o www.ahold.com/reports2009
Notes to the consolidated financial statements
23 Pensions and other post-employment benefits - continued
Financials
The following table shows the effect on the defined benefit obligation and on net periodic benefit cost if the discount rate had been
0.5 percent higher or lower as of year-end 2009. Positive amounts represent increases and negative amounts represent decreases
in defined benefit obligations and net periodic benefit cost:
million The Netherlands United States Total
0.5%-point increase
Defined benefit obligations at year-end 2009
(158)
(72)
(230)
Net periodic benefit cost 2010
(9)
(8)
(17)
0.5%-point decrease
Defined benefit obligations at year-end 2009
181
80
261
Net periodic benefit cost 2010
10
8
18
The expected return on plan assets is determined as a weighted-average rate of return based on the current and projected investment
portfolio mix of each plan, taking into account the corresponding long-term yields for the separate asset categories, which depend on
components such as the risk-free rate of return in real terms, expected inflation and expected risk and liquidity premiums. In addition,
actual long-term historical return information is taken into account. The actual return on plan assets in 2009 was 10.2 percent for the
Dutch plans (2008: negative 17.5 percent) and 16.1 percent for the U.S. plans (2008: negative 18.8 percent).
The assumed medical cost trend rates used in measuring the defined benefit obligations related to medical care plans were 8.6 percent
in 2009 and 9.2 percent in 2008, declining to an ultimate trend rate of 5.0 percent as of 2015. Because of the limited size of Ahold's
medical care plans, the impact of a 1.0 percentage-point increase or decrease in assumed medical cost trend rates on the defined benefit
obligation and net periodic benefit cost would be negligible.
Plan assets
The pension plan asset allocation differs per plan. On a weighted average basis, the allocation was as follows:
The Netherlands United States
Percent 2009 2008 2009 2008
Equity securities
44
31
52
48
Debt securities
43
53
40
39
Real estate
8
9
1
3
Other
5
7
7
10
Total
100
100
100
100
In the Netherlands, the investment strategies are based on the composition of the plan liabilities. With the aid of Asset Liability Management
modeling, analyses are made of possible future economic scenarios and investment portfolios. Based on these analyses, investment
strategies are determined for each plan to produce optimal investment returns at acceptable funding ratio risk levels. Less favorable years
can be part of these scenarios. Currently the strategic targets for asset allocation of the Dutch pension plan are 40-50 percent for equity
securities (including equity derivatives and forward currency contracts), 35-45 percent for debt securities, 5-15 percent for real estate
investments and 0-20 percent for other investments, cash included. To partially hedge against interest rate risk exposure on the pension
liabilities, the Dutch pension plan uses interest rate swap contracts. The Dutch early retirement plan has a relatively short remaining term;
therefore the plan assets are invested in fixed income securities and cash instruments only.
In the United States, the plan assets are generally managed by outside investment managers and rebalanced periodically. The committees
for the various U.S. plans establish investment policies and strategies and regularly monitor the performance of the assets, including
the selection of investment managers, setting long-term strategic targets and monitoring asset allocations. Target allocation ranges are
guidelines, not limitations, subject to variation from time to time, or as circumstances warrant. Occasionally, the committees may approve
allocations above or below a target range. Pension plan assets are invested in a trust intended to comply with the Employee Retirement
Income Security Act of 1974, as amended, ("ERISA") and applicable fiduciary standards. The long-term investment objective for the
plan's assets is to maintain an acceptable funding ratio between assets and plan liabilities without undue exposure to risk. Currently, the
strategic targets are between 50-70 percent for equity securities, 25-45 percent for debt securities and 0-10 percent for other investments.
In 2009, the fair value of the plan assets (Dutch and U.S. plans in the aggregate) included €5 million of Ahold shares (2008: €1 million).
Ahold Annual Report 2009 91
