Philips 2005 Annual Report Download - page 158

Philips Annual Report 2005158
Movements in net balances
2003 2004 2005
Increase in minimum liability, included in
other comprehensive income
(before income taxes) 13 118 181
The weighted average assumptions used to calculate the projected
benetobligationsasofDecember31wereasfollows:
2004 2005
Netherlands other Netherlands other
Discount rate 4.5% 5.4% 4.2% 5.1%
Rate of compensation
increase *3.5% *3.4%
The weighted-average assumptions used to calculate the net periodic
pension cost for the years ended December 31 were as follows:
2004 2005
Netherlands other Netherlands other
Discount rate 5.3% 5.8% 4.5% 5.4%
Expected returns on
plans assets 6.0% 6.5% 5.7% 6.5%
Rate of compensation
increase *3.6% *3.5%
* The rate of compensation increase for the Netherlands consists of a general
compensation increase and an individual salary increase based on merit, seniority
and promotion. The average individual salary increase for all active participants for
the remaining working lifetime is 0.75% annually. The rate of general compensation
increasefortheNetherlandschangedin2004becauseofthechangefromanal-
pay to an average-pay pension system which incorporates a limitation of the
indexation. Until 2008 the rate of compensation increase to calculate the
projectedbenetobligationis2%.From2008onwardsarateofcompensation
increase of 1% is included.
The components of net periodic pension costs were as follows:
2005
Netherlands other
Service cost 211 132
Interestcostontheprojectedbenetobligation 557 392
Expected return on plan assets (739) (360)
Net amortization of unrecognized net transition
assets/liabilities −1
Net actuarial (gain) loss recognized (28) 44
Amortization of prior-service cost (57) 27
Settlement loss −12
Curtailment loss − −
Other (4) (1)
Net periodic cost (income) (60) 247
2004
Netherlands other
Service cost 175 128
Interestcostontheprojectedbenetobligation 598 386
Expected return on plan assets (726) (370)
Net amortization of unrecognized net transition
assets/liabilities −5
Net actuarial (gain) loss recognized (1) 19
Amortization of prior-service cost (43) 26
Settlement loss 34 3
Curtailment loss − −
Other (12) 7
Net periodic cost 25 204
2003
Netherlands other
Service cost 229 116
Interestcostontheprojectedbenetobligation 683 384
Expected return on plan assets (700) (377)
Net amortization of unrecognized net transition
assets/liabilities (55) −
Net actuarial loss recognized 49 11
Amortization of prior-service cost −27
Settlement loss −24
Curtailment loss −3
Other (8) 8
Net periodic cost 198 196
TheCompanyalsosponsorsdened-contributionandsimilartypesof
plansforasignicantnumberofsalariedemployees.Thetotalcostof
these plans amounted to EUR 68 million in 2005 (2004: EUR 54 million,
2003: EUR 46 million). The contributions to multi-employer plans
amounted to EUR 3 million (2004: EUR 1 million, 2003: EUR 2 million).
Cashows
TheCompanyexpectsconsiderablecashoutowsinrelationto
employeebenetswhichareestimatedtoamounttoEUR1,086million
in 2006 (2005: EUR 445 million), consisting of EUR 931 million employer
contributionstodened-benetpensionplans,EUR76millionemployer
contributionstodened-contributionpensionplans,andEUR79million
expectedcashoutowsinrelationtounfundedpensionplans.The
employercontributionstodened-benetpensionplansareexpected
to amount to EUR 208 million for the Netherlands and EUR 723 million
for other countries. Included in expected employer contributions to
dened-benetpensionplansisacontributiontotheUnitedKingdom
plan of approximately EUR 584 million (GBP 400 million) in response to
recent regulatory changes.
Groupnancialstatements