HSBC 2003 Annual Report Download - page 256

HSBC HOLDINGS PLC
Notes on the Financial Statements (continued)
254
scheme in Mexico which had assets of US$68 million at 31 December 2003 (2002: US$13 million)
comprising US$nil in equities (2002: US$2 million), US$52 million in bonds (2002: US$6 million) and
US$16 million in cash (2002: US$5 million). The latest full actuarial valuations of the liability were carried
out at dates between 31 December 1999 and 31 December 2003 by independent qualified actuaries and
have been updated to 31 December 2003 as necessary. These latest actuarial reviews (in accordance with
FRS 17) estimated the present value of the accumulated post-retirement benefit obligation at US$850
million (2002: US$491 million; 2001: US$404 million), of which US$656 million (2002: US$366 million;
2001: US$269 million) has been provided and US$68 million (2002: US$13 million) is held in assets in the
funded scheme in Mexico. Of the year-end obligation, US$251 million arose on the acquisition of
Household International, Inc. The actuarial assumptions used to estimate this obligation vary according to
the claims experience and economic conditions of the countries in which the schemes are situated. For the
UK schemes, the main financial assumptions used at 31 December 2003 were price inflation of 2.5 per cent
per annum (2002: 2.5 per cent), health-care claims cost escalation of 7.5 per cent per annum (2002: 7.5 per
cent) and a discount rate of 5.3 per cent per annum (2002: 5.6 per cent).
Under FRS 17, the deferred tax asset related to the unprovided liability of US$126 million
(2002: US$112 million) would be US$46 million (2002: US$38 million). The movement in the FRS 17
liability is as follows:
Year ended 31 December
2003 2002
US$m US$m
Deficit at 1 January ............................................................................................... (478
)
(404
)
Current service cost .............................................................................................. (11
)
(5
)
Contributions ........................................................................................................ 81 15
Interest cost on liabilities ...................................................................................... (49
)
(28
)
Expected return on scheme assets ......................................................................... 1–
Experience gains and losses arising on liabilities .................................................. 32 (21
)
Change in assumptions underlying the present value of scheme liabilities ............ (67
)
40
Actual return less expected return on scheme assets............................................. (3
)
–
Acquisition of subsidiary undertaking .................................................................. (251
)
(67
)
Exchange and other movements ........................................................................... (37
)
(8
)
Deficit at 31 December.......................................................................................... (782
)
(478
)
Amounts provided in the balance sheet for unfunded liabilities............................. 656 366
Unprovided liability at 31 December .................................................................... (126
)
(112
)
Related deferred tax asset ..................................................................................... 46 38
Net unprovided liability at 31 December .............................................................. (80
)
(74
)
(c) Directors’ emoluments
The aggregate emoluments of the Directors of HSBC Holdings, computed in accordance with Part I of Schedule
6 of the Act were:
2003 2002 2001
US$000 US$000 US$000
Fees ......................................................................................................... 1,525 1,338 1,412
Salaries and other emoluments ................................................................ 8,712 7,605 7,445
Discretionary bonuses ............................................................................. 9,856 5,636 3,861
20,093 14,579 12,718
Gains on the exercise of share options ..................................................... 2,066 514 1,990
Vesting of Restricted Share Plan awards ................................................. 1,728 –756
In addition, there were payments under retirement benefit agreements with former Directors of US$557,000
(2002: US$501,000; 2001: US$472,000). The provision as at 31 December 2003 in respect of unfunded pension
obligations to former Directors amounted to US$7,273,000 (2002: US$6,942,000; 2001: US$6,281,000).