May 09, 2001 investment portfolio of 1.1%. Compared to previous years this lower
result was caused by the poor performance of the stock markets in
2000. The fixed income (8.1%) and real estate investments (17.1%)
compensated for the loss on the equity portfolio (-7.5%).
The funding ratio decreased from 163% in 1999 to 153% by the end of
2000 as a result of the lower investment returns and the increase of
the pension liabilities. In spite of this decrease, the pension fund
is solidly funded and sufficient buffers are available to mitigate
possible future solvency risks.
The Board of Trustees has set the inflation adjustment as of April 1,
2001 at 3.77%. This adjustment applies to all pensions and deferred
pensions and incorporates an additional increase of 0.5% related to a
cost of living adjustment specific for pensioners.
The Board of Trustees has anticipated developments in pension fund
governance and legislation by its decision taken at the end of 2000,
to disentangle its administration unit. The disentanglement will be
concluded by the middle of 2001.
Investment returns 2000
The actual investment returns of the pension fund match its internal
benchmarks as laid down in the strategic investment plan. When
compared to the returns from other Dutch pension funds, as compiled by
the WM Company, the return lags the average (1.1% versus 2.6% WM).
This is the result of a higher strategic weight in equity and the
disappointing performance of equity (-7.5% versus -5.2% WM). The real
estate returns also slightly lagged the WM-figures (17.1% versus 18.9%
WM). Fixed income investments however outperformed the WM-benchmark
(8.1% versus 7.8%).
For the year 2001 a moderate return on equity investments is
anticipated, while the interest rates will probably remain low.
By the end of 2000 the portfolio consisted of 48% equity investments,
40% fixed income and 12% real estate investments.
In spite of 2000's disappointing returns, Philips Pension Fund over
the last 10 years has shown an outperformance when compared to the
WM-benchmark (12.2% versus 11.6% WM). In view of the long-term
characteristics of the pension liabilities the security of the pension
benefits is dependent on the long-term returns.
The main figures for 2000 are in the appendix, below.
Disentanglement of administration unit
The Board of Trustees of Philips Pension Fund (PPF) has recently
decided to disentangle the administration unit, which comprises the
Board of Directors and the staff, from the fund.
As a consequence of this decision the administration unit will be
incorporated into the existing company Schootse Poort B.V. (SP), a
subsidiary of PPF which provides pension benefit administration and
asset management to pensionfunds. PPF will become a client of SP,
which enables SP to provide the administration for the pension plan of
Royal Philips Electronics in the Netherlands. The contract will detail
clear service levels. The shares of SP will be sold by PPF to Royal
Philips Electronics.
The Board of Trustees has the following reasons for this operation:
a) To provide a clearer division between policy making/supervision and
operations, thus providing the Board with better opportunities to
focus on its core responsibilities (policy making/supervision).
b) To improve the quality of administration of the plans and the
supervision thereon.
c) To anticipate future legislation with regard to the core activities
of a pension fund.
The implementation of the disentanglement, planned for the middle of
2001, is currently in progress. The disentanglement does not interfere
with the legal and statutory role and responsibility of the Board of
Trustees. Practically speaking there will be no consequences for the
members of the pension fund.
The disentanglement will provide better safeguards with regard to the
quality of the pension- and asset-management in an environment, which
becomes more and more complicated.
The disentanglement creates a company that manages assets in excess of
Euro 18 billion and that provides pensionplan administration for more
than 160,000 plan members. SP thus becomes one of the major players in
pension and asset management in the Netherlands. SP will also become
the competence centre with regard to pensions and asset management not
only for Philips Pension Fund in the Netherlands, but also for Royal
Philips Electronics in Europe and for third parties.
For further information:
Ben Geerts, Philips Corporate Communications, tel. +31-20-59 77 215
Appendix to press release Philips Pension Fund in the Netherlands
Main figures 2000
(all amounts in millions of Euros)
2000 1999
Plan members
Active members 42,248 43,165
Retired members/pensioners 55,144 54,000
Deferred members 45,766 45,607
Total 143,158 142,772
Funding
Net assets at fair value 16,237 16,855
Net actuarial liabilities 10,601 10,327
Funding ratio 153.2 163.2
Investment portfolio
Real estate 1,993 1,881
Equities 7,882 8,640
Fixed income 6,635 6,410
Cash 253 174
Cash connected with futures exposure (223)
Total investments 16,540 17,105Investment returns
Direct income 520 554
Total, including capital gains 206 3,168
Total investment return in %
Philips Pension Fund 1.1 22.3
WM-universe Dutch pension funds 2.6 16.3
