RBS 2003 Annual Report Download - page 192

190
Notes on the accounts continued
Notes on the accounts
53 Significant differences between UK and US generally accepted accounting principles (continued)
Earnings per share
Basic and diluted earnings per share (“EPS”) under US GAAP differs from UK GAAP only to the extent that the income
calculated under US GAAP differs from that under UK GAAP.
2003 2002 2001
No. of Per share No. of Per share No. of Per share
Income* shares amount Income* shares amount Income* shares amount
£m million pence £m million pence £m million pence
Basic EPS 2,564 2,931 87.5 3,108 2,881 107.9 2,062 2,762 74.7
Dilutive effect of share options outstanding — 22 (0.7) — 43 (1.6) — 55 (1.5)
Diluted EPS 2,564 2,953 86.8 3,108 2,924 106.3 2,062 2,817 73.2
* US GAAP net income available to ordinary shareholders, see page 189.
Pensions
On 1 April 2002, the Group’s main pension schemes, The
Royal Bank of Scotland Staff Pension Scheme and the National
Westminster Bank Pension Fund, were merged to form The
Royal Bank of Scotland Group Pension Fund (“the plan”).
The provisions of SFAS 87 ‘Employers’ Accounting for
Pensions’ have been applied to the plan, which covers most of
the Group’s UK employees; the impact of US GAAP on the
other Group schemes is considered to be immaterial.
A trust fund has been established under the plan, to which
payments are made, determined on an actuarial basis,
designed to build up reserves during the working life of full-
time employees to pay such employees or dependants a
pension after retirement. Such pensions are based on final
pensionable salaries and are related to the length of service
prior to retirement. Pensions are limited to a maximum of
two-thirds of final salary for 40 years service or more. Staff do
not make contributions for basic pensions but may make
voluntary contributions on a regular basis to purchase
additional service qualification where less than 40 years
service will have been completed by normal retirement age.
The assets of the plan are held under separate trusts and, in
the long-term, the funding policy is to maintain assets sufficient
to cover the benefits in respect of service to date, with due
allowance for future earnings increases. The plan assets
consist mainly of fixed-income securities and listed securities.
The investment policy followed for the plan seeks to deploy the
plan assets primarily in UK and overseas equity shares and UK
government securities.
Pension scheme disclosures required by SFAS 132R are set
out below.
Convertible preference shares totalling £200 million (2002 –
£200 million, 2001 – £800 million), 750 million (2002 and
2001 – 750 million) and $1,900 million (2002 and 2001 –
$1,900 million) have not been included in the computation of
diluted earnings per share as their effect is anti-dilutive.
Interest payments on the $1,200 million (2002 and 2001 –
$1,200 million) perpetual regulatory securities may be settled
by the issue of ordinary shares at the option of the company
and have not been included in the computation of diluted
earnings per share as their effect is also anti-dilutive.
Outstanding options to purchase shares are excluded from the
computation of diluted EPS where the exercise prices of the
options are greater than the average market price of the
ordinary shares during the relevant period. At 31 December
2003, there were 5.2 million such options outstanding (2002 –
3.8 million; 2001 – 0.6 million).
Obligations and funded status
2003 2002 2001
Change in benefit obligation: £m £m £m
Projected benefit obligation at beginning of year 12,526 12,198 10,573
Service cost 340 303 236
Interest cost 706 715 647
Amendments — —14
Net actuarial loss/(gain) 902 (217) 1,257
Benefits paid (511) (473) (529)
Projected benefit obligation at year end 13,963 12,526 12,198
2003 2002 2001
Change in plan assets: £m £m £m
Fair value of plan assets at beginning of year 10,682 12,567 13,846
Actual return on plan assets 1,559 (1,521) (833)
Employer contribution 92 109 83
Benefits and expenses paid (511) (473) (529)
Market value of plan assets at year end 11,822 10,682 12,567