HSBC 2004 Annual Report Download - page 259

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out at dates between 31 December 1999 and 31 December 2004 by independent qualified actuaries and have
been updated to 31 December 2004 as necessary. These latest actuarial reviews (in accordance with FRS 17)
estimated the present value of the accumulated post-retirement benefit obligation at US$1,013 million
(2003: US$850 million, 2002: US$491 million), of which US$726 million (2003: US$656 million, 2002:
US$366 million) has been provided and US$79 million (2003: US$68 million; 2002: US$13 million) is held
in assets in the funded scheme in Mexico. Of the year-end obligation, US$36 million arose on the
acquisition of Bank of Bermuda. 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 2004 were price inflation of 2.7 per cent
per annum (2003: 2.5 per cent, 2002: 2.5 per cent), health-care claims cost escalation of 7.7 per cent per
annum (2003: 7.5 per cent, 2002: 7.5 per cent) and a discount rate of 5.3 per cent per annum (2003: 5.3 per
cent, 2002: 5.6 per cent). For the US schemes, the main financial assumptions used at 31 December 2004
were price inflation of 2.5 per cent per annum (2003: 2.5 per cent, 2002: 2.5 per cent), health-care claims
cost escalation of 9 per cent per annum (2003: 12.9 per cent, 2002: 7 per cent) and a discount rate of 6 per
cent (2003: 6.25 per cent, 2002: 6.75 per cent).
Under FRS 17, the deferred tax asset related to the unprovided liability of US$208 million (2003:
US$126 million, 2002: US$112 million) would be US$75 million (2003: US$46 million, 2002:
US$38 million). The movement in the FRS 17 liability is as follows:
Year ended 31 December
2004 2003
US$m US$m
Deficit at 1 January ........................................................................................................ (782) (478)
Current service cost ........................................................................................................ (18) (11)
Contributions ................................................................................................................. 52 81
Interest cost on liabilities ................................................................................................ (61) (49)
Expected return on scheme assets .................................................................................. 61
Experience gains and losses arising on liabilities ........................................................... 332
Change in assumptions underlying the present value of scheme liabilities ..................... (58) (67)
Actual return less expected return on scheme assets ...................................................... (4) (3)
Acquisition of subsidiary undertaking ........................................................................... (36) (251)
Exchange and other movements ..................................................................................... (36) (37)
Deficit at 31 December ................................................................................................... (934) (782)
Amounts provided in the balance sheet for unfunded liabilities...................................... 726 656
Unprovided liability at 31 December ............................................................................. (208) (126)
Related deferred tax asset ............................................................................................... 75 46
Net unprovided liability at 31 December ....................................................................... (133) (80)
(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:
2004 2003 2002
US$000 US$000 US$000
Fees ........................................................................................................ 2,713 1,525 1,338
Salaries and other emoluments .............................................................. 9,721 8,712 7,605
Bonuses ................................................................................................. 17,288 9,856 5,636
29,722 20,093 14,579
Gains on the exercise of share options ................................................... 14,078 17,602 514
Vesting of Restricted Share Plan awards ............................................... 9,598 1,728 –
In addition, there were payments under retirement benefit agreements with former Directors of US$906,000
(2003: US$557,000). The provision as at 31 December 2004 in respect of unfunded pension obligations to
former Directors amounted to US$17,016,000 (2003: US$7,273,000).
During the year, aggregate contributions to pension schemes in respect of Directors were US$4,423,122 (2003:
US$3,337,433), including US$2,198,072 (2003: US$2,042,469) arising from a Director’ s waiver of bonus.