2008 Registration Document - Rexel

The expense recognized in the income statement breaksdown as follows:(in millions of euros)As of December 31,2008 2007Service costs (1) 14.9 12.2Interest costs (2) 45.2 21.8Expected return on plan assets (2) (43.8) (21.3)Curtailment and settlement (3) – (1.3)Amortization of unrecognizedactuarial gains / losses (1) 2.5 (2.7)Other (1) (2.6) 2.6Expense recognized 16.2 11.3(1) Recognized as personnel costs (see note 6).(2) Recognized as net financial expenses (see note 8).(3) Recognized as other income and expenses (see note 7).The main actuarial assumptions at the date of the most recent actuarial valuation are as follows:(in %)Canada United States United Kingdom Euro Zone2008 2007 2008 2007 2008 2007 2008 2007Discount rate (1) 6.50 5.25 6.00 6.25 6.00 5.80 5.75 5.50Expected return on plan assets (2) 6.75 7.75 7.75 8.00 7.15 6.70 5.75 5.25Future salary increases 3.00 3.00 n/a n/a 2.70 2.70 3.00 3.00Future pension increases 2.00 2.00 n/a n/a 2.25 2.25 2.00 2.00(1) Discount rates have been set by reference to market yields on high quality corporate bonds with a similar duration than the underlying obligation.Discount rates were determined based on a database developed by Rexel’s actuary which includes several hundreds of AA+ corporate bondswith durations from one year to approximately 30 years. For each plan, expected benefit payments are discounted using the rate that matchesthe plan duration. Then the database computes a single rate that, when applied to cash-flows of all plans, retrieves the same present value of theaggregated cash-flows of each individual plan.(2) Expected long term return on assets has been calculated as weighted average of expected return on bonds and equities. The expected return onbonds has been assumed equal to the applicable discount rate as set out above. Expected return on equities was determined on the basis of thediscount rate plus a 3% risk premium.Sensitivity analysisAs of December 31, 2008, a 25 basis points decrease indiscount rates would result in a €35 million increase inthe defined benefit obligation. A 25 basis points decreaseapplied to the expected return on assets would result in€2 million increase in the expense.As of December 31, 2008, a 1% increase in medical costswould translate to a €5 million increase in the present valueof health care plans.As of December 31, 2008, the average allocation of Groupfunds invested for retirement plans by type of investmentis as follows: 38% in stocks, 48% in bonds, 1% in moneymarkets and 13% in other investment categories.REXEL 2008 | PAGE 193