DHL Corporation and Subsidiaries - Page 113

                                         - 40 -                                       
          As part of the report, Coopers advised JAL that if common control           
          of DHL, DHLI, and MNV existed, the Internal Revenue Service (IRS)           
          might seek to impute a royalty for DHLI’s use of the DHL                    
          trademark.  Also, because of concerns about DHL’s weak                      
          capitalization and lack of profits, Coopers recommended the                 
          infusion of equity capital into DHL while safeguarding it from              
          transfer pricing problems.  Coopers stated that no royalty should           
          be charged DHL for continued use of the DHL trademark and that              
          such a royalty would make it more difficult for DHL to achieve              
          profitability.  Coopers also noted that a 2-percent royalty might           
          be imputed to DHL for its royalty-free license to DHLI.                     
               The foreign investors also wanted to ensure that DHL would             
          continue to be a cooperating and effective component of the DHL             
          network.  They were also concerned about the possibility that DHL           
          could experience financial difficulties or could be acquired by a           
          competitor, and in that regard they wanted to control the DHL               
          trademark, which they considered to be a valuable strategic                 
          asset.  The DHL network was the main focus of the foreign                   
               During May 1989, in accord with its advisers’                          
          recommendation, JAL decided not to acquire more than a 20-percent           
          equity interest in DHL to minimize JAL’s exposure to risks,                 
          including those that could occur with respect to U.S. taxation.             
          The buyers’ and sellers’ representatives were aware of and                  
          discussed concerns that DHL could be exposed to liability, tax              

Page:  Previous  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  Next

Last modified: May 25, 2011