Cemex 1999 Annual Report Download - page 62

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The principal transactions carried out with affiliated companies are:
PARENT COMPANY
1999 1998 1997
Rental income $ 341,725 134,908 152,935
License fees 1,075,491 559,573 420,379
Financial expenses (1,623,174) (2,110,337) (1,049,137)
Financial income 535,842 26,244 475,402
Dividends received 12,120,746 — 770,666
13.- PENSION PLANS AND SENIORITY PREMIUM
The net periodic pension cost of the pension plans and seniority premium and the actuarial present value of the
benefit obligation and the funded status of the plans described in note 3K, were determined based on computations
prepared by independent actuaries as of December 31, 1999 and 1998, and are summarized as follows:
1999 1998
Change in benefit obligation:
Benefit obligation (“PBO”) at beginning of year $ 1,320,987 577,854
Service cost 170,701 154,521
Interest cost 113,642 126,843
Amendments 1,038 573,921
Actuarial results 79,881 255
Acquisitions 3,910 12,719
Foreign exchange rate changes and inflation adjustments 47,401 (46,820)
Benefits paid (81,829) (78,306)
Benefit obligation (“PBO”) at end of year 1,655,731 1,320,987
Change in plan asset:
Fair value of plan assets at beginning of year 184,063 64,713
Actuarial return on plan assets 23,541 5,600
Actuarial differences 161,670 5,471
Acquisitions 800 10,372
Foreign exchange rate changes and inflation adjustments 25,014 —
Employer contribution 329,700 97,907
Benefits paid from the funds — —
Fair value of plan assets at end of year 724,788 184,063
Amounts recognized in the statements of financial position consist of:
Funded status (930,943) (1,136,924)
Unrecognized prior service cost 613,680 559,153
Unrecognized net actuarial results (80,661) (41,010)
Accrued benefit liability (397,924) (618,781)
Additional minimum liability (130,487) (339,883)
Net liability recognized in the consolidated balance sheet $ (528,411) (958,664)
The Actuarial Present Obligation (“APO”) as of December 31, 1999 and 1998 amounts to $1,368,408 and $1,138,758,
respectively. Of these APO amounts, the vested portion was $683,446 in 1999 and $627,423 in 1998. As of
December 31, 1997, the net cost of the period derived from the pension plans and seniority premium was $137,849.
As of December 31, 1999 and 1998, the plan assets are mainly composed by fixed return instruments and stock of
companies traded in formal stock exchanges.
The most significant assumptions used in the determination of the net periodic costs were the following:
1999 1998
Range of discount rates used to reflect the obligations present value 4.5% - 6.0% 4.5% - 6.0%
Rate of return on plan assets 6% 7%
Commencing in January 1998, most of the subsidiaries of the Company in Mexico were incorporated to the scheme
of pension plans. Therefore, the initial actuarial valuation of the labor obligation for all Mexican subsidiaries under the
plan benefits was made as of January 1, 1998.
As mentioned in note 3K, the Company applies real rates (nominal rates discounted for inflation) in the actuarial
assumptions used to determine the pension plans and seniority premium liabilities. With the use of real rates, there
is a decrease in the difference between the APO and the PBO. As a result, of the use of real rates and the initial
valuation in Mexico as of January 1, 1998, and according to generally accepted accounting principles, the Company
recognizes a minimum liability against an intangible asset, which as of December 31, 1999 and 1998 were $130,487
and $339,883, respectively.