Philips 2010 Annual Report Download - page 184

13 Group financial statements 13.11 - 13.11
184 Annual Report 2010
2009 2010
Netherlands other total Netherlands other total
Fair value of plan assets at beginning of year 13,003 4,896 17,899 13,329 5,141 18,470
Expected return on plan assets 758 343 1,101 743 344 1,087
Actuarial gains and (losses) on plan assets 125 (8) 117 95 625 720
Employee contributions − 4 4 − 3 3
Employer contributions 166 51 217 165 458 623
Acquisitions − 2 2 − − −
Divestments − − − − (1) (1)
Settlements − (94) (94) − (40) (40)
Benefits paid (723) (352) (1,075) (727) (370) (1,097)
Exchange rate differences − 299 299 − 313 313
Miscellaneous − − − 1 1 2
Fair value of plan assets at end of year 13,329 5,141 18,470 13,606 6,474 20,080
Funded status 2,648 (1,898) 750 1,380 (1,466) (86)
Unrecognized prior-service cost − − − − 6 6
Unrecognized net assets (1,161) (133) (1,294) (1,389) (345) (1,734)
Net balance sheet position 1,487 (2,031) (544) (9) (1,805) (1,814)
The classification of the net balance is as follows:
2009 2010
Netherlands other total Netherlands other total
Prepaid pension costs under other non-current assets 1,497 21 1,518 − 14 14
Accrued pension costs under other liabilities − (1,332) (1,332) − (1,057) (1,057)
Provision for pensions under provisions (10) (720) (730) (9) (762) (771)
1,487 (2,031) (544) (9) (1,805) (1,814)
Cumulative amount of actuarial (gains) and losses recognized in the
Consolidated statements of comprehensive income (pre tax): EUR
3,291 million (2009: EUR 1,767 million).
Plan assets in the Netherlands
The Company’s pension plan asset allocation in the Netherlands at
December 31, was as follows:
2009 2010
actual actual
% %
Matching portfolio: 76 70
- Debt securities 76 70
Return portfolio: 24 30
- Equity securities 19 18
- Real estate 4 5
- Other 1 7
100 100
The objective of the Matching portfolio is to match part of the interest
rate sensitivity of the plan’s real pension liabilities. The Matching
portfolio is mainly invested in euro-denominated government bonds
and investment grade debt securities and derivatives. Leverage or
gearing is not permitted. The size of the Matching portfolio is targeted
to be at least 70% of the fair value of the plan’s real pension obligations
(on the assumption of 2% inflation). The objective of the Return
portfolio is to maximize returns within well-specified risk constraints.
The long-term rate of return on total plan assets is expected to be
5.35% per annum, based on expected long-term returns on debt
securities, equity securities and real estate of 4.50%, 9.00% and 8.00%,
respectively.
Philips Pension Fund in the Netherlands
On November 13, 2007, various officials, on behalf of the Public
Prosecutor’s office in the Netherlands, visited a number of offices of the
Philips Pension Fund and the Company in relation to a widespread
investigation into potential fraud in the real estate sector. The Company
was notified that one former employee and one employee of an affiliate
of the Company had been detained. This affiliate, Philips Real Estate
Investment Management B.V., managed the real estate portfolio of the
Philips Pension Fund between 2002 and 2008. The investigation by the
public prosecutor concerns the potential involvement of (former)
employees of a number of Dutch companies with respect to fraud in the
context of certain real estate transactions. Neither the Philips Pension
Fund nor any Philips entity is a suspect in this investigation. The Philips
Pension Fund and Philips are cooperating with the authorities and have
also conducted their own investigation. Formal notifications of
suspected fraud have been filed with the public prosecutor against the
(former) employees concerned and with our insurers. Furthermore,
actions have been taken to claim damages from the responsible
individuals and legal entities. This has resulted in a number of
settlements. At this time it is not possible to assess the outcome of this
matter nor the potential consequences. At present, it is management’s
assessment that this matter will not cause a decline in plan assets nor an
increase in pension costs in any material respect.