ROYAL LONDON (CIS) LIMITED AND THE ROYAL LONDON MUTUAL INSURANCE SOCIETY LIMITED SCHEME

Transcription

1 ROYAL LONDON (CIS) LIMITED AND THE ROYAL LONDON MUTUAL INSURANCE SOCIETY LIMITED SCHEME Pursuant to Part VII of, and Schedule 12 to, the Financial Services and Markets Act 2000

2 CONTENTS PARAGRAPH PAGE 1. DEFINITIONS AND INTERPRETATION INTRODUCTION TRANSFER OF BUSINESS CONTINUITY OF PROCEEDINGS RIGHTS AND OBLIGATIONS UNDER TRANSFERRED POLICIES AND CONTRACTS EXCLUDED POLICIES PREMIUMS, MANDATES AND OTHER PAYMENTS DECLARATION OF TRUST BY RLCIS INDEMNITIES IN FAVOUR OF RLCIS ESTABLISHMENT OF THE RLCIS LT SUB-FUND PURPOSE OF ALLOCATIONS ALLOCATION OF POLICIES ALLOCATION OF ASSETS ALLOCATION OF LIABILITIES MIS-SELLING LIABILITIES AND OPERATIONAL RISK ALLOCATION MAINTENANCE AND CESSATION OF THE RLCIS LT SUB-FUND OTHER ROYAL LONDON FUNDS LINKED FUNDS FUTURE CHANGES TO LINKED FUNDS TAXATION OF THE RLCIS LT SUB-FUND SERVICES AND EXPENSE ARRANGEMENTS NEW BUSINESS EXCEPTIONAL COSTS THE ROYAL LONDON WPC ASSET MANAGEMENT INVESTMENT POLICY CAPITAL SUPPORT RETENTION OF RLCIS MARKETING LIMITED AND RLUM (CIS) LIMITED DEMUTUALISATION AND REATTRIBUTION EFFECTIVE DATE MODIFICATIONS, AMENDMENTS OR ADDITIONS EFFECT OF TRANSFER COSTS AND EXPENSES EVIDENCE OF TRANSFER CERTIFICATION OF THE ROYAL LONDON BOARD AND THE RLCIS LT SUB-FUND WP ACTUARY SUCCESSORS AND ASSIGNS THIRD PARTY RIGHTS GOVERNING LAW SCHEDULE Transferred Contracts and Transferred Reinsurance Agreements SCHEDULE Subsidiaries SCHEDULE Excluded Assets, Excluded Contracts and Excluded Liabilities SCHEDULE Part A Expenses Part B In Force Policies SCHEDULE Exceptional Costs... 65

3 IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION COMPANIES COURT No IN THE MATTER OF ROYAL LONDON (CIS) LIMITED - and - IN THE MATTER OF THE ROYAL LONDON MUTUAL INSURANCE SOCIETY LIMITED - and - IN THE MATTER OF PART VII OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 SCHEME for the transfer to The Royal London Mutual Insurance Society Limited of the long-term insurance business of Royal London (CIS) Limited PART A DEFINITIONS AND INTERPRETATION 1. DEFINITIONS AND INTERPRETATION 1.1 In this Scheme, unless the subject or context requires otherwise, the following expressions bear the meanings respectively set opposite them: "Actual Aggregate Calendar Monthly Per Policy Charge" means in respect of each Calendar Month, a sum calculated by multiplying the Actual Number of Policies in respect of that Calendar Month of each Class of Per Policy Business by the applicable Per Policy Rate for that Class of Per Policy Business divided by twelve; "Actual Cost" means the direct internal and external costs to Royal London or Royal London's Group of providing the relevant Services (which, for the avoidance of doubt, excludes Exceptional Costs and includes a fair proportion of overheads determined by the Royal London Board having regard to advice from the Royal London WP Actuary); "Actual Number of Policies" means (as applicable): the actual number of In Force Policies as at the first day of each Relevant Calendar Month calculated during each Calendar Month 1; 1

4 (d) the actual number of In Force Policies as at the first day of each Relevant Calendar Month calculated during each Calendar Month 4; the actual number of In Force Policies as at the first day of each Relevant Calendar Month calculated during each Calendar Month 7; the actual number of In Force Policies as at the first day of each Relevant Calendar Month calculated during each Calendar Month 10; applying the policy count method set out in Part B of Schedule 4. The Actual Number of Policies will be based on the actual number of In Force Policies implied by assuming a straight line interpolation between the two most recent Policy Count Dates; "Actuary" means the person appointed from time to time by the relevant insurer to perform the "actuarial function", as described in SUP R; "Asset" means any asset and property of every kind and description, wherever located, whether real, personal or mixed, tangible or intangible, that is owned, leased by or licenced to RLCIS (and comprised within the Transferred Business) including all rights, benefits and powers of RLCIS under any Contract and all rights, including any right to repayment or recovery of Tax relating to the Transferred Business or to the transfer thereof, claims and powers of RLCIS against any third party and including (for the avoidance of doubt) any such asset or property to which legal title is held by another party, provided and to the extent that RLCIS has an interest in such asset or property, including beneficial ownership of such asset or property; "Asset Management Services" means the Investment Management Services provided to Royal London in respect of the RLCIS LT Sub-Fund and/or RLUMCIS from time to time; "Asset Share" means in respect of a With-Profits Policy, a retrospective accumulation, at the rates of investment return earned on the assets backing such Asset Share, of the premiums paid under the Policy less the costs and charges attributable to the Policy and allowance for Taxation, enhancement and deductions as determined by the Royal London Board. Such an Asset Share may be an estimate of the Asset Share of the relevant With- Profits Policy derived from the Asset Share of one or more specimen With-Profits Policies, which have been selected to represent a group of the With-Profits Policies; "Average Per Class Charge" has the meaning given to it in paragraph 9 of Part A of Schedule 4; "Bailiwick of Guernsey" means the islands of Guernsey, Alderney, Sark, Herm, Jethou, Brecqhou and Lihou; "Bank Disengagement Agreement" means the disengagement agreement dated 18 March 2013 between The Co-operative Bank P.L.C., RLCIS and RLUMCIS and RLCIS Marketing; "BAU Charges" has the meaning given to it in paragraph 1 of Part A of Schedule 4; "Benchmark Provider" means an appropriate insurer or administrator providing similar or comparable services to the Services or, following the expiry of the Initial Period, the Operational Services to Long-Term Business funds that comprise similar or comparable Long-Term Business to that which comprises the RLCIS LT Sub-Fund as at the relevant time (taking into account the relative size and mix of policies in the relevant fund); "Benchmark Review Date" has the meaning given to it in paragraph 9 of Part A of Schedule 4; 2

5 "Business Day" means a day other than a Saturday or Sunday or public holiday in England and Wales; "Calendar Month" means a period of a calendar month and each calendar month in a year being numbered 1 (January) through to 12 (December), or where expressly specified means a part thereof; "Capita" means Capita Life & Pensions Regulated Services Limited, a company incorporated in England and Wales with registered number ; "Capita Contract" means the restated administration services agreement dated 19 November 2007 and last restated on 17 September 2013 (as amended, varied, supplemented or novated from time to time) originally between CFS Management Services Limited and Capita and now between RLCIS and Capita; "Capital Deficit" has the meaning given to it in paragraph 27.9; "Capital Support" means the provision of capital support to the RLCIS LT Sub-Fund pursuant to paragraph 27.1 in any of the forms stated in paragraph 27.3; "Capital Support Value" means at any time, the aggregate value of any assets provided to the RLCIS LT Sub-Fund by way of Capital Support under paragraph 27.3 or, if applicable, paragraph 27.3 pursuant to paragraph 27.1, increased or reduced by the Return and as reduced by any Settlement made from time to time; "Cash" means any cash or any cash deposit; "CBG Group" means Co-operative Banking Group Limited and its ultimate parent undertaking and their respective subsidiary undertakings from time to time and includes, for the avoidance of doubt, RLCIS on or before the Completion Date and excludes RLCIS thereafter; "Cessation Date" means has the meaning given to it in paragraph 16.2; "Class of Per Policy Business" has the meaning given to it in paragraph 3 of Part A of Schedule 4; "Clone Assets" has the meaning given to it in the Transitional Services Agreement; "CMP" means the capital management policy for the RLCIS LT Sub Fund (as amended from time to time); "Charge" has the meaning given to it in paragraph 27.10; "COBS" means the Conduct of Business Sourcebook issued by the PRA and the FCA; "Completion Date" means the date of completion of Royal London's acquisition of the entire issued share capital of RLCIS, being 31 July 2013; "Condition" means the condition set out in paragraph 30.3; "Contract" means any written contract, commitment, agreement (including a facility agreement), deed, indenture, note, bond, mortgage, loan, instrument, lease or licence, each as amended, supplemented, varied or substituted from time to time including without limitation the Transferred Contracts; "Court" means the High Court of Justice in England and Wales; 3

6 "Costs Information" has the meaning given to it in paragraph 7.1 of Part A of Schedule 4; "Data Room" means the documentation relating to RLCIS and the Subsidiaries in the Project Jupiter online data room provided by Merrill Data Site a copy of which is on the DVD entitled "Jupiter Data Room"; "Deficit" means, at any time, the amount, if any, by which, in the opinion of the Royal London Board after consultation with, and having had regard to the advice of the Royal London Actuary, the Royal London WP Actuary and the RLCIS LT Sub-Fund WP Actuary: the value of the assets comprised in the RLCIS LT Sub-Fund; falls short of: the Minimum Asset Requirement (determined ignoring any Liability to repay any Capital Support Value and any Liability to pay any Charge); "Dormant Policies" has the meaning given to it in paragraph 5 of Part A of Schedule 4; "Effective Date" means the time and date on which this Scheme shall take effect in accordance with paragraph 30; "Encumbrance" means any mortgage, charge, pledge, security assignment, lien, option, restriction, right of first refusal, right of pre-emption, third party right or interest, any other encumbrance or security interest of any kind and any other type of preferential arrangement (including, without limitation, title transfer and retention agreements) having a similar effect; "Exceptional Costs" has the meaning given to it in paragraph 1 of Schedule 5; "Excluded Assets" means the assets of RLCIS listed in Part A of Schedule 3 (including, for the avoidance of doubt, the Excluded Contracts); "Excluded Contracts" means the contracts to which RLCIS is a party listed in Part B of Schedule 3; "Excluded Liabilities" means the Liabilities listed in Part C of Schedule 3; "Excluded Policies" means Policies under which any Liability remains unsatisfied or outstanding at the Effective Date: written by RLCIS in the course of carrying on insurance business in the United Kingdom or any other EEA State, in respect of which: (i) (ii) for the purpose of paragraph 1(3) of Schedule 12 to FSMA, an EEA State other than the United Kingdom is the State of the commitment; and the PRA has not prior to the making of the Order by which the Court sanctions this Scheme provided the certificate referred to in paragraph 4 of Schedule 12 to FSMA with respect to the relevant EEA State which is the State of the commitment; written by RLCIS in an establishment situated in an EEA State other than the United Kingdom, in respect of which the PRA has not prior to the making of the Order by which the Court sanctions this Scheme provided the certificate referred to in paragraph 3 of Schedule 12 to FSMA with respect to the relevant EEA State; 4

7 which are: (i) (ii) Guernsey Policies (to the extent that and for so long only as the Guernsey Scheme has not yet received the requisite court approval and become effective in accordance with its terms); or Jersey Policies (to the extent that and for so long as the Jersey Scheme has not yet received the requisite court approval and become effective in accordance with its terms); (d) written by RLCIS in the course of carrying on Long-Term Business but which are not otherwise capable of being transferred pursuant to FSMA on the Effective Date, including, for the avoidance of doubt: (i) (ii) any Policy within paragraph,, or (d) of this definition which has lapsed on or before the Effective Date but which the relevant Policyholder is entitled to require RLCIS to reinstate; any proposal for a Policy received or issued by or on behalf of RLCIS before the Effective Date which has not become a Policy in force by the Effective Date but which would fall within paragraph,, or (d) of this definition were it to come into force, and any further Policy issued by RLCIS pursuant to the exercise of any right or option under an Excluded Policy, as described in paragraph 6.2; "Excluded Policies Reinsurance Agreement" means the reinsurance agreement to be implemented in respect of Excluded Policies pursuant to, and in accordance with, paragraph 6.1; "Exit Deed" means the deed dated 18 March 2013 between The Co-operative Bank P.L.C., RLCIS, RLCIS Marketing, RLUMCIS, Hornby Road Investments Limited, RLAMCIS, Co-operative Banking Group Limited and CFS Management Services Limited; "FCA" means the Financial Conduct Authority, or such other governmental, statutory or other authority as shall from time to time carry out such functions in relation to Long- Term Business carried on in the United Kingdom as were at the date of this Scheme allocated to the Financial Conduct Authority under FSMA; "FCA Rules" means the rules and guidance contained in the FCA Handbook of Rules and Guidance; "Financial Ombudsman Service" means Financial Ombudsman Service Limited (or any successor thereto or replacement thereof); "Financial Services Compensation Scheme" means the compensation scheme established pursuant to Part XV of FSMA or any successor compensation scheme established from time to time; "Forecast Aggregate Calendar Monthly Per Policy Charge" means in respect of each Calendar Month, a sum calculated by multiplying the Forecast Number of Policies in respect of that Calendar Month of each Class of Per Policy Business by the applicable Per Policy Rate for that Class of Per Policy Business divided by 12; "Forecast Number of Policies" means the forecast number of In Force Policies (applying the policy count method set out in Part B of Schedule 4) on the first day of each Calendar Month following the Effective Date based on the latest available realistic policy run-off projection; 5

8 "FSA" means the Financial Services Authority; "FSMA" means the Financial Services and Markets Act 2000; "GENPRU" means the General Prudential Sourcebook issued by the PRA and the FCA; "Guaranteed Rate Card" has the meaning given to it in paragraph 3 of Part A of Schedule 4; "Guernsey Effective Date" means the time and date on which the Guernsey Scheme becomes effective in accordance with its terms; "Guernsey Policy" means a Policy comprised in the Transferred Business and which was written under Guernsey law or issued to a resident of the Bailiwick of Guernsey and which the Royal Court of Guernsey has jurisdiction to transfer pursuant to section 44(1) of the Insurance Business (Bailiwick of Guernsey) Law 2002; "Guernsey Scheme" means the scheme of transfer referred to in paragraph 2.6; "HMRC" means HM Revenue & Customs (or any successor thereto or replacement thereof); "IMA Fees" means: the fees payable for the Asset Management Services as set out in the RLCIS IMAs and/or the RLUMCIS IMA, each as is in force immediately prior to the Effective Date; or the fees payable for the Asset Management Services under any successor arrangements to the RLCIS IMAs and/or the RLUMCIS IMA; "Independent Expert" means John Jenkins, the expert appointed to report on the provisions of this Scheme pursuant to section 109 of FSMA, or any successor appointed to act as Independent Expert and whose appointment has been approved by the PRA; "Indexation Date" has the meaning given to it in paragraph 4 of Part A of Schedule 4; "Industrial and Provident Society" means the industrial and provident society known as 'Co-operative Insurance Society Limited' incorporated in England and Wales with registered number IP03615R; "Inherited Defect or Error" means: a faulty system, process or similar defect in the Assets used by or on behalf of RLCIS in relation to the administration of the RLCIS Long-Term Fund prior to the Completion Date; or an error or omission committed by or on behalf of RLCIS in relation to the administration of the RLCIS Long-Term Fund prior to the Completion Date; "In Force Policies" means the in force Policies allocated from time to time to the RLCIS LT Sub-Fund and any LTBF Subsidiary; "Initial Period" means the period of twenty years commencing on the Completion Date; "INSPRU" means the Prudential Sourcebook for Insurers issued by the PRA and the FCA; "Investment Management Services" means management, investment management or investment advisory services or similar services; 6

9 "IPRU-INS" means the Interim Prudential Sourcebook for Insurers issued by the PRA and the FCA; "Jersey Effective Date" means the time and date on which the Jersey Scheme becomes effective in accordance with its terms; "Jersey Policy" means a Policy comprised in the Transferred Business and which was carried on by RLCIS in or from within Jersey (as such expression is interpreted for the purposes of the Insurance Business (Jersey) Law 1996) and which the Royal Court of Jersey has jurisdiction to transfer pursuant to Article 27 of, and Schedule 2 to, the Insurance (Business) Jersey Law 1996; "Jersey Scheme" means the scheme of transfer referred to in paragraph 2.6; "KA5H Index" means the KA5H earnings index published by the Office of National Statistics or such successor earnings index that may be published by the Office of National Statistics, or any successor to the Office of National Statistics, from time to time; "Liability" means any debt, liability, duty or obligation of any kind or description (whether direct or indirect, present or future, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due) including any liability to Taxation, and including all costs and expenses relating thereto; "LIBOR" means: the London Inter-bank sterling offered rate administered by ICE Benchmark Administration Limited (rounded down, if necessary, to four decimal places) which is quoted as of am on the relevant Business Day on the appropriate Reuters screen (or such other page or service as may replace it for the purpose of displaying London inter-bank sterling offered rates of leading reference banks) as being the interest rates offered in the London inter-bank market of six month sterling deposits (or, if such period is inappropriate, such other period as the Royal London Board may determine (having regard to the advice of the Royal London WP Actuary) having regard to the period of delay); or if the agreed page is replaced or the service ceases to be available, LIBOR shall be determined as the arithmetic mean multiplied by 1.02 (rounded as mentioned above) on the basis of the respective rates (as quoted to Royal London at its request) at which each of three independent banks of international repute selected by Royal London is offering six month sterling deposits (or, if such period is in appropriate, such other period as the Royal London Board may determine (having regard to the advice of the Royal London WP Actuary having regard to the period of delay) to prime banks in the London inter-bank market at or about am on the relevant Business Day); "Linked Assets" means the Assets to which, immediately prior to the Effective Date, any of the Linked Policies comprised in the Transferred Business are linked in any way; "Linked Fund" means an internal linked fund maintained by RLCIS prior to the Effective Date, or by Royal London prior to or following the Effective Date, for the purpose of calculating benefits payable under Linked Policies, other than (for the avoidance of doubt) benefits determined by reference to the value of notional units whose value or number varies by reference to bonuses declared, or surpluses otherwise distributed; "Linked Policies" means Policies under which the benefits are wholly or partly to be determined by reference: to the value of, or the income from, property of any description (whether or not specified in the Policies); or 7

10 to fluctuations in, or in an index of, the value of property of any description (whether or not so specified); "Long-Term Business" means the business of effecting or carrying out long-term insurance contracts as principal, being contracts falling within Part II of Schedule 1 to the RAO; "Long-Term Fund" means the fund, or each of the funds, established and maintained by RLCIS or Royal London (as the context requires) pursuant to INSPRU R in respect of Long-Term Business; "Long-Term Fund Demutualisation" means any demutualisation of the RLCIS LT Sub- Fund and includes, for the avoidance of doubt, amendments, variations or alterations to the fund structure of the RLCIS LT Sub-Fund such that the RLCIS Policyholders are no longer entitled to 100 per cent. of the established surplus (as such term is defined in IPRU-INS 3.3(4)) of the RLCIS LT Sub-Fund but excludes, for the avoidance of doubt, any demutualisation of Royal London which does not have the aforementioned consequence for the RLCIS Policyholders; "Long-Term Fund Reattribution" means any reattribution (as such term is defined in the PRA Rules and the FCA Rules) of the assets of the RLCIS LT Sub-Fund or any attribution of funds, assets or any value (other than in the ordinary course of business or on arm's length terms) of the RLCIS LT Sub-Fund to Royal London; "Loss" means any loss, expense, liability, claim, damages, penalty, fine, cost (including legal costs and experts' and consultants' fees and including, for the avoidance of doubt, Taxation), charges, demands, actions or proceedings and it shall include any costs or expenses incurred for the purpose of settling any complaint or claim or any agreed settlement or compromise (including an ex gratia payment made in the interests of saving or reducing any such loss, costs or expenses); "LTBF" means: in the period up to the Effective Date, the RLCIS Long-Term Fund; and in the period from the Effective Date, the RLCIS LT Sub-Fund; "LTBF Costs" means any amount payable by RLCIS or, following the Effective Date, Royal London on behalf of the LTBF under the Bank Disengagement Agreement, the Exit Deed or the Support Deed; "LTBF Subsidiary" means, at any time, any company whose shares are allocated to the LTBF; "Minimum Asset Requirement" means the minimum amount of assets required from time to time by the relevant Solvency Requirements to be maintained in the RLCIS LT Sub-Fund where, for the avoidance of doubt, the minimum amount of assets is determined allowing for the possibility of reducing payouts towards contractually guaranteed levels (to the extent such actions are consistent with the aim of treating customers fairly), or other relevant management actions. For the avoidance of doubt, the Minimum Asset Requirement excludes any capital requirements in respect of the business in the RLCIS LT Sub-Fund that can, under the relevant Solvency Requirements, be met from assets outside of the RLCIS LT Sub-Fund; "Minimum Notional Capital Requirement" means the minimum amount of assets that would be required from time to time by the Solvency Requirements to be held in respect of the RLCIS LT Sub-Fund in addition to the Minimum Asset Requirement in order for the Notional Mutual Insurance Company to satisfy its Solvency Requirements where, for the avoidance of doubt, the minimum amount of assets is determined allowing for the 8

11 possibility of reducing payouts towards contractually guaranteed levels (to the extent such actions are consistent with the aim of treating customers fairly which, for the avoidance of doubt, shall be assessed in the context of the circumstances existing at the time), or other relevant management actions; "Mis-selling Liability" means: any Loss which results from a failure to comply with, or an allegation of failure to comply with, rules, regulations, guidance or directions of the FSA, the PRA, the FCA or any other Relevant Regulator or the Financial Ombudsman Service (or any successor body thereto), in respect of the design, administration, manufacture, marketing of, or the provision of advice in respect of any products in any jurisdiction issued by RLCIS, any LTBF Subsidiary or any other regulated entity which was (or had been) an undertaking in the CBG Group on or prior to the Completion Date including: (i) (ii) (iii) any penalty or fine levied or which results from or arises in connection with any enforcement action undertaken by the FSA the PRA, the FCA or any other Relevant Regulator or the Financial Ombudsman Service; any costs or expenses incurred for the purpose of settling any complaint or claim or any agreed settlement or compromise (including an ex gratia payment made in the interests of saving or reducing any such Loss); any administrative costs or expenses incurred (whether internal or external) in relation to any review, investigation, remediation or communication exercise; and any other Loss arising as a result of: (i) (ii) an obligation of RLCIS or any LTBF Subsidiary to pay compensation or redress of a type covered by COBS R; or any amounts paid or payable to a skilled person in connection with a report under section 166 of FSMA if the report indicates that RLCIS or any LTBF Subsidiary has, or may have, materially failed to satisfy its regulatory obligations, in each case in respect of events both before and after 31 July 2009; "New Business Charges" means such charges as are reasonable in the opinion of the Royal London Board (having consulted with the Royal London WPC) for providing or procuring the provision of the New Business Services to the RLCIS LT Sub-Fund and/or RLUMCIS (as the case may be); "New Business Services" means the services to be provided by or on behalf of Royal London to the RLCIS LT Sub-Fund and/or RLUMCIS, as relevant, that are reasonably necessary for the administration and management of: any new Long-Term Business written into the RLCIS LT Sub-Fund as a result of the exercise of any option granted under the terms of an RLCIS Policy; and any new customer accounts established by RLUMCIS, excluding in each case any Operational Services already provided to the RLCIS LT Sub- Fund or RLUMCIS under paragraph 21; "New Linked Fund" means a new Linked Fund established by Royal London pursuant to paragraph 18.1 or paragraph 19.1; 9

12 "New RLCIS OB & IB Fund" means the new ordinary business and industrial business fund created pursuant to paragraph 10 as a sub-fund of the RLCIS LT Sub-Fund; "New RLCIS With-Profits Pension Fund" means the new with-profits pension fund created pursuant to paragraph 10 as a sub-fund of the RLCIS LT Sub-Fund; "New RLCIS With-Profits Stakeholder Fund" means the new with-profits stakeholder fund created pursuant to paragraph 10 as a sub-fund of the RLCIS LT Sub-Fund; "Notional Mutual Insurance Company" has the meaning given to it in paragraph 26.2; "Operational Services" means the Services excluding any Asset Management Services and any New Business Services; "Order" means an order made by the Court pursuant to section 111 of FSMA sanctioning this Scheme and any order (including any subsequent order) in relation to this Scheme made by the Court pursuant to section 112 of FSMA; "Other Royal London Funds" means the sub-funds of Royal London's Long-Term Fund from time to time including (but not limited to) the Royal London Main Fund, the SL Closed Fund, the PLAL With-Profits Sub-Fund and the Royal Liver Sub-Fund and any other sub-funds which are established by Royal London in its Long-Term Fund following the Effective Date, but excluding the RLCIS LT Sub-Fund; "Paid Up Policy" means a Policy where the Policyholder was originally contracted to pay regular premiums but has elected to cease paying the premiums in accordance with the Policy's terms and conditions; "Payment" has the meaning given to it in paragraph 9.3; "Per Policy Rates" means the per In Force Policy charges applicable to each Class of Per Policy Business as determined in accordance with paragraphs 3 to 7 of Part A of Schedule 4; "Policy Count Date" means the first day of each Calendar Month 1, 4, 7 and 10 of each calendar year; "Policy" and "Policyholder" have the meanings set out in Financial Services and Markets Act 2000 (Meaning of "Policy" and "Policyholder") Order 2001 (SI 2001/2361); "PRA" means the Prudential Regulation Authority, or such other governmental, statutory or other authority as shall from time to time carry out such functions in relation to Long- Term Business carried on in the United Kingdom as were at the date of this Scheme allocated to the Prudential Regulation Authority under FSMA; "PRA Rules" means the rules and guidance contained in the PRA Handbook of Rules and Guidance; "Premium Paying Policies" means Policies where the Policyholder is currently paying regular premiums in accordance with the Policy's terms and conditions; "Provider" means the provider of the services as defined in the Transitional Services Agreement; "Quasi Derivative" has the meaning given to it in paragraph 27.3; "RAO" means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544); 10

13 "Reconciled Amount" has the meaning given to it in paragraph 2.3 of Part A of Schedule 4; "Regulatory Change" has the meaning given to it in paragraph 31.3; "Regulatory Requirements" means the FSMA, the PRA Rules and the FCA Rules; "Relevant Calendar Months" means in respect of the Actual Number of Policies calculated in: (d) Calendar Month 1, the Calendar Months 10, 11 and 12 immediately preceding such Calendar Month; Calendar Month 4, the Calendar Months 1, 2 and 3 immediately preceding such Calendar Month; Calendar Month 7, the Calendar Months 4, 5 and 6 immediately preceding such Calendar Month; and Calendar Month 10, the Calendar Months 7, 8 and 9 immediately preceding such Calendar Month; "Relevant Date" means the Effective Date except in the case of any Residual Asset or Residual Liability in which case it means the applicable Subsequent Transfer Date; "Relevant Regulator" means any regulatory body, authority, government department or exchange or clearing body or organisation in any jurisdiction (including the PRA and the FCA) other than a Tax Authority; "Residual Assets" means in relation to the Transferred Business: any Asset comprised in or relating to the Transferred Business, the transfer of which pursuant to this Scheme: (i) (ii) (iii) is agreed by RLCIS and Royal London, or is proved by any third party, to be subject to the law of any country or territory other than the United Kingdom and in relation to which further steps, in addition to the Order, are required to secure that its transfer to Royal London is fully effective under the law of that country or territory; requires, at the Effective Date, (1) the consent of any third party; or (2) the waiver by any third party of any right to acquire, or be offered the right to, or offer to, acquire or procure the acquisition by some other person of, all or any part of such Asset, being a right which directly or indirectly arises or is exercisable as a consequence of such transfer being proposed or taking effect; or would result in a third party having a right to terminate an agreement with RLCIS or to claim compensation in damages or otherwise, and which the Court either does not have jurisdiction to transfer pursuant to section 112 of FSMA without such steps being taken as are referred to in (i) or in relation to which the Court has determined, pursuant to section 112A(2) of FSMA, not to disapply any entitlement referred to in (ii) or (iii), but in any case to the extent only of that part of the interest of RLCIS in any such Asset the transfer of which requires such steps and/or consent and/or waiver; 11

14 any interest of RLCIS in any Asset comprised in the Transferred Business the transfer of which RLCIS and Royal London agree prior to the Effective Date is to be delayed until after the Effective Date; and any proceeds of sale or income or other accrual or return whatsoever, whether or not in any case in the form of Cash, or any other Assets or rights earned or received from time to time after the Effective Date but prior to any Subsequent Transfer Date in respect of any such Asset referred to in paragraphs and of this definition, but excluding the rights, benefits and powers under the Excluded Policies; "Residual Liability" means in relation to the Transferred Business: any Liability comprised in or relating to the Transferred Business, the transfer of which: (i) (ii) is agreed by RLCIS, or is proved by any third party, to be subject to the law of any country or territory other than the United Kingdom and in relation to which further steps, in addition to the Order, are required to secure that its transfer to Royal London is fully effective under the law of that country or territory; or would result in a third party having a right to terminate an agreement with RLCIS or to claim compensation in damages or otherwise, and which the Court either does not have jurisdiction to transfer pursuant to section 112 of FSMA without the necessary steps being taken or the termination and/or compensation rights being waived or which the Court determines not to transfer by the virtue of the Order, but in any case to the extent only of that part of the Liability the transfer of which requires such steps and/or waiver or which the Court determines not to transfer; or any other Liability comprised in the Transferred Business, the transfer of which RLCIS and Royal London agree prior to the Effective Date is to be delayed until after the Effective Date; and any Liability that is attributable to or connected with a Residual Asset or a Residual Liability referred to in paragraphs and above that has arisen or arises at any time before the Subsequent Transfer Date applicable to that Residual Asset or Residual Liability, but excluding any Liability under the Excluded Policies; "Retail Price Index" means the retail price index published by the Office for National Statistics, or such successor price index as may be published by the Office of National Statistics, or any successor entity to the Office for National Statistics, from time to time; "Return" means the return earned (net of the investment management fees charged to the RLCIS LT Sub-Fund and RLUMCIS pursuant to paragraph 12 of Part A of Schedule 4) on the assets provided as Capital Support under paragraph 27.3 or, if applicable, paragraph 27.3 pursuant to paragraph 27.1 (including, for the avoidance of doubt, the return earned (net of the investment management fees charged to the RLCIS LT Sub- Fund and RLUMCIS pursuant to paragraph 12 of Part A of Schedule 4) on any assets which the assets provided as Capital Support under paragraph 27.3 or, if applicable, paragraph 27.3 pursuant to paragraph 27.1 may be invested or reinvested in from time to time) during the period from (and including) the provision of the Capital Support until Settlement adjusted by an appropriate deduction for Taxation or plus an appropriate addition for Tax Relief; 12

15 "Review Date" has the meaning given to it in paragraph 5 of Part A of Schedule 4; "Revised Per Policy Rates" has the meaning given to it in paragraph 8 of Part A of Schedule 4; "Retained Records" means any accounting and financial and other records of RLCIS relating to the Transferred Business that RLCIS is required to retain by law; "RLAM" means Royal London Asset Management Limited, a company incorporated in England and Wales with registered number ; "RLAMCIS" means Royal London Asset Management (CIS) Limited, a company incorporated in England and Wales with registered number ; "RLAMCIS Employees" means any individuals who are or were supplied to RLAMCIS by CFS Management Services Limited pursuant to the RLAMCIS Services Agreement; "RLAMCIS Services Agreement" means the services agreement dated 24 November 2009 between RLAMCIS and CFS Management Services Limited; "RLCIS" means Royal London (CIS) Limited, a company incorporated in England and Wales with registered number In this Scheme references to the company "RLCIS" shall be deemed to include the Industrial and Provident Society (which ceased to exist on 29 July 2013 when it converted into Royal London (CIS) Limited); "RLCIS Acquisition Documents" means: the Sale and Purchase Agreement; the tax deed dated 31 July 2013 between Co-operative Banking Group Limited and Royal London; and the CIS support deed dated 18 March 2013 between Co-operative Banking Group Limited and RLCIS; "RLCIS Actuary" means the Actuary of RLCIS; "RLCIS Board" means the board of directors of RLCIS from time to time; "RLCIS Capital Shortfall" means the circumstances described in paragraph 27.7; "RLCIS General Reserve" means that part of the RLCIS Shareholder Fund designated the 'General Reserve'; "RLCIS Group" means RLCIS, its subsidiaries, any subsidiary undertakings, any holding company of RLCIS and all other subsidiaries of any such holding company from time to time; "RLCIS IMAs" means: the investment management agreement dated 24 October 2012 between RLAMCIS and RLCIS as novated to RLAM pursuant to a deed of novation dated 17 April 2014 between RLAMCIS, RLAM and RLCIS; and the investment management agreement dated [insert date] 2014 between RLAM and RLCIS; 13

16 "RLCIS Long-Term Fund" means the Long-Term Fund of RLCIS and includes, for the avoidance of doubt, the RLCIS OB & IB Fund, the RLCIS With-Profits Pension Fund and the RLCIS With-Profits Stakeholder Fund; "RLCIS LT Sub-Fund" means the new Long-Term Business sub-fund of the Royal London Long-Term Fund created pursuant to paragraph 10 and includes, for the avoidance of doubt, the New RLCIS OB & IB Fund, the New RLCIS With-Profits Pension Fund and the New RLCIS With-Profits Stakeholder Fund; "RLCIS LT Sub-Fund PPFMs" means the principles and practices of financial management prepared and issued pursuant to COBS 20.3R by Royal London from time to time in respect of each of: (i) the New RLCIS OB & IB Fund; (ii) the New RLCIS With- Profits Pension Fund; and (iii) the New RLCIS With-Profits Stakeholder Fund; "RLCIS LT Sub-Fund WP Actuary" means the person appointed from time to time to perform the role of WP Actuary in respect of the RLCIS LT Sub-Fund, who, for the avoidance of doubt, may be the same person as the Royal London WP Actuary, and in the event of the cessation of the RLCIS LT Sub-Fund pursuant to paragraph 16.2 shall be deemed to be the Royal London WP Actuary; "RLCIS Marketing" means RL Marketing (CIS) Limited, a company incorporated in England and Wales with registered number ; "RLCIS Mis-selling Liability" means: any Mis-selling Liability incurred by or on behalf of RLCIS in relation to its Long- Term Business; and any other Mis-selling Liability incurred by any LTBF Subsidiary, but in each case only in respect of events occurring at any time in the period on and following 31 July 2009 up to and including the Effective Date; "RLCIS OB & IB Fund" means the ordinary business and industrial business sub-fund of the RLCIS Long-Term Fund; "RLCIS Policies" means: the Transferred Policies allocated to the RLCIS LT Sub-Fund from time to time in accordance with this Scheme; and Policies written in or allocated to the RLCIS LT Sub-Fund after the Effective Date; "RLCIS Policyholders" means holders of RLCIS Policies and "RLCIS Policyholder" shall mean any one of them; "RLCIS Shareholder Fund" means the assets and liabilities of RLCIS other than those attributable to or represented by the RLCIS Long-Term Fund (including, for the avoidance of doubt, the RLCIS General Reserve); "RLCIS With-Profits Pension Fund" means the with-profits pension sub-fund of the RLCIS Long-Term Fund; "RLCIS With-Profits Policies" means the RLCIS Policies that are With-Profits Policies; "RLCIS With-Profits Stakeholder Fund" means the with-profits stakeholder sub-fund of the RLCIS Long-Term Fund; 14

17 "RLCIS WPC" means the With-Profits Committee of RLCIS immediately prior to the Effective Date; "RLCIS WP Actuary" means the person appointed from time to time to perform the role of WP Actuary in respect of the RLCIS Long-Term Fund immediately prior to the Effective Date; "RLUMCIS" means RLUM (CIS) Limited, a company registered in England and Wales with registered number ; "RLUMCIS IMA" means the amended and restated investment management agreement dated 24 October 2012 between RLAMCIS and RLUMCIS as novated to RLAM pursuant to a deed of novation dated 17 April 2014 between RLAMCIS, RLAM and RLUMCIS; "Royal London" means The Royal London Mutual Insurance Society Limited, a company incorporated in England and Wales with registered number 99064; "Royal London Actuary" means the Actuary of Royal London; "Royal London Board" means the board of directors of Royal London from time to time; "Royal London Defect or Error" means: a faulty system, process or similar defect in the Assets used by or on behalf of Royal London in relation to the administration of the LTBF after the Completion Date; or an error or omission committed by Royal London or any other undertaking in the Royal London Group in relation to the administration of the LTBF after the Completion Date; "Royal London Group" means Royal London, its subsidiaries and subsidiary undertakings, any future holding company of Royal London and all other subsidiaries of any such future holding company in each case from time to time; "Royal London Main Fund" means the sub-fund of Royal London's Long-Term Fund that bears the name "Royal London Main Fund" and includes: the industrial branch business and ordinary branch business originally issued by Royal London; the ordinary branch business originally issued by Refuge Assurance plc; and certain other businesses acquired by Royal London but not referred to in (d) to (f) below, but excludes, for the purposes of this Scheme: (d) (e) (f) the industrial and ordinary branch business originally issued by United Friendly Insurance plc and the related additional accounts; the industrial branch business originally issued by Refuge Assurance plc and the related additional account; and the following separate sub-funds of the Royal London Long-Term Fund: (i) (ii) SL Closed Fund; PLAL With-Profits Sub-Fund; 15

18 (iii) (iv) Royal Liver Sub-Fund; and from the Effective Date, the RLCIS LT Sub-Fund; "Royal London Mis-selling Liability" means any Loss arising as a result of: any obligation of Royal London (in respect of the RLCIS LT Sub-Fund) or any LTBF Subsidiary to pay compensation or redress of a type covered by COBS R; or any amounts paid or payable to a skilled person in connection with a report under section 166 of FSMA if the report indicates that Royal London (in respect of the RLCIS LT Sub-Fund) or any LTBF Subsidiary has or may have, materially failed to satisfy its regulatory obligations, in each case in respect of events occurring after the Effective Date; "Royal London Transfer Documents" means the court orders, scheme documents, instruments of transfer and any amendments, replacements or successors thereto pursuant to which Royal London had transferred to it the Long-Term Business of each of United Friendly Insurance plc, Refuge Assurance plc, Scottish Life Assurance Company, Phoenix Life Assurance Limited and Royal Liver Assurance Limited; "Royal London WP Actuary" means the person appointed from time to time by Royal London to perform the role of WP Actuary to the Royal London Main Fund. For the avoidance of doubt, this Scheme does not prevent the Royal London WP Actuary from the Effective Date being the same person as the RLCIS LT Sub-Fund WP Actuary or any other WP Actuary appointed in respect of any Other Royal London Fund; "Royal London WPC" means the With-Profits Committee of Royal London; "Royal London WPC Terms of Reference" means the terms of reference for the Royal London WPC, as in force from time to time following the Effective Date; "Royal London Wrongful Act" means a deliberate wrongful act or negligence of Royal London or any other undertaking in the Royal London Group in relation to the administration of the LTBF or any LTBF Subsidiary, at any time after the Completion Date; "Sale and Purchase Agreement" means the sale and purchase agreement dated 18 March 2013 between the Co-operative Banking Group Limited and Royal London (as amended pursuant to an agreement dated 22 July 2013); "Scheme" means this Scheme in its original form or with or subject to any modification, addition or condition which may be approved or imposed in accordance with paragraph 31; "Segmented Policy" means all Policies issued as part of an arrangement (whether for Tax or other reasons) where more than one Policy was issued instead of one large Policy and where each of the Policies in the arrangement was effected on the same date, by the same person and with the same or virtually the same terms and conditions; "Services" means: the complete set of business-as-usual services (including, without limitation, administration services, Asset Management Services and regulatory and governance oversight, control and reporting services) required by the RLCIS LT Sub-Fund and to be provided by, or on behalf of, Royal London to the RLCIS LT Sub-Fund; and such business as usual services as Royal London provides to, or procures for: 16

19 (i) (ii) RLUMCIS or RLCIS Marketing; or any other subsidiary undertaking held by or allocated to the RLCIS LT Sub- Fund from time to time; "Service Recipient" has the meaning given to it in paragraph 21.1; "Settled" means the provision of assets by the RLCIS LT Sub-Fund to Royal London in full or partial settlement of the Capital Support Value pursuant to paragraph 27.5 (and references to "Settlement" shall be construed accordingly); "Single Premium Policy" means a Policy where the Policyholder is contractually obliged to pay a single, not regular, premium payment; "Solvency Requirements" means the solvency requirements imposed from time to time by the PRA on firms carrying on Long-Term Business under which those firms are required at all times to hold appropriate assets having a value sufficient to meet their liabilities (in each case, as required by applicable law and regulation) and also cover a specified additional amount over and above their liabilities from time to time. At the date of this Scheme, such additional amount is the greater of the individual capital assessment (adjusted to reflect any individual capital guidance imposed by the PRA) carried out pursuant to GENPRU section 1.2 and the requirement to hold capital resources which are equal to or in excess of the capital resources requirement calculated in accordance with GENPRU section 2.1 and section 2.2. Following the implementation of the Solvency II regime, the additional amount will become the Solvency Capital Requirement (SCR) (as defined by Solvency II) (adjusted to reflect any capital add-on imposed by the PRA from time to time) and will be interpreted equivalently following any further legal or regulatory changes; "Solvency II" means Directive 2009/138/EC of the European Parliament and the Council of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance, as amended; "Subsequent Transfer Date" means in relation to any Residual Asset, Residual Liability or Excluded Policy the date (and each date) after the Effective Date on which such Residual Asset, Residual Liability or Excluded Policy is or is to be transferred to Royal London, including: in respect of any Residual Asset or Residual Liability falling within paragraph of the respective definitions thereof and of any other Residual Liability which is attributable to or connected with any such Residual Asset, the date on which the requisite steps or, where applicable, the requisite consent or waiver to enable the same to be transferred from RLCIS to Royal London upon the provisions of this Scheme (where applicable, without any third party right to terminate or to compensation) is: (i) (ii) (iii) obtained; no longer required; or dispensed with by Order of the Court; in respect of any Residual Asset or Residual Liability falling within paragraph of the respective definitions thereof, and of any other Residual Liability which is attributable to or connected with such Residual Asset, the date agreed in writing by RLCIS and Royal London; in respect of any Residual Asset or Residual Liability falling within paragraph of the respective definitions thereof, the date on which such Residual Asset is 17

20 received or earned by RLCIS or, in the case of a Residual Liability, the date on which such Liability is incurred by RLCIS; (d) (e) in respect of any Excluded Policy falling within paragraph, and (d) of the definition thereof, the date in which the transfer of all rights, title, interest in, and obligations under such Policy is fully effective in the United Kingdom and under the law of any other country or territory to which it is subject; and in respect of any Excluded Policy falling within paragraph of the definition thereof, the Guernsey Effective Date or the Jersey Effective Date (as the case may be); "Subsidiaries" means the subsidiaries of RLCIS details of which are set out in Schedule 2; "SUP" means the Supervision Manual issued by the PRA and the FCA; "Support Deed" means the deed dated 18 March 2013 between Co-operative Banking Group Limited and RLCIS concerning the payment of charges for capital support from the RLCIS General Reserve; "Target Companies" means RLAMCIS, RLCIS and each subsidiary of RLAMCIS and RLCIS (each a "Target Company"); "Tax Authority" and "Taxation Authority" means any government, state or municipality or any local, state, federal or other authority, body or official anywhere in the world exercising a fiscal, revenue, customs or excise function (including, without limitation, HMRC); "Tax" or "Taxation" means all forms of tax, duty, rate, levy, charge or other imposition or withholding whenever and by whatever authority imposed and whether of the United Kingdom or elsewhere, including (without limitation) income tax (including income tax or amounts equivalent to or in respect of income tax required to be deducted or withheld from or accounted for in respect of any payment), corporation tax, capital gains tax, value added tax, stamp duty, stamp duty reserve tax, stamp duty land tax, national insurance and other similar contributions, and any other taxes, duties, rates, levies, charges, imposts or withholdings corresponding to, similar to, replaced by or replacing any of them, together with any interest, penalty, surcharge or fine in connection with such taxation or in connection with the failure to file any return for the purposes of any taxation; "Tax Relief" means any reliefs, allowances or credits in respect of any Taxation, any deductions in computing income, profits or gains for the purposes of any Taxation or any right to repayment of Taxation; "Threshold Amount" means 1 million (such amount to be adjusted annually on 1 January in the calendar year following the Effective Date and thereafter on each Indexation Date in line with the change in the Retail Price Index for the 12 month period to such date); "Transferred Assets" means all Assets of RLCIS whatsoever and wheresoever situated comprised in or attributable to the Transferred Business immediately prior to the Effective Date including (without prejudice to the generality of the foregoing): all rights, benefits and powers of RLCIS under or by virtue of the Transferred Policies; 18