Setting new standards - Friends Life

PARENT COMPANY ACCOUNTS
ABBREVIATIONS AND DEFINITIONS
Notes to the consolidated accounts continued
37. Share capital and share premium
(a) Allotted, called up and fully paid share capital of the Company
Authorised
2006 2005
£m £m
2,500m (2005: 2,500m) ordinary shares of 10 pence 250 250
Allotted, called up and fully paid
2,139m (2005: 2,139m) ordinary shares of 10 pence 214 214
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company. In respect of the Company’s shares that are held by the Group (Treasury shares), all rights are suspended until
those shares are reissued. Treasury shares are available for use to settle liabilities in respect of share options for employee share schemes,
at which point they are redesignated as ordinary shares.
(b) Changes to share capital and share premium during the year
Treasury Ordinary Share Share
shares shares Total capital premium
number (i) number number £m £m
At 1 January 2005 45,617,972 1,943,277,696 1,988,895,668 199 1,799
Allotment on acquisition of Lombard (ii) - 150,249,291 150,249,291 15 234
Employee share schemes (5,509,717) 5,509,717 - - 5
At 31 December 2005 40,108,255 2,099,036,704 2,139,144,959 214 2,038
Employee share schemes (17,478,172) 17,478,172 - - 13
At 31 December 2006 22,630,083 2,116,514,876 2,139,144,959 214 2,051
(i) Following demutualisation in 2001, share and cash entitlements that were not claimed were placed into two trusts. On 9 July 2004 the
trusts were wound up and 61.4m shares and £25m cash were transferred to the Company for nil consideration in exchange for it
accepting liability for any future claims in respect of demutualisation entitlements (which must be made by 9 July 2013) and a
commitment to endow the Friends Provident Foundation, a registered charity, with cash or shares to a value of £20m.
The Company has set up a provision of £10m, based on a best estimate, in respect of possible future claims from policyholders (which
will only be paid out in cash). To satisfy the commitment to the charitable trust, 14.9m shares with a fair value of £20m (£1.35 a share)
were transferred in 2004 to the Friends Provident Foundation for nil consideration. The combined effect of these transactions resulted in
an increase in the share premium of £15m.
The remaining 46.5m shares were designated as Treasury shares. These shares do not carry any voting rights or entitlement to dividends
and are available for use to settle liabilities in respect of share options for employee share schemes, at which point they are redesignated
as ordinary shares.
(ii) The allotment of 150.2m shares represents consideration in respect of the acquisition of Lombard. This was allotted in three stages, the
first being 113.5m shares on 11 January 2005 at £1.65 resulting in a share premium of £175.3m. The second was 0.4m shares on 6 April
2005 at £1.73 resulting in a share premium of £0.6m and the third was 36.4m shares on 15 April 2005 at £1.71 resulting in a share
premium of £58.4m. Further details are set out in note 41.
(iii) Since the end of the year 230,808 Treasury shares have been redesignated as ordinary shares to satisfy liabilities in respect of various
employee share schemes. Since the end of the year 584 shares have been issued to satisfy liabilities in respect of convertible bonds.
As at 19 March 2007, the Company had 2,116,746,268 ordinary shares in issue and 22,399,275 Treasury shares.
(c) Options
Outstanding options under the Group’s option schemes at 31 December 2006 are set out in note 11.
Friends Provident Annual Report & Accounts 2006 157