Honda 2011 Annual Report Download - page 37

Risks relating to
pension costs and
other postretirement
benefits
6.
A holder of ADSs will
have fewer rights than a
shareholder has and such
holder will have to act
through the depositary to
exercise those rights
7.
Rights of shareholders
under Japanese law may
be more limited than
under the laws of other
jurisdictions
8.
Because of daily price
range limitations under
Japanese stock exchange
rules, a holder of ADSs
may not be able to sell
his/her shares of the
Company’s Common
Stock at a particular price
on any particular trading
day, or at all
9.
Honda has pension plans and provides other post-retirement benefits. The amounts of pension
benefits, lump-sum payments and other post-retirement benefits are primarily based on the
combination of years of service and compensation. The funding policy is to make periodic con-
tributions as required by applicable regulations. Benefit obligations and pension costs are based
on assumptions of many factors, including the discount rate, the rate of salary increase and the
expected long-term rate of return on plan assets. Differences in actual expenses and costs or
changes in assumptions could affect Honda’s pension costs and benefit obligations, including
Honda’s cash requirements to fund such obligations, which could materially affect our financial
condition and results of operations.
The rights of shareholders under Japanese law to take various actions, including exercising
voting rights inherent in their shares, receiving dividends and distributions, bringing derivative
actions, examining a company’s accounting books and records, and exercising appraisal rights,
are available only to holders of record. Because the depositary, through its custodian agents,
is the record holder of the Shares underlying the ADSs, only the depositary can exercise those
rights in connection with the deposited Shares. The depositary will make efforts to exercise
votes regarding the Shares underlying the ADSs as instructed by the holders and will pay to the
holders the dividends and distributions collected from the Company. However, in the capacity as
an ADS holder, such holder will not be able to bring a derivative action, examine our accounting
books or records or exercise appraisal rights through the depositary.
The Company’s Articles of Incorporation, Regulations of the Board of Directors, Regulations
of the Board of Corporate Auditors and the Company Law of Japan (the “Company Law”)
govern corporate affairs of the Company. Legal principles relating to such matters as the validity
of corporate procedures, directors’ and officers’ fiduciary duties, and shareholders’ rights may
be different from those that would apply if the Company were a U.S. company. Shareholders’
rights under Japanese law may not be as extensive as shareholders’ rights under the laws of the
United States. An ADS holder may have more difficulty in asserting his/her rights as a share-
holder than such ADS holder would as a shareholder of a U.S. corporation. In addition, Japanese
courts may not be willing to enforce liabilities against the Company in actions brought in Japan
that are based upon the securities laws of the United States or any U.S. state.
Stock prices on Japanese stock exchanges are determined on a real-time basis by the equilibrium
between bids and offers. These exchanges are order-driven markets without specialists or mar-
ket makers to guide price formation. To prevent excessive volatility, these exchanges set daily
upward and downward price fluctuation limits for each stock, based on the previous day’s
closing price. Although transactions may continue at the upward or downward limit price if the
limit price is reached on a particular trading day, no transactions may take place outside these
limits. Consequently, an investor wishing to sell at a price above or below the relevant daily limit
may not be able to sell his or her shares at such price on a particular trading day, or at all.
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