Thorn-EMI 1995 Annual Report

27. Contlngent liabilities continued
Save as disclosed, the Directors are not aware ofany legal or arbitration proceedings
pending or threatened against any member of the THORN EMI Group which may have
any liability significantly in excess of provisions in the accounts.
(ii) Guarantees, bills discounted and other contingent liabilities (excluding litigation referred to
in (i) above) total f62.8m (1994: f79.9m) for the Group, ofwhich f41.9m (1994: nil) relate
to certain contracts entered into by former Group companies.
(iii) Pursuant to the provisions ofthe Irish Companies (Amendment) Act 1986, the Company
has guaranteed the liabilities of its Irish subsidiaries, thus exempting those companies from
the requirement to file their annual accounts in Ireland.
28. Pension arrangements
THORN EMI operates a number of pension schemes throughout the world. The main scheme,
which covers employees in the UK, is the THoRN EMI pension Fund. staffengaged outside the
uK are covered by local arrangements, which in the case of the Group schemes are largely of the
defrned contribution type. With the principal exception of the EMI Electrola pension plan,
the assets of rHORN EMI's pension schemes are held in separate trustee administered funds.
The THORN EMI Pension Fund is based in the UK and is of the defined benefit type. The
Fund is open to permanent staffover the age of18 employed by the Company and certain
subsidiaries in the UK. Benefits provided by the Fund are based on frnal pensionable pay.
Pensions payable from the Fund are guaranteed to increase by 5 per cent per annum, or by the
increase in the cost ofliving ifless. Members contribute to the Fund at the rate of4 per cent of
pensionable pay.
The latest actuarial valuation of the THORN EMI Pension Fund was made by a qualifred
actuary at 31 March 1994 using the projected unit method. At that date, the market value of the
assets of the THORN EMI Pension Fund amounted to f1,410m. The actuarial value of the assets
was sufficient to cover 121 per cent of the value of the benefits that had accrued to the members,
after allowing for assumed increases in earnings and for improvements to the benefits of the
Fund implemented with effect from I January 1995. Part of the surplus disclosed by the 1994
valuation was allocated towards the reduction ofemployer contributions below the long-term
rate, the balance being carried forward as a reserve in the Fund.
With effect lrom 1 April 1988 employer expense in respect ofthe Fund has been calculated
in accordance with SSAP 24 - Accountingfor Pension Corls. On the basis of actuarial advice, it is
calculated that employer expense would represent a credit to the profit and loss account on full
application of SSAP 24 principles. However, for reasons of conservatism, such expense has been
taken as nil for the years ended 31 March 1995 and 31 March 1994. The long-term annual growth
rate assumptions used for calculating employer expense under SSAP 24 are shown below:
Crowth relative to investment return
Pay increases
Pension increases
Dividend increases
(2.s\ok
(5.0)o/o
(4.5)o/o
Employer contributions of f11.8m (1994: !10.8m) were charged to the proflt and loss account.
These contributions all related to ovetseas schemes and were determined in accordance with
local practice.