Note 19 - Post-employment benefits

The amounts recognized in the consolidated financial statements related to post-employment benefits are as
follows:
2013

2012
(Restated)

Retirement benefits

3,684

1,900

Post-employment medical benefits

1,432

711

5,116

2,611

Retirement benefits

948

561

Post-employment medical benefits

184

119

1,132

680

Retirement benefits

(84)

717

Post-employment medical benefits

(35)

193

(119)

910

Statement of financial position obligations for:

Charge to profit or loss included in operating profit for:

Remeasurements for:

(a) Defined benefit retirement plans

DV,
19Rp136,
19Rp138139

The Group operates defined benefit retirement plans in the UK and the US under broadly similar regulatory
frameworks. All of the plans are final salary retirement plans, which provide benefits to members in the
form of a guaranteed level of retirement payable for life. The level of benefits provided depends on members
length of service and their salary in the final years leading up to retirement. In the UK plans, pensions in
payment are generally updated in line with the retail price index, whereas in the US plans, pensions
generally do not receive inflationary increases once in payment. With the exception of this inflationary risk
in the UK, the plans face broadly similar risks, as described below. The majority of benefit payments are
from trustee-administered funds; however, there are also a number of unfunded plans where the company
meets the benefit payment obligation as it falls due. Plan assets held in trusts are governed by local
regulations and practice in each country, as is the nature of the relationship between the Group and the
trustees (or equivalent) and their composition. Responsibility for governance of the plans - including
investment decisions and contribution schedules lies jointly with the company and the board of trustees.
The board of trustees must be composed of representatives of the company and plan participants in
accordance with the plans regulations.

19Rp140(a) The amounts recognized in the statement of financial position are determined as follows:

Present value of funded obligations

2013

2012
(Restated)

6,155

2,943

Fair value of plan assets

(5,211)

(2,797)

944

146

Present value of unfunded obligations

2,426

1,549

Total deficit of defined benefit retirement plans

3,370

1,695

314

205

3,684

1,900

Deficit of funded plans

Impact of minimum funding requirement/ asset ceiling

Liability in the statement of financial position

19Rp140(a), The movement in the retirement benefit obligations for the years ended December 31 are as follows:
141(a-h)

Present
value of Fair value of
obligation plan assets
At January 1, 2012 (Restated)

Impact of
minimum
funding
requiremen
t/ asset
ceiling
Total

Total

3,479

(2,264)

1,215

120

1,335

Current service cost

498

498

498

Interest expense (income)

214

(156)

58

63

712

(156)

556

561

(85)

(85)

(85)

Loss from change in

demographic assumptions

20

20

20

Loss from change in financial

assumptions

61

61

61

641

641

641

80

80

722

(85)

637

80

717

(324)

22

(302)

(302)

(411)

(411)

(411)

30

(30)

(127)

127

4,492

(2,797)

1,695

205

1,900

Remeasurements:
Return on plan assets, excluding
amounts included in interest
expense (income)

Experience losses
Change in asset ceiling,
excluding amounts included in
interest expense

Exchange differences
Contributions:
Employers
Plan participants
Payments from plans:
Benefit payments
At December 31, 2012 (Restated)

Impact of
minimum
funding
requirement
/ asset
Total
ceiling

Total

Present value
of obligation

Fair value of
plan assets

4,492

(2,797)

1,695

205

1,900

Current service cost

751

751

751

Interest expense (income)

431

(308)

123

132

65

65

65

1,247

(308)

939

948

(187)

(187)

(187)

Loss from change in

demographic assumptions

32

32

32

Loss from change in financial

assumptions

121

121

121

(150)

(150)

(150)

100

100

(187)

(184)

100

(84)

(61)

(25)

(86)

(86)

(908)

(908)

(908)

55

(55)

Benefit payments

(566)

566

Settlements

(280)

280

Acquired in a business combination

3,691

(1,777)

1,914

1,914

At December 31, 2013

8,581

(5,211)

3,370

314

3,684

At January 1, 2013 (Restated)

Past service cost and gains and

losses on settlements

Remeasurements:
Return on plan assets, excluding
amounts included in interest
expense (income)

Experience losses
Change in asset ceiling,
excluding amounts included in
interest expense

Exchange differences
Contributions:
Employers
Plan participants
Payments from plans:

19Rp141

One of our US plans has a surplus that is not recognized on the basis that future economic
benefits are not available to the entity in the form of a reduction in future contributions or a
cash refund.

19Rp139(c) In connection with the closure of a factory, a curtailment loss was incurred and a settlement

arrangement agreed with the plan trustees, effective December 30, 2012, which settled all
retirement benefit plan obligations relating to the employees of that factory.

DV

The defined benefit obligation and plan assets are composed by country as follows:
2013
UK
Present value of obligations
Fair value of plan assets

2012 (Restated)

US

Total

UK

US

Total

4,366

4,215

8,581

3,442

1,050

4,492

(3,109)

(2,102)

(5,211)

(2,403)

(394)

(2,797)

1,257

2,113

3,370

1,039

656

1,695

314

314

205

205

1,257

2,427

3,684

1,039

861

1,900

Impact of minimum funding

requirement/asset ceiling
Total

As at the last valuation date, the present value of the defined benefit obligation was
comprised of approximately P3,120 relating to active employees, P3,900 relating to deferred
members and P1,560 relating to members in retirement.
19Rp144

The significant actuarial assumptions were as follows:

2013
UK

2012
US

UK

US

Discount rate

5.1%

5.2%

5.5%

5.6%

Inflation

3.0%

4.0%

3.5%

4.2%

Salary growth rate

4.0%

4.5%

4.5%

4.0%

Pension growth rate

3.0%

2.8%

3.1%

2.7%

Assumptions regarding future mortality are set based on actuarial advice in accordance with
published statistics and experience in each territory. These assumptions translate into an
average life expectancy in years for a pensioner retiring at age 65:
2013
UK

2012
US

UK

US

Retiring at the end of the reporting period:

Male

22

20

22

20

Female

25

24

25

24

Male

24

23

24

23

Female

27

26

27

26

Retiring after 20 years of the reporting period:

19Rp145(a)

The sensitivity of the defined benefit obligation to changes in the weighted principal
assumptions is:
Impact on defined benefit obligation
Change in
assumption

Increase in
assumption

Decrease in
assumption

Discount rate

0.50%

Decrease by 8.2%

Increase by 9.0%

Salary growth rate

0.50%

Increase by 1.8%

Decrease by 1.7%

Pension growth rate

0.25%

Increase by 4.7%

Decrease by 4.4%

Life expectancy

Increase by 1 year in
assumption

Decrease by 1 year in
assumption

Increase by 2.8%

Decrease by 2.9%

19Rp145(b) The above sensitivity analyses are based on a change in an assumption while holding all

other assumptions constant. In practice, this is unlikely to occur, and changes in some of the
assumptions may be correlated. When calculating the sensitivity of the defined benefit
obligation to significant actuarial assumptions the same method (present value of the defined
benefit obligation calculated with the projected unit credit method at the end of the reporting
period) has been applied as when calculating the retirement liability recognized within the
statement of financial position.

19Rp145(c) The methods and types of assumptions used in preparing the sensitivity analysis did not

change compared to the previous period.

(b) Post-employment medical benefits

DV,
19Rp144

The Group operates a number of post-employment medical benefit schemes, principally in the
US. The majority of these plans are unfunded. The method of accounting, significant
assumptions and the frequency of valuations are similar to those used for defined benefit
pension schemes set out above with the addition of actuarial assumptions relating to the longterm increase in healthcare costs of 8.0% a year (2012 - 7.6%) and claim rates of 6% (2012 5.2%).

19Rp140(a) The amounts recognized in the balance sheet are determined as follows:

2013

2012
(Restated)

727

350

(605)

(294)

122

56

Present value of unfunded obligations

1,310

655

Liability in the balance sheet

1,432

711

Present value of funded obligations

Fair value of plan assets
Deficit of the funded plans

19Rp140(a), The movement in the defined benefit liability over the year is as follows:
141(a-h)
Present value
of obligation

Fair value of
plan assets

Total

At January 1, 2012 (Restated)

708

(207)

501

Current service cost

107

107

25

(13)

12

132

(13)

119

Return on plan assets, excluding amounts

included in interest expense (income

(11)

(11)

Loss from change in demographic assumptions

Loss from change in financial assumptions

194

194

204

(11)

193

(31)

(29)

(73)

(73)

(8)

1,005

(294)

711

Present value
of obligation

Fair value of
plan assets

Total

1,005

(294)

711

153

153

49

(18)

31

202

(18)

184

Return on plan assets, excluding

amounts included in interest
expense (income

(33)

(33)

Loss from change in demographic

assumptions

10

10

(16)

(16)

(2)

(33)

(35)

37

(5)

32

(185)

(185)

Interest expense (income)

Remeasurements:

Experience losses

Exchange differences
Contributions/premiums paid:
Employers
Payment from plans:
Benefit payments
At December 31, 2012 (Restated)

At January 1, 2013
Current service cost
Interest expense (income)

Remeasurements:

Loss from change in financial

assumptions
Experience gains

Exchange differences
Contributions/premiums paid:
Employers

Payment from plans:

Benefit payments
Acquired in a business combination
At December 31, 2013

(7)

802

(77)

725

2,037

(605)

1,432

(c) Post-employment benefits (retirement and medical)

19Rp142

Plan assets are comprised as follows:

SEC Memo
12-2012 (3)

2013
Quoted

2012

Unquoted

Total

Quoted

Unquoted

Total

Equity instruments
Information
technology

502

502

994

994

Energy

557

557

Manufacturing

746

746

194

194

19

19

28

28

1,805

19

1,824

1,188

28

1,216

916

916

321

321

900

900

99

99

68

277

345

41

110

151

1,884

277

2,161

461

110

571

In US

800

800

697

697

In UK

247

247

246

246

1,047

1,047

18%

943

943

31%

496

469

9%

190

190

6%

Cash and cash

equivalents

177

177

3%

94

94

3%

Investment funds

111

111

2%

77

77

2%

3,977

1,839

5,816 100%

1,820

1,271

3,091

100%

Other
Total

31%

39%

Debt instruments
Government
Corporate bonds
Investment grade
Non-investment
grade
Total

37%

18%

Property

Total
Qualifying insurance
policies

Total

19Rp143
Retirement and medical plan assets include the Companys ordinary shares with a fair value
SEC Memo of P136 (2012 - P126) and US real estate occupied by the Group with a fair value of P612
12-2012 (3),

(6)

(2012

- P609). With respect to the investment in the Companys ordinary shares:

There are no limitations or restrictions provided in the plan.
Director A exercises the voting right over the shares.
The gains or losses of the fund arising from such investment amount to P__ (2012 P__).

SEC Memo The plan is being administered by a trustee-bank who is authorized to invest the fund as it deems proper. The
12-2012 (1), Companys transactions with the retirement fund for the years are limited to contributions (Note 33). The fair
(2), (4)

value of the plan assets approximates their carrying value as at December 31, 2013 and 2012.

19Rp139(b) Through its defined benefit retirement plans and post-employment medical plans, the Group

is exposed to a number of risks, the most significant of 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 UK and US 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.
As the plans mature, the Group intends to reduce the level of investment risk by
investing more in assets that better match the liabilities. The first stage of this process
was completed in 2012 with the sale of a number of equity holdings and purchase of a
mixture of government and corporate bonds. The government bonds represent
investments in UK and US government securities only. The corporate bonds are global
securities with an emphasis on the UK and US.
However, the Group believes that due to the long-term nature of the plan liabilities
and the strength of the supporting Group, a level of continuing equity investment is an
appropriate element of the Groups long term strategy to manage the plans efficiently.
See below for more details on the Groups asset-liability matching strategy.

Changes in bond yields - 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.

Inflation risk - Some of the Group retirement obligations are linked to inflation, and
higher inflation will lead to higher liabilities (although, in most cases, caps on the level
of inflationary increases are in place to protect the plan against extreme inflation). The
majority of the plans assets are either unaffected by (fixed interest bonds) or loosely
correlated with (equities) inflation, meaning that an increase in inflation will also
increase the deficit.
In the US plans, the pensions in payment are not linked to inflation, so this is a less
material risk.

19Rp146

Life expectancy - The majority of the plans obligations are to provide benefits for the
life of the member, so increases in life expectancy will result in an increase in the
plans liabilities. This is particularly significant in the UK plan, where inflationary
increases result in higher sensitivity to changes in life expectancy.

In case of the funded plans, the Group ensures that the investment positions are managed
within an asset-liability matching (ALM) framework that has been developed to achieve longterm investments that are in line with the obligations under the pension schemes. Within this
framework, the Groups ALM objective is to match assets to the retirement obligations by
investing in long-term fixed interest securities with maturites that match the benefit
payments as they fall due and in the appropriate currency. The company actively monitors
how the duration and the expected yield of the investments are matching the expected cash
outflows arising from the retirement obligations. The Group has not changed the processes
used to manage its risks from previous periods. The Group does not use derivatives to
manage its risk. Investments are well diversified, such that the failure of any single
investment would not have a material impact on the overall level of assets. A large portion of
assets in 2013 consists of equities and bonds, although the group also invests in property,
bonds, cash and investment (hedge) funds. The group believes that equities offer the best
returns over the long term with an acceptable level of risk. The majority of equities are in a
globally diversified portfolio of international blue chip entities, with a target of 60% of equities
held in the UK and Europe, 30% in the US and the remainder in emerging markets.

19Rp147(a) The Group has agreed that it will aim to eliminate the retirement plan deficit over the next

nine years. Funding levels are monitored on an annual basis and the current agreed
contribution rate is 14% of pensionable salaries in the UK and 12% in the US. The next
triennial valuation is due to be completed as at 31 December 2014. The Group considers that
the contribution rates set at the last valuation date are sufficient to eliminate the deficit over
the agreed period and that regular contributions, which are based on service costs, will not
increase significantly.
19Rp147(b) Expected contributions to post-employment benefit plans for the year ending December 31,

2014 are P1,150.

19Rp147(c) The weighted average duration of the defined benefit obligation is 25.2 years.
19R147(c)

Expected maturity analysis of undiscounted retirement and post-employment medical

benefits:

At December 31, 2013

Less than a
year

Between
1-2 years

Between 2-5
years
Over 5 years

Total

Retirement benefits

628

927

2,004

21,947

25,506

Post-employment medical benefits

127

174

714

4,975

5,990

Total

755

1,101

2,718

26,922

31,496

Commentary Disclosures on transactions with retirement funds

SEC Memo 12- The Philippine SEC has mandated the following disclosures in the annual financial statements of a reporting entity that
2012
has transactions either directly or indirectly through its subsidiaries, with its employees' retirement benefit fund (the

"fund"):
(1) Information whether the reporting entity's fund is in the form of a trust being maintained by a trustee bank or trust
company, or in the form of a corporation which has been created for the purpose of managing the fund;
(2) The carrying amount and fair value of the fund;
(3) Description of the assets and investments of the fund. The disclosure shall include a brief description of each
category such as the market for equity or debt securities, information on the land or building;
(4) Volume and outstanding balances of transactions of the fund with the reporting entity or its subsidiaries including
the terms and conditions thereof. These transactions may include among others, loans, investment, lease,
guarantee or surety;
(5) If the transaction is material, a discussion of the nature of relationship of the persons who approved it with the
reporting entity, its subsidiaries, or any of its directors and officers.
(6) If the fund has investments in the securities (debt or equity) of the related entity, a disclosure of the following
information:
(i) The amount of investment in each type of securities of reporting entity and/or its subsidiaries, including
limitations or restrictions provided in the plan (if any);
(ii) In case of equity investment, nature of the relationship of the person/s who exercises voting right over the
shares, with the reporting entity, its subsidiaries, or any of its directors or officers;
(iii) The amount of gains or losses of the fund arising from its investment in the securities of the reporting entity
and/or its subsidiaries. The gains and losses shall be presented per type of security.