ANNUAL REPORT AND FINANCIAL STATEMENTS 2012 | 21


Report of the Directors Results, business review and dividend


The Group’s results for the year ended 31 December 2012 are shown in the Consolidated Income Statement on page 42. A business review of the year ended 31 December 2012 and future developments are covered on pages 2 to 19. This review, together with the Directors’ Report on Corporate Governance on pages 26 to 32, forms part of the Report of the Directors.


The Group profit for the year, after tax, amounted to £3.0 million.


The Directors recommend a final ordinary dividend of 2.0 pence per share, amounting to £10.9 million, resulting in a total of 3.0 pence and £16.3 million for the year.


The final ordinary dividend, if approved, will be paid on 24 May 2013 to ordinary shareholders whose names are on the register on 5 April 2013. No liability for the proposed dividends has been recognised as at 31 December 2012, in accordance with IFRS.


Principal activity and status


The Group’s business is asset management. Details of the progress of the business during the year and of future prospects are contained in the Executive Chairman’s Statement and the Business Review on pages 2 to 19.


The Company is registered as a Public Limited Company in terms of the Companies Act 2006 and is currently a constituent of the FTSE 250 Index. The Company is registered in Scotland, registered number SC73508, and is domiciled in the United Kingdom.


Details of the principal entities within the Group are contained in note 38 to the Consolidated Financial Statements. There are also two branch offices in the Group outside the UK, in Germany and Ireland.


Significant agreements


F&C is party to the following significant contracts that take effect, alter or terminate upon a change of control of the Company:


Friends Life Group (FL Group) There are three material Investment Management Agreements (the Agreements) that have been in place with companies within the FL Group since October 2004 and under which assets are managed by F&C. Management of the majority of these assets can only be terminated by the relevant contracting party within the FL Group upon twelve months’ notice expiring no earlier than 11 October 2014 subject to certain exceptions listed within the Agreements. These exceptions include withdrawals of assets as a result of underperformance thresholds being triggered, withdrawals for reasonable business and financial needs (such as discharging liabilities under insurance contracts and meeting internal financing requirements), and withdrawals of assets of up to £150 million per annum in respect of the overall portfolio of assets covered by each of the Agreements. Withdrawals of assets not permitted under the Agreements require the payment of compensation by the FL Group to F&C. Management of the remainder of the assets of the FL Group by F&C (known as the Demutualisation Assets) can be terminated at


any time by the relevant contracting entity within the FL Group either, in the case of the “With Profits” fund assets, upon six months’ notice or, in the case of the other Demutualisation Assets, upon twelve months’ notice.


Achmea Group


There are four material Investment Management Agreements (the Agreements) that have been in place with companies within the Achmea Group since October 2004. These Agreements sit alongside an overarching Umbrella Agreement which sets out the high level terms governing the relationship between the F&C Group and the Achmea Group including the operation of F&C’s rights to exclusivity over the management of assets of the Achmea Group. These rights to exclusivity are incorporated into the Agreements and operate subject to certain exceptions listed therein such as the withdrawal of assets for reasonable business needs or for underperformance by F&C in a particular asset class. Withdrawals of assets not permitted under the Agreements require the payment of compensation by the Achmea Group to F&C. The management by F&C of those assets covered by the Agreements is currently scheduled to terminate in October 2013, subject to any exceptions that have been or may be agreed between the Achmea Group and F&C in relation to specific asset classes. However, in the event of a change of control whereby a third party acquires a controlling interest in F&C, immediate termination would be possible.


Millennium BCP Group (BCP)


The consequences of termination of the various asset management agreements with BCP-related funds are regulated by an Umbrella Agreement with BCP (the UA), which terminates when the last of these asset management agreements is itself terminated. The UA provides that compensation would be payable if management of the assets governed by these agreements were to be terminated before 29 June 2014. However, if a person acquires an interest in the shares of F&C which is larger than the aggregate interest of Friends Life and Achmea, then the period by reference to which compensation is payable by BCP to F&C on termination of such an agreement is reduced. On 17 December 2010, Sherborne acquired an interest in the shares of F&C which is greater than the aggregate interest of Friends Life and Achmea thereby reducing the period by reference to which compensation would have been payable had an agreement been terminated at that time from forty-two months to twelve months. Further communications from BCP have put F&C on notice that payments by BCP in respect of F&C’s continued provision of services to BCP constitute payment in lieu of compensation and that the agreements could now be terminated by BCP at any time without compensation or notice. As at the latest practicable date prior to the publication of this Annual Report and Financial Statements, none of the relevant agreements has been terminated and no notice terminating such agreements has been received.


Millenniumbcp Ageas Group (Ageas)


There are three asset management contracts in place with insurance companies that form part of Ageas for which the notice period for


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