UK: Diageo agrees funding framework for UK pension fund deficit

Diageo plc announced on March 27 it has agreed framework funding principles with the Trustees of the UK company pension scheme which provide for the company to fund the UK pension scheme deficit over a 7-year period beginning in the 2007 financial year.

For the purposes of the agreement the value of the deficit, which will be calculated using the trustees’ actuarial valuation of the scheme, will be ascertained through the planned 3-yearly valuation as of 31 March 2006. Following the completion of that valuation later this year, the initial annual cash contribution, which Diageo will make under this funding framework, is estimated to be around £100 million. At 31 December 2005 the deficit in Diageo’s UK company pension schemes including unfunded liabilities and calculated under IAS 19, was £653 million.

In addition to the deficit funding, Diageo will continue to make a cash contribution in respect of annual benefits awarded to active members, which in the year ending 30 June 2006 is expected to be £50 million. The agreed framework provides for a reassessment of the funding position on a triennial basis and allows for appropriate adjustments in company contributions in line with the deficit at that time. These arrangements are not expected to lead to a change in Diageo’s previously announced share buy back programme.

Paul Walsh, Chief Executive of Diageo, commented: 'This funding framework, together with changes we have made to the pension scheme, demonstrate Diageo’s commitment to provide a high standard of employment benefits. It follows the sale of our shares in General Mills and our full exit from Burger King and provides further clarity in relation to Diageo’s balance sheet.'

Diageo is the world's leading premium drinks business. With its global vision, and local marketing focus, Diageo brings to consumers an outstanding collection of beverage alcohol brands across the spirits, wine and beer categories including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Cuervo, Captain Morgan and Tanqueray, and Beaulieu Vineyard and Sterling Vineyards wines. Diageo trades in some 180 countries around the world and is listed on both the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). For more information about Diageo, its people, brands and performance, visit us at www.diageo.com

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