82 | FINANCIAL STATEMENTS | Notes to the Consolidated Financial Statements


24. Provisions continued


NIC on share schemes The provision for national insurance contributions (NIC) on share schemes represents the potential employer’s NIC liabilities in respect of a number of share-based payment schemes operated by the Group. The provision is subject to uncertainties in respect of the extent to which performance conditions are met, movements in the Company’s share price, the extent to which awards are forfeited and, where eligible, the timing of when employees choose to exercise options. The current element of the provision for NIC on share schemes relates to awards which are expected to vest within one year. At 31 December 2011, £2.4m (31 December 2010: £2.6m) of financial investments were held by the Group to partially fund the NIC liability on the Deferred Investment Plan and Deferred Investment Option Plan. This is disclosed in note 18(a)(i)(2).


Long-term sickness The Group has long-term sickness insurance arrangements which cover the cost of absence from work of all current employees. However, the cost of employees who went on long-term absence prior to these arrangements being established are self-insured by the Group. The provision represents the expected present value of income protection payments due to these individuals.


This provision has been quantified on the assumption that all employees currently on long-term sick leave do not return to the employment of the Group. The discount rate and salary growth assumptions used in each year are identical to those used for the purposes of determining UK defined benefit pension obligations.


Guaranteed product The provision for the guaranteed product represents the actuarially assessed cost of meeting potential obligations under certain investment products which have a guaranteed payout in the event of death of the investor. This provision is subject to uncertainties in respect of movements in market levels and the mortality rates of investors. The underlying investment plan was closed to new investors during 2004.


Long-term service award This provision represents the obligation in respect of long-term service benefits to which some employees are entitled, including incremental holiday entitlement and long-term service awards.


F&C Partners litigation On 14 July 2011 a judgment was handed down by the High Court in respect of litigation between the Group and the two individual founder members of F&C Partners LLP (Partners), the Group’s fund of hedge funds business which is now in run-off. As disclosed in the Group’s last two Annual Reports and Financial Statements, the Group had sought a declaration as to the validity of the exercise of put options by the individual founder members to sell their non-controlling interest in Partners to the Group for a sum of approximately £7.8m. The individual founder members had sought an order that the Group buy out their interest, either at the put option price or at a price determined by the Court under section 996 of the Companies Act 2006 on the grounds that the affairs of Partners had been conducted in a manner which was unfairly prejudicial to the individual founder members’ interests.


The Court held that the put options were validly exercised by the individual founder members and that their interests were unfairly prejudiced with the result that the Group was required to buy out the relevant interests which it did, on 7 October 2011, for just over £7.8m.


On 28 October 2011, the Court handed down a judgment in respect of the costs and interest of the litigation and ordered that F&C pay to the founder members sums by way of interest and 70% of the founder members’ legal costs. The amount of costs (and consequently interest) payable under the terms of the judgment is to be determined by the Court in due course, but the Board has been advised that it is likely to be in the region of £5m.


F&C has, however, applied to the Court of Appeal for permission to appeal the terms of the costs awarded and the Board has been advised by leading counsel that it is likely to be successful on that appeal. In that case, it is estimated that the total costs and interest payable to the founder members would be in the region of £3m.


In order to protect its position pending the appeal, F&C has made payments totalling some £2.7m to the founder members in respect of costs and interest, and has also recognised a withholding tax cost of £0.3m attributable to the interest paid.


As a result of the judgments outlined above, the payments already made and the tax cost recognised, the Directors have re-assessed their estimate of the provision held in respect of this matter, resulting in a total provision of £2.0m as at 31 December 2011 in respect of further amounts of interest and costs which could be payable.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80  |  Page 81  |  Page 82  |  Page 83  |  Page 84  |  Page 85  |  Page 86  |  Page 87  |  Page 88  |  Page 89  |  Page 90  |  Page 91  |  Page 92  |  Page 93  |  Page 94  |  Page 95  |  Page 96  |  Page 97  |  Page 98  |  Page 99  |  Page 100  |  Page 101  |  Page 102  |  Page 103  |  Page 104  |  Page 105  |  Page 106  |  Page 107  |  Page 108  |  Page 109  |  Page 110  |  Page 111  |  Page 112  |  Page 113  |  Page 114  |  Page 115  |  Page 116  |  Page 117  |  Page 118  |  Page 119  |  Page 120  |  Page 121  |  Page 122  |  Page 123  |  Page 124  |  Page 125  |  Page 126  |  Page 127  |  Page 128  |  Page 129  |  Page 130  |  Page 131  |  Page 132  |  Page 133  |  Page 134  |  Page 135  |  Page 136  |  Page 137  |  Page 138  |  Page 139  |  Page 140  |  Page 141  |  Page 142  |  Page 143  |  Page 144  |  Page 145  |  Page 146  |  Page 147