FINANCIAL STATEMENTS - KPN

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Breakdown of non-current liabilities Amounts in millions of EUR 2012 2011 KPN PF 124 222 KPN early retirement 17 55 Corporate Market NL SVG (main plan) 2 38 Getronics UK 66 32 Getronics US 57 37 Other 46 42 Total 312 426 Breakdown of non-current assets Amounts in millions of EUR 2012 2011 KPN OPF 109 101 Other 28 33 Total 137 134 The total pension costs recognized for the years 2012 and 2011 were as follows: Amounts in millions of EUR 2012 2011 Service costs -99 -93 Interest costs -312 -341 Expected return on assets 293 326 Other costs -5 -6 Recognized actuarial losses/gains -90 -12 Past service costs -1 9 Curtailments/settlements – – Total defined benefit plans -214 -117 Defined contribution plans -14 -13 Total pension costs -228 -130 The key actuarial assumptions of KPN PF and the weighted average of the key actuarial assumptions of the other plans used in the calculation of the defined benefit obligations and pension cost for the subsequent year are as follows: December 31, 2012 December 31, 2011 As a % KPN PF Other KPN PF Other Discount rate 2.8 3.0 3.8 3.8 Expected salary increases 2.0 1.6 2.0 1.6 Expected return on assets 2.8 3.0 3.9 4.4 Expected benefit increases 1.3 0.8 1.5 1.0 The discount rate is based on yield curves of AA zero-coupon corporate bonds, with maturities equal to the duration of the benefit obligations and in the applicable currency. For the obligations in EUR, the yield curve is based on around 250 corporate bonds in different industries. For the year 2012, the expected return on assets was determined per asset category (i.e. equities, fixed-interest securities, real estate, hedge funds and commodities). The expected return on fixed-interest was derived from the actual interest rate on balance sheet date for similar interest bearing securities. The return on the other asset categories was derived from historic returns. As of January 1, 2013, under IAS 19R the expected return on plan assets is equal to the discount rate. The mortality assumptions in the Netherlands are based on the most recent GBM/GBV (2012−2062) prospective mortality table. For the other countries the most recent generally accepted mortality tables are applied. KPN | Annual Report 2012 125
Consolidated Financial Statements Notes to the Consolidated Statement of Financial Position continued Sensitivity analysis In 2013, service costs will amount to approximately EUR 119 million for all defined benefit plans. The table below shows the approximate impact on service costs in 2013 if the key actuarial assumptions change by one percentage point: Increase Decrease Amounts in millions of EUR by 1% by 1% Discount rate -32 44 Expected salary increases 4 -5 Expected return on assets not applicable not applicable Expected benefit increases 37 -29 The table below shows the approximate impact on the defined benefit obligation as at December 31, 2012, if the key actuarial assumptions change by one percentage point: Increase Decrease Amounts in millions of EUR by 1% by 1% Discount rate -1,596 1,984 Expected salary increases 145 -148 Expected return on assets not applicable not applicable Expected benefit increases 1,835 -1,487 If more than one of the assumptions changes, the impact of each change would not necessarily be the same as if only one assumption changed in isolation. Plan assets: investment policies/strategies The pension funds actively manage their investment portfolio. In most cases, the investment strategy is determined based on an asset-liability study in consultation with investment advisers and within the boundaries given by regulatory bodies for pension funds (in the Netherlands the regulatory body is ‘De Nederlandsche Bank’). The pension funds mainly invest in the global equity and debt markets. As the pension fund invests in market indices like MSCI, a minor part of these investments is related to KPN equities. KPN PF KPN PF is the largest plan (assets of EUR 5,891 million and benefit obligations of EUR 6,981 million at December 31, 2012). The Board of KPN PF determines the investment policies on the basis of the long-term goals of the fund. The investment policies apply in principle for the long-term but are evaluated annually. The weighted average investment portfolio of KPN PF is as follows: Actual as per December 2012 Actual as per December 2011 Strategy as from 2013 Equities 39% 40% 35% Fixed income 37% 39% 38% Real estate 10% 8% 11% Other 14% 13% 16% Total 100% 100% 100% The risk of a decrease in value of equity investments is partially hedged with put options on equities in developed markets. Currency risks on equities are in principle hedged. The interest rate risk is hedged for 50% with interest sensitive fixed income instruments and interest rate swaps. Also options on interest swaps are used to mitigate the interest rate risk. To mitigate the effects of rising inflation on the value of the fund’s investments, part of the fixed income porfolio is invested in inflation linked bonds. The investments of KPN’s Dutch funds are reviewed daily by investment managers and on a monthly basis by the board of the pension funds. Other plans KPN’s weighted average actual investment portfolio in other plans and countries at December 31, 2012, and 2011 is as follows: As per December 2012 As per December 2011 Equities 41% 38% Fixed income 43% 43% Real estate 5% 6% Other 11% 13% Total 100% 100% 126 KPN | Annual Report 2012
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FINANCIAL STATEMENTS - KPN

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