Setting new standards - Friends Life

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CORPORATE GOVERNANCE CORPORATE SOCIAL RESPONSIBILITY REPORT DIRECTORS AND MANAGEMENT Substantial shareholdings At 19 March 2007, the Company has received notifications from the following parties that they have an interest in the Company’s issued share capital: Number of Number of % of total shares with shares with voting direct indirect rights of voting voting the issued rights rights share capital AXA S.A. 16,705,691 322,608,869 16.03% Eureko Group (1) Eureko B.V. 21,987,926 – 1.04% Achmea Pension-en- Levensverzekeringen N.V. 20,300,012 – 0.96% Capital Group International, Inc. 108,622,525 – 5.13% Legal & General Group plc 79,064,794 – 3.73% (1) Eureko B.V. is an indirect controlling shareholder in Achmea Pensioen-en- Levensverzekeringen N.V. Accordingly, the Eureko group of companies has an aggregate interest in 42,287,938 shares, or 2%, of the issued share capital of the Company excluding treasury shares. Directors’ interests Details of directors’ interests in shares under option as at 31 December 2006 are shown in the table on page 64. Of the directors of the Company, only Alain Grisay, an employee of F&C, holds share options in F&C. The interests of directors in the shares of the Company and its subsidiaries as at 31 December 2006 are shown in note 43 on page 162. Directors Details of Board members at the date of this report are set out on pages 44 and 45 together with their biographical details. All directors must be elected at the AGM following their appointment. Sir Mervyn Pedelty, who was appointed to the Board as a nonexecutive director on 1 October 2006 and Jim Smart who was appointed as an executive director on 1 January 2007, will offer themselves for election at the AGM 2007. In addition, one-third of the Board members must retire by rotation every year and, if appropriate, seek re-election. The directors retiring by rotation at the AGM and seeking re-election are Ray King, Sir Adrian Montague and Philip Moore. Christopher Jemmett and Lord MacGregor will retire at the AGM 2007. The Combined Code requires that Lady Judge submits to annual re-election and the Notice of the AGM 2007 sent to shareholders fully deals with this and explains why the Board is recommending her re-election. Other than their employment and service contracts, the indemnity granted to directors by a deed poll dated 30 January 2006 in accordance with section 309A of the Companies Act 1985 and the related party transactions referred to in note 44 on pages 163 to 164, there were no contracts in existence during or at the end of the financial year in which a director of the Company was interested. Employees and equal opportunities As at 31 December 2006, the Group employs a total of 5,078 people, including 813 employees at F&C and 686 within its International Life and Pensions business. The Company aims to provide equal opportunities for all, without discrimination on the grounds of race, religion, marital status, age, gender, sexual orientation or disability in all its dealings with employees. It recruits and promotes those best suited for the job. During 2006, the Company reviewed all of its policies to ensure it complied with new legislation concerning age discrimination that became effective from 1 October 2006. The Company respects the dignity of individuals and their beliefs. The Company does not tolerate any sexual, racial, physical or mental harassment of employees in the work place. The Company operates flexi-time arrangements in the UK to assist employees manage their working hours. The Group has amongst its employees a number who are disabled. It gives full and fair consideration to applications for employment from disabled persons. In the event of employees becoming disabled, every effort is made to maintain them in employment with appropriate retraining being arranged if necessary. It is the Group’s policy that disabled persons should as far as possible be given the same opportunities for training, career development and promotion as other employees. Employee involvement and communications The Group is committed to its policy of encouraging employee involvement at all levels. The methods used to implement this policy include: • management briefings/presentations and discussion through the management structure; • the issue of a full range of employee communications via the Company’s intranet or other internal publication of relevant information, which inform employees of current issues/developments and progress; • an established and regular staff opinion survey that encourages employees anonymously to present their views, thereby generating workplace and business improvements; and • the establishment of effective working relationships with employee representative bodies. The primary aim of all these activities is to ensure employees know the objectives and activities of the Company and the Group so that they can contribute fully to their continued success. Additionally, all employees, other than those of F&C and Lombard, may participate in HM Revenue & Customs approved All-Employee Share Schemes: a ShareSave Scheme (savings-related share option scheme) and a Share Incentive Plan. In 2006, the Company introduced a Deferred Share Plan under which shares may be awarded, subject to certain performance criteria, to all employees other than executive directors, directors of business units and employees of F&C and Lombard. 48 Friends Provident Annual Report & Accounts 2006
DIRECTORS’ REPORT CORPORATE GOVERNANCE REPORTS Creditor payment policy While the Company does not follow any code or standard on payment practice, it is the Company’s policy to adhere to the payment terms agreed with individual suppliers and to pay in accordance with their contractual and other legal obligations. The standard payment terms of the Company and the UK Life and Pension subsidiaries require settlement within 30 days. The Company has no trade creditors. The ratio, expressed in days, between the amount invoiced to the Group by its suppliers during 2006 and the amount owed to its trade creditors at 31 December 2006, was 16 days (2005: 16 days). Use of financial instruments Further information on the Group’s risk management process and the policies for mitigating certain type of risks are set out on page 54. Details of the financial instruments used for these purposes are in note 30 to the consolidated accounts. Environment The Company’s engagement and commitment to environmental issues are referred to in the Corporate Social Responsibility Report from pages 40 to 43. Charitable and political donations The Friends Provident Foundation is an independent vehicle through which the Company may make its charitable donations. The Foundation currently focuses its grant making activities on charities that stimulate new thinking about how money and the financial systems around it should be used to generate social good. The Foundation has made grants and donations to various bodies including charities that the Company traditionally has supported. The Group provides various administrative services to the Foundation free of charge. In 2006, donations to charitable organisations paid by the Group and grants approved, including outstanding commitments from previous years of £1.04 million, by the Foundation amounted to £2,028,740 (2005: £1,954,539). In addition to the giving through the Friends Provident Foundation, Friends Provident has during 2006 introduced new initiatives to promote charitable giving through staff participation. Full details of these initiatives can be found in the Corporate Social Responsibility Report. No political donations were made during 2006 (2005: nil). Directors and officers – Indemnity and insurance The Company maintains insurance cover with respect to directors’ and officers’ liabilities. In addition, the Company has granted an indemnity in favour of directors and officers of companies within the Group in accordance with Article 140 and the provisions of section 309A of the Companies Act 1985 against personal financial exposure that they may incur in the course of their professional duties. Copies of the indemnity are available for inspection at the Company’s registered office. Adequacy of the information supplied to the auditor The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each director has taken all the steps that he or she ought to have taken as a director to make himself or herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Statement of going concern After making enquiries, the directors are satisfied that the Company and the Group have adequate resources to continue to operate as a going concern for the foreseeable future and have prepared the financial statements on that basis. Auditor The Company’s auditor, KPMG Audit Plc, has indicated its willingness to continue in office and, on the recommendation of the Audit and Compliance Committee, a resolution to reappoint KPMG Audit Plc as auditor to the Company, and to authorise the directors to fix their remuneration, will be proposed at the AGM. On behalf of the Board Gordon Ellis Company Secretary 19 March 2007 Friends Provident Annual Report & Accounts 2006 49
Page 1 and 2: Setting new standards Friends Provi
Page 3 and 4: ANNUAL REVIEW CORPORATE GOVERNANCE
Page 5 and 6: Group financial highlights Group
Page 7 and 8: INTERNATIONAL LIFE & PENSIONS ASSET
Page 43 and 44: DIRECTORS’ REPORT CORPORATE GOVER
Page 49: DIRECTORS’ REPORT CORPORATE GOVER
Page 71 and 72: FINANCIAL STATEMENTS Independent Au
Page 73 and 74: PARENT COMPANY ACCOUNTS ABBREVIATIO
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Friends Provident plc Pixham End Do
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Setting new standards - Friends Life

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