Notes 26-30

26. Employee benefits

In millions of EUR 2008 2007
Present value of unfunded obligations 266 287
Present value of funded obligations 4,697 2,571
Total present value of obligations 4,963 2,858
Fair value of plan assets (4,231) (2,535)
Present value of net obligations 732 323
Actuarial (losses)/gains not recognised (143) 171
Recognised liability for defined benefit obligations 589 494
Other long-term employee benefits 99 92
688 586

Plan assets comprise:

In millions of EUR 2008 2007
Equity securities 1,593 1,050
Government bonds 1,955 959
Properties and real estate 333 220
Other plan assets 350 306
4,231 2,535

Liability for defined benefit obligations

Heineken makes contributions to a number of defined benefit plans that provide pension benefits for employees upon retirement in a number of countries being mainly: the Netherlands, the UK, Greece, Austria, Germany, Italy, France, Spain and Nigeria. In other countries the pension plans are defined contribution plans and/or similar arrangements for employees.

Other long-term employee benefits mainly relate to long-term bonus plans, termination benefits and jubilee benefits.

Movements in the present value of the defined benefit obligations

In millions of EUR 2008 2007
Defined benefit obligations as at 1 January 2,858 2,984
Changes in consolidation and reclassification 2,973 (1)
Effect of movements in exchange rates (494) (4)
Benefits paid (199) (98)
Current service costs and interest on obligation (see below) 333 204
Past service costs 5 1
Effect of any curtailment or settlement (18) 4
Actuarial gains/(losses) (495) (232)
Defined benefit obligations as at 31 December 4,963 2,858

Movements in the present value of plan assets

In millions of EUR 2008 2007
Fair value of plan assets as at 1 January 2,535 2,397
Changes in consolidation and reclassification 2,737 –
Effect of movements in exchange rates (450) (3)
Contributions paid into the plan 177 91
Benefits paid (199) (98)
Expected return on plan assets 241 129
Actuarial gains/(losses) (810) 19
Fair value of plan assets as at 31 December 4,231 2,535
 
Actual return on plan assets (569) 148

Expense recognised in the income statement

In millions of EUR Note 2008 2007
Current service costs 75 71
Interest on obligation 258 133
Expected return on plan assets (241) (129)
Actuarial gains and losses recognised (1) 2
Past service costs 5 1
Effect of any curtailment or settlement (18) 4
10 78 82

Principal actuarial assumptions as at the balance sheet date

The defined benefit plans in the Netherlands and the UK cover 88.6 per cent of the present value of the plan assets, 83.5 per cent of the present value of the defined benefit obligations and 54.3 per cent of the deficit in the plans as per 31 December 2008. For the Netherlands and the UK the following actuarial assumptions apply as per 31 December 2008:

The Netherlands UK
  2008 2007 2008 2007
Discount rate as at 31 December 5.6 5.5 6.7 –
Expected return on plan assets as at 1 January 5.9 5.5 5.7 –
Future salary increases 3 3 4 –
Future pension increases 1.5 2 2.8 –
Medical cost trend rate – – 7 –

For the other defined benefit plans the following actuarial assumptions apply as per 31 December 2008:

  Other Western,
Central and
Eastern Europe		 The Americas Africa and the
Middle East		 Asia Pacific
2008 2007 2008 2007 2008 2007 2008 2007
Discount rate as at 31 December 4.5-6.2 4.5-5.7 5.5-6.5 5.5-6.5 12 4.6-15 2.5-12 3.5-9.5
Expected return on plan assets
as at 1 January		 4.5-7 1.5-6.6 6.5 6.5 4.6 4.6 2.5-8 3.5-8
Future salary increases 2.9-12 2.5-9 0.5-5.5 0.5-5.5 11 3-14 3-10 3-6.5
Future pension increases 1.5-5 1.5-2.5 3.5 3.5 – 2 8 6.5
Medical cost trend rate 1.5 1.5 5 5 – – – –

Assumptions regarding future mortality rates are based on published statistics and mortality tables. The overall expected long-term rate of return on assets is 6.0 per cent (2007: 5.3 per cent), which is based on the asset mix and the expected rate of return on each major asset class, as managed by the pension funds.

Assumed healthcare cost trend rates have nil effect on the amounts recognised in the income statement. A one percentage point change in assumed healthcare cost trend rates would not have any effect on the income statement neither on the balance sheet as per 31 December 2008.

The Group expects the 2009 contributions to be paid for the defined benefit plans to be in line with 2008 and 2007, excluding the impact of acquisitions.

Historical information

In millions of EUR 2008 2007 2006 2005
Present value of the defined benefit obligation 4,963 2,858 2,984 3,061
Fair value of plan assets (4,231) (2,535) (2,397) (2,268)
Deficit in the plan 732 323 587 793
 
Experience adjustments arising on plan liabilities, losses/(gains) 71 (4) (159) –
Experience adjustments arising on plan assets, (losses)/gains (817) 16 9 –