103
Notes to the Consolidated Financial Statements (continued)
Defined benefit plan assets
-
-
-
-
-
-
-
-
Asset volatility
Interest rate risk
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
2017
2016
In millions of
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Equity instruments:
Europe
985
985
1,092
1,092
Northern America
556
556
403
403
Japan
109
109
113
113
Asia other
122
122
47
47
Other
330
180
510
478
246
724
2,102
180
2,282
2,133
246
2,379
Debt instruments:
Corporate bonds - investment grade
2,258
1,524
3,782
2,673
1,537
4,210
Corporate bonds - non-investment grade
240
476
716
297
102
399
2,498
2,000
4,498
2,970
1,639
4,609
Derivatives
11
(1,333)
(1,322)
10
(1,389)
(1,379)
Properties and real estate
270
437
707
230
362
592
Cash and cash equivalents
626
3
629
180
116
296
Investment funds
675
244
919
711
350
1,061
Other plan assets
119
76
195
3
254
257
1,701
(573)
1,128
1,134
(307)
827
Balance as at 31 December
6,301
1,607
7,908
6,237
1,578
7,815
The HEINEKEN pension funds monitorthe 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:
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If the return on the plan assets is less than the
return on the liabilities implied by this assumption, 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 38% equity securities, 40%
bonds, 7% property and real estate and 15% other investments. The objective is to hedge currency risk on the US dollar, Japanese yen and British
pound for 50% of the equity exposure 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 45% of plan assets in liability driven
investments, 18% in absolute return, 16% in equities (global and emerging markets), 5.5% in alternatives and 15.5% in private markets.
The objective is to hedge 100% of currency risk on developed non-GBP equity market exposures in the strategic investment mix.
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' fixed
rate instruments holdings.
In the Netherlands, interest rate risk is partly managed through fixed income investments. These investments match the liabilities for 22.9%
(2016: 22.9%). 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 32% of the interest rate sensitivity of the total liabilities (2016: 28%).
