Notes to the Consolidated Financial Statements (continued)
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Japan
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O O Qs
Introduction Report of the Executive Board Report of the Supervisory Board
Defined benefit plan assets
2019
2018
In millions of
Quoted
Unquoted
Total
Quoted
Unquoted
Total
Equity instruments:
Europe
579
579
815
815
Northern America
1,051
1,051
522
522
196
196
129
129
Asia other
122
122
60
60
Other
339
69
408
315
193
508
2,287
69
2,356
1,841
193
2,034
Debt instruments:
Bonds - investment grade
3,759
512
4,271
2,150
1,353
3,503
Bonds - non-investment
grade
251
240
491
223
507
730
4,010
752
4,762
2,373
1,860
4,233
Derivatives
5
(602)
(597)
33
(537)
(504)
Properties and real estate
15
794
809
256
501
757
Cash and cash equivalents
107
17
124
196
(12)
184
Investment funds
66
848
914
523
239
762
Other plan assets
13
70
83
104
112
216
206
1,127
1,333
1,112
303
1,415
Balance as at 31 December
6,503
1,948
8,451
5,326
2,356
7,682
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 are detailed below.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019
Other Information
Risks associated with defined benefit plans
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to AA corporate 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% of plan assets in equity securities, 30% in bonds, 12.5%
in other investments, 10% in mortgage and 9.5% in real estate. The last ALM study was performed in 2018.
In the UK, an actuarial valuation is performed at least on a triennial basis. The valuation is the basis for the
funding plan, strategic investment policies and the (long-term) strategic investment mix. Following the 2018
valuation a strategic asset mix comprising 30% of plan assets in liability driven investments, 20% in equities,
15% in corporate bonds, 15% in higher yielding credit, 15% in private markets and 5% in long lease property.
As part of the Funding Agreement, the strategic asset mix will evolve between now and 2030 to provide
a greater certainty of return, lower volatility and higher cash generation.
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' fixed rate instruments holdings.
In the Netherlands, interest rate risk is partly managed through fixed income investments. These investments
match the liabilities for 23.4% (2018: 24.4%). 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 49% of the interest rate sensitivity of the total liabilities (2018: 34%).
