Annual Report 2007 - Severstal

OAO Severstal and subsidiaries
Notes to the consolidated financial statements
for the year ended December 31, 2007
(Amounts expressed in thousands of US dollars, except as otherwise stated)
The movements in the defined benefit obligation are as follows:
Year ended December 31,
2007 2006 2005
Opening balance 549,009 387,657 208,325
Business combinations/(de-combinations) (33,612) 39,328 149,110
Reclassified to assets held for sale (9,260) – –
Benefits paid (55,238) (33,547) (36,241)
Interest cost 27,589 24,962 19,144
Service cost 18,640 18,767 12,890
Actuarial (gain)/loss (37,497) 68,573 56,139
Foreign exchange loss/(gain) 36,082 43,269 (21,710)
Closing balance 495,713 549,009 387,657
The movements in the plan assets are as follows:
Year ended December 31,
2007 2006 2005
Opening balance 106,055 49,171 50,302
Business combinations/(de-combinations) (10,122) 28,566 –
Contributions made during the year 11,534 13,424 16,641
Benefits paid (14,852) (12,356) (18,787)
Return on assets 10,921 16,382 9,084
Actuarial gain/(loss) (441) 915 (6,241)
Foreign exchange gain/(loss) 5,220 9,953 (1,828)
Closing balance 108,315 106,055 49,171
Defined benefit obligation analysis is as follows:
Year ended December 31,
2007 2006 2005
Wholly unfunded 258,926 284,485 238,098
Partly funded 236,787 264,524 149,559
Total 495,713 549,009 387,657
Plan assets analysis is as follows:
December 31,
2007 2006 2005
Equity instruments 44,448 44,450 20,625
Government bonds 28,548 28,850 20,009
Corporate bonds 14,964 14,178 –
Deposits 3,037 1,980 3,132
Cash 1,170 1,417 511
Other investments 16,148 15,180 4,894
Total 108,315 106,055 49,171
The Group’s best estimate of contributions expected to be paid to the plan during the year 2008 is US$ 8.5 million. Expected rate of return on plan assets
was 17.0% for Russia and 4.95% for United Kingdom during 2007. Actual rate of return on plan assets was 16.1% for Russia and 4.95% for United
Kingdom during 2007.
The retirement benefit expenses recognized in the income statement are contained in the caption: ‘General and administrative expenses’, except for
the interest cost, which is recognized in the caption ‘Interest expense’.
Severstal Annual Report 2007 95