NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 26 EMPLOYEE BENEFITS (CONT’D) The expenses are recognised in the following line items in profit or loss: Group Note 2022 2021 $’000 $’000 Cost of sales 124 (593) Administrative expenses 448 812 Other operating expenses 82 (236) Defined benefit obligation expenses 33 654 (17) The weighted average duration of the defined benefit obligations as at 31 December 2022 was 11 years (2021: 17 years). The Group expects approximately $8 million (£5 million) (2021: $5 million (£3 million)) contributions to be paid to the defined benefit plans in 2023 (2021: 2022). The Group operates various funded pension schemes which are established in accordance with local conditions and practices within the countries concerned. The most significant funds are described below: United Kingdom (UK) The Group makes contributions to a pension scheme for its UK employees, which was set up in 1993. The plan operates a funded defined benefit arrangement together with a defined contribution plan, both with different categories of membership. The defined benefit section of the plan was closed to new entrants in 2001 and at the same time, rights to a guaranteed minimum pension (GMP) under the defined contribution scheme also ceased. The plan entitles a retired employee to receive an annual pension payment. The contributions required are determined by a qualified actuary on the basis of triennial valuations using the projected unit credit method. The last full actuarial valuation of this scheme was carried out by a qualified independent actuary as at 5 April 2020 and this has been updated on an approximate basis to 31 December 2022. The contributions of the Group during the year were about 36.30% (2021: 11%) of pensionable salary. As the defined benefit section is closed to new entrants, the current service cost, as a percentage of pensionable payroll is likely to increase as the membership ages, although it will be applied to a decreasing pensionable payroll. The assumptions which have the most significant effect on the results of the valuation are those relating to the discount rate and the rates of increase in salaries and pensions. Taiwan The Group makes contributions to a defined benefit pension plan for its employees in Taiwan. The contributions required are determined by an external qualified actuary using the projected unit credit method. The most recent valuation was carried out on 31 December 2022. The contributions of the Group were no less than 6% (2021: 6%) of the employees’ earnings. The assumptions which have the most significant effect on the results of the valuations are those relating to the discount rate and the rate of increase in salaries. The defined benefit plans are administered by pension funds that are legally separated from the Group. The boards of the pension funds are required by law to act in the best interests of the plan participants. These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market investment risk. The above plans are substantially funded by the Group’s subsidiary. The funding requirements are based on pension funds’ actuarial measurement framework set out in the funding policies of the plans. 26 EMPLOYEE BENEFITS (CONT’D) Group 2022 2021 $’000 $’000 Net liability for defined benefit obligations Present value of unfunded obligations 3,732 6,267 Present value of funded obligations 88,682 152,062 Fair value of plan assets (85,138) (133,795) Liability for defined benefit obligations 7,276 24,534 Changes in the present value of defined benefit obligations Defined benefit obligations at 1 January 158,329 166,058 Remeasurements: – Experience adjustment 6,275 (101) – Actuarial (gain)/loss from changes in demographic assumptions (4,818) 1,333 – Actuarial gain from changes in financial assumptions (51,482) (5,289) Benefits paid (5,023) (322) Interest cost 2,355 2,222 Current service costs 329 852 Past service costs (53) (1,328) Translation differences on consolidation (13,498) (5,096) Defined benefit obligations at 31 December 92,414 158,329 Changes in the fair value of plan assets Fair value of plan assets at 1 January 133,795 135,919 Return on plan assets, excluding interest income (34,025) 655 Contributions by employer 4,738 761 Benefits paid (8,892) (6,396) Interest income 1,977 1,763 Translation differences on consolidation (12,455) 1,093 Fair value of plan assets at 31 December 85,138 133,795 The fair values of plan assets in each category are as follows: Group 2022 2021 $’000 $’000 Equity 8,394 16,200 Bonds 10,154 25,409 Cash 66,590 92,186 Fair value of plan assets 85,138 133,795 Expenses recognised in profit or loss Current service costs 329 852 Past service costs (53) (1,328) Net interest costs 378 459 Defined benefit obligation expenses 654 (17) CITY DEVELOPMENTS LIMITED ANNUAL REPORT 2022 FINANCIALS 188 189
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