independent director, such person must comply with the conditions set forth in Article 526ter of the Belgian Companies Code.

F U N C T I O N I N GThe Board of Directors is a collegial body. It deliberates if a majority of its members are present or represented (except in the case of force majeure, for which the quorum is three directors present or represented).

The Board of Directors meets as regularly and as frequently as required by RHJI’s interests.

In accordance with the Belgian Companies Code (Article 523), any director with a conflicting interest must bring this to the notice of both the statutory auditor (see section «Statutory Auditor» below) and his fellow directors and may not take part in related deliberations. During the fiscal year ended December 31, 2010, the Board of Directors held eight meetings, in addition to periodic updates from executive management. Major topics considered by the Board of Directors during the fiscal year included, among others: financial statements and reports relating thereto for the fiscal year ended March 31, 2010; operations and performance of the Company; acquisition of KBC Asset Management (Dublin) Limited (now Kleinwort Benson Investors); other potential acquisitions and divestitures. The conflict of interest procedure provided by Article 523 of the Belgian Companies Code was applied three times (please refer to the statutory report of the Board of Directors on the non-consolidated financial statements dated April 27, 2011, which is published separately from this Annual Report and may be viewed on RHJI’s website at www.rhji.com). Except for Mr. Collins who did not attend four meetings, Mr. Döpfner who did not attend two meetings, Mr. Golub who did not attend four meetings, Mr. Häusler who did not attend two meetings, Mr. König who did not attend five meetings, Mr. Makihara who did not attend one meeting and Mr. Sillem who did not attend one meeting, directors attended all meetings.

B O A R D O F D I R E C T O R S

1 4 6


The following table sets forth the current members of the Board of Directors. Each director serves for a three-year term ending on the date of the Annual Shareholders’ Meeting in June 2011 which will approve the non-consolidated financial statements relating to the fiscal year ended in December 2010. Directors may be reappointed (and it is expected that a substantial number of the directors below will be proposed for renewal of their mandate at the above Annual Shareholders’ Meeting).

Biographies of each director are available below.

(1 ) I ndependen t d i rec to r pu rsuan t to A r t i c l e 526 te r o f t he Be lg ian Compan ies Code .

(2 ) Member o f the Aud i t and Comp l i ance Commi t tee .(3 ) Member o f the Nomina t ion and Remunera t ion Commi t tee .(4 ) Member o f the Inves tment and S t ra tegy Commi t tee .

D. Ronald Daniel - Chairman of the Board of Directors and of the Nomination and Remuneration Committee.

Mr. Daniel, a director since April 1, 2005, has been a management consultant for over 50 years, including 12 years as McKinsey & Company’s managing partner. Prior to joining McKinsey, Mr. Daniel served in the United States Navy. From 1989 through 2004, Mr. Daniel was the Treasurer of Harvard University, a member of the Harvard Corporation and a member of the Harvard Board of Overseers. He also was Chairman of the Harvard Management Company (which oversees Harvard’s endowment) and Chairman of the Board of Fellows of the Harvard Medical School. Mr. Daniel is also a member of the Board of Trustees of Thirteen/WNET, of Rockefeller University and of Brandeis University. He is a member of the Council on Foreign Relations, an Honorary Trustee of the Brookings Institution and Chairman Emeritus of the Wesleyan University Board of Trustees. Mr. Daniel has a B.A. in Mathematics from Wesleyan University and an M.B.A. from Harvard Business School. He also holds an Honorary Doctor of Humane Letters from Wesleyan University and an Honorary Doctor of Laws degree from Harvard University.

Timothy C. Collins - Director and Chairman of the Investment and Strategy Committee.

A director with RHJI since the company’s formation in June 2004, Mr. Collins is Chairman of the Investment and Strategy Committee of RHJI, a position he has held since January 2009. Mr. Collins was co-Chief Executive Officer of RHJI from May 2007 (when Mr. Fischer joined the company) until December of 2008. He was RHJI’s Chief Executive Officer from its formation in June 2004 until May 2007.

A director of Citigroup Inc. since July 2009, Mr. Collins also founded Ripplewood Holdings LLC in 1995 and served as its Senior Managing Director and Chief Executive Officer until its investment activities were merged with those of RHJI on October 15, 2010. He now serves as a consultant to the Company. From 1990 to 1995, Mr. Collins managed the New york office of Onex Corporation, a Toronto-based holding company engaged in acquiring companies in a variety of industries. Previously, Mr. Collins held positions at Lazard Frères & Company, Booz, Allen & Hamilton and Cummins Engine Company. Mr. Collins is a member of the Investment Advisory Committee of the New york State Common Retirement Fund and is involved in several other not-for-profit and public sector activities, including the Trilateral Commission, yale Divinity School Advisory Board, yale School of Organization and Management Board of Advisors, the Board of Overseers of the Weill Cornell Medical College and is a member of the Council on Foreign Relations. Mr. Collins is also a Member of the board of the Tony Blair Foundation. Mr. Collins has a B.A. in Philosophy from DePauw University and an M.B.A. from yale University’s School of Organization and Management.

Name Age Title

D. Ronald Daniel (3) (4) 81

Chairman of the Board of Directors and Chairman of the Nomination andRemuneration

Committee

Timothy C. Coll ins (4) 54 Chairman of the Investment and Strategy Committee

Leonhard Fischer (4) 48 Chief Executive Officer

Mathias Döpfner (1) (3) 48 Director

Harvey Golub 72 Director

Gerd Häusler 59 Director

Björn könig (1) (2) 48 Director

Jun Makihara (1) (2) (3) 53 Director

Jeremy W. Sil lem (1) (2) 60 Chairman of the Audit and Compliance Committee

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Leonhard Fischer - Director and Chief Executive Officer.

Mr. Fischer was appointed Chief Executive Officer in January 2009. He was co-Chief Executive Officer of RHJI since May 2007 and is a member of the Board of Directors since September 18, 2007.

M. Fischer is a member of the Board of Glencore International plc since April 14, 2011, and has been a member of the Board of Directors at Julius Baer Group Ltd since April 2009 and a member of the Board at AXA Konzern AG, since January 2007. Prior to joining RHJI, Mr. Fischer was Chief Executive Officer of Winterthur Group from 2003 to 2006, an insurance subsidiary of Credit Suisse, and a member of the Executive Board of Credit Suisse Group from 2003 to March 2007. Mr. Fischer joined Credit Suisse Group from Allianz AG, where he had been a Member of the Management Board and Head of the Corporate and Markets Division since 2001. Previously, he had been with Dresdner Bank AG as a member of the Executive Board since 1998 and with JP Morgan in Frankfurt since 1987. Mr. Fischer holds an M.A. in Finance from the University of Georgia and a Business Management Degree from the University of Bielefeld.

Harvey Golub - Director.

Mr. Golub has been a director of RHJI since September 2006.

Mr. Golub currently serves on the Boards of Campbell Soup Company, Dynasty Financial Partners, LLC, and Ripplewood Holdings, LLC. He is also a member of the Advisory Board of Miller Buckfire & Co., LLC and Marblegate Asset Management, LLC. Previously, Mr. Golub has served as Non-Executive Chairman of the Board of American International Group (AIG), Campbell Soup Company and The Reader’s Digest Association. He has also served as a member of the Board of Dow Jones & Company and several private companies. He also serves on the Boards of the American Enterprise Institute for Public Policy Research, Lincoln Center for the Performing Arts, and New york-Presbyterian Hospital.

Mr. Golub served as the Chief Executive Officer and Chairman of the Board of American Express from 1993 until he retired in 2001. Prior to joining American Express in 1991, he was a senior partner with McKinsey & Company.

Mr. Golub attended Cornell University from 1956 to 1958, and received a B.S. degree from the New york University in 1961.

Mathias Döpfner - Director.

Dr. Döpfner was appointed as a director of RHJI on September 16, 2008.

He is currently Chairman and Chief Executive Officer of Axel Springer AG in Berlin, which he joined in 1998 as Editor-in-Chief of Die Welt. He has been a Member of the Management Board of Axel Springer since 2000.

Mathias Döpfner has held several different positions in media companies during his career, amongst others, as Editor-in-Chief of the Wochenpost and the Hamburger Morgenpost newspapers. Since 2006 he has been a member of the Board of Directors at Time Warner, Inc. He holds several honorary offices, among others at the American Academy, the American Jewish Committee, the Aspen Institute and the European Publishers Council (EPC). In 2010 he was Visiting Professor in Media at the University of Cambridge and became a member of St. John’s College.

Dr. Döpfner studied Musicology, German, and Theatrical Arts in Frankfurt and Boston.

Björn König - Director.

Mr. König, a director since April 1, 2005, is currently an adviser to private equity and alternative asset management groups. Mr. König has several years of experience as an investor in limited partnerships and has served as an advisor in the establishment of a number of l imited partnerships. Mr. König has a B.S. in Business Administration from the University of Stockholm, Sweden.

Jun Makihara - Director.

Mr. Makihara, a director since April 1, 2005, is currently the Chairman of Neoteny Co., Ltd., an early stage venture investment firm in Japan. From 1981 to 2000, Mr. Makihara was with Goldman, Sachs & Co. where he served in various capacities, including as a Managing Director in New york in Investment Banking from 1998 to 2000, as a Managing Director in Tokyo as co-head of Equities and co-branch manager from 1995 to 1998 and as co-head of Investment Banking in Tokyo from 1992 to 1995. Mr. Makihara is a director of Monex Group, Inc. and the Japan Society. Mr. Makihara has an B.A. from Harvard College in Economics and an M.B.A. from Harvard Business School.

Gerd Häusler - Director.

Mr. Gerd Häusler joined RHJI in October 2008 as a director after having served the previous two years at Lazard as a Vice-Chairman and Managing Director in their Financial Institutions Group and their Sovereign Debt Advisory practice. Since April of 2010,Mr. Häusler serves as CEO of Bayerische Landesbank. Between 2001 and 2006 he was counselor and director of the International Capital Markets Department of the IMF responsible for all financial markets-related work and is credited with the creation of the Global Financial Stability Report; he also represented the Fund at the Financial Stability Forum. Before, Mr. Häusler was a Member of the Board of Managing Directors at Dresdner Bank AG in Frankfurt (1996 to 2000) and Chairman of Dresdner Kleinwort Benson in London (1997 to 2000). He spent the first 18 years of his career at Deutsche Bundesbank, the last two of them (1994-1996) on the

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Executive Board and the Central Bank Council. He has served as an outside director on the board of various companies and has been a member of the Group of Thirty, a think tank, since 1996.

Mr. Häusler studied Law and Economics at the Universities of Frankfurt and Geneva.

Jeremy W. Sillem – Director and Chairman of the Audit and Compliance Committee.

Mr. Sillem, a director since April 1, 2005, is the Managing Partner of Spencer House Partners LLP. Before establishing Spencer House Partners, from 2000 to 2004 he was the Chairman of Bear, Stearns International Limited, prior to which he spent a 28 year career with Lazard. He sits on a number of boards including those of Martin Currie (Holdings) Limited, the Edinburgh based global equities manager, Harbourmaster Capital (Holdings) Limited, the Dublin based loan management business and CDC Group plc, the UK Government’s development finance institution.

Mr. Sillem has a M.A. in Philosophy, Politics and Economics from Oxford University.

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The RHJI Board of Directors has created the following Board Committees: the Audit and Compliance Committee, the Nomination and Remuneration Committee and the Investment and Strategy Committee. The Board of Directors has adopted formal charters for such committees.

Amendments to key principles with respect to the composition and core tasks of such committees, as set out in their respective charters, may be made by the Board of Directors.

A U D I T A N D C O M P L I A N C E C O M M I T T E EThe Audit and Compliance Committee must consist of at least three non-executive directors, all of whom must be independent and none of whom may be the Chairman of the Board of Directors. Directors may be appointed to the Audit and Compliance Committee for terms of up to three years and may be re-appointed. The Audit and Compliance Committee’s role is to assist and advise the Board of Directors regarding, among others,

(i) the quality and integrity of RHJI’s financial statements;

(i i) the relationship with RHJI’s statutory auditor;(i i i ) risk management; (iv) compliance with legal and regulatory requirements; (v) compliance with internal codes of conduct and

other policies.

The Audit and Compliance Committee currently consists of Messrs. Sillem, König and Makihara.

During the fiscal year ended December 31, 2010, the Audit and Compliance Committee held four meetings. Major topics considered by the Committee during the fiscal year were: financial statements and reports relating to the fiscal years ended March 31, 2010 and December 31, 2010, risk management and controls, relationship with the statutory auditor and compliance with the Belgian Code on Corporate Governance and the law of April 6, 2010 aiming to reinforce corporate governance in listed companies. Committee members attended all meetings of the Audit and Compliance Committee during the fiscal year, except that Mr. König did not attend two meetings.

N O M I N AT I O N A N D R E M U N E R AT I O N C O M M I T T E EThe Nomination and Remuneration Committee must consist of at least three non-executive directors, a majority of whom must be independent. Directors may be appointed to the Nomination and Remuneration Committee for terms of up to three years and may be re-appointed (but no member of the Committee shall serve for consecutive terms collectively exceeding nine years). The Nomination and Remuneration Committee’s role is to assist and advise the Board of Directors regarding, among others,

(i) the size and composition of, and appointment to, the Board of Directors,

(i i) the size and composition of, and appointment to, the committees of the Board of Directors,

(i i i ) appointment of members of senior management and the remuneration policy, evaluation and

(iv) strategy for directors and personnel.

The Nomination and Remuneration Committee currently consists of Messrs. Daniel, Döpfner and Makihara. During the fiscal year ended December 31, 2010, the Nomination and Remuneration Committee held three meetings. Major topics considered by the Committee during the fiscal year were: RHJI’s compensation structure; implications of the Belgian law of April 6, 2010, aiming to reinforce corporate governance in listed companies, RHJI’s corporate governance structure and the composition of the Board of Directors. Committee members attended all meetings of the Nomination and Remuneration Committee during the fiscal year except that Mr. Döpfner did not attend two meetings.

B O A R D C O M M I T T E E S

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I N V E S T M E N T A N D S T R AT E G Y C O M M I T T E EThe Investment and Strategy Committee must consist of at least three executive or non-executive directors. Directors may be appointed to the Investment and Strategy Committee for terms of up to three years and may be re-appointed. The key responsibil ities of the Investment and Strategy Committee include:

(i) approval of any acquisition in which the purchase price payable by RHJI, together with any other commitment made by RHJI, does not exceed EUR 100 mill ion and any disposal in which the sale price or book value of the sold assets (whichever is the highest), together with any their form of payment does not exceed EUR 100 mill ion;

(i i) approval of any financing activity related to an acquisition mentioned in (i);

( i i i ) providing recommendations to the Board of Directors regarding any acquisition (including any related financing activity) or disposal in excess of EUR 100 mill ion;

(iv) in consultation with the Nomination and Remuneration Committee, jointly recommending, to the Board of Directors, individuals for appointment as Chief Executive Officer, Chief Financial Officer and General Counsel;

(v) defining and preparing the strategic options and proposals (including all iances, spin-offs or mergers, investments, acquisitions, divestitures, capital structure and secondary listings) that may contribute to the development of RHJI, for recommendations to the Board of Directors.

The Investment and Strategy Committee currently consists of Messrs. Collins, Daniel and Fischer. Mr. Collins is Chairman of the Investment and Strategy Committee. During the fiscal year ended December 31, 2010, the Investment and Strategy Committee held no meetings, as the relevant matters were brought directly to the attention of the Board of Directors.

A S S E S S M E N T O F B O A R D A N D B O A R D C O M M I T T E E SThe Board of Directors has adopted a policy to regularly review and assess its own performance and interaction with executive management at least every 2 or 3 years. In addition, periodically, the Board assesses its size and composition. The assessment is to be conducted at the initiative of the Chairman of the Board (with the assistance of the Nomination and Remuneration Committee and of any external specialist when deemed necessary). During such evaluation process, each director is requested to comment and evaluate topics such as:

• The effectiveness of the Board (availability and adequacy of background materials; time available for discussing important issues; etc.)

• Qualifications and responsibil ities of individual directors (contribution, presence at meetings, outside commitments, understanding of the business and risks, independence of relevant directors; etc.)

• Effectiveness of oversight of management and interaction with management.

Where appropriate, part of such evaluation can be conducted on the basis of a written process, each director being requested to comment and provide a numerical rating on a number of questions included in a written questionnaire. Following review and discussion, the Chairman of the Board may make proposals to enhance the performance or effectiveness of the functioning of the Board. The Audit and Compliance Committee and the Nomination and Remuneration Committee review at least every two to three years their respective terms of reference and own effectiveness and submit such evaluation, including any recommendations for change, to the Board of Directors. The Investment and Strategy Committee reviews regularly (at least every two to three years) its terms of reference and its own effectiveness and recommends any necessary changes to the Board. The evaluation process for the Committees is similar to the process described above for the Board of Directors, with, among others, the process being conducted by the respective Chairmen of the various Committees. 1 5 1


M R . F I S C H E R A S C H I E F E X E C U T I V E O F F I C E RMr. Leonhard Fischer is the Chief Executive Officer of RHJI and, as such, carries out the daily management of RHJI. Mr. Fischer is engaged full-time with the Company for an indefinite term.

D e l e g a t i o n o f a u t h o r i t y The Board of Directors has delegated to Mr. Fischer the powers typically exercised by a Chief Executive Officer, which consists of general executive authority over RHJI’s affairs arising in the ordinary course of business. The authority delegated to the Chief Executive Officer is intended to be within the limits of the daily management of RHJI’s business within the meaning of the Belgian Companies Code.

While the Chief Executive Officer is supported, for his activities of daily management, by other members of the executive management (see below), the Chief Executive Officer retains the sole decision-making power. The Chief Executive Officer and the other members of executive management do not constitute (nor exercise their functions through) any, formal or informal, management committee.

At any time the Board of Directors has the power to withdraw or modify the authority it has delegated or terminate the agreement with the Chief Executive Officer with or without cause.

Mr. Fischer is authorized to sub-delegate, under his own responsibil ity, one or more specific powers fall ing within the scope of day-to-day management to employees of the Company or any other person of his choice. However, he may not sub-delegate the daily management as a whole to anybody. As part of his daily management powers, Mr. Fischer has authority to cause the Company to, among others, incur or grant any form of financing; grant any form of collateral;

effect any treasury management transaction, investment or disinvestment transaction, hedging transaction, renting or leasing transaction; enter into any (including consultancy) services agreement (as a provider or beneficiary of the services); initiate or defend legal proceedings, provided (i) the amount of such financing, collateral, treasury management transaction, investment or disinvestment transaction, hedging transaction, renting or leasing transaction, services agreement or legal proceedings does not exceed EUR 25 mill ion and (i i) such financing, collateral, hedging transaction or services agreement are for purposes other than M&A activity or such investment or disinvestment transaction does not qualify as M&A activity. The following will not qualify as «M&A activity»: any (i) investment into or (i i) disinvestment of, a shareholding in a company when such shareholding represents (together with any such shares already, directly or indirectly, (i) held or (i i) disinvested, respectively, by the Company) less than 10% of all shares outstanding of such company.

Mr. Fischer has no authority over any matters that are reserved for the Board of Directors or the Shareholders’ Meeting pursuant to law or the Company’s Articles of Association or that are within the duties of any committee of the Board of Directors.

Without prejudice to the day-to-day management powers of Mr. Fischer, Mr. Fischer has specific representation powers to hire, dismiss and determine the terms of employment of any employee, including any member of the Company’s senior management (other than the Chief Financial Officer and General Counsel).

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C O M P O S I T I O N O F E X E C U T I V E M A N A G E M E N TThe following table sets forth information as to the individuals who comprised RHJI’s executive management during the fiscal year ended December 31, 2010.

R E M U N E R AT I O N R E P O R T

P r o c e d u r e f o r e s t a b l i s h i n g a r e m u n e r a t i o n p o l i c yPeriodically, the Nomination and Remuneration Committee assesses the level of remuneration for directors, including the Chairman of the Board, and any modifications proposed by the Nomination and Remuneration Committee are subject to approval by the Board and are subsequently submitted to the Annual Shareholders’ Meeting for approval. The remuneration policy for the executive management is also overseen by the Nomination and Remuneration Committee, which makes recommendations to the Board of Directors. The Nomination and Remuneration Committee uses a benchmarking approach against peer companies and may also retain the services of internationally recognized compensation consultants.

R e m u n e r a t i o n p o l i c yThe remuneration policy of non-executive directors is designed to attract, retain and motivate those who have the profile determined by the Board, taking into account the responsibil ities and time commitment for the function. The remuneration of non-executive directors for their services as directors comprises a fixed amount. It does not make directors eligible for any variable remuneration linked to results or other performance related criteria, nor does it grant rights to stock options, pension plans or other benefits. Considering their supplementary duties and liabilities, directors who are also members of a Board Committee are entitled to an additional fixed remuneration. Directors who are members of executive management do not receive any compensation for their services as directors or members of any Board Committees.

The remuneration of executive management comprises (i) a fixed amount based on the responsibil ities of the executive manager, his experience and market standards, (i i) a variable amount based on (individual and company) performance (in the form of an annual bonus and, where appropriate, of a transaction-based bonus (in cash or RSUs (generally subject to some progressive vesting tranches) and/or in shares, generally subject to some form of lock-up)) and (i i i) benefits (in the form of pensions, insurance coverage and other fringe benefits, including allowances). For the remuneration paid for services performed during the fiscal year ended December 2010, the relative weighting of each element of the remuneration for (i) the CEO and (ii) the other members of executive management as a whole was the following:

C E O- Fixed remuneration : 1.3%- Bonus : 80.0%- Benefits : 18.7%

Name Age Title

Leonhard Fischer 48 Chief Executive Officer

Martha Boeckenfeld 46 Chief Financial Officer

Jean-Marc Roelandt 46 Managing Director

Rüdiger Schmid-kühnhöfer 37 General Counsel and Managing Director

O T H E R M E M B E R S O F E X E C U T I V E M A N A G E M E N T

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O t h e r m e m b e r s o f e x e c u t i v e m a n a g e m e n t a s a w h o l e- Fixed remuneration : 16.4%- Bonus : 81.1%- Benefits : 2.5%

The remuneration of executive management is structured so as to:

• ensure that the Company can attract, motivate and retain high caliber and high potential executive talent for which the Company competes internationally;

• support the high-performance culture and the creation of long-term sustainable value for the shareholders;

• promote alignment with shareholders’ interest by encouraging executive ownership of shares;

• stimulate, recognize and reward individual performance as well as contribution to executive team performance.

The Board of Directors of the Company has adopted an equity-based compensation plan for executive management. While the Belgian Code on Corporate Governance recommends that such equity-based compensation plan be submitted to the approval of the shareholders, information on the equity-based compensation granted to the members of executive management is (along with other compensation granted to them) disclosed in the Annual Report of RHJI and RHJI believes that this provides information for shareholders to assess whether the level and structure of the remuneration of the members of executive management is such that qualified professionals can be attracted to, motivated and retained by RHJI, taking into account the global nature of RHJI’s business and competitive environment in which it operates. RHJI further believes that the process whereby executive remuneration requires the approval of the Board of Directors, upon recommendation of the Nomination and Remuneration Committee, is designed to ensure that such remuneration is fair and equitable.

C h a n g e s t o t h e r e m u n e r a t i o n p o l i c yNo significant changes were made to the remuneration policy during the fiscal year ended December 31, 2010.

R e m u n e r a t i o n o f n o n - e x e c u t i v e d i r e c t o r sThe following remuneration was paid to directors for their services as directors during the fiscal year ended December 31, 2010. During the fiscal year ended December 31, 2010, each of RHJI’s non-executive directors (except as mentioned below and other than the Chairman of the Board of Directors) was paid an amount of EUR 100,000. The Chairman was paid an amount of EUR 250,000. In addition, the Chairman of the Audit and Compliance Committee was paid an amount of EUR 60,000 and members of that Committee were paid an amount of EUR 40,000. The Chairman

of the Nomination and Remuneration committee was paid an amount of EUR 40,000 and members of that Committee were paid an amount of EUR 25,000. Pursuant to the Corporate Governance Charter of RHJI, the Chairman of the Investment and Strategy Committee is paid an annual retainer of EUR 60,000 and members of such Committee are paid an annual retainer of EUR 40,000. However, Mr. Collins does not receive any compensation for his function as member and Chairman of the Investment and Strategy Committee. As a result, the total remuneration of non-executive directors and Board Committee members during the fiscal year ended December 31, 2010 was as follows:

No benefits were granted to directors for their services as directors.

Leonhard Fischer, who is also CEO of the Company, did not receive any compensation for his services as director or member of the Investment and Strategy Committee.

R e m u n e r a t i o n o f C E O a n d o t h e r e x e c u t i v e m a n a g e m e n t F i x e d r e m u n e r a t i o n

During the fiscal year ended December 31, 2010, Mr. Fischer received an annual salary of EUR 72,222.

The aggregate annual salary granted to the other members of the executive management during the fiscal year ended December 31, 2010, amounted to EUR 815,367.

V a r i a b l e r e m u n e r a t i o n

During the fiscal year ended December 31, 2010, Mr. Fischer received variable cash compensation of EUR 2.5 mill ion related to his performance for the year ended December 31, 2010.

During the fiscal year ended December 31, 2010, Mr. Fischer was awarded 348,432 restricted stock units («RSUs») under the equity-based compensation plan adopted by the Board of Directors, on September 18, 2007, as remuneration related to the year ended December 31, 2010.

The other members of the executive management received variable cash compensation of EUR 2.35 mill ion related to their performance for the year ended December 31, 2010.

Name Remuneration

D. Ronald Daniel EUR 330,000

Timothy C. Coll ins EUR 100,000

Harvey Golub EUR 100,000

Mathias Döpfner EUR 125,000

Björn könig EUR 140,000

Jun Makihara EUR 165,000

Gerd Häusler EUR 100,000

Jeremy W. Sil lem EUR 160,000

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During the fiscal year ended December 31, 2010, they were awarded 296,167 restricted stock units under the equity-based compensation plan adopted by the Board of Directors, on September 18, 2007, as remuneration related to the year ended December 31, 2010.

R e s t r i c t e d S t o c k U n i t s

On September 18, 2007, the Board of Directors has approved a long-term share-based incentive plan. The purpose of the plan is to serve the interests of RHJI and its affi l iates by attracting and retaining exceptional employees, consultants and independent contractors, aligning their interests with the interests of RHJI’s shareholders and reinforcing the creation of long-term value.

Awards under the plan are made in the form of restricted stock units («RSUs»), which shall be vested at such times, in such manner and subject to such terms and conditions contained in the relevant award agreement. For each restricted stock unit which vests, the participant shall receive one share of RHJI or, at the option of the Company and subject to the beneficiary’s consent, a cash amount equal to the fair market value of such share as of the vesting date. The beneficiary may also request, subject to the Company’s consent, that a portion of the RSUs vest in cash in order to satisfy any tax liabilities that may become due upon or after such vesting.

Usually, a grant of RSUs would vest on the basis of a 4-years schedule, with a 25% tranche of the granted RSUs vesting each year. During the fiscal year ended December 31, 2010, the Company’s Board of Directors decided to accelerate the vesting of 264,085 and 224,471 unvested RSUs granted pursuant to an award dated April 1, 2009 to Mr. Fischer and certain other members of the executive management, respectively. The shares delivered to Mr. Fischer and certain other members of the executive management pursuant to the accelerated vesting, are subject to a lock-up of 3 years and a claw-back, mirroring the terms of the Company’s Incentive Compensation Plan, in the event of termination of their employment with the Company for cause or as a result of their voluntary resignation prior to April 1, 2011. The acceleration of the unvested RSUs did not increase their fair value as determined at the initial grant date. The accelerated vesting of the unvested RSUs therefore only resulted in the immediate recognition of the initial fair value of the granted RSUs which amounted to EUR 470,731 and to EUR 300,391 with respect to Mr. Fischer and certain other members of executive management, respectively. Except for the immediate recognition of the fair value of the unvested RSUs, the acceleration of the granted RSUs did not result in any additional cost for the Company compared to the fair value which would have been recognized otherwise.

The following table sets forth information regarding the number of RSUs granted for services performed during the year ended December 31, 2010 or previously granted RSUs, which vested during the fiscal year

ended December 31, 2010 per individual member of RHJI’s executive management:

O t h e r e x e c u t i v e b e n e f i t sMr. Fischer is entitled to participate in an extra-legal defined contribution pension plan and the amount paid by RHJI to such plan during the course of the fiscal year ended December, 2010, is EUR 15,433. In addition, Mr. Fisher is entitled to private aircraft usage, the cost of which amounted to EUR 1,054,335 for the fiscal year ended December 31, 2010. The other members of executive management are entitled to participate in an extra-legal defined contribution pension plan and the aggregate amount paid by RHJI to such plan during the course of the fiscal year ended December 31, 2010, is EUR 98,115. The other members of the executive management are also entitled to other customary fringe benefits, for an aggregate amount of EUR 27,421.

Te r m i n a t i o n a n d c e r t a i n o t h e r t e r m sMr. Fischer’s employment agreement with the Company provides for customary non-compete and non-solicitation restrictions. The agreement may be terminated by either party, with or without cause. No severance will be paid to Mr. Fischer upon termination except as required by law and pursuant to the non-competition clause if enforced by the Company. Upon termination of the agreement, Mr. Fischer will receive payment for any accrued compensation and unreimbursed expenses. In addition, upon termination of the agreement, Mr. Fischer will resign from any position at the Board of Directors (and Committee thereof) of RHJI and any companies owned directly or indirectly by RHJI, as applicable. RHJI’s executive management is generally subject to customary non-compete, non-solicitation and no hire restrictions. The agreements may be terminated at any time by RHJI. Generally, no severance will be paid to members of RHJI’s executive management upon termination, except as required by law.

Name RSU’s granted Vested

Leonhard Fischer 348,432 352,113

Martha Boeckenfeld 174,216 176,056

Jean-Marc Roelandt 52,265 44,493

Rüdiger Schmid-kühnhöfer 69,686 123,239

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As of March 31, 2011:

• All directors and executive management as a group beneficially own approximately 13.03% of RHJI’s total outstanding ordinary shares;

• All directors and executive management as a group (other than Mr. Collins) beneficially own approximately 2.88%;

• Executive management as a group beneficially owns approximately 2.17%.

RHJI’s risk management and internal controls relating to financial reporting are organized with a view to ensure the (i) presentation of management accounts that allow the group’s performance to be measured and monitored and (i i) presentation of financial statements that comply with IFRS, as adopted by the EU, and other additional Belgian disclosure requirements for the annual reports of l isted companies, and that provide a true and fair view of RHJI’s financial position.

The internal controls and risk management systems are updated on an ongoing basis and have been designed with a view to preventing or detecting and correcting errors and misstatements in the financial statements. Although risks of misappropriation of assets, unexpected losses, etc. can never be totally eliminated, the internal control and risk management systems should provide reasonable security that all material errors and misstatements are detected and corrected.

The executive management of RHJI is composed so as to provide relevant expertise in risk management and assessment of internal controls in relation to financial reporting. It is the executive management’s responsibil ity to prepare RHJI’s financial statements and to develop and maintain adequate systems of internal accounting and financial controls.

RHJI prepares consolidated financial statements twice a year, based on the submission of reporting packages prepared by the consolidated subsidiaries in accordance with IFRS. RHJI regularly organizes training and formation seminars to enhance the knowledge of IFRS of accounting and reporting staff involved in the preparation of financial information for the consolidated subsidiaries. RHJI relies on the consolidated subsidiaries’ management’s representation that the audited reporting packages present a true and fair view of the subsidiaries’ financial position and results. RHJI uses specialized software to consolidate financial information and has a team of well trained professionals to perform adequate controls on the consolidated financial statements.

A u d i t a n d C o m p l i a n c e C o m m i t t e eThe Audit and Compliance Committee monitors the adequacy of the group’s internal controls on an ongoing basis and assesses material risks in connection with the financial reporting process. The Committee regularly reports to the Board on the exercise of its duties, identifying any matters in respect of which it considers that action is needed, and making recommendations as to the steps to be taken.

The Audit and Compliance Committee monitors the quality and integrity of the financial information provided by RHJI, in particular by reviewing the relevance and consistency of the accounting standards used. This includes the criteria for the consolidation of the accounts of companies in the group. The review covers periodic information before it is made public. Executive management informs the Audit and Compliance Committee of the methods used to

R H J I S H A R E S H E L D B Y D I R E C T O R S A N D E X E C U T I V E M A N A G E M E N T

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account for significant and unusual transactions where the accounting treatment may be open to different approaches. In this respect, particular attention is paid to both the existence of, and the justification for, any activity carried out by RHJI in offshore centers and/or through special purpose vehicles.

The Audit and Compliance Committee discusses significant financial reporting issues with both executive management and the statutory auditor.

As a result of the ongoing transformation and the acquisition of Kleinwort Benson, RHJI is exposed to certain specific risks associated with financial services. RHJI’s main assets in financial services are held under Kleinwort Benson Group («KBG»), a holding company domiciled in the UK. Given the size and strategic importance of KBG and its subsidiaries in RHJI’s overall activities, a comprehensive governance structure was implemented at the level of KBG, based on a committee structure including its own audit committee and strategic risk committee.

To enable RHJI’s Audit Committee to perform its duties without creating duplication, RHJI’s Audit Committee has access to the relevant information through the following channels: (i) review of the minutes of KBG’s Audit Committee and Strategic Risk Committee; (i i) interaction with both committees’ respective chairmen at least once a year; (i i i ) reporting by the chairman of KBG’s Audit Committee in view of the preparation of RHJI’s Annual report; and (iv) access to key risk and compliance functions within KBG for a yearly presentation of major risk policies and a report on compliance with legal and regulatory requirements.

Key principles with respect to the composition and role of RHJI’s Audit and Compliance Committee can be found in the Corporate Governance section of this Annual Report on page 150.

I n t e r n a l A u d i tThe Belgian Code on Corporate Governance recommends the establishment of an internal audit function. RHJI, having both financial services assets and a legacy portfolio of industrial assets, ensure compliance with this requirement through:

• A professional and experienced audit professional based in Tokyo, providing guidance and support to the industrial portfolio companies’ internal audit functions. The RHJI internal audit professional complements internal audit functions at each industrial portfolio company and monitors the implementation of, and compliance with, J-Sox, for both the listed and private portfolio companies. J-Sox was confirmed to be equivalent to the COSO Internal Control Integrated Framework and to provide an adequate basis to provide sufficient audit assurance. The RHJI internal audit professional regularly reports to the Audit Committee following review and monitoring of the individual portfolio companies’ audit plans, audit programs, findings

from audit engagements and the implementation of remedial action.

• Reliance on the internal audit functions of KBG and its subsidiaries. The different subsidiaries of KBG have adopted a comprehensive audit plan based on an assessment of the risk and control environment, and have independent internal audit policies, procedures and systems. The reliance by RHJI’s Audit Committee on KBG’s internal audit function is based on (i) review of all internal audit documentation presented to KBG’s audit committee; and (i i) access to senior internal audit functions within KBG for a yearly presentation of the audit plan and any ad hoc request for information upon the discretion of RHJI’s Audit Committee.

• Maintenance of a framework of policies and procedures for RHJI’s corporate activities, including treasury and payroll, under the responsibil ity of RHJI’s CFO. RHJI adopted an authorization and approval process which governs the expenditure and release of funds, based on sufficient segregation of duties. Adherence with approved policies and procedures is monitored by the RHJI Internal Audit professional from time to time.

A complete description of the risks associated with the Company’s activities can be found in the «Management’s discussion and Analysis of financial condition and results of operations» section of this Annual Report on page 30.

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Article 34 of the Belgian Royal Decree of 14 November 2007 requires disclosing certain items when these may be susceptible to have an adverse effect on the ability of a third party to launch a public take-over bid on RHJI.

According to this provision, RHJI discloses the following:

• see Article 8 of RHJI’s Articles of Association (as published on www.rhji.com) on the ability of the Board of Directors to increase the share capital of RHJI under certain conditions;

• see Article 12 of RHJI’s Articles of Association (as published on www.rhji.com) on the ability of the Board of Directors to cause RHJI to acquire and dispose of its own shares under certain conditions.

Under Belgian law, the statutory auditor is appointed by a resolution adopted by a simple majority vote at a Shareholders’ Meeting. The statutory auditor is appointed for renewable terms of three years. During their term of office, the statutory auditor can be removed only by a Shareholders’ Meeting for just cause. KPMG Reviseurs d’Entreprises/Bedrijfsrevisoren (represented by Mr. Olivier Macq, partner) is RHJI’s statutory auditor. KPMG was appointed until the Annual Shareholders’ Meeting of June 18, 2013. The Shareholders’ Meeting determines the remuneration of RHJI’s statutory auditor for his services in connection with the audit of RHJI’s financial statements. During the fiscal year ended December 31, 2010, the aggregate annual fee for these services has been EUR 0.3 mill ion, excluding value-added tax and outlays. Information about total remuneration received by KPMG and certain of KPMG’s member firms for audit and other services is presented in note 46 to the Consolidated Financial Statements.

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S TAT U T O R Y A U D I T O R

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RHJI holds its Annual Shareholders’ Meeting on the third Tuesday of June of each year. If such day is a legal public holiday, the meeting will be held on the following working day. At this meeting, the Board of Directors and the statutory auditor’s report on the management and RHJI’s financial situation at the end of the previous fiscal year. RHJI’s shareholders then vote on the approval of the statutory annual accounts, the allocation of the profit or loss, the appointment, if necessary, of new directors or statutory auditor, and the release from liability of the directors and the statutory auditor (see section «Statutory Auditor» above) for the previous fiscal year. The Board of Directors or the statutory auditor may convene an Extraordinary Shareholders’ Meeting at any time RHJI’s interests so require. Shareholders representing one-fifth of RHJI’s total issued share capital may also convene an Extraordinary Shareholders’ Meeting.

Shareholders representing one-fifth of RHJI’s total issued share capital may also move to include an item of business in the agenda for a Shareholders’ Meeting. While the Belgian Code on Corporate Governance provides that the level of shareholding to that effect should not exceed 5% of the total issued share capital, the one-fifth threshold adopted by RHJI is in compliance with the Belgian Companies Code. In addition, RHJI encourages participation at shareholders’ meeting and promotes proxy voting. Time is always allocated for questions during the Shareholders’ Meetings.

Notices of all Shareholders’ Meetings contain the agenda of the meeting and the Board of Directors’ recommendations on the matters to be voted upon and are published in accordance with the Belgian Companies Code and posted on RHJI’s website at www.rhji.com.

Except as described below, no quorum is required for a Shareholders’ Meeting and decisions are taken upon a simple majority vote of the shares present in person or represented by proxy. Each ordinary share is entitled to one vote.

Resolutions relating to amendments of RHJI’s Articles of Association are subject to special quorum and majority requirements. Specifically, any resolution on these matters requires the presence in person or by proxy of shareholders holding an aggregate of at least 50% of RHJI’s total issued share capital and, generally, the approval by at least 75% of the shares present in person or represented by proxy at the meeting (and, in some cases, such as, among others, a modification to RHJI’s corporate purposes or legal form, a majority of at least 80%). If a quorum is not present, a second meeting must be convened.

At the second meeting, the quorum requirement does not apply. The special majority requirement, however, will continue to apply.

RHJI’s Code of Business Conduct and Ethics summarizes the values, principles and business practices that guide its business conduct. The Business Conduct and Ethics Code sets out a set of basic principles regarding the minimum requirements which each of RHJI’s employees, officers, members of executive management, directors, advisors and consultants are expected to become familiar with and to apply as guiding principles in the daily performance of their job responsibil ities.

In addition to general principles, there are specific provisions which address various legal and ethical compliance issues, including, among others, conflicts of interest (including conflicts of interest not covered by Article 523 of the Belgian Companies Code), outside directorships and other outside activities, business gifts and entertainment, whether offered or received, competition and fair dealing, discrimination and harassment, health and safety, confidentiality and personal data protection and protection of proprietary information.

The Business Conduct and Ethics Code also provides procedures for addressing complaints concerning auditing issues. The Business Conduct and Ethics Code encourages the reporting of any possible unethical or il legal conduct and sets forth specific compliance procedures. This includes the opportunity for all complaints to be brought anonymously.

The Business Conduct and Ethics Code is intended to supplement RHJI’s other policies including the Dealing and Disclosure Code (see section «Dealing and Disclosure Code» below) and RHJI’s general commitment to comply with applicable laws, and is not intended to replace those laws.

S H A R E H O L D E R S ’ M E E T I N G B U S I N E S S C O N D U C T A N D E T H I C S C O D E

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RHJI’s Dealing and Disclosure Code applies to all of RHJI’s employees and directors, as well as to the other persons and entities (including, to the extent indicated in the Code, to employees and directors of the companies controlled by RHJI) indicated therein. The purpose of the Dealing and Disclosure Code is to ensure that such persons and entities do not abuse, nor place themselves under suspicion of abusing, and maintain the confidentiality of price sensitive information that they may have or may be thought to have, especially in periods leading up to an announcement of financial results or of price sensitive events or decisions. To this end, the Dealing and Disclosure Code sets out minimum standards to be followed. In particular, subject to special clearance that can only be granted in very limited circumstances, the persons that are subject to the Dealing and Disclosure Code may not deal in RHJI’s shares during a closed period or a prohibited period. A closed period is defined substantially as the period of one month before publication of the annual, semi-annual or any IFRS 34 quarterly results for RHJI and of 15 days before publication of any quarterly «trading update» for RHJI or the annual, semi-annual, any IFRS 34 (or equivalent) quarterly results or any quarterly «trading update» of any subsidiary of RHJI which publicly announces results. A prohibited period is a period that RHJI’s General Counsel has determined as a sensitive period. The Dealing and Disclosure Code also provides that directors and certain members of senior management (and certain persons associated to them) must comply with the Belgian law requirement to notify their transactions in RHJI shares (or other financial instruments linked to such shares) to the FSMA in accordance with applicable Belgian rules and the guidance published by the FSMA. The Dealing and Disclosure Code is not intended to replace the applicable laws prohibiting insider dealing and disclosure of price sensitive information.

D E A L I N G A N D D I S C L O S U R E C O D E

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RHJI SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4SHAREHOLDING STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4FINANCIAL CALENDAR AND INVESTOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 5


PA R T V

Shareholders’ Information 1 6 3

R H J I S H A R E S H A R E H O L D E R S T R U C T U R E

1 L i s t i n g

All outstanding ordinary shares of RHJI have been listed on NySE-Euronext Brussels and have been part of the BEL Mid Index since July 1, 2005 and the PRIVATE EQUITy NXT Index since February 2008.

2 P e r f o r m a n c e

The share capital of RHJI amounts to EUR 604,562,379 and is represented by 85,545,547 shares without nominal value. All shares are listed on NySE-Euronext Brussels, have the same rights and par accounting value and are fully paid up. Each share entitles the holder to one voting right.

Based on the most recent transparency declarations received by RHJI in accordance with Belgian rules and RHJI’s Articles of Association, the shareholder structure is as follows:

(1 ) Pe rcen tages i nd ica ted re l a te to the vo t i ng r i gh ts a t tached to the to ta l number o f ou ts tand ing sha res i ssued by RHJ I

(2 ) I nc ludes 5% o f non-bene f i c i a l l y he ld sha res . I n accordance w i th Be lg ian ru l es , 13 .07% rep resen ts a comb ina t ion o f sha res bene f i c i a l l y owned by Mr. Co l l i ns d i rec t l y o r th rough en t i t i es re l a ted w i th Mr. Co l l i ns (8 .08%) and sha res (he ld i n en t i t i es re l a ted w i th Mr. Co l l i ns on beha l f o f ce r ta in o the r i nves to rs ) ove r wh ich Mr. Co l l i ns i s deemed to have vo t i ng r i gh ts (5%) bu t no t bene f i c i a l ownersh ip .

Share Code RHJI

ISIN Code BE0003815322

Reuters Code RHJI.BR

Bloomberg Code RHJI.BB

Number of shares 85,545,547

Market Capitalization (31/03/2011) EUR 488 mill ion

In EUR Fiscal Year Ending

December 31, 2010

March 31, 2010

Highest Closing Price EUR 6.70 EUR 6.70

Lowest Closing Price EUR 5.17 EUR 2.79

Fiscal Year-End Share Price EUR 6.20 EUR 6.42

Number of Shares 85,545,547 85,545,547

Average daily volumes traded 103,294 121,104

Stock Market Capitalization EUR 530 mill ion EUR 549 mill ion

Shareholder Number of shares

Percentage of the total (1)

Timothy C. Coll ins 11,183,654 13.07% (2)

Franklin Templeton Institutional 8,557,693 10%

BlackRock Group 8,002,363 9.35%

Davis Selected Advisors LP 4,840,741 5.66%

Third Avenue Management LLC 3,934,399 4.60%

First Manhattan Co 2,616,391 3.06%

Bank of America Corporation 2,599,672 2.99%

RIT Capital Partners plc. 2,522,810 2.95%

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F I N A N C I A L C A L E N D A R I N V E S T O R R E L AT I O N S

Shareholders and investors wishing to obtain copies of this Annual Report or other information on RHJI can contact:

Arnaud DenisInvestor Relations Director Tel. +32 (0)2 643 60 13Fax +32 (0)2 648 99 38 E-Mail [email protected]

When accessing RHJI’s website on www.rhji.com, you will find a PDF version of this Annual Report, the non-consolidated financial statements and the related directors’ report and auditors’ report, press releases, stock price and other information on RHJ International, in English and French.

Date Event

Tuesday, June 21, 2011 Annual Shareholders’ Meeting

Thursday, May 19, 2011 Trading Update

Wednesday, August 31, 2011 Half-Year Results 2011 (period ending June 30, 2011)

Friday, November 18, 2011 Trading Update

Friday, March 30, 2012

Preliminary Full-Year Results 2011 (fiscal year ending December 31, 2011)

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Shareho lders ’ In fo rmat ion

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- Annua l Repo r t 2010

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Co-ord ina t ion and P roduc t ion : IPAC - Corpora te & F inanc ia l Commun ica t ion

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