Unilever 2004 Annual Report Download - page 130

Unilever Annual Report and Accounts 2004 127
18 Pensions and similar obligations (continued)
Post-employment healthcare benefits
Additional assumptions in respect of healthcare benefits are:
2004 2003
Weighted average healthcare trend rates at 31 December
Healthcare cost trend rate assumed for next year 11.20% 9.50%
Rate to which the cost trend rate gradually declines 4.80% 4.90%
Year that the assumed long-term rate is reached 2011 2009
Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point change
in assumed healthcare cost trend rates would have the following effect:
€ million € million
1% point 1% point
increase decrease
Effect on post-employment benefit obligation 65 (55)
Plan assets
The table below shows the changes in plan assets during 2004 and 2003.
€ million € million € million € million
Other post- Other post-
Pension Pension employment employment
plans plans benefit plans benefit plans
2004 2003 2004 2003
Change in plan assets
Fair value of plan assets at 1 January 12 850 12 097 32
Extension of coverage(e) –485 ––
Plan mergers ––––
Actual return on plan assets 1 275 1 744 9–
Acquisitions/(disposals) ––––
Settlements (23) 1––
Employer contributions/surplus refunds 693 390 88 79
Plan member contributions 32 21 ––
Benefits paid from plan assets (1 126) (1 139) (89) (78)
Reclassification of benefits(f) (166) –––
Currency retranslations (94) (749) 3–
Fair value of plan assets at 31 December 13 441 12 850 14 3
(e) With effect from 1 January 2003, a number of additional pension plans were included in the SFAS 87 disclosures. This increased the
coverage from 90% to 100%.
(f) During 2004, some plans changed from defined benefit to defined contribution.
Asset allocation
The asset allocation for the Group’s principal pension plans at 31 December 2003 and 2004, target allocation for 2005, and expected long-term
rates of return by asset category are as follows:
Long-term
Target Percentage Percentage expected
percentage of plan of plan return on
allocation assets at assets at plan assets at
for 31 December 31 December 31 December
2005 2004 2003 2004
Long-term asset category:
Equity securities 61 63 63 7.80%
Debt securities 27 24 25 4.50%
Property 9996.30%
Other 3435.00%
Total 100 100 100 6.80%
Equity securities include Unilever securities amounting to €24 million (0.2% of total plan assets) and €44 million (0.3% of total plan assets) at
31 December 2004 and 2003 respectively.
Investment strategy
The Group’s investment strategy in respect of its funded pension plans is implemented within the framework of the various statutory
requirements of the territories where the plans are based. The Group has developed policy guidelines for the allocation of assets to different
classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to
the company of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not
have a material impact on the overall level of assets. The plans invest the largest proportion of the assets in equities which the Group believes
offer the best returns over the long term commensurate with an acceptable level of risk. The Group also keeps a proportion of assets invested
in bonds, property and cash. Most assets are managed by a number of external fund managers, with a small proportion managed in-house.
Notes to the consolidated accounts
Unilever Group