Notes 30-36.

30. Contingent liabilities
31. Insurance
32. Related party transactions
33. Principal operations
34. Retirement plans
35. Share based payments
36. Segmental information

Back to top30. Contingent liabilities

Provision has been made in the ordinary course of business for all known and probable future claims but not for such claims as are considered remote. Contingent liabilities arise in respect of the following categories:

Back to top31. Insurance

The company monitors its capacity to retain otherwise insurable losses. The directors believe that the group's risk management programmes are adequate to protect its assets and earnings against losses incurred. Based on past experience, the company does not anticipate that future losses within these levels would have a significant impact on the group’s financial position or performance. In general terms, the group-wide insurance policies are with insurers having a Standard & Poor’s A grade rating (or equivalent) or better.

Insurance

Back to top32. Related party transactions

¹ These unsecured advances represent long term funding even though they are for no fixed term and bear interest at 10.2 percent.

² These unsecured advances represent long term funding even though they are for no fixed term and bear interest at 7.5 percent.

³ These unsecured advances represent long term funding even though they are for no fixed term and bear interest at 6.7 percent.

⁴ These unsecured advances represent long term funding even though they are for no fixed term and bear interest at 9.75 percent.

5 The unsecured advance represents long term funding even though it is for no fixed term and is non interest bearing.

Fletcher Building Limited is the holding company of the Fletcher Building group. Fletcher Building Limited has a relationship with each of its associates and joint ventures. A full list of all the subsidiaries of the group is included in the Regulatory Disclosures section of the annual report.

Fletcher Building Retirement Plan
As at 30 June 2011, Fletcher Building Nominees Limited (the New Zealand retirement plan) held $8,500,000 of shares and $18,500,000 of capital notes in Fletcher Building, (June 2010: $7,400,000 of shares; $18,500,000 of capital notes).

Back to top33. Principal operations

Fletcher Building Limited is the holding company of the Fletcher Building group. The principal subsidiaries and associates, as at 30 June 2011, are outlined below:

Principal Operations

Back to top34. Retirement plans

Fletcher Building Limited is the principal sponsoring company of a plan that provides retirement and other benefits to employees of the group in New Zealand. Participation in this plan has been closed for a number of years, although defined contribution savings plans have been made available. Various defined benefit and defined contribution plans exist in Australia following the acquisition of the Crane, Amatek, Tasman Building Products, and the Laminex groups which companies contribute to on behalf of their employees. All of these plans’ obligations are wholly funded. Various defined benefit plans and medical plans exist in other countries as a result of the acquisition of the Formica group, which companies contribute to on behalf of their employees. All of the Formica plans have a deficit in their funded status and the companies are making additional contributions, as recommended by the trustees of the plans, to improve the funded status.

The calculation of the defined benefit obligations are based on years of service and the employees’ compensation during their years of employment. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. These obligations are accounted for in accordance with NZ IAS 19 Employee Benefits, which has the effect of smoothing the volatility in the returns earned by the plans through amortising gains and losses over the life of the plans. At 30 June 2011, $87 million of deferred actuarial losses (June 2010: $123 million) will be amortised in future years.

Fletcher Building Limited has an obligation to ensure that the funding ratio of the New Zealand plan’s assets is at least 115 percent of the plan’s actuarial liability. This is based upon any two consecutive annual actuarial valuations as calculated by the plan’s actuary. This calculation is done on the plan’s funding basis which differs from the calculation under NZ IAS 19. At 31 March 2011 the value of the assets was 127.1 percent of the actuarial liability and the funded surplus was $60 million (31 March 2010: 122.6 percent, $51 million).

During the year the company contributed $5 million in respect of its Australian defined benefit plans contribution plans. It contributed $15 million in respect of its Formica defined benefit and medical plans employees as part of their salary sacrifice arrangements.

Retirement plans

Assumptions used
The following table provides the weighted average assumptions used to develop the net periodic pension cost and the actuarial present value of projected benefit obligations for the group's plans:

Retirement plans

Expected returns on plan assets have been determined by the independent actuaries as the weighted average of the expected return after tax and investments fees for each asset class by the target allocation of assets to each class.

The group expects to contribute $22 million to its Australian and other overseas defined benefit plans during the year to 30 June 2012.

Back to top35. Share based payments

Executive share schemes
The group has implemented long term cash based incentive schemes targeted at the executives most able to influence the results of the group, with an agreed percentage of any cash received to be invested in purchasing the company’s shares. For all participants in the 2007 scheme, and for most participants in the 2008 scheme, payment of any benefit is dependent upon the group’s total shareholder return exceeding the 51st percentile of the total shareholder return of a comparative group of companies over a three year restricted period. For a small number of participants in the 2008 scheme and all participants in the 2009 and 2010 schemes, a variation was implemented whereby the three year restricted period is automatically extended by up to one further year if total shareholder return does not exceed the 51st percentile. Participants may elect to extend the restricted period if total shareholder return is between the 51st and 75th percentiles.

In addition, for the relevant participants in the 2008, 2009 and 2010 schemes, payment of half of any benefit is dependent upon total shareholder return, including the one-year extension of the restricted period, and payment of the other half of any benefit is dependent upon the group achieving an earnings per share target over the three year restricted period. No one-year extension is made for any benefit which is dependent upon the earnings per share performance target.

The group provides interest free loans to executives, who instruct the trustee to purchase shares on their behalf. The shares purchased by executives are held by the trustee with executives entitled to vote and receive dividends, the proceeds of which are used to repay the interest free loan.

At the end of the restricted period the group will pay a bonus to the executives to the extent the performance targets have been met, sufficient for the executives to repay the balance of the interest free loan on those shares which vest. The shares upon which performance targets have been met will then fully vest to the executives. The loan owing on shares upon which performance targets have not been met (the forfeited shares) will be novated from the executives to the trustee and will be fully repaid by the transfer of the forfeited shares. The receivable from the executives, which is secured only against the shares held in the company, has been accounted for under the treasury stock method and deducted from paid up capital.