Notes to the consolidated financial statements continued
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Report of the
Report of the
Financial
Other
Contents
Overview
Executive Board
Supervisory Board
statements
information
28. Employee benefits
Defined benefit plan assets
2014
2013
In millions of EUR
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Equity instruments:
Europe
764
764
711
711
Northern America
712
712
582
582
Japan
204
204
197
197
Asia other
234
234
177
177
Other
242
1
243
252
252
2,156
1
2,157
1,919
1,919
Debt instruments:
Corporate bonds - investment grade
2,857
2,150
Corporate bonds - non-investment grade
186
39
3,043
35
3,078
2,189
20
2,209
Derivatives
132
(4)
128
423
2
425
Properties and real estate
278
212
490
233
214
447
Cash and cash equivalents
178
16
194
107
12
119
Investment funds
916
309
1,225
979
228
1,207
Other plan assets
210
65
275
184
43
227
1,714
598
2,312
1,926
499
2,425
Balance as at 31 December
6,913
634
7,547
6,034
519
6,553
The HEINEKEN pension funds monitor the mix of debt and equity securities in their investment portfolios based on market expectations.
Material investments within the portfolio are managed on an individual basis. Through its defined benefit pension plans, HEINEKEN is
exposed to a number of risks, the most significant which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If plan assets underperform this yield,
this will create a deficit. Both the Netherlands and the UK plans hold a significant proportion of equities, which are expected to outperform
corporate bonds in the long term, while providing volatility and risk in the short term.
In the Netherlands, an Asset-Liability Matching (ALM) study is performed at least on a triennial basis. The ALM study is the basis for the
strategic investment policies and the (long-term) strategic investment mix. This resulted in a strategic asset mix comprising 35 per cent equity
securities, 40 per cent bonds, 10 per cent property and real estate and 15 percent other investments. The objective is to hedge currency risk
on the US dollar, Japanese yen and British pound for 50 per cent in the strategic investment mix.
In the UK, an Asset-Liability Matching study is performed at least on a triennial basis. The ALM study is the basis for the strategic investment
policies and the (long-term) strategic investment mix. This resulted in a strategic asset mix comprising 29 per cent equity securities (including
synthetic exposure from derivatives), 35 per cent bonds (including synthetic exposure from derivatives), 5 percent property and real estate
and 31 per cent other investments. The objective is to hedge currency risk on developed non-GBP equity market exposures for 70 per cent,
with US dollar currency risk on other investments hedged 100 per cent in the strategic investment mix.
Interest rate risk
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans'
bond holdings.
In the Netherlands, interest rate risk is partly managed through fixed income investments. These investments match the liabilities for 20.1 per
cent (2013: 23.4 percent). In the UK, interest rate risk is partly managed through the use of a mixture of fixed income investments and interest
rate swap instruments. These investments and instruments match the liabilities for 24.7 percent (2013: 29.2 per cent).
108
Heineken N.V. Annual Report 2014
