SAGA PLC

Regulatory Filings • May 8, 2014

This document, the Registration Document and the Securities Note together comprise a prospectus (the "Prospectus") for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended (the "Prospectus Directive") relating to Saga plc (the "Company") prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the "FCA") made under section 73A of the Financial Services and Markets Act 2000 (the "FSMA"). The Prospectus will be made available to the public in accordance with the Prospectus Rules.

Application will be made to the FCA for all of the ordinary shares of the Company (the "Shares") issued and to be issued in connection with the Offer to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange plc (the "London Stock Exchange") for all of the Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together, "Admission"). Conditional dealings in the Shares are expected to commence on the London Stock Exchange, on 23 May 2014. It is expected that Admission will become effective, and that unconditional dealings in the Shares will commence, on 29 May 2014. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange. The new Shares issued by the Company will rank, upon Admission, pari passu in all respects with the existing Shares including the right to receive dividends or other distributions declared, made or paid after Admission.

Prospective investors should read this document in its entirety, together with the Registration Document and the Securities Note and, in particular, the discussion of certain risks and other factors that should be considered prior to any investment in the Shares.

Saga plc

(Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 08804263)

Offer of up to 555,352,703 Shares of one pence each at an Offer Price expected to be between 185 pence and 245 pence per Share and admission to the premium listing segment of the Official List and to trading on the London Stock Exchange

			Joint Global Co-ordinators
	BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International
			Joint Bookrunners
BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International	J.P. Morgan Cazenove	UBS
			Joint Lead Manager Investec
			Co-Lead Manager Mizuho International
			Sponsor Citigroup
			ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION (assuming the Offer Price is set at the mid-point of the Price Range)

Issued and fully paid
Number Nominal Value
1,067,351,162 £10,673,512

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities other than the securities to which it relates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances in which such offer or solicitation is unlawful.

Each of Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited (the "Underwriters") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. Mizuho International plc (together with the Underwriters, the "Banks") is authorised and regulated by the Financial Conduct Authority. Each of the Banks is acting exclusively for the Company and no one else in connection with the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Offer or any transaction or arrangement referred to in this document.

The Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "US Securities Act"). The Shares offered by the Prospectus may not be offered or sold in the United States, except to qualified institutional buyers ("QIBs"), as defined in, and in reliance on, the exemption from the registration requirements of the US Securities Act provided in Rule 144A under the US Securities Act ("Rule 144A") or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Prospective investors are hereby notified that the sellers of the Shares may be relying on the exemption from the provisions of section 5 of the US Securities Act provided by Rule 144A or another relevant exemption. The Shares have not been recommended by any US federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of the Prospectus. Any representation to the contrary is a criminal offence in the United States.

The Shares have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Shares may not be offered or sold in Australia, Canada, Japan or South Africa, or to or for the account or benefit of any national, resident or citizen in Australia, Canada, Japan or South Africa.

The distribution of the Prospectus and the offer and sale of the Shares in certain jurisdictions may be restricted by law. Other than in the United Kingdom, the Channel Islands and the Isle of Man, no action has been or will be taken by the Company, the Selling Shareholder or the Banks to permit a public offering of the Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom the Channel Islands and the Isle of Man, no action has been taken or will be taken to permit the possession or distribution of the Prospectus (or any other offering or publicity materials relating to the Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. The Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or purchase, any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction. Accordingly, neither the Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession the Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the Prospectus including its accuracy, completeness and verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of the Prospectus or any such statement. No representation or warranty, express or implied, is made by any of the Banks or any of their respective affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in the Prospectus, and nothing in the Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future.

Information contained on the Company's website is not incorporated into and does not form part of this document.

The date of this document is 8 May 2014.

SUMMARY

Summaries are made up of disclosure requirements known as "Elements". These Elements are numbered in Sections A – E (A.1 – E.7).

This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.

Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of "not applicable".

SECTION A – INTRODUCTION AND WARNINGS

A.1 Warning

This summary should be read as an introduction to the Prospectus.

Any decision to invest in the Shares should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated.

Civil liability attaches only to those persons who have tabled the summary including any translation thereof, and applied for its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such Shares.

A.2 Consent for Intermediaries

The Company consents to the use of the Prospectus by the Intermediaries in connection with the Intermediaries Offer in the UK, the Channel Islands and the Isle of Man on the following terms: (i) in respect of Intermediaries who are appointed by the Company on or prior to the date of the Prospectus, from the date of the Prospectus and (ii) in respect of Intermediaries who are appointed by the Company after the date of the Prospectus, from the date on which they are appointed to participate in the Intermediaries Offer and agree to adhere and be bound by the terms of the Intermediaries Terms and Conditions, in each case until the closing of the Intermediaries Offer. Prospective investors interested in participating in the Intermediaries Offer should apply for Shares through the Intermediaries by following their relevant application procedures.

Intermediaries are required to provide, at or prior to the time of such offer, the terms and conditions of the Intermediaries Offer to any prospective investor who has expressed an interest to such Intermediary in participating in the Intermediaries Offer. Any application made by investors to any Intermediary is subject to the terms and conditions which apply to the transaction between such investor and such Intermediary. Any Intermediary that uses the Prospectus must state on its website that it uses this document in accordance with the Company's consent.

SECTION B – ISSUER

B.1 Legal and commercial name

Saga plc (the "Company")

B.2 Domicile and legal form

The Company's registered office is in the UK. Saga plc was incorporated and registered in England and Wales on 5 December 2013 with registered number 08804263 under the Companies Act 2006, as amended (the "Act") as a private limited company under the name Sequoia Newco 1 Limited. On 23 December 2013, the Company was renamed Saga Limited. The Company was re-registered as a public limited company under the Act and the Company's name was changed to Saga plc on 2 May 2014. The principal legislation under which the Company operates, and under which the New Shares will be created, is the Act.

B.3 Current operations and principal activities

Saga is a leading provider of products and services primarily tailored for customers over the age of 50 in the UK. The Saga brand has been carefully developed over the past 60 years and is now one of the most recognised and trusted brands among UK consumers aged over 50. Saga is synonymous in the UK with the over 50s market and is recognised for its high quality products and services, expertise in serving its target demographic and excellence in customer service. Initially established as a holiday provider in 1950, Saga has successfully capitalised on the strength of its brand and reputation to broaden its product offering over time. Today, Saga is a leading provider of high quality travel, financial, healthcare and media products and services, and the only commercial organisation of scale with a focus primarily on the fast growing over 50s demographic.

Having spent its first 30 years focused on travel, Saga launched Saga Magazine and developed insurance and financial services offerings in the 1980s, introduced private medical and pet insurance offerings and launched its own cruise ship operation in the 1990s and expanded its travel offering to include Titan Travel escorted tours in the late 2000s. Since 2010, the Group has significantly expanded its healthcare division through the acquisition of a number of domiciliary and homecare businesses. The strength of the Saga brand offers the Group the potential to expand into other business areas as opportunities present themselves and as customer needs change.

The combination of Saga's unique and trusted brand, its primary focus on the over 50s, the depth of its customer insights and data, its tailored services and added value products, coupled with its analysis of the customer value chain, its focus on operating efficiency and its flexible business model, together form the intrinsic "DNA" of the Saga business. By selling its products and services directly to customers through its contact centres in the UK and over the internet, Saga captures information about its customers at every point of contact and tracks changes in their behaviour over time, which enables it to build highly personalised and direct customer relationships. This, in turn, allows Saga to accurately model customer propensities which drive its marketing, pricing and product development strategies.

Its multiple customer interactions across a broad range of products and services over many years have enabled Saga to develop a sophisticated proprietary Group Marketing Database containing detailed information for approximately 10.4 million contactable names and 8.4 million contactable households in the UK. Saga estimates this covers over 50 per cent. of over 50s households and more than 60 per cent. of the over 50s ABC1 households in the UK. Saga uses the Group Marketing Database to operate an effective, integrated direct marketing business model with relatively low customer acquisition costs. The size of Saga's Group Marketing Database and its primary focus on the over 50s, combined with its knowledge and understanding of its customers, give Saga the ability to provide products and services designed to meet its customer needs which, in turn, improves Saga's cross-selling and up-selling potential within and across its different business segments. As at 31 January 2014, the Group had active customers in 2.1 million individual households, with each Saga customer holding, on average, 2.7 Saga-branded products.

Saga's brand recognition and excellence in customer service have enabled it to expand its product offering successfully, achieve high levels of repeat business and acquire new customers without needing to rely heavily on costly third-party advertising. Saga's brand and the strength of its relationships with its customers are at the core of the Group's business philosophy. The unique model that Saga operates, with a business centred around the power of its brand and multi-product provision, rather than on a single product segment, has allowed it to achieve sustainable growth, delivering robust performance in recent years. Saga has also grown the Group Marketing Database from 4.8 million contactable households in 2002 to 8.4 million contactable households today.

The Group has benefited from consistent earnings, underpinned by high quality revenue streams and repeat customers. The Group calculates underlying revenue and underlying EBITDA to remove the impact of one-off items or timing differences from its audited results. These underlying figures are derived from the Group's management accounting records and are unaudited. In the year ended 31 January 2014, the Group generated underlying revenue of £1,209.3 million, trading EBITDA of £233.7 million and underlying EBITDA of £222.4 million. As at 31 January 2014, approximately 88 per cent. of Saga's active customers were repeat buyers, having purchased their first Saga product more than one year prior to that date. Between 2012 and 2014, the Group's underlying revenue and underlying EBITDA grew at a compound annual growth rate ("CAGR") of 4.7 per cent. and 7.4 per cent., respectively. Over the same period, the Group's underlying EBITDA margin increased from 17.5 per cent. to 18.4 per cent.

The Group's underlying cash conversion ratio (being underlying available cash flow from operating activities divided by underlying EBITDA) was 88 per cent. in the year ended 31 January 2014. The Group has low levels of maintenance capital expenditure and, given that a majority of its customers pay for services in advance and a majority of its suppliers are paid after the provision of goods and services, it also has favourable working capital dynamics.

Saga highlights

Primary focus on serving the attractive and growing over 50s demographic in the UK

Saga is one of the largest commercial organisations in the UK that offers a range of products and services primarily focused on people aged 50 and over. The over 50s population is the fastest growing demographic in the UK and is expected to increase from an estimated 22.8 million people in 2013 to 29.1 million people by 2033.

A unique and trusted consumer brand

The Saga brand is synonymous with the over 50s market and is an established name in the UK, achieving 96 per cent. prompted brand awareness among those aged 50 and over. Saga is recognised for its high quality products and services, expertise in serving the over 50s market, including creation and distribution of bespoke products, and excellence in customer service.

An established and growing Group Marketing Database providing unique customer insight

Saga's Group Marketing Database contains over one billion lines of data for approximately 10.4 million contactable names and 8.4 million households in the UK. Approximately 400,000 net new names have been added to the Group Marketing Database each year on average from 31 January 2009 to 31 January 2014.

Tailored products and a focus on service, providing high levels of customer satisfaction

Saga uses its knowledge and understanding of its target demographic, including its Group Marketing Database, to tailor its products and services to its customers' increasingly complex needs.

Flexible business model and forensic analysis of the value chain

Saga maintains a business model that allows it to generate underlying EBITDA growth by responding quickly to new commercial opportunities across its existing and potential product portfolio.

Sophisticated and data-led approach to insurance pricing and risk selection, claims management strength and underwriting expertise have driven industry outperformance

Saga's scrutiny of actuarial data and its in-house underwriting capabilities have enabled it to identify and respond to changes in claims experience in advance of the wider market. The Group maintains industry-leading loss ratios through predictive pricing, careful selection of risk and claims management excellence.

Focus on efficiency

Saga's integrated business model achieves significant operating efficiency through best-in-class customer acquisition costs, increasing customer value over time, and continual pursuit of operational excellence. This is supported by leveraging the Group Marketing Database to deliver targeted marketing, product cross sales and multi-product holdings.

Consistent financial performance underpinned by significant repeat business

Saga benefits from high quality revenue streams and significant levels of repeat business which have underpinned its resilient revenue and earnings growth through the economic cycle.

Strong cash flow generation and cash conversion rates

Saga's underlying cash flow from operating activities increased from £130.7 million in the year ended 31 January 2012 to £196.7 million in the year ended 31 January 2014, resulting in attractive and growing underlying EBITDA margins, increasing from 17.5 per cent. to 18.4 per cent. over the last three financial years.

Experienced and proven management team

Saga has built an experienced senior management team that has been integral to the development and growth of its businesses. Saga's Executive Chairman, Andrew Goodsell, and its Chief Financial Officer, Stuart Howard, have been with Saga for 22 years and 14 years, respectively. This team has been further strengthened with the appointment of Lance Batchelor as Group Chief Executive in March 2014, previously CEO of Domino's Pizza Group, a FTSE 250 company. They are supported by a strong senior management team comprised of five divisional CEOs (Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong) with over 29 years' combined experience at Saga.

Significant opportunities for further growth

The strength of the Saga brand offers the Group the potential to expand into other business areas as opportunities present themselves and as customer needs change over time.

Current Trading and Prospects

In the two months ended 31 March 2014, the Group has performed strongly with revenue ahead of expectations.

In line with the Group's expectations, revenue from the financial services segment is lower than the same two month period in 2013, as the lower market premium levels experienced in motor insurance in the prior year continue to pass through into the first quarter of the current financial year.

Within the travel segment, trading has been strong with revenue on confirmed bookings up compared to the same period in 2013.

Within the Group's healthcare segment, trading has been in line with expectations, as the benefits of streamlined policies, processes and systems have become evident. In April 2014, the healthcare business was awarded a contract with Kent County Council, its largest contract win to date. Under the terms of the contract, the business will provide 32 per cent. of Kent County Council's total hours available, increasing the number of hours of care delivered per week in the county from 4,400 up to 13,800.

As a result, the Directors remain confident in the outlook for the full financial year ending 31 January 2015 and the Group's longer term prospects. It is anticipated that the Company's next trading update will be its interim results for the six months ending 31 July 2014, which are expected to be published in September 2014.

Strategy and opportunities for further growth

• Continue to develop the Saga brand and grow the Group Marketing Database.
• Continue to deliver exceptional customer service and a unique customer experience.
• Increase the multi-product holdings of existing customers and increase conversion rates of new customers.
• Develop new and expand existing products and services tailored for the over 50s market.
• Expand into other business areas, such as wealth management and private homecare, as opportunities present themselves and as customer needs change over time.

B.4a Significant recent trends affecting the Group and the industry in which it operates

Saga operates in the travel, financial services, healthcare services and media sectors in the UK. The Group's growth is underpinned by the following structural growth drivers:

• The Group's target demographic of over 50s individuals is one of the fastest growing segments of the UK's population, numbering 22.8 million individuals in 2013 and forecast to grow by 30 per cent. to approximately 29.1 million by 2033. This was equivalent to approximately 36 per cent. of the UK's total population in 2013, and is forecast to represent approximately 40 per cent. of the UK's total population by 2033 (source: ONS). Within the over 50s population, the 65 to 75 and 75 and over segments are expected to increase even faster over the same time period at approximately 39 and 73 per cent., respectively.
• The Group operates in the UK outbound tourism market for both packaged and non-packaged holidays, which represented approximately 36.2 million passengers departing from the UK in 2012 (source: ONS).
• There were 28.7 million cars in the UK in 2012, all of which require automobile insurance (source: Department of Transport). The UK car insurance market is expected to grow from 2012 through to 2017 with an anticipated CAGR of 1.6 per cent. across that five-year period (source: MarketLine).
• The home insurance market generated approximately £7.1 billion in gross written premiums in 2012 (source: Datamonitor). Over 70 per cent. of people over 50 own their own home (source: ONS).
• Growth in the age 65 and above population and their increasing personal preference to live at home is fuelling growth in the number of individuals requiring domiciliary care support.

Additionally, the Group has benefited from a large subscriber base for Saga Magazine, which is the UK's bestselling paid-for monthly magazine and, according to the National Readership Survey, had an estimated readership of 1.2 million people in the twelve months ending December 2013.

B.5 Group structure

The Company is currently an indirect wholly-owned subsidiary of Acromas Holdings Limited ("Acromas"). Since completion of a group reorganisation (the "Reorganisation") on 4 March 2014, the Company has been the holding company of Saga in preparation for the Offer.

B.6 Major shareholders

The Company is currently owned and controlled by Acromas, which indirectly holds 100 per cent. of the voting rights attached to the share capital of the Company. Acromas is owned by the Charterhouse Funds (holding 36 per cent. of the share capital and 42 per cent. of the voting rights), the CVC Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), the Permira Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), Andrew Goodsell (holding six per cent. of the share capital and two per cent. of the voting rights), Stuart Howard (holding three per cent. of the share capital and one per cent. of the voting rights), numerous employees (together holding 10 per cent. of the share capital and three per cent. of the voting rights) and other institutional investors (holding four per cent. of the share capital and five per cent. of the voting rights). Immediately following the Offer and Admission, it is expected that Acromas will hold between 48 per cent. and 74 per cent. of the issued share capital of the Company, assuming no exercise of the Over-allotment Option, and between 41 per cent. and 70 per cent., if the Overallotment Option is exercised in full. Any further sales of Shares by the Selling Shareholder would require the approval of the Private Equity Investors.

Many of the shareholders in Acromas are owed subordinated shareholder debt by an Acromas subsidiary (the "Acromas shareholder debt"). As at 31 January 2014, approximately £4.0 billion of Acromas shareholder debt was outstanding, of which two per cent. was held by Andrew Goodsell, one per cent. by Stuart Howard and three per cent. by numerous employees. Acromas intends to use all of the net proceeds from the sale of Existing Shares in the Offer, and the proceeds of any future sales of Shares, to pay down holders of Acromas shareholder debt proportionately.

Andrew Goodsell and Stuart Howard are both directors of Acromas and various entities within the AA Group.

On 8 May 2014, the Company, Acromas, certain general partners of the Charterhouse Funds, the CVC Funds, the Permira Funds, the Selling Shareholder, Andrew Goodsell and Stuart Howard entered into the Relationship Agreement which will, conditional upon Admission, regulate the ongoing relationship between the Company and the other parties. The principal purpose of the Relationship Agreement is to ensure that the Company and its subsidiaries are capable of carrying on their business independently of Acromas and its shareholders, that transactions and relationships with Acromas and its shareholders (including any transactions and relationships with any member of the Group) are at arm's length and on normal commercial terms, and that the goodwill, reputation and commercial interests of the Company are maintained. The Relationship Agreement will continue (a) for so long as the Shares are listed on the premium listing segment of the Official List and traded on the London Stock Exchange's main market for listed securities; and (b) until the later of (i) any of the Private Equity Investors (together with its associates) being entitled to exercise or control the exercise, directly or indirectly, of 10 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company; and (ii) Acromas or any of its current shareholders being entitled to exercise or to control the exercise of 30 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company.

Under the Relationship Agreement, each Private Equity Investor is able to appoint one Non-Executive Director to the Board for so long as it is entitled, either directly or indirectly through its voting rights in Acromas, to exercise or to control the exercise of the equivalent of 10 per cent. or more (or such lower percentage as it may hold on the later of Admission and any sale of Shares pursuant to the Over-allotment Option) of the votes able to be cast on all or substantially all matters at general meetings of the Company. The first such appointees are James Arnell on behalf of the Charterhouse Funds, Pev Hooper on behalf of the CVC Funds and Charles Sherwood on behalf of the Permira Funds. One of these appointees, as determined by the Selling Shareholder, may also be an observer (with the right to attend but not vote) at Audit Committee meetings.

The Directors believe that the terms of the Relationship Agreement will enable the Group to carry on its business independently of Acromas and its shareholders, and ensure that all transactions and relationships between the Company and/or the members of the Group (on the one hand) and Acromas and its shareholders (on the other) are, and will be, on arm's length terms and on a normal commercial basis.

B.7 Historical financial information

The selected financial information set out below has been extracted without material adjustment from the historical financial information relating to the Group.

Combined income statement

	Year ended 31 January
	2014	2013 (£ millions)	2012
Revenue	1,257.9	1,310.4	1,175.3
Cost of sales	(817.9)	(854.8)	(776.0)
Gross profit	440.0	455.6	399.3
Administrative and selling expenses	(292.4)	(322.7)	(263.7)
Investment income	12.7	15.6	13.7
Finance costs	(11.1)	(2.2)	(2.5)
Finance income	–	3.3	1.4
Profit before tax	149.2	149.6	148.2
Tax expense	(39.6)	(36.3)	(40.0)
Profit for the year	109.6	113.3	108.2

Combined Statement of Financial Position

	Year ended 31 January
	2014	2013 (£ millions)	2012
Total assets	3,927.3	5,028.4	4,633.8
Total liabilities	2,807.5	3,983.3	3,696.9
Invested capital	1,119.8	1,045.1	936.9
Total liabilities and invested capital	3,927.3	5,028.4	4,633.8

Combined Statement of Cash Flows

	Year ended 31 January
	2014	2013 (£ millions)	2012
Net cash (used in) / from operating activities	174.1	234.5	218.5
Net cash (used in) / from investing activities	(59.9)	(76.5)	(364.3)
Net cash (used in) / from financing activities	(469.7)	54.2	86.6
Net (decrease) / increase in cash and cash equivalents	(355.5)	212.2	(59.2)
Net foreign exchange differences	0.1	(0.3)	1.2
Cash and cash equivalents at 1 February	609.0	397.1	455.1
Cash and cash equivalents at 31 January	253.6	609.0	397.1

Revenue increased by £82.6 million, or 7.0 per cent., from £1,175.3 million in the year ended 31 January 2012 to £1,257.9 million in the year ended 31 January 2014, primarily reflecting the full-year impact of trading results for the Allied Healthcare Group, which was acquired in October 2011, partially offset by a decline in motor insurance gross premiums and AA Motor net premiums underwritten by the Group, which reflects wider market trends.

Profit increased by £1.4 million, or 1.3 per cent., from £108.2 million in the year ended 31 January 2012 to £109.6 million in the year ended 31 January 2014, primarily reflecting a favourable prevailing trend in motor insurance claims experience leading to increased reserve releases, partially offset by an increase in exceptional expenses primarily due to one-off refinancing costs, an increase in healthcare branch integration costs and fair value losses being recognised in the 2014 financial year on currency forward contracts that were unexpired as at 31 January 2014.

The Group's total assets net of liabilities have increased by £182.9 million, or 19.5 per cent., from £936.9 million as at 31 January 2012 to £1,119.8 million as at 31 January 2014, primarily as a result of retained earnings over that period, less a dividend paid to Acromas in the 2014 financial year.

As discussed in "Current operations and principal activities" above, the Group also calculates underlying revenue and underlying EBITDA to remove the impact of one-off items or timing differences from its audited results.

There has been no significant change in the financial or trading position of the Group since 31 January 2014, the date to which the last audited combined accounts of the Group were prepared.

B.8 Pro forma financial information

The unaudited pro forma statement of net assets set out below has been prepared to illustrate the effect of the Offer and refinancing of certain Group debt on the combined net assets of the Group as if the Offer and refinancing of certain Group debt had occurred on 31 January 2014.

This unaudited pro forma statement of net assets has been prepared for illustrative purposes only and, because of its nature, the pro forma statement of net assets addresses a hypothetical situation and does not represent the Group's real financial position or results. It may not, therefore, give a true picture of the Group's financial position or results nor is it indicative of the results that may or may not be expected to be achieved in the future. The unaudited pro forma statement of net assets is compiled on the basis consistent with the accounting policies of the Group and on the basis set out in the notes below, and in accordance with Annex II to the Prospectus Directive Regulation. It should be read in conjunction with the notes below.

			Adjustments
	Group's statement of net assets as	Proceeds from the Offer net of expenses		Pro forma Group's statement of
		Refinancing	and related	net assets as
	at 31 January 2014 (note 1)	of Group debt (note 2) (£ millions)	application (note 3)	at 31 January 2014 (note 4)
Total assets	3,927.3	(1,077.1)	(37.6)	2,812.6
Financial liabilities	1,798.4	(555.4)	(538.8)	704.2
Other liabilities	1,009.1	–	–	1,009.1
Total liabilities	2,807.5	(555.4)	(538.8)	1,713.3
Net assets	1,119.8	(521.7)	501.2	1,099.3

(1) The combined statement of net assets of the Group at 31 January 2014 has been extracted without material adjustment from the Group's historical financial information for the year ended 31 January 2014.

(2) As at 31 January 2014, the Group's debt facilities were held by the Acromas Group and distributed to the Group via intercompany loans. On 17 April 2014, the Group entered into a new Senior Facilities Agreement and on 25 April 2014, the Group drew term loan facilities of £825.0 million maturing in 2019 and £425.0 million maturing in 2020, incurring fees of £27.0 million (of which £1.5 million was expensed immediately).

The net proceeds of £1,223.0 million together with existing cash resources of £47.0 million were loaned to Acromas to facilitate repayment of its existing debt including accrued interest totalling £1,270.0 million. Interest rate cap instruments covering the full amount of the debt through to March 2016 were acquired by the Group from the Acromas Group at their fair value of £0.6 million. The net amount due to the Group from these two transactions was settled by way of a distribution of £1,269.5 million.

As part of the transactions associated with the refinancing, the Group utilised part of its distributable reserves to release the Acromas Group from the remaining balance due to the Group. Following this release, the amounts owed by and to the Acromas Group have been reduced to £nil, and bank debt totalling £1,250.0 million less capitalised fees of £25.5 million has been incurred and reflected in the Group's balance sheet.

(3) The Company expects to receive approximately £550.0 million from the subscription of New Shares in the Offer before estimated underwriting commissions and other taxes, fees and expenses incurred in connection with the Offer of approximately £37.6 million.

As a result, the Company expects to receive net proceeds of £512.4 million from the Offer which it intends to use together with existing cash resources to reduce the Group's indebtedness by repaying the full amount (£425.0 million) of the bank debt maturing in 2020 and £125.0 million of the bank debt maturing in 2019. On repayment of the debt, £11.2 million of capitalised fees will be expensed.

(4) No adjustment has been made to reflect any trading or other transactions undertaken by the Group since 31 January 2014.

B.9 Profit forecast

Not applicable. There is no profit forecast or estimate included in the Prospectus.

B.10 Qualifications in the audit report on the historical financial information

Not applicable. There are no qualifications to the accountants' report on the historical financial information.

B.11 Insufficient working capital

Not applicable. In the opinion of the Company, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of the Prospectus.

SECTION C – SECURITIES

C.1 Type and class of securities

On Admission, there will be up to 1,110,705,405 ordinary shares of one pence each in the share capital of the Company (the "Shares") in issue (assuming the New Share Offer Size (as defined below) is set at the top end of the New Share Offer Size Range (as defined below)). The New Share Offer Size and the Existing Share Offer Size will be set out in a pricing statement (the "Pricing Statement"), which is expected to be published on or about 23 May 2014 and will be available on the Offer Website at www.saga.co.uk/shares.

All Shares in issue on Admission will be fully paid.

When admitted to trading, the Shares will be registered with ISIN number GB00BLT1Y088 and SEDOL number BLT1Y08.

C.2 Currency

United Kingdom pounds sterling.

C.3 Issued share capital

As at the date of the Prospectus, the issued share capital of the Company is £8 million, comprising 800 million Shares of one pence each, all of which were fully paid or credited as fully paid. Immediately following Admission, the issued share capital of the Company is expected to be between £10,346,143 comprising 1,034,614,286 Shares (if the New Share Offer Size is set at the bottom of the New Share Offer Size Range) and £11,107,054 comprising 1,110,705,405 Shares (if the New Share Offer Size is set at the top of the New Share Offer Size Range).

All Shares rank pari passu with each other in all respects.

C.4 Rights attaching to the Shares

The rights attaching to the Shares will be uniform in all respects and they will form a single class for all purposes, including with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Company. On a show of hands every shareholder who is present in person shall have one vote and on a poll every shareholder present in person or by proxy shall have one vote per Share. Except as provided by the rights and restrictions attached to any class of shares, shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.

C.5 Restrictions on transfer

There are no restrictions on the free transferability of the Shares.

C.6 Admission

Application will be made to the FCA for all of the Shares, issued and to be issued, to be admitted to the premium listing segment of the Official List of the FCA and to the London Stock Exchange for such Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

C.7 Dividend policy

The Directors intend to adopt a progressive dividend policy while maintaining an appropriate level of dividend cover. This dividend policy will reflect the underlying earnings and growth of the business and the cash conversion of the Group while retaining sufficient capital in the Group to fund continued investment and sufficient capital reserves. It is therefore the Board's current intention to target an initial dividend payout ratio of approximately 40 to 50 per cent. of the Group's net income (excluding the impact of extraordinary or one-off items).

Assuming that there are sufficient distributable reserves available at the time, the Directors intend that the Company will pay an interim dividend and a final dividend in respect of each financial year in the approximate proportions of one-third and two-thirds, respectively, of the total annual dividend.

The current intention of the Board is that the first dividend to be paid by the Company will be a prorata dividend in respect of the financial year ending 31 January 2015, which will be paid in June 2015 and determined by applying Saga's dividend policy described above to the full year to 31 January 2015 and pro-rating the dividend for the proportion of the financial year that follows Admission.

The Company may revise its dividend policy from time to time. There are no guarantees that the Company will pay dividends or the level of any such dividends.

SECTION D – RISKS

D.1 Key information on the key risks specific to the Company and its industry

The Group's business depends on the integrity of its brand. Any actual or perceived deterioration of the quality of the Group's brand, as a result of actions by the Group or by third parties, could have a material adverse effect on the Group's business, results of operations and financial condition.

The Group is subject to detailed and comprehensive government regulation and legislation applicable to each of its business segments. Government regulators are concerned primarily with the Group's financial stability and the protection of customers and third-party claimants rather than its shareholders or creditors. The Group may have to respond to changes in legislation or regulation, which may require the Group to change its operational practices or otherwise make adaptations to its services in the relevant markets, which may further result in reduced revenues.

The Group may face increased competition and price pressure in any of the markets in which it operates. The Group's competitors may seek to compete aggressively on the basis of pricing and to the extent that the Group matches any reduction in pricing by its competitors, its business, financial conditions and results of operations could be materially and adversely affected. To the extent that the Group does not match or remain within a competitive margin of its competitors' pricing, or if the Group otherwise seeks to implement price increases, the Group may experience a decline in sales, which could materially and adversely affect the Group's business, financial conditions and results of operations.

The Group collects non-public data (including name, address, age, bank and credit card details and other personal data) from its customers and others as part of the operation of its business. Failure to comply with data protection laws could lead to regulatory censure, fines, civil and criminal liability and reputational and financial costs. Forthcoming changes to the UK, EU or other data protection regimes under which the Group operates, including the EU General Data Protection Regulation, may also impact the Group's operations.

Due to the uncertain nature of underwriting insurance products, the Group's technical reserves to cover the estimated cost of future insurance claims payments and related expenses may not adequately cover those costs, which may negatively impact the Group's financial condition.

The Group is subject to a range of additional risks arising from economic, market and geo-political conditions impacting on demand for its products and services and its investment returns. In addition, it is subject to operational risks including in relation to its IT systems, retention of key staff and integration of acquisitions.

D.3 Key information on the key risks specific to the Shares

There is no existing market for the Shares and an active trading market for the Shares may not develop or be sustained. Moreover, even if a market develops, the Shares could be subject to market price volatility and the market price of the Shares may decline in response to developments that are unrelated to the Company's operating performance, as a result of sales of substantial amounts of Shares, for example, following the expiry of the restriction on Acromas selling Shares, or the issuance of additional Shares in the future, and shareholders could earn a negative or no return on their investment in the Company. Finally, shareholders in the United States or other jurisdictions outside the UK may not be able to participate in future equity offerings.

Acromas will retain a significant interest in the Group following the Offer and its interests may differ from or conflict with those of other shareholders.

The Company's ability to pay dividends in the future depends, among other things, on the Group's financial performance, claims experience and capital requirements and is therefore not guaranteed. There can be no guarantee that the Group's historic performance will be repeated in the future and its sales, profits and cash flow may not meet market expectations.

SECTION E – OFFER

E.1 Net proceeds and costs of the Offer

Through the issue of New Shares pursuant to the Offer, the Company expects to raise gross proceeds of £550.0 million. The aggregate expenses of, or incidental to, Admission and the Offer to be borne by the Company are estimated to be approximately £37.6 million, which the Company intends to pay out of the proceeds of the Offer.

Through the sale of Existing Shares pursuant to the Offer, the Company expects the Selling Shareholder to raise approximately £314.7 million (assuming that the Offer Price is set at the midpoint of the Price Range, the Existing Share Offer Size is set at the mid-point of the Existing Share Offer Size Range and there is no exercise of the Over-allotment Option) before taking into account expenses. On that basis, the aggregate underwriting commissions and amounts in respect of stamp duty or SDRT payable by the Selling Shareholder in connection with the Offer are estimated to be up to approximately £9.8 million.

E.2a Reasons for the Offer and use of proceeds

The Company is making the Offer and is seeking Admission in order to raise further consumer and investor awareness of Saga and to provide the Company with a structure for future growth and development. Saga has generated extensive publicity in the UK in anticipation of the Offer which has served to further enhance the Group's public profile and raise Saga's brand awareness. The Retail Offer has been structured to enable Saga's existing and prospective customers, along with other retail investors in the UK, to become shareholders in the Company.

The Directors believe that:

• the increased publicity surrounding Saga as a result of the Offer, coupled with the increased brand affinity resulting from its customers becoming shareholders in the Company, will further strengthen the Saga brand and lead to new business; and

• the Retail Offer will provide Saga with a number of additional contactable names for the Group Marketing Database, which Saga intends to use to generate incremental business over time.

The Company expects to receive approximately £550.0 million from the subscription of New Shares in the Offer before estimated underwriting commissions, fees and expenses incurred in connection with the Offer of approximately £37.6 million. As a result, the Company expects to receive net proceeds of approximately £512.4 million from the Offer.

The Company intends to use the net proceeds of the Offer of £512.4 million, together with existing cash resources, to reduce the Group's indebtedness by repaying £550.0 million drawn under the Group's senior facilities agreement (the "Senior Facilities Agreement"), which is expected to give the Company greater financial flexibility to drive the future growth of the business.

E.3 Terms and conditions of the Offer

The Offer is being made by way of:

• an Institutional Offer by the Company and the Selling Shareholder: (i) to certain institutional investors in the UK and elsewhere outside the United States in reliance on Regulation S and in accordance with locally applicable laws and regulations, and (ii) in the United States, only to QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act; and
• a Retail Offer by the Company and the Selling Shareholder to investors in the UK, the Channel Islands and the Isle of Man pursuant to:
• a Customer Offer to the Group's Eligible Customers;
• a Non-Customer Offer to retail investors;
• an Intermediaries Offer to Intermediaries for onward distribution to underlying applicants; and
• an Employee Offer to Eligible Employees of the Group.

Eligible Customers who acquire Shares under the Customer Offer and Eligible Employees who acquire Shares under the Employee Offer and hold them for a continuous period of one year following Admission will be eligible to receive at the end of that one year period one Free Share for every twenty Shares acquired in the Customer Offer or the Employee Offer (as applicable) and still retained, subject to certain conditions.

If there is more demand for Shares than the number of Shares available in the Offer, applications for Shares will be scaled back. In such circumstances, within the Retail Offer, the Company and the Selling Shareholder intend, after having consulted with the Joint Bookrunners, to give a preference to applications made in the Customer Offer and the Employee Offer over applications made in the Non-Customer Offer and the Intermediaries Offer. The same allocation policy will apply to retail investors applying through the Non-Customer Offer or the Intermediaries Offer.

The price at which the Shares are to be issued and sold in the Offer (the "Offer Price") is expected to be between 185 pence and 245 pence per Share (the "Price Range"). The number of New Shares to be issued in the Offer (the "New Share Offer Size") is expected to be between 224,489,796 Shares and 297,297,297 Shares (the "New Share Offer Size Range") and the number of Existing Shares to be sold in the Offer (the "Existing Share Offer Size") is expected to be between no Shares and 292,817,347 Shares (the "Existing Share Offer Size Range").

In addition, existing Shares (representing up to 15 per cent. of the total number of Shares that are subject to the Offer) are being made available pursuant to the Over-allotment Option granted by the Selling Shareholder.

The Price Range and the New Share Offer Size Range have been set by the Company. The Existing Share Offer Size Range has been set by the Selling Shareholder. It is currently expected that the Offer Price, the New Share Offer Size and the Existing Share Offer Size will be set within the Price Range, the New Share Offer Size Range and the Existing Share Offer Size Range, respectively. All Shares subject to the Offer will be issued or sold at the Offer Price, which will be determined by the Company and the Selling Shareholder in consultation with the Joint Bookrunners, following a bookbuilding process. A number of factors will be considered when setting the Offer Price, including the level and nature of demand for Shares during the book-building process, the level of demand in the Retail Offer and the objective of encouraging the development of an orderly after-market in the Shares. The Offer Price, the New Share Offer Size and the Existing Share Offer Size are expected to be announced on or around 23 May 2014. The Pricing Statement, which will contain, among other things, the Offer Price, the New Share Offer Size and the Existing Share Offer Size, will (subject to certain restrictions) be published on the Offer Website at www.saga.co.uk/shares.

If (i) the Offer Price is set above the Price Range or the Price Range is revised higher; (ii) the number of New Shares to be issued by the Company is set above or below the New Share Offer Size Range; and/or (iii) the number of Existing Shares to be sold by the Selling Shareholder is set above or below the Existing Share Offer Size Range, then the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA.

In such circumstances, the Pricing Statement would not be published until the period for exercising such withdrawal rights has ended. The expected date of publication of the Pricing Statement would be extended and the arrangements for withdrawing offers to subscribe for or purchase Shares would be made clear in the accompanying announcement.

It is expected that Admission will take place and unconditional dealings in the Shares will commence on the London Stock Exchange at 8.00 a.m. on 29 May 2014. Prior to Admission, it is expected that dealings in the Shares will commence on a conditional basis on the London Stock Exchange on 23 May 2014. The earliest date for settlement of such dealings will be 29 May 2014. All dealings in the Shares prior to the commencement of unconditional dealings will be on a "when issued" basis and will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. These dates and times may be changed without further notice.

The Offer is subject to the satisfaction of certain conditions contained in the Underwriting Agreement, which are typical for an agreement of this nature, including Admission becoming effective by no later than 8.00 a.m. on 29 May 2014 and on the Underwriting Agreement not having been terminated prior to Admission.

	Expected timetable of principal events
--	----------------------------------------	--	--	--

Event	Time and Date(1)(2) 2014
Latest time and date for receipt of completed Online Applications and hard copy Application Forms in respect of the Direct Retail Offer	11:59 pm on 20 May 2014
Latest date for receipt by the Intermediaries of completed application forms from retail investors in the Intermediaries Offer	20 May 2014
Latest time and date for receipt by the Receiving Agent of applications from Intermediaries in respect of the Intermediaries Offer	12:00 pm on 21 May 2014
Latest date for receipt of indications of interest in the Institutional Offer	22 May 2014
Announcement of the Offer Price and Offer Size, publication of the Pricing Statement and notification of allocations of Shares(3)	7:00 am on 23 May 2014
Commencement of conditional dealings in Shares on the London Stock Exchange	8:00 am on 23 May 2014
Admission and commencement of unconditional dealings in Shares on the London Stock Exchange	8:00 am on 29 May 2014

Notes:

• (1) Times and dates set out in the timetable above and mentioned throughout this document that fall after the date of publication of this document are indicative only and may be subject to change without further notice.
• (2) All references to time in this timetable are to UK time.
• (3) The Offer Price and Offer Size will be set out in the Pricing Statement. The Pricing Statement will not automatically be sent to persons who receive this document but it will be available free of charge at the Company's registered office at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE. In addition, the Pricing Statement will (subject to certain restrictions) be published on the Company's website at www.saga.co.uk/shares.

None of the Shares comprising the Offer may be offered for subscription, sale or purchase or be subscribed, sold or delivered, and this document and any other offering material in relation to the Shares may not be circulated, in any jurisdiction where to do so would breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval or permission, or to make any application, filing or registration, other than the UK.

Investors agreeing to subscribe for New Shares and/or purchase Existing Shares pursuant to the Offer agree with each of the Company and the Selling Shareholder to be bound by certain terms and conditions upon which Shares will be issued and/or sold in the Offer. Upon being allocated Shares pursuant to the Offer, each investor agrees to become a member of the Company, to acquire the Shares allocated to it at the Offer Price and to pay the Offer Price for the Shares allocated to it. If an investor fails to pay as required, the relevant investor will remain liable to pay such amount and will be deemed to have appointed the Joint Global Co-ordinators to sell any or all of the Shares allocated to it at such price as the Joint Global Co-ordinators may achieve subsequent to any such failure to pay.

Under the terms and conditions of the Offer, each investor makes certain representations, warranties and acknowledgements to the Company and the Selling Shareholder customary for an offer of this type, including but not limited to: (i) in relation to certain characteristics of the investor; (ii) the investor's compliance with restrictions contained in the Offer and with specified laws and regulations; (iii) reliance, responsibility and liability in respect of the Prospectus, the Offer and information outside of the Prospectus; (iv) compliance with laws; (v) jurisdiction; and (vi) liability for duties or taxes.

On request, an investor may be required to disclose certain information, including any information about the agreement to subscribe for and/or purchase Shares, the investor's nationality (if an individual) and the jurisdiction in which the investor's funds are managed or owned (if a discretionary fund manager). The terms and conditions also provide for the following issues: the sending of documents to the investor; the investor being bound by the Articles upon the transfer or issue of Shares; the application of English law to the contract to subscribe for and/or purchase Shares; and joint agreements to subscribe for and/or purchase Shares.

From Admission, the Offer will be fully underwritten by the Underwriters in accordance with the terms of the Underwriting Agreement.

E.4 Material interests

There are no interests, including conflicting interests, that are material to the Offer, other than those disclosed in B.6 above.

E.5 Selling Shareholder and Lock-up

(A) Expected interests of the Selling Shareholder immediately prior to and following Admission

The indicative interests in Shares of the Selling Shareholder immediately prior to Admission, together with a corresponding estimate of its interests in Shares immediately following Admission, are set out in the table below (calculated on the basis that the number of Shares issued and sold is set at the mid-point of the New Share Offer Size Range and Existing Share Offer Size Range, respectively).

	Interest immediately prior to Admission		Existing Shares to be sold pursuant to the Offer(1)		Interests immediately following Admission(2)
		% of				% of
Shareholder	No.	total issue	No.	% of holding	No.	total issued
Acromas Bid Co Limited	800,000,000	100	146,408,674	18	653,591,326	61

(1) Assuming that the number of Shares sold is set at the mid-point of the Existing Share Offer Size Range.

(2) Assuming the number of Shares issued and sold is set at the mid-point of the New Share Offer Size Range and Existing Share Offer Size Range, respectively.

(B) Lock-up arrangements

Pursuant to the Underwriting Agreement and related arrangements:

(i) the Company has undertaken, for 180 days from the date of the Prospectus, not to issue, offer, pledge, sell, issue or grant options, rights or warrants in respect of, contract to issue, pledge or sell, or otherwise dispose of, directly or indirectly, except for customary exceptions as provided in the Underwriting Agreement, any Shares or any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into, or exchangeable for, or that represent the right to receive, Shares or any such substantially similar securities (other than pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of, and in each case described in, this document) or to enter into any agreement, commitment or arrangement which provides for the issue, offer or sale of Shares or to do anything with the same economic effect as any of the foregoing, without the prior written consent of a majority of the Joint Global Co-ordinators, not to be unreasonably withheld or delayed;

(ii) the Selling Shareholder has undertaken, for 180 days from the date of the Prospectus, not to offer, pledge, sell, contract to sell or pledge, issue options, rights or warrants in respect of or otherwise dispose of, directly or indirectly, except for customary exceptions as provided in the Underwriting Agreement (including to meet tax liabilities incurred as a result of the Offer), any Shares or any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into, or exchangeable for, or that represent the right to receive, Shares or any such substantially similar securities, in each case, which are held by the Selling Shareholder on Admission or do anything with the same economic effect as any of the foregoing, without the prior written consent of a majority of the Joint Global Co-ordinators, not to be unreasonably withheld or delayed. Part of the proceeds of any sale of Shares by the Selling Shareholder will benefit certain of the Executive Directors, Senior Managers and other employees of the Group who have Acromas shareholder debt outstanding, which will be partly repaid from the proceeds of any such sale; and

(iii) in addition to their interest in the shares and debt of the Selling Shareholder, the Executive Directors and Senior Managers will be issued nil paid options, entitling them to call for Shares in the Company, on the day of Admission. Each Director and Senior Manager has undertaken, for 365 days from the date of the Prospectus, not to offer, pledge, sell, contract to sell or pledge, issue options, rights or warrants in respect of or otherwise dispose of, directly or indirectly, except for customary exceptions as provided in the Underwriting Agreement (including to meet tax liabilities incurred as a result of the Offer or by share awards received in connection with Admission), any Shares or any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into, or exchangeable for, or that represent the right to receive, Shares or any such substantially similar securities, in each case, which are held by the Director or Senior Manager (whether directly or through any employee share option plan) or do anything with the same economic effect as any of the foregoing, without the prior written consent of a majority of the Joint Global Co-ordinators, not to be unreasonably withheld or delayed.

E.6 Dilution

Pursuant to the Offer and Shares issued in connection with the nil cost options granted to certain members of management, the existing shareholders will experience a 25 per cent. dilution, if the New Share Offer Size is set at the mid-point of the New Share Offer Size Range.

E.7 Expenses charged to the investor

No expenses will be charged to investors by the Company or the Selling Shareholder. The Company intends to pay for the expenses of, or incidental to, Admission and the Offer to be borne by it out of cash resources.

Any expenses incurred by an Intermediary are for its own account. Intermediaries may charge retail investors a fee for acquiring or holding the allocated Shares for them, provided that the Intermediary has disclosed the fees and terms and conditions of providing those services to each retail investor prior to the underlying application being made. Any application made by investors through any Intermediary is subject to the terms and conditions agreed with each Intermediary.

DEFINITIONS AND GLOSSARY

The following apply throughout this document unless the context requires otherwise:

"AA Group"	AA Limited and its consolidated subsidiaries and subsidiary undertakings from time to time
"ABI"	Association of British Insurers
"Acromas"	Acromas Holdings Limited, the ultimate holding company of the Company
"Acromas Shareholders' Agreement"	the agreement between the Charterhouse Funds, the CVC Funds, the Permira Funds, Andrew Goodsell and Stuart Howard, among others, dated 18 September 2007 and amended on 28 January 2013 pursuant to which they agreed to regulate their relationship as shareholders of Acromas
"Act"	the Companies Act 2006, as amended
"Admission"	the admission of the Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities
"Articles"	the Articles of Association of the Company to be adopted from Admission
"Banks"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International, Mizuho International plc and UBS Limited
"Board"	the board of directors of the Company
"CAGR"	compound annual growth rate
"Charterhouse Funds"	CCP VII LP No. 1.1, CCP VII LP No. 1.2, CCP VII LP No. 2.1, CCP VII LP No. 2.2, CCP VII Co-investment LP A, CCP VII Co investment LP B, CCP VII Co-investment LP C, CCP VII Co investment LP D, CCP VII Co-investment LP E, Charterhouse Saga LP, CCP VII GmbH & Co. KG, CCP VIII LP No 1.1, CCP VIII LP No 1.2, CCP VIII LP No 2.1, CCP VIII LP No 2.2 and CCP VIII Co investment LP
"Co-Lead Manager"	Mizuho International plc
"Company"	Saga plc
"contactable household"	households included in the Group Marketing Database, excluding those that have opted out of all marketing under the UK Data Protection Act 1998, suppressed buyers (those individuals who have opted out of Saga marketing contact) and those who have been removed from the Group Marketing Database following data cleansing routines
"CREST"	the computerised settlement system operated by Euroclear UK & Ireland Limited to facilitate the transfer of title to shares in uncertificated form
"Customer Offer"	means the offer of Shares in the UK, the Channel Islands and the Isle of Man to the Group's Eligible Customers
"CVC Funds"	CVC European Equity Partners IV (A) L.P., CVC European Equity Partners IV (B) L.P., CVC European Equity Partners IV (C) L.P., CVC European Equity Partners IV (D) L.P., CVC European Equity Partners IV (E) L.P., CVC European Equity Partners Tandem Fund (A) LP, CVC European Equity Partners Tandem Fund (B) LP and CVC European Equity Partners Tandem Fund (C) LP

"Directors"	the Executive Directors and the Non-Executive Directors
"Direct Retail Offer"	means the Customer Offer, the Non-Customer Offer and the Employee Offer
"domiciliary care"	provision of social care services to individuals in their homes
"EBITDA"	earnings before interest payable, taxation, depreciation and amortisation
"EEA"	the European Economic Area
"Eligible Customers"	Saga's customers that are eligible for the Customer Offer
"Eligible Employees"	for purposes of the Employee Offer, employees of the Company or one of its subsidiaries as at 2 May 2014 in the UK, Channel Islands or the Isle of Man
"Employee Offer"	means the direct offer of Shares to Eligible Employees as described in, and pursuant to, the terms and conditions of the Employee Offer
"EU"	the European Union
"Executive Directors"	the executive directors of the Company
"Existing Share Offer Size"	the number of Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Existing Share Offer Size Range"	the range within which the Existing Share Offer Size is currently expected to be set, being between no Shares and 292,817,347 Shares
"Existing Shares"	Shares to be sold as part of the Offer by the Selling Shareholder (excluding, for the avoidance of doubt, the Over-allotment Shares)
"FCA"	the Financial Conduct Authority
"Group"	the Company and its consolidated subsidiaries and subsidiary undertakings and, prior to the completion of the Reorganisation, Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"Group Marketing Database"	the Group's proprietary database containing customer and other data used in the Group's marketing operations
"household"	an individual or couple (married or unmarried) living at a single address
"Institutional Offer"	the offer of Shares to certain institutional and other investors
"Intermediaries"	the entities appointed by the Company in connection with the Intermediaries Offer
"Intermediaries Offer"	the offer of Shares to the Intermediaries
"Intermediaries Terms and Conditions"	the terms and conditions on which each Intermediary has agreed to be appointed by the Company to act as an Intermediary in the Intermediaries Offer and pursuant to which Intermediaries may apply for Shares in the Intermediaries Offer
"Joint Bookrunners"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Joint Global Co-ordinators"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International and Merrill Lynch International
"Joint Lead Manager"	Investec Bank plc
"London Stock Exchange"	London Stock Exchange plc

"Main Market"	the London Stock Exchange's main market for listed securities
"Member State"	a member state of the European Union
"New Share Offer Size"	the number of New Shares to be issued pursuant to the Offer, to be set out in the Pricing Statement
"New Share Offer Size Range"	the range within which the New Share Offer Size is currently expected to be set, being between 224,489,796 New Shares and 297,297,297 New Shares
"New Shares"	new Shares in the Company to be issued as part of the Offer
"Non-Customer Offer"	means the direct offer of Shares to retail investors in the UK, the Channel Islands and the Isle of Man as described in, and pursuant to, the terms and conditions of the Non-Customer Offer
"Non-Executive Directors"	the non-executive directors of the Company
"Offer"	the issue of New Shares by the Company and the sale of Existing Shares by the Selling Shareholder
"Offer Price"	the price at which each Share is to be issued or sold under the Offer
"Offer Size"	the aggregate of the New Shares to be issued and sold pursuant to the Offer and the Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Offer Website"	www.saga.co.uk/shares
"Official List"	the Official List of the FCA
"Operating Group"	Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"Over-allotment Option"	the option granted to the Stabilising Manager by the Selling Shareholder to purchase, or procure purchasers for additional Shares (representing up to 15 per cent. of the total number of Shares that are subject to the Offer)
"Over-allotment Shares"	the existing Shares the subject of the Over-allotment Option
"Permira Funds"	Permira Europe III L.P.1, Permira Europe III L.P.2, Permira Europe III GmbH & Co. KG, Permira Europe III Co-investment Scheme and Permira Investments Limited
"Price Range"	185p to 245p per Share
"Pricing Statement"	the pricing statement to be published on or about 23 May 2014 by the Company detailing the Offer Price and the number of Shares which are the subject of the Offer
"Private Equity Investors"	the Charterhouse Funds, the CVC Funds and the Premira Funds
"Prospectus"	the final prospectus approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA, comprising this document, the Registration Document and the Securities Note
"Prospectus Directive"	Directive (2003/71/EC)
"Prospectus Directive Amending Directive"	Directive (2010/73/EU)
"qualified institutional buyers" or "QIBs"	has the meaning given by Rule 144A
"Qualified Investors"	persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive
"Registrar"	Capita Asset Services, a trading name of Capita Registrars Limited
"Registration Document"	means the Registration Document, which, together with this document and the Securities Note, constitutes the Prospectus

"Regulation S"	Regulation S under the US Securities Act
"Relationship Agreement"	the relationship agreement entered into between the Company, Acromas, certain general partners of the Charterhouse Funds, the CVC Funds, the Permira Funds, the Selling Shareholder, Andrew Goodsell and Stuart Howard on 8 May 2014
"Reorganisation"	the group reorganisation completed on 4 March 2014 in preparation for the Offer, as a result of which the Company became the holding company of the Group
"Retail Offer"	means the retail offer of Shares in the UK, the Channel Islands and the Isle of Man pursuant to the Customer Offer, the Non-Customer Offer, the Employee Offer and the Intermediaries Offer
"Retail Offer Advisor"	Solid Solutions (Associates) UK Limited
"Rule 144A"	Rule 144A under the US Securities Act
"Saga"	the Company and its consolidated subsidiaries and subsidiary undertakings
"Saga Shareholder Account"	the arrangements for the holding of Shares provided by the Saga Shareholder Account Nominee
"Saga Shareholder Account Nominee"	Capita Asset Services, a trading name of Capita IRG Trustees Limited
"SDRT"	stamp duty reserve tax
"Securities Note"	means the Securities Note, which, together with this document and the Registration Document, constitutes the Prospectus
"Selling Shareholder"	Acromas Bid Co Limited
"Senior Facilities Agreement"	the senior facilities agreement entered into by the Company and others members of the Group for (i) a term loan facility in an aggregate amount of £825.0 million maturing in 2019, (ii) a term loan facility in an aggregate amount of £425.0 million maturing in 2020 and (iii) a multicurrency revolving credit facility in an aggregate amount of £150.0 million
"Senior Managers"	Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong
"Shares"	the ordinary shares of the Company, having the rights set out in the Articles
"Sponsor"	Citigroup Global Markets Limited
"Stabilising Manager"	Merrill Lynch International
"UK"	the United Kingdom of Great Britain and Northern Ireland
"Underlying Applicants"	retail investors in the United Kingdom, the Channel Islands and the Isle of Man who wish to acquire Shares under the Intermediaries Offer
"Underlying EBITDA margin"	underlying EBITDA margin is calculated to show underlying EBITDA as a percentage of underlying revenue
"Underwriters"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Underwriting Agreement"	the underwriting agreement entered into between the Company, the Directors, the Selling Shareholder and the Banks
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States of America, and the District of Columbia
"US Securities Act"	United States Securities Act of 1933, as amended

This document, the Securities Note and the Summary together comprise a prospectus (the "Prospectus") for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended (the "Prospectus Directive") relating to Saga plc (the "Company") prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the "FCA") made under section 73A of the Financial Services and Markets Act 2000 (the "FSMA"). The Prospectus will be made available to the public in accordance with the Prospectus Rules.

Application will be made to the FCA for all of the ordinary shares of the Company (the "Shares") issued and to be issued in connection with the Offer to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange plc (the "London Stock Exchange") for all of the Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together, "Admission"). Conditional dealings in the Shares are expected to commence on the London Stock Exchange, on 23 May 2014. It is expected that Admission will become effective, and that unconditional dealings in the Shares will commence, on 29 May 2014. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange. The new Shares issued by the Company will rank, upon Admission, pari passu in all respects with the existing Shares including the right to receive dividends or other distributions declared, made or paid after Admission.

The directors of the Company, whose names appear on page 25 of this document (the "Directors"), including those individuals who will become Directors on Admission, and the Company accept responsibility for the information contained in the Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in the Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.

Prospective investors should read this document in its entirety, together with the Securities Note and the Summary and, in particular, the discussion of certain risks and other factors that should be considered prior to any investment in the Shares as set out in the sections entitled "Risk Factors" in this document and the Securities Note.

Saga plc

(Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 08804263)

Offer of up to 555,352,703 Shares of one pence each at an Offer Price expected to be between 185 pence and 245 pence per Share and admission to the premium listing segment of the Official List and to trading on the London Stock Exchange

		Joint Global Co-ordinators
	BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International
		Joint Bookrunners
BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International	J.P. Morgan Cazenove	UBS
		Joint Lead Manager Investec
		Co-Lead Manager Mizuho International
		Sponsor Citigroup
	ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION (assuming the Offer Price is set at the mid-point of the Price Range)
		Issued and fully paid
	Number			Nominal Value
	1,067,351,162			£10,673,512

The Price Range and the New Share Offer Size Range have been set by the Company and the Existing Share Offer Size Range has been set by the Selling Shareholder. It is currently expected that the Offer Price, New Share Offer Size and Existing Share Offer Size will be set within the Price Range, the New Share Offer Size Range and the Existing Share Offer Size Range, respectively. A number of factors will be considered in determining the Offer Price, the New Share Offer Size, the Existing Share Offer Size and the basis of allocation, including the level and nature of demand for the Shares during the bookbuilding process, the level of demand in the Retail Offer, prevailing market conditions, the Company's historical performance estimates of its business potential and earning prospects and the objective of establishing an orderly after-market in the Shares. Unless required to do so by law or regulation, the Company does not envisage publishing a supplementary prospectus or an announcement triggering the right to withdraw applications for Shares pursuant to section 87Q of FSMA on determination of the Offer Price, the New Share Offer Size or the Existing Share Offer Size. If the Offer Price is set within the Price Range, the New Share Offer Size is set within the New Share Offer Size Range and the Existing Share Offer Size is set within the Existing Share Offer Size Range, a pricing statement containing the Offer Price and confirming the number of New Shares and Existing Shares which are comprised in the Offer (the "Pricing Statement") and related disclosures are expected to be published on or about 23 May 2014 and will be available on the Offer Website at www.saga.co.uk/shares.

In connection with the Offer, Merrill Lynch International, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law over-allot Shares up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

Each of Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited (the "Underwriters") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. Mizuho International plc (together with the Underwriters, the "Banks") is authorised and regulated by the Financial Conduct Authority. Each of the Banks is acting exclusively for the Company and no one else in connection with the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Offer or any transaction or arrangement referred to in the Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the Prospectus including its accuracy, completeness and verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of the Prospectus or any such statement. No representation or warranty, express or implied, is made by any of the Banks or any of their respective affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in the Prospectus, and nothing in the Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities other than the securities to which it relates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances in which such offer or solicitation is unlawful.

The Company consents to the use of the Prospectus by the Intermediaries in connection with the Intermediaries Offer in the UK, the Channel Islands and the Isle of Man on the following terms: (i) in respect of Intermediaries who are appointed by the Company prior to the date of this document, from the date of this document and (ii) in respect of Intermediaries who are appointed by the Company after the date of this document, from the date on which they are appointed to participate in the Intermediaries Offer and agree to adhere to and be bound by the terms of the Intermediaries Terms and Conditions, in each case until the closing of the Intermediaries Offer. The Company accepts responsibility for the information contained in the Prospectus with respect to any purchaser of Shares pursuant to the Offer. Any Intermediary that uses the Prospectus must state on its website that it uses this document in accordance with the Company's consent. Intermediaries are required to provide, at the time of such offer, the terms and conditions of the Intermediaries Offer to any prospective investor who has expressed an interest to such Intermediary in participating in the Intermediaries Offer. Any application made by investors to any Intermediary is subject to the terms and conditions which apply to the transaction between such investor and such Intermediary.

NOTICE TO OVERSEAS SHAREHOLDERS

The Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "US Securities Act"). The Shares offered by the Prospectus may not be offered or sold in the United States, except to qualified institutional buyers ("QIBs"), as defined in, and in reliance on, the exemption from the registration requirements of the US Securities Act provided in Rule 144A under the US Securities Act ("Rule 144A") or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Prospective investors are hereby notified that the sellers of the Shares may be relying on the exemption from the provisions of section 5 of the US Securities Act provided by Rule 144A or another relevant exemption. The Shares have not been recommended by any US federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of the Prospectus. Any representation to the contrary is a criminal offence in the United States.

The Shares have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Shares may not be offered or sold in Australia, Canada, Japan or South Africa, or to or for the account or benefit of any national, resident or citizen in Australia, Canada, Japan or South Africa. No actions have been taken to allow a public offering of the Shares under the applicable securities laws of any jurisdiction, including Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen of any jurisdiction, including Australia, Canada, Japan or South Africa. The Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or purchase any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.

The distribution of the Prospectus and the offer and sale of the Shares in certain jurisdictions may be restricted by law. Other than in the United Kingdom, the Channel Islands and the Isle of Man, no action has been or will be taken by the Company, the Selling Shareholder or the Banks to permit a public offering of the Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom the Channel Islands and the Isle of Man, no action has been taken or will be taken to permit the possession or distribution of the Prospectus (or any other offering or publicity materials relating to the Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither the Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession the Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421 B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421 B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

Available information

For so long as any of the Shares are in issue and are "restricted securities" within the meaning of Rule 144(a)(3) under the US Securities Act, the Company will, during any period in which it is not subject to section 13 or 15(d) under the US Securities Exchange Act of 1934, as amended (the "US Exchange Act"), nor exempt from reporting under the US Exchange Act pursuant to Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of a Share, or to any prospective purchaser of a Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the US Securities Act.

Withdrawals

In the event that the Company is required to publish a supplementary prospectus, applicants who have applied to subscribe for or purchase Shares in the Offer will have at least two Business Days following the publication of the supplementary prospectus within which to withdraw their offer to acquire Shares in the Offer.

In addition, in the event that (i) the Offer Price is set above the Price Range or the Price Range is revised higher; and/or (ii) the number of New Shares to be issued by the Company is set above or below the New Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority); and/or (iii) the number of Existing Shares to be sold by the Selling Shareholder is set above or below the Existing Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority), then applicants who have applied to subscribe for or purchase Shares in the Offer would have a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer in its entirety pursuant to section 87Q of FSMA before the end of a period of two Business Days commencing on the first Business Day after the date on which an announcement of this is published via a Regulatory Information Service announcement (or such later date as may be specified in that announcement).

If the application is not withdrawn within the stipulated period, any offer to apply for Shares in the Offer will remain valid and binding. Institutional investors wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer must do so by lodging a written notice of withdrawal by hand (during normal business hours only) at the offices of any of the Joint Global Co-ordinators at their respective address set out in Part 3 "Directors, Secretary, Registered and Head Office and Advisers" so as to be received by no later than two Business Days after the date on which the supplementary prospectus is published or the date on which an announcement is made (as described above). Investors in the Direct Retail Offer wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer must do so by registering the withdrawal on the Offer Website at www.saga.co.uk/shares or notifying the Receiving Agent, Capita Registrars Limited, (during normal business hours only) by telephone on 0800 015 5429. Notice of withdrawal given by any other means or which is deposited with or received after the expiry of such period will not constitute a valid withdrawal. Applicants who have applied for Shares via the Intermediaries, who wish to withdraw an application following publication of a supplementary prospectus or an announcement is made (as described above), should contact the Intermediary through whom they applied for Shares for details of how to withdraw an application.

Company's website

Information contained on the Company's website is not incorporated into and does not form part of this document.

The date of this document is 8 May 2014.

CONTENTS

PART		Page
PART 1	EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS	6
PART 2	RISK FACTORS	8
PART 3	DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS	25
PART 4	PRESENTATION OF FINANCIAL AND OTHER INFORMATION	27
PART 5	TARGET MARKET OVERVIEW	33
PART 6	BUSINESS DESCRIPTION	37
PART 7	REGULATORY OVERVIEW	56
PART 8	DIRECTORS, SENIOR MANAGERS AND CORPORATE GOVERNANCE	74
PART 9	SELECTED FINANCIAL INFORMATION	80
PART 10	OPERATING AND FINANCIAL REVIEW	83
PART 11	HISTORICAL FINANCIAL INFORMATION	112
PART 12	UNAUDITED PRO FORMA FINANCIAL INFORMATION	170
PART 13	INDEPENDENT EXTERNAL ACTUARIES' STATEMENT	174
PART 14	ADDITIONAL INFORMATION	177
PART 15	DEFINITIONS AND GLOSSARY	213

PART 1

EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS

Expected timetable of principal events

Event	Time and Date(1)(2) 2014
Latest time and date for receipt of completed Online Applications and hard copy Application Forms in respect of the Direct Retail Offer	11:59 pm on 20 May 2014
Latest date for receipt by the Intermediaries of completed application forms from retail investors in the Intermediaries Offer	20 May 2014
Latest time and date for receipt by the Receiving Agent of applications from Intermediaries in respect of the Intermediaries Offer	12:00 pm on 21 May 2014
Latest date for receipt of indications of interest in the Institutional Offer	22 May 2014
Announcement of the Offer Price and Offer Size, publication of the Pricing Statement and notification of allocations of Shares(3)	7:00 am on 23 May 2014
Commencement of conditional dealings in Shares on the London Stock Exchange	8:00 am on 23 May 2014
Notification by e-mail of share allocation for Shareholders who submitted an Online Application and elected to hold their Shares through the Saga Shareholder Account or Saga Share Direct(4) (5)	23 May 2014
Admission and commencement of unconditional dealings in Shares on the London Stock Exchange	8:00 am on 29 May 2014
CREST accounts credited in respect of Shares in uncertificated form	29 May 2014
Despatch by post of: (i) Share Account Statements to Shareholders holding Shares in the Saga Shareholder Account; (ii) definitive share certificates to Shareholders for Shares in certificated form; and (iii) allocation statements to Shareholders who elected to hold their Shares with Saga Share Direct (excluding, in each case, those Shareholders who are sent a notification by e-mail) together with, in each case (if applicable), payment of any refund by cheque	From 29 May 2014
Payment of any refund (as applicable) to debit card accounts of Shareholders who submitted an Online Application	From 29 May 2014

Notes:

• (1) Times and dates set out in the timetable above and mentioned throughout this document that fall after the date of publication of this document are indicative only and may be subject to change without further notice.
• (2) All references to time in this timetable are to UK time.
• (3) The Offer Price and Offer Size will be set out in the Pricing Statement. The Pricing Statement will not automatically be sent to persons who receive this document but it will be available free of charge at the Company's registered office at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE. In addition, the Pricing Statement will (subject to certain restrictions) be published on the Company's website at www.saga.co.uk/shares.
• (4) Shareholders who submitted an Online Application and elected to hold their Shares through the Saga Shareholder Account or Saga Share Direct will be able to deal in Shares on a conditional basis prior to Admission. For further details on how to effect sales and purchases prior to and from Admission, and the charges payable, please refer to section 5 of Part 6 "Details of the Offer" of the Securities Note.
• (5) Shareholders who applied for Shares in the Intermediaries Offer should consult their Intermediary as to when they will be sent documents in respect of any Shares they have been allocated and when they may commence dealing in any such Shares.

It should be noted that, if Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of the parties concerned.

Offer statistics

Price Range (per Share)(1)	185 pence to 245 pence
Expected minimum number of Shares in the Offer	258,653,571
Expected maximum number of Shares in the Offer(2)	555,352,703
– New Shares	297,297,297
– Existing Shares	258,055,406
Number of existing Shares subject to the Over-allotment Option(3)	83,302,905
Number of Shares in issue following the Offer(4)	1,067,351,162
Market capitalisation of the Company at the Offer Price(4)	£2.3 billion
Estimated net proceeds of the Offer receivable by the Company(5)	£512.4 million
Estimated net proceeds of the Offer receivable by the Selling Shareholder(6)(7)	£304.9 million

Notes:

• (1) It is currently expected that the Offer Price will be within the Price Range. It is expected that the Pricing Statement containing the Offer Price and the number of Shares which are comprised in the Offer will be published on or about 23 May 2014 and will be available (subject to certain restrictions) on the Company's website at www.saga.co.uk/shares. If the Offer Price is set above the Price Range, the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA.
• (2) It is currently expected that the Offer Size will be set by the Company within the Offer Size Range. If the Offer Size is set above or below the Offer Size Range, then the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA. It is expected that the Pricing Statement containing the Offer Price and the number of New Shares and Existing Shares which are comprised in the Offer will be published on or about 23 May 2014 and will be available (subject to certain restrictions) on the Company's website at www.saga.co.uk/shares.
• (3) The maximum number of existing Shares comprised in the Over-allotment Option is, in aggregate, equal to 15 per cent. of the maximum number of Shares comprised in the Offer.
• (4) Assuming the Offer Price is set at the mid-point of the Price Range. The market capitalisation of the Company at any given time will depend on the market price of the Shares at that time. There can be no assurance that the market price of a Share will be equal to or exceed the Offer Price.
• (5) The estimated net proceeds receivable by the Company are stated after deduction of the estimated underwriting commissions and other fees and expenses of the Offer (including VAT) payable by the Company, which are currently expected to be approximately £37.6 million. The Company will not receive any of the net proceeds from the sale of the Existing Shares in the Offer by the Selling Shareholder or the sale of Shares pursuant to the Over-allotment Option.
• (6) The number of Shares to be delivered on settlement of the Retail Offer (or thereafter) is subject to minor adjustment to the extent Shares are retained by the Selling Shareholder following defaults by applicants under the terms of the Retail Offer and/or if the Selling Shareholder determines to increase the number of Shares sold to rectify any operational or administrative errors in the Retail Offer.
• (7) The estimated net proceeds receivable by the Selling Shareholder are stated after deduction of the estimated underwriting commissions and other fees and expenses of the Offer (including VAT) payable by the Selling Shareholder, which are currently expected to be approximately £9.8 million.

PART 2

RISK FACTORS

Any investment in the Shares is subject to a number of risks. Prior to investing in the Shares, prospective investors should carefully consider risk factors associated with the Group's business and the industry in which it operates, described below, together with all other information contained in this document, the Securities Note and the Summary. In particular and in addition to the risk factors included below, prospective investors should carefully review the risks relating to the Offer and the Shares detailed in the section entitled "Risk Factors" in the Securities Note.

Prospective investors should note that the risks relating to the Group, its industries and the Shares summarised in the Summary are the risks that the Directors and the Company believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the Summary but also, among other things, the risks and uncertainties described below and in the section entitled "Risk Factors" in the Securities Note.

The risk factors described below and in the section entitled "Risk Factors" in the Securities Note are not an exhaustive list or explanation of all risks which investors may face when making an investment in the Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations and/or financial condition and, if any such risk should occur, the price of the Shares may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Shares is suitable for them in the light of the information in this document and their personal circumstances.

RISKS RELATING TO THE GROUP'S BUSINESS

The Group may fail to maintain favourable brand recognition or may be adversely impacted by negative publicity.

The Group's business depends on the integrity of its brand and its reputation for quality of service, and favourable recognition of the Saga brand is important in the sectors in which the Group operates. Any actual or perceived quality deficiency could adversely impact the Group's sales and marketing activities, as well as demand for its services. Factors affecting brand recognition are often outside of the Group's control, and the Group's efforts and investments to maintain or enhance favourable brand recognition may not have their desired effects. The Group is highly reliant on maintaining satisfactory customer service performance to prevent brand corrosion. If its customer service were to be deficient or if any one incident were to receive significant negative publicity, the Saga brand could be damaged. In addition, if the publicity surrounding Saga as a result of the Offer is negative or if the share price were to trade lower in the after-market, it could damage the Saga brand. The Group is also exposed to the risk that litigation, employee misconduct, operational failures, failure to process insurance claims in an efficient manner, the outcome of regulatory or other investigations or actions, data protection failures, health and safety incidents, the reputations and actions of its business partners or competitors, press speculation, negative publicity or negative customer reviews, whether or not founded in fact, could damage the Group's brand and reputation.

The proliferation of online information on and reviews about consumer experiences has increased the reputational risk the Group faces as a result of any dissatisfaction a customer may have with respect to its services. The rise in the use of social media over recent years has further compounded the potential impact of any negative publicity generated by such incidents. Any negative publicity relating to specific incidents in any one of the Group's business segments has the potential to negatively impact the reputation of the Group's other segments, particularly those operating under the same brand names. Likewise, if the Group were to enter into a new business, it may be exposed to events which have a negative impact on its brand or reputation, which in turn could reduce the value of its brand in its current business segments. Furthermore, the damage to the Group's reputation from any such incident could be exacerbated by any failure on its part to respond effectively to such an incident. There can be no assurances that an event giving rise to significant negative publicity will not occur. Any negative publicity could have a material adverse effect on the Saga brand and the Group's reputation, and therefore could have a negative impact on the Group's business, financial condition and results of operations.

The Group is dependent on the provision of services by third-party suppliers in all its businesses, including insurance underwriters, hotel operators, airlines, third-party tour operators, ship servicers, healthcare service providers and IT service providers. The efficiency, timeliness and quality of performance by such third-party suppliers are largely beyond the Group's control. Any negative publicity resulting from the action of partners to whom the Group outsources certain activities or third-party suppliers could also have an adverse effect on the Group's reputation. Incidents involving third parties may also result in increased regulation, legislation or liability impacting the Group. The Group has limited control over incidents involving third parties and how those third parties respond to such incidents but the Group's business, financial condition and results of operations may still be adversely impacted by any negative publicity surrounding those incidents.

The Group is subject to extensive regulatory supervision and legislation, including requirements to maintain certain licences, permissions and authorisations.

The Group is subject to detailed and comprehensive government and other regulation and legislation (see Part 7 "Regulatory Overview"). Regulatory authorities have broad powers over many aspects of the business, including marketing and selling practices, product development and structures, data and records management (including customer financial and personal data), systems and controls, health and safety, capital requirements, permitted investments and the ability to impose restrictions on the future growth of business, particularly in respect of the Group's financial services products. The Group may also be negatively impacted by any national or EU regulation prohibiting distinctions between customers on the basis of age. Government regulators are concerned primarily with the Group's financial stability and the protection of customers and third-party claimants rather than its shareholders or creditors.

The Group may be unable to pass on regulatory compliance costs to its customers, thereby contributing to a decline in its margins. If the Group does seek to pass such costs to its customers, this may reduce the price competiveness of, and, hence, customer demand for, the Group's products and services. Government policy, legislative and regulatory requirements and interpretations thereof may change and become more onerous or constraining, and may weaken or eliminate markets in which the Group operates. The Group cannot predict any such changes with certainty and may have to respond to changes in government policy, legislation or regulation. This may require the Group to change its strategy, marketing, business or operational practices or otherwise make adaptations to its products or services in the relevant market, which may further increase its costs or result in reduced revenues. The Group may not be able to respond effectively to any such changes and this may have a material adverse effect upon its business, financial condition and results of operation.

Travel regulation

The Group's travel business is subject to extensive legislative and regulatory requirements specific to the travel and tourism business, including requirements related to environmental protection (including noise, anti-fouling and carbon emissions restrictions), ship safety and security regulation, the suitability of vessels and the obligation to pay duties. Compliance with legal and regulatory requirements (including with respect to its licences) imposes significant costs and restrictions on the Group's travel business and changing requirements could potentially limit the Group's flexibility with respect to its strategy and its marketing, business and operational practices.

Additionally, tour operators, including the Group, are subject to the tax regulations of the EU and individual member states. European Court decisions have mandated that the Tour Operators Margin Scheme ("TOMS"), which imposes additional VAT charges on travel businesses, is applicable to tour operators in all EU member states. While HMRC has not to date imposed additional tax burdens on tour operators in the UK, the imposition of additional VAT charges resulting from TOMS may impact the Group or the partner travel companies with which the Group operates in other jurisdictions. Non-compliance with applicable legislation, regulation or applicable tax schemes could lead to sanctions, substantial fines and an inability to conduct business, as well as reputational damage, thereby affecting a significant part of the Group's travel business.

Financial services regulation

The Group's financial services business must obtain and maintain certain licences, permissions and authorisations (such as permission from the FCA to conduct insurance intermediation activities and investment services) and must comply with relevant rules and regulations. The Group is also subject to competition and consumer protection laws enforced by the Office of Fair Trading ("OFT"), the UK Competition Commission and the European Competition Commission.

Changes in government policy or legislation, or the regulatory interpretation or enforcement thereof (at a national or EU level), in any of the financial services markets in which the Group operates may occur in the future or be applied retrospectively, and may adversely affect the Group's underlying profitability, product range, distribution channels and capital requirements. For example, in December 2013, the UK Competition Commission released a provisional findings report on the private motor insurance market, which found unnecessarily high insurance premiums, price-parity contracts between price comparison websites ("PCWs") and insurers and sub-standard post-accident repairs, and as a result proposed a number of possible remedies, including audits of repairs and more clear information on PCWs. The ultimate outcome of the UK Competition Commission's investigation has yet to be seen, but may result in adverse outcomes, including negatively impacting the profitability of the Group's credit hire schemes through the introduction of caps on the costs of hire vehicles. As another example, the Legal Aid Sentencing and Punishing of Offenders Act 2012 ("LASPO"), which bans personal injury referral fees, is pushing down the cost of motor insurance claims, and therefore the wholesale price of motor insurance. The Directors believe LASPO was largely responsible for the reduction in average premiums within the motor insurance market in 2013, which has created greater price competition within the sector. The Group has responded to this downward price pressure by reducing its prices, but has also benefited from corresponding reductions in its claims costs. Other examples of recent or future legislation or regulation which may have or has had an adverse effect on the Group includes the implementation of the Insurance Mediation Directive II ("IMD II") in 2015, genderneutral pricing at the end of 2012, the Retail Distribution Review (the "RDR") at the start of 2013, the impact of historical and future changes in the Financial Services Compensation Scheme ("FSCS"), including the risk of failure in other financial services sectors impacting the level of levies on insurers, amendments to UK insurance contract law, government initiatives to improve transparency and customer confidence in insurance pricing and new EU solvency requirements. The Group may also face increased compliance or compensation costs due to such changes to financial services legislation or regulation, or due to the need to set up additional compliance controls.

The market for insurance products is highly competitive, particularly in the home and motor insurance markets. This often results in new business policies being accepted by the Group, like most other insurance providers, on non-economic or negative margins. This can lead to a difference in new and renewal policy pricing, whereby a new business customer will normally receive a lower (discounted) price than a renewing customer. The practice of differentiating between new and renewing customers is part of an ongoing debate in the UK and continues to be an area of focus for regulators, the media and consumer groups. If the insurance industry were subject to heightened regulatory scrutiny or media comment as a result of this practice, it may negatively impact the Group's business and brand, especially as some of the Group's target demographic may be perceived as vulnerable.

The Group's technical reserves are particularly susceptible to potential retrospective changes in legislation and new court decisions. For example, a change in the "Ogden discount rate," which is the discount rate set by the UK government and used by courts to calculate lump sum awards in personal injury cases, would impact all relevant claims settled after that date, regardless of whether the insurance to which the claim relates was priced on that basis or not. Changes to the Ogden discount rate can result from changes in or volatility of interest rates or changes in the cost of care and other medical cost inflation, and there is a particular risk that sustained low interest rates may lead to increased pressure on the UK government to reduce the Ogden discount rate. A reduction in the Ogden discount rate would have the effect of increasing the present value of lump sum awards, thereby increasing the amount the Group would need to pay to settle certain claims. Any such changes could have a material adverse effect on the Group's business, financial condition and results of operations.

Healthcare services regulation

The Group's healthcare services business is subject to a high level of regulation and oversight, in particular from the Care Quality Commission ("CQC"), the independent regulator for health and adult social care in England. Many aspects of the Group's healthcare services business are subject to regulatory requirements, including the recruitment and appointment of staff, occupational health and safety, the duty of care to people the Group supports, administration of controlled drugs, clinical standards and the conduct of its professional and care staff.

Regulators in the healthcare sector carry out inspections on an announced and unannounced basis. A failure to comply with regulations, the receipt of a poor rating, the receipt of a negative report that leads to a determination of regulatory non-compliance or the Group's failure to cure any defect noted in an inspection report could result in reputational damage, license suspension or revocation, fines and other penalties. Additionally, where the services the Group provides are funded by local authorities ("LAs"), such authorities monitor the Group's performance. If the authorities find shortcomings in the quality of care, they may impose punitive measures. These can, for example, include the suspension of new placements with service users and, in extreme cases, removal of all individuals placed by that authority, which can also have implications for the referral activity of other authorities.

Actions taken by the CQC, LAs or other regulatory entities could also result in the Group ceasing to provide a service or providing care in a particular location because of the negative publicity such action may generate. In addition, action taken by a regulator, LAs or clinical commissioning groups ("CCGs") in relation to one or more of its services or the Group directly, regardless of the substantive merit or the eventual outcome of such action, may have a negative effect on the Group's reputation and its ability to attract or retain customers and staff or expand its business.

The healthcare sector is subject to frequent, and often significant, legislative change, with which the Group will be required to comply. The Group cannot guarantee that current laws and regulations will not be modified or replaced in the future, whether in response to public pressure or otherwise. Current proposed legislation, including the Care Bill, may result in significant changes to the policy and regulatory framework for adult care and support, including a cap on personal care costs. The implementation of such policies may be more restrictive on the prices the Group may set and may also result in increased compliance costs, which could have a material adverse effect on the Group's business, financial condition, or results of operations.

Increased competition may result in downward pressure on the Group's pricing.

The Group may face increased competition and price pressure in the markets in which it operates. While the Group does not focus on price as its primary means of competition, the Group recognises that price is an important competitive factor for all its businesses. The Group's competitors may seek to compete aggressively on price in order to protect or gain market share. To the extent that the Group matches or exceeds any reduction in price by its competitors, its business, financial conditions and results of operations could be materially and adversely affected. In addition, to the extent that the Group does not match or remain within a competitive margin of its competitors' pricing, or if the Group otherwise seeks to implement price increases, the Group may lose market share and experience a decline in sales, which could materially and adversely affect the Group's business, financial conditions and results of operations.

Competition in the travel sector

The Group's travel business has numerous competitors, particularly in its core European markets. There are a variety of risks which may undermine the Group's competitiveness or the competitiveness of its products and services. For example, further consolidation on either a global or a pan-European scale may offer travel groups the opportunity to expand their operations, enhance capacity management and achieve greater cost reductions by eliminating redundancy in their operations and networks.

Over recent years, the travel industry has also experienced a substantial increase in travel and tourism businesses focused on online distribution, including travel PCWs such as kayak.com, hotelscombined.com and mobissimo.com, as well as more broadly web-based travel providers, such as Expedia and Travelocity, with lower cost structures than traditional retail travel businesses resulting in increased competition. These factors have driven down selling prices and may continue to do so. Further, the expanded availability and choice of airlines have, together with the rise of low-cost airlines, led to a significant increase in the online distribution of airline seats to a wide range of destinations at competitive prices. Neither Saga Holidays nor Titan Travel holiday products are currently offered through PCWs. If the Group is unable to maintain a competitive cost structure with its partner airlines as compared with other airlines, the Group may be unable to offer competitive prices to its customers for package holidays that involve flights. Additionally, as a result of the rise of PCWs, there has been a shift away from individuals relying on packaged tours towards a "do it yourself" approach to holiday planning. As the Group offers only packaged tours and does not offer services through PCWs, there is a risk that the Group will lose business to those entities which offer their services separately in a manner appropriate for a "do it yourself" holiday booking.

Although both the Saga Holidays and Titan Travel brands largely serve the mature, premium end of the holiday market catering to over 50s individuals travelling in non-peak times, their business model is still subject to various competitive challenges, including price competition, and the failure to respond to such challenges may force the Group to reduce their prices significantly in order not to lose customers and to maintain their market share. These competitive challenges could have a material adverse effect on the Group's business, financial condition and results of operations.

Competition in the financial services sector

The Group's financial services business competes with global, national and local insurance companies, including direct writers of insurance coverage and other non-insurance financial services companies, such as banks, many of which offer, or may offer, alternative products or more competitive prices. In particular, the Group faces intense pricing competition in the over 50s insurance market. Many of the Group's competitors are larger and have greater financial, technical and operational resources, as well as the ability to underwrite all of their own policies. Additionally, the Group may face new entrants who compete for business in the over 50s insurance or financial services markets.

The supply of insurance capacity is related to prevailing prices, the level of insured losses and the level of industry profitability and capital surplus which, in turn, may fluctuate in response to changes in inflation rates, the rates of return on investments being earned by the insurance industry, as well as other social, economic, legal and political changes. As a result, the insurance business has historically been characterised by periods of intense competition in relation to price and policy terms and conditions often due to excessive underwriting capacity, as well as periods when shortages of capacity have seen increased premium rates and policy terms and conditions that are more advantageous to underwriters. As a result of such fluctuations, the Group has lost customers through price competition in the past and may again lose customers through price competition in the future.

The Group and the Group's competitors in the insurance industry may write policies at a loss in the first year of business through initial price discounts in order to gain new business that will be profitable in subsequent years. In order to respond to this practice, the Group will, as appropriate, compete on price, which may have the effect of lowering insurance portfolio margins and profits in the near term. Increases in the supply of insurance (whether through an increase in the number of competitors, an increase in the capitalisation available to insurers or otherwise) and, similarly, reduction in consumer demand for insurance, or alternatively, prolonged periods of price reductions and discounts, could have adverse consequences for the Group, including fewer contracts written, lower premium rates, increased expenses for customer acquisition and retention, and less favourable policy terms and conditions.

Competition to sell general insurance products has also intensified in recent years through the development of alternative distribution channels, such as PCWs. Insurance PCWs are intermediaries that present multiple insurance quotes to a given buyer, allowing the buyer to make a comparison between insurance offerings based on a single set of information provided to the PCW by the buyer. PCWs have led to lower prices in the insurance industry. While the long-term implications of the growth in PCWs cannot be predicted, consumer use of PCWs in the motor insurance industry has generally increased over time, while the use of PCWs by the over 50s demographic has remained relatively stable in the same period. However, with the increasing use of the internet amongst the over 50s population, use of PCWs by over 50s insurance customers may increase in the future as it has in the general insurance industry. Increased use of PCWs could reduce the effectiveness of the Group's marketing efforts, which could negatively impact the Group's business, financial condition and results of operations.

Competition in the healthcare services sector

The Group's healthcare services business faces current and prospective competition for individuals requiring care from numerous local, regional and national providers of care at home services. Some of its competitors are public sector bodies such as foundation trusts, entities that operate on a not-for-profit basis or charitable organisations, none of which are subject to the same economic pressures as for-profit companies. Although the Group is the largest care at home service provider by revenue, the Group also competes with complex care providers, who provide services to individuals with complex needs (including long-term conditions and end of life care) in out-of-hospital settings, including the patient's home. The revenues of competitors attributable to complex care are not directly comparable to the Group, however, because their services cannot be easily disaggregated from their care at home services. Competition in the healthcare services business could limit the Group's ability to attract and retain customers requiring support or expand its business, which could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group collects non-public data from customers, business contacts and employees and is subject to data protection regulations, which may result in regulatory action or reputational damage.

The Group regularly collects and processes non-public data from its customers, business contacts and employees as part of the operation of its business and in connection with developing and maintaining the Group Marketing Database. As a result, the Group must comply with data protection and privacy laws in the United Kingdom, the European Union ("EU") and other relevant jurisdictions. Those laws impose certain requirements on the Group in respect of the collection and use of such personal information. For example, under UK and EU data protection law, when collecting personal data, certain information must be provided to the individual whose data is being collected. This information includes the identity of the data controller, the purpose for which the data is being collected, and any other relevant information relating to the processing. There is a risk that the Group may not make the notifications required to, or obtain the consents required from, subjects and regulators. Failure to comply with data protection laws could potentially lead to regulatory censure, fines, civil and criminal liability and reputational and financial costs.

Forthcoming changes to the wider UK, EU or other data protection regimes may also impact the Group's operations. For example, the EU General Data Protection Regulation, which is currently being drafted, may require the Group to change its customer profiling, reconfirm regulatory compliance of all or a portion of the Group Marketing Database, prevent the Group from using certain data that it currently collects or require the Group to delete customer data it currently has in the Group Marketing Database. Compliance with any such regulations could have a material adverse effect on the Group's business, financial condition and results of operations.

In connection with its financial services business, the Group collects customer data, including credit scores, vehicle data and licensing information and the Group's travel business collects passenger data for its cruise and package tours. Other businesses in the financial services and travel industries have been subjected to investigations, lawsuits and adverse publicity due to allegedly improper disclosure of customer information. Additionally, data protection regulations restrict the collection and use of data from publicly funded healthcare customers. As privacy and data protection have become more sensitive issues, the Group may also become exposed to potential liabilities in relation to its handling, use and disclosure of individuals' data. The Group is also exposed to the risk that the personal data the Group controls could be wrongfully accessed or used, whether by employees or third parties. If the Group, or any of the third-party service providers on which the Group relies, fail to process, store or protect such personal data in a secure manner or if any such theft or loss of personal data were to occur, the Group could be exposed to liability under data protection laws. This could also result in damage to the Group's brand and reputation, as well as the loss of new or existing customers, any of which could have a material adverse effect on its business, financial position and results of operations.

The Group's own insurance may be inadequate, premiums may increase and, if there is a significant deterioration in its claims experience, insurance may not be available on acceptable terms.

The Group maintains medical malpractice, public liability, employer's liability, directors' and officers' liability, motor fleet, marine and property insurance, as well as insurance for certain other claims. However, claims not covered by the Group's insurance or in excess of its insurance coverage may arise, such as property losses resulting from fire, natural disaster or other causes outside its control. Furthermore, the Group may be unable to obtain insurance cover in the future on acceptable terms, or without substantial premium increases or at all, particularly if there is deterioration in its claims experience history. For example, there are a limited number of providers of shipping insurance and the Group has in the past had difficulty securing appropriate or reasonably priced insurance cover for its shipping operations. A successful claim against the Group not covered by or in excess of its insurance cover could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group's results depend on the performance of its investment portfolio, and changes in the financial markets may have an adverse effect on the value of the Group's investment portfolio

The Group's investment returns, which are a significant contributor to the Group's profitability in any given year, are highly susceptible to changes in interest rates and credit spreads. The Group's investment returns are subject to a variety of risks, including risks related to general global economic conditions (including those in the eurozone), market volatility and interest rate fluctuations, liquidity risk and credit risk. Changes in these factors can be difficult to predict.

The value of the Group's fixed income portfolio will be affected by interest rates, changes in the credit ratings of the issuers of the securities and liquidity generally in the bond markets, which may affect returns on, and the market values of, UK and international fixed-income investments in the Group's investment portfolios. Generally, investment income may be reduced during sustained periods of lower interest rates as higher yielding fixed-income securities are called, mature or are sold and the proceeds reinvested at lower rates, even though prices of fixed-income securities tend to be higher and gains realised upon their sale tend to increase under such circumstances. During periods of rising interest rates, prices of fixed income securities tend to fall and realised gains upon their sale are reduced or realised losses are increased, but reinvestments take place at a higher yield. When the credit rating of the issuer of the debt securities falls, or the credit spread with respect to the issuer increases, the value of the fixed income securities may also decline. A substantial part of the Group's fixed income securities are classified as "available for sale" in its accounts, such that changes in asset values attributable to interest rate and credit changes are reflected in other comprehensive income on the Group's balance sheet. Changes to the amortised cost resulting from changes in currency exchange rates in which the Group's fixed income securities are held are reflected in the Group's income statement, whereas currency changes that impact the fair value of the Group's investment assets and other comprehensive income are reflected in the Group's balance sheet.

The Group invests in various financial instruments and real property. As of 31 January 2014, the Group's investment portfolio included £650.6 million in deposits with financial institutions, debt securities, money market funds, loan funds and hedge funds, and an additional £57.0 million in freehold and long leasehold land and buildings. The Group is also directly and indirectly exposed to the credit of sovereign states, financial services institutions and other sectors such as utilities, including exposure to member countries of the eurozone. The value of those instruments has been and may continue to be adversely affected by developments in the global sovereign debt markets, the global economy as a whole and developments specific to the issuers of those securities. In addition, there can be no assurance that the Group will not have more varied exposure in the future, that it will not incur losses as a result of indirect exposure or that the risks associated with its direct holdings will not increase as a result of adverse changes in the sovereign debt markets.

The Group's investment portfolio also contains interest-rate-sensitive instruments that may be adversely affected by significant changes in interest rates, particularly its cash holdings. As of 31 January 2014, the Group's investment portfolio included £490.1 million in interest-rate-sensitive instruments (primarily LIBORlinked or subject to fair value remeasurement). Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions, and other factors beyond the Group's control. In the event of a significant change in interest rates, the Group may not be able to mitigate interest rate sensitivity in a changing interest rate environment. In particular, a significant increase in interest rates could result in significant losses, realised or unrealised, in the fair value of the Group's current investment portfolio and, consequently, could have an adverse effect on its results of operations and capital position. Lower interest rates could also affect income derived from fixed income investments as borrowers seek to refinance at lower interest rates, redeeming current debt instruments and requiring the Group to reinvest the proceeds in securities with lower interest yields. A changing interest rate environment will also impact the Group's returns on its substantial cash holdings.

Due to the unpredictable nature of the frequency, size and timing of losses, including payments, that may arise under the Group's insurance policies, the Group's liquidity needs could be substantial from time to time. Illiquidity of certain investments may prevent the Group from selling assets in a timely manner. This may force the Group to liquidate its investments at times and prices that are not optimal. This could have a material adverse effect on the performance of its investment portfolio and therefore a material adverse effect on the Group's business, prospects, results of operations and financial position.

As with its fixed income investments, any hedging or property designated as investment property held by the Group would be classified as financial assets at fair value. In the event of future currency fluctuation or property market declines, there can be no assurance as to the amount or timing of future realised losses or unrealised losses or impairments of the Group's investments, which may, in each case, adversely affect the Group's business, financial condition and results of operations.

The Group is exposed to transactional risks due to volatility in foreign exchange rates and fuel prices.

The Group is exposed to transactional risks in respect of costs denominated in foreign currencies, particularly euros and US dollars, as the Group purchases holiday package components denominated in currencies other than pounds sterling, its functional and reporting currency. A fall in pounds sterling relative to other currencies would lead to a corresponding increase in costs denominated in foreign currencies. Although the Group has in the past and may in the future have foreign exchange forward contracts in place to reduce its exposure, the Group's exposure is not always hedged, in full or in part, and foreign exchange volatility may have a material adverse effect on the Group's business, financial condition and results of operations. As at 31 January 2014, the Group has no foreign exchange forward contracts outstanding.

The Group has in the past and may in the future use fuel oil swap agreements to reduce its exposure to fluctuations in the oil price based on estimated monthly fuel consumption. The Group may not be able to fully forecast all of its fuel needs in order to hedge them through swap contracts, and therefore fuel price volatility may have a material adverse effect on the Group's business, financial condition and results of operations. As at 31 January 2014, the Group had no fuel oil swaps outstanding.

The Group is exposed to risks in connection with the acquisitions or disposals it may undertake.

The Group has in the past and may in the future make acquisitions and disposals of businesses, and enter in to joint ventures with third parties, that are consistent with its core strategic priorities. While the Group will undertake due diligence and consider potential costs, risks and issues in relation to the integration of any proposed acquisition, joint venture or the disaggregation of any disposal, there can be no assurance that such procedures will be accurate or complete, and they may not identify or mitigate all material risks to which the entity being acquired is exposed. In addition, the integration of any proposed acquisition may not be successful or in line with the Group's expectations.

The Group will seek, where appropriate, contractual representations and warranties in connection with any acquisition, joint venture or disposal and, where necessary, additional indemnifications in relation to specific risks. However, there can be no guarantee that such protection will be obtained or be adequate in all circumstances. The Group may also provide relevant representations, warranties and indemnities to counterparties. While most such clauses are likely to be customary in such contracts, they may result in the Group receiving claims from counterparties. Even if the Group identifies an attractive opportunity, it may not be able to successfully complete the acquisition or disposal. Failure to adequately protect the Group from losses resulting from acquisitions, joint ventures or disposals, including losses resulting from the unsuccessful integration of future acquisitions, could damage the Group's reputation and brands, and could have an adverse effect on the Group's business, financial condition and results of operations.

The Group could be materially adversely affected by the loss of key employees, or by an inability to attract and retain, or obtain FCA approval for, qualified personnel.

The Directors believe that the growth and success of the Group's business depends on its ability to attract highly skilled and reliable personnel that either have or can develop specialised know-how in the insurance and underwriting, travel, healthcare and media sectors, as well as IT and other specialist skills. The Group competes with various employers across its segments, including private, not for profit and public sector employers, in attracting and retaining suitably qualified personnel. Additionally, regulatory changes in the financial services, travel and healthcare sectors could require the Group to hire more qualified personnel or, if the Group cannot find and recruit more suitable personnel, to reduce its operations accordingly. Specifically, the Group is required to have individuals approved by the FCA and the Gibraltar Financial Services Commission in key roles in the Group's financial services business. The Group's inability to retain senior personnel or to hire suitable personnel in the future to form part of its senior management teams could negatively impact its business, financial condition and results of operations.

Likewise, wage pressures due to increases in public or private sector pay or other factors could increase the Group's operating costs and decrease its operating margins. Labour, through wages, salaries and staff costs, represents the Group's highest cost and an increase in the minimum wage or a discretionary pay award would increase its payroll cost. Failure to maintain the Group's existing staff would increase its operating costs and impact the quality of the products and services the Group provides as the Group invests substantial financial resources and time in recruiting and training its staff. Furthermore, the outsourcing of certain functions within the Group's business and certain internal restructuring and redundancies may adversely affect the morale of its staff. The Group's expansion and development could be hampered by any staff shortage and the quality of its services could be adversely affected.

In 2012, HMRC commenced an enquiry into specific branches of the healthcare business's compliance with national minimum wage legislation as it applies to care workers engaged in the supply of domiciliary care. This enquiry did not relate to the basic rate of pay for the hours worked (as the Group's rates of pay per hour worked are at, or in excess of, the national minimum wage), but to varying hourly rates of pay, compensation for waiting time and travel time between service appointments. Following this enquiry, HMRC confirmed that they would not take any action in relation to this enquiry. However, there can be no guarantee that HMRC will not commence future enquiries into the pay models used by the Group's healthcare business. Any further enquiry or any quantified claims made against the Group could negatively impact the Group's business, financial condition and results of operations.

The Group's operations are highly dependent on the proper functioning of its IT and communication systems, and the obsolescence or failure of such systems could have a material adverse effect on the Group's business, financial condition and result of operations.

The Group relies heavily on its IT and communication systems to conduct its business, including for the purposes of maintaining the Group Marketing Database, its payment processing systems, its reservation system, its insurance systems and other operational systems. Additionally, the Group relies on third parties to provide key IT functions, such as operation of the general ledger, corporate domain services and payroll services. The Group's processes and systems, including those provided by third parties, may not operate as expected, may not fulfil their intended purpose, or may become obsolete, which may result in the Group's operations being inefficient, ineffective or inaccurate and, in turn, adversely affect the overall operational and financial performance of its business. In particular, several of the Group's systems have been developed internally by the Group and therefore any system upgrades would also need to be developed internally. The Group's contact centre operations could be disrupted due to loss or breakdown of physical infrastructure, insufficient staff or other reasons. If its customers experience a lack of quality service or reliability, its reputation could be damaged significantly, such that customers may be reluctant to employ its services, which could result in the loss of existing customers and a decline in revenue.

To achieve its strategic objectives and remain competitive, the Group must continue to develop and enhance its IT and communications systems and adapt its services, products and infrastructure in order to meet evolving market trends and consumer demands and keep pace with new IT developments, while at the same time maintaining the reliability and integrity of its operations, products and services. The Group may be required to invest substantial financial, operational and technical resources to the development of new software or other technology, the acquisition of equipment and software or upgrades to its existing systems and infrastructure. The Group may not be able to anticipate such developments or have the resources to acquire, design, develop, implement or utilise, in a cost-effective manner, IT and communications systems that provide the capabilities necessary for the Group to compete effectively. Any failure to adapt to technological developments could have a negative effect on the Group's business, financial condition and results of operations.

Downturns in economic conditions in the UK and elsewhere may have a material adverse effect on the Group's business, financial condition and results of operations.

Changes in economic conditions and the volatility of, and disruptions to, the international financial markets have had, and, if prolonged or repeated, may continue to have, a material adverse effect on customer demand for the Group's products and services and therefore its business, financial condition and results of operations. Both global and European capital markets have experienced volatility and disruption for extended periods in recent years. This volatility and disruption has had a number of effects, including a lack of liquidity in the equity and debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the credit market, failure of major financial institutions, downgrades to sovereign credit ratings, a decrease in spending and an increase in debt defaults. In particular, if economic volatility negatively impacts the economic welfare of the Group's target demographic of over 50s individuals, the Group's business, financial condition and results of operations may be materially and adversely affected.

The Group is exposed to the economic, market, fiscal, regulatory, legislative, political and social conditions in the United Kingdom from which it derives the majority of its revenues. Economic conditions have been volatile in the United Kingdom in the past and may become volatile again in the future. Deterioration in economic conditions or a long-term persistence of negative conditions could result in a downturn in new business and sales volumes of the Group's products and services, an increase in insurance claims and cancellations of package holidays and cruises, and a decrease in its investment return, which, in turn, could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is exposed to various risks in connection with its pension commitments, which could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group operates three defined benefit pension schemes: (i) the Saga Pension Scheme, (ii) the Nestor Scheme and (iii) the Healthcall Scheme (together, the "Saga Group Defined Benefit Schemes"). Valuations of all UK defined benefit plans are required to be conducted on at least a triennial basis in accordance with legislative requirements. The last valuations of the Nestor Scheme and the Healthcall Scheme took place as at 5 April 2012 and 31 October 2012 respectively, with the next valuation of the Saga Pension Scheme currently taking place as at 31 January 2014 (with results expected by October 2014). The Group is currently in compliance with its funding obligations in relation to the Saga Pension Scheme, the Nestor Scheme and the Healthcall Scheme, with recovery plans in place to eliminate deficits over time on the Nestor Scheme and the Healthcall Scheme. On an IAS19(R) basis, the funding deficit with respect to the Saga Pension Scheme was £14.9 million as at 31 January 2014. However, whether a funding deficit is recognised in the 2014 triennial valuation will depend on the assumptions the Company agrees with the Saga Pension Trustee, which means any funding deficit may differ materially from the current estimate. If a funding deficit is disclosed in the context of future triennial valuations of the Saga Pension Scheme, the trustees and employers under the applicable plan will be required to agree a recovery plan for the Saga Pension Scheme, or could be determined by the Pensions Regulator, the statutory regulator for occupational pension schemes in the UK, to be in default. Any such "funding deficit" will be the estimated shortfall in the amount required, on an actuarial calculation based on assumptions agreed between the employer and trustees in the context of the relevant valuation, to make provision for the scheme's liabilities. Accordingly, the Group is exposed to the risk that its pension funding commitments may increase over time in the context of subsequent valuations of the Saga Group Defined Benefit Schemes which could have a material adverse effect on the Group's business, financial condition and results of operations. In addition, a funding obligation can arise if a relevant trigger occurs, such as a scheme wind-up, employer insolvency or the last active member of the scheme ceases to be employed, and the Pensions Regulator has the power to require the Group to make additional contributions or put in place other financial support.

The assets of the Saga Group Defined Benefit Schemes are invested predominantly in externally managed funds and insurance companies. The trustees of the Saga Group Defined Benefit Schemes prescribe the investment strategy in relation to the assets of each of the Saga Group Defined Benefit Schemes. The assets may be invested in different asset classes including diversified growth funds, equities, fixed-income securities, real estate and other investment vehicles. The values attributable to the externally invested pension plan assets are subject to fluctuations in the capital markets. Unfavourable developments in the capital markets could result in a substantial coverage shortfall for these pension obligations, resulting in a significant increase in the Group's net pension obligations. In addition, deterioration in the Group's financial condition could lead to an increased funding commitment by the Group to the trustees, which could further exacerbate any financial difficulties the Group could face at such time. Any such increases in its net pension obligations could adversely affect its financial condition due to increased additional outflow of funds to finance the pension obligations. The Group is also exposed to risks associated with interest rate and inflation rate changes in connection with its pension commitments. A decrease in interest rates and/or increase in longevity or inflation could result in an increase to the Group's liabilities, and therefore its contribution requirements in respect of the Saga Group Defined Benefit Schemes.

The Pensions Regulator has powers under the Pensions Act 2004 which, if various conditions are met and the power is exercised, could require the Group to make additional contributions or put in place other financial support for liabilities of a UK tax registered occupational pension scheme outside the Group. One condition is that a member of the Group is (or was within the previous six years) "connected" or "associated" with an employer in that scheme. The Pensions Regulator would need to decide to exercise the power and that imposing the obligation is reasonable in the circumstances. The Group is currently "associated" with the AA Group. The AA Group operates a defined benefit pension scheme: the AA UK Pension Scheme. The last completed triennial actuarial valuation carried out in relation to the AA UK Pension Scheme as at 31 March 2013 disclosed assets of approximately £1,563 million and a funding deficit of approximately £202 million (any buy-out deficit would be significantly higher). The AA Group have recently undertaken asset based financing to remove this deficit. The Group may be exposed to the risk that its pension funding commitments may increase if liability for such a non-Group pension scheme is extended to the Group by the Pensions Regulator. Since the power arose in 2005, a public decision by the determinations panel of the Pensions Regulator to exercise its powers has only been reported six times. An order made by the Pensions Regulator could have a material adverse effect on the Group's operating results, business prospects and financial condition. The maximum amount of any support that an individual member of the Group could be forced to pay is limited to the buy-out deficit in the relevant third party scheme at the relevant default date.

Separation from the AA Group may result in disruptions to the Group

Saga and the AA Group provide certain services to each other, including administrative and central functions, and commercial services such as the underwriting of AA products by the Group's underwriting function, fulfilment of roadside assistance and home emergency services for Saga by the AA Group, and claims management services provided by Saga to the AA Group. These services have been formalised in an inter-group umbrella services agreement (the "Umbrella Services Agreement"), initially between certain members of the Group, the AA Group and the Acromas Group, which came into effect on 1 February 2013 and was amended on 31 March 2014.

It is possible that disagreements may arise with the AA Group, that the arrangements described above may not function properly, that the AA Group may find alternative arrangements with third parties on more attractive commercial terms to those set out in the Umbrella Services Agreement or that those arrangements may be terminated by either or both parties. Any of these events could have a negative impact on the ongoing operations of the Group. The Group will also continue to offer its underwriting services to both the Group's insurance entities and the AA Group, and any breakdown of that relationship could negatively impact the Group. Finally, the AA Group may also seek to compete with the Group in any or all of the markets in which the Group currently operates. Any of these events could have an adverse effect on the Group's business, prospects, results of operations and financial position.

RISKS SPECIFIC TO THE GROUP'S TRAVEL BUSINESS

Incidents, political instability, war, the spread of contagious diseases, adverse weather conditions, natural disasters and other incidents or threats thereof affecting the health, safety, security and satisfaction of customers and employees could have an adverse impact on the Group's travel business.

The use and operation of hotels, land tours, cruise ships, port facilities, shore excursions and the like involve the risk of incidents, including accidents caused by the improper operation of aircraft, ships, motor-coaches and trains; political instability or war in travel destinations; employee and crew illnesses; the spread of contagious diseases; mechanical failures; fires; repair delays; groundings; navigational errors; environmental mishaps; missing passengers; piracy; and other incidents, which may cause injury and death, or the alteration of itineraries or cancellation of tours or cruises. Although the Group places customer and employee safety as its highest priority, its tours and ships have been involved in accidents and other incidents in the past.

In addition, the Group's ability to effectively and efficiently operate its tours and cruises may be impacted by widespread public health issues or health warnings, which could result in, among other things, reduced demand for the Group's tours and cruises, cancellations or employee absenteeism. Cruise ships and hotels are particularly susceptible to the spread of infectious disease and waterborne bacterial infections. The Group's doctors and other staff may not be able to adequately diagnose or prescribe adequate medication to treat such conditions, which could increase the Group's liability and any resulting negative publicity. Likewise, natural disasters such as volcanic ash and tsunamis may result in a significant amount of additional costs, including costs relating to providing accommodation for stranded customers, the cancellation and delay of a number of flights and associated compensation payments and medical treatment payments for affected customers. The occurrence and timing of such events cannot be predicted or controlled by the Group, and such occurrences could also adversely impact demand for holidays even in areas unaffected by such incidents. As package holiday providers, the Group is exposed to potential liability arising from such health and safety incidents that occur during the holiday, involving injury or illness to customers and employees.

The Group is also exposed to potentially significant losses or potential criminal liability if any aircraft included in one of its travel packages is lost or subject to an accident, terrorist incident or other disaster. Any aircraft, ground transportation, ship accident or other health and safety incident could potentially result in the exposure of the Group to significant losses or liabilities, even if fully insured. Such incidents could also create a perception that the Group's cruise ships or the airlines and ground transportation that the Group uses are less safe or reliable than those provided by its competitors and could cause customers to lose confidence and switch to other package holiday or cruise providers. Such accidents and incidents, the occurrence and timing of which cannot be predicted or controlled by the Group, could have a material adverse effect on the Group's business, financial condition and results of operations, particularly if the Group were perceived to be acting inappropriately following any such event.

Damage to the Group's cruise ships or the Group's inability to implement ship repairs or maintenance may result in cancellation of cruises or unscheduled drydocks.

The Group depends on shipyards for scheduled repair and refit of its cruise ships on a timely basis and to good working order. The repair, maintenance and refurbishment of cruise ships are complex processes and involve risks similar to those encountered in other large and sophisticated repair, maintenance and refurbishment projects, which could cause delays and cost overruns in completing such work. As the Group's ships age, its repair and maintenance expenses typically increase. Delays or mechanical faults in ship repair and revitalisation have in the past and may in the future result in delays or cancellations of cruises or necessitate unscheduled drydocks and repairs of ships. The Group's cruise ships have required more repairs in recent years in order to maintain adequate performance and regulatory approval due to the fact that they are aging. For instance, prior to its decommission earlier this year, the Saga Ruby required an increased number of repairs in order to address mechanical issues that had arisen since 2012. In addition, during the 2012 cruise season, the late delivery of the Saga Sapphire after a scheduled refit and inadequate performance of repairs caused the Group to delay the embark date of one of its cruises. Events such as these and any related adverse publicity could result in lost revenue or increased operating expenses, which could have a material adverse effect on the Group's business, financial condition and results of operations.

In addition, the Group's ships are subject to the risks of mechanical failures and accidents, which would incur repair expenses and ancillary losses caused by delays, the inability to use the ships and compensation owed to customers. The Group may be unable to procure spare parts when needed or make repairs without incurring significant expense or suspension of service. The Group has outsourced the management of deck and engine functions for its cruise ships to V Ships UK Ltd, a professional cruise ship maintenance company. Events such as work stoppages, labour actions, insolvencies, "force majeure" events or other financial difficulties experienced at V Ships UK Ltd or its subcontractors or suppliers who build, repair, maintain or refurbish its ships could also prevent or delay the Group from undertaking scheduled cruises or the completion of the refurbishment, repair and maintenance of its ships. Any of these events could have a material adverse effect on the Group's business, financial condition and results of operations.

Changes in and compliance with environmental laws and regulations could have a material adverse effect on the Group's travel business.

Some environmental groups have lobbied for more stringent regulation of cruise ships and other forms of air and ground transportation. Some groups have also generated negative publicity about the cruise business and its environmental impact. Various agencies and regulatory organisations have enacted or are considering new regulations or policies, such as requirements to use lower sulphur content fuels and stricter emission limits to reduce Greenhouse Gas ("GHG") effects, which could adversely impact the Group's cruise business.

The International Maritime Organization ("IMO") has amended the MARPOL regulations to require reduced emissions from ships. These changes will result in reductions in ship sulphur oxide emissions by requiring progressive reductions in the sulphur content in fuel or the use of abatement technologies. These limits will be further reduced in designated Emissions Control Areas ("ECAs"), including ECAs that have been or could be proposed in other prime cruising areas, such as around Australia, Hong Kong, Japan, the Mediterranean Sea and Mexico. As a result of these amendments, low sulphur fuel may be less available because of increased demand, and the cost of such fuel may increase. If utilised, new sulphur emissions abatement technologies may also increase costs. The increase in fuel prices impacts not only the Group's fuel costs, but also some of its other expenses, including crew and guest travel, freight and commodity prices.

RISKS SPECIFIC TO THE GROUP'S FINANCIAL SERVICES BUSINESS

The Group is required to ensure compliance with capital adequacy requirements and other regulations relating to its operations, solvency and reporting bases.

Certain of the Company's subsidiaries in its financial services business are required to maintain a minimum margin of solvency capital in excess of the value of their liabilities in order to comply with a number of regulatory requirements relating to capital adequacy. The amount of regulatory and economic capital required depends on the level of risk facing each of these subsidiaries.

The capital position of the Company's regulated subsidiaries can be adversely affected by a number of factors, in particular, factors that erode their capital resources or impact the quantum of risk to which they are exposed. In the event that regulatory capital requirements are, or may be, breached, the supervisory authorities are likely to require the Group or its regulated subsidiaries to take remedial action, which could include measures to restore the individual subsidiary's capital and solvency positions to levels acceptable to such authorities. In addition, the supervisory authorities could decide to increase the regulatory capital requirements of any of the Group's regulated subsidiaries. Any event which causes the Group's regulated subsidiaries to hold additional regulatory capital could have a material adverse effect on the Group's business, financial condition and results of operations. Additionally, as a result of the solvency capital the Group is required to maintain, the Group has significant cash holdings which may place the Group at risk were there to be any structural failures in the banking industry.

The European Union is in the process of developing and implementing a new capital adequacy regime, affecting the financial strength of insurers and reinsurers within each Member State ("Solvency II"). It is intended that Solvency II will apply more consistent risk sensitive standards to capital requirements, bringing European insurance regulation more closely in line with banking and securities regulation with a view to avoiding regulatory arbitrage, aligning regulatory capital with economic capital, and enhancing public disclosure and transparency. The Solvency II regime is also expected to require changes to the Group's business operations, including the organisation of internal processes, the roles and responsibilities among certain key officers and external reporting obligations. The significant changes to the presentation of financial information for insurers on a Solvency II basis may also pose increased risk of misinterpretation by the market, third parties, stakeholders and consumers. While the overall intentions and processes for implementing Solvency II have been outlined, the future of EU solvency regulation is still evolving, and the interpretation of the rules is still being developed. The current expectation is that the new regulations will come into force in 2016.

If the Group is unable to meet applicable or new regulatory capital requirements in any of its regulated subsidiaries, the Group would have to take other measures to protect its capital and solvency position which may be difficult or costly, including raising additional capital through equity or debt issuances. In addition, if the regulatory capital requirements are not met, the Group could be subject to a range of regulatory actions, including losing key licences, and hence may be forced to cease some of its insurance operations.

The Group's technical reserves may not adequately cover actual insurance claims due to the uncertain nature and timing of the risks that the Group incurs in underwriting insurance products.

The Group maintains technical reserves to cover the estimated cost of future claims payments and related administrative expenses, with respect to losses or injuries which have been incurred but have not been fully settled at the balance sheet date or which may occur in the future against insurance policies which have already been written prior to the balance sheet date. As at 31 January 2014, the Group has established a booked outstanding claims provision that exceeds by 15 per cent. its internal best estimate of the provision. Additionally, as reserve releases directly impact the Group's profitability, a decision to maintain a more cautious claims provision, less favourable claims experiences or less cautious initial provisioning could lead to a decrease in, or absence of, reserve releases. See Part 10 "Operating and Financial Review – Technical Reserves".

Due to the uncertain nature and timing of the risks that the Group incurs in underwriting insurance products, the Group cannot precisely determine the amounts that it will ultimately pay to meet the liabilities covered by the insurance policies it underwrites or the timing of payment and settlement of those liabilities. As such, the Group's technical reserves may prove to be inadequate to cover actual claims, particularly when the settlement of liability or payments of claims may not occur until well into the future.

Estimated future claims payments includes losses or injuries that have been reported to the Group as well as those that have not yet been reported. The technical claims reserves that the Group maintains represent estimates of all expected future payments, including related administrative expenses, to bring every claim, whether reported or not, which has occurred prior to the balance sheet date to final settlement. The Group's reserves represent the higher of unexpired premiums or the estimated ultimate cost of its exposure to claims and expenses occurring after the balance sheet date against business which was written prior to such date.

Saga estimates technical reserves using a range of actuarial and statistical projections and assumptions across a range of variables such as the time required to learn of and settle claims, facts and circumstances known at a given time, trends in the number of claims or claims of certain types, inflation in claims severity and expected future claims payment patterns. Estimates are also dependent on other variable factors, including the legal, social, economic, regulatory environments, results of litigation, rehabilitation and mortality trends, business mix, consumer behaviour, market trends, underwriting assumptions, risk pricing models, inflation in medical care costs, future earnings inflation and other relevant forms of inflation, exchange rate movements, the cost of repairs and replacement, and estimated future receipts from third parties such as other insurers and reinsurance recoveries, as well as changes in internal claims handling processes. The inevitable variations in any of these factors contribute to the uncertainty of the technical reserves estimate.

The award of periodical payment orders ("PPOs") to settle personal injury claims, in which annually indexed payments are made periodically over several years or the lifetime of the injured party, could also increase. The recent increase in the utilisation of PPOs to settle personal injury claims makes the estimation of technical reserves increasingly complex and uncertain due to the increased range of assumptions required, such as the future propensity of such settlement methods, estimated rates of inflation, estimated mortality trends for impaired lives, payment patterns, investment income and the impact of reinsurance recoveries which will occur many years into the future with a resultant increase in the associated credit or other nonpayment risk. The fact that these claims take many years to ultimately settle increases the uncertainty around their estimation.

Consequently, changes in any of these factors may result in actual future claims costs and related expenses paid differing, potentially significantly, from the estimates reflected in the claims and reserves in the Group's financial statements. To the extent that the Group's technical reserves are subsequently estimated to be insufficient to cover the future cost of claims or administrative expenses, the Group will have to increase its technical reserves and incur a corresponding reduction in earnings in the relevant period. In addition, if the Group's technical reserves are excessive as a result of an over-estimation of risk, the Group may set premiums at levels which are too high, which may impact the Group's ability to compete. Conversely, if the Group charges premiums that are insufficient for the cover provided, the Group may suffer underwriting losses, which would lead to a reduction in earnings. Either of these occurrences could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is exposed to risks specific to motor insurance, including an increasing number of claims and uncertainty caused by changes in regulations and legislation.

Motor insurance is one of the Group's largest financial services products by volume of in-force policies and gross written premiums, and represents 29.4 per cent. of the Group's overall business by underlying revenue, as of 31 January 2014. The motor insurance business is subject to a variety of specific risks, including:

• Increased propensity of severe personal injury claims to settle using PPOs, which exposes the Group to further earnings-related inflation as well as additional mortality, investment income and reinsurance credit risks;
• Increased personal injury or third-party property damage claims, which could be caused by, among other things, an increased propensity of third parties to claim, increased size or severity of claims, and increased fraud associated with staged accidents, falsified claims or other fraudulent reporting;
• Enhancements in medical knowledge and techniques as well as the increasing use of rehabilitation, resulting in increased life expectancy for injured claimants, with expensive medical and rehabilitation regimes required for longer periods;
• The potential for one or more global reinsurers to fail, change their risk appetite or alter the nature, price or terms of their reinsurance cover, such as removing unlimited personal injury cover;
• Uncertainty of the outcome or impact of regulatory or legislative changes on motor insurance as a result of either current investigations and initiatives or potential future initiatives;
• The exposure of motor insurance reserves to retrospective and prospective legal changes through court awards;
• Changes in the frequency of motor accidents due to potential changes in the economy, changes in fuel prices and technological changes to vehicles and roadways.

The occurrence or persistence of any of these factors could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group's underwriting assumptions and risk pricing models may not accurately reflect its overall risk exposure.

The Group's results depend significantly on whether its actual claims experience is consistent with the assumptions the Group uses in underwriting and setting prices for its products. The Group's pricing assumptions are based on a variety of factors, which may include historical data, estimates, assumptions and individual expert judgements. Statistical methods, models and individual expert judgements may not accurately quantify the Group's risk exposure. In addition, the statistical methods, models and individual judgements themselves may be flawed, leading to inaccurate pricing of risk despite access to accurate data and accurate assessment of other risks. The Group's ability to properly quantify risk exposure and, as a result, price its insurance products successfully is subject to various risks and uncertainties, including exposure to claims inflation, changes in claims frequency, unanticipated legal and regulatory changes and costs, changes in mortality or rehabilitation trends, assumptions on weather trends, unexpected or new types of claims, changes in social or market trends, including customer and claimant behaviour, changes in economic conditions, potential inaccuracies in the data collected from internal or external parties or used within the modelling and pricing processes, incorrect or incomplete analysis of data, potentially inaccurate or inappropriate policy terms and conditions, inappropriate or incomplete purchase of reinsurance or receipt of recoveries therefrom, changes in its internal operating environment, the selection of inappropriate pricing methodologies, assumptions for future investment income and the uncertainties inherent in estimates and assumptions.

If the Group's actual claims and expense experience or investment income differ from the underlying assumptions and estimates the Group uses in pricing its business, or if its pricing is different to the market price for similar insurance products, this could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group may not be able to manage its underwriting risk successfully through reinsurance arrangements if reinsurers withdraw their products, increase prices or fail to meet their payment obligations.

An important part of the Group's risk management strategy is to purchase reinsurance from third parties, thereby transferring exposure to certain risks to others through reinsurance arrangements. The Group currently uses the reinsurance markets primarily to limit risk, support growth and manage capital more efficiently. The Group has historically relied on excess of loss reinsurance agreements to maintain its exposure to loss at or below a level that is within the capacity of its capital resources. If reinsurers do not offer to renew their products and services, in whole or in part, for any reason, there is a risk that the Group may be unable to procure replacement cover for any reinsurance agreements at rates equivalent to those of the terminated cover and that the Group may be exposed to un-reinsured losses during any interim period between termination of the existing agreements and the start of any replacement cover. Further, changes in reinsurers' levels of risk tolerance may result in changes in price or willingness to reinsure certain risks. In private motor reinsurance, the recent increase in PPOs to settle personal injury claims has already led to increases in the price of reinsurance. Further changes in the price of motor reinsurance or willingness to provide motor reinsurance may develop if PPOs and the liabilities connected with such orders continue to increase.

While the Group's reinsurance and coinsurance reduces the liability of the Group to the extent of the risk ceded, it does not discharge the Group's primary obligation to pay under an insurance policy for losses incurred. As a result, the Group is subject to credit risk with respect to its current and future reinsurers, as the Group is liable to customers regarding the portion of the risk that has been reinsured or coinsured in the event that the reinsurers or coinsurers fail to meet their payment obligations for any reason, including insolvency. The insolvency of any reinsurers or conisurers, or their inability or refusal to pay claims under the terms of any agreements could therefore have a material adverse effect on the Group's business, financial condition and results of operations.

Failure to optimise the pricing of the Group's insurance products could lead to either immediate or future reductions in the Group's profitability.

The Group needs to balance the anticipated impact its pricing will have on its insurance portfolio volume (measured by conversion and retention rates) with its insurance portfolio margin (measured as the average revenue per policy). Increasing the Group's insurance prices in relation to market prices tends to have the effect of increasing the Group's margins, but tends to result in a corresponding decline in insurance portfolio volume with respect to new and renewal business. Such increases in insurance prices tend to result in increased insurance profits in the immediate year, but can be detrimental to the Group's insurance business in subsequent years, as there are fewer policies that can be renewed for the following year. Conversely, decreasing prices in relation to the market has the effect of decreasing the Group's insurance portfolio margins; however the Group experiences a corresponding increase in its insurance portfolio volume. This results in more policies that can be renewed in subsequent years and has the effect of increasing profits in subsequent years. While the Group attempts to optimise the balance between margin and volume, there is a possibility that it may not be able to set its pricing correctly in order to achieve the desired balance. Any such inability to correctly optimise the Group's pricing could therefore have a material adverse effect on the Group's business, financial condition and results of operations.

Actions taken by the Group's home insurance underwriting panel, such as price increases or withdrawals, could adversely impact the Group's business.

The Group utilises its insurance panel to underwrite its home insurance products. The Group's insurance panel is made up of the Group's underwriting entity (which represents 10.1 per cent. of policies written and 6.5 per cent. of premiums written on the Group's home insurance panel as at 31 January 2014) and certain of the Group's competitors. In order to function efficiently, the Group needs to provide the panel with appropriate information and ensure the panel is managed appropriately. Failure to do so could result in the Group's competitors increasing their prices, failing to maintain their competitive positions or withdrawing from the Group's panel, which may impact the Group's ability to compete with the rest of the market and negatively impact sales volumes and profitability. If the Group's panel were to lose members, there would be less price competition between panel members. In addition, if the Group's panel members fail to competitively price their policies, the Group would be required to reduce its revenue, pass the cost on to the consumer or increase the amount of its in-house underwriting. Further, the Group could be forced to re-broker policies if one of its underwriting partners fails to resolve insurance claims in a timely or satisfactory manner and the Group may be exposed to litigation with respect to any such claims. Finally, the failure of any one or more of the Group's panel members could harm its reputation, sales and profitability. Any of the above events could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group is exposed to risks associated with internal and external fraudulent claims in connection with its insurance business.

The Group is vulnerable to internal and external fraud from a variety of sources such as employees, suppliers, intermediaries, customers and other third parties. The Group is at risk from customers who misrepresent or fail to provide full disclosure of the risks covered before such cover is purchased, from policyholders who file fraudulent or exaggerated claims, and from a range of other fraud-related exposures, such as the fraudulent use of its confidential information. The Group's fraud protection processes may fail to effectively identify and combat these risks.

Additionally, the Group experiences risk from employees and staff members who fail to follow or who circumvent procedures designed to prevent fraudulent activities. The occurrence or persistence of fraud in any aspect of the Group's financial services business could damage its reputation and brands as well as its financial standing, and could have a material adverse effect on the Group's business, financial condition and results of operations.

RISKS SPECIFIC TO THE GROUP'S HEALTHCARE SERVICES BUSINESS

The Group's healthcare services business relies on publicly-funded local purchasers in the UK, such as local authorities and clinical commissioning groups, for substantially all of its revenue.

Payments for the Group's services by UK publicly funded local purchasers, such as LAs and CCGs, account for almost all of the Group's healthcare services business's revenue. The Group maintains these relationships through contracts with LAs and CCGs that are generally terminable with six months' prior notice and some of these contracts are financially material on an individual basis. There is a risk that budget constraints, public spending cuts, such as the cuts to central government contributions to LAs announced by the UK Government in the 2010 comprehensive spending review and implemented in the 2011 and 2012 budgets, or other financial pressures could cause such publicly funded local purchasers to spend less money on the type of services that the Group provides, or that political or UK Government policy changes mean that fewer of such services are purchased by publicly funded local purchasers, which could materially reduce the Group's healthcare services business's revenue. Funding pressures from the LAs and CCGs are already in effect, with most LAs trying to reduce their expenditures across the spectrum, and funding pressure may increase further. Publicly funded local purchasers that commission its services may reduce healthcare spending or spending on the types of services that the Group provides.

The Group's healthcare services business depends on commissioners referring people in need of support to the Group for care and on families recommending its services. As such, it is important that the Group fosters strong relationships with these commissioners. Deterioration in such relationships, deterioration in its reputation with LAs, CCGs or a decision by one or more commissioners to refer individuals to its competitors or to stop referring them to the Group could have a material adverse effect on the Group's business, financial condition and results of operations.

The Group's healthcare business is subject to the risk of complaints and claims resulting from the nature of the service it provides

The Group is subject to complaints and claims from the people it provides services to through its healthcare services business, who are often perceived as vulnerable, and their family members, who may allege professional negligence, medical malpractice or mistreatment, some of which may lead to claims for substantial damages and may cause the Group to incur significant legal costs. Lawsuits may be filed based on these claims, either individually or as a class in a class action lawsuit. From time to time, the Group receives claims from customers who have or allege to have suffered physical and mental injuries while under the Group's care. The Group may be subject to future claims that could harm its reputation, or have a material adverse effect on the Group's business, financial condition and results of operations.

PART 3

DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS

Directors	Andrew Goodsell, Executive Chairman Lance Batchelor, Group Chief Executive Stuart Howard, Group Finance Director Philip Green, Senior Independent Non-Executive Director James Arnell, Non-Executive Director Pev Hooper, Non-Executive Director Ray King, Independent Non-Executive Director Orna Ni-Chionna, Independent Non-Executive Director Charles Sherwood, Non-Executive Director Gareth Williams, Independent Non-Executive Director
Company Secretary	Vicki Haynes
Registered and head office of the Company	Enbrook Park Sandgate Folkestone Kent CT20 3SE
Joint Global Co-ordinator, Joint Bookrunner and Sponsor	Citigroup Global Markets Limited Citigroup Centre 33 Canada Square London E14 5LB
Joint Global Co-ordinator and Joint Bookrunner	Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ
Joint Global Co-ordinator and Joint Bookrunner	Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB
Joint Global Co-ordinator and Joint Bookrunner	Merrill Lynch International 2 King Edward Street London EC1A 1HQ
Joint Bookrunner	J.P. Morgan Securities plc 25 Bank Street, London E14 5JP
Joint Bookrunner	UBS Limited 1 Finsbury Avenue London EC2M 2PP
Joint Lead Manager	Investec Bank plc 2 Gresham Street London EC2V 7QP
Co-Lead Manager	Mizuho International plc Bracken House One Friday Street London EC4M 9JA
English and US legal advisors to the Company	Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS
English and US legal advisors to the Sponsor and Banks	Linklaters LLP 1 Silk Street London EC2Y 1HQ

Auditors and Reporting Accountant	Ernst & Young LLP 1 More London Place London SE1 2AF
Reporting Accountant	PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT
Independent External Actuaries	Towers Watson Limited Watson House London Road Reigate Surrey RH2 9PQ
Registrar and Receiving Agent	Capita Asset Services, a trading name of Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Retail Offer Advisor	Solid Solutions Associates (UK) Limited 5 St John's Lane London EC1M 4BH

PART 4

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Certain terms used in this document, including all capitalised terms and certain technical and other items, are defined and explained in Part 15 "Definitions and Glossary".

Investors should only rely on the information in the Prospectus. No person has been authorised to give any information or to make any representations in connection with the Offer, other than those contained in the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Company, the Directors, the Selling Shareholder, or any of the Banks. No representation or warranty, express or implied, is made by any of the Banks or any selling agent as to the accuracy or completeness of such information, and nothing contained in this document is, or shall be relied upon as, a promise or representation by any of the Banks or any selling agent as to the past, present or future. Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to FSMA, neither the delivery of this document nor any subscription or sale of Shares pursuant to the Offer shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group since the date of this document or that the information contained herein is correct as of any time subsequent to its date.

The Company will update the information provided in the Prospectus by means of a supplement if a significant new factor that may affect the evaluation by prospective investors of the Offer occurs after the publication of the Prospectus or if this document contains any mistake or substantial inaccuracy. The Prospectus and any supplement thereto will be subject to approval by the FCA and will be made public in accordance with the Prospectus Rules. If a supplement to the Prospectus is published prior to Admission, investors shall have the right to withdraw their applications for Shares made prior to the publication of the supplement. Such withdrawal must be made within the time limits and in the manner set out in any such supplement (which shall not be shorter than two Business Days after publication of the supplement).

The contents of this document are not to be construed as legal, business or tax advice. Each prospective investor should consult his or her own advisors for legal, financial, business, tax advice and related aspects of a purchase of the Shares. In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of the Offer, including the merits and risks involved.

This document is not intended to provide the basis of any credit evaluation and should not be considered as a recommendation by any of the Company, the Directors, the Selling Shareholder or any of the Banks or any of their representatives that any recipient of this document should subscribe for or purchase the Shares. Prior to making any decision as to whether to subscribe for or purchase the Shares, prospective investors should read this document. Investors should ensure that they read the whole of this document carefully and not just rely on key information or information summarised within it. In making an investment decision, prospective investors must rely upon their own examination of the Company and the terms of this document, including the risks involved.

Investors who subscribe for or purchase Shares in the Offer will be deemed to have acknowledged that: (i) they have not relied on any of the Banks or any person affiliated with any of them in connection with any investigation of the accuracy of any information contained in this document or their investment decision; and (ii) they have relied on the information contained in this document, and no person has been authorised to give any information or to make any representation concerning the Group or the Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, the Directors, the Selling Shareholder or any of the Banks.

None of the Company, the Directors, the Selling Shareholder or any of the Banks or any of their representatives is making any representation to any offeree, subscriber or purchaser of the Shares regarding the legality of an investment in the Shares by such offeree, subscriber or purchaser.

Each of the Banks is acting exclusively for the Company and no one else in connection with the Offer. None of the Banks will regard any other person (whether or not a recipient of the Prospectus) as a client in relation to the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for the giving of advice in relation to the Offer or any transaction, matter or arrangement referred to in the Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the Prospectus including its accuracy, completeness and verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of the Prospectus or any such statement.

In connection with the Offer, the Banks and any of their respective affiliates, acting as investors for their own accounts, may subscribe for and/or acquire Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company or related investments in connection with the Offer or otherwise. Accordingly, references in this document to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any or issue, offer, subscription, acquisition, dealing or placing by, the Banks and any of their affiliates acting as investors for their own accounts. None of the Banks intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so. In addition, certain of the Banks or their affiliates may enter into financing arrangements (including swaps) with investors in connection with which such Banks (or their affiliates) may from time to time acquire, hold or dispose of Shares.

The Banks and their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services to the Company and the Selling Shareholder, for which they would have received customary fees. The Banks and any of their respective affiliates may provide such services to the Company, the Selling Shareholder and any of their respective affiliates in the future.

Presentation of Financial Information

The financial information in this document has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The significant IFRS accounting policies applied in the financial information of the Company are applied consistently in the financial information in this document.

Financial Information

The Company's financial year runs from 1 February to 31 January. The financial information included in Part 11 "Historical Financial Information" is covered by an accountants' report included in Section A, which was prepared in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.

None of the financial information used in this document has been audited in accordance with auditing standards generally accepted in the United States of America ("US GAAS") or auditing standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). US GAAS and the auditing standards of the PCAOB do not provide for the expression of an opinion on accounting standards which have not been finalised and are still subject to modification, as is the case with accounting standards as adopted for use in the EU and included in Part 11 "Historical Financial Information". Accordingly, it would not be possible to express any opinion on the "Historical Financial Information" in Part 11 under US GAAS or the auditing standards of the PCAOB. In addition, there could be other differences between the auditing standards issued by the Auditing Practices Board in the United Kingdom and those required by US GAAS or the auditing standards of the PCAOB. Potential investors should consult their own professional advisors to gain an understanding of the "Historical Financial Information" in Part 11 and the implications of differences between the auditing standards noted herein.

Key Performance Indicators

The Directors monitor the Group's performance by regularly reviewing the following metrics, which are non-GAAP measures, as the Directors consider these measures to give greater understanding of the underlying performance drivers of the Group. The Directors consider these measures to be the Group's key performance indicators ("KPIs"). The measures described below are not measures of financial performance under generally accepted accounting principles, including IFRS, and should not be considered in isolation or as an alternative to the IFRS financial statements set out in Part 11 "Historical Financial Information". Because these measures are not determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, they may not be comparable with other similarly titled measures of performance of other companies.

Underlying Revenue

Underlying revenue is the Group's reported revenue reflecting underlying adjustments to remove the impact of one-off items or timing differences. Underlying revenue is derived from the Group's management accounting records and is unaudited.

For a reconciliation of reported revenue to underlying revenue, see "Key Performance Indicators " in Part 10 "Operating and Financial Review".

Trading and Underlying EBITDA

Trading EBITDA is earnings before interest payable, tax, depreciation and amortisation, profit or loss on disposal of non-current assets, exceptional expenses and fair value gains or losses on derivative financial instruments. Exceptional expenses are those items which, by virtue of their nature or incidence, are excluded to enable a better understanding of the underlying financial performance of the Group.

Underlying EBITDA is trading EBITDA reflecting underlying adjustments to remove the impact of one-off items or timing differences, including the impact of profit sharing with the AA Group, the sale of the Saga Ruby and extraordinary claims. Underlying EBITDA is derived from the Group's management accounting records and is unaudited.

For a reconciliation of trading EBITDA to underlying EBITDA, see "Key Performance Indicators " in Part 10 "Operating and Financial Review".

Underlying Available Cash Flow From Operating Activities

Underlying cash flow from operating activities excludes the impact of one-off items or timing differences, including the impact of profit sharing with the AA Group, the sale of the Saga Ruby and exceptional claims

Underlying cash conversion is calculated as underlying available cash flow divided by underlying EBITDA, including reconciliation from reported to underlying figures.

For a reconciliation of trading EBITDA to underlying cash flow, see "Key Performance Indicators " in Part 10 "Operating and Financial Review".

Number of Customers

For the purposes of the KPIs, a customer is defined as a household which has purchased a Saga product, which is different to the Eligible Customer definition for the purposes of the Customer Offer. A household is an individual or couple (married or unmarried) living at a single address. The method of calculating customers varies by business segment, including:

• for the travel segment, a household which has made a holiday booking within the last three years, calculated by reference to the date of booking. Third-party partner and Titan Travel sales are excluded from this calculation;
• for the financial services segment, a household with at least one "live" insurance policy (excluding Direct Choice and AA-branded products underwritten by the Group) or a household that has at least one "live" personal finance product (as defined below). A purchased insurance policy which has not yet reached its inception date (the date on which cover starts) is not yet considered live. A household purchasing single trip travel insurance is considered a customer if a single trip travel insurance policy was purchased within the last twelve months or a household has at least one "live" personal finance product (as defined below);
• for the healthcare services segment, a household which is leasing an emergency alarm systems in the home ("SOS") product, or which has purchased an SOS product in the last 12 months, by reference to the lease inception date. All other persons utilising other care products offered by the Group are excluded from the calculation of customers;
• for the media and central costs segment, a household which has a live, paid-for Saga Magazine subscription, calculated by reference to the subscription purchase date.

A household which has purchased multiple Saga products is only counted once for purposes of calculating the number of customers. The number of customers for the Group and the Group's individual business segments are derived from the Group Marketing Database, which excludes those who have requested to be removed from the Group Marketing Database.

Number of Products Held

A product includes:

• a travel booking made in the last three years, excluding Titan and Saga partner travel bookings;
• a live insurance policy or discrete add-on to the policy (excluding extensions of cover, Direct Choice policies and AA-branded products underwritten by the Group);
• a personal finance product considered "live", which includes activated credit cards, open savings or bond accounts with non-zero balances, any securities trade transacted in the last year, life assurance policies, foreign currency purchases transacted in the last 12 months, equity release products or annuity products;
• the only healthcare services products included are SOS products currently leased and SOS products purchased in the last 12 months. All other healthcare products are excluded.

The number of products is derived from the Group Marketing Database and excludes products held by customers who have requested to be removed from the Group Marketing Database.

Number of Contactable Households

Contactable households are those households included in the Group Marketing Database, excluding (i) households that have opted out of all marketing under the UK Data Protection Act 1998, (ii) households which only include suppressed buyers (those individuals who have opted out of Saga marketing contact) and (iii) households removed from the Group Marketing Database following data cleansing routines.

Number of Passengers

For package holidays and Titan sales, passengers is calculated as the number of tours booked per passenger on a booking, calculated by reference to the departure date of the first tour. Extensions of tours are not counted as separate tours.

For Saga cruises, passengers is calculated by the number of people who have been on a cruise holiday in the financial year. A single person can go on multiple cruises per year and be calculated as a passenger multiple times.

Number of Policies Sold

Policies sold is a metric specific to the Group's insurance subsegments. Policies sold represents the number of stand-alone and discrete add-on insurance policies that have been sold by Saga Services or Direct Choice and includes any new business conversions, renewing policies and complementary add-ons transacted mid-way through the policy year of the stand-alone product to which it is added.

Policies sold are counted by reference to the cover start date of the policy and excludes cancellations prior to the inception date of the policy, to the extent they are known at the date of data extraction. Mid-term cancellations of policies are not deducted.

Gross Written Premiums

Gross written premium ("GWP") is defined as the total premium charged to the customer by Saga Services or Direct Choice, excluding insurance premium tax ("IPT") for stand-alone policies and add-on sales. GWP is measured after deducting discounts intrinsic to pricing tables and some policy line discounts, but before deducting certain additional promotional discounts that may be added at the point of sale.

GWP includes premiums charged in respect of cover enhancements added at the point of new business conversion or renewal. GWP also includes all new business conversions, renewing policies, add-ons transacted mid-way through the policy year of the stand-alone product to which it is added. GWP is calculated by reference to the cover start date.

Hours of Care Delivered

Hours of care includes the number of hours that were planned and confirmed on the Group's social care rostering system and that are thus eligible to be invoiced during the relevant financial period. For the financial year ending 2012, this excludes hours of care delivered by the acquired Allied Healthcare Group.

Currency Presentation

Unless otherwise indicated, all references in this document to "sterling", "pounds sterling", "GBP", "£", or "pence" are to the lawful currency of the United Kingdom. The Company prepares its financial statements in pounds sterling. All references to the "euro" or "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. All references to "US dollars" or "US\$" are to the lawful currency of the United States.

Roundings

Certain data in this document, including financial, statistical, and operating information has been rounded. As a result of the rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to 100 per cent.

Market, Economic and Industry Data

Unless the source is otherwise stated, the market, economic and industry data in this document constitute the Directors' estimates, using underlying data from independent third parties. The Company obtained market data and certain industry forecasts used in this document from internal surveys, reports and studies, where appropriate, as well as market research, publicly available information and industry publications, including publications and data compiled by the Office of National Statistics ("ONS"), the Association of British Insurers ("ABI"), confused.com/Towers Watson, Datamonitor and Marketline.

The Company confirms that all such data contained in this document has been accurately reproduced and, so far as the Company is aware and able to ascertain, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where third-party information has been used in this document, the source of such information has been identified.

Service of Process and Enforcement of Civil Liabilities

The Company has been incorporated under English law. Service of process upon Directors and officers of the Company, all of whom reside outside the United States, may be difficult to obtain within the United States. Furthermore, since most directly owned assets of the Company are outside the United States, any judgment obtained in the United States against it may not be collectible within the United States. There is doubt as to the enforceability of certain civil liabilities under US federal securities laws in original actions in English courts, and, subject to certain exceptions and time limitations, English courts will treat a final and conclusive judgment of a US court for a liquidated amount as a debt enforceable by fresh proceedings in the English courts.

No Incorporation of Website Information

The contents of the Group's websites do not form part of this document.

Information Not Contained in This Document

No person has been authorised to give any information or make any representation other than those contained in this document and, if given or made, such information or representation must not be relied upon as having been so authorised. Neither the delivery of this document nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information in this document is correct as of any time subsequent to the date hereof.

Information Regarding Forward-Looking Statements

This document includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes indentified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the results of operations, financial condition, prospects, growth, strategies, and dividend policy of the Group and the industry in which it operates. In particular, the statements under the headings "Summary", "Risk Factors", "Business Description" and "Operating and Financial Review" regarding the Company's strategy and other future events or prospects are forward-looking statements.

These forward-looking statements and other statements contained in this document regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements. Such forward-looking statements contained in this document speak only as of the date of this document. The Company, the Directors, the Selling Shareholder and the Banks expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, or the Disclosure and Transparency Rules of the FCA.

Over-Allotment and Stabilisation

In connection with the Offer, Merrill Lynch International, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilisation transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

PART 5

TARGET MARKET OVERVIEW

The following information relating to the markets in which the Group operates has been provided for background purposes only. The information has been extracted from a variety of sources released by public and private organisations. The information has been accurately reproduced and, as far as the Company is aware and is able to ascertain from information published by such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. Investors should read this Part 5 "Target Market Overview" in conjunction with the more detailed information contained in this document including Part 6 "Business Description", Part 7 "Regulatory Overview" and Part 10 "Operating and Financial Review".

TARGET DEMOGRAPHIC

The over 50s population is the fastest growing, most affluent and one of the most influential demographics in the UK, with increasingly complex needs due to longer periods in retirement and increased spending on leisure, culture, food, recreation and health. According to the UK Office for National Statistics, the over 50s population comprised an estimated 22.8 million people in 2013, representing approximately 36 per cent. of the total population in the UK, and is expected to increase by approximately 30 per cent. to 29.1 million people by 2033, representing approximately 40 per cent. of the total population of the UK. Within the over 50s population, the 65 to 75 and 75 and over segments are expected to increase even faster over the same time period at approximately 39 and 73 per cent., respectively.

Approximately 68 per cent. of total household financial wealth is controlled by the over 50s population and approximately 75 per cent. of people over 50 are homeowners. The over 50s population also represented approximately 48 per cent. of total UK household expenditure in 2012. This has increased from 41 per cent. in 2003, as household expenditure for the over 50s population experienced faster growth relative to the remainder of the total population, growing at a CAGR of approximately four per cent. per annum over the period, while remaining resilient throughout the recent UK economic downturn.

Additionally, with approximately 81 per cent. of FTSE 100 CEOs and 66 per cent. of business owners over 50, and over 70 per cent. of over 55s having voted in the last general election, the over 50s population is one of the most influential groups in UK society.

TRAVEL

The Group operates in the UK outbound tourism market for both packaged and non-packaged holidays, which together represented approximately 36.2 million outbound holiday visits from the UK in 2012 (source: ONS). The over 50s travel market is estimated to be worth in excess of £7 billion annually, with over 50s spending more on average than any other age group. This has been driven by a number of positive drivers related to the over 50s population, including:

• population growth of the age 50 and over outpacing the overall population;
• growth in disposable income for the age 50 and over outpacing that for the less than age 50 demographic; and
• the older population having a higher propensity to spend on travel.

The Group operates in two distinct segments of the UK's overall travel industry, namely as a tour operator for package holidays and ocean cruises departing from the UK via its cruise ships.

Package Holidays

The package holiday market segment represented approximately 40 per cent. of the overall outbound tourism market by volume in 2012 (source: ONS Travel Trends). In 2012, 45 per cent. of individuals over 55 took a package holiday, increasing from 42 per cent. in 2009. Approximately 90 per cent. of all package holidays for the age 50 and over demographic relate to travel within or to the UK, Europe, North Africa and the Middle East. The remaining 10 per cent. relates to other destinations. The average over 50s holiday spend was £805 per person in 2013. The age 50 and over demographic segment also has a much larger proportion of customers travelling during off-peak periods relative to the overall market. Overall, the package holiday market in the UK has a total size of approximately £3 billion.

Cruises

The UK is one of the largest cruise markets in Europe, with approximately 1.7 million cruise passengers in 2012 and one of the strongest penetration rates, with cruises representing 4.7 per cent. of all foreign holidays in 2012. Approximately 2.7 per cent. of the British population took a cruise in 2012. More than half of all cruise passengers in 2012 took two or more cruises in the year (source: Passenger Shipping Association). The average UK cruise spend was £1,337 per person in 2013.

The UK cruise market has been a high growth industry over the last ten years with the total number of cruise passengers increasing at a CAGR of approximately eight per cent. over the period 2002 to 2012. The over 55 segment represented approximately 64 per cent. of all cruise passengers in 2012, growing at a CAGR of 8.6 per cent. from 2002. The average age of cruise passengers was 56 in 2012. The key driver underpinning the growth historically relates to the UK cruise industry capacity additions or increased number of cruise ships by the major operators. The over 55s UK cruise market has a total size of approximately £1.7 billion.

FINANCIAL SERVICES

Motor Insurance

It is a legal requirement in the UK for drivers of motor vehicles to have motor insurance to cover legal liabilities for injuries to other people and damage to third-party property. As such, motor insurance is a nondiscretionary product, and total market volume is directly linked to the number of privately-registered vehicles on the road in the UK. The UK car parc (the census of total motor vehicles in the UK conducted by the UK government) for the over 50s population increased at a CAGR of approximately two per cent. from 2002 to 2010. According to the Department for Transport, there were 28.7 million private cars insured in the UK in 2012.

The UK motor insurance market fluctuated between growth and decline from 2008 through to 2012 as a result of the eurozone crisis and the fall in car sales seen across much of Europe, particularly within the European Union. The UK motor insurance market had a total gross premium income of £15.0 billion* in 2012, representing a CAGR of 4.3 per cent. from 2008 through to 2012. The personal segment continues to be the largest market segment, with a total gross premium income of £11.1 billion* in 2012, equivalent to 74.2 per cent. of the market's overall premiums. The commercial segment contributed a gross premium income of £4.2 billion* in 2012, representing 21.8 per cent. of the market's aggregate premiums. Forecasts from MarketLine suggest the UK market will grow with a CAGR of 1.6 per cent. from 2012 through to 2017, which is expected to drive the market to a value of £16.2 billion* by the end of 2017.

Private motor insurance products are marketed and distributed to the public either directly or through some form of intermediary, for example, brokers, agents, or banks. Price comparison websites ("PCWs"), such as Moneysupermarket.com, Gocompare.com, Confused.com and Comparethemarket.com, have become increasingly important to the UK market in recent years. The emergence of PCWs, which allow consumers to compare multiple prices on the same website, has led to increasing price competition and margin pressure in the UK market. PCWs are now the most prominent channel in the overall UK market for motor insurance, although the Directors believe that their market penetration is now reaching maturity.

Over the last 18 months, the UK market has seen declining pricing for motor insurance policies due to price competition and the implementation of regulatory reforms such as LASPO. According to the confused.com/ Towers Watson Car Insurance Price Index of Private Car comprehensive new business quotes, the average cost of a new car insurance policy fell by 19.1 per cent. in the 12 months to April 2014.

Home Insurance

The UK home insurance market generated approximately £7.1 billion in gross written premiums in 2011, having grown by 1.0 per cent. in 2012 (source: Datamonitor). The development of the home insurance market is largely driven by residential property transactions, as home insurance is typically taken out when purchasing a property. According to the Association of British Insurers (the "ABI"), of the 26.4 million households in the UK in 2012, an estimated 20.2 million households have contents insurance. Within the

^* Figures converted to pounds sterling based on the Bloomberg London Composite Rate average 2012 exchange rate of 1.5851 US dollars per pound sterling.

Group's target market of over 50s individuals, it is estimated that there are approximately 12.2 million households out of a total of 23.4 million as of 2011, of which over 70 per cent. are privately owned (source: ONS).

The Group believes that the over 50s population also offers a different profile from a younger home insurance consumer, as they are generally more diligent in the upkeep and maintenance of their (typically older) homes, generally occupy their homes for longer periods during the day, are wealthier and thus have more valuable contents and tend to have more safety features in their homes.

Datamonitor predicts moderate growth in the household insurance market, gradually gaining momentum on the back of an improving mortgage market to reach £9.1 billion in gross written premiums by 2016, representing a CAGR of 3.0 per cent. since 2011.

Home insurance is distributed across a broader range of channels than motor insurance. PCWs are less prevalent than in relation to motor insurance, in part due to the relative prominence of banks and building societies, which are an important sales channel as home insurance is often required when purchasing a home with mortgage financing. Lower average premiums and higher retention rates compared to motor insurance, combined with individual property specifications (flood locations, home size and building materials), which are used in the underwriting process, have also restricted the PCW penetration.

Private Medical Insurance

Private medical insurance helps to cover the costs of a variety of private medical treatments, including in-patient care, nursing, cancer care and dental plans. According to the ABI, 5.6 million people were covered for private healthcare in 2012.

Travel Insurance

The development of the travel insurance market has largely been driven by the overall number of trips taken abroad by UK residents. ABI data shows that the 26.2 million travel insurance policies were bought by consumers in 2011. Customers paid an average of £24 for annual travel insurance and £35 for single trip cover.

HEALTHCARE SERVICES

Domiciliary Care

Domiciliary care involves the provision of social care services to individuals (which includes, but is not exclusive to, the over 50s population) in their homes, with the aim of maintaining independent living in the community. The Directors estimate the size of the community care market to be £5.7 billion. The majority of domiciliary care expenditure is funded from public sources, primarily local authority ("LA") adult social care budgets. Growth in the age 65 and above population and their increasing preference to live at home is helping to fuel growth in the number of individuals requiring domiciliary care support. Constrained public funding is resulting in structural changes to the public pay market, with LAs rationing hours, tightening eligibility criteria, placing pressure on pricing, and adopting new procurement strategies in an effort to extract greater value for money in service provision. Furthermore, there is increasing expectation on service users to contribute towards their care, as LAs realise that a move to a mixed funding environment is necessary given demand levels and funding constraints.

Growth in the private pay market is resulting in the emergence of end user influence on choice of care in a previously commoditised supply landscape. As a result, services are becoming more differentiated, with commissioners and providers increasingly developing innovative service designs, with an emphasis on assistive technologies and community integration, in order to deliver more care for the same or less money.

Complex Care

Complex care services combine both health and social care, and are delivered to individuals with complex needs (including long-term conditions and end of life care) in out-of-hospital settings, including the patient's home. Complex care is commissioned through clinical commissioning groups ("CCGs") and is primarily funded through the NHS Continuing Healthcare ("CHC") budget. Growth in demand for home-based complex care services has been driven by the increasing prevalence of long-term conditions and rationalisation of hospital-based service provision as the NHS looks to achieve savings. In addition, individuals are becoming more aware of the availability of CHC funding and of the opportunity to receive care at home, and are becoming more likely to request this option.

Primary Care

The primary care market includes a range of services, including out-of-hours ("OOH") primary care services, equitable access to primary care centres ("EAPCs"), secure or detainee healthcare, and dentistry, as well as locum clinical and medical staff provision.

PART 6

BUSINESS DESCRIPTION

OVERVIEW

Saga is a leading provider of products and services primarily tailored for customers over the age of 50 in the UK. The Saga brand has been carefully developed over the past 60 years and is now one of the most recognised and trusted brands among UK consumers aged over 50. Saga is synonymous in the UK with the over 50s market and is recognised for its high quality products and services, expertise in serving its target demographic and excellence in customer service. Initially established as a holiday provider in 1950, Saga has successfully capitalised on the strength of its brand and reputation to broaden its product offering over time. Today Saga is a leading provider of high quality travel, financial, healthcare and media products and services, and the only commercial organisation of scale with a focus primarily on the fast growing over 50s demographic.

Having spent its first 30 years focused on travel, Saga launched Saga Magazine and developed insurance and financial services offerings in the 1980s, introduced private medical and pet insurance offerings and launched its own cruise ship operation in the 1990s and expanded its travel offering to include Titan Travel escorted tours in the late 2000s. Since 2010, the Group has significantly expanded its healthcare division through the acquisition of a number of domiciliary and homecare businesses. The strength of the Saga brand offers the Group the potential to expand into other business areas as opportunities present themselves and as customer needs change.

The combination of Saga's unique and trusted brand, its primary focus on the over 50s, the depth of its customer insights and data, its tailored services and added value products, coupled with its analysis of the customer value chain, its focus on operating efficiency and its flexible business model, together form the intrinsic "DNA" of the Saga business. By selling its products and services directly to customers through its contact centres in the UK and over the internet, Saga captures information about its customers at every point of contact and tracks changes in their behaviour over time, which enables it to build highly personalised and direct customer relationships. This, in turn, allows Saga to accurately model customer propensities which drive its marketing, pricing and product development strategies.

Its multiple customer interactions across a broad range of products and services over many years have enabled Saga to develop a sophisticated proprietary Group Marketing Database containing detailed information for approximately 10.4 million contactable names and 8.4 million contactable households in the UK. Saga estimates this covers over 50 per cent. of over 50s households and more than 60 per cent. of the over 50s ABC1 households in the UK. Saga uses the Group Marketing Database to operate an effective, integrated direct marketing business model with relatively low customer acquisition costs. The size of Saga's Group Marketing Database and its primary focus on the over 50s, combined with its knowledge and understanding of its customers, give Saga the ability to provide products and services designed to meet its customer needs which, in turn, improves Saga's cross-selling and up-selling potential within and across its different business segments. As at 31 January 2014, the Group had active customers in 2.1 million individual households, with each Saga customer holding, on average, 2.7 Saga-branded products.

Saga's brand recognition and excellence in customer service have enabled it to expand its product offering successfully, achieve high levels of repeat business and acquire new customers without needing to rely heavily on costly third-party advertising. Saga's brand and the strength of its relationships with its customers are at the core of the Group's business philosophy. The unique model that Saga operates, with a business centred around the power of its brand and multi-product provision, rather than on a single product segment, has allowed it to achieve sustainable growth, delivering robust performance in recent years. Saga has also grown the Group Marketing Database from 4.8 million contactable households in 2002 to 8.4 million contactable households today.

The Group has benefited from consistent earnings, underpinned by high quality revenue streams and repeat customers. In the year ended 31 January 2014, the Group generated underlying revenue of £1,209.3 million, trading EBITDA of £233.7 million and underlying EBITDA of £222.4 million. As at 31 January 2014, approximately 88 per cent. of Saga's active customers were repeat buyers, having bought their first Saga product more than one year prior to that date. Between 2012 and 2014, the Group's underlying revenue and underlying EBITDA grew at a compound annual growth rate ("CAGR") of 4.7 per cent. and 7.4 per cent., respectively. Over the same period, the Group's underlying EBITDA margin increased from 17.5 per cent. to 18.4 per cent.

The Group's underlying cash conversion ratio (being underlying available cash flow from operating activities divided by underlying EBITDA) was 88 per cent. in the year ended 31 January 2014. The Group has low levels of maintenance capital expenditure and, given that a majority of its customers pay for services in advance and a majority of its suppliers are paid after the provision of goods and services, it also has favourable working capital dynamics.

HISTORY OF SAGA

Saga was established in 1950 when its founder, Sidney De Haan, purchased the Rhodesia Hotel in Folkestone and began offering pensioners off-peak holiday packages. The Group's business expanded to include other destinations across the UK, then Europe and around the world. Since inception, the Group has focused on directly marketing and selling its all-inclusive holidays to people aged over 50, as this demographic tends to have greater flexibility to travel during off-peak periods and is attracted by the allinclusive nature of Saga's offering.

Saga Holidays plc was listed on the London Stock Exchange in 1978, by which time the Group had established itself as a leading tour operator in the UK. Saga reverted to private ownership under the De Haan family in 1990.

As its business expanded and diversified, the Group recognised its strength and experience in the growing over 50s market, and thus divested the majority of interests unrelated to this market to better focus on building businesses based on its understanding of the increasingly complex lives and interests of such consumers. As a result, the Group launched the Saga Magazine as a monthly commercial general interest publication in 1984. In 1987, the Group commenced a process of diversification to broaden the range of products and services offered to its customers. The Group established Saga Services Limited to develop its financial services business and established Saga home insurance. In 1988, the Group launched Saga motor insurance and, in 1996, Saga was authorised to sell investment products on an execution only basis. In 2003, Saga established Saga Insurance Company Limited to write motor insurance in-house.

In 1996, the Group purchased its first cruise ship, the Saga Rose, and launched a cruise ship operation the following year. Following the sale of the Saga Ruby in January 2014, Saga currently owns and operates two cruise ships: the Saga Sapphire and the Saga Pearl II. In 2009, the Group expanded its travel segment through the acquisition of the Titan Travel business, to complement its traditional package holiday and cruise offerings with escorted tours. In 2007, the Group began to expand into healthcare with the establishment of Saga Independent Living. This was followed in 2010 with the acquisitions of three small domiciliary care businesses. In 2011, the Group enhanced its domiciliary care business through the acquisition of Nestor Healthcare Group ("Nestor"), providing domiciliary care and primary care, and Allied Healthcare International LLC ("Allied"), providing domiciliary and complex care. These businesses have been substantially integrated and now trade as Allied Healthcare.

The Group was acquired by management, employees and Charterhouse in 2004 following the retirement of Roger De Haan. The Group was later combined with the AA Group in 2007, which was owned by the CVC Funds and Permira Funds, to form part of the Acromas Group. Since 2007, the Group has operated as a group of subsidiaries of the parent company Acromas, which is owned by the Charterhouse Funds (holding 36 per cent. of the share capital and 42 per cent. of the voting rights), the CVC Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), the Permira Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), Andrew Goodsell (holding six per cent. of the share capital and two per cent. of the voting rights), Stuart Howard (holding three per cent. of the share capital and one per cent. of the voting rights), numerous employees (together holding 10 per cent. of the share capital and three per cent. of the voting rights) and other institutional investors (holding four per cent. of the share capital and five per cent. of the voting rights).

STRENGTHS

Primary focus on serving the attractive and growing over 50s demographic in the UK

Saga is one of the largest commercial organisations in the United Kingdom offering a range of products and services for people aged 50 and over. The over 50s population is the fastest growing, most affluent and one of the most influential demographics in the UK, with increasingly complex needs due to longer periods in retirement and increased spending on leisure, culture, food, recreation and health. According to the UK Office for National Statistics, the over 50s population comprised an estimated 22.8 million people in 2013, representing approximately 36 per cent. of the total population in the UK, and is expected to increase by approximately 30 per cent. to 29.1 million people by 2033, representing approximately 40 per cent. of the total population of the UK.

In addition, the over 50s demographic represents a disproportionate percentage of the UK's total private wealth, household income and expenditure. For example, the over 50s control approximately 68 per cent. of total UK household financial wealth, and approximately 75 per cent. are homeowners. The over 50s population also represented approximately 48 per cent. of total UK household expenditure in 2012. This has increased from 41 per cent. in 2003, as household expenditure for the over 50s demographic experienced faster growth relative to the remainder of the total population, growing at a CAGR of approximately four per cent. per annum over the period, while remaining resilient throughout the recent economic downturn. Saga's customer base is also more affluent than the broader over 50s demographic, with the ABC1 demographic class representing 60 per cent. of Saga customers as compared to approximately 47 per cent. of over 50s households in the UK. With approximately 66 per cent. of business owners being 50 and over and 70 per cent. of over 50s having voted in the last general election, the over 50s demographic is also one of the most influential groups in UK society.

Within the over 50s demographic, the 65 to 75 and 75 and over populations are expected to increase at the fastest rate, increasing by 34 per cent. and 70 per cent., respectively, by 2033, as compared to six per cent. for the 50 to 65 population. The 70 and over segment is the most valuable to Saga, representing an average five year customer value (calculated as the total five year value of the total commission value less mailing, fulfilment, aggregators and paid search costs for all customers who bought a product during the financial year ending 31 January 2009) of £704, as compared to £548 for those aged 60 to 69, and £348 for those aged 50 to 59.

The Directors believe that Saga's extensive experience, unique customer insights and understanding of the increasingly complex needs of people aged 50 and over provide it with a distinct competitive advantage that will allow it to capitalise on these attractive demographic trends.

A unique and trusted consumer brand

The Saga brand has been carefully developed over the past 60 years to become one of the most widely recognised and trusted brands among consumers over the age of 50 in the United Kingdom. In the UK, the Saga brand is synonymous with the over 50s market and is an established household name. The Saga brand achieves 96 per cent. prompted brand recognition among over 50s surveyed, according to a YouGov survey carried out in October 20131, and 66 per cent. spontaneous brand awareness among its target ABC1 social class, according to an Ipsos MORI survey carried out in February 20142. The Saga brand is recognised for its high quality products and services, expertise in serving the over 50s market and excellence in customer service.

Saga has successfully leveraged the strength of its brand and reputation to broaden its product offering over time, developing into a leading provider of a range of high quality products and services across the travel, financial services, healthcare and media sectors, and the only provider operating in all of these sectors offering a range of products and services for consumers over the age of 50 in the UK.

The breadth of brand recognition as well as trust, loyalty and brand advocacy generated by Saga's products and customer service have enabled Saga to expand its product offering, achieve high levels of repeat business and acquire new customers without needing to rely solely on costly or extensive third-party broadcast advertising campaigns across the majority of its business.

¹ All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1324 GB adults aged 40 or over. Fieldwork was undertaken between 22 to 24 October 2013. The survey was carried out online. The figures have been not been weighted.

² Ipsos MORI interviewed a representative quota sample of 489 ABC1 adults across Great Britain aged 50 and over. Interviews were conducted face to face between 7 and 13 February 2014. Survey data were weighted to the known population profile of this audience.

An established Group Marketing Database providing unique customer insight

Saga's Group Marketing Database contains over one billion lines of highly relevant data for approximately 10.4 million people, and 8.4 million households, covering over 50 per cent. of over 50s households and over 60 per cent. of over 50s ABC1 households in the UK. Saga successfully grew the Group Marketing Database from 4.8 million contactable households in 2002 to 8.4 million contactable households today, representing a CAGR of 4.9 per cent. An average of 520,000 new names have been added each year from 2004 to 2014, with an average net growth of approximately 400,000 contactable households per annum from 31 January 2009 to 31 January 2014. The Group Marketing Database is exclusive to Saga, as it does not share the information with third parties for marketing purposes.

Saga has a consistent focus on data collection. By selling products and services directly to customers, Saga captures information about its customers at every point of contact and builds a proprietary view of the customer, including their multi-level preferences and changes in behaviour over time. For example, in providing an initial motor insurance quote to a prospective customer, Saga can capture 40 to 50 lines of data such as age, address, income, number of cars and vehicles in the household, employment status, retirement age and intentions and other non-motor specific information. Saga is constantly re-confirming the data it gathers from its over 128 million interactions per year with both existing and prospective customers, along with complementary data it gathers from third-parties, and regularly updates the Group Marketing Database with this information.

Saga has gained customer insight through 60 years of customer interaction and by utilising tools such as polls of over 10,000 people over 50 every month. This customer insight helps Saga to identify new commercial opportunities for innovative product development. Saga's data analysts are then able to leverage the Saga Group Marketing Database to perform sophisticated analysis such as customer segmentation and propensity modelling, resulting in targeted marketing, in order to introduce appropriate products and services to customers in a highly efficient manner. For example, Saga has 5.9 million motor insurance renewal dates and 5.7 million home insurance renewal dates meaning it can deliver event-driven, personalised marketing when a policy is nearing the end of its term and drive higher conversion rates.

In the year ended 31 January 2014, Saga achieved conversion rates of 26 per cent. on its home insurance quotes and 28 per cent. on its motor insurance quotes. Of the 616,000 new names added to the Group Marketing Database in 2004, 44 per cent. have since purchased a Saga product, representing 1.76 million products purchased. The average commission per purchase bought by the new names added to the Group Marketing Database in 2004 has risen by 63 per cent. over the last ten years. Of the new names that were added to the database during the financial years ending 31 January 2013 and 31 January 2014, 30 per cent. of them have since purchased a Saga product. Finally, most purchases come from established customers of Saga, as 75 per cent. of products sold in the 2014 financial year were to customers who were added to the Group Marketing Database more than 10 years ago.

Saga believes the size of the Group Marketing Database and the unique customer insight it provides are key competitive advantages.

Tailored products and a focus on service, providing high levels of customer satisfaction

Saga uses its knowledge and understanding of the over 50s demographic to tailor its products and services specifically to the increasingly complex needs of its customers. For example, Saga's cruise ships are designed with the comfort and demands of older customers in mind, while Saga offers a "Saga Price Promise" to Saga Holidays customers who book early by guaranteeing that they will be refunded the difference if the price of their holiday is reduced. Saga's insurance products are also bespoke with unique features such as emergency "any driver" cover and "get you home" cover on motor insurance, no age limits on travel insurance, and 60 day unoccupancy on home insurance due to the propensity for over 50s customers to take longer holidays.

Saga also has a strong institutional focus on excellence in customer service as the Directors believe that a commitment to high-quality, personalised customer service is key to achieving repeat business, along with new customer referrals, particularly in the over 50s demographic. For example, calls to Saga's call centres are only answered in the UK by real customer service representatives, without using computerised interactive voice responses. Saga's customer service also has a scorecard approach to calls rather than call length targets, thus encouraging a focus of "quality" rather than "speed" on each call, and insurance claims handling for Saga insurance products is processed internally by an in-house Saga team, so that the quality of calls and service delivered can be monitored and controlled. The Group has an induction programme, ongoing training and incentives for field and contact centre staff in order to encourage excellent customer service and high levels of customer satisfaction. The Group operates a regular and intense regime of monitoring its customer service and call quality standards. Over 44,000 "Moments of Truth" customer feedback surveys were taken in 2013, allowing management to track customer satisfaction, and investigate and remediate any downward trends in performance. Saga achieved an average of approximately 90 per cent. positive feedback across its travel, motor insurance and home insurance customers in its latest customer feedback survey on value for money. Third-party suppliers are also required to meet quality standards on which they are regularly monitored.

As a result, the Group achieves high levels of customer satisfaction and has received numerous awards for its products and services from various independent consumer and industry awards organisations. In 2013, Saga received over 30 awards including: Which? 2013 Recommended Provider of Motor Insurance, Travel Insurance and Breakdown Assistance; Defaqto 5 star rated Home Insurance, Motor Insurance, Travel Insurance, Caravan Insurance, Breakdown Assistance, Health Insurance, Home Emergency and Motor Legal Expenses; Moneywise Trusted Provider of Car Insurance and Travel Insurance; The 50+ Awards Best UK Holiday Provider, Overseas Holiday Provider and Tour Operator.

Flexible business model and forensic analysis of the value chain

Saga maintains a flexible business model which has allowed it to generate strong underlying EBITDA growth by responding to changes in the commercial opportunities across its existing and potential product portfolio. For example, it has been able to adapt pricing levels, marketing spend, both in aggregate and by channel, the level of product development and the balance of product manufacturing compared to broking across different segments depending on the Group's analysis of the respective market dynamics, management's desire to focus on growth or on profitability, and the Group's objectives for long term positioning and product portfolio expansion.

The Group's flexible approach extends to the design and manufacture of its products, ranging from developing and manufacturing its products "in-house", to branding third party white-label products, to acting as broker for third party products. Once Saga has identified a product that may benefit customers, it conducts an examination of the value chain to understand where cost is distributed and where value lies. When the Group identifies value opportunities, Saga has the flexibility to decide whether it will provide the product itself or in a partnership, and then applies its analysis of cost and returns in the value chain in its negotiations with suppliers. Importantly, Saga always ensures it retains access to all relevant information generated by those customer interactions to ensure that it understands further potential opportunities. For example, in 2009, having identified the financial benefits of moving away from an exclusive third-party underwriting arrangement for its home insurance products, Saga launched its home insurance panel with 11 underwriters. This panel has served to reduce net rates and improve both the competitiveness and profitability of the Group's home insurance products, resulting in savings in excess of £15 million per annum. The Group also seeks to establish long-term relationships with its suppliers.

Focus on efficiency

Saga's integrated business model achieves significant operating efficiency through best in class customer acquisition costs, increasing customer value over time, optimal pricing strategies and operational excellence.

Saga's Group Marketing Database allows it to deliver targeted marketing, product cross sales and multiproduct holdings to generate best-in-class customer acquisition costs and increased customer value over time. As at 31 January 2014, an active Saga customer held an average of 2.7 Saga-branded products in total. As at January 2014, 32 per cent. of Saga's home insurance customers also had a motor insurance policy, and, conversely, 27 per cent. of Saga's motor insurance customers also had a home insurance policy. From 2006 through to 2014, Saga has delivered approximately 11 per cent. growth per annum in the average cumulative value of its customers. In addition Saga's customer acquisition ratios for core home insurance and core motor insurance were 7.6 per cent. and 5.6 per cent., respectively, in the financial year ended 31 January 2013, defined as acquisition expenses divided by earned premiums. This compares to an average of 30.2 per cent. and 12.3 per cent. for the respective UK home insurance and UK motor insurance markets.

Saga also optimises pricing through real time elasticity testing, carefully designed pricing strategies and the sale of ancillary products and add-ons. Saga utilises customer profiling, analysis of historical data and market dynamics to inform its pricing decisions which has yielded pricing advantages over time. For example Saga can analyse approximately 600,000 price elasticity tests, approximately 600,000 price quotes and approximately 600,000 renewals that it conducts each year. Saga also ensures any price movements are synchronised with its marketing activities and continually reviews its range of ancillary products and addons, such as legal expenses cover and personal accident cover, which drive pricing enhancements and deliver incremental revenues.

Saga's in house mailing operations and call centre operations generate low cost customer interaction. MetroMail is a standalone profit-generating business with third party revenues of £2.1 million for the year ended 31 January 2014, and has the capacity to deliver 68 million mailings per annum, providing significant benefits of scale. Saga's call centre operations achieve what the Directors believe to be market leading sales per employee and call cost levels, while maintaining the quality of customer service which management feels is critical for the over 50s demographic. For example Saga manages 2,800 policies per Saga full time employee and incurs costs of £2.40 per call compared to 1,700 policies and £3.00 per call respectively for competitors that handle more than 1.4 million calls in six months.

Sophisticated and data-led approach to pricing and risk selection, claims management strength and underwriting expertise have driven industry outperformance

The Group sells Saga branded insurance policies in the motor, home and other insurance sectors to over 1.56 million customers in the UK. Saga underwrites approximately 95 per cent. of its motor insurance policies itself, through the Group's insurance underwriting function. Saga's home insurance policies are underwritten through a panel of underwriters including Saga's own underwriting function. Of the home insurance policies underwritten by Saga, approximately 99 per cent. are coinsured through the New India Assurance Company, with the remaining one per cent. reinsured through the New India Assurance Company with Saga taking no residual risk. Saga's other insurance products are solus arrangements with a range of underwriters, including Saga's underwriting function.

In the financial year ended 31 January 2014, Saga's core motor insurance business achieved a reported claims ratio of 65.7 per cent. The Group maintains industry-leading loss ratios through predictive pricing, careful selection of risk and claims management excellence. Saga's dedicated actuarial teams utilise dataintensive analysis of its extensive proprietary claims and customer data to generate highly predictive pricing models that respond quickly to changes in customer price sensitivity.

Saga's continual scrutiny of detailed actuarial data as well as its in-house underwriting capabilities have enabled it to identify and respond to changes in the claims environment in advance of the wider market. For example, Saga generated a strong performance relative to its competitors in years which saw a significant rise in personal injury claims across the industry, by anticipating changes in the market.

In addition, the group manages risk carefully by focusing on lower risk customers combined with detailed analysis of individual customer data and the application of stringent underwriting criteria. Saga's underwriting entity's presence on the panel for its home business gives Saga the flexibility to increase or decrease its level of underwriting based on market terms, and maintains competitive tension across its panel underwriters. The home policies it underwrites have limited flood exposure, with only two flood claims for a total of £4,000 made over the last six months.

Where claims are made, Saga's effective claims cost control capabilities support its industry leading loss ratios and have allowed for strong claims reserve releases in recent years. For example, Saga controls fraud risk through a dedicated claims and validation team that identifies fraud at the point of claim and has achieved over £50 million in cumulative fraud savings. It has also established a 96 per cent. garage network penetration and has a high credit hire conversion to minimise cost escalation in the repair process. These capabilities are supported by a claims handling process that looks to provide high customer satisfaction while minimising cost per customer. Customers experience low average handling times and high first call resolution thanks to a strong first notification of loss process.

Consistent financial performance underpinned by significant repeat business

Saga benefits from high quality revenue streams and significant levels of repeat business, which have underpinned its resilient revenue and earnings growth through the economic cycle. For example, as at 31 January 2014, approximately 88 per cent. of Saga's active customers were repeat buyers, having purchased their first Saga product more than one year prior to that date. Of the passengers who booked a Saga holiday in the financial year ended 31 January 2013, 85 per cent. booked a holiday in the following year. Similarly, of the passengers who booked a Saga cruise in the financial year ended 31 January 2013, 72 per cent. booked a holiday in the following year. In the year ended 31 January 2014, Saga's retention rates on its core home and motor insurance products were 76 per cent. and 73 per cent. respectively.

Strong cash flow generation due to high operating margins and cash conversion rates

Saga achieved attractive underlying EBITDA margins of 18 per cent. in the year ended 31 January 2014 as a result of its high levels of repeat business, lower marketing costs, thoughtful pricing, effective fraud prevention at the point of sale and claim stages, and careful risk selection and underwriting. Saga has a high underlying cash conversion ratio (being underlying available cash flow from operating activities of £196.7 million in the year ended 31 January 2014 divided by underlying EBITDA of £222.4 million in the same period), which was 88 per cent. in the year ended 31 January 2014. This is attributable to Saga's favourable working capital dynamics, which result primarily from the fact that the majority of its travel and financial services customers pay for its products and services in advance of Saga's contractual obligations to pay its suppliers becoming due, and the fact that Saga requires limited maintenance capital expenditure.

Experienced and proven management team

Saga has built an experienced senior management team that has been integral to the development and growth of its businesses, with a combined experience of more than 36 years with Saga. Saga's Executive Chairman, Andrew Goodsell, and its Chief Financial Officer, Stuart Howard, have been with Saga for 22 years and 14 years, respectively. Lance Batchelor was appointed Group Chief Executive in March 2014, having previously served as CEO of Domino's Pizza Group, a FTSE 250 company. They are supported by a strong senior management team comprised of five divisional CEOs (Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong) with over 29 years' combined experience at Saga. Saga's management team has contributed to Saga's robust financial performance and successfully overseen the creation and organic development of Saga's financial services segment, its various acquisitions and the development of its cross-selling capabilities. Saga's senior management team also led the acquisition of the AA in 2007, managed it since that time and recently finalised its separation from the operations of the Group such that the AA Group now stands alone with a separate executive management team.

STRATEGY

Continue to develop the Saga brand and enhance its marketing efforts

Saga intends to strengthen further its brand positioning to ensure that it continues to resonate with its customers. The Directors continue to believe that it is important to build the Saga brand through every interaction that Saga has with its customers, rather than relying on traditional advertising campaigns.

As a result of new technology and media options, Saga is adapting its marketing strategy to ensure it engages with its customers through their preferred platforms. With 49 per cent. of Saga's insurance sales originating online in the year ended 31 January 2014, Saga is investing in tools to improve the online experience for its customers and the effectiveness of its online sales channels. Saga is also increasing its use of mobile and social media platforms in conjunction with its marketing and branding efforts. Saga intends to continue to explore new marketing methods to drive sales and attract new customers.

Grow Saga's Group Marketing Database and deepen its knowledge of its customers

Saga's customer-led growth strategy is based on its ability to grow the number of contactable households on its Group Marketing Database and to improve the quality of the information it collects in order to develop a comprehensive understanding of its customers. Saga's Group Marketing Database provides it with a powerful marketing platform to attract new customers and to cross-sell and up-sell to its existing customers. Saga continues to grow the Group Marketing Database as new individuals enquire about its services. Saga also expects that the Retail Offer will further grow the number of contactable households on the Group Marketing Database.

Saga's customer relations strategy across its business is to interact directly with its customers to build strong relationships while collecting tailored data on their interests and needs. Saga's dedicated data analytics team utilises this data to model customer preferences which in turn drive the Group's pricing and marketing strategies and help ensure the most appropriate products and services are offered to its customers. For example, Saga uses location and earnings-related data to determine which customers will have the highest propensity to purchase a cruise where advertising is initiated by direct mail.

Continue to deliver exceptional customer service and a unique customer experience

Saga has a strong focus on excellence in customer service and devotes significant internal resources to ensuring that it maintains the high levels of customer service that are associated with the Saga brand. Saga operates a regular and intense regime of monitoring its customer service and call quality standards to maintain its service quality. Suppliers must also meet quality standards on which they are regularly monitored. Saga regularly asks customers to complete surveys to track customer satisfaction and is consistently seeking to improve the level of service that its customers receive.

The Directors believe that targeted recruitment and motivation of Saga's workforce is fundamental to its ability to deliver exceptional customer service. Saga has implemented a number of recruitment and employee initiatives, which have successfully reduced staff attrition, in order to maintain its consistently high levels of customer service.

Increase multiple product holdings with existing customers and increase conversion rates of new customers

Saga intends to continue to drive growth by increasing the cross-selling of its products to its existing customers (both within each business unit and across the business) through targeted customer-focused marketing and by tailoring its products to its customers' needs. For example, Saga's contact centre staff receive regular training on how to utilise the data from the Group Marketing Database, and on effective call centre techniques, to help them ensure the most appropriate products and services are offered to customers.

The Directors also aim to regularly add new features to Saga's products, and introduce ancillary products, in order to improve customer value and enhance up-selling opportunities. For example, in 2013, Saga added additional cover to its motor insurance policies to protect policy holders' no claims discounts and excesses in the event of damage caused by an identified uninsured driver.

Saga will also continue to leverage its Group Marketing Database to identify additional cross-selling opportunities through customer segmentation and propensity modelling. For example, Saga analyses the purchasing patterns of its holiday (non-cruise) customers to identify those individuals most likely to want to cruise and therefore likely to upgrade or purchase cruise vacations.

The Directors will also continue to strive to increase conversion rates of new customers in order to drive revenue growth. Specifically, for its insurance products, Saga will continue to focus on delivering the most appropriate product to the customer, on price optimisation of those products and on active management of its insurance panel to improve the ability of underwriters to write profitable policies while keeping net premiums low. For example, Saga was able to increase sales conversion rates for motor insurance from approximately 25 per cent. in the year ended 31 January 2013 to approximately 29 per cent. in the year ended 31 January 2014.

Further improve operating efficiency

The Directors intend to continue promoting a business culture that combines innovation and optimisation of operational efficiencies to achieve effective cost base management. Saga has implemented a number of successful initiatives and is currently pursuing additional cost reduction initiatives. For example, in its financial services segment, Saga has reduced the potential for fraudulent claims, at the point of sale, by using identity checks as part of the underwriting and pricing processes. Also, in its travel segment, Saga regularly analyses customer responses to specific mailings and modifies its direct mailing programmes accordingly with the goal of achieving maximum impact with minimum expenditure. Saga plans to continue to look for opportunities to increase cost efficiency across its segments without compromising quality or customer service.

Develop new and expand existing products and services tailored for the over 50s market

Having spent its first 30 years principally focused on travel, Saga has successfully expanded into a range of new products and services which now comprise the Group. In that context, the Directors intend to continue to utilise Saga's knowledge and understanding of the over 50s market, and its brand affinity, to introduce new tailored products and services to address the increasingly complex needs of Saga's customers. Saga will assess opportunities against a range of strategic questions including "does the strategy fit with the Saga brand", "is the market of an attractive size", "does it address the needs of over 50s customers", and "can Saga develop and differentiate the product". Depending on the opportunity, Saga has a flexible business model that allows it to either design and manufacture its own products in-house, brand third party white-label products, or act as a broker for third party products. For example, in 2013, having identified a significant market opportunity in the over 50s market for the provision of legal services, Saga began providing legal services such as will preparation, conveyancing, powers of attorney and probate in collaboration with a law firm. Saga is currently targeting the marketing of its legal services to over one million of its policy holders who have an add-on insurance policy for legal cover through Saga. In addition, the Directors believe that there is a significant opportunity to provide legal services to its broader customer base.

Saga will also continue to develop and differentiate its travel offerings in response to changes in the market. For example, Saga recently expanded its geographical coverage to capitalise on customer demand for more adventurous holidays in Asia and Africa and also introduced winter season long stay offers tailored for timerich, price-conscious consumers.

Saga has also identified a number of key product sectors likely to appeal to consumers over 50, including health and wealth management. In particular, the Directors believe expansion into wealth management to be an attractive opportunity for Saga, given the increasingly complex financial planning needs of its customers, the need for a trusted brand in the space, and the high proportion of household wealth held by the over 50s demographic. The Directors estimate the wealth management market to be worth approximately £14 billion based on an assumed two per cent. management fee on an estimated £700 billion of over 55s financial wealth. Saga intends to continue to develop new offerings.

Utilise flexibility in home insurance to increase underwriting exposure where Saga identifies opportunity

Saga maintains underwriting flexibility in the home insurance market which it expects will allow it to capitalise on opportunities that it identifies in home insurance underwriting as its market intelligence further develops.

Prior to 2004 Saga only acted as broker for motor insurance, before developing its own underwriting capabilities when it fully understood the value chain and the opportunities for Saga. However, Saga continues to retain its motor panel to underwrite risk that it is not comfortable taking.

In home insurance, Saga developed a panel of insurers in 2009 to introduce real underwriting competition in its policies, which provided significant annual savings and better value for its customers compared to its previous solus underwriting arrangement. Broking home insurance policies and expertise from its actuarial team also provided Saga with an understanding of the market and the returns made by the panel. As a result, Saga's underwriting function joined this panel in 2011 and has built its share of underwriting to approximately 10 per cent. of policies written in the year ended 31 January 2014. Saga currently limits its underwriting risk on these policies through a coinsurance agreement on 99 per cent. of exposure, with the remaining one per cent. reinsured. However as Saga's expertise and understanding of the market develop further, it may seek to increase its underwriting exposure to capture greater value from the supply chain for both its shareholders and its customers.

Continue to develop a premium branded private pay homecare model to meet the needs of the growing over 50s market

Saga is continuing to improve business practices in its Allied healthcare business in order to create an optimal platform for organic growth. Having created scale in its Allied healthcare business largely through acquisitions, Saga has made further investments in streamlining all aspects of its healthcare business, including information systems, operational policies and management. One of Allied's primary strategies has been to differentiate itself from its competitors in the domiciliary market through the roll out of a clinical governance structure. In 2012, Allied appointed a medical director (who is a physician), a clinical risk director and a head of nursing to supervise the design, implementation and audit of best practices across its healthcare business. Allied is focused, in particular, on improving patient care, monitoring the administration of medication, and ensuring that locally developed expertise with specific patient conditions can be leveraged throughout the organisation. The Directors believe its strategy, based on models used in the primary care industry, will provide Allied with a significant competitive advantage based on quality of service in the domiciliary care market. The Directors believe that the ability to present Allied as an integrated national organisation designed and audited by medical professionals will allow Saga to leverage the scale and efficiency of its healthcare business to grow its market share of the LA-funded social care market, in particular. In addition, the Directors intend to leverage Allied's expertise to capitalise on opportunities in specialist publicly funded areas such as complex healthcare, community care, dementia care, assistive technologies and learning disabilities.

The Directors intend to leverage the platform provided by Allied's healthcare business, such as its scale, expertise, industry knowledge, systems, clinical governance and clinical registrations, to create a Saga branded private pay care advisory, case management and care at home service tailored to the over 50s market. In part due to medical advances increasing life expectancy, the Directors believe the growth in the number of people over the age of 50 will drive increased demand for domiciliary care services generally. The Directors currently estimate the size of the private home healthcare market to be approximately £5.7bn and also believe that constraints on public spending will lead to more people paying privately for solutions. The Directors believe that its private pay care advisory service, leveraging the expertise of the Allied healthcare business, will be well positioned to capitalise on the market opportunity presented by the needs of a growing over 50s population that will look toward private pay homecare to meet their care needs.

The Directors believe that a key component to the success of Saga's new private pay care offerings will be the effective use of technology, both as a means of improving efficiency and patient outcomes. Saga has been extensively investigating assistive technologies, wearable health technology, telehealth and telecare solutions, work force automation solutions and electronic health records in order to further differentiate its product offerings from those of its competitors. For example, Saga recently obtained a license for exclusive use in the UK market of a touch screen telehealth system and assistive technology home based data hub, which is designed to facilitate patient monitoring and diagnostics and to provide an easy-to-use platform for communication between patients, their families and care providers.

Selectively pursue acquisition opportunities that could strategically enhance the Group and deliver attractive returns

Saga continues actively to consider acquisitions and investments that could strategically enhance the Group and enable Saga to both expand into new business segments and offer new products and services. Saga has a proven track record of identifying, implementing and integrating both large and small acquisitions and creating value for its shareholders. Examples include the acquisitions of Titan Travel in October 2009, Nestor Healthcare in February 2011 and Allied Healthcare in October 2011. The Directors believe that there remain further attractive acquisition opportunities that would meet Saga's investment criteria and allow the Group to expand into new business segments and offer new products and services.

BUSINESS SEGMENTS

The following description sets out the services offered by each of the Group's business segments, consisting of travel, financial services, healthcare services and media and central costs.

Travel

Saga has operated its travel business for over 60 years. Travel is considered to be the heart of the Saga brand and provides positive brand associations for the other products and services offered by Saga. The Group is a highly regarded provider of UK and international holidays for the over 50s market. The Group specialises in package holidays and cruises to customers based in the UK, either through the Saga Holidays or Titan Travel brands. The Group's travel segment served approximately 158,000 package holiday and escorted tour passengers and 315,300 ship passenger days, and achieved a 97 per cent. positive customer satisfaction in its "Moments of Truth" customer surveys.

The travel business uses the Group Marketing Database to identify customers best suited for its travel offerings and is so able to limit spending on marketing its travel products to approximately six to eight per cent. of its yearly revenue.

Package Holidays

The Group provides package holidays under the Saga and Titan brands, with a focus on European and long-haul destinations around the world. Saga Holidays caters to the Group's target demographic of over 50s customers, with an average customer age of 73. The Group offers global escorted tours, primarily to long-haul destinations under the Titan Travel brand. Although the Titan Travel brand does not cater exclusively to the Group's primary market demographic of over 50s, the vast majority of Titan Travel's customers are over 50 years of age, with an average customer age of 67.

Saga Holidays and Titan Travel creates package holidays using external suppliers for flights and hotels, and do not own their own accommodation or transport infrastructure, with the exception of the Bel Jou Hotel in St. Lucia which is owned by Saga.

Saga Holidays

Saga Holidays's focus on care, security and value is of prime importance to its brand and its customers. The Group requires its staff and suppliers to maintain high standards of quality and have dedicated teams responsible for monitoring performance. Saga Holidays provides package holidays to approximately 120,000 passengers annually to over 150 destinations. In the financial year ended 31 January 2014, the average sale price for a Saga package holiday was £1,419 per person. Saga Holidays also generated an average value to Saga of £575 per customer over three years, compared to only £181 in average customer acquisition cost at the start of that period. Saga Holidays also had an 85 per cent. retention rate from 2013 holiday buyers in 2014. Finally, Saga Holidays had an average booking lead time of 7.2 months compared to an industry average of 4.0 months.

Saga's package holidays also include third-party river cruises, special interest holidays, activity holidays and UK and European short breaks. Saga Holidays currently offers the following package holiday products:

Hotel holidays: Hotel holidays are traditional package holidays to Europe and around the world. Saga Holidays flies its customers from airports throughout the UK. The majority of its holidays are all-inclusive, with all associated costs included in one price, including flights, taxes, travel insurance, accommodation, meals, transfers, visas, free bar, excursions, entertainment and the services of a Saga representative.

Touring holidays: Touring holidays are themed package holidays that centre around escorted tours at various destinations around the world, including tours to diverse locations around the world including, for example, Cuba, Greece, Italy, Panama and Zambia. Touring holidays tend to be more adventurous than hotel holidays.

River cruises: River cruises are theme-based. Saga Holidays's river cruises are mostly in Europe.

Special interest: Saga Holidays also offers a range of holidays and tours centred around a specific interest. Saga Holidays's special interest package holidays have various focuses, including music and dancing events, musicals, art history, Christmas and New Year celebrations, and places of historic interest and natural beauty. European holidays were Saga Holidays's most popular product sold in the year ended 31 January 2014, followed by long-haul package holidays and river cruises.

Saga Holidays negotiates with its suppliers for such services using an in-house product development team. This team includes buyers who specialise in different regions of the world and experts in areas such as aviation, ground transport and staffing. Saga Holidays's suppliers are appointed on terms and conditions that require them to maintain its high customer service standards. Saga Holidays's travel supply contracts generally do not require Saga Holidays to fill beds or seats on flights, thus the majority of its cost of sales are directly related to demand for its products. Saga Holidays is able to negotiate favourable pricing terms for off-peak dates because its over 50s customer base generally have greater flexibility to travel outside of peak periods. Saga Holidays currently also has deals with travel-related partners such as Hertz and Warner Hotels.

Titan Travel

Titan Travel's escorted tour packages combine flights, hotels and activities, and all trips include both home pick-up and drop-off services. Specialist local tour guides, who generally have long-standing relationships with Saga, are hired for each individual tour. In the financial year ended 31 January 2014, the average sale price for a Titan Travel holiday was £2,500 per person. Titan Travel also generated an average value for Saga of £725 per customer over three years, compared to only £160 in average customer acquisition cost at the start of that period. Titan Travel also had an 57 per cent. repeat booker rate from 2013 bookers in 2014. Titan Travel had an average booking lead time of 7.5 months.

The Group currently offers the following Titan-branded travel products:

Escorted coach tours: Instead of a single destination, customers experience a range of highlights in a particular country or region through Titan Travel's coach tours. These tours centre around various themes, including culture and history, lakes and mountain regions, epic journeys, music, national parks, wildlife and world wonders.

River cruises: Titan Travel sells cruises along several of the great waterways of the world, including the Nile, the Rhine, the Yangtze and the Danube.

Rail tours: Titan Travel's luxury rail tours allow customers to experience great landscapes around the world in a unique way. Customers can travel by train to various destinations, including the Canadian Rocky Mountains, Venice and Tuscany.

Tours in the US account for the greatest proportion of Titan Travel's sales, representing 21.6 per cent. of total tour revenue for the year ended 31 January 2014. Titan Travel's largest area of growth has been in long haul destinations such as Africa, South America and Asia. River Cruises also represent an area of growth for Titan Travel.

Other Travel

In addition to the Saga and Titan Travel branded travel businesses, the Group also generates revenue from its own hotel in St. Lucia, the Bel Jou, as well as other hotel and supplier partnerships. The Group purchased the Bel Jou in 2007 and it is available exclusively to Saga customers.

Cruises

Saga Cruises

The Group currently owns and operates two cruise ships under the Saga brand: the Saga Sapphire and the Saga Pearl II, both of which are registered in Malta. The Saga Sapphire can accommodate 720 passengers and 415 crew. The Saga Pearl II can accommodate 449 passengers and 252 crew. The high staff to passenger ratio on the Group's cruise ships, which the Directors believe is the highest in the industry, allows the Group to deliver high levels of customer service to passengers.

Saga's cruises are positioned towards the mature, premium end of the market and have high brand awareness, with approximately 30,000 passengers in the year ended 31 January 2014. Saga's average cruise customer is 76 years old. Saga focuses on providing a high level of service aboard its cruise ships. Saga cruises start from ports in the UK and sail to classic sights and destinations across the globe, with an emphasis on relaxation and elegance. In the financial year ended 31 January 2014, the average sale price for a Saga cruise was £2,565 per person. Saga Cruises also generated an average value of £3,939 per customer over three years, compared to £521 in average customer acquisition cost at the start of that period. Saga Cruises also had a 72 per cent. retention rate from 2013 buyers in 2014. Saga cruises achieve greater than 90 per cent. average occupancy rates, with even its Mystery Cruise itinerary, where the ports of call are unknown, achieving 85 to 90 per cent. average occupancy.

Titan Travel Cruises

The Group offers cruise itineraries in more than 70 countries across six continents under the Titan Travel brand, with approximately 40,000 passengers for the year ended 31 January 2014. Titan Travel offers a wide range of ocean cruises, including cruise themes such as Adventure, Alaskan, Baltic, Caribbean, Norwegian Fjord and Saga. Titan Travel also offers the 'Cruise and Tour' concept, combining luxuriously cruising with award-winning escorted touring. Titan Travel's Cruise and Tour portfolio offers destinations as diverse as Alaska and Australia.

Financial Services

Financial services is Saga's largest business segment by revenue and has been operating for over 25 years. It consists of three subsegments: motor insurance, home insurance and other financial services.

Motor Insurance

Motor insurance is the largest of the Group's insurance products by revenue and volume, with approximately 1.1 million core policies and 1.6 million ancillary policies sold in the year ended 31 January 2014. The Group's policies are held by over 50s individuals, who tend to be lower risk customers as compared to the general population and make fewer claims on average. The Group offers a number of motor insurance policies, including comprehensive cover and third-party fire and theft cover. The Group's comprehensive motor insurance cover includes liability to others for injury or damage to property, travel abroad (up to 90 days across EU countries), damage to a vehicle when in the custody of garage staff or valet service, damage caused by accident, fire or theft, replacement locks and keys, personal belongings inside the vehicle and a variety of other items. The Group also offers ancillary complementary policies, such as legal expenses, motor breakdown assistance, personal accident cover, car hire and an accident healthcare plan. The Group provides temporary hire vehicles, repairs and debt recovery services to the not-at-fault parties of motor accidents through ClaimFast, which also provides claims handling services and expertise to the Group. The Group has a claims handling cost ratio below the market average. 84 per cent. of the Group's motor insurance revenue was derived from the insurance renewals in the year ended 31 January 2014, driven by average retention rates of 73 per cent. and received 94 per cent. positive feedback from customers in "Moments of Truth" surveys in calendar year 2013.

The Group self-underwrites the vast majority of its motor insurance cover. Approximately 92 per cent. of £331.6 million in gross written premiums on Saga-branded products that were underwritten in-house in the financial year ended 31 January 2014 were from motor insurance policies and ancillary motor insurance products, including legal expenses, personal accident and breakdown cover, resulting in total gross written premiums of £304 million for the Motor Insurance business. Saga also participates on the AA Motor and Home panels, but does not otherwise currently underwrite insurance policies for other third parties.

Due to its underwriting policies, the Group has been able to make reserves releases in most financial years and has never had to strengthen reserves in any financial year.

The Group purchases reinsurance from third parties, thereby transferring exposure to certain risks to others through reinsurance arrangements. The Group currently uses reinsurance to protect the Group's capital position and reduce underwriting volatility. Approximately 2.1 per cent. of the Group's motor insurance exposure was reinsured. For the motor insurance subsegment, the Group reinsures individual excess of loss with a retention of £3.0 million (subject to market indexation) and property damage excess of loss covering events on the motor accounts with a retention of £1.0 million. The Group also cedes all of the risk on AA branded policies where the policyholder is under 50 years old through reinsurance arrangements.

Home Insurance

Home insurance is the second largest of the Group's insurance products by revenue and volume, with approximately 1.3 million core policies and 0.6 million ancillary policies sold in the year ended 31 January 2014. The Group offers two core home insurance products: buildings insurance and contents insurance under three separate tiers of cover, Essential, Essential Plus and Premier, as well as TailorMade policies for customer who require a higher insurance cover. Enhanced accidental damage cover is offered under the Essential Plus, Premier and TailorMade tiers. The Group's buildings insurance includes the structure of the home, loss or damage caused by fire, smoke and other elements, a 24-hour a day home emergency helpline, alternative accommodation costs, accidental damage and a variety of other items. The Group's contents insurance includes household goods and valuables and personal belongings. The Group also offers additional complementary policies, such as legal expenses cover and Saga home emergency cover which had average revenue per policy of £6.70 and £6.40 in the year ended 31 January 2014, respectively.

92 per cent. of the Group's home insurance revenue was derived from renewals in the year ended 31 January 2014, driven by average retention rates of 76 per cent. and received 91 per cent. positive feedback from customers in "Moments of Truth" surveys in 2013 for overall satisfaction.

In June 2009, the Group moved away from exclusive third-party underwriting for its home insurance products and established a panel of underwriters. Currently, the Group's underwriting function and 13 other distinct underwriters are on this panel, which has served to reduce net rates and improve both the competitiveness and profitability of the Group's home insurance products. Other members of Saga's home insurance panel include, among others, Ageas, Allianz, AXA, The Co-operative, Covéa, e-Underwriting, Legal & General, Lloyds, LV, RSA, Towergate and Zurich Insurance. The largest of these panel members held more than 15 per cent. of the panel's share in the year ended 31 January 2014. Saga underwrote approximately 10 per cent. of the policies written on the Group's home insurance panel in the year ended 31 January 2014. In order to further reduce the underwriting risk of home insurance, the Group has coinsurance arrangements in place with the New India Assurance Company that allows it to increase volumes underwritten internally without increasing associated risk. Approximately 99 per cent. of the Group's home insurance underwriting exposure is coinsured through the New India Assurance Company, with the remaining one per cent. reinsured through the New India Assurance Company with the Group taking no residual risk.

Home policies that Saga chooses to underwrite are selected based on data on past claims experience combined with external data on risk of flood, subsidence and theft by postcode, resulting in average loss ratios of 56 per cent. on new business and 53 per cent. on renewal business for the three years from 2011 to 2013. Over the same period, renewals achieved customer acquisition ratios of two per cent., with new business achieving acquisition ratios of 51 per cent. on new business from aggregators, 13 per cent. on new business from its website and 19 per cent. on new business over the phone.

Other Financial Services

In addition to its motor and home insurance offerings, the Group offers other insurance and financial services products to its customers.

Other Insurance

In the financial year ended 31 January 2014, Saga customers purchased approximately 338,000 other insurance policies. Private medical insurance is Saga's third largest insurance product by revenue and is the Group's highest value insurance product on average, with an average annual premium of £1,911 in the financial year ended 31 January 2014. Saga's market share in health insurance was estimated to be 3.6 per cent. of the total market and 7.5 per cent. of the over 50s market. The Group offers a range of cover levels and cover ranges from in-patient and day-patient treatments, to various out-patient treatments and additional benefits such as home nursing, recuperative care, cancer cover and dental cash plans. 99 per cent. of customers rated Saga's health insurance products as good or excellent.

The Group also offers a number of other smaller lines of insurance cover, including travel, pet, caravan, motor home, commercial van, motorbike, boat, holiday home, personal accident, accidental death, health cash plan, breakdown and home emergency insurance. In travel insurance, the Group's fourth largest insurance product, Saga had an estimated market share of 5.2 per cent. of the single and annual trip market.

Collectively, its other insurance products account for approximately 0.3 million policies currently in force.

Other Financial Products

As a part of its financial services offerings, the Group introduces its customers to selected third-party providers of savings accounts, a share dealing service, a Saga-branded credit card, an equity release service for home owners over the age of 55, life insurance and annuity products, a long-term care funding product, and other financial products, on a commission basis. The Group's financial services intermediation products are offered primarily under the Saga brand through various business partners such as Birmingham Midshires (a division of Lloyds Banking Group) and Barclays Stockbrokers Limited. Saga has over £5 billion of customer deposits held with Birmingham Midshires. As of 31 January 2014, Saga customers held approximately 67,000 wealth products. The Group offers its customers legal services through Saga Legal Solutions, including wills and estate planning, probate services and conveyancing services.

Healthcare Services

Since 2007, the Group has developed an extensive healthcare business, with 147 local branches and over 16,000 employees as of 31 January 2014 (including part-time employees). The Group established its healthcare services segment primarily through the acquisitions of Nestor (providing domiciliary care and primary care) and Allied (providing domiciliary care) in 2011. The Group has invested and continues to invest significant resources in integrating these two businesses under the Allied brand by consolidating their respective branch networks, management and administrative functions, implementing a common IT platform and reallocating staffing. The Group offers a range of healthcare services (providing both domiciliary care and complex care) nationwide under the Allied Healthcare, Saga, Patricia White's and Country Cousins brands and a further range of primary care services under the Primecare brand. The Group's healthcare services segment delivered an average of 332,000 weekly hours of care, in the year ended 31 January 2014.

The Group's healthcare services segment provides managed health and social care services through its care in the home and primary care divisions.

Care in the Home

Care in the home represents the majority of the Group's healthcare services revenue and the Group is the leading provider of care in the home services in the UK. These services are either publicly funded by local authorities or CCGs established by the NHS, privately purchased by individuals who do not qualify for public funding or by a combination of both. The Group receives funding from local authorities for its services either through direct settlement with the local authority or through service users who are provided with local authority funds to make their own decision about which supplier to use for their care. Some publicly-funded customers also choose to "top-up" the care commissioned by the local authorities, by purchasing additional hours of care directly from the Group as a privately-funded customer. The care in the home services that the Group provides includes both domiciliary care and complex care, which each tend to largely be for individuals over 65 years of age due to the nature of the service, but also encompass other required care in the home services such as paediatric care and care for those with special needs.

Domiciliary care: Domiciliary care involves the provision of social care services, such as bathing, dressing and domestic chores, to individuals within their homes, with the aim of maintaining independent living in the community. These services are delivered to the majority of customers on a per-hour basis. The Group also offers live-in care services through its branches. Saga also provides emergency alarm systems in the home ("SOS") for private customers using the Saga brand. The Group provides domiciliary care services in Northern Ireland and the Republic of Ireland through a 50.1 per cent. holding in its Homecare Independent Living business.

Care Introductory Service: Saga's Country Cousins and Patricia White's brands are introduction agency businesses providing live-in carers to private customers by introducing the carers to the clients who in turn directly engage the carers.

Clinical Placement: The Group also assists in the placement of nursing staff, midwives and locum doctors into primary care roles through the Allied brand. The Group also provides nurses for private nursing placements through its Nightingale Nursing brand.

Complex care: Complex care involves home-based services that are commissioned by CCGs and include services ranging from post-surgery rehabilitation to end-of-life care, palliative cancer care and care for individuals with complex long-term conditions.

Primary Care

The Group provides primary healthcare through the Primecare brand, which is commissioned by public sector bodies, including local authorities and CCGs. The Group provides a range of services, including a long-established general practitioner ("GP") "out-of-hours" service, 24/7 urgent care services, GP-led NHS health centres, NHS dentistry, forensic medical services, locums and occupational health.

Media and Central Costs

The Group's media and central costs segment includes Saga Publishing, which produces and markets the Saga Magazine, and MetroMail, Saga's own print and mailing house.

Saga Publishing

In 1984, the Group's free newsletter, Saga News, was re-launched as a commercial publishing venture called Saga Magazine. Saga Magazine is a key element of the Group's brand-building and marketing. The magazine provides editorial content designed to satisfy the general interests of the over 50s market, as well as advertising for its own and third-party products and services. According to ABC, Saga Magazine is the UK's bestselling paid-for monthly magazine and, according to the National Readership Survey, had an estimated readership of 1.2 million people in the twelve months ending December 2013.

MetroMail

MetroMail is Saga's printing, packaging and automated mailing house that handles both the Group's direct mailing requirements and, for a fee, the printing, packaging, mailing and fulfilment needs of the AA Group and of other third parties. MetroMail generated £2.1 million, in revenues from third parties in the year ended 31 January 2014. MetroMail is electronically linked directly to the Group's contact centres so that brochure requests and insurance documents are dispatched quickly and efficiently.

OPERATIONS AND DEPARTMENTS

Customer Service

The Group's customer service centres are all in the UK and have no automated interactive voice response mechanisms, allowing customers to speak directly with a customer service staff member.

The Group's high level of customer service is maintained through a staff induction programme, on-going training and incentives for field and contact centre staff. The Group tracks its customer service and customer satisfaction standards both internally and externally. Customers are given surveys after interactions with its contact centre staff and at other times during and after they use the Group's products and services. The Group uses the results of these surveys to track the levels of customer service that it provides and to improve customer service satisfaction.

The Group operates UK-based contact centres specific to each of its segments, as the Group offers a broad range of specialised products and services, each requiring their own focus with regard to recruitment, training, management and control. Each contact centre relies on centralised infrastructure and the Group Marketing Database. The Group's centralised telephony systems interface with the Group Marketing Database and its operating platforms to present relevant information to the contact centre operator. This enables the operator to recognise past customers, to personalise the dialogue, to facilitate the presentation of other products and to gather further information for future marketing opportunities. In the case of travel bookings, for instance, operators in divisional contact centres are able to record special needs, requests and other details, and this information is automatically delivered to its staff in holiday resorts in advance of the customer's arrival.

Marketing

The Group's public relations and market research departments operate at a Group-wide level, with work commissioned to them by each division.

Group Marketing Database

The Group utilises a proprietary Group Marketing Database to store customer information across segments. The Group Marketing Database includes such information as contactable names, birth dates, email addresses, retirement status, home and motor insurance renewal dates, mobile phone numbers and retirement dates. Once data has been captured and analysed within the Group Marketing Database, it is made available to all of the Group's businesses for a variety of purposes, including:

• marketing analysis;
• production of mailing lists;
• insurance pricing;
• data distilleries modelling, a technique which uses specialised logic to identify the best mailing prospects;
• automatic generation of mailing packs, emails and texts based on customer and potential customer expressions of interest; and
• providing contact centre and other staff with access to selected information to improve their interaction with the customer.

The functionality of the Group Marketing Database enables the Group to improve overall margin performance, as existing Group customers are matched to new products, reducing the need for extensive third-party product advertising. The Group's proprietary Group Marketing Database is also supported and maintained by a central team of specialised analysts. The Group does not share its customer information with third parties and has no plans to do so in the future.

Direct Mail

A large part of the Group's marketing strategy involves sending direct mail to its customers to advertise its products and services. MetroMail plays a key role in disseminating this information for the Group's business segments. Each segment is responsible for the content of its direct mail advertisements and is able to direct its offerings to particular customers who are most likely to be interested in particular products or services, based on both industry expertise and information collected and stored in its proprietary Group Marketing Database.

Other Marketing Channels

In addition to direct mail, the Group utilises a range of other appropriate marketing channels. These include press, radio and TV advertising, web based search engine marketing ("SEM") and search engine optimisation ("SEO"), direct email, outbound telephony, social media advertising, social media activity and lead generation through PCWs.

IT Infrastructure

The majority of the Group's IT systems are supported, developed and maintained in-house, as many of the systems are a key source of its competitive advantage. Most of the Group's operating systems are adapted to each business segment, so application support is administered by decentralised segment-specific IT support functions.

Most IT infrastructures, such as telephony switches, data networks and server rooms, are maintained by centralised IT support functions. The healthcare services segment has its own IT department to support its IT infrastructure, which is fundamentally different to the IT infrastructure maintained by the rest of the Group in that it is decentralised to many small offices that often have low technical and bandwidth demands.

The Group has taken certain measures for disaster recovery of its IT systems, including alternative servers located on and off-site. The computer room environment incorporates typical data centre controls, including fire detection, fire suppression, air condition and uninterruptible power supplies.

Insurance Function

The Group's insurance businesses employs technical and actuarial insurance specialists to seek to ensure the correct pricing of insurance products, the maintenance of appropriate technical reserves, proper capital management and insurance risk management. The Group's pricing teams seek to ensure the correct pricing of the insurance products the Group sells, with an aim to optimise the balance between volume and margin using advanced actuarial techniques. For products self-underwritten, the Group's underwriting teams aim to set premiums to ensure that the costs of claims and associated expenses are adequately covered to achieve a nominal return on capital.

The Group is required to maintain technical reserves to cover the estimated cost of future claims payments and related administrative expenses. The Group estimates technical reserves using a range of actuarial and statistical projections and assumptions across a range of variables such as the time required to learn of and settle claims, facts and circumstances known at a given time, trends in the number of claims or claims of certain types, inflation in claims severity and expected future claims payment patterns. The total level of claims costs the Group incurs are impacted by the frequency and the severity at which they occur. Claims frequency refers to the volume of claims relative to the number of policies on risk, whereas claims severity refers to the average cost of each claim. The Directors believe that an efficient and effective claims management system and an efficient and well managed claims supply chain are key to controlling claims costs. As is required of insurance underwriters, The Group holds reserves and capital to meet claims on policies that it has written in the past and to allow for fluctuations in estimates made for these claims.

The Group manages insurance risk within its risk management framework as set out by the Directors. The key policies and processes of mitigating insurance risks have been implemented, including underwriting partnership arrangements, reinsurance and excess of loss contracts, pricing policies and claims management and administration policies.

RELATIONSHIP WITH THE AA GROUP AND ACROMAS

Saga and the AA Group provide certain services to each other, including administrative and central functions, and commercial services such as the underwriting of AA products by Saga's underwriting function, fulfilment of roadside assistance and home emergency services for the Group by the AA Group, and claims management services provided by the Group to the AA Group. These services are formalised in the Umbrella Services Agreement between certain members of the Group, the AA Group and the Acromas Group, which came into effect on 1 February 2013 and was amended on 31 March 2014. The Umbrella Services Agreement sets out specific arrangements for certain of these services and also refers to certain other existing arrangements in place at that time which are continued under the Umbrella Services Agreement. Saga also provides certain services to Acromas, including, amongst others: tax work, treasury, accounting and company secretarial services.

On 6 May 2014, Saga, Acromas and certain other entities within the Group and the Acromas Group entered into the Acromas Services Agreement to formalise the terms on which the Group is to provide tax services, treasury services, internal accounting, audit and budget services, company secretarial and related services, legal services and public relations services to entities within the Acromas Group on arm's length terms. In addition to serving as directors and senior managers for Saga, Andrew Goodsell and Stuart Howard will continue to sit on the board of directors of various entities within the Acromas Group.

INTELLECTUAL PROPERTY

The Group has various trademarks incorporating the Saga name. The Group has also registered the domain name Saga.co.uk and owns many other domain names incorporating the Saga and other brand names.

EMPLOYEES

Based on a monthly average over the year ended 31 January 2014, Saga employed 22,031 people, and the number of people employed in each of the four businesses was 2,423 in travel (including 1,218 ships' crew employed via a manning agency), 2,113 in financial services, 16,844 in healthcare services and 651 in media and central costs, which includes employees who work in the Group's central division overseeing the Group's pensions, IT, human resources, property, legal, internal audit, health and safety and finance departments.

Saga's employee policies are designed to maximise employee retention and minimise staff turnover. The Group pays basic salaries in line with market rates and operates a Group-wide job grading structure, with salary bands adjusted annually in line with market movements. Within this framework, Saga uses a performance management system involving quarterly or semi-annual reviews of performance against business objectives to determine pay awards for individuals. Additionally, Saga operates a performance-related bonus system, subject to both relevant businesses and the overall Group meeting its budgeted profit. Rather than taking part in the general bonus system, sales agents in the contact centres are eligible for commission payments linked to key performance indicators which are designed to prevent sales from being achieved at the expense of customer service and in accordance with regulation. The Group has a good record of employee relations, with no recent history of material industrial disputes.

Saga's policy is to develop and retain its employees. In particular, the Directors believe Saga's employee turnover figures are considerably lower than those typically experienced in a contact centre environment. Vacancies are advertised internally in the first instance and employees are encouraged to put themselves forward for suitable opportunities. The Group also seeks to employ people with market-leading experience when specialist expertise is required. As part of its performance management system, employee training and development needs are actively identified and appropriate courses developed in-house or sourced externally to meet such needs. Additionally, Saga has strong links with local schools and colleges both for potential candidates and suitable training input. The Group has been running a management training scheme for over 25 years. Trainees are allocated a mentor with whom they have regular meetings to discuss progress, ambitions, and future career development.

To help employees make the most of their existing skills, as well as to acquire new skills, Saga runs the Saga Learning Academy. The Saga Learning Academy makes available a wide range of facilities and resources to all employees. Learning Academy sites provide a quiet space for learning, reading or studying. The scheme offers access to over 250 e-learning courses covering a number of topics, including communication, leadership, human resources, management, customer service, sales, marketing, negotiation, project management, health and safety, team building, typing, languages, first aid and software courses.

The following table shows the Group's employee numbers by business segment on average over the years ended 31 January 2014, 2013 and 2012:

Employees by business segment

	31 January
	2014	2013	2012
Travel(1)	2,423	2,233	2,166
Financial services	2,113	2,457	2,617
Healthcare services	16,844	17,201	10,938
Media and central costs	651	709	721
Total	22,031	22,600	16,442

(1) The number of employees in the Group's travel segment includes 1,218, 1,197 and 1,293 ships' crew employed via a manning agency in the years ended 31 January 2014, 2013 and 2012, respectively.

For details of the Group's pension schemes, see Part 14 "Additional Information – Pensions".

INSURANCE COVERAGE

The Directors believe that the Group's current insurance coverage is appropriate for its business, in respect of its level and applicable excesses and deductibles, considering the Group's business location as well as the size of its business activities.

CORPORATE AND SOCIAL RESPONSIBILITY

Saga is committed to being a good corporate citizen. Saga has a staff crèche at its head office and utilises the childcare voucher scheme to support working parents with the cost of childcare. Saga also actively considers flexible working requests for employees. The pavilion at the Group's headquarters is also used by local groups and charities.

Saga was one of the first businesses to sign up to the Corporate Covenant, which was launched by the UK Government in 2013 as a way for UK corporations to demonstrate their concrete support for the armed forces community.

Charitable Activities

The Group operates two charitable trusts: the Saga Charitable Trust, which is linked to the activities of the travel segment; and the Saga Respite for Carers Trust, which is linked to the activities of the healthcare segment.

Saga Charitable Trust

The Saga Charitable Trust ("SCT") benefits under-privileged communities at destinations in developing countries visited by Saga travel customers. The aim is to invest in sustainable projects that will empower and support local communities, as well as provide increased opportunities for those communities to benefit from tourism. The operating costs of the SCT are funded by Saga. The SCT raises funds through fundraising activities supported by customers and by Saga employees. Projects supported by the SCT are sometimes visited by travel customers, both in the course of normal packaged holidays or cruises, and as destinations for volunteer travel.

Saga Respite for Carers Trust

The Saga Respite for Carers Trust ("SRCT") provides unpaid carers (frequently family care givers) aged 50 and over with holidays for the carer and, where necessary, covers the cost of professional substitute respite care.

Environmental Matters

The Group is sensitive to its environmental impact and aims to operate in a manner that minimises negative impact, such as waste sent to landfill, and invests in activities which have a positive impact on the environment, such as improved energy efficiency. Saga promotes green travel options and has a network of Saga minibuses that take people to and from its sites and is introducing a cycle to work scheme.

PART 7

REGULATORY OVERVIEW

The Group is subject to detailed and comprehensive legislation and regulation in respect of its operations. Regulatory agencies have broad administrative powers over many aspects of the travel, financial services and healthcare industries. The Group is subject to regulation and supervision by the FCA and the PRA in relation to the carrying on of its regulated activities in the United Kingdom.

The following discussion considers the main features of the relevant regulatory regimes for each of the industries in which the Group operates.

Travel Regulation

Package Holiday Regulations

As a tour operator, the Group is subject to several key areas of law, regulation and consumer protection.

General consumer protection legislation such as the Consumer Protection from Unfair Trading Regulations 2008 introduce general duties on businesses which affect how the Group advertises, how the Group sells its holiday products and requires the Group to treat customers fairly.

The Package Travel, Package Holidays and Package Tours Regulations 1992 define what constitutes a package holiday and the obligations the Group has as a package holiday provider, in terms of both the information to be provided to customers before contracts are concluded and the Group's responsibilities for the provision of the package. These regulations also provide that the Group must protect customers' monies in the event of its financial failure. The European Commission is currently consulting on changes to these regulations to widen their remit.

The Civil Aviation (Air Travel Organisers' Licensing) Regulations 2012 require that persons offering to sell flights or holidays with flights to UK consumers must hold an ATOL licence. The Air Travel Trust also operates a scheme on behalf of the Civil Aviation Authority ("CAA") to protect customers' monies for flight based holidays in the event of financial failure. In order to meet the CAA's financial fitness requirements, there are restrictions on the withdrawal of cash from the travel business for use within the wider Group. As at 31 January 2014, there was approximately £62.2 million of ring-fenced cash within the travel business. As at the same date, the Group's travel segment satisfied both the liquidity and leverage test imposed by the CAA.

The Group also chooses to be a member of the Association of British Travel Agents ("ABTA") and the Federation of Tour Operators ("FTO"), well-recognised UK trade bodies with codes of conduct to which members are expected to adhere. The Group also holds a bond with ABTA for the protection of customers' monies where holidays do not include flights.

CAA Licensing Regime

Certain entities within the Group are licensed by the CAA. ATOL licences, which are granted by the CAA, are designed to protect customers by requiring the licence-holder to provide funds that can be used to repatriate customers in the event of financial failure of the tour operator. Failure to comply with The Civil Aviation (Air Travel Organisers' Licensing) Regulations 2012 or the Package Travel, Package Holidays and Package Tours Regulations 1992 exposes the Group to enforcement action by the CAA (which action can include fines, securing undertakings, refusing licence applications, withdrawing, not renewing a licence and/ or imposing additional conditions on a licence and criminal prosecution, including the risk of an unlimited fine and/or 2 years imprisonment). The CAA is also empowered to conduct inspections. Various Group entities who operate the Group's travel business are required to comply with the fitness and competence criteria set by the CAA and to ensure the nominated 'Accountable Person' is acceptable to the CAA. Under section 35 of the Civil Aviation (Air Travel Organisers' Licensing) Regulations 2012, the CAA can revoke, suspend or vary an ATOL licence if it is no longer satisfied that the licence-holder is a fit person to make available flight accommodation. It should be noted that the Group's relationship with the CAA is positive and gives the Group no cause for concern.

Other Regulatory Requirements

As a provider of package holidays, the Group is also required to comply with the Package Travel, Package Holidays and Package Tours Regulations 1992 (which are based on the Package Travel Directive (90/314/EEC)). These regulations make the Group responsible to the customer for all aspects of the package holiday provided, even where the service is provided by a third party (for example an airline or hotel operator). In addition, these regulations also regulate the level of information given to customers prior to travel. This includes content of brochures, booking conditions and Saga's emergency contact details. Failure to comply with these regulations exposes the Group to the risk of an unlimited fine.

The European Commission has proposed a new directive on package travel and assisted travel arrangements that would repeal the existing Directive and require the UK to make changes to the 1992 Regulations. The proposed changes include:

• stricter controls on price surcharges: 10 per cent. cap on price increases and a requirement to pass on price reductions;
• improved cancellation rights for customers: a right to terminate before departure by paying a reasonable compensation to the organiser;
• the ability to cancel free of charge prior to departure, in the event of a serious situation at the destination which would affect the holiday;
• clearer information about liability: consumers to be informed that the organiser is responsible for the proper performance of all included services (national rules currently differ as to whether the retailer or organiser are liable to the consumer);
• better redress: price reductions if a travel service isn't performed as it should have been, as well as compensation for "immaterial damage" suffered e.g. a spoilt holiday; and
• a single point of contact if something goes wrong: consumers to be able to address claims directly to the retailer (travel agent).

The estimated date of adoption of the directive is late 2014, following which the UK Government will have two years to update the 1992 Regulations. The proposals will also have implications for the ATOL scheme, which is likely to require amendment to comply fully with the revised directive. The proposed new legislation is at the draft stage now but, if implemented, is likely to lead to an increased regulatory burden on the Group. In its current form, the Group expects that this impact will not be unduly problematic.

ABTA Membership

Titan and Saga are the trading names of Group entities which are members of ABTA. Membership of ABTA is undertaken on a voluntary basis. ABTA members are required to comply with the ABTA Code of Conduct which requires that members meet certain standards of service and protects non-flight holiday customers. ABTA also operates a complaints service, providing access to independent arbitration and mediation schemes. ABTA can issue fixed penalties and require members to give undertakings in respect of their subsequent conduct. Complaints can also be heard by the Code of Conduct Committee, which is empowered to issue undertakings, reprimands, fines and suspend or terminate membership of ABTA. A serious breach of the ABTA code is therefore also likely to expose the Group to reputational harm and could affect profitability, if consumers opt not to book travel packages with a non-ABTA member.

The Group's travel business is also licensed by the Irish Commission for Aviation Regulation, to carry on business in Ireland as a travel agent. The Group has been advised by its legal advisers in Ireland that it requires a licence from the Commission for Aviation Regulation ("CAR") in order to sell holidays in Ireland. The Group was advised that CAR's approach is that where a company either: (i) charters flights out of Ireland; or (ii) block books seats on flights out of Ireland (where they will be liable for the cost of those seats whether or not they sell such seats on to final customers), such a company will require a tour operator's licence. However, where a company merely books individual seats on flights out of Ireland, a travel agent's licence is required. This distinction is based on the fact that the higher the number of seats booked on each flight out of Ireland, the higher the risk, and such higher risk is covered by the higher bond required for tour operators. Consequently, the Group's legal advisers advised that the Group's activities fall within CAR's definition of a travel agent, which is the type of licence held.

IATA Membership

The Group, through its licensed travel entity, is also an accredited agent for IATA. IATA is a trade body of the world's scheduled airlines and its membership allows the Group to issue air tickets through the airlines reservation systems. Again, IATA membership is subject to satisfying minimum financial hurdles. Membership is not compulsory but the Group would not be able to obtain competitive air fares with airlines if it did not hold this license. The Group also holds a bond with IATA that protects the airlines in the event of its financial failure.

Cruise and Shipping Regulations

Shipping is one of the world's most heavily regulated industries, and it is subject to many industry standards. Government regulation significantly affects the ownership and operation of vessels. These regulations consist mainly of rules and standards established by international conventions, but they also include national, state and local laws and regulations in force in jurisdictions where vessels may operate or are registered, and which may be more stringent than international rules and standards. This is the case particularly in the United States and, increasingly, in Europe.

A variety of governmental and private entities subject vessels to both scheduled and unscheduled inspections. These entities include local port authorities (the US Coast Guard, harbour masters or equivalent entities), classification societies, flag state administration (country vessel of registry), and charterers, particularly terminal operators. Certain of these entities require vessel owners to obtain permits, licenses and certificates for the operation of their vessels. Failure to maintain necessary permits or approvals could require a vessel owner to incur substantial costs or temporarily suspend operation of one or more of its vessels.

Heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers continue to lead to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. Vessel owners are required to maintain operating standards for all vessels that will emphasise operational safety, quality maintenance, continuous training of officers and crews and compliance with US and international regulations. Because laws and regulations frequently change and may impose increasingly strict requirements, the Group cannot predict the ultimate cost of complying with these requirements, or the impact of these requirements on the resale value or useful lives of its vessels. In addition, a future serious marine incident that causes significant adverse environmental impact could result in additional legislation or regulation that could negatively affect its profitability.

The International Maritime Organization ("IMO") has negotiated a number of international conventions concerned with preventing, reducing and controlling pollution from vessels. These fall into two main categories, consisting firstly of those concerned generally with vessel safety standards, and secondly of those specifically concerned with measures to prevent pollution.

Compliance Enforcement

A flag state, as defined by the United Nations Convention on Law of the Sea, has overall responsibility for the implementation and enforcement of international maritime regulations for all vessels granted the right to fly its flag. The "Shipping Industry Guidelines on Flag State Performance" evaluates flag states based on factors such as sufficiency of infrastructure, ratification of international maritime treaties, implementation and enforcement of international maritime regulations, supervision of surveys, casualty investigations and participation at IMO meetings. The vessels that the Group operates are flagged in Malta. Malta-flagged vessels have historically received a good assessment in the shipping industry.

Non-compliance with the ISM Code or other IMO regulations may subject the ship owner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports. The US Coast Guard and European Union authorities have, for example, indicated that vessels not in compliance with the ISM Code will be prohibited from trading in US and European Union ports, respectively. As of the date of this document, each of its vessels is ISM Code certified. However, there can be no assurance that such certificate will be maintained.

The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulations may have on its operations.

Ship Safety Regulation

A primary international safety instrument is the Safety of Life at Sea Convention of 1974, as amended, or SOLAS, together with the regulations and codes of practice that form part of its regime. Much of SOLAS is not directly concerned with preventing pollution, but some of its safety provisions are intended to prevent pollution as well as promote safety of life and preservation of property. These regulations have been and continue to be regularly amended as new and higher safety standards are introduced with which the Group is required to comply.

An amendment of SOLAS introduced the International Safety Management, or ISM, Code, which has been effective since July 1998. Under the ISM Code, the party with operational control of a vessel is required to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel's management with code requirements for a safety management system. No vessel can obtain a certificate unless its manager has been awarded a document of compliance, issued by the respective flag state for the vessel, under the ISM Code.

Ship Security Regulation

In December 2002, amendments to SOLAS created a new chapter of the convention dealing specifically with maritime security. The new chapter went into effect on 1 July 2004, and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created ISPS Code. Among the various requirements are:

• on-board installation of automatic information systems to enhance vessel-to-vessel and vesselto-shore communications;
• on-board installation of ship security alert systems;
• the development of vessel security plans; and
• compliance with flag state security certification requirements.

The vessels in its fleet that the Group operates have on board valid International Ship Security Certificates that attest to the vessel's compliance with SOLAS security requirements and the ISPS Code.

Regulations to Prevent Pollution from Ships

In the secondary main category of international regulation, the primary instrument is the International Convention for the Prevention of Pollution from Ships ("MARPOL"), which imposes environmental standards on the shipping industry set out in Annexes I-VI of MARPOL. These contain regulations for the prevention of pollution by oil (Annex I), by noxious liquid substances in bulk (Annex II), by harmful substances in packaged forms within the scope of the International Maritime Dangerous Goods Code (Annex III), by sewage (Annex IV), by garbage (Annex V) and by air emissions (Annex VI).

These regulations have been and continue to be regularly amended as new and higher standards of pollution prevention are introduced with which the Group is required to comply.

For example, MARPOL Annex VI sets limits on Sulphur Oxides ("SOx") and Nitrogen Oxides ("NOx") emissions from vessel exhausts, prohibits deliberate emissions of ozone depleting substances and limits the emission of volatile organic compound ("VOC"). Limiting worldwide SOx emissions will mean a cap on the content of sulphur in fuel oil of 3.5 per cent. For special areas known as Emission Control Areas ("ECAs") the cap is lower and is currently at 1.0 per cent. and will reduce to 0.1 per cent. after 1 January 2015. Further regulations come into force from 1 January 2020 lowering the sulphur content limit to 0.5 per cent. in all non-ECAs from the 3.5 per cent. limit currently in place. Limiting NOx emissions is set on a three tier reduction, the final one of which comes into force on 1 January 2016. Currently the Group is SOx and NOx compliant in all its vessels.

Greenhouse Gas Emissions

In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change ("Kyoto Protocol") entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programmes to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the greenhouse gas emissions from international shipping do not come under the Kyoto Protocol. The European Union confirmed in April 2007 that it plans to expand the European Union emissions trading scheme by adding vessels. In December 2009, more than 27 nations, including the United States, entered into the Copenhagen Accord. The Copenhagen Accord is non-binding, but is intended to pave the way for a comprehensive, international treaty on climate change. The IMO is evaluating various mandatory measures to reduce greenhouse gas emissions from international shipping, which may include market-based instruments or a carbon tax. The European Union also has indicated that it intends to propose an expansion of an existing EU emissions trading regime to include emissions of greenhouse gases from vessels, and individual countries in the European Union may impose additional requirements. In the United States, the US Environmental Protection Agency ("EPA") issued an "endangerment finding" regarding greenhouse gases under the Clean Air Act. While this finding in itself does not impose any requirements on the shipping industry, it authorises the EPA to regulate directly greenhouse gas emissions through a rule-making process. In addition, climate change initiatives are being considered in the United States Congress and by individual states. Any passage of new climate control legislation or other regulatory initiatives by the IMO, European Union, the United States or other countries or states where the Group operates that restrict emissions of greenhouse gases could have a significant financial and operational impact on its business through increased compliance costs or additional operational restrictions that the Group cannot predict with certainty at this time.

Anti-Fouling Requirements

In 2001, the IMO adopted the International Convention on the Control of Harmful Anti-fouling Systems on Ships (the "Anti-fouling Convention"). The Anti-fouling Convention prohibits the use of organotin compound coatings to prevent the attachment of molluscs and other sea life to the hulls of vessels. Vessels of over 400 gross tons engaged in international voyages must obtain an International Anti-Fouling System Certificate and undergo a survey before the vessel is put into service or when the anti-fouling systems are altered or replaced. Currently each of the Group's vessels have such Certificates in place.

Other International Regulations to Prevent Pollution

In addition to MARPOL, other more specialised international instruments have been adopted to prevent different types of pollution or environmental harm from vessels. In February 2004, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments (the "BWM Convention"), which has not yet entered into force. The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements. The BWM Convention will not enter into force until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35.0 per cent. of the gross tonnage of the world's merchant shipping. To date, there has not been sufficient adoption of this standard by governments that are members of the BWM Convention for it to enter into force.

Although the United States is not a party to the International Convention on Civil Liability for Oil Pollution Damage of 1969 ("CLC"), as amended, many countries have ratified and follow the liability plan adopted by the IMO and set out in the CLC and its Protocols. Under this convention and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain defences. The limits on liability outlined in the 1992 Protocol use the International Monetary Fund currency unit of Special Drawing Rights ("SDR"). Under an amendment to the 1992 Protocol that became effective on 1 November 2003, for vessels between 5,000 and 140,000 gross tons (a unit of measurement for the total enclosed spaces within a vessel), liability is limited to approximately 4.51 million SDR plus 631 SDR for each additional gross ton over 5,000. For vessels of over 140,000 gross tons, liability is limited to 89.77 million SDR. The exchange rate between SDRs and US dollars was 1.00 SDR per 1.00 US dollar on 31 January 2014. The right to limit liability is forfeited under the CLC where the spill is caused by the ship owner's actual fault and under the 1992 Protocol where the spill is caused by the ship owner's intentional or reckless conduct. Vessels trading with states that are parties to these conventions must provide evidence of insurance covering the liability of the owner. In jurisdictions where the CLC has not been adopted, various legislative schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that of the convention. The Directors believe that its protection and indemnity insurance will cover the liability under the plan adopted by the IMO.

IMO regulations also require owners and operators of vessels to adopt Ship Oil Pollution Emergency Plans. Periodic training and drills for response personnel and for vessels and their crews are required, and in compliance with such regulations, drills are carried out on its vessels no less than four times per year when the crews are trained.

European Regulations

European regulations in the maritime sector are in general based on international law, most of which were promulgated by the IMO and subsequently adopted by the Member States. However, since the Erika incident in 1999, when the Erika broke in two off the coast of France while carrying heavy fuel oil, the European Community has become increasingly active in the field of regulation of maritime safety and protection of the environment. It has been the driving force behind a number of amendments of MARPOL (including, for example, changes to accelerate the timetable for the phase-out of single hull tankers, and prohibiting the carriage in such tankers of heavy grades of oil), and if dissatisfied either with the extent of such amendments or with the timetable for their introduction it has been prepared to legislate on a unilateral basis. In some instances where it has done so, international regulations have subsequently been amended to the same level of stringency as that introduced in Europe, but the risk is well established that EU regulations (and other jurisdictions) may from time to time impose burdens and costs on ship owners and operators which are additional to those involved in complying with international rules and standards.

In some areas of regulation the EU has introduced new laws without attempting to procure a corresponding amendment of international law. Notably, in 2005 it adopted a directive on ship-source pollution, imposing criminal sanctions for pollution not only where this is caused by intent or recklessness (which would be an offense under MARPOL), but also where it is caused by "serious negligence." The directive could therefore result in criminal liability being incurred in circumstances where it would not be incurred under international law. Experience has shown that in the emotive atmosphere often associated with pollution incidents, retributive attitudes towards vessel interests have found expression in negligence being alleged by prosecutors and found by courts on grounds which the international maritime community has found hard to understand. Moreover, there is scepticism that the notion of "serious negligence" is likely to prove any narrower in practice than ordinary negligence. Criminal liability for a pollution incident could not only result in the Group incurring substantial penalties or fines but may also, in some jurisdictions, facilitate civil liability claims for greater compensation than would otherwise have been payable.

International Laws Governing Civil Liability to Pay Compensation or Damages

In 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage (the "Bunker Convention"), which imposes strict liability on ship owners for pollution damage in jurisdictional waters of ratifying states caused by discharges of "bunker oil." The Bunker Convention defines "bunker oil" as "any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, and any residues of such oil." The Bunker Convention also requires registered owners of vessels over a certain size to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended, or the 1976 Convention). The Bunker Convention entered into force in November 2008. In other jurisdictions, liability for spills or releases of oil from vessels' bunkers continues to be determined by the national or other domestic laws in the jurisdiction where the events or damages occur.

Outside the United States, national laws generally provide for the owner to bear strict liability for pollution, subject to a right to limit liability under applicable national or international regimes for limitation of liability. The most widely applicable international regime limiting maritime pollution liability is the 1976 Convention. Rights to limit liability under the 1976 Convention are forfeited where a spill is caused by a ship owner's intentional or reckless conduct. Some states have ratified the 1996 LLMC Protocol to the 1976 Convention, which provides for liability limits substantially higher than those set forth in the 1976 Convention to apply in such states. Finally, some jurisdictions are not a party to either the 1976 Convention or the 1996 LLMC Protocol, and, therefore, shipowners' rights to limit liability for maritime pollution in such jurisdictions may be uncertain.

Insurance cover for oil pollution is covered through American Club.

Maritime Labour Convention 2006

New rules under the Maritime Labour Convention 2006 ("MLC 2006") entered into force on 20 August 2013. The MLC 2006 provides comprehensive rights and protection at work for the world's seafarers. The convention aims to achieve both decent work conditions for seafarers and secure economic interests in fair competition for quality shipowners. A Maritime Labour Certificate and a declaration of Maritime Labour Compliance is required to ensure compliance with the convention for all ships above 500 tons. The Group has obtained the required certification for its vessels.

Increasingly Stringent Regulatory Environment Post Costa Concordia

Port states, flag states and Class societies are applying a higher level of tests to existing rules. Different regulatory bodies are being more critical of each other and this is increasing the pressure to be more aggressive in order to protect their position should any incident occur.

Financial Services Regulation

The majority of the Group's regulated business is general insurance intermediation, which is carried on through Acromas Financial Services Limited ("AFSL") and Direct Choice Insurance Services Limited ("DCIS") in the United Kingdom, and through Saga Services Limited ("SSL") in the United Kingdom and Jersey. AFSL also intermediates long-term insurance products and regulated investment services in addition to its insurance intermediation activities. The Group conducts some insurance intermediation activities in the United Kingdom through AHL, an appointed representative of AFSL and SSL, and CHMC Limited ("CHMC"), an appointed representative of SSL. An appointed representative is not itself directly authorised by the FCA (although it is registered) but is an agent of the authorised firm. Under the appointed representative regime, the authorised firm remains responsible for the regulatory compliance of its agents. The Group also owns a general insurance company authorised in Gibraltar which writes predominantly motor and home insurance.

General

Regulation of the financial services industry in the United Kingdom is set out in the Financial Services and Markets Act 2000 ("FSMA") which requires providers of financial services in the United Kingdom to be authorised and regulated by the relevant regulatory authority. Financial services firms are subject to the authority of one or both of the two UK regulators, the Prudential Regulation Authority ("PRA") and the Financial Conduct Authority ("FCA") for their prudential supervision. The PRA is responsible for the prudential regulation of all banks, insurers and some designated investment firms. Although the PRA is responsible for the prudential regulation of these firms, they are dual-regulated as the FCA regulates their conduct of business and consumer protection. For other financial services firms, including insurance intermediaries, fund managers and investment firms, the FCA is the sole regulator in both prudential and conduct matters. All UK regulated entities in the Group are solo-regulated by the FCA.

An authorised firm must comply with the requirements of FSMA as well as the supplementary rules made by the PRA and/or the FCA, as the case may be, under powers granted by FSMA. There are a number of regulatory handbooks, but some important sources of the rules, and accompanying guidance, relevant to the intermediary and insurance intermediary businesses undertaken within the Group include (but are not limited to) the General Prudential Sourcebook ("GENPRU"), the Prudential Sourcebook for Banks, Building Societies and Investment Firms ("BIPRU"), the Prudential Sourcebook for Mortgage and Home Finance Firms and Insurance Intermediaries ("MIPRU"), the Mortgages and Home Finance: Conduct of Business Sourcebook ("MCOBS") and the Insurance: Conduct of Business Sourcebook ("ICOBS"), as well as the PRA and FCA's principles for businesses. Certain entities within the Group are required to hold consumer credit licenses, which have been administered by the FCA as of 1 April 2014.

Insurers

The Group owns one authorised insurance underwriting company which is incorporated in Gibraltar and operates through a branch (freedom of establishment) in the United Kingdom and on a freedom of services basis in Ireland. Subject to certain exemptions (which do not apply to the Group), no person may carry on insurance business in Gibraltar unless authorised to do so by the Commissioner of Insurance of the Financial Services Commission ("FSC") pursuant to the Insurance Companies Ordinance of Gibraltar 1987 (as subsequently amended). The FSC, in deciding whether to grant authorisation, is required to determine whether the applicant satisfies the threshold conditions set out in the Insurance Companies Ordinance to be engaged in insurance business and, in particular, whether the applicant has and will continue to have appropriate resources, and that it is and will continue to be a fit and proper person having regard to the objectives of the FSC (including in both cases whether those who manage the applicant's affairs have adequate skills and experience and those affairs are conducted soundly and with probity). An authorisation to carry on insurance business may also be subject to such requirements as the FSC considers appropriate.

In specific circumstances, the FSC may vary or cancel an insurer's authorisation to carry on a particular class or classes of business or insurance business generally. The circumstances in which the FSC can vary or cancel an authorisation include a failure to meet the threshold conditions or where such action is desirable in order to protect the interests of consumers or potential consumers.

The Group is also entitled to conduct insurance business in the United Kingdom by virtue of the passporting rights granted under the EU single market directives which allow insurers to exercise passport rights throughout EEA states. These rights extend to Gibraltar as if it were an EEA state in relation to the United Kingdom by virtue of the Financial Services and Markets Act 2000 (Gibraltar) Order 2001 (SI 2001/3084). Therefore, although prudential regulation is the responsibility of the FSC, the Group's underwriting function is subject to conduct of business regulation by the FCA in relation to insurance business undertaken in the United Kingdom and the Central Bank of Ireland ("CBI") in relation to insurance business undertaken in Ireland. Both the FCA and the CBI have the power to intervene in the Group's business to ensure compliance in this respect.

As of 31 January 2014, the Group held over twice its minimum capital requirements. The Group does not expect the anticipated growth of its insurance business to require significant additional capital injection beyond the retained earnings of the Group. The PRA in the United Kingdom has assessed the Group's underwriting function as a P3 insurer, which means that the PRA considers the Group's underwriting function to be "prudentially non-significant" and will place greater reliance on the Group's own assessment of its capital requirements than if it were considered to be more prudentially significant.

Insurance Intermediaries and Investment Firms

Insurance intermediaries are authorised and regulated by the FCA and investment firms are authorised and regulated by the FCA and (in the case of the most significant investment firms) the PRA. Both insurance intermediaries and investment firms must comply with certain conditions relating to capital and liquidity, corporate governance and risk management and controls, among others, although these conditions will vary dependent upon the nature of the regulated activities that the firm is authorised to conduct in the United Kingdom. The relevant requirements are set out in Schedule 6 of FSMA and further supported by the provisions of the FCA Handbook and PRA Handbook, as applicable. Due to the nature of the insurance intermediation business, generally lower prudential requirements apply for insurance intermediaries, particularly those who do not hold client money, than those for investment firms. The FCA and the PRA each have the power to cancel or vary a firm's permission or to withdraw a firm's authorisation.

The Group owns three companies which carry out insurance intermediation activities: AFSL, DCIS and SSL, each of which is authorised and regulated by the FCA. Both DCIS and SSL are subject to relatively limited minimum capital requirements (the higher of £5,000 and 2.5 per cent. of annual income from the regulated activities of the intermediary) and have capital resources in excess of their minimum capital requirements.

AFSL is the only Group entity that carries out investment services. It is authorised and regulated by the FCA in respect of its investment activities in addition to its insurance intermediation activities. As an investment firm, AFSL must comply with the provisions of BIPRU and is required to hold the higher of the financial resources requirements applied under MIPRU in respect of its insurance intermediary business and those applied under BIPRU in respect of its investment services. AFSL also has capital resources in excess of its minimum capital requirements.

Insurance Mediation Directives I and II

The Insurance Mediation Directive I ("IMD I") was implemented in EU Members States in 2005. IMD I sets standards covering matters such as intermediary fitness and propriety, training, competence, prudential requirements and complaints handling. It also requires a certain minimum of pre-sale information to be given to customers by insurance intermediaries.

On 3 July 2012, the European Commission presented a proposal for the revision of IMD I, the Insurance Mediation Directive II ("IMD II"). IMD II includes provisions meant to expand the scope of IMD I and includes other proposed regulations which aim to address the weaknesses perceived in IMD I. The most significant change will be a requirement for insurance intermediaries to disclose their remuneration to clients.

The proposed IMD II requires disclosure of the nature of the payment, the amount or basis of remuneration calculation and information on any contingent commission. Those requirements apply only to intermediaries. The new disclosure duty will apply to those selling life insurance products as soon as IMD II is implemented. For other intermediaries there will be a transitional period of five years, during which they will be required to disclose information on remuneration if requested by customers.

Supervision and Enforcement

The PRA and FCA have extensive powers to supervise and intervene in the affairs of an authorised firm under FSMA. For example, they can require firms to provide information or documents with respect to any matter or prepare and update a "skilled persons" report under sections 166 and 166A of FSMA (powers which are increasingly being used in a wide variety of situations). They can also formally investigate a firm. The PRA and FCA have the power to take a range of disciplinary enforcement actions, including public censure, restitution, fines or sanctions and the award of compensation. From publications of the PRA and FCA, the method of supervision is shifting to a key risks approach by each regulator and the "ARROW" supervisory process will change to a form of continuous supervision. Such ongoing supervision is intended to become more intrusive, for example, in the FCA's remit, through thematic reviews of various issues in the market, analysis of product development and a new business model assessment procedure.

Approved Persons

FSMA gives the FCA and the PRA powers and responsibilities over individuals carrying on certain roles for or on behalf of an authorised firm within the UK financial services industry. These roles are described as "controlled functions" and the individuals performing them are described as "approved persons." The main purpose of the approved persons regime is the protection of consumers and the UK financial system through ensuring the quality of individuals working in certain positions and roles within the financial services industry. Approved persons are typically individuals. However, a body corporate can be an approved person, for example, if the body corporate is a director of an authorised firm.

The controlled functions which an approved person performs are functions which have been identified by the FCA and the PRA as being key to the operations of the approved persons regime in accordance with the provisions of Part V of FSMA. They are divided between "significant influence functions" and "the customer dealing function." Significant influence functions include governance functions, required functions, systems and controls functions or any significant management functions. They are typically relevant to a firm's directors, non-executive directors, compliance officer, chief risk officer and heads of significant departments, among others. The customer dealing function covers persons dealing with an authorised firm's customers or property belonging to such customers. A person must have regulatory approval before they can perform any of these controlled functions.

All persons performing controlled functions in AFSL, SSL and DCIS (being the Group's UK authorised firms) must be, and are, approved persons. As such, they are subject to ongoing regulatory obligations for which they are personally accountable to the FCA. They are expected to be fit and proper persons, they must satisfy standards of conduct that are appropriate to the role they perform and, in particular, they must comply with the Statements of Principle and Code of Practice for Approved Persons ("APER") issued by the FCA and contained in the FCA Handbook. As a result of the 2012 Act, the scope of the Statements of Principle in APER now extends to conduct expected of approved persons not just in relation to the controlled functions that they perform, but also in relation to other functions they perform in connection with their firms' regulated activities. The FCA and PRA have wide-ranging powers under FSMA to act against any person who fails to satisfy these standards of conduct or who ceases to be fit and proper, including withdrawal of their approved status, granting a prohibition order, disciplinary action and/or fines.

Solvency II

The Solvency II Directive (2009/138/EC), an insurance industry directive adopted by the EU in November 2009 ("Solvency II") and subsequently amended in September 2012 (2012/23/EU), will provide a new prudential framework for insurance companies. The new approach will be based on the concept of three pillars: (i) minimum capital requirements; (ii) supervisory review of firms' assessment of risk; and (iii) enhanced disclosure requirements. Solvency II will cover valuations, the treatment of insurance groups, the definition of capital and the overall level of capital requirements. A key aspect of Solvency II is that the assessment of risks and capital requirements will be aligned more closely with economic capital methodologies, and will allow insurers to make use of internal capital models, if approved by their local regulator. There remains considerable uncertainty surrounding the interpretation of the provisions of Solvency II with more detailed level two implementing measures, binding technical standards and nonbinding standards, guidance at level three and/or delegated acts yet to be finalised. The Omnibus II Directive, published by the Council of the European Union in November 2013 and which was adopted by European Parliament in March 2014, amends Solvency II in respect of the powers of the European Insurance and Occupational Pensions Authority ("EIOPA"), the new European Supervisory Authority, responsible for insurance.

The Omnibus II Directive confirms that the implementation date of Solvency II as 1 January 2016 and requires Member States to transpose the Solvency II regime into national law by 31 March 2015. EIOPA are currently consulting on the phased introduction of specific aspects of the Solvency II requirements into national supervision from 1 January 2014, in advance of the full implementation of the Solvency II regime.

Jersey

Saga Services Limited ("SSL") is regulated by the Jersey Financial Services Commission (the "Commission") as a registered person under the Financial Services (Jersey) Law 1998 to carry on general insurance mediation business (including incidental general insurance mediation business) (a) in addition to carrying on (i) any class of financial service business other than general insurance mediation business, or (ii) any other business authorised under the Banking Business (Jersey) Law 1991, the Collective Investment Funds (Jersey) Law 1988 or the Insurance Business (Jersey) Law 1996; or (b) as a company that is part of a group, where another part of the group carries on (i) any class of financial service business other than general insurance mediation business, or (ii) any other authorised under the Banking Business (Jersey) Law 1991, the Collective Investment Funds (Jersey) Law 1988 or the Insurance Business (Jersey) Law 1996. As such, SSL is required to comply with the Codes of Practice for General Insurance Mediation Business issued by the Commission (the "Codes of Practice"). The Codes of Practice set out the principles for the conduct of business and SSL is responsible for following the principles and implementing such practices as it considers necessary for the proper management and control of its business. Broadly, the Codes of Practice require SSL to: (1) conduct its business with integrity; (2) have due regard to the interests of its customers; (3) organise and control its affairs effectively for the proper performance and management of its business and be able to demonstrate the existence of adequate risk management systems; (4) be transparent in its business arrangements; (5) maintain and be able to demonstrate the existence of adequate capital resources to enable it to meet its liabilities; (6) deal with the Commission and other authorities in Jersey in an open and co-operative manner; and (7) not make statements that are misleading, false or deceptive. The Codes of Practice set out further regulatory requirements respect of each of these principles.

Healthcare Services Regulation

The healthcare sectors in England, Wales, Scotland and Northern Ireland are subject to extensive and complex regulation and frequent regulatory change, especially in England, where the majority of the Group's operations are based. Different national regulators and regulatory regimes operate in England, Wales, Scotland and Northern Ireland. While regulation differs between these jurisdictions, it shares the same general underlying purpose of protecting vulnerable persons from exploitation or harm. It also sets out the rules governing the quality of care delivered, staffing, physical design, record keeping and required services for individuals.

Separate local enforcement bodies in England, Wales, Scotland and Northern Ireland enforce the relevant healthcare laws and regulations. These enforcement bodies control and administer the registration, inspection and complaints procedures. The enforcement bodies have the power to cancel a healthcare provider's registration or refuse to register a healthcare provider, if that provider repeatedly fails to meet the key minimum standards and requirements prescribed. Accordingly, any substantial changes to the existing healthcare regulation that alter the Group's ability to provide quality care services at a competitive cost, could have a material adverse effect on both the sustainability and the growth of its business, as well as increasing the barriers to entry into the care services industry.

In addition to the specific healthcare-related laws and regulations described below, the Group's services are also subject to a variety of laws and regulations of general applicability. Examples include various planning law restrictions, building regulations, licensing and other regulations (such as on pharmaceutical distribution, fire safety, asbestos management, waste management, energy efficiency, food hygiene and health and safety). Further, compliance with the requirements of the UK Data Protection Act 1998 will be required in relation to personal data of individuals. There are particular regulations relating to health records, subject access requests (rights to access are modified in respect of health records) and sensitive personal data. The Freedom of Information Act 2000 applies to information held by providers on behalf of a public authority and data disclosed by providers to public authorities. Breach of regulations of this type is generally a criminal offence and could result in enforcement action, reputational damage and fines. Such a breach could also potentially lead to the relevant national care regulator revoking or suspending the registration of any related service or a decrease in, or cessation of the services provided by at any given location. The Group is also subject to rules and responsibilities set out by the General Medical Council on the duties of health professionals.

The Health and Social Care Act 2012 (applicable to both England and Wales)

The Health and Social Care Act 2012 ("HSCA 2012") was implemented in 2012 and provides additional regulation for the healthcare services industry, in addition to the regulatory regimes described below. Most significantly, the regulatory body known as "Monitor," originally established in 2004, has taken on a more significant role in the English regulatory scheme under the HSCA 2012 (Monitor does not form part of the Welsh regulatory scheme). Monitor sits within a system of health sector oversight which also comprises the Care Quality Commission ("CQC"), the NHS Commissioning Board ("NHSCB"), clinical commissioning groups ("CCG") and others. Under the HSCA 2012, Monitor has become the English sector regulator for health; it has also taken over monitoring and regulating competition in the healthcare sector. This role may be extended to encompass adult social care in the future. In its role as regulator, Monitor has responsibility for all providers of NHS care and the authority to set maximum prices for NHS services and promote competition.

The HSCA 2012 requires everyone who provides an NHS healthcare service to hold a licence, unless exempt under regulations made by the Department of Health. At present, there are only two licensing criteria to obtain such a licence: that the provider holds a CQC registration and that its governors and directors, or those performing equivalent or similar functions, are fit and proper persons. The Group currently holds a Monitor license.

Under the licence, providers are subject to a number of obligations, including the obligation for all licensees to provide Monitor with any information it requires for its licensing functions; to publish any information as Monitor may require; and to pay any licence fees requested by Monitor.

Under the HSCA 2012, Monitor has been granted wide enforcement powers. These powers include compliance requirements, to remedy a breach; restoration requirements, to restore a situation to its previous state; and monetary penalties, subject to a cap set at 10 per cent. of the provider's turnover in England.

The Health and Social Care Act 2008 (applicable to England)

The Health and Social Care Act 2008 ("HSCA") superseded the Care Standards Act 2000 ("CSA") with respect to adult social care in England (the CSA remains in force in Wales, see below) and established the CQC as the registration and regulatory body for health and adult social care in England. While Monitor has taken over its economic monitoring function, the CQC remains the regulator of quality standards in the healthcare sector. Under the HSCA 2008, service providers carrying out 'regulated activities' (such as its primary care services or the operation of care services provided by its domiciliary care businesses) must be registered with the CQC for each separate regulated activity provided. Where the service provider is a company, each regulated activity/ location must also have a registered manager. Registration depends on an assessment of the fitness of the registered provider and the registered manager. It should be noted that the range of activities which require registration is much greater under the HSCA 2008 than it was under the CSA.

Like the CSA, the HSCA 2008 empowers the Secretary of State for Health in England to issue regulations containing legally binding obligations on care providers. To date, the most important regulations under the HSCA 2008 are the Health and Social Care Act 2008 (Regulated Activities) Regulations 2010 ("Regulated Activities Regulations"), which set out which activities are registrable and the requirements relating to persons carrying on or managing a regulated activity; and the Care Quality Commission (Registration) Regulations 2009 ("Registration Regulations"), which set out additional registration and notification requirements and provisions relating to the publication of information. Breach of either regulation is a criminal offence. With respect to the Regulated Activities Regulations, such an offence is punishable by (at the discretion of the CQC) a warning notice or fixed penalty notice (as an alternative to prosecution) or prosecution, which may result upon conviction in a fine for the care provider of up to £50,000 for each offence. Breach of the Registration Regulations (which generally relate to the provision of information to the CQC) is punishable, on summary conviction, to a fine (currently set at a maximum of £2,500). In some circumstances, the CQC may also take action to cancel, suspend or vary the conditions of registration of a care provider which has breached the Regulated Activities Regulations or the Registration Regulations.

In order to assist providers in complying with the Regulated Activities Regulations, the CQC has produced guidance on compliance entitled 'Essential Standards of Quality and Safety' ("ESQS"). The ESQS consist of the CQC's interpretation of the Regulated Activities Regulations and the Registration Regulations (including in relation to the safeguarding of people the Group supports, management of medicines and safety of premises, for example). The ESQS indicate an associated outcome for each regulation representing the experience that the CQC expects people using the service to have and indicate what a care provider should do to comply.

Care Standards Act 2000 (applicable to Wales)

The CSA enables the National Assembly for Wales to issue regulations containing legally binding obligations on registered care providers governing their operations in Wales and makes it a legal requirement for any person who carries on or manages a specified establishment or care agency to be registered. The CSA also sets out certain requirements on the healthcare service provider and the registered manager to demonstrate their fitness to carry on their respective functions. Additionally, the CSA empowers the National Assembly for Wales to publish national minimum standards ("NMS") which provide detail as to the minimum standards expected of registered care providers in relation to issues such as the delivery of care, training levels, record keeping. The NMS in themselves do not have the force of law and have to be enforced by specific reference to the regulations. There are NMS relating to both healthcare and domiciliary services.

The CSA and related regulations also deal with matters such as the activities which require registration, the fees for registration, when the national regulator must be notified of certain matters, the frequency of quality audits to be carried out by registered providers, when a registered provider will be committing a criminal offence and what action the Care and Social Services Inspectorate Wales ("CSSIW"), as regulator, must take before a registered provider can be prosecuted for an offence. CSSIW is responsible for registering, inspecting and dealing with complaints in relation to registered providers of care services in Wales and is required to take the NMS into consideration when conducting its functions (including in respect of enforcement action). In some circumstances, the CSSIW can also take measures in order to cancel, suspend or vary the conditions of registration of a care provider which has breached such regulations.

The Healthcare Inspectorate Wales ("HIW") is the independent inspectorate and regulator of all healthcare in Wales. HIW carries out its functions on behalf of Welsh Ministers and, although it is part of the Welsh Government, protocols have been established to safeguard its operational autonomy. HIW's core role is to review and inspect NHS and independent healthcare organisations in Wales in order to provide assurance that services are safe and of good quality. Services are reviewed against a range of published standards, policies, guidance and regulations. Where necessary, HIW will undertake special reviews and investigations where there appears to be systematic failures in delivering healthcare services. In addition, HIW is the regulator of independent healthcare providers in Wales.

While the CSA and NMS remain in force in Wales, they have now been superseded in England by the HSCA 2008 with respect to adult care.

Civil Enforcement Powers

As noted above, the HSCA 2012, the HSCA 2008 and the CSA include civil enforcement powers. In addition to powers to issue warning notices requiring specified action to be taken within a set timescale (or risk prosecution), the regulators also have powers to impose new conditions and suspend or cancel registrations. These powers are potentially very significant for a care provider because the regulator can effectively render the continuation of some or all of the care provider's operations unlawful. In practice this would mean the removal of some or all of the people the Group supports from affected services. Any criminal and civil enforcement actions taken against the Group could have a serious effect on its reputation and the profits.

Inspection Reports

The HSCA 2008 and CSA require that the CQC in England and the CSSIW and HIW in Wales inspect registered establishments and agencies in order to ensure that they comply with all relevant legislation and regulations and any conditions of registration. In England registered establishments are evaluated against ESQS and in Wales against the NMS.

The CQC website provides profiles for each location of a registered provider. These profiles include a summary of the latest assessment by the CQC as to whether a location met each of the reviewed ESQS and a link to historical reports. The ESQs are grouped under five areas and each area's overall compliance or non–compliance is determined by the worst judged standards within that area. A green tick indicates compliance with all standards in a particular area when last checked, a grey cross indicates that at least one standard within an area was not being met and improvements were required, while a red cross indicates that at least one standard within an area was not being met and that the CQC has taken enforcement action. The registered provider profile will generally be reviewed within three months after the provider advises the CQC that any required corrective action has been completed. Additionally, where the CQC takes urgent enforcement action–such as suspending a provider or registered manager, or varying the conditions of a provider's registration due to major concerns–it will state this on its website immediately.

CCSIW also has a searchable online directory of registered services which links to copies of CSSIW inspection reports. However, it does not provide the same level of detail as the CQC or a tick based compliance overview. If during the period following the publication of a report CSSIW investigates a complaint relating to a service, a report of that complaint investigation will be included at the end of the annual inspection report.

Inspections by regulators in England and Wales can be carried out on both an announced and, in most cases, an unannounced basis depending on the specific regulatory provisions relating to the different services provided. For example, HIW conducts frequent inspections, alongside "themed" reviews to ensure that the care standards are in compliance with the NMS. A failure to comply with regulations, the receipt of a poor inspection report rating or a lower rating, or the receipt of a negative report that leads to a determination of regulatory non-compliance or a failure to cure any defect noted in an inspection report, may result in reputational damage, fines, the revocation or suspension of the registration of any healthcare provider or a decrease in, or cessation of, the services provided at any given location.

In addition to conducting inspections, the CQC also monitors the compliance of providers by gathering information from a range of other sources, including the people they support and connected persons, public representative groups, whistle-blowers and other regulators. Profile pages include information on how to provide comments on a particular service. The CQC also uses the information supplied to it directly from registered providers via statutory notifications when certain events, incidents or changes take place to help monitor compliance.

Mental Capacity Act 2005

The Mental Capacity Act 2005 ("MCA") applies to providers of care services to people aged 16 and over who live in England and Wales and who are deemed to be unable to make all or some decisions for themselves. It sets out the process for determining whether a person lacks mental capacity at a particular time. Additionally, once this determination is made, the MCA sets out the legal framework by which an independent mental capacity advocate may be appointed to represent and support that individual by making decisions about that individual's care in that individual's best interest. The MCA also sets out when liability may arise for actions in connection with the care or treatment of persons who lack capacity to consent to such actions. In addition to the MCA itself, care service providers in England and Wales must also have regard to the MCA Code of Practice, which explains how the MCA works on a day-to-day basis.

The MCA is, therefore, particularly relevant to its primary care business, particularly where healthcare is provided in secure settings, for example prisons, or to its live in care business that care for individuals who lack capacity to reason or make appropriate decisions.

Safeguarding Vulnerable Groups Act 2006

The law and practice around safeguarding vulnerable adults is extensive and complex. The Safeguarding Vulnerable Groups Act 2006 ("Safeguarding Act") (as amended) created the Independent Safeguarding Authority ("ISA") and sets out a framework for the scope and operation of the Vetting and Barring Scheme ("VBS"). However, the Safeguarding Act and ISA have been the subject of recent reform. The HSCA 2008 and supporting regulations also include provisions to help ensure that people are safeguarded from abuse. These provisions are enforced by the CQC.

Under the Safeguarding Act, the ISA was required to establish and maintain lists of persons barred from working with children and adults. It is a criminal offence for a barred person to seek to work, or work in, activities from which they are barred. It is also generally a criminal offence for an employer to allow a barred person, or person who is not appropriately registered, to work in any regulated activity. It is important to note that the term 'regulated activity' in this context does not have the same meaning as it does in the HSCA 2008–a 'regulated activity' under the Safeguarding Act is one involving close work with vulnerable groups, including children, which a barred person must not do, whether paid or voluntary.

Until recently, registered persons were required to obtain a Criminal Record Bureau ("CRB") check on everyone employed for the purpose of carrying on a regulated activity under the HSCA 2008. Additionally, anyone applying to register with the CQC as the provider or manager of a CQC regulated service was required to have an enhanced CRB check countersigned by the CQC. However, reforms introduced in 2012 have amended this requirement.

The Protection of Freedoms Act 2012 has significantly amended and updated the Safeguarding Act to give effect to the coalition government's commitment to balance the need to protect vulnerable groups with the need to protect civil liberties. As a result, employees whose work does not necessarily involve direct contact with people in vulnerable circumstances may no longer be required to undergo barring checks. From 1 December 2012, the CRB and ISA merged to become the Disclosure and Barring Service ("DBS"). This new organisation combines the criminal records checking and VBS. The DBS searches police records and, in relevant cases, barred list information, and then issues a DBS certificate to the applicant and employer to help them make an informed recruitment decision. Registered persons must now conduct DBS checks to meet their legal obligations outlined above.

The Mental Health Act 2007

The Mental Health Act 2007 (the "Mental Health Act"), which amended the Mental Health Act 1983, and the Mental Capacity Act 2005, introduced significant changes in the area of mental healthcare. These changes included the introduction of supervised community treatment, the broadening of the range of mental health professionals responsible for the treatment of patients without their consent, an introduction of a single definition of mental disorder, and the redefinition of the criteria for detention. Critically, the Mental Health Act regulates the manner in which an individual can be committed or detained against his or her will. In particular, it places the burden on the entity detaining a person to prove that the entity has the right to hold the detainee. This regime is of relatively limited relevance to its healthcare businesses since they do not themselves detain persons under the Mental Health Act, although they may work with other professionals who do so. The Mental Health Act Commission previously had monitoring functions with regard to the operation of the Mental Health Act; however, this function is now undertaken by the CQC.

Healthcare Services Regulation in Scotland and Northern Ireland

The Group is subject to regulatory regimes in Scotland and Northern Ireland that are very similar to those of England and Wales. The principal enforcement body is the Social Care and Social Work Improvement Scotland (the "SCSWIS" or the "Care Inspectorate") in Scotland and the Regulation Quality and Improvement Authority ("RQIA") in Northern Ireland, each of which have the same enforcement powers as the Care Quality Commission in England.

In Scotland, the SCSWIS enforces the Scottish national care standards. Providers are graded against four aspects of care: (i) Quality of Care and Support; (ii) Quality of Environment; (iii) Quality of Staffing; and (iv),Quality of Management and Leadership. In Northern Ireland, the RQIA enforces the National Minimum Standards for Domiciliary Care Agencies.

Other relevant legislation common across the UK includes that related to the General Medical Council and the Nursing and Midwifery Council, the Freedom of Information Act 2000 and the Data Protection Act 1998

Mental Capacity

Scotland has an Adults with Incapacity Act (2008), which is similar to the Mental Capacity Act 2005 in England and Wales. Similar legislation is currently being considered in Northern Ireland.

Other Key Legislation

The Social Care (Self-directed Support) (Scotland) Act 2013 came into force on 1 April 2014. The Act gives people a range of options for how their social care is delivered and aims to empower people to decide how much ongoing control and responsibility they want over their own support arrangements.

Other Industry-Specific Matters

The majority of domiciliary care services are publicly funded by local authorities and by health authorities. Such authorities enter into contracts with domiciliary care providers whereby the domiciliary care provider agrees to provide a measurable quality of care (sometimes higher than that required by NMS or ESQS). Most local authorities will monitor performance of contractual standards as a separate process to the inspection process carried out by the relevant regulators. This is, in effect, an additional and separate level of "regulation" and can have a significant impact on its business as contracts with such authorities will generally have wide-ranging punitive provisions for non-performance by care providers. These can, for example, include the suspension of placements by local authorities and health authorities and, in extreme cases, removal of all care providers placed by that authority. Local authorities and health authorities are required to communicate with each other in relation to the welfare of patients and if a number of authorities make placements using a particular care provider, if one suspends such placements the others will be informed and will generally follow suit.

There is similar regulation in respect of those patients of care providers who are registered to provide nursing care. For example, in England, those people who require nursing care provided directly or indirectly by a registered nurse have that nursing care funded by the local CCG. While the accommodation and personal care (as opposed to nursing care) is still arranged by the local authority, the CCG will contract with the care provider in relation to the care provided directly or indirectly by a registered nurse, and will similarly monitor compliance with contractual quality standards. Where nursing and health needs reach an assessed high level the patient may be entitled to free NHS care resulting in the local authority contract ceasing and being replaced by a new "Continuing Care" contract with the CCG. As with local authorities, compliance monitoring by CCGs of both nursing care and Continuing Care contracts may lead to suspension of placements or, in extreme cases, removal of the care provider. The importance of contract monitoring by local authorities and health authorities is growing because the CQC has made it clear that it will rely increasingly on self-assessment by providers and notifications of concerns by outside agencies such as local authorities and health authorities in deciding whether to take regulatory action.

There is a further level of regulation which all local authorities must have in place, namely provision for the safeguarding of vulnerable adults and the safeguarding of vulnerable children. Local authorities must have (entirely separate from their functions as the arrangers of the provision of care) a multi-agency system which can be implemented quickly should allegations come from any source that a patient has been abused, actively or passively (e.g. by neglect), in any domiciliary care setting. Allegations of abuse may also be made by relatives or visiting doctors or, increasingly frequently, by other members of staff of the care provider who are encouraged by the relevant authorities to contact the safeguarding authority if they suspect or have knowledge of lack of care. Each local authority has established a safeguarding board and a safeguarding team with a manager to lead procedures and investigations. Once a local authority is in receipt of an allegation of abuse, the local authority will appoint one of its officers as the chair of a multi-agency committee which will then investigate the allegation of abuse, often in secret, without the knowledge or participation of the care provider. In most cases, an investigating committee will consist of members drawn from local authorities contracting with the care provider, CCGs contracting with the care provider, other health professionals and, in serious cases, the police. One consequence of the appointment of an investigating committee is that local authorities (and CCGs) may suspend placements and in extreme cases remove all placed care providers until they are satisfied that either the allegation is unfounded or that the domiciliary care provider has provided sufficient assurance that the situation leading to the abuse will not reoccur.

Future Developments

As noted above, the Group's business is subject to a high level of regulation and oversight and frequent regulatory change. For example, in July 2012, the UK Government published its Care and Support White Paper, "Caring for Our future: reforming care and support," together with a draft Care Bill for consultation. At present, the Care Bill is being considered by Parliament. The Care Bill seeks to consolidate provisions from over a dozen different Acts into a single, framework for adult care and support. It provides a legal framework for putting into action some of the main principles of the White Paper and also includes some health measures.

The Care Bill contains provisions to (i) clarify entitlements to care and support to provide individuals with a greater understanding of their entitlements and enable them to plan for the future, for example setting out what people should expect when using care and support, and the roles and responsibilities of different organisations to deliver this, alongside giving people access to clear and comparative information about the quality of care providers and the options they offer, so that people are empowered to make informed decisions; (ii) provide for the development of a national minimum eligibility threshold, bringing greater consistency in access to care and support across England; (iii) reform how care and support is funded, including a cap on care costs; (iv) support the UK Government's aim of rebalancing the focus of care and support to promote wellbeing, rather than as a system of crisis point intervention; (v) remove the barriers to people moving to a different local authority area, by ensuring that no-one's care and support is interrupted; and (vi) simplify the care and support system and process to ensure that local authorities and care professionals have the freedom and flexibility to integrate with other available services.

In December 2012, the UK Government published its final report into the events at Winterbourne View Hospital and set out a programme of action to help protect vulnerable people. Of note, the programme of action includes plans to: (i) by spring 2013, set out proposals to strengthen accountability of boards of directors and senior managers for the safety and quality of care which their organisations provide; (ii) by June 2013, review all current hospital placements and move everyone inappropriately in hospital to community based support as quickly as possible, and no later than June 2014; and (iii) strengthen inspections performed by the CQC and regulation of hospitals and care homes for children, young people and adults with learning disabilities or autism and mental health conditions or behaviour described as challenging.

In May 2013, the UK Government published its response to a consultation seeking views on new measures to protect people who rely on care services in the event of a provider failing and going out of business. The consultation follows the widely publicised collapse in 2011 of the then largest independent provider of residential care, Southern Cross. The response to the consultation was largely in favour of the principles set out in the UK Government's White Paper "Caring for Our Future." A system of checks on the finances of care companies that meet a certain risk threshold (based on size and scale, regional or sub-regional market share or the specialist services offered) is proposed to give early warning of problems and to challenge financial models which could be unsustainable or could compromise quality. In the consultation response, the UK Government stated it intends to introduce legislation in regards to these proposals. This additional regulation will likely have some cost to both taxpayers and providers.

Media

Press Regulation

The Press Complaints Commission ("PCC") acts as regulator in respect of complaints made about the majority of commercially available UK newspapers and magazines, including Saga Magazine. The PCC deals with all editorially-controlled material in UK newspapers and magazines (and their websites). This can include:

• articles and pictures;
• words and pictures (including video) on newspaper and magazine websites;
• audio material on newspaper and magazine websites;
• readers' letters; and
• edited or moderated reader comments on newspaper and magazine websites.

Editors and publishers have a responsibility to comply with the PCC code in respect of editorial material in both printed and online versions of their publications. If the PCC considers that a breach of the code has occurred, it will launch an investigation. The PCC seeks to negotiate a settlement between the complainant and the publication. Past remedies have included a retraction, apology or undertaking as to future conduct from the newspaper. The PCC's most significant sanction is the ability to issue a critical adjudication against a newspaper or magazine. Under the press system of self-regulation, the publication concerned is then obliged to publish this text in full in the publication/on its own web pages, with a headline reference to the PCC, and with "due prominence."

Following the publication in November 2012 of the Leveson report, containing recommendations for reform of press regulation, the UK government has been negotiating with the major UK newspaper groups to implement these recommendations, which will involve replacing the PCC with a regulator with stronger powers to sanction publishers. The basis on which the new regulator is to be established has been the subject of controversy. A royal charter was originally proposed as the basis on which the new regulator would be established and passed by Parliament in March 2013. This was rejected by a group representing the largest UK newspaper and magazine publishers. This group has instead proposed the establishment of an Independent Press Standards Organisation (the "IPSO"). It is intended that the IPSO would implement all the key Leveson recommendations, namely:

• the power to impose £1 million fines for serious and systematic wrongdoing;

• the ability to require upfront corrections and adjudications;

• creation of a standards and compliance arm with investigative powers to call editors to account;

• establishment of a whistleblowers hotline;
• an arbitration service to offer a quick and inexpensive alternative to the libel courts; and
• a warning service to alert the press when members of the public make it clear they do not wish to be the subject of media attention.

Saga Magazine would be subject to regulation by the IPSO.

As part of the amendment to the press regulatory framework, Parliament has passed the Crime and Courts Act 2013 (which received royal assent on 25 April 2013). This act also includes provisions designed to implement recommendations in the Leveson report on the award of costs and damages in cases involving breach of data protection, privacy, breach of confidence and other media-related torts. Accordingly, the act includes provisions for the award of costs and exemplary damages in certain types of claim against publishers who fail to participate in the forthcoming scheme of press regulation (and also in certain limited circumstances against those who have signed up to it). The provisions on exemplary damages will come into force a year after establishment of the new press regulator, and those on costs will be brought in by statutory instrument at an unspecified later date. These will only apply to claims arising from publication of news-related material in the course of a business (whether profit-making or not), for:

• libel or slander;
• breach of confidence;
• misuse of private information (but excluding claims for damage or distress brought under section 13 of the Data Protection Act 1998);
• malicious falsehood; and
• harassment under the provisions of the Protection from Harassment Act 1997.

There are some exceptions for special interest magazines, as the regime only applies to publishers of newsrelated materials (which includes news or information about current affairs, opinion about matters relating to the news or current affairs, or gossip about celebrities, other public figures or other persons in the news).

Copyright Infringement and Defamation

Magazine publishers are also liable for the content of the material published in a magazine. To the extent that material in an edition of a magazine: (i) infringes a third party's copyright; or (ii) is defamatory, the publisher may be liable for copyright infringement or defamation, as applicable. As a magazine publisher, Saga Publishing would be liable as a primary publisher in respect of any defamatory content. A successful claimant can claim general damages (and aggravated and exemplary damages in certain circumstances) in respect of the publication of defamatory material. From a copyright infringement perspective, a successful claimant can elect either for an account of the defendant's profits or an inquiry into damages. Damages are intended to put the claimant in the position it would have been in if the infringing act had not occurred, while an account of profits is intended to make the defendant disgorge the profits made as a result of the infringing act.

The Defamation Act 2013 has consequences for magazine publishers, such as requiring claimants alleging damages to show they have suffered "serious harm" as a result of published information and including a defence for those who are publishing material which they reasonably believe is in the public interest.

Advertising Regulation

The Advertising Standards Authority (the "ASA") is the independent regulator of advertising across both broadcast and non-broadcast media (including on-line advertising) and is responsible for overseeing compliance with various advertising codes (the "Codes"). The ASA investigates and adjudicates on potential breaches of the Codes. Saga Publishing is responsible for ensuring non-broadcast adverts advertising Saga products comply with the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (the "CAP Code"). An equivalent code exists in respect of broadcast advertising. A general principle under the CAP Code is that marketing communications should be legal, decent, honest and truthful, and in particular advertising must not be materially misleading to a consumer. The ASA will investigate complaints made about claims made in advertising and will issue an adjudication in respect of its findings. The advertiser will usually be required to amend or withdraw its advertisement. If an advertiser fails to comply with an ASA ruling regarding misleading or unfair advertising, the ASA Chief Executive is able to refer the advertiser to the Office of Fair Trading, which is able to bring legal proceedings under the Consumer Protection from Unfair Trading Regulations 2008 or the Business Protection from Misleading Marketing Regulations 2008. Breach of these regulations is a criminal offence. It can also require persistent or serious offenders to have their marketing material vetted before publication. Third parties placing advertising in Saga Magazine are separately responsible for compliance with the CAP Code, in respect of advertisements they place in Saga Magazine. If a third-party advertiser is found to breach the CAP Code, ASA may issue an ad alert under which media publications, including Saga Magazine, would be advised by the ASA to withhold services, such as access to advertising space.

Prize Promotions and Competitions

Competitions run through Saga Magazine must comply in Great Britain with the provisions of the Gambling Act 2005 (which regulates lotteries, competitions and prize draws), as well as the provisions of the Consumer Protection from Unfair Trading Regulations 2008. Saga Publishing may be referred to the relevant regulators for non-compliance (such as the Gambling Commission, Information Commissioner, Advertising Standards Authority and Office of Fair Trading), and enforcement action may be taken by such bodies, including censure, fines, legal action and criminal prosecution. Separate legislation governs equivalent activity in Northern Ireland.

The CAP Code also contains rules regarding the conduct of competitions and promotions. Promoters are required to conduct their promotions equitably, promptly and efficiently and must be seen to deal fairly and honourably with participants and potential participants. Promoters must avoid causing unnecessary disappointment. Competitions run through Saga Magazine must therefore also comply with these rules. Again, separate legislation applies to prize promotions run in Northern Ireland (Betting, Gaming and Lotteries and Amusements (NI Order) 1985).

PART 8

DIRECTORS, SENIOR MANAGERS AND CORPORATE GOVERNANCE

Directors

The following table lists the names, positions and ages of the Directors. Philip Green, Ray King, Orna Ni-Chionna and Gareth Williams will become Directors with effect from Admission.

Name	Age	Position
Andrew Goodsell	55	Executive Chairman
Lance Batchelor	50	Group Chief Executive
Stuart Howard	52	Group Finance Director
Philip Green	55	Senior Independent Non-Executive Director
James Arnell	44	Non-Executive Director
Pev Hooper	40	Non-Executive Director
Ray King	60	Independent Non-Executive Director
Orna Ni-Chionna	58	Independent Non-Executive Director
Charles Sherwood	54	Non-Executive Director
Gareth Williams	61	Independent Non-Executive Director

Andrew Goodsell (Executive Chairman)

Mr. Goodsell has spent the last 22 years with Saga. Mr. Goodsell was appointed Chief Executive of Acromas in 2007. Mr. Goodsell joined Saga Services as Business Development Manager in 1992, became Saga Group Business Development Director in 1995, Chief Executive of Saga Services and Saga Investment Direct in 1999, Deputy Group Chief Executive in 2001 and Chief Executive and Chairman in 2004.

Lance Batchelor (Group Chief Executive)

Mr. Batchelor was most recently the CEO of Domino's Pizza Group and joined Saga in March 2014. Mr. Batchelor started his career in the Royal Navy as a submariner. Upon leaving the Navy he progressed to a number of senior marketing roles in Procter & Gamble, Amazon, Vodafone and Tesco, where he was Marketing Director. Immediately prior to joining Domino's, Mr. Batchelor was CEO of Tesco Mobile.

Stuart Howard (Group Finance Director)

Mr. Howard has spent the last 14 years with Saga, which he joined in 2000 as Group Chief Financial Officer. In 2007, Mr. Howard became Chief Financial Officer of Acromas. Prior to joining Acromas, he worked for two years at the advertising group Cordiant Communications plc as Deputy Chief Financial Officer and for 10 years prior to that at the advertising group WPP Group plc in various positions. Mr. Howard qualified as a Chartered Accountant at KPMG in London.

Philip Green (Senior Independent Non-Executive Director)

Mr. Green is currently Chairman of Carillion plc. He is also Chairman of BakerCorp, a US industrial services company owned by Permira, and Chairman Designate of Williams & Glyn. Previously, Mr. Green was Chairman of Clarkson plc, Chief Executive of United Utilities Group plc and Chief Executive of Royal P&O Nedlloyd NV. His earlier business experience includes serving as Chief Operating Officer of Reuters Group plc and Chief Operating Officer of DHL for Europe and Africa. Mr. Green is also the UK Prime Minister's adviser on corporate responsibility and Chairman of Sentebale, a charity set up by Prince Harry.

James Arnell (Non-Executive Director)

Mr. Arnell has been a Partner at Charterhouse Capital Partners LLP since 1998. He was involved in the acquisition of Saga by the Charterhouse Funds in 2004 and in Charterhouse's investment in the Acromas Group in 2007. He has been a member of the Saga and Acromas boards throughout the period of Charterhouse's investment. He is also a non-executive director of various other companies, including the AA Group, and has been involved in Charterhouse's investments in the UK, France and Germany.

Pev Hooper (Non-Executive Director)

Mr. Hooper is a Partner at CVC Capital Partners. In addition to Saga, Acromas and the AA, Mr. Hooper is responsible for monitoring certain CVC funds' investments in Merlin Entertainments, Virgin Active and Domestic & General, and has sat on the board and/or board committees of these and other CVC fund portfolio companies. He joined CVC in 2003 after working in mergers and acquisitions at Citigroup and Schroders.

Ray King (Independent Non-Executive Director)

Mr. King is currently a Non-Executive Director of Infinis Energy plc and Rothesay Holdco UK Limited. Previously, he was Chief Executive of Bupa from 2008 to 2012, after serving as Group Finance Director from 2001 to 2008. Before Bupa, Mr. King was a Non-Executive Director of Friends Provident plc, Deputy Chief Executive of Parity Group plc, Director of Group Finance and Control at Diageo plc and Group Finance Director of Southern Water plc. Mr. King is also a Reporting Panel Member of the Competition Commission and a member of the Audit and Assurance Council of the Financial Reporting Council.

Orna Ni-Chionna (Independent Non-Executive Director)

Ms. Ni-Chionna is currently Senior Independent Non-Executive Director of Royal Mail plc. Previously, she was Senior Independent Non-Executive Director of HMV plc, Northern Foods plc and Bupa and a Non-Executive Director of the Bank of Ireland UK Holdings plc and Bristol & West plc. Ms. Ni-Chionna is also currently a Trustee of the National Trust and a former Partner at McKinsey & Company.

Charles Sherwood (Non-Executive Director)

Mr. Sherwood has been a Partner of Permira Advisers (formerly Schroder Ventures) since 1985. He serves on the firm's holding company board and investment committee. Mr. Sherwood has been a Non-Executive Director of the AA Group since 2004 and of Acromas and Saga since 2007. He has also served as a Non-Executive Director on the boards of a number of Permira's investments including Homebase, Provimi and Just Retirement.

Gareth Williams (Independent Non-Executive Director)

Mr. Williams is currently a Non-Executive Director of YSC Limited and WNS (Holdings) Limited. Previously, Mr. Williams was Human Resources Director of Diageo plc and held a series of key positions in human resources at Grand Metropolitan plc.

Senior Managers

The Company's current Senior Managers, in addition to the Executive Directors listed above, are as follows.

Name	Age	Position
Darryn Gibson	48	CEO of Allied Healthcare
Tim Pethick	51	Chief Marketing Officer / Director of Strategy / CEO of
		Saga Publishing
Roger Ramsden	54	CEO of Saga Services
David Slater	45	CEO of AICL / Group Chief Actuary
Andrew Strong	50	CEO of Travel

Darryn Gibson (CEO of Allied Healthcare)

Mr. Gibson joined Saga in February 2013 as CEO of Allied Healthcare. Previously, Mr. Gibson worked for Radio Networks as Head of Finance and in Serco's group finance function. Mr. Gibson became the CFO of Serco Rail in 1999 and was promoted to the CEO of Serco Solutions in 2007. He is a qualified accountant.

Tim Pethick (Chief Marketing Officer / Director of Strategy / CEO of Saga Publishing)

Mr. Pethick joined Acromas as Group Chief Marketing Officer in early 2011. Mr. Pethick began his career as an accountant, becoming a Fellow in the Institute of Chartered Accountants (Australia) and a principal in the management consulting division of Ernst & Whinney. Mr. Pethick's career includes roles as CEO of BTLooksmart, a British Telecom joint venture, CEO of Encyclopaedia Britannica (EMEA) and marketing director of the Microsoft Network in Australia. Mr. Pethick is also the founder of Nudie, a successful Australian smoothie producer, which he sold out of in 2006.

Roger Ramsden (CEO of Saga Services)

Prior to joining Saga in August 2008 as CEO of Saga Services, Mr. Ramsden was Managing Director of the household insurance business of RBS Insurance and Strategy and Marketing Director for the RBS Insurance Group. Previously, he was Commercial Director at Prudential for the UK life and pensions business, covering all marketing and product activities. Before joining the financial services industry, Mr. Ramsden's career was in food retailing as Marketing Director of Safeway and Management Consultancy for the Boston Consulting Group. He started his career at Unilever.

David Slater (CEO of AICL / Group Chief Actuary)

Mr. Slater joined Saga in February 2008 as Group Chief Actuary. Prior to this, Mr. Slater worked as a Principal Consultant for Watson Wyatt (now known as at Towers Watson) for 17 years.

Andrew Strong (CEO of Travel)

Mr. Strong joined Saga in 2001 and currently leads Saga's travel business. Previously, Mr. Strong served as Saga Service's Operations Director and Chief Operating Officer of Saga Services, among other roles at Saga. Mr. Strong also served for six years as CEO of AA Services (Road, Insurance and Driving School) as part of the 2007 creation of the Acromas Group. Before joining Saga, Mr. Strong held number of roles with AMP UK, including Director of Group Operations and Director of Customer Service at NPI/AMP.

Corporate Governance

UK Corporate Governance Code

From Admission, the Company and the Board will comply with the UK Corporate Governance Code (the "Governance Code") published in September 2012 by the Financial Reporting Council except as set out below.

The Governance Code recommends that the chairman of the board of directors should meet the independence criteria set out in the Governance Code on appointment. Mr. Goodsell was not independent on appointment, having previously been the Group Chief Executive. As the Group's Executive Chairman, Mr. Goodsell is responsible for the leadership and overall effectiveness of the board and setting the board's agenda. He is also currently responsible for the day to day management of the Group. That responsibility will be transitioned to Mr. Batchelor as the Group Chief Executive over a period of 12 to 18 months to facilitate a smooth handover of executive management and regulatory responsibilities. The transition will be a gradual process, and the Group Chief Executive will take increasing responsibility during the transition period. Following the completion of that transition, it is anticipated that Mr. Goodsell will become the Group's Non-Executive Chairman at which time his responsibilities will be aligned with those normally undertaken by a chairman, as contemplated by the Governance Code. The arrangements in respect of his transition to a non-executive role are described at section 3.2.2 of Part 14 "Additional Information" below. During the period that Mr. Goodsell is Executive Chairman, the Senior Independent Director will have certain responsibilities which go beyond those contemplated in the Governance Code, notably in relation to the appointment of independent Non-Executive Directors to the board committees described below.

The Governance Code also recommends that at least half the board of directors of a UK-listed company, excluding the chairman, should comprise non-executive directors determined by the board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the director's judgement. The Company will not be compliant with the requirement of the Governance Code in this respect. However, the Company intends to become fully compliant with the Governance Code in this respect within a period of 24 months.

Although Mr. Green serves on the board of BakerCorp (a Permira portfolio company), the other Directors have concluded that Mr. Green's judgement, experience and challenging approach should ensure that he makes a significant contribution to the work of the Board and its committees. Therefore, the Board has determined that Mr. Green is of independent character and judgement and should be regarded as an independent Director for the purposes of the UK Corporate Governance Code.

As envisaged by the Governance Code, the Board has established an audit committee, a nomination committee and a remuneration committee and has also established a separate risk committee. If the need should arise, the Board may set up additional committees as appropriate.

Audit Committee

The audit committee's role is to assist the Board with the discharge of its responsibilities in relation to financial reporting, including reviewing the Group's annual and half year financial statements and accounting policies, internal and external audits and controls, reviewing and monitoring the scope of the annual audit and the extent of the non audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the internal audit, internal controls, whistleblowing and fraud systems in place within the Group. The audit committee will normally meet not less than three times a year.

The audit committee will be chaired by Ray King and its other members will be Philip Green, Orna Ni-Chionna and Gareth Williams. The Governance Code recommends that all members of the audit committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment and that one such member has recent and relevant financial experience. The Board considers that the Company complies with the requirements of the Governance Code in this respect.

Risk Committee

The risk committee is responsible for providing oversight and advice to the Board in relation to risk management systems, risk appetite, strategy and exposure, reviewing and approving risk assessment and reporting processes within the Group. The risk committee will normally meet not less than three times a year.

The risk committee will initially be chaired by Ray King and its other members will be Philip Green, Orna Ni-Chionna and Gareth Williams.

Nomination Committee

The nomination committee assists the Board in reviewing the structure, size and composition of the Board. It is also responsible for reviewing succession plans for the Directors, including the Chairman and Chief Executive and other senior executives. The nomination committee will normally meet not less than twice a year.

The nomination committee will be chaired by Philip Green and its other members will be Ray King, Orna Ni-Chionna and Gareth Williams. The Governance Code recommends that a majority of the nomination committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment. The Board considers that the Company complies with the requirements of the Governance Code in this respect.

Remuneration Committee

The Remuneration Committee recommends the Group's policy on executive remuneration, determines the levels of remuneration for Executive Directors and the Chairman and other senior executives and prepares an annual remuneration report for approval by the Shareholders at the annual general meeting. The Remuneration Committee will normally meet not less than twice a year.

The remuneration committee will be chaired by Gareth Williams and its other members will be Philip Green, Ray King and Orna Ni-Chionna. The Governance Code recommends that all members of the remuneration committee be non-executive directors, independent in character and judgment and free from any relationship or circumstance which may, could or would be likely to, or appear to, affect their judgment. The Board considers that the Group complies with the requirements of the Governance Code in this respect.

Share Dealing Code

The Company has adopted, with effect from Admission, a code of securities dealings in relation to the Shares which is based on, and is at least as rigorous as, the model code as published in the Listing Rules. The code adopted will apply to the Directors and other relevant employees of the Group.

Interests of Directors, Senior Managers and employees of the Group in Acromas

All of the voting rights attached to the existing issued share capital of the Company are ultimately held by Acromas. It is expected that, immediately following Admission, Acromas will hold through Acromas Bid Co between 48.8 per cent. and 74.0 per cent. of the voting rights attached to the issued share capital of the Company, assuming no exercise of the Over-allotment Option, and between 41.3 per cent. and 70.3 per cent. if the Over-allotment Option is exercised in full.

The shareholders in Acromas are the Charterhouse Funds (holding 36 per cent. of the share capital and 42 per cent. of the voting rights), the CVC Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), the Permira Funds (holding 20 per cent. of the share capital and 23 per cent. of the voting rights), Andrew Goodsell (holding six per cent. of the share capital and two per cent. of the voting rights), Stuart Howard (holding three per cent. of the share capital and one per cent. of the voting rights), numerous employees (together holding 10 per cent. of the share capital and three per cent. of the voting rights) and other institutional investors (holding four per cent. of the share capital and five per cent. of the voting rights).

Many of the shareholders in Acromas are owed subordinated shareholder debt by an Acromas subsidiary (the "Acromas shareholder debt"). As at 31 January 2014, approximately £4.0 billion of Acromas shareholder debt was outstanding, of which two per cent. was held by Andrew Goodsell, one per cent. by Stuart Howard and three per cent. by numerous employees. Acromas intends to use all of the net proceeds from the sale of Existing Shares in the Offer, and the proceeds of any future sales of Shares, to pay down holders of Acromas shareholder debt proportionately.

Andrew Goodsell and Stuart Howard are both directors of Acromas and various entities within the AA Group, as listed in section 3.8 of Part 14 "Additional Information".

Relationship Agreement with Acromas and its Principal Shareholders

The Charterhouse Funds, the CVC Funds, the Permira Funds, Andrew Goodsell and Stuart Howard, among others, entered into the Acromas Shareholders' Agreement in order to regulate their relationship as shareholders of Acromas.

On 8 May 2014, the Company, Acromas, certain general partners of the Charterhouse Funds, the CVC Funds, the Permira Funds, the Selling Shareholder, Andrew Goodsell and Stuart Howard entered into the Relationship Agreement which will, conditional upon Admission, regulate the ongoing relationship between the Company and the other parties. By entering into the Relationship Agreement, the parties to the Acromas Shareholders' Agreement agreed that, conditional upon Admission, the Acromas Shareholders' Agreement will be terminated save in respect of their relationship as shareholders of the AA Group and that any further sales of Shares by the Selling Shareholder would require the approval of the Private Equity Investors.

The principal purpose of the Relationship Agreement is to ensure that the Company and its subsidiaries are capable of carrying on their business independently of Acromas and its shareholders, that transactions and relationships with Acromas and its shareholders (including any transactions and relationships with any member of the Group) are at arm's length and on normal commercial terms, and that the goodwill, reputation and commercial interests of the Company are maintained. The Relationship Agreement will continue (a) for so long as the Shares are listed on the premium listing segment of the Official List and traded on the London Stock Exchange's main market for listed securities; and (b) until the later of (i) any of the Private Equity Investors (together with its associates) being entitled to exercise or control the exercise, directly or indirectly, of 10 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company; and (ii) Acromas or any of its current shareholders being entitled to exercise or to control the exercise of 30 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of the Company.

Under the Relationship Agreement, each Private Equity Investor is able to appoint one Non-Executive Director to the Board for so long as it is entitled, either directly or indirectly through its voting rights in Acromas, to exercise or to control the exercise of the equivalent of 10 per cent. or more (or such lower percentage at it may hold on the later of Admission and any sale of Shares pursuant to the Over-allotment Option) of the votes able to be cast on all or substantially all matters at general meetings of the Company. The first such appointees are James Arnell on behalf of the Charterhouse Funds, Pev Hooper on behalf of the CVC Funds and Charles Sherwood on behalf of the Permira Funds. One of these appointees, as determined by the Selling Shareholder, may also be an observer (with the right to attend but not vote) at Audit Committee meetings.

Each of the Private Equity Investors agrees under the Relationship Agreement to procure that if any shares in Acromas are allotted, issued or transferred to a new investor, such investor shall enter into a deed of adherence to the Relationship Agreement prior to the completion of such allotment, issue or transfer.

Each of the Selling Shareholder and the Private Equity Investors agrees that it will not deal in Shares in the Company when any Director is prohibited from dealing in Shares in the Company pursuant to the Company's share dealing code or other applicable law or regulation.

The Directors believe that the terms of the Relationship Agreement will enable the Group to carry on its business independently of Acromas and its shareholders, and ensure that all transactions and relationships between the Company and/or the members of the Group (on the one hand) and Acromas and its shareholders (on the other) are, and will be, on arm's length terms and on a normal commercial basis.

Conflicts of Interest

Save as set out above, there are no potential conflicts of interest between any duties owed by the Directors or Senior Managers to the Company and their private interests or other duties.

PART 9

SELECTED FINANCIAL INFORMATION

The selected financial information set out below has been extracted without material amendment from Section A of Part 11 "Historical Financial Information" of this document, where it is shown with important notes describing some of the line items.

Combined Income Statement

	Year ended 31 January
	2014	2013 (£ millions)	2012
Revenue	1,257.9	1,310.4	1,175.3
Cost of sales	(817.9)	(854.8)	(776.0)
Gross profit	440.0	455.6	399.3
Administrative and selling expenses	(292.4)	(322.7)	(263.7)
Investment income	12.7	15.6	13.7
Finance costs	(11.1)	(2.2)	(2.5)
Finance income	–	3.3	1.4
Profit before tax	149.2	149.6	148.2
Tax expense	(39.6)	(36.3)	(40.0)
Profit for the year	109.6	113.3	108.2
Attributable to:
Equity holders of the parent	108.5	113.1	108.1
Non-controlling interests	1.1	0.2	0.1

Combined Statement of Financial Position

	Year ended 31 January
	2014	2013 (£ millions)	2012
Assets
Goodwill	1,636.2	1,636.3	1,633.4
Intangible fixed assets	47.4	68.5	101.6
Property, plant and equipment	139.8	159.2	155.2
Financial assets	1,681.7	2,419.7	2,169.7
Deferred tax assets	19.9	12.6	14.4
Current tax assets	5.1	–	17.9
Reinsurance assets	24.7	18.6	46.7
Inventories	4.8	6.4	5.3
Trade and other receivables	193.9	227.2	217.0
Prepayments and other assets	22.5	28.9	31.1
Assets classified as held for sale	–	–	9.0
Cash and short term deposits	151.3	451.0	232.5
Total assets	3,927.3	5,028.4	4,633.8
Liabilities
Pension scheme obligations	24.3	12.6	8.1
Gross insurance contract liabilities	690.5	695.6	676.4
Provisions	9.2	9.3	7.1
Financial liabilities	1,798.4	2,958.6	2,685.6
Deferred tax liabilities	7.0	11.9	20.2
Current tax liabilities	–	3.5	–
Other liabilities	113.2	120.7	111.6
Trade and other payables	164.9	171.1	187.9
Total liabilities	2,807.5	3,983.3	3,696.9
Invested capital	1,119.8	1,045.1	936.9
Total liabilities and invested capital	3,927.3	5,028.4	4,633.8

Combined Statement of Cash Flows

	Year ended 31 January
	2014	2013 (£ millions)	2012
Net cash flows from operating activities	174.1	234.5	218.5
Investing activities
Proceeds from sale of property, plant and equipment	9.3	0.2	0.5
Proceeds from sale of assets held for sale	–	9.0	–
Purchase of property, plant and equipment	(29.3)	(45.7)	(44.9)
Net sale of financial assets	(39.2)	(38.7)	(102.2)
Acquisition of subsidiaries	(0.7)	(1.3)	(217.7)
Net cash flows used in investing activities	(59.9)	(76.5)	(364.3)
Financing activities
Payment of finance lease liabilities	(1.2)	(1.9)	(1.7)
Repayment of borrowings acquired with a subsidiary	–	–	(24.2)
Net movement on AA Group borrowings	(1,262.2)	209.6	256.7
Net movement on parent undertaking borrowings	814.7	(153.1)	(144.2)
Dividends paid	(21.0)	(0.4)	–
Net cash flows from financing activities	(469.7)	54.2	86.6
Net (decrease) / increase in cash and cash equivalents	(355.5)	212.2	(59.2)
Net foreign exchange differences	0.1	(0.3)	1.2
Cash and cash equivalents at 1 February	609.0	397.1	455.1
Cash and cash equivalents at 31 January	253.6	609.0	397.1

PART 10

OPERATING AND FINANCIAL REVIEW

This Part 10 "Operating and Financial Review" should be read in conjunction with Part 4 "Presentation of Financial and Other Information", Part 5 "Target Market Overview", Part 6 "Business Description", Part 7 "Regulatory Overview" and Part 11 "Historical Financial Information". Prospective investors should read the entire document and not just rely on the summary set out below. The financial information considered in this Part 10 "Operating and Financial Review" is extracted from the financial information set out in Part 11 "Historical Financial Information".

The following discussion of the Company's results of operations and financial conditions contains forwardlooking statements. The Company's actual results could differ materially from those that it discusses in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this document, particularly under Part 2 "Risk Factors" and Part 4 "Presentation of Financial and Other Information – Forward-Looking Statements". In addition, certain industry issues also affect the Company's results of operations and are described in Part 5 "Target Market Overview".

Business Overview

Saga is a leading provider of products and services primarily tailored for customers over the age of 50 in the UK. The Saga brand has been carefully developed over the past 60 years and is now one of the most recognised and trusted brands among UK consumers aged over 50. Saga is synonymous in the UK with the over 50s market and is recognised for its high quality products and services, expertise in serving its target demographic and excellence in customer service. Initially established as a holiday provider in 1950, Saga has successfully capitalised on the strength of its brand and reputation to broaden its product offering over time. Today Saga is a leading provider of high quality travel, financial, healthcare and media products and services, and the only commercial organisation of scale with a focus primarily on the fast growing over 50s demographic.

Having spent its first 30 years focused on travel, Saga launched Saga Magazine and developed insurance and financial services offerings in the 1980s, introduced private medical and pet insurance offerings and launched its own cruise ship operation in the 1990s and expanded its travel offering to include Titan Travel escorted tours in the late 2000s. Since 2010, the Group has significantly expanded its healthcare division through the acquisition of a number of domiciliary and homecare businesses. The strength of the Saga brand offers the Group the potential to expand into other business areas as opportunities present themselves and as customer needs change.

The combination of Saga's unique and trusted brand, its primary focus on the over 50s, the depth of its customer insights and data, its tailored services and added value products, coupled with its analysis of the customer value chain, its focus on operating efficiency and its flexible business model, together form the intrinsic "DNA" of the Saga business. By selling its products and services directly to customers through its contact centres in the UK and over the internet, Saga captures information about its customers at every point of contact and tracks changes in their behaviour over time, which enables it to build highly personalised and direct customer relationships. This, in turn, allows Saga to accurately model customer propensities which drive its marketing, pricing and product development strategies.

Its multiple customer interactions across a broad range of products and services over many years have enabled Saga to develop a sophisticated proprietary Group Marketing Database containing detailed information for approximately 10.4 million contactable names and 8.4 million contactable households in the UK. Saga estimates this covers over 50 per cent. of over 50s households and more than 60 per cent. of the over 50s ABC1 households in the UK. Saga uses the Group Marketing Database to operate an effective, integrated direct marketing business model with relatively low customer acquisition costs. The size of Saga's Group Marketing Database and its primary focus on the over 50s, combined with its knowledge and understanding of its customers, give Saga the ability to provide products and services designed to meet its customer needs which, in turn, improves Saga's cross-selling and up-selling potential within and across its different business segments. As at 31 January 2014, the Group had active customers in 2.1 million individual households, with each Saga customer holding, on average, 2.7 Saga-branded products.

Saga's brand recognition and excellence in customer service have enabled it to expand its product offering successfully, achieve high levels of repeat business and acquire new customers without needing to rely heavily on costly third-party advertising. Saga's brand and the strength of its relationships with its customers are at the core of the Group's business philosophy. The unique model that Saga operates, with a business centred around the power of its brand and multi-product provision, rather than on a single product segment, has allowed it to achieve sustainable growth, delivering robust performance in recent years. Saga has also grown the Group Marketing Database from 4.8 million contactable households in 2002 to 8.4 million contactable households today.

The Group has benefited from consistent earnings, underpinned by high quality revenue streams and repeat customers. In the year ended 31 January 2014, the Group generated underlying revenue of £1,209.3 million, trading EBITDA of £233.7 million and underlying EBITDA of £222.4 million. As at 31 January 2014, approximately 88 per cent. of Saga's active customers were repeat buyers, having purchased their first Saga product more than one year prior to that date. Between 2012 and 2014, the Group's underlying revenue and underlying EBITDA grew at a compound annual growth rate ("CAGR") of 4.7 per cent. and 7.4 per cent., respectively. Over the same period, the Group's underlying EBITDA margin increased from 17.5 per cent. to 18.4 per cent.

The Group's underlying cash conversion ratio (being underlying available cash flow from operating activities divided by underlying EBITDA) was 88 per cent. in the year ended 31 January 2014. The Group has low levels of maintenance capital expenditure and, given that a majority of its customers pay for services in advance and a majority of its suppliers are paid after the provision of goods and services, it also has favourable working capital dynamics.

Business Segments

The trading activities of the Group are comprised of four key trading segments: financial services (which consists of the motor insurance, home insurance and other financial services subsegments), travel, healthcare services and media and central costs. Central costs, which are included in the Group's media and central costs segment, represent costs relating to the Group's central functions, including the salaries of the Directors, and other central management and support functions of Group activities, such as corporate finance.

Key Factors Affecting the Group's Results of Operations

Set forth below is a description of certain key factors that have historically affected the Group's business and which may impact its business in the future.

Pricing and Competition

The Group's revenue and gross profit depends in part on its ability to price its products and services appropriately. The Group aims to manage the pricing of its products and services for both new and existing customers across the Group's business segments in order to provide customers with quality products and services at attractive prices, while seeking to maximise long-term value. In establishing pricing for its products and services, the Group assesses the competitive environment within each of its segments, which can impact the rates it charges for its products and services and, as a result, Group revenue and profit margins.

Insurance Pricing and Competition

The Group controls the gross retail price of the insurance products it sells to customers. In establishing the gross retail price of its insurance products, the Group has to balance the anticipated impact its pricing will have on its insurance portfolio volume (measured by conversion and renewal rates) with its insurance portfolio margin (measured as the average revenue per policy). The Group aims to optimise the balance between volume and margin using advanced actuarial techniques. The Group's ability to price at the optimum level, relative to its competitors in its chosen markets, can affect the Group's business volume and margin, which thereby affects the Group's revenue and profitability.

Insurance markets are highly competitive and while the aim of an insurer is to write business at the appropriate price relative to the risk involved, competitors may write business at a loss, either intentionally to increase volumes in the immediate term and thus to boost profitability in future years, or unintentionally through inaccurate pricing assumptions. The effect of this market dynamic is that the Group may need to respond to competitor activity by competing on price regardless of the Group's actuarial assessment of an optimum price level, which can create variability in annual profits. For example, there was a significant increase in personal injury claims in the motor insurance market between 2008 and 2010. The Group implemented higher prices for its insurance products to cover the expected increase in underwriting risk early in 2009. Many of the Group's competitors generally did not recognise this increase in personal injury claims as quickly, and as a result the Group's motor insurance was relatively more expensive than its competitors until the Group's competitors recognised the increase in personal injury claims and amended their pricing.

The rise of PCWs has also increased pricing competition in the insurance industry over the past decade, particularly for motor insurance, which is a more readily comparable product between insurers.

For home insurance products, the Group operates a panel of underwriters, including the Group's own underwriting entity. At the point of a new business quote or renewal invite to a customer, each panel member will offer a net premium for the risk in question, provided that it can underwrite the specific risk, and the Group selects the most competitive price for the customer. The home insurance product is standardised across the vast majority of customer risk profiles, so each panel underwriter is providing the same product features as other underwriters on the panel and is taking the same level of risk for any given customer.

The Group's revenue may be affected by its decision as to whether to utilise the Group's underwriting entity or a panel member to underwrite the Group's home insurance products. Effective panel management has and is expected to continue to result in favourable average net rates for home insurance. This is achieved by working closely with each underwriter and providing them with the necessary information to help them understand the customer base, which the Directors believe enables them to price policies for particular risks and remain competitive and profitable. This in turn creates healthy competition between panel members and drives down the wholesale cost of the Group's home insurance products. In recent years, the Group has witnessed an improvement in the overall profitability of its home insurance products, resulting in part from effective panel management.

Insurance Net Pricing

For those insurance products that the Group self underwrites, the Group's underwriting teams aim to set the net premium to ensure that the costs of claims and associated expenses are adequately covered to achieve a nominal return on capital. The net premium is the wholesale cost of an insurance policy to the broker, which is set by the underwriter appropriate to the risk being underwritten. The Group's pricing strategy of setting net premiums sufficient only to cover the cost of claims and associated expenses and to achieve a return on the assets it deploys, provides the customer-facing portion of the Group's insurance business with the flexibility to set customer prices at the appropriate level in order to maximise the balance between margin and volume.

The Group's ability to set the net premium correctly is based on its ability to predict the cost of claims in the future using advanced actuarial techniques. If the Group sets prices too high it may become uncompetitive and lose volume to competitors and if the Group set prices too low it may not adequately cover the cost of future claims. The occurrence of either scenario can negatively impact the Group's underwriting revenue. The Group's own underwriting entity has a track record of conservative and careful pricing, which often has resulted in surplus reserves that it can release once they mature.

Travel Pricing

The majority of the Group's contracts for the supply of the components of its package holidays are not linked to fixed passenger quotas. As a result, the Group only pays for the wholesale cost of flights and hotels based on the exact volume of holidays sold. Aside from the two cruise ships that it currently operates, the travel segment's cost base is largely variable in nature as a result of a low level of committed costs, and therefore, unlike many competitors, the Group does not have the same pressures as its competitors to heavily discount its holidays or cruises to fill capacity as the scheduled date of travel approaches. The Group offers a "Price Promise", which guarantees that a customer will always pay the lowest price for a Saga and Titan holiday or cruise, regardless of when it is purchased. This encourages customers to book early.

The Group's holidays and cruises are positioned in the market based on high levels of quality and customer service. Cruises and long-haul holidays are generally more expensive and carry higher profit gross margins than short-haul holidays to Europe. As a result, the mix of type of holidays and cruises that customers purchase can affect the revenue and profitability in this segment.

Healthcare Services Pricing and Competition

When a contract with an LA ends, the LA will invite care providers to tender for its renewal. The Group's ability to renew existing contracts and win new tenders is largely affected by how competitive its pricing proposal is relative to its competitors. The Group aims to price contracts so as to maximise profitability. The Group may choose to reduce its gross margins on a given contract so as to secure a successful tender if the size of the contract would dilute the overhead required to support it, thereby maintaining overall EBITDA levels.

The nature of the Group's activity in the healthcare services segment means that there is continual customer turnover. The Group seeks to ensure a minimum level of throughput of new customers to maintain revenue and profits. The Group's ability to take on new customers and maintain and grow revenue is driven by the capacity of service hours that the Group can deliver, which is governed by the number of available trained carers the Group employs. Due to the nature of the work involved, the domiciliary care industry also sees relatively high staff turnover. The combination of these factors means that it is crucial for the Group to have an efficient and effective carer recruitment and training process in order to maximise hours, retention and, as a result, revenue.

Customer Retention

The majority of the Group's profitability comes from renewing existing customers. In the Group's insurance operations, the cost to retain an insurance customer is typically lower than the cost of attracting a new customer. The Group's operations depend on managing and monitoring those factors that affect insurance retention rates, including the price of its products and services and the level of benefits offered. Renewal rates are influenced partly by the level at which the Group prices its renewal premiums relative to other insurance providers in the market, but they are also affected by customer loyalty to the Saga brand. Insurance products that are not backed by a trusted and well-established brand name are likely to experience higher levels of elasticity in the demand for their products. The proven track record of excellent customer service and quality product design that the Saga brand embodies reinforces the renewal price. In the financial year ended 31 January 2014, the Group experienced retention rates of 76 per cent. for its core home insurance business and 73 per cent. for its core motor insurance business.

The Group's travel segment also relies on the level of repeat buyers of holidays and cruises. Of the passengers who booked a Saga holiday in the financial year ended 31 January 2013, 85 per cent. booked a holiday in the following year. Similarly, of the passengers who booked a Saga cruise in the financial year ended 31 January 2013, 72 per cent. booked a holiday in the following year. Saga's focus on the customer experience builds this favourable brand loyalty, which translates into future package holiday and cruise sales and enables the Group to better introduce other Saga products to those customers, such as insurance and financial services products.

Claims Experience

Technical Reserves

The Group maintains technical reserves to cover the estimated cost of future insurance claims payments and related administrative expenses with respect to losses or injuries which may have been established but have not been fully quantified and settled at the balance sheet date or which may occur in the future against insurance policies which have already been written prior to the balance sheet date. This includes losses or injuries that have been reported to the Group, as well as those that have not yet been reported. The technical claims reserves that the Group maintains represent estimates of all expected future payments, including related administrative expenses, to bring every claim, whether reported or not, which has occurred prior to the balance sheet date to final settlement. The Group's reserves represent the higher of unexpired premiums or the estimated ultimate cost of its exposure to claims and expenses occurring after the balance sheet date against business which was written prior to such date.

The Group undertakes regular actuarial reviews to determine by how much claim reserves exceed a best estimate of future claims. Saga estimates technical reserves using a range of actuarial and statistical projections and assumptions across a range of variables such as the time required to learn of and settle claims, facts and circumstances known at a given time, trends in the number of claims or claims of certain types, inflation in claims severity and expected future claims payment patterns. Adjustments to reserves are made periodically if appropriate.

Due to its approach to underwriting, the Group has made reserves releases in most financial years and has never had to strengthen reserves in any financial year. These reserve releases contribute to the Group's EBITDA. The table below sets forth the Group's reserve releases for the previous three financial years.

	Year ended 31 January
	2014	2013 (£ millions)	2012
Motor insurance	54.5	43.8	13.1
Home insurance	0.9	0.1	0.1
Other insurance	1.6	1.9	3.1
Total	57.0	45.8	16.3

As at 31 January 2014, the Group has established a booked outstanding claims provision that exceeds by 15 per cent. its internal best estimate of the exposure. Towers Watson has conducted an independent actuarial review of specified segments of the net of reinsurance outstanding claims provision excluding allowance for claims handling costs and reinsurance bad debts covering in excess of 97 per cent. of the corresponding constituents of the Group's net booked outstanding claim provision. Towers Watson concluded that the Group's corresponding internal best estimate is reasonable in that it falls within a range that is regarded as reasonable by Towers Watson as a best estimate. Further details of Towers Watson's review are set out in Part 13 "Independent External Actuaries' Statement" of this document.

The table below sets forth the Group's insurance liabilities (being technical reserves), unearned premium reserve and reinsurance assets as at 31 January 2014.

	Gross	Reinsurance assets	Net
		(£ millions)
Claims liabilities
Reported claims	267.0	(15.3)	251.7
Incurred but not reported	253.4	(5.2)	248.2
Claims handling provision	8.7	–	8.7
Total claims liabilities	529.1	(20.5)	508.6
Unearned premiums	161.4	(4.2)	157.2
Total	690.5	(24.7)	665.8

The volatile nature of claims, particularly large claims, means that actual claims experience can vary from that predicted at the point of pricing. As such, there will naturally be a degree of uncertainty about the estimated reserves held to cover future claims costs and therefore the Group's ability to release reserves and the size of such a release, if any, may change in any given year. Such fluctuations will have a direct contribution to the Group's EBITDA. While the Group's underwriting function has been profitable in every year since its incorporation, thereby more than covering the cost of claims relative to premiums paid, claims costs relative to premiums can vary in magnitude from one year to the next and this can create variability in the Group's cost of sales.

Claims Frequency and Severity

The total level of claims costs the Group incurs are impacted by the frequency and the severity at which they occur. Claims frequency refers to the volume of claims relative to the number of policies on risk, whereas claims severity refers to the average cost of each claim.

The Directors believe that an efficient and effective claims management system and an efficient and well managed claims supply chain are key to controlling claims costs. The Group uses a claims management system called ClaimFLO which is provided by a third party but has been extensively customised to meet the Group's requirements. The system allows pro-active and efficient handling of claims and also produces extensive information which is regularly reviewed by management in order to pursue continual improvement in the claims handling process.

The Group has sought to improve its claims costs management in order to reduce the severity of claims. Reduced severity of claims improves the Group's competitive position and/or margins. Improvements in risk selection and pricing through the increased use of more intelligent data have also led to reductions in claims frequency, which has resulted in year-on-year improvements in the Group's insurance underwriting combined ratios. The Group also has strong logistical claims management, including high repair garage penetration, and advanced fraud detection capabilities, which have helped produce over £50 million in cumulative fraud savings. All of this has translated through to more competitive net and gross premiums and improved margins for the Group's motor insurance subsegment.

Claims Development

The following table details the Group's initial estimate of ultimate net claims incurred over the past five years and the re-estimation at subsequent financial period ends. The table details the net incurred claims (net of reinsurance recoveries) on an accident year basis.

	Year ended 31 January
	2010	2011	2012 (£ millions)	2013	2014	Total
Accident year
2009 and earlier	(5.5)	–	(9.2)	(11.0)	(1.2)
2010	202.1	–	(4.3)	(4.0)	(5.5)	188.3
2011		266.0	(2.8)	(5.2)	(4.6)	253.4
2012			302.3	(25.6)	(31.1)	245.6
2013				315.4	(14.6)	300.8
2014					276.8	276.8
Total claims incurred	196.6	266.0	286.0	269.6	219.8
Claims handling costs	9.0	10.3	15.6	17.4	17.2
Net claims incurred	205.6	276.3	301.6	287.0	237.0

The development of the associated loss ratios on the same basis is presented in the table below.

	Year ended 31 January
	2010	2011	2012	2013	2014
Accident year
2010	73%	73%	72%	70%	68%
2011		78%	78%	76%	75%
2012			76%	70%	62%
2013				76%	72%
2014					75%

Ship Operating Effectiveness

Ships purchased by the Group undergo an extensive refurbishment to bring them in line with the standard required for a Saga vessel prior to their inaugural voyage. In years subsequent to purchase, each ship will be subject to an ongoing programme of maintenance.

Delays and disruptions associated with the refurbishment and maintenance of cruise ships can result in the delay and cancellation of cruises, which impacts the Group's results of operations within its travel segment. In the financial year ended 31 January 2013, the Group suffered a total of £8.6 million in exceptional costs associated with cancelled and curtailed cruises for the Saga Sapphire and the Saga Ruby, due to technical faults. In July 2013, the Group outsourced the deck and engine functions for cruise ships to provide improved resilience and management. This has not resulted in a material increase in cost but is expected to add greater stability to the Group's travel segment revenue.

Marketing Efficiency

The majority of the Group's operating costs are associated with the sale and administration of the Group's insurance, package holidays, cruise and healthcare services. These include marketing campaigns, such as direct insurance mailings, brochure mailings and internet marketing activity, the cost of running contact centres, which primarily consists of the payroll expense of staff employed to operate contact centres, and the cost of paying other staff in the business, such as carers and support and administrative functions. The majority of these costs are variable in nature, but the Group's ability to control these effectively in line with output has an impact on profitability in a given period. In the year ended 31 January 2014, the Group incurred £44.6 million in marketing expenses, which are included in the Group's administrative and selling expenses.

The continual review of marketing efficiencies in the Group's financial services segment and decisions to amend the length of time required to recover the cost of the Group's marketing investments (the "payback model") to manage its marketing campaigns will affect profitability in any year. The period over which to calculate the payback model affects the outcome of the calculation and, as such, decisions to alter the payback period will create variability in annual revenue and profitability. Furthermore, it is insurance industry practice to often operate at a loss in the first year of providing insurance to a customer by offering introductory discounts, as this approach attracts new customers.

For the Group's travel segment, the effectiveness of the Group's major brochure releases affects results of operations. Brochure design and the frequency and method of distribution to customers influences the amount and type of holidays and cruises that Saga customers purchase. This can affect the volume and mix of holidays and cruises sold by the Group, which in turn affects revenue and gross profit margins.

Operating Efficiency and Productivity

Contact Centres

The Group operates large centralised contact centres through which it sells products and provides customer service for its financial services and travel segments. The majority of the cost of operating contact centres is the payroll cost of the staff employed. The level of cost varies with employee headcount, which in turn is driven by customer call volume.

The level of contact centre staff efficiency affects the volume of calls that each contact centre agent can answer in a given period of time. The Group operates a number of initiatives and controls to ensure that agent time is optimised. Contact centre productivity impacts revenue, as it influences new business conversion rates, renewal rates and the rate at which the Group can cross-sell additional products and upsell enhanced products and services. Similarly, the Group has enacted a series of measures to maximise this potential. For example, in Saga Services in the financial year ended 31 January 2014, the Group has put in place a number of new initiatives to improve the efficiency and productivity of the insurance contact centre which the Directors believe have delivered a benefit to the Group's results of operations.

Healthcare

The majority of the Group's revenue from its healthcare services segment is currently derived from LAs. LAs tender for healthcare services by region and prices are set for a given period for a given region based on the services provided. For domiciliary care and other care in the home services, this is charged to the LAs on a variable basis based on the length of each visit and the number of visits made. Contracts with LAs can be individually significant, with some of the largest contracts valued in excess of £10 million per annum. It is important for the Group to actively manage its relationships with the LAs to ensure a throughput of new hours to maintain and grow revenue. A failure to do so can result in a reduced level of hours being delivered under these contracts, which will reduce revenue and profits yielded from the segment.

The main driver of costs in the Group's healthcare services segment is the cost of employing carers. The Group pays carers based on the number of hours worked, which varies with the volume of healthcare services sold by the Group. Gross margins are therefore largely protected from fluctuations in volume, although branch and head office costs contain fixed elements.

The efficiency at which carer rounds are planned and administered can also impact the profitability of the healthcare services segment. Efficiency is achieved by varying the scale of each branch operation. The greater number of customers and volume of hours that are served, the greater potential there is to increase the efficiency of carer rounds.

Acquisitions and Disposals

During 2010 and 2011, the Group's healthcare services segment grew significantly through several acquisitions. In 2010, the Group acquired Greenbanks, Sussex Homecare and Cooksbridge Care Services, which were relatively small, regional companies. The Group later acquired two healthcare companies with national presence, Nestor in February 2011 and Allied in October 2011. The smaller acquisitions of Greenbanks, Sussex Homecare and Cooksbridge Care Services were then subsumed into Nestor during 2011. These acquisitions contributed significantly to the growth of the Group's revenue and EBITDA. In the year ended 31 January 2012, Nestor and Allied contributed £167.7 and £53.3 million, respectively, in revenue to the Group, or 14.3 per cent. and 4.5 per cent. of the Group's total revenue for the year.

Within the Group's travel segment, the acquisition or sale of cruise ships affects both the number of berths and range of cruises available to customers. In 2010, the Group purchased the Saga Sapphire, which joined its fleet in 2012. In May 2012, Saga sold one of its cruise ships, formerly known as the Spirit of Adventure, to a third party for US\$14.8 million, payable in instalments. US\$5.92 million of this amount was a loan of which US\$2.96 million remains outstanding and is due to be settled half in May 2014 and half in May 2015, with interest accruing on the principal amount outstanding at a rate of 4.0 per cent. per annum. Finally, in January 2014, the Group sold the Saga Ruby for US\$13.1 million, at the end of its anticipated useful life for the Group.

Regulatory, Legislative and Governmental Change

Regulatory and legislative changes in the insurance industry may impact the revenue the Group receives and the costs the Group incurs from its insurance business, as such changes can affect claims costs or restrict the amount of revenue obtained from the sale of insurance products. Regulatory activity may also influence the way in which the Group operates, either directly through recommendations made to the Group by the regulator or indirectly by setting precedent elsewhere in the industry as a basis for conduct. The Group's insurance business is regulated by the FCA, who proactively investigates and opines on all aspects of the sale and administration of insurance products on an ongoing basis. For example, in March 2014, the FCA set out new requirements for the sales of add-on insurance products. Such a regime influences the Group's processes and procedures, which in turn can affect the Group's results in its insurance subsegments.

The Group's travel segment is regulated by a number of mandatory regulators, such as the Package Travel Regulators, the Civil Aviation Authority and the Air Travel Organisers' Licensing, and discretionary schemes, such as the Association of British Travel Agents. In addition, the Group's shipping business is subject to extensive regulations. Changes in the regulations that these bodies impose and the compliance costs associated with such changes could have an impact on the Group's results of operations in the travel segment. Changes in airport duties in the various countries to which the Group sends customers can also affect results, as margins may be reduced if the Group decides to absorb additional costs.

The Group's healthcare services segment is regulated by the Care Quality Commission and the majority of the Group's revenue is derived from government-funded LAs, PCTs and CCGs. Therefore, pressure on LA budgets due to government spending cuts can have an impact on the Group's results of operations in the healthcare segment. If LA budgets are reduced, this can result in the reduction of the length and frequency of visits made for each customer, which affects the overall volume of hours served and therefore revenue. It can also create an increased focus on price when tendering for a new contract, which can impact the Group's revenue and gross margins.

General Economic Conditions

The Group's results are affected by conditions in the global economy, in the United Kingdom, Europe and elsewhere around the world. For the Group's insurance business, economic conditions may cause the Group's insurance subsegments to experience elevated incidences of claims or cost of claims, including higher claims inflation or fraudulent claims, as well as changes in accident rates, any of which could affect the current and future profitability of the insurance business. A prolonged economic downturn could result in lower sales figures in the future as consumers may choose to reduce their insurance cover or purchases, defer buying or stop buying insurance altogether. Conversely, during times of economic prosperity, the Group may see increased demand for discretionary insurance products such as home, private medical and travel insurances, and will also have more opportunity to sell enhanced levels of cover.

For the Group's travel segment, as holidays and cruises are discretionary in nature, during times of economic downturn consumers may choose to travel less, purchase lower priced holiday packages and cruises (which generally carry lower margins) or stop purchasing holiday packages and cruises altogether. Conversely, during times of economic prosperity the Group sees increased demand for its holidays and cruises, with customers more likely to travel more often and on higher priced holidays and cruises, which in turn increases revenues and profits.

The Group's healthcare products and services tend to be essential for the customer, so are generally not impacted to the same degree in times of economic downturn. During such times, however, LAs may be subject to budgetary pressures which may result in reduced visit lengths and frequencies, which can translate to lower revenue and profit for the Group.

Environmental and World Events

The results of the Group's travel segment can be affected by environmental and other world events, such as natural disasters, wars and acts of terrorism. These events may have a direct impact on the Group's results and create specific and measurable costs and revenue impacts. For example, river floods in the first half of 2013 in Europe forced the Group to cancel some of its Titan river cruises, which generated £0.3 million of incremental costs to recompense customers and the Directors believe approximately £0.2 million of additional lost margin. Other events, such as unrest in North African countries, can also have a detrimental affect on demand for holidays to countries in such regions, and can create an overall downward trend on demand in the wider travel industry.

The results of the Group's insurance subsegments can also be affected by environmental events in the UK, such as prolonged periods of bad weather. For example, while the Group has not been significantly impacted by direct claims resulting from the widespread flooding in recent years in the UK, this has restricted the Group's ability to insure customers in areas that are prone to regular flooding, and such events may increase the cost of claims in the home insurance market which impacts net and gross premiums. Recent harsh winters and extended periods of snow can also temporarily raise the frequency and severity of motor claims costs, which in turn can affect the Group's revenue and margins.

Seasonality of Financial Services and Travel Products

Most of the Group's products in its financial services and travel segments are subject to seasonality throughout the financial year and, as such, profitability will vary from quarter to quarter during the course of any given financial year. For example, the Group tends to experience increased motor insurance sales during the month of March, which coincides with the issue of new vehicle registration plates in the United Kingdom. Home insurance sales also tend to be higher in March, June and September, which broadly coincides with the building society quarter days.

The Group also tends to experience increased holiday departures during the months of May, June and September, with steady or consistent sales volumes throughout the winter months, however the Group tends to have relatively low departure volumes during July and August, as most of its customers travel outside of the peak vacation months.

The Group's healthcare services segment is less affected by seasonal variations, although during weeks of national holidays such as Christmas and Easter it does witness a temporary decline in the number of hours delivered, particularly for privately-funded customers, as family members are more likely to visit older relatives (or vice versa) and cater for their care needs themselves.

Capital Management

As is required of insurance underwriters, the Group's underwriting entity holds reserves and capital to meet claims on policies that it has written in the past and to allow for fluctuations in estimates made for these claims. The majority of the reserves and capital are invested in low risk investments that yield a return. In the financial year ended 31 January 2014, the Group recognised £12.7 million of investment income in respect of its reserves and capital.

Managing Foreign Exchange and Commodity Inflation Risk

The Group's travel segment contracts with suppliers globally and often settles expenses in currencies other than Sterling. As a result, movements in the exchange rates for Sterling to and from other currencies can create variability in the level of gross margin the Group attains on the holidays and cruises it sells. To mitigate this risk, the Group operates a hedging policy and seeks to fix exchange rates in advance by purchasing currency forward contracts. This protects the Group's results from short-term variability but also results in increased costs over the long term.

One of the main costs of operating the Group's ships is fuel. As fuel is a widely traded commodity, the level of cost the Group incurs is subject to inflation risk, which can be extremely variable. As a result, the Group operates a fuel oil hedging policy for fuel purchases and may fix the rate at which it purchases fuel in advance by purchasing fuel oil swaps. As with foreign exchange risk, this removes any short-term variability in the cost of fuel, but increases the cost of fuel over the long term.

Key Performance Indicators

The Group reviews several key performance indicators, including trading EBITDA, number of customers, number of products held, number of contactable households, number of policies sold, gross written premiums, number of passengers and hours of care delivered, to track the financial and operating performance of its business. The usage of various key performance indicators varies by Group business segment. These measures are derived from the Group's internal operating and financial systems. Because these measures are not determined in accordance with generally accepted accounting principles and are thus susceptible to varying calculations, they may not be comparable with other similarly titled measures of performance of other companies. For more information on the Group's methods of calculating KPIs, see Part 4 "Presentation of Financial and Other Information—Key Performance Indicators".

Overall Group

The table below presents the key performance indicators for the Group, including reconciliation from reported to underlying figures.

	Year ended 31 January
	2014 (£ millions, except as otherwise indicated)	2013	2012
Overall Group
Number of customers (millions)	2.7	2.8	2.8
Number of customers (millions as at 31 January)	2.1	2.2	2.3
Number of products held (millions)	5.8	6.0	6.2
Number of contactable households (millions)	8.4	8.2	7.9
Reported revenue	1,257.9	1,310.4	1,175.3
Underlying revenue reconciliation(1)
Discounts gross-up	–	(2.4)	(3.6)
Discontinued Saga Holidays operations	(4.7)	(7.3)	(7.1)
Discontinued Titan operations	(8.5)	(12.1)	(13.6)
Retirement of the Saga Ruby	(35.4)	(34.7)	(43.1)
Cruise pre-launch profit	–	–	(4.4)
Total underlying revenue adjustments for the Group(1)	(48.6)	(56.5)	(71.8)
Underlying revenue	1,209.3	1,253.9	1,103.5
Trading EBITDA	233.7	234.8	212.7
Underlying EBITDA reconciliation(1)
AA related	–	(5.9)	(9.4)
Remove exceptional claim	–	(5.8)	5.8
Discontinued operations including Saga Ruby(2)	(9.2)	(1.9)	(10.1)
Other underlying adjustments	(1.0)	(5.8)	(5.0)
Total underlying EBITDA adjustments for the Group(1)	(10.2)	(19.4)	(18.7)
Interest received on available cash	(1.1)	(1.7)	(1.3)
Underlying EBITDA	222.4	213.7	192.7

(1) Underlying adjustments include one-off items or timing differences, including the impact of profit sharing with the AA Group, the sale of the Saga Ruby and exceptional claims.

(2) Note the discontinued operations are either not sufficiently material to warrant being treated as such within trading EBITDA in accordance with IFRS 5 – "Non-current Assets Held for Sale and Discontinued Operations, or in the case of the Saga Ruby, do not comprise an entire trading operation.

Number of Customers

The Group measures number of customers as households which have purchased a Saga product during the financial year. The Group had 2.7 million customers in the year ended 31 January 2014, as compared to 2.8 million customers for the year ended 31 January 2013, a decrease of 0.1 million, or 3.6 per cent. In the year ended 31 January 2013, the Group had 2.8 million customers, as compared to 2.8 million customers for the year ended 31 January 2012. The decline in the Group's customer numbers over these periods is primarily driven by the Group's decision to forego increasing customer volumes during periods in which insurance claims activity and market pricing were uncertain.

The Group also measures the number of customers as households that hold at least one active product as at 31 January each year. The Group had 2.1 million customers as at 31 January 2014, as compared to 2.2 million customers as at 31 January 2013, a decrease of 0.1 million, or 4.5 per cent. As at 31 January 2013, the Group had 2.2 million customers, as compared to 2.3 million customers for the year ended 31 January 2012, a decrease of 0.1 million, or 4.3 per cent.

Number of Products Held

The Group measures the total number of active Saga products held by customers as at 31 January each year. This excludes healthcare services and Titan Travel products. The Group's customers held 5.8 million products as at 31 January 2014, as compared to 6.0 million products as at 31 January 2013, a decrease of 0.2 million, or 3.3 per cent. As at 31 January 2013, the Group's customers held 6.0 million products, as compared to 6.2 million products as at 31 January 2012, a decrease of 0.2 million, or 3.2 per cent.

Number of Contactable Households

The Group measures the total number of households included in the Group Marketing Database (excluding those which have had suppressions applied that prevent any marketing contact). The Group had 8.4 million contactable households as at 31 January 2014, as compared to 8.2 million contactable households as at 31 January 2013, an increase of 0.2 million, or 2.4 per cent. The Group had 8.2 million contactable households as at 31 January 2013, as compared to 7.9 million contactable households as at 31 January 2012, an increase of 0.3 million, or 3.8 per cent.

Underlying Revenue

Underlying revenue for the Group was £1,209.3 million in the year ended 31 January 2014, as compared to £1,253.9 million for the year ended 31 January 2013, a decrease of £44.6 million, or 3.6 per cent. The decrease was principally due to a decline in Motor premiums reflecting wider market trends. Underlying revenue for the Group was £1,253.9 million in the year ended 31 January 2013, as compared to £1,103.5 million for the year ended 31 January 2012, an increase of £150.4 million, or 13.6 per cent. The increase was principally due to the full-year impact of trading results for the Allied Healthcare Group, which was acquired in October 2011.

Underlying EBITDA

Underlying EBITDA is trading EBITDA (earnings before interest payable, tax, depreciation and amortisation, profit or loss on disposal of non-current assets, exceptional expenses and fair value gains or losses on derivative financial instruments) reflecting underlying adjustments to remove the impact of one-off items, timing differences and interest received on available cash. These one-off items include the impact of discontinued operations in travel including the sale of the Saga Ruby, profit share arrangements with the AA Group that are no longer in place within financial services, and extraordinary claims.

Underlying EBITDA for the Group was £222.4 million in the year ended 31 January 2014, as compared to £213.7 million for the year ended 31 January 2013, an increase of £8.7 million, or 4.1 per cent. The increase was principally due to increased profit on the Sapphire following technical issues in the 2013 financial year coupled with continued passenger increases and improved margins in Holidays, partially offset by a decline in social care hours due to the implementation of a branch integration programme and on-going pressure on Local Authority budgets. Underlying EBITDA for the Group was £213.7 million in the year ended 31 January 2013, as compared to £192.7 million for the year ended 31 January 2012, an increase of £21.0 million, or 10.9 per cent. The increase was principally due to a favourable prevailing trend in Motor claims experience leading to increased reserve releases.

Underlying available cash flow from operating activities

The table below sets out the Group's available underlying operating cash flows for the years ended 31 January 2014, 2013 and 2012, including reconciliation from reported to underlying figures.

		Year ended 31 January
	2014 (£ millions, except as otherwise indicated)	2013	2012
Underlying EBITDA(1)	222.4	213.7	192.7
Adjustments
Remove underlying EBITDA generated in restricted trading divisions(2)	(42.9)	(50.5)	(42.0)
Add back cash released from restricted trading divisions(3)	9.0	(20.4)	(9.0)
	(33.9)	(70.9)	(51.0)
Working capital impact on available cash(4)	18.8	19.7	10.2
Capital expenditure funded with available cash(5)	(10.6)	(17.0)	(21.2)
Available underlying operating cash flow	196.7	145.5	130.7
Underlying cash conversion	88%	68%	68%

(1) Underlying adjustments to underlying EBITDA include one-off items or timing differences as reflected in the reconciliation table above.

• (2) Removal of the underlying EBITDA of the Group's underwriting entity, and the travel segment, whose cash flows are restricted by regulatory rules and not readily distributable amongst the Group.
• (3) Inclusion of restricted cash released from or invested into the travel segment during the year.
• (4) Movement on inventories, trade debtors and trade creditors during the year excluding those relating to the restricted underwriting entity and travel segments.
• (5) Capital expenditure for the consolidated Group excluding those expenditures relating to the restricted underwriting entity and travel segments.

Financial Services

The table below presents the key performance indicators for the Group's financial services segment, including reconciliation to underlying figures.

		Year ended 31 January
	2014	2013	2012
Reported revenue	(£ millions, except as otherwise indicated) 542.6	606.2	593.1
Underlying adjustments(1)	–	(2.4)	(3.6)
Underlying revenue	542.6	603.8	589.5
Trading EBITDA	197.1	198.4	166.9
Underlying adjustments(2)	(1.0)	(7.7)	(0.8)
Underlying EBITDA	196.1	190.7	166.1
Motor Insurance
Number of policies sold (millions)	2.7	2.9	3.0
Gross written premiums	333.9	390.0	436.9
Reported revenue	355.2	425.6	448.8
Underlying adjustments(1)	–	(1.0)	(1.5)
Underlying revenue	355.2	424.6	447.3
Trading EBITDA	96.7	105.1	73.8
Underlying adjustments(2)	(1.0)	(7.7)	(0.8)
Underlying EBITDA	95.7	97.4	73.0
Home Insurance
Number of policies sold (millions)	1.9	1.9	1.8
Gross written premiums	195.5	207.2	207.5
Reported revenue	90.5	89.6	84.4
Underlying adjustments(1)	–	(1.4)	(2.1)
Underlying revenue	90.5	88.2	82.3
Trading EBITDA	63.1	58.0	56.4
Underlying adjustments(2)	–	–	–
Underlying EBITDA	63.1	58.0	56.4
Other Financial Services
Numbers of policies sold (general insurance only, millions)	0.3	0.3	0.4
Number of personal finance customers (millions)	0.3	0.3	0.3
Reported revenue	96.9	91.0	59.9
Underlying adjustments(1)	–	–	–
Underlying revenue	96.9	91.0	59.9
Trading EBITDA	37.3	35.3	36.7
Underlying adjustments(2)	–	–	–
Underlying EBITDA	37.3	35.3	36.7

(1) Underlying adjustments to the financial services segment's reported revenue reflects the gross-up of discounts.

(2) Underlying adjustments to the financial service segment's trading EBITDA reflects the reversal of the AA profit sharing agreement, the removal of an expected PI claim reserve which was later released without any utilisation and legal and professional fees in relation to the start-up of Saga and AA legal services.

Policies Sold

The Group's insurance subsegments measure the total number of insurance policies sold to customers.

The Group's motor insurance subsegment sold 2.7 million policies in the year ended 31 January 2014, as compared to 2.9 million policies for the year ended 31 January 2013, a decrease of 0.2 million, or 6.9 per cent. In the year ended 31 January 2013, the Group's motor insurance subsegment sold 2.9 million policies, as compared to 3.0 million policies for the year ended 31 January 2012, a decrease of 0.1 million, or 3.3 per cent. The consistency in the number of policies the Group sold over the periods discussed was driven by the Group's decision to forego increasing customer volumes during periods in which claims activity and market pricing were uncertain.

The Group's home insurance subsegment sold 1.9 million policies in the year ended 31 January 2014, as compared to 1.9 million policies for the year ended 31 January 2013. In the year ended 31 January 2013, the Group's home insurance subsegment sold 1.9 million policies, as compared to 1.8 million policies for the year ended 31 January 2012, an increase of 0.1 million, or 5.6 per cent.

Gross Written Premiums

The Group's insurance subsegments measure the gross written premiums ("GWP") associated with the policies sold to customers, which is defined as the total premium charged to the customer by Saga Services or Direct Choice, excluding insurance premium tax ("IPT"), for stand-alone policies and add-on sales. GWP is measured after deducting discounts intrinsic to pricing tables, but before deducting additional promotional discounts that may be added at the point of sale.

The Group's motor insurance subsegment had £333.9 million in gross written premiums for the year ended 31 January 2014, as compared to £390.0 million in gross written premiums for the year ended 31 January 2013, a decrease of £56.1 million, or 14.4 per cent. In the year ended 31 January 2013, the Group's motor insurance subsegment had £390.0 million in gross written premiums, as compared to £436.9 million in gross written premiums for the year ended 31 January 2012, a decrease of £46.9 million, or 10.7 per cent.

The Group's home insurance subsegment had £195.5 million in gross written premiums for the year ended 31 January 2014, as compared to £207.2 million in gross written premiums for the year ended 31 January 2013, a decrease of £11.7 million, or 5.6 per cent. In the year ended 31 January 2013, the Group's home insurance subsegment had £207.2 million in gross written premiums, as compared to £207.5 million in gross written premiums for the year ended 31 January 2012, a decrease of £0.3 million, or 0.1 per cent.

Underlying EBITDA

Underlying EBITDA from the Group's financial services segment was £196.1 million in the year ended 31 January 2014 (consisting of £95.7 million from the motor insurance subsegment, £63.1 million from the home insurance subsegment and £37.3 million from the other financial services subsegment), as compared to £190.7 million for the year ended 31 January 2013 (consisting of £97.4 million from the motor insurance subsegment, £58.0 million from the home insurance subsegment and £35.3 million from the other financial services subsegment), representing an increase of £5.4 million, or 2.8 per cent. The increase was principally due to improved margins on home insurance.

Underlying EBITDA from the Group's financial services segment was £190.7 million in the year ended 31 January 2013 (consisting of £97.4 million from the motor insurance subsegment, £58.0 million from the home insurance subsegment and £35.3 million from the other financial services subsegment), as compared to £166.1 million for the year ended 31 January 2012 (consisting of £73.0 million from the motor insurance subsegment, £56.4 million from the home insurance subsegment and £36.7 million from the other financial services subsegment), representing an increase of £24.6 million, or 14.8 per cent. The increase was principally due to a favourable prevailing trend in motor claims experience leading to increased reserve releases.

Travel

The table below presents the key performance indicators for the Group's travel segment, including reconciliation to underlying figures.

	Year ended 31 January
	2014 (£ millions, except as otherwise indicated)	2013	2012
Number of passengers (thousand)	194	183	182
Reported revenue Underlying adjustments(1)	379.6 (48.6)	352.3 (54.1)	344.6 (68.2)
Underlying revenue	331.0	298.2	276.4
Trading EBITDA Underlying adjustments(2)	27.8 (7.7)	13.9 (7.0)	26.9 (15.0)
Underlying EBITDA	20.1	6.9	11.9

(1) Underlying adjustments to the travel segment's reported revenue reflects the retirement of the Saga Ruby, other discontinued operations, cost accruals and provision adjustments, one-off travel insurance profit share and cruise pre-launch profit.

(2) Underlying adjustments to the travel segment's trading EBITDA reflects the retirement of the Saga Ruby, other discontinued operations, cost accruals and provision adjustments, one-off travel insurance profit share and cruise pre-launch profit.

Number of Passengers

The Group's travel segment measures the number of passengers that travel each financial year. The Group's travel segment had 194 thousand passengers in the year ended 31 January 2014, as compared to 183 thousand passengers for the year ended 31 January 2013, an increase of 9 thousand, or 4.9 per cent. The Group's travel segment had 183 thousand passengers in the year ended 31 January 2013, as compared to 182 thousand passengers for the year ended 31 January 2012, an increase of 1 thousand, or 0.5 per cent.

Underlying EBITDA

Underlying EBITDA from the Group's travel segment was £20.1 million in the year ended 31 January 2014, as compared to £6.9 million for the year ended 31 January 2013, representing an increase of £13.2 million. The increase was principally due to the full-year effect of increased passenger days on the Saga Sapphire, primarily due to the technical issues in 2013, and continued growth in Saga Holiday passenger volumes.

Underlying EBITDA from the Group's travel segment was £6.9 million in the year ended 31 January 2013, as compared to £11.9 million for the year ended 31 January 2012, representing a decrease of £5.0 million, or 42.0 per cent. The decrease was principally due to technical issues with the Saga Sapphire in 2013, which was partially offset by increased passengers and improved margins in Saga Holidays.

Healthcare Services

The table below presents the key performance indicators for the Group's healthcare services segment, including reconciliation to underlying figures.

	Year ended 31 January
	2014	2013 (£ millions, except as otherwise indicated)	2012
Hours of care delivered (million)	17.3	19.2	8.5
Reported revenue Underlying adjustments(1)	318.6 –	334.5 –	221.0 –
Underlying revenue	318.6	334.5	221.0
Trading EBITDA Underlying adjustments(2)	10.2 0.4	22.0 (1.9)	17.1 –
Underlying EBITDA	10.6	20.1	17.1

(1) Underlying adjustments to the healthcare segment's reported revenue reflects adjustments in respect of holiday pay and nursing contract accruals.

(2) Underlying adjustments to the healthcare segment's trading EBITDA reflects adjustments in respect of holiday pay and nursing contract accruals.

Hours of Care Delivered

The Group's healthcare services segment measures the total number of social care hours it delivers each year. The Group's healthcare services segment delivered 17.3 million hours of care in the year ended 31 January 2014, as compared to 19.2 million hours of care for the year ended 31 January 2013, a decrease of 1.9 million, or 9.9 per cent. In the year ended 31 January 2013, the Group's healthcare services segment delivered 19.2 million hours of care, as compared to 8.5 million hours of care (excluding the Allied Healthcare Group acquired in October 2011) for the year ended 31 January 2012, an increase of 10.9 million.

Underlying EBITDA

Underlying EBITDA from the Group's healthcare services segment was £10.6 million in the year ended 31 January 2014, as compared to £20.1 million for the year ended 31 January 2013, representing a decrease of £9.5 million, or 47.3 per cent. The decrease was principally due to a lower volume of social care hours due to the branch integration programme and a focus on improving the operational platform.

Underlying EBITDA from the Group's healthcare services segment was £20.1 million in the year ended 31 January 2013, as compared to £17.1 million for the year ended 31 January 2012, representing an increase of £3.0 million, or 17.5 per cent. The increase was principally due to the full-year impact of Allied trading results, which was acquired in October 2011.

Media and Central Costs

The table below presents the key performance indicators for the Group's media and central costs segment, including reconciliation to underlying figures.

	Year ended 31 January
	2014 (£ millions, except as otherwise indicated)	2013	2012
Reported revenue Underlying adjustments(1)	17.1 –	17.4 –	16.6 –
Underlying revenue	17.1	17.4	16.6
Trading EBITDA Underlying adjustments(2) Interest received on available cash	(1.4) (1.9) (1.1)	0.5 (2.9) (1.7)	1.8 (2.9) (1.3)
Underlying EBITDA	(4.4)	(4.1)	(2.4)

(1) The media and central costs segment had no underlying adjustments to underlying revenue.

(2) Underlying adjustments to the media and central costs segment's trading EBITDA reflects adjustments applicable to the Group, including waived AA charges and the recognition of a government grant following the acquisition of a call centre in Thanet, Kent.

Underlying EBITDA

Underlying EBITDA from the Group's media and central costs segment was a loss of £4.4 million in the year ended 31 January 2014, as compared to a loss of £4.1 million for the year ended 31 January 2013, representing a decrease of £0.3 million. The decrease was principally due to a marginal increase in the central cost base.

Underlying EBITDA from the Group's media and central costs segment was a loss of £4.1 million in the year ended 31 January 2013, as compared to a loss of £2.4 million for the year ended 31 January 2012, representing a decrease of £1.7 million. The decrease was principally due to a marginal increase in the central cost base.

Description of Key Line Items

The following is a discussion of the Group's key income statement line items. For additional information, see Note 2 of Part 11 "Historical Financial Information".

Revenue

Revenue consists of income generated primarily from the Group's financial services, travel, healthcare services and media businesses. Financial services revenue is primarily generated through the sales and underwriting of insurance products, especially motor and home insurance, and other financial products, such as credit cards, to customers. Travel revenue is primarily derived from direct sales of package holidays and cruises. Healthcare revenue is currently primarily derived from LAs, PCTs and CCGs, who provide public funding for care in the home and primary care services. This segment also generates revenue from payments directly from customers for similar services. Media revenue is primarily derived from the sales of Saga Magazine.

Cost of Sales

Cost of sales include costs from insurance underwriting activities, including net claims incurred and handling costs for products the Group underwrites, as well as the supply cost of flights, hotels and tours sold to customers, the direct cost of running its cruise ships, including the depreciation of its cruise ships, and the payroll cost of employing care staff directly related to the billable hours fulfilled.

Administrative and Selling Expenses

Administrative and selling expenses consists of costs associated with the Group's employees and staff, including wages and salaries, social security and pensions, as well as marketing and fulfilment expenses, lease rentals, auditor remuneration, other administrative costs, depreciation, amortisation and impairment and exceptional expenses.

Investment Income

Investment income represents interest income on financial investments.

Finance Costs

Finance costs consist of interest on debt and borrowings, finance charges payable under finance leases and hire purchase contracts, interest expense, loss on financial instruments, net finance expenses on pension schemes and unwinding of discount and effect of changes in discount rate of provisions.

Finance Income

Finance income consists of the net gain on financial instruments and the net finance income on the Group's pension schemes.

Results of Operations

Results of Operations for the Group for Years Ended 31 January 2014 and 2013

The table below presents the Group's results of operations for the years ended 31 January 2014 and 2013.

		Year ended 31 January
	2014 (£ millions)	2013
Revenue	1,257.9	1,310.4
Cost of sales	(817.9)	(854.8)
Gross profit	440.0	455.6
Administrative and selling expenses	(292.4)	(322.7)
Investment income	12.7	15.6
Finance costs	(11.1)	(2.2)
Finance income	–	3.3
Profit before tax	149.2	149.6
Tax expense	(39.6)	(36.3)
Profit for the year	109.6	113.3
Attributable to:
Equity holders of the parent	108.5	113.1
Non-controlling interests	1.1	0.2

Revenue

The Group's revenue for the year ended 31 January 2014 was £1,257.9 million, as compared to £1,310.4 million for the year ended 31 January 2013, representing a decrease of £52.5 million, or 4.0 per cent. This decrease was principally due to a decline in motor insurance gross premiums, which reflects general market trends.

The table below sets out the Group's revenue by segment for the years ended 31 January 2014 and 2013, both in pounds sterling and as a percentage of total Group revenue.

	Year ended 31 January
	(£ millions)	2014 (% of Group revenue)	(£ millions)	2013 (% of Group revenue)
Financial Services
Motor Insurance	355.2	28.2	425.6	32.5
Home Insurance	90.5	7.2	89.6	6.8
Other Financial Services	96.9	7.7	91.0	6.9
Total Financial Services	542.6	43.1	606.2	46.3
Travel	379.6	30.2	352.3	26.9
Healthcare Services	318.6	25.3	334.5	25.5
Media and Central Costs	26.0	1.4	26.0	1.3
Adjustments for intra-group transactions, balances, income and
expenses	(8.9)		(8.6)
Total Group	1,257.9		1,310.4

An analysis of revenue by segment is set out below.

Financial Services: revenue from the Group's financial services segment was £542.6 million in the year ended 31 January 2014 (consisting of £355.2 million from the motor insurance subsegment, £90.5 million from the home insurance subsegment and £96.9 million from the other financial services subsegment), as compared to £606.2 million for the year ended 31 January 2013 (consisting of £425.6 million from the motor insurance subsegment, £89.6 million from the home insurance subsegment and £91.0 million from the other financial services subsegment), representing a decrease of £63.6 million, or 10.5 per cent. The decrease was principally due to a decline in motor insurance gross premiums reflecting a general decline in market premiums due to falling claims costs.

Travel: revenue from the Group's travel segment was £379.6 million in the year ended 31 January 2014, as compared to £352.3 million for the year ended 31 January 2013, representing an increase of £27.3 million, or 7.7 per cent. The increase was principally due to the full-year impact of the Saga Sapphire, which suffered technical issues in 2013, and continued growth in Saga Holiday passenger volumes.

Healthcare Services: revenue from the Group's healthcare services segment was £318.6 million in the year ended 31 January 2014, as compared to £334.5 million for the year ended 31 January 2013, representing a decrease of £15.9 million, or 4.8 per cent. The decrease was principally due to a decline in social care hours and a focus on improving the operational platform and investment in clinical governance.

Media and Central Costs: revenue from the Group's media and central costs segment was £26.0 million in the year ended 31 January 2014, which was consistent with revenue for 31 January 2013.

Cost of Sales

The Group's cost of sales for the year ended 31 January 2014 was £817.9 million, as compared to £854.8 million for the year ended 31 January 2013, representing a decrease of £36.9 million, or 4.3 per cent. This decrease was principally due to a favourable prevailing trend in Motor claims experience, partially offset by increased passenger volumes in the Travel segment.

As a percentage of revenue, cost of sales remained relatively stable at 65.0 per cent. for the year ended 31 January 2014 compared to 65.2 per cent. for the year ended 31 January 2013.

Administrative and Selling Expenses

The table below presents the breakdown of the Group's administrative and selling expenses for the years ended 31 January 2014 and 2013.

	Year ended 31 January
	2014 (£ millions)	2013
Staff costs
Wages and salaries	120.1	119.4
Social security costs	10.7	10.8
Pension costs	7.1	6.7
Staff costs	137.9	136.9
Marketing and fulfilment costs	44.6	57.8
Lease rentals	8.3	6.8
Auditors remuneration	1.1	1.6
Other administrative costs	46.0	48.7
Depreciation	9.4	9.5
Loss / (profit) on disposal of property, plant and equipment	1.6	(0.1)
Amortisation of intangible assets	25.6	38.9
Impairment of intangible assets	3.7	1.4
Exceptional expenses	14.2	21.2
Total administrative and selling expenses	292.4	322.7

The Group's administrative and selling expenses for the year ended 31 January 2014 were £292.4 million, as compared to £322.7 million for the year ended 31 January 2013, representing a decrease of £30.3 million, or 9.4 per cent. This decrease was principally due to reduced marketing costs anticipating the sale of the Saga Ruby, rationalised mailing activity in Saga Services, to improving marketing efficiencies, reduced amortisation charges in respect of intangible assets acquired as part of the acquisition of the healthcare businesses, and a reduction in exceptional expenses as a result of an abnormally high level of technical and operating issues in Saga Cruises in 2013.

As a percentage of revenue, administrative and selling expenses remained relatively stable at 23.2 per cent. for the year ended 31 January 2014 compared to 24.6 per cent. for the year ended 31 January 2013.

Investment Income

The Group's investment income for the year ended 31 January 2014 was £12.7 million, as compared to £15.6 million for the year ended 31 January 2013, representing a decrease of £2.9 million, or 18.6 per cent. The decrease in investment income was principally due to lower interest returns on the portfolio of investments held by the Group's underwriting function.

Finance Costs

The table below presents the breakdown of the Group's financial costs for the years ended 31 January 2014 and 2013.

	Year ended 31 January
	2014 (£ millions)	2013
Interest on debt and borrowings	–	–
Interest on balances with the AA Group	–	0.6
Finance charges payable under finance leases and hire purchase contracts	0.1	0.2
Total interest expense	0.1	0.8
Net fair value loss on derivative financial instruments	10.4	0.6
Net finance expense on pension schemes	0.4	0.2
Unwinding of discount and effect of changes in discount rate on provisions	0.2	0.6
Total finance costs	11.1	2.2

The Group's finance costs for the year ended 31 January 2014 were £11.1 million, as compared to £2.2 million for the year ended 31 January 2013, representing an increase of £8.9 million. The increase in finance costs was principally due to fair value losses being recognised on currency forward contracts that were unexpired as at 31 January 2014.

Finance Income

The table below presents the breakdown of the Group's financial income for the years ended 31 January 2014 and 2013.

	Year ended 31 January
	2014 (£ millions)	2013
Net fair value gain on derivative financial instruments	–	3.3
Net finance income on pension schemes	–	–
Total finance income	–	3.3

The Group's finance income for the year ended 31 January 2014 was nil, as compared to £3.3 million for the year ended 31 January 2013. The decrease to nil in finance income was due to fair value gains on currency forward contracts being recognised in the 2013 financial year, that changed to a net loss in the 2014 financial year.

Tax Expense

The Group's tax expense for the year ended 31 January 2014 was £39.6 million, as compared to £36.3 million for the year ended 31 January 2013, representing an increase of £3.3 million, or 9.1 per cent. The increase in taxation expense was principally due to a deferred tax retranslation, where the rate at which deferred tax was recognised reduced from 23 per cent. to 20 per cent. in the 2014 financial year. As the Group has deferred tax assets, this resulted in a one-off additional tax expense of £2.9 million. The Group's effective tax rate was 23.2 per cent. in the year ended 31 January 2014 and 24.3 per cent. in the year ended 31 January 2013.

Profit for the Year

As a result of the above, the Group's profit for the year ended 31 January 2014 was £109.6 million, as compared to £113.3 million for the year ended 31 January 2013, representing a decrease of £3.7 million, or 3.3 per cent.

Results of Operations for the Group for Years Ended 31 January 2013 and 2012

The table below presents the Group's results of operations for the years ended 31 January 2013 and 2012.

		Year ended 31 January
	2013 (£ millions)	2012
Revenue	1,310.4	1,175.3
Cost of sales	(854.8)	(776.0)
Gross profit	455.6	399.3
Administrative and selling expenses	(322.7)	(263.7)
Investment income	15.6	13.7
Finance costs	(2.2)	(2.5)
Finance income	3.3	1.4
Profit before tax	149.6	148.2
Tax expense	(36.3)	(40.0)
Profit for the year	113.3	108.2
Attributable to:
Equity holders of the parent	113.1	108.1
Non-controlling interests	0.2	0.1

Revenue

The Group's revenue for the year ended 31 January 2013 was £1,310.4 million, as compared to £1,175.3 million for the year ended 31 January 2012, representing an increase of £135.1 million, or 11.5 per cent. This increase was principally driven by the full year impact of the acquisition of the Allied Healthcare group in October 2011, as the financial year ended 31 January 2012 only included approximately three months of Allied trading.

The table below sets forth the Group's revenue by segment for the years ended 31 January 2013 and 2012, both in pounds sterling and as a percentage of total Group revenue.

	Year ended 31 January
	(£ millions)	2013 (% of Group revenue)	(£ millions)	2012 (% of Group revenue)
Financial Services
Motor Insurance	425.6	32.5	448.8	38.2
Home Insurance	89.6	6.8	84.4	7.5
Other Financial Services	91.0	6.9	59.9	5.1
Total Financial Services	606.2	46.3	593.1	50.5
Travel	352.3	26.9	344.6	29.3
Healthcare Services	334.5	25.5	221.0	18.8
Media and Central Costs	26.0	1.3	24.6	1.4
Adjustments for intra-group transactions, balances, income and
expenses	(8.6)		(8.0)
Total Group	1,310.4		1,175.3

An analysis of revenue by segment is set out below.

Financial Services: revenue from the Group's financial services segment was £606.2 million in the year ended 31 January 2013 (consisting of £425.6 million from the motor insurance subsegment, £89.6 million from the home insurance subsegment and £91.0 million from the other financial services subsegment), as compared to £593.1 million for the year ended 31 January 2012 (consisting of £448.8 million from the motor insurance subsegment, £84.4 million from the home insurance subsegment and £59.9 million from the other financial services subsegment), representing an increase of £13.1 million, or 2.2 per cent. The increase was principally due to the cessation of the underwriting quota share arrangement with the AA Group's underwriting entity, Acromas Reinsurance Company Limited. This was partially offset by a decline in motor policy volumes and average motor premiums in line with the wider market.

Travel: revenue from the Group's travel segment was £352.3 million in the year ended 31 January 2013, as compared to £344.6 million for the year ended 31 January 2012, representing an increase of £7.7 million, or 2.2 per cent. The increase was principally due to a £5.2 million increase in holidays, reflecting a shift of product mix towards higher revenue long-haul holidays. Cruise revenue also increased by £2.5 million, which was driven by the addition of the Saga Sapphire to the Group's fleet during the course of 2012, though this was partially offset by the discontinuation of the Spirit of Adventure in May 2012 and lower revenue passenger days on the Saga Ruby.

Healthcare Services: revenue from the Group's healthcare services segment was £334.5 million in the year ended 31 January 2013, as compared to £221.0 million for the year ended 31 January 2012, representing an increase of £113.5 million, or 51.4 per cent. The increase in revenue was principally due to the full year impact of the acquisition of the Allied Healthcare group in October 2011.

Media and Central Costs: revenue from the Group's media and central costs segment was £26.0 million in the year ended 31 January 2013, as compared to £24.6 million for the year ended 31 January 2012, representing an increase of £1.4 million, or 5.7 per cent.

Cost of Sales

The Group's cost of sales for the year ended 31 January 2013 was £854.8 million, as compared to £776.0 million for the year ended 31 January 2012, representing an increase of £78.8 million, or 10.2 per cent. This increase was principally due to the full year impact of the acquisition of Allied Healthcare in October 2011. In addition, cost of sales increased with respect to Saga cruises, which was driven by the Saga Sapphire commencing operation during the course of 2012.

As a percentage of revenue, cost of sales remained relatively stable at 65.2 per cent. for the year ended 31 January 2013 compared to 66.0 per cent. for the year ended 31 January 2012.

Administrative and Selling Expenses

The table below presents the breakdown of the Group's administrative and selling expenses for the years ended 31 January 2013 and 2012.

	Year ended 31 January
	2013 (£ millions)	2012
Staff costs
Wages and salaries	119.4	87.3
Social security costs	10.8	8.9
Pension costs	6.7	7.1
Staff costs	136.9	103.3
Marketing and fulfilment costs	57.8	60.8
Lease rentals	6.8	5.6
Auditors remuneration	1.6	1.4
Other administrative costs	48.7	44.7
Depreciation	9.5	7.4
Loss / (profit) on disposal of property, plant and equipment	(0.1)	0.1
Amortisation of intangible assets	38.9	32.7
Impairment of intangible assets	1.4	–
Exceptional expenses	21.2	7.7
Total administrative and selling expenses	322.7	263.7

The Group's administrative and selling expenses for the year ended 31 January 2013 were £322.7 million, as compared to £263.7 million for the year ended 31 January 2012, representing an increase of £59.0 million, or 22.4 per cent. This increase was principally due to the full year impact of the acquisition of the Allied Healthcare group in October 2011 and the restructuring costs associated with the integration of the Allied and Nestor Healthcare groups.

As a percentage of revenue, administrative and selling expenses increased slightly to 24.6 per cent. for the year ended 31 January 2013 compared to 22.4 per cent. for the year ended 31 January 2012.

Investment Income

The Group's investment income for the year ended 31 January 2013 was £15.6 million, as compared to £13.7 million for the year ended 31 January 2012, representing an increase of £1.9 million, or 13.9 per cent. The increase in finance income was principally due to improved interest returns on the portfolio of investments held by the Group's underwriting function.

Finance Costs

The table below presents the breakdown of the Group's financial costs for the years ended 31 January 2013 and 2012.

	Year ended 31 January
	2013 (£ millions)	2012
Interest on debt and borrowings	–	0.2
Interest on balances with the AA Group	0.6	1.2
Finance charges payable under finance leases and hire purchase contracts	0.2	0.3
Total interest expense	0.8	1.7
Net fair value loss on derivative financial instruments	0.6	0.5
Net finance expense on pension schemes	0.2	–
Unwinding of discount and effect of changes in discount rate on provisions	0.6	0.3
Total finance costs	2.2	2.5

The Group's finance costs for the year ended 31 January 2013 were £2.2 million, as compared to £2.5 million for the year ended 31 January 2012, representing a decrease of £0.3 million, or 12.0 per cent.

Finance Income

The table below presents the breakdown of the Group's financial income for the years ended 31 January 2013 and 2012.

	Year ended 31 January
	2013 (£ millions)	2012
Net fair value gain on derivative financial instruments	3.3	1.2
Net finance income on pension schemes	–	0.2
Total finance income	3.3	1.4

The Group's finance income for the year ended 31 January 2013 was £3.3 million, as compared to £1.4 million for the year ended 31 January 2012, representing an increase of £1.9 million. The increase in finance income was principally due to fair value gains on currency forward derivative contracts.

Tax Expense

The Group's tax expense for the year ended 31 January 2013 was £36.3 million, as compared to £40.0 million for the year ended 31 January 2012, representing a decrease of £3.7 million, or 9.3 per cent. The decrease in taxation expense was principally due to a decrease in a deferred tax charge, which was higher in the year ended 31 January 2012 due to the Group's acquisition of the Allied and Nestor Healthcare groups. The Group's effective tax rate was 24.3 per cent. in the year ended 31 January 2013 and 26.3 per cent. in the year ended 31 January 2012.

Profit for the Year

As a result of the above, the Group's profit for the year ended 31 January 2013 was £113.3 million, as compared to £108.2 million for the year ended 31 January 2012, representing an increase of £5.1 million, or 4.7 per cent.

Liquidity and Capital Resources

The Group's primary sources of cash for operations are receipts from customers in respect of insurance premiums, holidays and cruises, receipts from LAs, PCTs and CCGs in respect of care in the home and primary care services, settlement of net premiums due in respect of the insurance business that the Group underwrites for the AA and investment returns on assets held by the Group.

The Group has consistently generated positive net cash flow from operations due to the nature of its trading activities and the structure of its contractual arrangements. The Group's financial services segment is highly cash generative, as the vast majority of contracts between the Group and external underwriters are on a "pay-as-paid" basis, meaning that the Group only pays the underwriter after the customer pays the Group, irrespective of whether the customer pays through instalments, and on terms up to 90 days after the end of the calendar month. The Group also receives the majority of its net premium receipts well in advance of claim settlement. The Group's travel segment customers pay for their holidays in advance of travelling, and in advance of the point at which the Group settles corresponding invoices with airlines, hotels and tour operators, which is usually only required after the customer has travelled. The Group's healthcare services segment has a working capital funding lag, as the Group tends to pay its carers wages in advance of its receipt of payments for its care services. However, this delay is greatly outweighed by the cash generated by the Group's other segments.

The cash generated and held by the Group's underwriting entity and the Group's travel segment is subject to regulatory rules and restrictions, and can only be made available for distribution to other parts of the Group if certain capital requirement rules are fulfilled and at the permission of the relevant regulator. The Group also holds a small element of cash on deposit that cannot be used for other purposes as it is required to fulfil the terms of specific contracts with third-party underwriters.

The Company and certain members of the Group entered into a Senior Facilities Agreement on 17 April 2014 with Bank of America Merrill Lynch International Limited, Credit Suisse AG, London Branch, Citigroup Global Markets Limited, Goldman Sachs Bank USA, HSBC Bank plc, ING Bank, Ltd., J.P. Morgan Limited, Lloyds Bank plc, Mizuho Bank, Ltd, the Royal Bank of Scotland plc and UBS Limited (the "Arrangers") in order to refinance the financial indebtedness of the Group and to ensure that sufficient liquidity reserves are available to the Group. Prior to the Group's refinancing, the Group's debt facilities were held by Acromas and distributed to the Group via intercompany loans.

The amounts available under the Senior Facilities Agreement include (i) a term loan facility in an aggregate amount of £825.0 million maturing in 2019 ("Facility A"), (ii) a term loan facility in an aggregate amount of £425.0 million maturing in 2020 ("Facility B") and (iii) a multicurrency revolving credit facility in an aggregate amount of £150.0 million (the "Revolving Facility").

As of 30 April 2014, the Group had £1,250.0 million drawn under the Facility A and Facility B, and passed this to Acromas to settle the previous financing, and is in the process of transferring £39.5 million issued against the Acromas Mid Co Limited revolving credit facility related to the Group in to the Revolving Facility. As described in section 2 of Part 6 "Details of the Offer" of the Securities Note, the Company intends to use the net proceeds of the Offer of £512.4 million, together with existing cash resources, to reduce the Group's indebtedness by repaying £555.0 million drawn under the Senior Facilities Agreement, which is expected to give the Company greater financial flexibility to drive the future growth of the business.

Although the Directors believe that the Group's expected cash flows from operations and available credit facilities will be adequate to meet the Group's liquidity needs and debt service obligations, the Group's ability to generate cash from its operations and availability of its current credit facilities will depend on its future operating performance, which is dependent to some extent on general economic, financial, competitive, market, regulatory and other factors, many of which are beyond its control.

Cash Flows

The table below sets out the principal components of the Group's cash flows for the years ended 31 January 2014, 2013 and 2012.

	Year ended 31 January
	2014	2013 (£ millions)	2012
Net cash (used in) / from operating activities	174.1	234.5	218.5
Net cash (used in) / from investing activities	(59.9)	(76.5)	(364.3)
Net cash (used in) / from financing activities	(469.7)	54.2	86.6
Net (decrease) / increase in cash and cash equivalents	(355.5)	212.2	(59.2)
Net foreign exchange differences	0.1	(0.3)	1.2
Cash and cash equivalents at 1 February	609.0	397.1	455.1
Cash and cash equivalents at 31 January	253.6	609.0	397.1

Net Cash (Used In) / From Operating activities

The Group's net cash from operating activities consists primarily of receipts from customers in respect of insurance premiums, holidays and cruises, receipts from LAs in respect of social and primary care services, settlement of net premiums due in respect of the insurance business that the Group underwrites for the AA and investment returns on assets held in the Group, which is partially offset against payments to third-party insurance underwriters, hotel providers, airlines, cruise and tour providers, and payments to staff and in respect of other administrative and selling expenses.

Net cash from operating activities was £174.1 million in the year ended 31 January 2014, a decrease of £60.4 million from £234.5 million in the year ended 31 January 2013. This was principally due to an increase in income tax payments due to a one-off cash benefit in the 2013 financial year as a result of tax relief becoming allowable on a portion of the interest accrued on the subordinated preference certificates held at an Acromas level. Net cash from operating activities was £234.5 million in the year ended 31 January 2013, an increase of £16.0 million from £218.5 million in the year ended 31 January 2012, which was principally due to less income tax paid in the 2013 financial year.

Net Cash (Used In) / From Investing Activities

The Group's net cash used in investing activities consists of proceeds from the sale of property, plant and equipment and assets held for sale, the purchase of new property, plant and equipment, the net amount invested into or proceeds from financial assets classified as cash or a cash equivalent (these typically include Money Market Funds) and the cash invested in acquiring new subsidiary businesses.

Net cash used in investing activities was £59.9 million in the year ended 31 January 2014, a decrease of £16.6 million from £76.5 million in the year ended 31 January 2013. This was principally due to higher capital expenditure in 2013 financial year due to the refit of the Saga Sapphire and the proceeds of the sale of the Saga Ruby received in the 2014 financial year. Net cash used in investing activities was £76.5 million in the year ended 31 January 2013, a decrease of £287.8 million from £364.3 million in the year ended 31 January 2012. This was principally due to the acquisitions of Nestor and Allied occurring in the financial year ended 31 January 2012.

Net Cash (Used In) / From Financing Activities

The Group's net cash from financing activities consists of the historical movement of cash flows between the Saga Group and Acromas, primarily used to service the Acromas debt, the movement of cash flows between the Saga Group and the AA Group, which only included inter-company trading cash flows from July 2013, but included cash swept to the Group as part of a centralised treasury function prior to this, dividends paid to Acromas, the repayment of borrowings and the repayment of finance lease liabilities.

Net cash used in financing activities was a £469.7 million outflow in the year ended 31 January 2014, an increase of £523.9 million from a £54.2 million inflow in the year ended 31 January 2013. This was principally due to the settlement of the intercompany liability with the AA Group during the 2014 financial year in respect of surplus cash that the Saga Group had previously swept from the AA Group for investment centrally. Net cash from financing activities was a £54.2 million inflow in the year ended 31 January 2013, a decrease of £32.4 million from £86.6 million in the year ended 31 January 2012. This was principally due to a lower level of surplus cash being swept from the AA Group during the year ended 31 January 2013.

Solvency Capital

The Group's underwriting entity holds more than twice the amount of capital reserves that insurance underwriters are statutorily required to hold pursuant to Gibraltar Financial Services Commission regulations, where the Group's underwriting entity is based. The Group has never been required to inject any available cash into the Group's underwriting entity to cover claims and to date the Group has been able to reinvest excess reserves in its business.

The table below sets out the statutory solvency capital position of the Group's underwriting entity as at 31 January 2014, 2013, and 2012:

	As at 31 January
	2014	2013 (£ millions, except ratios)	2012
Solo statutory solvency capital
Total invested equity	161.2	167.9	129.7
Regulatory adjustments	(17.4)	(15.0)	(1.4)
Total regulatory capital resource	143.8	152.9	128.3
European Insurance Directive Requirement (Solvency I)
Required Minimum Margin	64.0	64.0	58.3
Excess Solvency	79.8	88.9	70.0
Coverage Ratio	225%	239%	220%

The total regulatory capital resource was £143.8 million in the year ended 31 January 2014, a decrease of £9.1 million from £152.9 million in the year ended 31 January 2013. This was principally due to a dividend being paid from Saga's underwriting function, offset by earnings during the 2014 financial year. The total regulatory capital resource was £152.9 million in the year ended 31 January 2013, an increase of £24.6 million from £128.3 million in the year ended 31 January 2013. This was principally due to the level of earnings in the underwriting function during the 2013 financial year.

The solvency capital requirement is an underwriting function requirement and based on the claims method, which is based on a three year rolling average. The Group's underwriting function is statutorily required to hold twice the amount required under Solvency I, as well as a margin with any excess available for distribution.

The Group does not foresee any requirement to increase capital as a result of Solvency II coming into effect in the future.

Capital Expenditure

The majority of the Group's capital expenditure is attributable to: (a) the development and upgrade of its IT and communications systems; (b) the purchase, re-fit and dry-docking of cruise ships; and (c) the purchase, fit-out and refurbishment of land and buildings. The Group provides for capital expenditure in the Group's cash used in investing activities.

Saga classifies its capital expenditure in the following categories:

• IT development: Investment in IT infrastructure such as servers, storage equipment and other physical assets that support delivery of the Group's IT requirements, systems development and enhancement for customer administration systems, deployment and claims systems, e-commerce and website development activities.
• Cruise ships: Purchase, re-fit and dry-docking of cruise ships operated by the travel business.
• Land and buildings: Purchase, fit-out and refurbishment of freehold and leasehold land and buildings used within the Group as head office buildings, call centres and factories.

The table below sets out the Group's capital expenditure for the years ended 31 January 2014, 2013 and 2012. These figures have been adjusted to remove the impact of one-off refit costs of the discontinued Saga Ruby of £4.0 million in the financial year ending 31 January 2013 and to reflect one-off asset transfers within group (which have no impact on the overall totals in each year).

	Year ended 31 January
	2014	2013 (£ millions)	2012
Financial services	15.2	5.7	7.4
Travel	5.0	19.7	27.3
Healthcare services	2.8	2.9	3.5
Media and central costs	2.6	8.5	11.2
Total capital expenditure	25.6	36.8	49.4

In the year ended 31 January 2014, the Group's total capital expenditure decreased by £11.2 million, or 30.4 per cent., to £25.6 million from £36.8 million in the year ended 31 January 2013. This was due to lower expenditure on ships, as the previous year contained cash expenditure on the initial refit of the Saga Sapphire.

The Group's capital expenditure in the year ended 31 January 2014 comprised IT hardware and software costs for the financial services, travel, healthcare and media and central costs segments, the acquisition of the Eurokent call centre at a cost of £9.4 million, property costs associated with the Bel Jou hotel and costs associated with the Saga Sapphire.

In the year ended 31 January 2013, the Group's total capital expenditure decreased by £12.6 million, or 25.5 per cent., to £36.8 million from £49.4 million in the year ended 31 January 2012. The decrease in total capital expenditure was due to a combination of a reduction in IT development expenditure, reduced expenditure on the initial refit of the Saga Sapphire and reduced expenditure on plant and machinery at Metromail.

Working Capital

The Group has favourable working capital dynamics and a high cash conversion ratio as the majority of its customers pay for services in advance and the majority of its suppliers are paid after the provision of goods and services. The Group's cash growth rate and rate of cash conversion (defined as available cash inflow from operating activities as a percentage of EBITDA) depends on the Group's ability to maintain this low working capital balance.

Cash generated in connection with the Group's insurance underwriting business and travel business must be segregated from its accounts for regulatory reasons.

Contractual Obligations, Investment Portfolio and Pension Obligations

Contractual Obligations

The table below presents a summary of the Group's contractual obligations as at 31 January 2014.

	Less than one year	One to five years	More than five years	Total
		(£ millions)
Loans and borrowings	1,799.2	–	–	1,799.2
Insurance contract liabilities	173.1	263.1	92.9	529.1
Contingent consideration	–	–	–	–
Other financial liabilities	146.7	–	–	146.7
Trade and other payables	164.9	–	–	164.9
Derivative liabilities	7.3	0.8	–	8.1
Total	2,291.2	263.9	92.9	2,648.0

See "Liquidity and Capital Resources" in this Part 10 "Operating and Financial Review" for a discussion of the Group's current indebtedness and contractual obligations.

Investment Portfolio

The Group has various financial investments. The Group's underwriting entity holds reserves and capital which are invested in low risk investments. In the financial year ended 31 January 2014, the Group recognised £11.4 million of interest income in respect of its insurance reserves and restricted capital in its underwriting function, which is net of any realised and unrealised gains and losses.

The table below presents the Group's financial assets as at 31 January 2014, 2013, and 2012:

	As at 31 January
	2014	2013 (£ millions)	2012
Financial assets
Deposits with financial institution	465.8	433.1	387.0
Amounts owed by parent undertaking	1,030.7	1,727.2	1,513.2
Amounts owed by AA Group	0.4	19.4	14.2
Debt securities	51.2	70.6	80.5
Money market funds	107.5	165.7	171.5
Foreign exchange forward contracts	–	2.9	1.9
Loan funds	13.0	–	–
Hedge funds	13.1	–	–
Fuel oil swaps	–	0.8	1.4
Total	1,681.7	2,419.7	2,169.7

As a result of the Group's refinancing and entering into the Senior Facilities Agreement, the Group's financial assets have changed since 31 January 2014. See Part 12 "Unaudited Pro Forma Financial Information" for an illustration of the effects of the refinancing of the Group's net assets.

Pension Obligations

The Group operates three defined benefit pension schemes: (i) the Saga Pension Scheme, (ii) the Nestor Healthcare Group Retirement Benefits Scheme and (iii) the Healthcall Group Limited Pension Scheme. For purposes of the presentation of the Group's historical financial information, the Nestor Healthcare Group Retirement Benefits Scheme and the Healthcall Group Limited Pension Scheme are aggregated (the "Nestor Schemes").

The table below presents the accounting treatment of the Group's pension obligations.

		As of 31 January 2014
	Saga Pension Scheme	Nestor Schemes (£ millions)	Total
Fair value of scheme assets	171.2	48.3	219.5
Present value of defined benefit obligation	(186.1)	(57.7)	(243.8)
Defined benefit scheme liability	(14.9)	(9.4)	(24.3)

As of 31 January 2014, the Group's total defined benefit scheme liability was a deficit of £24.3 million.

Current Trading and Prospects

In the two months ended 31 March 2014, the Group has performed strongly with revenue ahead of the Group's expectations.

In line with the Group's expectations, revenue from the financial services segment is lower than the same two month period in 2013, as the lower market premium levels experienced in motor insurance in the prior year continue to pass through into the first quarter of the current financial year.

Within the travel segment, trading has been strong with revenue on confirmed bookings up compared to the same period in 2013.

Within the Group's healthcare segment, trading has been in line with expectations, as the benefits of streamlined policies, processes and systems have become evident. In April 2014, the healthcare business was awarded a contract with Kent County Council, its largest contract win to date. Under the terms of the contract, the business will provide 32 per cent. of Kent County Council's total hours available, increasing the number of hours of care delivered per week in the county from 4,400 up to 13,800.

As a result, the Directors remain confident in the outlook for the full financial year ending 31 January 2015 and the Group's longer term prospects. It is anticipated that the Company's next trading update will be its interim results for the six months ending 31 July 2014, which are expected to be published in September 2014.

Quantitative and Qualitative Disclosures about Financial Risk

Insurance Risk

Insurance risk arises from the inherent uncertainties as to the occurrence, amount and timing of events that could lead to significant individual or aggregated claims in terms of quantity or value. This could be for a number of reasons, including weather related events, large individual claims, changes in claimant behaviour patterns such as increased levels of fraudulent activities or the use of periodic payment orders, prospective or retrospective legislative changes, unresponsive and inaccurate pricing or reserving methodologies and the deterioration in Saga's ability to effectively and efficiently handle claims.

The Directors do not consider that there are significant concentrations of insurance risks because the risks are spread across large numbers of policyholders, assets and geographical areas.

The Group manages insurance risk within its risk management framework as set out by the Board. The key policies and processes of mitigating these risks have been implemented which include underwriting partnership arrangements, reinsurance and excess of loss contracts, pricing policies and claims management and administration policies.

Credit Risk

Credit risk is the risk that a counter-party will not meet its obligations under a financial instrument or contract, leading to a financial loss. The Group is exposed to credit risk in relation to its financial assets, outstanding derivatives and trade and other receivables. The Group assesses its counterparty exposure in relation to the investment of surplus cash, fuel oil and foreign currency contracts, and undrawn credit facilities. The Group primarily uses published credit ratings to assess counterparty strength and therefore to define the credit limit for each counterparty in accordance with approved treasury policies.

Credit risk in relation to deposits and derivative counterparties is managed by the Group's treasury department in accordance with the Group's risk management policy. Investments of surplus funds are made only with approved counter-parties and within credit limits assigned to each counter-party. Counter-party credit limits are reviewed on a regular basis, and updated throughout the year subject to approval of the Group's treasury committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through any potential counter-party failure

	At 31 January 2014
	AAA	AA	A (£ millions)	Unrated	Total
Debt securities	51.2	–	–	–	51.2
Money market funds	107.5	–	–	–	107.5
Deposits with financial institutions	29.0	120.0	310.3	6.5	465.8
Loan funds	–	–	–	13.0	13.0
Hedge funds	–	–	–	13.1	13.1
Reinsurance assets	–	13.1	10.8	0.8	24.7
Total	187.7	133.1	321.1	33.4	675.3
	At 31 January 2013
	AAA	AA	A (£ millions)	Unrated	Total
Debt securities	70.6	–	–	–	70.6
Money market funds	165.7	–	–	–	165.7
Deposits with financial institutions	29.4	105.4	298.3	–	433.1
Derivative assets	–	–	3.7	–	3.7
Reinsurance assets	–	9.1	9.4	0.1	18.6
Total	265.7	114.5	311.4	0.1	691.7

	At 31 January 2012
	AAA	AA	A (£ millions)	Unrated	Total
Debt securities	80.5	–	–	–	80.5
Money market funds	171.5	–	–	–	171.5
Deposits with financial institutions	–	216.9	170.1	–	387.0
Derivative assets	–	–	3.3	–	3.3
Reinsurance assets	–	7.3	6.8	32.6	46.7
Total	252.0	224.2	180.2	32.6	689.0

Foreign Currency Risk

Foreign currency risk is the risk that the Group's income statement, cash flow statement and balance sheet are negatively affected by fluctuations in exchange rates. The Group has transactional currency exposures that arise from purchases in currencies other than its functional currency and investments in foreign entities.

The Group has in the past and may in the future use foreign exchange forward contracts to manage its foreign transaction exposures. The foreign exchange forward contracts are not formally designated as hedging instruments and are entered into for periods consistent with the foreign currency exposure of the underlying transactions, generally from one to 24 months. The foreign exchange forward contract balances vary with the level of expected foreign currency sales and purchases and changes in foreign exchange forward rates.

Commodity Risk

The Group's operating activities require the on-going purchase of fuel oil to sail its cruise ships and therefore the Group requires a continuous supply of fuel oil. The volatility in the price of fuel oil means that the Group has in the past and may in the future enter into commodity fuel swap contracts. These contracts are expected to reduce the volatility attributable to price fluctuations of fuel oil. Managing the price volatility of forecast fuel oil purchases is in accordance with the Group's risk management policy.

Liquidity Risk

Liquidity risk is the risk that the Group does not have available sufficient financial resources to enable it to meet its obligations as they fall due or can secure its obligations only at excessive cost. The primary liquidity risk of the Group is the obligation to pay claims to policyholders as they fall due. Due to the nature of the Group's business, cash flows are such that the liquidity risk has only to be considered for catastrophe type events.

Pension Risk

Pension risk is the risk that the Group's cash flow is negatively affected by additional cash contributions required to fund shortfalls in the funding arrangements for its pension schemes. The Group operates three defined benefit pension schemes: (i) the Saga Pension Scheme, (ii) the Nestor Healthcare Group Retirement Benefits Scheme and (iii) the Healthcall Group Limited Pension Scheme. The last valuations of the Saga Pension Scheme, the Nestor Scheme and the Healthcall Scheme took place on 31 January 2014, 5 April 2012 and 31 October 2012, respectively. Based on the Group's last completed annual valuation which took place on 31 January 2013, the funding deficit on an IAS 19(R) basis with respect to the Saga Pension Scheme was £14.9 million as at 31 January 2014. However, whether a funding deficit is recognised in the 2014 triennial valuation will depend on the assumptions the Group agrees with the Saga Pension Trustee, which means any funding deficit may differ materially from the current estimate. Furthermore, there can be no assurance that the funding deficit with respect to the Saga Pension Scheme will not increase in the future, which may result in materially higher payments being required to address such increased deficit.

Gilt yields and investment returns are significant factors impacting pension risk. The Group's pension liabilities are discounted based on gilt yields over the duration of the liabilities. If gilt yields reduce by more than the market expected at the previous scheme valuation, the liabilities, the deficit and annual payments thereunder may materially increase. The Group is required to fund any deficit over a number of years. If gilt yields increase then the pension scheme liabilities reduce and the likelihood of a scheme surplus emerging increases. This surplus will only be released to Saga over a number of years.

The Group's pension schemes invest contributions in a number of different asset classes, the returns from which are used to reduce its contribution rates. If these investments do not perform as expected the required funding rate may change significantly.

Operational Risk

The Group faces a number of operational risks which are fundamental to carrying on its business, including suppliers not being able to provide contracted services through force majeure, the risk associated with operating holidays, cruise ships and domiciliary care businesses, and business disruption due to infrastructure failures. Operational risk is inherent in all of the Group's processes, systems and products, and from external events, and the Group's risk management framework and risk management tools ensure that operational risks are identified, managed and mitigated to an acceptable level and that contingency plans are in place.

Dividend Policy

The Directors intend to adopt a progressive dividend policy while maintaining an appropriate level of dividend cover. This dividend policy will reflect the underlying earnings and growth of the business and the cash conversion of the Group while retaining sufficient capital in the Group to fund continued investment and sufficient capital reserves. It is therefore the Board's current intention to target an initial dividend payout ratio of approximately 40 to 50 per cent. of the Group's net income (excluding the impact of extraordinary or one-off items).

Assuming that there are sufficient distributable reserves available at the time, the Directors intend that the Company will pay an interim dividend and a final dividend in respect of each financial year in the approximate proportions of one-third and two-thirds, respectively, of the total annual dividend.

The current intention of the Board is that the first dividend to be paid by the Company will be a pro-rata dividend in respect of the financial year ending 31 January 2015, which will be paid in June 2015 and determined by applying Saga's dividend policy described above to the full year to 31 January 2015 and prorating the dividend for the proportion of the financial year that follows Admission.

The Company may revise its dividend policy from time to time. There are no guarantees that the Company will pay dividends or the level of any such dividends.

Critical Accounting Policies and Estimates

For a description of the Group's critical accounting judgements and key sources of estimation uncertainty, see Note 3 of Part 11 "Historical Financial Information".

PART 11

HISTORICAL FINANCIAL INFORMATION

SECTION A – ACCOUNTANTS' REPORT

Ernst & Young LLP 1 More London Place London SE1 2AF

Tel: + 44 207 951 2000 Fax: + 44 207 951 1345 ey.com

Tel: 023 8038 2000 Fax: 023 8038 2001 www.ey.com/uk

The Board of Directors Saga plc Enbrook Park Folkestone Kent CT20 3SE

Dear Sirs

Operating Group Combined Historical Financial Information

We report on the financial information of the Operating Group set out on pages 114 to 169 (the "Combined Historical Financial Information") as at and for the years ended 31 January 2012, 31 January 2013 and 31 January 2014. This Combined Historical Financial Information has been prepared for inclusion in the prospectus dated 8 May 2014 of Saga plc (the "Company") on the basis of the accounting policies set out in Note 2.5. This report is required by item 20.1 of Annex I of Commission Regulation (EC) 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) 809/2004, consenting to its inclusion in the prospectus.

Responsibilities

The Directors of the Company are responsible for preparing the Combined Historical Financial Information in accordance with the basis of preparation set out in Note 2.1.

It is our responsibility to form an opinion on the Combined Historical Financial Information and to report our opinion to you.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Combined Historical Financial Information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the Combined Historical Financial Information and whether the accounting policies are appropriate to the entity's circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Combined Historical Financial Information is free from material misstatement whether caused by fraud or other irregularity or error.

8 May 2014

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion, the Combined Historical Financial Information gives, for the purposes of the prospectus dated 8 May 2014, a true and fair view of the state of affairs of the Operating Group as at 31 January 2012, 31 January 2013 and 31 January 2014 and of its profits, cash flows and changes in invested capital for the periods then ended in accordance with the basis of preparation set out in Note 2.1.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the prospectus in compliance with item 1.2 of Annex I of Commission Regulation (EC) 809/2004.

Yours faithfully

Ernst & Young LLP

SECTION B—HISTORICAL FINANCIAL INFORMATION

Combined income statement for the year ended 31 January 2014

	Note	2014 £'m	2013 £'m	2012 £'m
Revenue	4	1,257.9	1,310.4	1,175.3
Cost of sales	4	(817.9)	(854.8)	(776.0)
Gross profit		440.0	455.6	399.3
Administrative & selling expenses	5	(292.4)	(322.7)	(263.7)
Investment income	6	12.7	15.6	13.7
Finance costs	7(a)	(11.1)	(2.2)	(2.5)
Finance income	7(b)	–	3.3	1.4
Profit before tax		149.2	149.6	148.2
Tax expense	8	(39.6)	(36.3)	(40.0)
Profit for the year		109.6	113.3	108.2
Attributable to:
Equity holders of the parent		108.5	113.1	108.1
Non-controlling interests		1.1	0.2	0.1
		109.6	113.3	108.2

Combined statement of other comprehensive income for the year ended 31 January 2014

	Note	2014 £'m	2013 £'m	2012 £'m
Profit for the year		109.6	113.3	108.2
Other comprehensive income
Other comprehensive income to be reclassified to profit
and loss account in subsequent years
Exchange differences on translation of foreign operations		0.1	(0.3)	1.2
Net loss on available-for-sale financial assets		(1.1)	(0.5)	(0.3)
Tax effect		0.2	0.2	(0.2)
		(0.8)	(0.6)	0.7
Other comprehensive income not to be reclassified to profit
and loss account in subsequent years
Re-measurement losses on defined benefit plans	21	(16.4)	(5.3)	(25.0)
Tax effect		3.3	1.2	6.3
		(13.1)	(4.1)	(18.7)
Total other comprehensive income		(13.9)	(4.7)	(18.0)
Total comprehensive income for the year		95.7	108.6	90.2
Attributable to:
Equity holders of the parent		94.6	108.4	90.1
Non-controlling interests		1.1	0.2	0.1
		95.7	108.6	90.2

Combined statement of financial position as at 31 January 2014

	Note	2014 £'m	2013 £'m	2012 £'m
Assets
Goodwill	10	1,636.2	1,636.3	1,633.4
Intangible fixed assets	11	47.4	68.5	101.6
Property, plant and equipment	13	139.8	159.2	155.2
Financial assets	14	1,681.7	2,419.7	2,169.7
Deferred tax assets	8	19.9	12.6	14.4
Current tax assets		5.1	–	17.9
Reinsurance assets	22	24.7	18.6	46.7
Inventories	17	4.8	6.4	5.3
Trade and other receivables	18	193.9	227.2	217.0
Prepayments and other assets	19	22.5	28.9	31.1
Assets classified as held for sale	13	–	–	9.0
Cash and short term deposits	20	151.3	451.0	232.5
Total assets		3,927.3	5,028.4	4,633.8
Liabilities
Pension scheme obligations	21	24.3	12.6	8.1
Gross insurance contract liabilities	22	690.5	695.6	676.4
Provisions	23	9.2	9.3	7.1
Financial liabilities	14	1,798.4	2,958.6	2,685.6
Deferred tax liabilities	8	7.0	11.9	20.2
Current tax liabilities		–	3.5	–
Other liabilities	24	113.2	120.7	111.6
Trade and other payables	25	164.9	171.1	187.9
Total liabilities		2,807.5	3,983.3	3,696.9
Invested capital		1,119.8	1,045.1	936.9
Total liabilities and invested capital		3,927.3	5,028.4	4,633.8

Combined statement of changes in equity for the year ended 31 January 2014

		Attributable to the equity holders of the parent
	Issued capital £'m	Foreign currency translation reserve £'m	Available for sale reserve £'m	Retained earnings £'m	Total £'m	Non Controlling interests £'m	Total equity £'m
At 1 February 2011	–	(0.2)	2.0	844.9	846.7	–	846.7
Profit for the year	–	–	–	108.1	108.1	0.1	108.2
Other comprehensive income	–	0.9	(0.2)	(18.7)	(18.0)	–	(18.0)
At 31 January 2012	–	0.7	1.8	934.3	936.8	0.1	936.9
Profit for the year	–	–	–	113.1	113.1	0.2	113.3
Dividends paid	–	–	–	–	–	(0.4)	(0.4)
Other comprehensive income	–	(0.2)	(0.4)	(4.1)	(4.7)	–	(4.7)
At 31 January 2013	–	0.5	1.4	1,043.3	1,045.2	(0.1)	1,045.1
Profit for the year	–	–	–	108.5	108.5	1.1	109.6
Dividends paid	–	–	–	(20.0)	(20.0)	(1.0)	(21.0)
Other comprehensive income	–	–	(0.8)	(13.1)	(13.9)	–	(13.9)
At 31 January 2014	–	0.5	0.6	1,118.7	1,119.8	–	1,119.8

Combined statement of cash flows for the year ended 31 January 2014

	Note	2014 £'m	2013 £'m	2012 £'m
Net cash flows from operating activities	29	174.1	234.5	218.5
Investing activities
Proceeds from sale of property, plant and equipment		9.3	0.2	0.5
Proceeds from sale of assets held for sale		–	9.0	–
Purchase of property, plant and equipment		(29.3)	(45.7)	(44.9)
Net sale of financial assets		(39.2)	(38.7)	(102.2)
Acquisition of subsidiaries	9	(0.7)	(1.3)	(217.7)
Net cash flows used in investing activities		(59.9)	(76.5)	(364.3)
Financing activities
Payment of finance lease liabilities		(1.2)	(1.9)	(1.7)
Repayment of borrowings acquired with a subsidiary		–	–	(24.2)
Net movement on AA Group borrowings		(1,262.2)	209.6	256.7
Net movement on parent undertaking borrowings		814.7	(153.1)	(144.2)
Dividends paid		(21.0)	(0.4)	–
Net cash flows from financing activities		(469.7)	54.2	86.6
Net (decrease) / increase in cash and cash equivalents		(355.5)	212.2	(59.2)
Net foreign exchange differences		0.1	(0.3)	1.2
Cash and cash equivalents at 1 February	20	609.0	397.1	455.1
Cash and cash equivalents at 31 January	20	253.6	609.0	397.1

The attached notes on pages 119 to 169 form an integral part of these combined financial statements.

Notes to the combined financial statements

1 Corporate information

The combined financial statements for the three years ended 31 January 2014 comprise the financial statements of Saga Limited, Saga Mid Co Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited and Allied Healthcare International LLC and their respective subsidiaries (collectively the 'Operating Group') and were approved for issue by the Board of Directors on 1 May 2014.

The Operating Group (referred to as 'the Group') offers a wide range of products and services to its customer base which include a range of general insurance and financial services products, package and cruise holidays, domiciliary care, and a monthly subscription magazine. Accordingly, the Group segments its business into four trading segments – Financial services, Travel, Healthcare services and Media and Central costs (see Note 4).

2.1 Basis of preparation

Saga Limited was formed on 5 December 2013 for the purpose of acting as parent undertaking for the Operating Group of companies. The Company does not have independent operations in its own right and as at 31 January 2014 it was a wholly owned subsidiary of Acromas Bid Co Limited, a fellow undertaking of the Acromas group and immediate parent company of a number of subsidiaries. On 4 March 2014, the Company acquired investments from Acromas Bid Co Limited which comprised 100% of the issued share capital of Saga Mid Co Limited, and indirectly 100% of the issued share capital of Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited and Allied Healthcare International LLC following implementation of a group reconstruction.

In order to reflect the effect of this restructuring, the combined historical financial information of the Group for the three years ended 31 January 2012, 31 January 2013 and 31 January 2014 has been prepared on a basis that combines the results, assets and liabilities of all entities within the Group. The Group has not in the past constituted a separate legal group. The combined historical financial information has been prepared by applying the principles underlying the consolidation procedures of IFRS 10 'Consolidated Financial Statements' ('IFRS 10') for each of the three years to 31 January 2012, 31 January 2013 and 31 January 2014 and as at these dates. On such basis, the combined historical financial information sets out the Group's financial position as at 31 January 2012, 31 January 2013 and 31 January 2014 and the results of operations and cash flows for the three years then ended.

The combined financial information has been prepared in accordance with the requirements of the PD Regulation and the UK Listing Rules and in accordance with this basis of preparation. This basis of preparation describes how the financial information has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRSs') except as described below.

IFRSs do not provide for the preparation of combined historical financial information or for the specific accounting treatments set out below. Accordingly in preparing the combined financial information of the Group certain accounting conventions commonly applied for the purposes of preparing historical information for inclusion in investment circulars as described in the Annexure to SIR 2000 (Investment Reporting Standards applicable to public reporting engagements on historical information) issued by the UK Auditing Practices Board have been applied. The application of these conventions results in the material departures from IFRSs set out below. In all other respects, IFRSs have been applied.

• As explained above, the combined financial information is prepared on a combined basis and therefore does not comply with the requirements of IFRS 10. However, the financial information has been prepared on a combined basis applying the principles underlying the consolidation procedures of IFRS 10.
• The combined financial information does not constitute a set of general purpose financial statements under paragraph 2 of IAS 1 'Presentation of Financial Statements' and consequently the Group does not make an explicit and unreserved statement of compliance with IFRSs as contemplated by paragraph 16 of IAS 1. A company is only permitted to apply the first time adoption rules of IFRS 1 'First time Adoption of International Financial Reporting Standards' in its first set of financial statements where such an unreserved statement of compliance would be made. Although such a

2.1 Basis of preparation (continued)

statement has not been made, the combined historical financial information has been prepared as if the date of transition to IFRS is 1 February 2011, the beginning of the first period presented.

• As the financial information has been prepared on a combined basis, it is not possible to measure earnings per share. Accordingly, the requirement of IAS 33 'Earnings per Share' to disclose earnings per share has not been applied.

The Group's deemed transition date to IFRSs is 1 February 2011. The principles and requirements for first time adoption of IFRSs are set out in IFRS 1. IFRS 1 allows for certain exemptions in the application of particular standards to prior periods in order to assist companies with the transition process. The exemptions applied by the Group on transition to IFRSs are set out in note 2.6 to the combined financial information.

The Group has not previously prepared or reported any combined historical financial information in accordance with any other generally accepted accounting principles ("GAAP"). Consequently it is not possible to provide the reconciliations between financial information prepared under a previous GAAP and the financial information prepared in accordance with IFRSs (which is required by IFRS 1 on transition to IFRSs). The Group's opening statement of financial position is however provided in note 2.6.

The preparation of the combined historical financial information under IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The combined financial information has been prepared using consistent accounting policies. All amounts in the combined historical financial information are shown in millions of pounds sterling unless otherwise stated.

The following summarises the accounting and other principles applied in preparing the combined financial information:

• The Group has not previously formed a separate legal group and therefore it is not meaningful to present share capital or an analysis of reserves. The excess of assets over liabilities of all combining entities in the Group as of 31 January 2012, 31 January 2013 and 31 January 2014 are representative of the cumulative investment of Acromas Bid Co Limited in the Group, shown as "Invested Capital".
• Transactions and balances between entities have been eliminated. All intra-group balances, transactions, income and expenses and profits and losses have been eliminated on combination.
• Interest income or expense recorded in the combined financial information has been affected by the historical financing arrangements within the Acromas group, including the AA group.
• Goodwill directly attributable to the combined business and subsidiaries of the Group has been 'pushed down' and included in the combined historical financial information at the beginning of the comparative period (with a corresponding credit being taken to Invested Capital). As permitted by IFRS 1, the deemed cost of this goodwill has been derived from that previously reported in the consolidated financial statements of Acromas Bid Co Limited under UK GAAP.
• The Combined Financial Information has been prepared on a going concern basis.

2.2 Basis of combination

The financial information comprises the financial statements of each of the companies within the Group.

The results of subsidiaries acquired during the period are included in the combined income statement from the effective date of the acquisition. Where necessary, adjustments have been made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on combination. The policies set out below have been applied consistently throughout all the periods presented to items considered material to the combined financial information.

2.2 Basis of combination (continued)

As set out in the basis of preparation note 2.1, Saga Limited was formed on 5 December 2013 and the Group has not in the past constituted a separate legal group. Therefore the combined historical financial information of the group for the three years ended 31 January 2012, 31 January 2013 and 31 January 2014 has been prepared on a basis that combines the results, cash flows and assets and liabilities of all entities within the Group.

2.3 Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, its exposure to risk and its management of these risks, details of its financial instruments and derivative activities, and details of other financial and non-financial liabilities are described throughout these financial statements.

The Group has access to sufficient cash and other financial resources together with a large renewing income stream from insurance policies and high repeat purchase levels from customers of its other products, together with long-term contracts with a number of suppliers across different industries. As a consequence, the Directors believe that the Group is well placed to successfully manage its business risks.

The Group has net assets at the year end. The Directors have considered this together with projected cash flows for a period of one year from the date of signing of these financial statements including the impact of the financing detailed in note 31 and have concluded that the Group has sufficient funds to continue trading for this period, and the foreseeable future. Therefore, the financial statements have been prepared on a going concern basis.

2.4 Key Performance Measures

Trading EBITDA

The nature of the Group's operations means that for management's decision making and internal performance management, the key performance metric is Trading EBITDA.

Trading EBITDA comprises earnings before interest, tax, depreciation and amortisation and excludes exceptional expenses and fair value gains and losses on derivative financial instruments. Exceptional expenses are those items which, by virtue of their nature or incidence, are excluded to enable a better understanding of the underlying financial performance of the Group.

The Group undertakes a programme of economic hedging to fix the costs associated with its Travel operations which are impacted by movements in currency exchange rates and fuel oil commodity prices. The Group considers its hedging programme to be economically effective and therefore excludes the fair value gains and losses which arise on these derivatives from Trading EBITDA to enable a better understanding of the underlying financial performance of the Travel operation.

The Trading EBITDA of the Group is analysed in the segmental information set out in note 4, with further information on the nature of the exceptional expenses provided in note 5.

Trading EBITDA %

Trading EBITDA % is calculated to show Trading EBITDA as a percentage of Gross revenue. Gross revenue comprises the Group's revenues as shown in the Income Statement plus the value of premiums sold on behalf of third party insurers, which are included to facilitate meaningful comparison with the Group's own underwritten insurance business.

Operating profit

Operating profit represents earnings derived from trading activities before interest and tax. In line with Trading EBITDA, Operating profit excludes exceptional expenses and fair value gains and losses on financial instruments.

2.5 Summary of significant accounting policies

a Revenue recognition

Revenue represents amounts receivable from the sale or supply of goods and services provided to customers in the ordinary course of business. The recognition policies for the Group's various revenue streams by segment are as follows:

Financial Services

Insurance operations

Insurance premiums received for risks underwritten by the Group are recognised on a straight line timeapportioned basis over the period of the policy. Any changes to premium arising as a result of adjustments to the underlying risk notified by the policyholders are recognised over the remaining period of the policy from the effective date of notification.

Revenue received in connection with the sale, renewal, or adjustment of insurance policies not underwritten by the Group is recognised at the commencement of the period of risk.

Insurance premiums received for risks which are not underwritten by the Group are not recognised in the income statement, as these amounts are passed through directly to the relevant insurer. These amounts are, however, included in the calculation of Trading EBITDA % (see note 2.4).

Insurance premiums and sales revenues received in advance of the inception date of a policy are treated as advanced receipts and included as Other liabilities in the statement of financial position.

Premiums and sales revenue in respect of insurance policies underwritten by the Group which are live at the reporting date and which relate to the period after the reporting date are treated as unearned and included in insurance contract liabilities in the statement of financial position.

Income from credit provided to customers to facilitate payment of their insurance costs over the life of their policy is treated as part of the revenue from insurance operations and recognised over the period of the policy in proportion to the outstanding premium balance.

Personal Finance operations

Revenue from personal finance products is recognised when the customer contracts with the provider of the relevant personal finance product where the revenue comprises a one-off payment by the provider of the product.

Where the personal finance product is one that delivers a recurring income stream, for example ongoing investment, savings, or lending products, revenues are recognised over the life of the product on an accruals basis.

Travel

Travel operations

Revenue from tour operations is recognised in full on the passenger's date of departure which represents the date upon which the revenue becomes fully non-refundable. Revenue in respect of cruise holidays where the Group operates the cruise ship is recognised on a per diem basis over the duration of the cruise reflecting the often longer durations of cruise holidays, and to facilitate more accurate matching of revenue with costs as they arise.

Revenue from sales in resort, for example for optional excursions, or on board a cruise ship operated by the Group, for example bar sales or optional excursions, is recognised as and when earned.

Revenue from tour operations received in advance of the date of departure, and the unearned element of cruise revenues not yet recognised on a per diem basis, are included as Other liabilities in the statement of financial position.

Healthcare Services

Healthcare operations

Revenue from healthcare operations is recognised when services are supplied to customers against orders received.

For Social Care operations, the point of supply is generally defined as the point at which a service user has received care services from the Group and which are usually provided on a daily basis.

For Primary Care operations, revenue is recognised on delivery of the contracted services or, for capacityrelated contracts, on a time-elapsed basis as the principal contractual obligation is to provide an agreed level of capacity over a fixed term. On longer term contracts, where the timing of the provision of services is not necessarily consistent with the patterns for billing of services rendered, for example contracts with Primary Care Trusts for the operation of walk-in health centres, revenue is recognised over the life of each contract in line with the pattern of delivery of the associated services.

Media and Central costs

Magazine subscriptions

Magazine subscription revenue is recognised on a straight-line basis over the period of the subscription. Revenue generated from advertising within the magazine is recognised when the magazine is provided to the customer. The element of subscriptions and advertising revenue relating to the period after the reporting date is treated as unearned and included within Other liabilities in the statement of financial position.

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

All segments

Long term commercial agreements

Income received in advance relating to long term commercial agreements is recognised when the Group has performed its contractual obligations.

b Cost recognition

Direct costs

Costs directly associated with the revenues generated by the Group's principal activities (excluding insurance underwriting) are recognised in the income statement on a basis consistent with the relevant revenue recognition policy (and detailed in note 2.5a).

Acquisition costs

Acquisition costs arising from the selling or renewing of insurance policies underwritten by the Group are recognised on a straight line time-apportioned basis over the period of the policy in which the related revenues are earned. The proportion of acquisition costs relating to premiums treated as unearned at the reporting date are deferred and included as Other assets in the statement of financial position.

Claims costs

Claims costs incurred in respect of insurance policies underwritten by the Group include claims made for losses reported as occurring during the period together with the related handling costs, any adjustments to claims outstanding from previous periods, and a provision for the estimated cost of claims incurred during the period but not reported at the reporting date. Further detail is provided in note 2.5p.

Reinsurance costs

The Group undertakes a programme of reinsurance in respect of the policies which it underwrites. Outward reinsurance premiums are accounted for in the same accounting period as the related inward insurance premiums and are included as a deduction from earned premium, and therefore as a reduction in revenue.

The amount of any anticipated reinsurance recoveries is treated as a reduction in claims costs. Where this amount is material is it reported separately in the statement of financial position.

Finance costs

Finance costs comprises interest paid and payable which is calculated using the effective interest rate method and recognised in the income statement as it accrues. Accrued interest is included within the carrying value of the interest bearing financial liability in the statement of financial position.

Other expenses

Other expenses are taken to the income statement as incurred and exclude intra-group transactions.

c Recognition of other income statement items

Investment income

Investment income in the form of interest is recognised in the income statement as it accrues and is calculated using the effective interest rate method. Fees and commissions which are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument.

Investment income in the form of dividends is recognised when the right to receive payment is established. For listed securities, this is the date the security is listed as ex-dividend.

Gains and losses on financial investments

Realised and unrealised gains and losses on financial investments are recorded as investment income in the income statement. Realised gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on the date of sale. Unrealised gains and losses, arising on financial assets measured at fair value through profit and loss which have not been derecognised as a result of disposal or transfer, represent the difference between the carrying value at the year end and the carrying value at the previous year end or the purchase value for investments acquired during the year, less the reversal of previously recognised unrealised gains and losses in respect of disposals made during the year.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Where the grant relates to an item of expense, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed. Where the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

d Taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is dealt with in other comprehensive income.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

e Foreign currencies

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group at their respective functional currency spot rate at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date. Differences arising on settlement or translation of monetary items are recognised in the income statement.

Non-monetary items that are measured at historical cost are translated using the exchange rate at the date of the initial transaction. Non-monetary items measured at fair value are translated using the exchange rate at the date when the fair value is determined. The gains or losses arising on translation of non-monetary items measured at fair value are treated in line with the recognition of gains or losses arising on a change in the fair value of the item (i.e. the translation differences on items whose fair value gain or loss is recognised in other comprehensive income or the income statement are also recognised in other comprehensive income or the income statement, respectively).

Group companies

The assets and liabilities of foreign operations are translated into pounds sterling at the rate of exchange prevailing at the reporting date and their income statements are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recycled to the income statement.

f Intangible assets

Intangible assets acquired are measured on initial recognition at cost. Intangible assets acquired in a business combination are measured at their fair value at the date of acquisition and, following initial recognition are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding internally developed software, are not capitalised and the related expenditure is reflected in the income statement in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. Estimated useful lives are as follows:

Goodwill	Indefinite
Brands	10 years
Customer relationship	over the life of the customer relationship
Contracts acquired	over the life of the contract
Software	3–6 years

Intangible assets with finite lives are amortised over their useful economic life on a basis appropriate to the consumption of the asset and are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

g Business combinations and goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date at fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.

Any excess of the cost of acquisition over the fair values of the identifiable assets and liabilities is recognised as goodwill. If the cost of acquisition is less than the fair values of the identifiable assets and liabilities of the acquired business, the difference is treated as negative goodwill and is recognised directly in the income statement in the year of acquisition.

Acquisition-related costs are expensed as incurred and included in administrative expenses.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units (CGU's) at the point of acquisition and is reviewed annually for impairment.

h Impairment of non-financial assets

The Group undertakes a full impairment review of the carrying value of goodwill at each reporting date. The Group also assesses at each reporting date whether there is any indication that any other non-financial assets may be impaired. If such an indication exists, the recoverable amount is estimated and compared to the carrying amount. If the recoverable amount is less than the carrying amount, the asset is considered impaired and is written down to its recoverable amount and the impairment loss is recognised immediately in the income statement.

In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculations on detailed budgets, plans and long-term growth assumptions, which are prepared separately for each of the Group's CGUs to which individual assets are allocated.

i Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and impairment losses, if any. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for separately. Likewise, when a major inspection or dry-docking is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in the income statement as incurred.

Depreciation is charged to the income statement on a straight-line basis so as to write off the depreciable amount of property, plant and equipment over its estimated useful lives. The depreciable amount is the cost of an asset less its residual value. Land is not depreciated. Estimated useful lives are as follows:

Buildings, properties and related fixtures:
Buildings	50 years
Related fittings	3–20 years
Leasehold properties	over the period of the lease
Cruise ships	2–15 years
Computers	3 years
Plant, vehicles and other equipment	3–10 years

Costs relating to cruise-ship mandatory dry-dockings are capitalised and depreciated over the period up to the next dry-dock where appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of an asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.

Estimated residual values and useful lives are reviewed annually.

j Non-current assets held for sale and discontinued operations

The Group classifies non-current assets as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. To be classified as held for sale, an asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for the sale of such assets, and the sale must be highly probable. Sale is considered to be highly probable when management is committed to a plan to sell an asset and an active programme to locate a buyer and complete the plan has been initiated at a price that is reasonable in relation to its current fair value, and there is an expectation that the sale will be completed within one year from the date of classification. In relation to the Group's significant ship assets, a sale is considered to be highly probable when a conditional contract of sale has been signed with a buyer. Non-current assets classified as held for sale are carried on the Group's statement of financial position at the lower of their carrying amount and fair value less costs to sell.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

k Financial instruments

i) Financial assets

Initial recognition and measurement

Financial assets are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments or available-for-sale financial assets. The Group determines the classification of its financial assets at initial recognition and are accounted on a trade date basis. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. The Group has fair value through profit or loss, loans and receivables and available-for-sale financial assets.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as described below:

Financial assets at fair value through profit or loss (FVTPL)

Financial assets at FVTPL are assets:

• which upon initial recognition are designated at fair value through the income statement to eliminate or significantly reduce a measurement recognition inconsistency; or
• which are acquired principally for the purpose of selling in the near term or forming part of the portfolio of financial instruments that are managed together and for which there is evidence of shortterm profit taking.

Derivative financial instruments not designated as hedging instruments and hedge funds are classified as FVTPL. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised through the income statement. The fair values are quoted market prices (where there is an active market) or are based on valuation techniques (where there is no active market or the securities are unlisted). Valuation techniques include the use of recent arm's length transactions, discounted cash flow analysis and other commonly used valuation techniques.

The Group has not designated any financial assets upon initial recognition as at fair value through profit or loss.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment losses. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the income statement. The losses arising from impairment are recognised in the income statement in finance costs.

Available-for-sale financial investments

Available-for-sale financial investments include debt securities and money market funds. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at which time, the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the income statement in finance costs and removed from the available-for-sale reserve. Interest income on availablefor-sale debt securities is calculated using the EIR and is recognised in the income statement.

Derecognition

A financial asset is derecognised when the rights to receive cash flows from the asset have expired or when the Group has transferred substantially all the risks and rewards relating to the asset, to a third party.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that debtors are experiencing significant financial difficulty, or where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or other factors that correlate with defaults.

Loans and receivables

If there is objective evidence that an impairment loss on a financial asset or group of financial assets classified as loans and receivables has been incurred, the Group measures the amount of the loss as the difference between the carrying amount of the asset or group of assets and the present value of estimated future cash flows from the asset or group of assets, discounted at the effective interest rate of the instrument at initial recognition.

Impairment losses are assessed individually where significant, or collectively for assets that are not individually significant.

Impairment losses are recognised in the income statement and the carrying amount of the financial asset or group of financial assets is reduced by establishing an allowance for the impairment losses. If in a subsequent period the amount of the impairment loss reduces and the reduction can be ascribed to an event after the impairment was recognised, the previously recognised loss is reversed by adjusting the allowance.

Available-for-sale financial investments

When a decline in the fair value of a financial asset classified as available-for-sale has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss is removed from equity and recognised in the income statement. The loss is measured as the difference between the amortised cost of the financial asset and its current fair value. Impairment losses on available-for-sale equity instruments are not reversed through the income statement, but those on available-for-sale debt instruments are reversed if there is an increase in fair value that is objectively related to a subsequent event. Subsequent increases in the fair value of available-for-sale debt instruments are all recognised in equity.

ii) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowings, payables or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group's financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss (FVTPL):

Derivative financial instruments not designated as hedging instruments are classified as FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised through the income statement.

The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or loss.

Loans and borrowings and other payables:

After initial recognition, interest bearing loans and borrowings and other payables are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.

iii) Derivatives and hedge accounting

Derivatives are measured at fair value both initially and subsequent to initial recognition. All changes in fair value are recognised in the income statement. Derivatives are presented as assets when the fair values are positive and as liabilities when the fair values are negative. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months.

The group has not designated any derivatives as hedging instruments in the period under review.

iv) Fair value measurement of financial instruments

The Group measures financial instruments, such as, derivatives, and financial instruments classified as available-for-sale and at FVTPL at fair value at each reporting date.

Fair value is the price that would be required to sell an asset or to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market accessible by the Group for the asset or liability or in the absence of a principal market, in the most advantageous market accessible by the Group for the asset or liability.

The fair values are quoted market prices where there is an active market or are based on valuation techniques when there is no active market or the instruments are unlisted. Valuation techniques include the use of recent arm's length market transactions, discounted cash flow analysis and other commonly used valuation techniques. An analysis of the fair values of financial instruments and further details as to how they are measured are provided in note 14.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
• Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the combined statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.

l Leases

Leases under which substantially all of the risk and rewards of ownership are transferred to the Group are finance leases. All other leases are operating leases.

Assets held under finance leases are recognised at the lower of the fair value of the asset and the present value of the minimum lease payments within property, plant and equipment on the statement of financial position and depreciated over the shorter of the lease term or their expected useful lives. The interest element of finance lease payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.

Operating lease rentals are charged to the income statement on a straight-line basis over the lease term. Income arising from operating leases where the Group acts as lessor is recognised on a straight-line basis over the lease term and included in operating income due to its operating nature.

m Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

n Cash and short-term deposits

Cash and short-term deposits in the statement of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less.

For the purpose of the combined statement of cash flows, cash and cash equivalents consist of cash, shortterm deposits as defined above and short-term highly liquid investments (including money market funds) with original maturities of three months or less which are subject to insignificant risk of change in value, net of outstanding bank overdrafts.

o Inventories

Inventories are stated at the lower of cost and net realisable value. Costs include all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.

p Insurance contract liabilities

Insurance contract liabilities include an outstanding claims provision, a provision for unearned premiums and, if required, a provision for premium deficiency.

Outstanding claims provision

The provision for outstanding claims is set on an individual claim basis and is based on the ultimate cost of all claims notified but not settled less amounts already paid by the reporting date, together with a provision for related claims handling costs. The provision also includes the estimated cost of claims incurred but not reported at the statement of financial position date, which is set using statistical methods. The outstanding claims provision is not discounted for the time value of money with the exception of claims settled on a periodic payment orders ("PPOs") basis.

The amount of any anticipated reinsurance, salvage or subrogation recoveries is separately identified and reported within trade and other receivables and insurance contract liabilities respectively.

Differences between the provisions at the reporting date and settlements and provisions in the following year (known as 'run off deviations') are recognised in the income statement as they arise.

Provision for unearned premiums

The provision for unearned premiums represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract.

Provision for premium deficiency

At each reporting date, the Group reviews its unexpired risks and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the income statement by setting up a provision for premium deficiency.

q Pensions

The Group operates a number of defined benefit pension plans which require contributions to be made to separately administered funds. The cost of providing benefits under the defined benefit plans are determined separately using the projected unit credit valuation method.

Actuarial gains and losses arising in the year are credited/charged to other comprehensive income and comprise the effects of changes in actuarial assumptions and experience adjustments due to differences between the previous actuarial assumptions and what has actually occurred. In particular, the difference between the interest income and the actual return on plan assets is recognised in other comprehensive income.

Other movements in the net surplus or deficit, which include the current service cost, any past service cost and the effect of any curtailment or settlements, are recognised in the income statement. Past service costs are recognised in the income statement on the earlier of the date of plan curtailment and the date that the Group recognises restructuring-related costs. The interest cost less interest income on assets held in the plans is also charged to the income statement.

The defined benefit schemes are funded, with assets of the schemes held separately from those of the Group, in separate trustee administered funds. Scheme assets are measured using market values, and scheme liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Full actuarial valuations are obtained at least triennially and are updated at each reporting date. The resulting defined benefit asset or liability is presented separately after other net assets and liabilities on the face of the statement of financial position. The value of a pension benefit asset is restricted to the amount that may be recovered either through reduced contributions or agreed refunds from the scheme.

For defined contribution schemes, the amounts charged to the income statement are the contributions payable in the year.

r Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

A provision is recognised for onerous contracts in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs reflect the least net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

s Equity

The Group has ordinary shares that are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax.

2.6 First time adoption of IFRS

The Group was formed via a group reconstruction on 4 March 2014. The Group has not previously prepared combined financial statements and, accordingly, these combined financial statements are the first that the Group has prepared which comply with IFRS applicable for periods ending on or after 31 January 2014 except as detailed in the basis of preparation note 2.1.

The combined financial statements include the results for the years ended 31 January 2014, 31 January 2013 and 31 January 2012 and statement of financial position as at each date.

The individual entities within the Group have previously prepared, and continued to prepare, their financial statements under their respective local generally accepted accounting principles (GAAP).

2.6 First time adoption of IFRS (continued)

In preparing these financial statements, the Group's opening statement of financial position was prepared as at 1 February 2011, the Group's date of transition to IFRS, and was as follows:

	£'m
Assets
Goodwill	1,463.7
Intangible fixed assets	22.4
Property, plant and equipment	156.3
Financial assets	1,841.7
Deferred tax assets	10.2
Pension scheme assets	7.2
Reinsurance assets	52.0
Inventories	3.3
Trade and other receivables	180.4
Prepayments and other assets	24.8
Cash and short term deposits	308.4
Total assets	4,070.4
Liabilities
Gross insurance contract liabilities	577.3
Provisions	1.2
Financial liabilities	2,362.2
Deferred tax liabilities	3.2
Current tax liabilities	8.7
Other liabilities	109.3
Trade and other payables	161.8
Total liabilities	3,223.7
Invested capital	846.7
Total liabilities and invested capital	4,070.4

Exemptions applied

In general, a company is required to determine its IFRS accounting policies and apply these retrospectively to determine its opening balance sheet under IFRSs. However, IFRS 1 permits a number of exemptions to this general principle upon adoption of IFRS. Accordingly, the Group has applied the following exemptions on transition to IFRS:

• IFRS 3 Business Combinations has not been applied to business combinations that occurred before 16 July 2010. Use of this exemption means that the UK GAAP carrying amounts of assets and liabilities is their deemed cost under IFRSs as at this date. The Group did not recognise or exclude any previously recognised amounts as a result of IFRS recognition requirements.
• The Group has elected to disclose only five years of claims experience data in its claims development tables as permitted in the first financial year in which it adopts IFRS 4 Insurance Contracts. These disclosures will be extended for an additional year in each succeeding year until the 10-year information requirement has been satisfied.
• The Group has elected to measure certain items of property, plant and equipment at fair value at the date of transition to IFRS.
• All cumulative actuarial gains and losses on the Group's defined benefit pension schemes have been recognised in equity at the transition date. In addition, the Group has elected not to present comparative information for the disclosure requirements regarding the sensitivity analysis of its defined benefit obligation.

3 Significant accounting judgements, estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

i) Fair value of financial instruments determined using valuation techniques

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques

3 Significant accounting judgements, estimates and assumptions (continued)

that include the use of discounted cash flow models and/or mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgement is required to establish fair values. The judgements include considerations of liquidity risk, credit risk, and model inputs such as volatility for longer dated derivatives and discount rates and prepayment rates.

Further details about the fair value of financial assets, financial liabilities and derivative financial instruments including their carrying amount are contained in note 15.

ii) Impairment of financial assets

The Group determines that loans and receivables or available-for-sale financial assets are impaired when there is objective evidence that an event or events since initial recognition of the assets have adversely affected the amount or timing of future cash flows from the asset. The determination of which events may have adversely affected the amount or timing of future cash flows from an asset requires judgement. In making this judgement, the Group evaluates, amongst other factors, the normal price volatility of the financial asset, the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows or where there has been a significant or prolonged decline in the fair value of the asset below its cost. Impairment may be appropriate when there is evidence of deterioration in these factors.

Impairment provision charges on available-for-sale financial assets at 31 January 2014 amounted to £nil (2013: £nil; 2012 £nil).

iii) Valuation of pension benefit obligation

The cost of defined benefit pension plans and the present value of the pension obligation are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Further details about pension obligations and details of the key assumptions used are contained in note 21.

iv) Goodwill impairment testing

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash generating units at a suitable discount rate in order to calculate present value.

Further details about goodwill and details of the key assumptions used in the estimation of the recoverable amounts are contained in notes 10 and 12.

v) Valuation of insurance contract liabilities

For insurance contracts, estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported at the reporting date (IBNR). It can take a significant period of time before the ultimate claims cost can be established with certainty. For some types of policies, IBNR claims form the majority of the liability in the statement of financial position.

The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods.

The main assumption underlying these techniques is that past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical area, as well as by significant

3 Significant accounting judgements, estimates and assumptions (continued)

business lines and claim types. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (e.g. to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all of the uncertainties involved.

Similar judgements, estimates and assumptions are employed in the assessment of the adequacy of provisions for unearned premium. Judgement is also required in determining whether the pattern of insurance service provided by a contract requires amortisation of unearned premium on a basis other than time apportionment.

Further details about insurance contract liabilities are contained in note 22.

vi) Deferred tax assets and liabilities

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and the level of future taxable profits together with future tax planning strategies.

Uncertainties exist with respect to the amount and timing of future taxable profits, including where the profit arises within the Group.

Further details on deferred tax assets and liabilities are disclosed in note 8.

4 Segmental information

For management purposes, the Group is organised into business units based on their products and services and has four reportable operating segments as follows:

• Financial services: the segment primarily comprises general insurance and financial services products. Revenue is derived primarily from insurance premiums, insurance commissions and financial services product commissions.

This segment is further analysed into three sub-segments:

• Motor insurance
• Home insurance
• Other financial services

The Group operates its own general insurer which underwrites all of the Group's Saga-branded Motor insurance policies, a proportion of its Home insurance policies, and some of its other products. The remaining insurance policies are underwritten by third party underwriters.

• Travel: the segment primarily comprises the operation and delivery of package tours and cruise holiday products. The Group operates its own cruise ships and one hotel. All other holiday products are packaged together with third party supplied accommodation, flights and other transport arrangements.
• Healthcare services: the segment primarily comprises the delivery of domiciliary care services and delivery of various primary care services.
• Media and Central costs: the segment primarily comprises a monthly subscription magazine product, the Group's internal mailing house and centrally borne administrative costs.

Segment performance is primarily evaluated using the Group's key performance measure of Trading EBITDA (see note 2.4). Items not allocated to a segment relate to transactions that do not form part of the on-going segment performance. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to individual operating segments.

4 Segmental information (continued)

Transfer prices between operating segments are set on an arm's length basis in a manner similar to transactions with third parties. Segment income, expenses and results includes transfers between business segments which are then eliminated on consolidation.

Finance income and costs, and fair value gains and losses on derivative financial instruments are not allocated to individual segments as the underlying instruments are managed on a group basis. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to segments as they are also managed on a group basis.

2014

	Financial Services		Travel	Healthcare Services	Media & Central Costs	Adjustments	Total
	Motor Insurance £'m	Home Insurance £'m	Other Financial Services £'m	Total £'m	£'m	£'m	£'m	£'m	£'m
Gross revenue Inter-segment	362.6 –	197.8 –	122.5 –	682.9 –	379.6 –	318.6 –	17.1 8.9	– (8.9)	1,398.2 –
Segment revenue Third party premiums	362.6 (7.4)	197.8 (107.3)	122.5	682.9 (25.6) (140.3)	379.6 –	318.6 –	26.0 –	–	(8.9) 1,398.2 (140.3)
Revenue Cost of sales	355.2 (218.9)	90.5 (4.4)	96.9	542.6 (38.0) (261.3) (315.0)	379.6	318.6 (224.9)	26.0 (16.7)	–	(8.9) 1,257.9 (817.9)
Gross profit	136.3	86.1	58.9	281.3	64.6	93.7	9.3	(8.9)	440.0
Results Trading EBITDA Trading EBITDA % Depreciation Loss on disposal	96.7 26.7% (1.3) –	63.1 31.9% (0.5) –	37.3 30.4% (0.3) –	197.1 28.9% (2.1) –	27.8 7.3% (17.9) (1.6)	10.2 3.2% (2.8) –	(1.4) (5.4%) (5.5) –	– – – –	233.7 16.7% (28.3) (1.6)
Segment profit	95.4	62.6	37.0	195.0	8.3	7.4	(6.9)	–	203.8
Unallocated items: Amortisation of intangible assets Impairment of intangibles Operating profit Exceptional expenses Fair value losses on derivative financial instruments									(25.6) (3.7) 174.5 (14.2) (10.4)
Net finance costs									(0.7)
Profit before tax									149.2
Total assets less liabilities				274.9	(5.3)	(0.2)	(55.4)	905.8	1,119.8
No of employees				2,113	2,423	16,844	651		22,031

The total revenue of £1,257.9m is generated £1,252.4m in the UK and £5.5m in the rest of the world.

Cost of sales within the Financial Services segment comprises claims costs incurred on insurance policies underwritten by the Group (see note 4b). The costs of marketing, selling and administering the policies are deducted in deriving at Trading EBITDA.

The number of employees in the Travel Segment includes 1,218 crew who are employed via a manning agency.

2013

			Financial Services		Travel	Healthcare Services	Media & Central Costs	Adjustments	Total
	Motor Insurance £'m	Home Insurance £'m	Other Financial Services £'m	Total £'m	£'m	£'m	£'m	£'m	£'m
Gross revenue Inter-segment	448.8 –	207.5 –	118.6 –	774.9 –	352.3 –	334.5 –	17.4 8.6	– (8.6)	1,479.1 –
Segment revenue Third party premiums	448.8 (23.2)	207.5 (117.9)	118.6	774.9 (27.6) (168.7)	352.3 –	334.5 –	26.0 –	–	(8.6) 1,479.1 (168.7)
Revenue Cost of sales	425.6 (278.4)	89.6 (4.3)	91.0	606.2 (33.9) (316.6) (292.2)	352.3	334.5 (228.4)	26.0 (17.6)	–	(8.6) 1,310.4 (854.8)
Gross profit	147.2	85.3	57.1	289.6	60.1	106.1	8.4	(8.6)	455.6
Results Trading EBITDA Trading EBITDA % Depreciation Profit on disposal	105.1 23.4% (1.4) –	58.0 28.0% (0.6) –	35.3 29.8% (0.3) –	198.4 25.6% (2.3) –	13.9 3.9% (14.2) 0.1	22.0 6.6% (2.2) –	0.5 1.9% (6.2) –	– – –	234.8 15.9% (24.9) 0.1
Segment profit	103.7	57.4	35.0	196.1	(0.2)	19.8	(5.7)	–	210.0
Unallocated items: Amortisation of intangible assets Impairment of intangibles Operating profit Exceptional expenses Fair value gains on									(38.9) (1.4) 169.7 (21.2)
derivative financial instruments Net finance costs									2.7 (1.6)
Profit before tax									149.6
Total assets less liabilities				291.3	(5.8)	20.0	285.3	454.3	1,045.1
No of employees				2,233	2,457	17,201	709		22,600

The total revenue of £1,310.4m is generated £1,304.4m in the UK and £6.0m in the rest of the world.

Cost of sales within the Financial Services segment comprises claims costs incurred on insurance policies underwritten by the Group (see note 4b). The costs of marketing, selling and administering the policies are deducted in deriving at Trading EBITDA.

The number of employees in the Travel segment includes 1,197 crew who are employed via a manning agency.

4 Segmental information (continued)

2012

			Financial Services		Travel	Healthcare Services	Media & Central Costs	Adjustments	Total
	Motor Insurance £'m	Home Insurance £'m	Other Financial Services £'m	Total £'m	£'m	£'m	£'m	£'m	£'m
Gross revenue Inter-segment	485.8 –	204.7 –	119.3 –	809.8 –	344.6 –	221.0 –	16.6 8.0	– (8.0)	1,392.0 –
Segment revenue Third party premiums	485.8 (37.0)	204.7 (120.3)	119.3	809.8 (59.4) (216.7)	344.6 –	221.0 –	24.6 –	–	(8.0) 1,392.0 (216.7)
Revenue Cost of sales	448.8 (327.9)	84.4 (1.7)	59.9	593.1 (2.0) (331.6) (281.1)	344.6	221.0 (146.4)	24.6 (16.9)	–	(8.0) 1,175.3 (776.0)
Gross profit	120.9	82.7	57.9	261.5	63.5	74.6	7.7	(8.0)	399.3
Results Trading EBITDA Trading EBITDA % Depreciation Loss on disposal	73.8 15.2% (0.7) –	56.4 27.6% (0.4) –	36.7 30.8% (0.2) –	166.9 20.6% (1.3) –	26.9 7.8% (24.4) (0.1)	17.1 7.7% (1.7) –	1.8 7.3% (5.1) –	– – –	212.7 15.3% (32.5) (0.1)
Segment profit	73.1	56.0	36.5	165.6	2.4	15.4	(3.3)	–	180.1
Unallocated items: Saga Past Scheme past service credit Amortisation of intangible assets									9.6 (32.7)
Operating profit Exceptional expenses Fair value gains on derivative financial instruments									157.0 (7.7) 0.7
Net finance costs									(1.8)
Profit before tax									148.2
Total assets less liabilities				245.1	1.6	55.8	130.4	504.0	936.9
No of employees				2,166	2,617	10,938	721		16,442

The total revenue of £1,175.3m is generated £1,173.6m in the UK and £1.7m in the rest of the world.

Cost of sales within the Financial Services segment comprises claims costs incurred on insurance policies underwritten by the Group (see note 4b). The costs of marketing, selling and administering the policies are deducted in deriving at Trading EBITDA.

The number of employees in the Travel segment includes 1,293 crew who are employed via a manning agency.

Adjustments in relation to total assets less liabilities relates to the following unallocated items:

	2014 £'m	2013 £'m	2012 £'m
Goodwill	1,636.2	1,636.3	1,633.4
Net amounts owed (to) / by parent undertakings	(749.2)	65.4	(87.7)
Net amounts owed to AA group undertakings	(4.2)	(1,266.4)	(1,056.1)
Deferred tax – non-pension scheme related	23.0	19.0	14.4
	905.8	454.3	504.0
4a Analysis of Financial Services revenue
	2014 £'m	2013 £'m	2012 £'m
Income from insurance underwritten by the Group
– Motor Insurance	310.9	366.7	381.7
– Home Insurance	16.4	15.3	9.9
– Other	41.7	37.6	6.2
	369.0	419.6	397.8
Income from other insurance and financial services products	173.6	186.6	195.3
	542.6	606.2	593.1

4 Segmental information (continued)

4b Analysis of Financial Services cost of sales

	2014 £'m	2013 £'m	2012 £'m
Net Claims incurred on insurance underwritten by the Group
– Motor Insurance	194.8	248.7	297.9
– Home Insurance	4.4	4.3	1.7
– Other	37.8	34.0	2.0
	237.0	287.0	301.6
Other cost of sales	24.3	29.6	30.0
	261.3	316.6	331.6

5 Administrative & selling expenses

	2014 £'m	2013 £'m	2012 £'m
Wages and salaries	120.1	119.4	87.3
Social security costs	10.7	10.8	8.9
Pension costs	7.1	6.7	7.1
Staff costs	137.9	136.9	103.3
Marketing and fulfilment costs	44.6	57.8	60.8
Lease rentals	8.3	6.8	5.6
Auditors remuneration	1.1	1.6	1.4
Other administrative costs	46.0	48.7	44.7
Depreciation	9.4	9.5	7.4
Loss / (profit) on disposal of property, plant and equipment	1.6	(0.1)	0.1
Amortisation of intangible assets	25.6	38.9	32.7
Impairment of intangible assets	3.7	1.4	–
Exceptional expenses	14.2	21.2	7.7
	292.4	322.7	263.7

Exceptional expenses:

	2014 £'m	2013 £'m	2012 £'m
Acquisition of subsidiaries (note 9)	–	–	3.0
Restructuring costs	12.9	7.8	4.6
Cost of cancelled and curtailed cruises	0.8	8.6	–
Other exceptional expenses	0.5	4.8	0.1
	14.2	21.2	7.7

Restructuring costs represent costs associated with restructuring and re-organising a number of Group operations and include staff-related costs such as redundancy and other termination costs, together with various professional fees for advice and processes associated with the restructuring.

During the year ended 31 January 2013, third-party industrial action during the refit of the Group's new flag ship meant that this ship came into service later than expected and this, together with major quality issues on some unrelated third party engine maintenance on a sister ship, resulted in the cancellation or curtailment of a number of cruises. The amount detailed in respect of this reflects the cost of compensation and other payments to customers together with other exceptional operating costs incurred, net of amounts received from insurance claims.

Other exceptional expenses primarily comprises the costs of a legal settlement in relation to a claim made against the Healthcare operation, onerous property lease costs associated with the Healthcare operation, and overseas indirect taxes associated with the historic Travel operation.

6 Investment income

Investment income represents interest income and fair value gains and losses on financial investments.

7 (a) Finance costs

	2014 £'m	2013 £'m	2012 £'m
Interest on debt and borrowings	–	–	0.2
Interest on inter-group balances	–	0.6	1.2
Finance charges payable under finance leases and hire purchase contracts	0.1	0.2	0.3
Total interest expense	0.1	0.8	1.7
Net fair value loss on derivative financial instruments	10.4	0.6	0.5
Net finance expense on pension schemes	0.4	0.2	–
Unwinding of discount and effect of changes in discount rate on provisions	0.2	0.6	0.3
	11.1	2.2	2.5

7 (b) Finance income

	2014 £'m	2013 £'m	2012 £'m
Net fair value gain on derivative financial instruments	–	3.3	1.2
Net finance income on pension schemes	–	–	0.2
	–	3.3	1.4

8 Tax

The major components of the income tax expense are:

	2014 £'m	2013 £'m	2012 £'m
Combined income statement
Current income tax
Current income tax charge	47.4	40.6	38.8
Adjustments in respect of previous years	0.9	(0.2)	(0.2)
	48.3	40.4	38.6
Deferred tax
Relating to origination and reversal of temporary differences	(8.7)	(4.1)	1.4
Tax expense in the income statement	39.6	36.3	40.0

Reconciliation of tax expense to profit before tax multiplied by the UK corporation tax rate:

	2014 £'m	2013 £'m	2012 £'m
Profit before tax	149.2	149.6	148.2
Tax at rate of 23.2% (2013: 24.3% and 2012: 26.3%)	34.6	36.4	39.0
Adjustments in respect of previous years	0.9	(0.2)	(0.2)
Rate change adjustment on temporary differences	2.9	(0.7)	(1.2)
Expenses not deductible for tax purposes:
– Fair value adjustments	0.9	1.7	1.4
– Other non-deductible expenses / non-taxed income	0.3	(0.9)	1.0
Tax expense in the income statement	39.6	36.3	40.0

Deferred tax

		Combined statement of financial position	Combined income statement
	2014 £'m	2013 £'m	2012 £'m	2014 £'m	2013 £'m	2012 £'m
Excess of depreciation over
capital allowances	0.2	(1.6)	(1.2)	(1.8)	0.4	1.6
Intangibles	(6.7)	(11.5)	(19.3)	(4.9)	(7.8)	(7.2)
Pension	4.9	2.9	2.0	1.6	1.4	2.6
Short-term temporary
differences	13.7	10.8	12.5	(2.9)	1.8	4.4
Losses available for offsetting
against future taxable income	0.8	0.1	0.2	(0.7)	0.1	(0.1)
Deferred tax expense				(8.7)	(4.1)	1.3
Net deferred tax assets /
(liabilities)	12.9	0.7	(5.8)

8 Tax (continued)

Reflected in the statement of financial position as follows:

	2014 £'m	2013 £'m	2012 £'m
Deferred tax assets	19.9	12.6	14.4
Deferred tax liabilities	(7.0)	(11.9)	(20.2)
Net deferred tax assets / (liabilities)	12.9	0.7	(5.8)

Reconciliation of net deferred tax assets / (liabilities)

	2014 £'m	2013 £'m	2012 £'m
At 1 February	0.7	(5.8)	7.0
Tax income/(expense) recognised in the income statement	8.7	4.1	(1.3)
Tax income/(expense) recognised in OCI	3.5	1.4	6.1
Deferred taxes acquired in business combinations	–	1.0	(17.6)
At 31 January	12.9	0.7	(5.8)

The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Reductions in the UK corporation tax rate over the three years were as follows: 1 April 2011, from 28% to 26%; 1 April 2012, from 26% to 24%; 1 April 2013, from 24% to 23%. A further reduction from 23% to 21% took effect on 1 April 2014, and a final reduction to 20% has been enacted in the Finance Act 2013 to take effect from 1 April 2015. As a result, the closing deferred tax balances have been reflected at 20%.

The Group has tax losses which arose in the UK of £4.6m (2013: £4.8m, 2012: £5.3m) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group, they have arisen in subsidiaries that have been loss-making for some time, and there are no other tax planning opportunities or other evidence of recoverability in the near future. If the Group were able to recognise all unrecognised deferred tax assets, the profit would increase by £1.0m.

9 Business combinations and acquisition of non-controlling interests

Acquisitions during the year ended 31 January 2014 and 31 January 2013

There were no acquisitions in the years ended 31 January 2014 and 31 January 2013.

Cash consideration of £1.3m and £0.7m was paid during the years ended 31 January 2013 and 31 January 2014 respectively, in relation to Nestor Healthcare Group as part of the deferred consideration on this acquisition. As at 31 January 2014, £0.3m of the deferred consideration remains outstanding.

Acquisitions during the year ended 31 January 2012

During the year ended 31 January 2012, the Group made the following acquisitions:

i. Acquisition of Nestor Healthcare Group Limited

On 1 February 2011, the Group acquired 100% of the voting shares of Nestor Healthcare Group Limited, a company specialising in social and primary care, for a consideration of £132.4m.

The acquisition was undertaken as part of the Group's strategy to provide a range of domiciliary care services for its customers. The scale of Nestor Healthcare Group and the various businesses within it enabled the Group to transform its existing regional domiciliary care business into a market leader with national coverage. The acquisition brought a significant management structure to facilitate the expansion of the existing business.

9 Business combinations and acquisition of non-controlling interests (continued)

Consideration for the transaction was settled in cash, with the exception of unvested share options valued at £2.3m, which will be settled in cash in the future.

	Fair value
	recognised on acquisition
Assets	£'m
Property, plant and equipment	1.9
Software	0.9
Trade receivables	25.3
Deferred tax asset	4.0
Contracts	36.5
Brands	1.4
Customer relationships	9.0
Total assets	79.0
Liabilities
Trade payables	(18.6)
Bank overdrafts (net of cash and cash equivalents)	(5.2)
Bank loans	(19.0)
Provision for onerous operating lease costs	(4.3)
Provision for property dilapidations	(1.0)
Provision for clinical incidents	(0.6)
Deferred tax liability	(12.3)
Net employee defined benefit liabilities	(4.2)
Total liabilities	(65.2)
Total identifiable net assets at fair value	13.8
Goodwill arising on acquisition	118.6
Purchase consideration transferred	132.4

Transaction costs of £1.8m have been expensed and are included as part of exceptional expenses within administrative and selling expenses (see note 5).

During the year ended 31 January 2012, the Nestor Healthcare group contributed £167.7m of revenue and £10.8m to the profit before tax of the Group.

The goodwill arising on acquisition of £118.6m represents the fair value arising from the acquired management structure, the acquired infrastructure bringing the benefit of national coverage, and other synergies arising on acquisition.

Purchase consideration Cash (consideration for cash acquired) 130.1 Deferred consideration re share options 2.3 Total consideration 132.4

ii. Acquisition of Allied Healthcare Group Holdings Limited

On 20 October 2011, the Group acquired 100% of the voting shares of Allied Healthcare Group Holdings, a company specialising in primary and social care, for a consideration of £112.7m. Consideration for the transaction was settled in cash.

9 Business combinations and acquisition of non-controlling interests (continued)

The acquisition built on the earlier acquisition of Nestor Healthcare Group providing greater scale, and further expanding the branch network by in-filling various geographical areas where the Nestor Healthcare group and the existing regional domiciliary care business did not have coverage. In areas where both the Allied Healthcare Group and the Nestor Healthcare Group had branch coverage, synergies would be obtained by consolidating these branches.

	Fair value recognised on acquisition £'m
Assets
Property, plant and equipment	4.0
Software	1.0
Cash and cash equivalents	25.1
Trade receivables	24.3
Deferred tax asset	0.8
Contracts	34.0
Customer relationships	10.0
Total assets	99.2
Liabilities
Trade payables	(24.9)
Provision for property dilapidations	(0.8)
Deferred tax liability	(11.6)
Total liabilities	(37.3)
Total identifiable net assets at fair value	61.9
Goodwill arising on acquisition	50.8
Purchase consideration transferred	112.7

Transaction costs of £1.2m have been expensed and are included as part of exceptional expenses within administrative and selling expenses (see note 5).

During the year ended 31 January 2012, the Allied Healthcare group contributed £53.3m of revenue and £1.6m loss to the profit before tax of the Group.

If the combination had taken place at the beginning of the year, the Group's revenue for the year ended 31 January 2012 would have £136.5m higher and the profit before tax would have been £3.7m lower than reported.

The goodwill arising on acquisition of £50.8m represents the fair value of expected synergies arising from infilling the various geographical gaps in the existing business and through consolidation of duplicated geographical areas.

Purchase consideration

Cash (consideration for cash acquired)	112.7
Total consideration	112.7

Analysis of net acquisition consideration for cash flow purposes:

	£'m
Cash consideration on Nestor Healthcare acquisition	130.1
Cash consideration on Allied Healthcare acquisition	112.7
Less: Cash acquired on acquisition	(25.1)
Net consideration for cash flow purposes	217.7

10 Goodwill

	Goodwill
Cost	£'m
At 1 February 2011	1,463.7
Additions	169.4
Fair value adjustment	0.3
At 31 January 2012	1,633.4
Fair value adjustment	2.9
At 31 January 2013	1,636.3
Fair value adjustment	(0.1)
At 31 January 2014	1,636.2
Impairment
At 1 February 2011	–
Impairment	–
At 31 January 2012	–
Impairment	–
At 31 January 2013	–
Impairment	–
At 31 January 2014	–
Net book value
At 31 January 2014	1,636.2
At 31 January 2013	1,636.3
At 31 January 2012	1,633.4

11 Intangible fixed assets

			Customer
	Contracts	Brands	Relationships	Software	Total
Cost	£'m	£'m	£'m	£'m	£'m
At 1 February 2011	10.6	–	0.1	22.7	33.4
Acquired with subsidiaries	70.5	1.4	19.0	1.9	92.8
Additions	–	–	–	19.1	19.1
At 31 January 2012	81.1	1.4	19.1	43.7	145.3
Additions	–	–	–	7.2	7.2
At 31 January 2013	81.1	1.4	19.1	50.9	152.5
Additions	–	–	–	8.2	8.2
Disposals	–	–	–	(0.4)	(0.4)
At 31 January 2014	81.1	1.4	19.1	58.7	160.3
Amortisation and impairment
At 1 February 2011	1.2	0.0	0.0	9.8	11.0
Amortisation	15.0	0.1	9.9	7.7	32.7
At 31 January 2012	16.2	0.1	9.9	17.5	43.7
Amortisation	17.9	0.2	8.8	12.0	38.9
Impairment	1.4	–	–	–	1.4
At 31 January 2013	35.5	0.3	18.7	29.5	84.0
Amortisation	13.6	0.2	0.4	11.4	25.6
Impairment	3.7	–	–	–	3.7
Disposals	–	–	–	(0.4)	(0.4)
At 31 January 2014	52.8	0.5	19.1	40.5	112.9
Net book value
At 31 January 2014	28.3	0.9	–	18.2	47.4
At 31 January 2013	45.6	1.1	0.4	21.4	68.5
At 31 January 2012	64.9	1.3	9.2	26.2	101.6

Intangible assets detailed as Contracts, Brands and Customer relationships represent assets identified at the time of acquisition of various subsidiaries within the Healthcare segment. These assets are amortised over their appropriate useful lives assessed at the time of acquisition and reviewed annually.

11 Intangible fixed assets (continued)

The balance at 1 February 2011 represents the separately identified assets acquired as part of Sussex Homecare (Hove) Limited and Greenbanks Homecare Limited, with the additions during the year ended 31 January 2012 relating to the acquisitions of Nestor Healthcare Group Limited and Allied Healthcare Group Holdings Limited (detailed in note 9).

The intangible assets identified as part of these acquisitions represent:

• Contracts with local authorities and other government departments;
• Customer relationships representing contracts held directly with the end-user customers; and
• Brands acquired as part of the Nestor Healthcare Group acquisition, specifically Patricia White's and Country Cousins.

12 Impairment of intangible assets

Goodwill

Goodwill acquired through business combinations has been allocated to cash-generating units ("CGUs") on initial recognition and for subsequent for impairment testing. The carrying value of goodwill by CGU is as follows:

	2014 £'m	2013 £'m	2012 £'m
Financial Services	1,398.5	1,398.5	1,398.5
Travel	59.8	59.8	59.8
Healthcare	177.9	178.0	175.1
	1,636.2	1,636.3	1,633.4

The Group has performed impairment testing at 31 January 2014, 31 January 2013 and 31 January 2012. The impairment test compares the recoverable amount of the CGU to its carrying value.

The recoverable amount of each CGU has been determined based on a value-in-use calculation using cash flow projections from the Group's 3 year plan up to 2017 and a reasonable expectation of growth in the subsequent two years. Terminal values have been included using 3% as the expected long term average growth rate of the UK economy, and calculated using the Gordon growth model. Cash flows have been discounted considering the weighted average cost of capital of a market participant capable of acquiring a similar business, and which has been determined as a pre-tax rate of approximately 13.9%.

The value-in-use calculation is most sensitive to the assumptions used for growth and for the discount rate. Accordingly, stress testing has been performed on these key assumptions as part of the impairment test to further inform the consideration of whether any impairment is evident. Further to this, management believes that no reasonably foreseeable change in any of the key assumptions would cause the recoverable amount of the CGU to be lower than its carrying amount, and consequently no impairment has been recognised.

Other intangible assets

Separately-identifiable intangible assets are valued and their appropriate useful lives established at the time of acquisition. The carrying values of these assets and their remaining useful lives are reviewed annually for indicators of impairment.

The Group has performed a review for indicators of impairment at 31 January 2014, 31 January 2013 and 31 January 2012.

The carrying value of Contracts and Customer Relationships has been tested using the multi-period excess earnings method to forecast associated future cash flows through to the anticipated conclusion of each acquired contract. These cash flows consider current contract values and a renewal rate based upon historical experience and current market assessments, and are discounted using the market participant weighted average cost of capital, assessed as a post-tax rate of 10%. The calculation is most sensitive to the assumption surrounding contract renewal rates and the discount rate.

The initial valuation in respect of Brands was made using the relief from royalty method which applies an appropriate royalty rate to the projected revenues expected from the operation of the brand, discounted to a present value using a market participant post-tax weighted average cost of capital of 10%. At the time of

12 Impairment of intangible assets (continued)

acquisition, the Group assessed it appropriate to amortise the acquired brands over a period of 10 years. Accordingly, the carrying value of brands is assessed by re-performing the relief from royalty calculation over the remaining amortisation period at the end of each financial year. The calculation is most sensitive to the assumptions underpinning future revenues and the discount rate.

As at 31 January 2013 and 31 January 2014, the assessed recoverable amount of the acquired Contracts was lower than the carrying amount, and consequently impairments of £1.4m and £3.7m respectively have been recognised. There have been no impairments in respect of Brands or Customer Relationships.

13 Property, plant and equipment

Cost or valuation	Freehold Land & Buildings £'m	Long Leasehold Land & Buildings £'m	Cruise Ships £'m	Plant & equipment £'m	Total £'m
At 1 February 2011	42.8	13.7	110.1	34.1	200.7
Acquired with subsidiaries	–	0.2	–	5.7	5.9
Additions	–	0.8	19.1	15.3	35.2
Disposals	(0.1)	–	(2.4)	(2.1)	(4.6)
Reclassified as held for sale	–	–	(30.1)	–	(30.1)
At 31 January 2012	42.7	14.7	96.7	53.0	207.1
Additions	0.2	0.3	18.4	11.4	30.3
Disposals	–	–	–	(6.2)	(6.2)
Reclassification adjustments	–	(0.9)	–	0.9	–
At 31 January 2013	42.9	14.1	115.1	59.1	231.2
Additions	9.4	–	5.9	4.7	20.0
Disposals	(0.5)	–	(40.7)	(7.9)	(49.1)
At 31 January 2014	51.8	14.1	80.3	55.9	202.1
Depreciation and impairment
At 1 February 2011	4.5	1.5	22.6	15.8	44.4
Provided during the year	0.5	0.3	22.6	9.1	32.5
Reclassified as held for sale	–	–	(21.1)	–	(21.1)
Disposals	–	–	(2.4)	(1.5)	(3.9)
At 1 February 2012	5.0	1.8	21.7	23.4	51.9
Provided during the year	1.9	0.1	11.2	11.7	24.9
Disposals	–	–	0.4	(5.2)	(4.8)
Reclassification adjustments	–	(0.7)	–	0.7	–
At 31 January 2013	6.9	1.2	33.3	30.6	72.0
Provided during the year	0.7	0.1	14.8	12.7	28.3
Disposals	–	–	(30.1)	(7.9)	(38.0)
At 31 January 2014	7.6	1.3	18.0	35.4	62.3
Net book value
At 31 January 2014	44.2	12.8	62.3	20.5	139.8
At 31 January 2013	36.0	12.9	81.8	28.5	159.2
At 31 January 2012	37.7	12.9	75.0	29.6	155.2

The Group has elected to measure certain items of property, plant and equipment at fair value at the date of transition to IFRS which represents their deemed cost. As at the date of transition, the fair value of freehold land and buildings was £18.6m lower than the original cost. Similarly, the fair value of the Group's cruise ships was £21.0m lower than their original cost. The relevant adjustments to deemed cost at the date of transition on fair value have been recognised in retained earnings.

The net book amount of Other Assets includes £0.4m (2013: £2.8m, 2012: £4.8m) in respect of plant & machinery held under finance lease agreements. The accumulated depreciation on these assets is £2.9m (2013: £6.8m, 2012: £6.2m).

13 Property, plant and equipment (continued)

The depreciation charge for the year is analysed between Cost of sales and Administrative and selling expenses as follows:

	2014 £'m	2013 £'m	2012 £'m
Cost of sales	18.9	15.4	25.1
Administrative and selling expenses	9.4	9.5	7.4
	28.3	24.9	32.5

During the year the Group disposed of assets with a net book value of £11.0m (2013: £14.6m, 2012: £0.6m). The profits and losses arising on disposal were £1.6m loss (2013: £0.1m profit, 2012: £0.1m loss) and are all included within Administrative and selling expenses.

Assets classified as held for sale

In relation to the Group's significant ship assets, a sale is considered to be highly probable when a conditional contract for sale has been signed with a buyer and the terms and conditions in the contract have been fulfilled. During the year ended 31 January 2012 the Group transferred its cruise ship, Spirit of Adventure, from property, plant and equipment to assets held for sale at fair value. The cruise ship was disposed for net proceeds of £9.0m in May 2012.

14 Financial assets and financial liabilities

a. Financial assets

Fair value through profit or loss	2014 £'m	2013 £'m	2012 £'m
Foreign exchange forward contracts	–	2.9	1.9
Fuel oil swaps	–	0.8	1.4
Loan funds	13.0	–	–
Hedge funds	13.1	–	–
	26.1	3.7	3.3
Loans and receivables
Deposits with financial institutions	465.8	433.1	387.0
Amounts owed by parent undertaking	1,030.7	1,727.2	1,513.2
Amounts owed by AA Group	0.4	19.4	14.2
	1,496.9	2,179.7	1,914.4
Available-for-sale investments
Debt securities	51.2	70.6	80.5
Money market funds	107.5	165.7	171.5
	158.7	236.3	252.0
Total financial assets	1,681.7	2,419.7	2,169.7
Current	1,600.6	2,360.7	1,850.0
Non-current	81.1	59.0	319.7
	1,681.7	2,419.7	2,169.7

Available-for-sale investments and deposits with financial institutions relate to monies held by the Group's insurance business and are subject to contractual restrictions and are not readily available to be used for other purposes within the Group.

Whilst fixed / floating interest securities investments could be realised at short notice, it is anticipated that they will be held until maturity.

14 Financial assets and financial liabilities (continued)

b. Financial liabilities

	2014 £'m	2013 £'m	2012 £'m
Fair value through profit or loss
Derivative liabilities not designated as hedges
Foreign exchange forward contracts	7.2	1.1	3.3
Fuel oil swaps	0.9	0.3	0.4
	8.1	1.4	3.7
Loans and borrowings
Obligations under finance leases and hire purchase	0.6	1.9	3.8
Bank overdrafts	5.2	7.7	6.9
Amounts owed to parent undertaking	1,779.9	1,661.8	1,600.9
Amounts owed to AA Group	4.6	1,285.8	1,070.3
	1,790.3	2,957.2	2,681.9
Total financial liabilities	1,798.4	2,958.6	2,685.6
Current	1,797.5	2,957.7	2,682.8
Non-current	0.9	0.9	2.8
	1,798.4	2,958.6	2,685.6

c. Fair Values

Financial instruments held at fair value are valued using quoted market prices or other valuation techniques.

Valuation techniques include net present value and discounted cash flow models, and comparison to similar instruments for which market observable prices exist. Assumptions and market observable inputs used in valuation techniques include foreign currency exchange rates and future oil prices.

The objective of using valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date which would have been determined by market participants acting at arm's length.

Observable prices are those that have been seen either from counterparties or from market pricing sources including Bloomberg. The use of these depends upon the liquidity of the relevant market.

The fair value and carrying value of financial assets and financial liabilities are materially same. Financial instruments held at fair value have been categorised into a fair value measurement hierarchy as follows:

Level 1

These are valuation techniques that are based entirely on quoted market prices in an actively traded market and are the most reliable.

All money market funds and debt securities are categorised as Level 1 as the fair value is obtained directly from the quoted market price.

Level 2

These are valuation techniques for which all significant inputs are taken from observable market data. These include valuation models used to calculate the present value of expected future cash flows and may be employed either when no active market exists or when there are quoted prices available for similar instruments in active markets. The models incorporate various inputs including the credit quality of counterparties, interest rate curves and forward rate curves of the underlying instrument.

All the derivative financial instruments are categorised as Level 2 as the fair values are obtained from the counterparty, brokers or valued using observable inputs. Where material, CVA / DVA risk adjustment is factored into the fair values of these instruments. As at 31 January 2014, the marked-to-market values of derivative assets are net of a credit valuation adjustment attributable to derivative counter-party default risk.

The fair values are periodically reviewed by the treasury committee.

14 Financial assets and financial liabilities (continued)

Level 3

These are valuation techniques for which any one or more significant inputs are not based on observable market data. There are no level 3 instruments in the Group as at 31 January 2014, 31 January 2013 or 31 January 2012.

The following tables provide the quantitative fair value hierarchy of the Group's financial assets and financial liabilities:

At 31 January 2014:

		Fair value measurement using
	Total £'m	Quoted prices in active markets (Level 1) £'m	Significant observable inputs (Level 2) £'m	Significant unobservable inputs (Level 3) £'m
Financial assets measured at fair value
Loan funds	13.0	–	13.0	–
Hedge funds	13.1	–	13.1	–
Available-for-sale financial assets
Debt securities	51.2	51.2	–	–
Money market funds	107.5	–	107.5	–
Financial liabilities measured at fair value Derivative financial liabilities Foreign exchange forward contracts	7.2	–	7.2	–
Fuel oil swaps	0.9	–	0.9	–
Assets for which fair values are disclosed Loans and receivables
Deposits with financial institutions	465.8	–	465.8	–
Amounts owed by parent undertaking	1,030.7	–	1,030.7	–
Amounts owed by AA Group	0.4	–	0.4	–
Liabilities for which fair values are disclosed
Loans and borrowings
Obligations under finance leases and hire purchase contracts	0.6	–	0.6	–
Bank overdrafts	5.2	–	5.2	–
Amounts owed to parent undertaking	1,779.9	–	1,779.9	–
Amounts owed to and AA Group	4.6	–	4.6	–

There have been no transfers between Level 1 and Level 2 and no non-recurring fair value measurements of assets and liabilities during the year.

14 Financial assets and financial liabilities (continued)

At 31 January 2013:

		Fair value measurement using
	Total £'m	Quoted prices in active markets (Level 1) £'m	Significant observable inputs (Level 2) £'m	Significant unobservable inputs (Level 3) £'m
Financial assets measured at fair value
Derivative financial assets
Foreign exchange forward contracts	2.9	–	2.9	–
Fuel oil swaps	0.8	–	0.8	–
Available-for-sale financial assets
Debt securities	70.6	70.6	–	–
Money market funds	165.7	–	165.7	–
Financial liabilities measured at fair value Derivative financial liabilities
Foreign exchange forward contracts	1.1	–	1.1	–
Fuel oil swaps	0.3	–	0.3	–
Assets for which fair values are disclosed Loans and receivables
Deposits with financial institutions	433.1	–	433.1	–
Amounts owed by parent undertaking	1,727.2	–	1,727.2	–
Amounts owed by AA Group	19.4	–	19.4	–
Liabilities for which fair values are disclosed
Loans and borrowings
Obligations under finance leases and hire purchase contracts	1.9	–	1.9	–
Bank overdrafts	7.7	–	7.7	–
Amounts owed to parent undertaking	1,661.8	–	1,661.8	–
Amounts owed to AA Group	1,285.8	–	1,285.8	–

There have been no transfers between Level 1 and Level 2 and no non-recurring fair value measurements of assets and liabilities during the year.

At 31 January 2012:

		Fair value measurement using
	Total £'m	Quoted prices in active markets (Level 1) £'m	Significant observable inputs (Level 2) £'m	Significant unobservable inputs (Level 3) £'m
Financial assets measured at fair value
Derivative financial assets
Foreign exchange forward contracts	1.9	–	1.9	–
Fuel oil swaps	1.4	–	1.4	–
Available-for-sale financial assets
Debt securities	80.5	80.5	–	–
Money market funds	171.5	–	171.5	–
Financial liabilities measured at fair value Derivative financial liabilities Foreign exchange forward contracts	3.3	–	3.3	–
Fuel oil swaps	0.4	–	0.4	–
Assets for which fair values are disclosed Loans and receivables
Deposits with financial institutions	387.0	–	387.0	–
Amounts owed by parent undertaking	1,513.2	–	1,513.2	–
Amounts owed by AA Group	14.2	–	14.2	–
Liabilities for which fair values are disclosed Loans and borrowings
Obligations under finance leases and hire purchase contracts	3.8	–	3.8	–
Bank overdrafts	6.9	–	6.9	–
Amounts owed to parent undertaking	1,600.9	–	1,600.9	–
Amounts owed to AA Group	1,070.3	–	1,070.3	–

There have been no transfers between Level 1 and Level 2 and no non-recurring fair value measurements of assets and liabilities during the year.

15 Financial risk management objectives and policies

The Group's principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations and to provide guarantees to support its operations. The Group's principal financial assets include debt securities, deposits with financial institutions, money market funds, loan funds and hedge funds. The Group also enters into derivative transactions such as foreign exchange forward contracts, fuel and gas oil swaps and interest rate swaps to manage its exposures to various risks.

The Group is exposed to market risk, credit risk, liquidity risk and insurance risk. The Group's senior management oversees the management of these risks, supported by the Group Treasury function and treasury committees within the key areas of the Group that advise on financial risks and the appropriate financial risk governance framework for the Group. The treasury committees ensures that the Group's financial risks are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Group's policies and risk objectives. All derivative activities are for risk management purposes and are carried out by the Group's Treasury function. It is the Group's policy that no trading in derivatives for speculative purposes may be undertaken.

The Group manages concentration risk, through a policy of diversification that is outlined in the Group Treasury Policy and approved by the Board. The policy defines the exposure limit to third party institutions based on the credit ratings of the individual counterparties, combined with the views of the Board. On a monthly basis, exposure to each counterparty is calculated and reported, and compliance with the policy is monitored.

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Group is exposed to the following market risk factors:

• foreign currency risk;
• commodity price risk; and
• interest rate risk.

The Group has policies and limits approved by the Board for managing the market risk exposure. These set out the principles that the business should adhere to for managing market risk and establishing the maximum limits the Group is willing to accept considering strategy, risk appetite and capital resources.

The Group has the ability to monitor market risk exposure on a daily basis and has established limits for each component of market risk.

The Group uses derivatives for hedging its exposure to foreign currency, fuel oil prices and interest rate risks. The market risk policy explicitly prohibits the use of derivatives for speculative purposes.

Foreign currency risk

Foreign currency risk is the risk that the fair value of future cash flows of a financial asset or liability will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense is denominated in a different currency from the Group's presentation currency) and the Group's net investments in foreign subsidiaries.

The Group uses foreign exchange forward contracts to manage the majority of its transaction exposures. The foreign exchange forward contracts are not formally designated as hedging instruments and are entered into for periods consistent with the foreign currency exposure of the underlying transactions, generally from one to 24 months. The foreign exchange forward contracts vary with the level of expected foreign currency sales and purchases.

The following table demonstrates the sensitivity of the fair value of forward exchange contracts to a 5% change in US Dollar and Euro exchange rates, with all other variables held constant. The Group's exposure to foreign currency changes for all other currencies is not material. The impact is shown net of tax at the current rate.

	Sensitivity of + / 5% rate change in	Effect on profit after tax and equity
2014	EUR	+ / £3.0m
	USD	+ / £2.5m
2013	EUR	+ / £2.8m
	USD	+ / £3.1m
2012	EUR	+ / £2.9m
	USD	+ / £3.1m

Commodity price risk

The Group is affected by the price volatility of certain commodities. Its operating activities require the ongoing purchase of fuel and gas oil to sail its cruise ships and therefore requires a continuous supply of fuel and gas oil. The volatility in the price of fuel and gas oil has led to the decision to enter into commodity fuel and gas oil swap contracts. These contracts are expected to reduce the volatility attributable to price fluctuations of fuel and gas oil. Managing the price volatility of forecast oil purchases is in accordance with the risk management strategy outlined by the Board of Directors.

The Group manages the purchase price using forward commodity purchase contracts based on a maximum 24-month forecast of the required fuel oil supply.

The following table shows the sensitivity of the fair value of fuel oil swaps to changes in the US Dollar exchange rate with all other variables held constant. The impact is shown net of tax at the current rate.

£/000	Sensitivity of + / 5% rate change in	Effect on profit after tax and equity
2014	USD	+ / £0.8m
2013	USD	+ / £1.1m
2012	USD	+ / £1.3m

Interest rate risk

Interest rate risk arises primarily from medium and long investments in fixed interest securities. The market value of these investments is affected by the movement in interest rates. This is managed by a policy of holding all investments to maturity by closely matching asset and liability duration.

It is also ensured that the investment portfolio has a diversified range of investments such that there is a combination of fixed and floating rate securities, as well as other types of investments such as RPI linked securities and property.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk in relation to its financial assets, outstanding derivatives and trade and other receivables. The Group assesses its counterparty exposure in relation to the investment of surplus cash, fuel oil and foreign currency contracts, and undrawn credit facilities. The Group primarily uses published credit ratings to assess counterparty strength and therefore to define the credit limit for each counterparty in accordance with approved treasury policies.

The credit risk in respect of trade and other receivables is limited as payment from customers is generally required before services are provided, with the exception of the Healthcare services products.

Credit risk in relation to deposits and derivative counterparties is managed by the Group's treasury department in accordance with the Group's policy. Investments of surplus funds are made only with approved counter-parties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed on a regular basis, and updated throughout the year subject to approval of the Group Board. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through any potential counter-party failure.

The Group's maximum exposure to credit risk for the components of the statement of financial position at 31 January 2014, 31 January 2013 and 31 January 2012 is the carrying amount except for derivative financial instruments. The Group's maximum exposure for financial guarantees and financial derivative instruments is noted under liquidity risk. None of the financial assets were impaired at the reporting date.

31 January 2014 £'m	AAA	AA	A	Unrated	Total
Debt securities	51.2	–	–	–	51.2
Money market funds	107.5	–	–	–	107.5
Deposits with financial institutions	29.0	120.0	310.3	6.5	465.8
Loan funds	–	–	–	13.0	13.0
Hedge funds	–	–	–	13.1	13.1
Reinsurance assets	–	13.1	10.8	0.8	24.7
Total	187.7	133.1	321.1	33.4	675.3
31 January 2013 £'m	AAA	AA	A	Unrated	Total
Debt securities	70.6	–	–	–	70.6
Money market funds	165.7	–	–	–	165.7
Deposits with financial institutions	29.4	105.4	298.3	–	433.1
Derivative assets	–	–	3.7	–	3.7
Reinsurance assets	–	9.1	9.4	0.1	18.6
Total	265.7	114.5	311.4	0.1	691.7
31 January 2012 £'m	AAA	AA	A	Unrated	Total
Debt securities	80.5	–	–	–	80.5
Money market funds	171.5	–	–	–	171.5
Deposits with financial institutions	–	216.9	170.1	–	387.0
Derivative assets	–	–	3.3	–	3.3
Reinsurance assets	–	7.3	6.8	32.6	46.7
Total	252.0	224.2	180.2	32.6	689.0

Liquidity risk

Liquidity risk is the risk that the group, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. The group's approach to managing liquidity risk is to evaluate current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and headroom on its revolving credit facility. The Group manages its obligations to pay claims to policyholders as they fall due by matching the maturity of investments to the expected maturity of claims payments.

The table below analyses the maturity of the group's financial liabilities on contractual undiscounted payments. The analysis of non-derivative financial liabilities is based on the remaining period at the reporting date to the contractual maturity date. The analysis of claims outstanding is based on the expected dates on which the claims will be settled.

31 January 2014 £'m	On demand	Less than 1 year	1 to 2 years	2-5 years	over 5 years	Total
Loans and borrowings	1,798.7	0.5	–	–	–	1,799.2
Insurance contract liabilities	–	173.1	92.6	170.5	92.9	529.1
Contingent consideration	–	–	–	–	–	–
Other financial liabilities	146.7	–	–	–	–	146.7
Trade and other payables	164.9	–	–	–	–	164.9
Derivative liabilities	–	7.3	0.8	–	–	8.1
	2,110.3	180.9	93.4	170.5	92.9	2,648.0

31 January 2013 £'m	On demand	Less than 1 year	1 to 2 years	2-5 years	over 5 years	Total
Loans and borrowings	2,955.3	1.5	0.5	–	–	2,957.3
Insurance contract liabilities	–	167.6	98.2	171.1	79.8	516.7
Contingent consideration	–	0.1	–	–	–	0.1
Other financial liabilities	142.6	–	–	–	–	142.6
Trade and other payables	171.1	–	–	–	–	171.1
Derivative liabilities	–	1.0	0.4	–	–	1.4
	3,269.0	170.2	99.1	171.1	79.8	3,789.2
31 January 2012 £'m	On demand	Less than 1 year	1 to 2 years	2-5 years	over 5 years	Total
Loans and borrowings	2,678.1	2.0	2.0	–	–	2,682.1
Insurance contract liabilities	–	164.6	84.0	149.6	75.4	473.6
Contingent consideration	–	6.1	–	–	–	6.1
Other financial liabilities	126.8	–	–	–	–	126.8
Trade and other payables	187.9	–	–	–	–	187.9
Derivative liabilities	–	2.8	0.9	–	–	3.7
	2,992.8	175.5	86.9	149.6	75.4	3,480.2

Insurance risk

Insurance risk arises from the inherent uncertainties as to the occurrence, cost and timing of insured events that could lead to significant individual or aggregated claims in terms of quantity or value. This could be for a number of reasons, including weather-related events, large individual claims, changes in claimant behaviour patterns such as increased levels of fraudulent activities, the use of periodic payment orders ("PPOs"), prospective or retrospective legislative changes, unresponsive and inaccurate pricing or reserving methodologies and the deterioration in the Group's ability to effectively and efficiently handle claims while delivering excellent customer service.

The Group manages insurance risk within its risk management framework as set out by the Board. The key policies and processes of mitigating these risks have been implemented which include underwriting partnership arrangements, reinsurance and excess of loss contracts, pricing policies and claims management and administration policies.

Underwriting and pricing risk

The Group primarily underwrites motor insurance for private cars in the UK. The book consists of a large number of individual risks which are widely spread geographically which helps to minimise concentration risk. The Group has controls in place to restrict access to its products to only those risks it wishes to underwrite.

The Group has management information to allow it to monitor underwriting performance on a continuous basis and the ability to make pricing and underwriting changes quickly. The Group undertakes detailed statistical analyses of underwriting experience for each rating factor and combinations of rating factors to enable it to adjust pricing for emerging trends.

Reserving risk

Reserving risk is the risk that insufficient funds have been set aside to settle claims as they fall due. The Group undertakes regular internal actuarial reviews and commissions external actuarial reviews at least once a year. These reviews estimate the future liabilities in order to consider the adequacy of the provisions.

Claims which are subject to PPOs are a significant source of uncertainty in the claims reserves. Cash flow projections are undertaken for PPO claims to estimate the gross and net of reinsurance provisions required. For PPOs, the provisions are discounted for future investment returns.

An important source of uncertainty is the risk of future legislative changes affecting bodily injury awards including the ongoing Ministry of Justice review of the discount rate.

Reinsurance

The Group purchases reinsurance to reduce the impact of individual large losses or accumulations from a single catastrophe event. The Group purchases individual excess of loss protections for the motor portfolio

to limit the impact of a single large claim. Similar protections are in place for all years for which the Group has written motor business. The Group has quota share reinsurance in place for AA branded motor business for drivers aged under 50.

Reinsurance recoveries on individual excess of loss protections can take many years to collect, particularly if a claim is subject to a PPO. This means that the Group has exposure to reinsurance credit risk for many years. Reinsurers are therefore required to have strong credit ratings and their financial health is regularly monitored.

Sensitivities

The following table demonstrates the impact on profit and loss and equity of a 1 percentage point variation in the recorded loss ratio at 31 January 2014, 31 January 2013 and 31 January 2012. The impact of a 1% change in claims outstanding is also shown at the same dates. The impact is shown net of reinsurance and tax at the current rate.

	2014	2013	2012
Impact of 1 percentage point change in loss ratio	+ /	+ /	+ /
	£2.8m	£3.2m	£3.1m
Impact of 1% change in claims outstanding	+ /	+ /	+ /
	£3.9m	£3.8m	£3.2m

Operational risk

Effective operational risk management requires the Group to identify, assess, manage, monitor, report and mitigate all areas of exposure. The Group operates across a range of segments and operational risk is inherent in all of the Group's products and services, arising from the operation of assets, from external events and dependencies, and from internal processes and systems.

All of the Group's operations are dependent on the proper functioning of its IT and communication systems; on its properties and other infrastructure assets; on the need to adequately maintain and protect customer and employee data and other information; and on the ability of the Group to attract and retain staff. Specific areas of operational risk by segment include:

Financial services

The Financial Services segment is required to comply with various operational regulatory requirements primarily in the UK but also within Gibraltar for its underwriting business. To the extent that significant external events could increase the incidence of claims, these would place additional strain on the claims handling function but any financial impact of such an event is considered to be an insurance risk.

Travel

The Travel segment operates two cruise ships which are the Group's largest trading assets. Risk to the operation of these cruise ships arises from the impact of mechanical or other malfunction, non-compliance with regulatory requirements, and from global weather and socio-economic events. The tour holidays operated by the segment are also affected by global weather and socio-economic events which impact either the Group directly or its suppliers.

Healthcare services

The Healthcare segment provides a range of domiciliary and non-domiciliary, medical and non-medical services to a range of customers, clients and other end-users. Risk to the operation of these services arises mainly from the availability of appropriately-skilled staff to deliver the level and standard of care required by the end-user, and from the clinical oversight of the delivery of these services.

The Group manages its operational risk through the risk management framework agreed by the Board, and through the use of risk management tools which together ensure that operational risks are identified, managed and mitigated to the level accepted, and that contingency processes and disaster recovery plans are in place. Regular reporting is undertaken to segment Boards and includes details of new and emerging risks, as well as monitoring of existing risks. Testing of contingency processes and disaster recovery plans is undertaken to ensure the effectiveness of these processes.

16 Interests in unconsolidated structured entities

A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant activities are directed by means of contractual agreements. The Group has interests in unconsolidated structured entities as described below:

• Investment funds in the form of hedge funds
• Investment funds in the form of bank loan funds
• Investment funds in the form of money market funds.

The nature and purpose of the hedge and bank loan funds is to diversify the assets held within the investment portfolio and enhance the overall yield, whilst maintaining an acceptable level of risk for the portfolio as a whole.

The nature and purpose of the money market funds is to provide maximum security and liquidity for the funds invested whilst also providing an adequate return.

The total values of the funds in which the group has investments are:

	Value £bn
Loan funds	2.7
Hedge funds	8.3
Money market funds	54.1

The primary activity of the hedge funds is to invest in a wide range of securities and markets, and the funds may take a variety of positions in these markets. Bank loan funds invest in secured loans to companies rated below investment grade.

The money market funds used by the group are all members of the International Money Market Funds Association (IMMFA). They are thus required to maintain specified liquidity and diversification characteristics of their underlying portfolios which comprise investment grade investments in financial institutions.

The Group invests in unconsolidated structured entities as part of its investment activities. The Group does not sponsor any of the unconsolidated structured entities.

As at 31 January 2014 the Group's total interest in unconsolidated structured entities was £133.6m analysed as follows:

	Carrying value £m	Interest income £m	Fair value gains £m
Loan Funds	13.0	–	0.1
Hedge Funds	13.1	–	0.1
Money Market Funds	107.5	–	–

The Group's maximum exposure to loss on the interests presented above is the carrying amount of the Group's investments.

17 Inventories

	2014 £'m	2013 £'m	2012 £'m
Raw materials	1.0	2.2	2.4
Finished goods	3.8	4.2	2.9
	4.8	6.4	5.3

18 Trade and other receivables

	2014 £'m	2013 £'m	2012 £'m
Trade receivables	160.2	186.1	182.5
Other receivables	30.7	35.8	29.1
Other taxes and social security costs	3.0	5.3	5.4
	193.9	227.2	217.0

18 Trade and other receivables (continued)

The ageing analysis of trade receivables is as follows:

			Past due but not impaired
	Total £'m	Neither past due nor impaired £'m	< 30 days £'m	30 – 60 days £'m	£'m	61 – 90 days 91 – 120 days £'m	> 120 days £'m
2014	160.2	135.1	7.1	2.9	1.8	1.6	11.7
2013	186.1	154.1	13.1	5.3	3.4	3.3	6.9
2012	182.5	159.1	8.2	3.0	2.3	1.7	8.2

As at 31 January 2014, impairment provisions totalling £9.0m (2013: £10.3m, 2012: £8.9m) were made against trade receivables with an initial value of £169.2m (2013: £196.4m, 2012: £191.4m). The movements in the provision for impairment of receivables are as follows:

	Individually impaired £'m	Collectively impaired £'m	Total £'m
At 1 February 2011	0.2	7.1	7.3
Acquired with subsidiaries	0.6	0.6	1.2
Charge for the year	0.2	7.3	7.5
Unused amounts reversed	(0.2)	(6.9)	(7.1)
At 31 January 2012	0.8	8.1	8.9
Charge for the year	0.6	8.3	8.9
Unused amounts reversed	(0.2)	(7.3)	(7.5)
At 31 January 2013	1.2	9.1	10.3
Charge for the year	0.4	7.0	7.4
Unused amounts reversed	(0.9)	(7.8)	(8.7)
At 31 January 2014	0.7	8.3	9.0

See note 15 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

19 Prepayments and other assets

	2014 £'m	2013 £'m	2012 £'m
Prepayments	13.8	19.2	19.0
Deferred acquisition costs	8.7	9.7	12.1
	22.5	28.9	31.1

20 Cash and short term deposits

	2014 £'m	2013 £'m	2012 £'m
Cash at bank and in hand	52.4	22.3	22.2
Short term deposits	98.9	428.7	210.3
Cash and short term deposits	151.3	451.0	232.5
Money markets funds	107.5	165.7	171.5
Bank overdraft	(5.2)	(7.7)	(6.9)
Cash and cash equivalents in the cash flow statement	253.6	609.0	397.1

Included within cash and short term deposits are amounts held by the Group's travel and insurance businesses which are subject to contractual or regulatory restrictions. These amounts held are not readily available to be used for other purposes within the Group and total £66.8m (2013: £50.3m, 2012: £61.9m).

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

21 Pensions

The Group operates pension benefits for the employees of the Group consisting of defined contribution plans and defined benefit plans.

Defined contribution plans:

There are a number of defined contribution schemes in the Group. The total charge for the year in respect of the defined contribution schemes was £0.9m (2013: £0.7m, 2012: £0.7m).

The assets of these schemes are held separately from those of the Group in funds under the control of trustees.

Defined benefit plans:

The Group operates three funded defined benefit schemes. Two of these schemes, the Nestor Healthcare Group Retirement Benefits Scheme and the Healthcall Group Limited Pension Scheme ("Nestor schemes") provide benefits based on final salary and are closed to new members. The Saga Pension Scheme ("Saga scheme") is open to new members who accrue benefits on a career average salary basis. The assets of all schemes are held separately from those of the Group in independently administered funds.

These plans are governed by the employment laws of the UK, which require final salary payments to be adjusted for the consumer price index once in payment during retirement. The level of benefits provided depends on the member's length of service and salary at retirement age. The defined benefit pension plan requires contributions to be made to a separately administered fund. The fund is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy.

The long-term investment objectives of the Trustees and the Group are to limit the risk of the assets failing to meet the liabilities of the schemes over the long term, and to maximise returns consistent with an acceptable level of risk so as to control the long-term costs of the schemes. To meet those objectives, each scheme's assets are invested in different categories of assets, with different maturities designed to match liabilities as they fall due. The investment strategy will continue to evolve over time and is expected to match to the liability profile increasingly closely. The pension liability is exposed to inflation rate risks and changes in the life expectancy for pensioners. As the plan assets include investments in quoted equities, the Group is exposed to equity market risk.

The fair value of the assets and present value of the obligations of the defined benefit schemes are as follows:

At 31 January 2014

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Fair value of scheme assets	171.2	48.3	219.5
Present value of defined benefit obligation	(186.1)	(57.7)	(243.8)
Defined benefit scheme liability	(14.9)	(9.4)	(24.3)

At 31 January 2013

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Fair value of scheme assets	160.8	44.2	205.0
Present value of defined benefit obligation	(160.8)	(56.8)	(217.6)
Defined benefit scheme asset / (liability)	–	(12.6)	(12.6)

At 31 January 2012

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Fair value of scheme assets	146.0	40.6	186.6
Present value of defined benefit obligation	(145.1)	(49.6)	(194.7)
Defined benefit scheme asset / (liability)	0.9	(9.0)	(8.1)

The valuations used have been based on a full assessment of the liabilities of the schemes. The present values of the defined benefit obligation, the related current service cost and any past service costs were measured using the projected unit credit method.

The Nestor schemes were acquired on 1 February 2011 as part of the acquisition of the Nestor Healthcare group.

The following table summarises the components of the net benefit expense recognised in the income statement and amounts recognised in the statement of financial position for the Schemes for the year ended 31 January 2014:

	Saga Scheme			Nestor Schemes			Total
	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme liability £'m	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme liability £'m	Defined benefit scheme liability £'m
1 February 2013	160.8	(160.8)	–	44.2	(56.8)	(12.6)	(12.6)
Pension cost charge to income statement
Service cost	–	(5.0)	(5.0)	–	(0.1)	(0.1)	(5.1)
Net interest	7.6	(7.5)	0.1	2.1	(2.6)	(0.5)	(0.4)
Sub-total included in income statement	7.6	(12.5)	(4.9)	2.1	(2.7)	(0.6)	(5.5)
Re-measurement gains/(losses) in OCI Benefits paid Return on plan assets (excluding	(2.9)	2.9	–	(1.8)	1.8	–	–
amounts included in net interest expense)	(1.2)	–	(1.2)	0.3	–	0.3	(0.9)
Actuarial changes arising from changes in demographic assumptions	–	(6.0)	(6.0)	–	–	–	(6.0)
Actuarial changes arising from changes in financial assumptions	–	(9.6)	(9.6)	–	(2.8)	(2.8)	(12.4)
Experience adjustments	–	–	–	–	2.9	2.9	2.9
Sub-total included in OCI	(4.1)	(12.7)	(16.8)	(1.5)	1.9	0.4	(16.4)
Contributions by employer	6.9	(0.1)	6.8	3.4	–	3.4	10.2
31 January 2014	171.2	(186.1)	(14.9)	48.2	(57.6)	(9.4)	(24.3)

The following table summarises the components of the net benefit expense recognised in the income statement and amounts recognised in the statement of financial position for the Schemes for the year ended 31 January 2013:

	Saga Scheme			Nestor Schemes			Total
	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme asset £'m	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme liability £'m	Defined benefit scheme liability £'m
1 February 2012	146.0	(145.1)	0.9	40.6	(49.6)	(9.0)	(8.1)
Pension cost charge to income statement
Service cost Net interest	– 6.8	(4.7) (6.7)	(4.7) 0.1	– 2.0	(0.1) (2.3)	(0.1) (0.3)	(4.8) (0.2)
Sub-total included in income statement	6.8	(11.4)	(4.6)	2.0	(2.4)	(0.4)	(5.0)
Re-measurement gains/(losses) in OCI
Benefits paid Return on plan assets (excluding amounts included in net interest	(2.3)	2.3	–	(2.9)	2.9	–	–
expense) Actuarial changes arising from changes in demographic assumptions	– –	– –	– –	1.2 –	– (2.9)	1.2 (2.9)	1.2 (2.9)
Actuarial changes arising from changes in financial assumptions Experience adjustments	– 3.6	(6.5) –	(6.5) 3.6	– –	(0.7) –	(0.7) –	(7.2) 3.6
Sub-total included in OCI Adjustment to fair value on acquisition	1.3	(4.2)	(2.9)	(1.7)	(0.7)	(2.4)	(5.3)
of subsidiaries Contributions by employer	– 6.7	– (0.1)	– 6.6	– 3.3	(4.1) –	(4.1) 3.3	(4.1) 9.9
31 January 2013	160.8	(160.8)	–	44.2	(56.8)	(12.6)	(12.6)

The following table summarises the components of the net benefit expense recognised in the income statement and amounts recognised in the statement of financial position for the Schemes for the year ended 31 January 2012:

	Saga Scheme		Nestor Schemes			Total
	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme asset £'m	Fair value of scheme assets £'m	Defined benefit obligation £'m	Defined benefit scheme liability £'m	Defined benefit scheme liability £'m
1 February 2011	126.4	(119.2)	7.2	–	–	–	7.2
Pension cost charge to income statement
Service cost	–	5.1	5.1	–	(0.1)	(0.1)	5.0
Net interest	7.4	(6.9)	0.5	2.1	(2.4)	(0.3)	0.2
Sub-total included in income statement	7.4	(1.8)	5.6	2.1	(2.5)	(0.4)	5.2
Re-measurement gains/(losses) in OCI
Benefits paid	(2.5)	2.5	–	(1.9)	1.9	–	–
Return on plan assets (excluding amounts included in net interest expense)	–	–	–	(1.8)	–	(1.8)	(1.8)
Actuarial changes arising from changes
in demographic assumptions	–	(1.0)	(1.0)	–	–	–	(1.0)
Actuarial changes arising from changes
in financial assumptions	–	(18.4)	(18.4)	–	(4.5)	(4.5)	(22.9)
Experience adjustments	7.6	(7.1)	0.5	–	0.2	0.2	0.7
Sub-total included in OCI	5.1	(24.0)	(18.9)	(3.7)	(2.4)	(6.1)	(25.0)
Acquisition of subsidiaries	–	–	–	38.9	(44.7)	(5.8)	(5.8)
Contributions by employer	7.1	(0.1)	7.0	3.3	–	3.3	10.3
31 January 2012	146.0	(145.1)	0.9	40.6	(49.6)	(9.0)	(8.1)

The major categories of plan assets are as follows:

At 31 January 2014

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Equities	48.9	24.7	73.6
Government bonds	63.0	–	63.0
Corporate bonds	23.3	20.3	43.6
Property	17.1	–	17.1
Insurance policies	–	3.0	3.0
Cash and other	18.9	0.2	19.1
Total	171.2	48.2	219.1

Equities, Government bonds and Corporate bonds are all quoted in active markets whilst Property and Insurance policies are not.

At 31 January 2013

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Equities	60.1	22.2	82.3
Government bonds	60.9	–	60.9
Corporate bonds	22.2	18.9	41.1
Property	15.5	–	15.5
Insurance policies	–	2.6	2.6
Cash and other	2.1	0.5	2.6
Total	160.8	44.2	205.0

Equities, Government bonds and Corporate bonds are all quoted in active markets whilst Property and Insurance policies are not.

At 31 January 2012

	Saga scheme £'m	Nestor schemes £'m	Total £'m
Equities	50.6	21.6	72.2
Government bonds	59.9	–	59.9
Corporate bonds	20.5	15.9	36.4
Property	13.7	–	13.7
Insurance policies	–	2.6	2.6
Cash and other	1.3	0.5	1.8
Total	146.0	40.6	186.6

Equities, Government bonds and Corporate bonds are all quoted in active markets whilst Property and Insurance policies are not.

The principal assumptions used in determining pension benefit obligations for both the Saga scheme and Nestor Schemes are shown below:

	2014	2013	2012
Real rate of increase in salaries	0.0%	0.0%	0.0%
Real rate of increase of pensions in payment	0.0%	0.0%	0.0%
Real rate of increase of pensions in deferment	0.0%	0.0%	0.0%
Discount rate – Pensioner	4.1%	4.7%	4.6% - Saga,
			4.7% - Nestor
Discount rate – Non pensioner	4.5%	4.7%	4.6% - Saga,
			4.7% - Nestor
Inflation – Pensioner	3.2%	3.4%	3.0%
Inflation – Non pensioner	3.4%	3.4%	3.0%

Mortality assumptions are set using standard tables based on scheme specific experience where available. Each scheme's mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The Saga scheme assumptions is that a member currently aged 65 will live on average for a further 23.9 years if they are male. The Nestor scheme assumption is that an active male retiring in normal health currently aged 65 will live on average for a further 22.9 years.

A quantitative sensitivity analysis for significant assumptions as at 31 January 2014 and their impact on the net defined benefit obligation is as follows:

Assumptions	Discount rate		Future inflation		Life expectancy	Future salary
Sensitivity		+ / - 0.5%		+ / - 0.5%		+ / - 0.5%
	Increase	Decrease	Increase	Decrease
Impact £m	(26.4)	30.9	10.5	(18.3)	+ / - 5.8	+ / - 0.1

Note: a negative impact represents an increase in the net defined benefit liability.

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method has been applied as when calculating the pension liability recognised within the statement of financial position.

For the Saga scheme, the expected contribution to the plan for the next year is £6.8m and average duration of the defined benefit plan obligation at the end of the reporting period is 26 years. For the Nestor schemes, the expected contribution to the plan for the next year is £3.5m and average duration of the defined benefit plan obligation at the end of the reporting period is 17 years.

Formal actuarial valuations take place every three years for each Scheme. The assumptions adopted for actuarial valuations are determined by the Trustee and are agreed with the Group and are normally more prudent than the assumptions adopted for IAS19 purposes, which are best estimate. Where a funding deficit is identified, the Group and the Trustee may agree a deficit recovery plan.

The latest valuations of the three schemes were at 31 January 2011 for the Saga Scheme, 5 April 2012 for the Nestor Healthcare Group Retirement Benefits Scheme, and 31 October 2012 for the Healthcall Group Limited Pension Scheme. Further to these valuations, recovery plans put in place for the Nestor schemes following the previous valuations were extended.

Under the agreed recovery plans, the Group made additional payments totalling £3.2m during the year ended 31 January 2014 to the Nestor schemes, and will make payments totalling a further £22.4m over the next 7 years, with the last payment being made by 5 April 2020. Additional payments totalling £3.4m will be made during the year ending 31 January 2015.

22 Insurance contract liabilities and reinsurance assets

Analysis of recognised amounts

	2014 £'m	2013 £'m	2012 £'m
Gross
Claims outstanding	529.1	516.7	473.6
Provision for unearned premiums	161.4	178.9	202.8
Total gross insurance liabilities	690.5	695.6	676.4
	2014 £'m	2013 £'m	2012 £'m
Recoverable from reinsurers
Claims outstanding	20.5	16.1	44.4
Provision for unearned premiums	4.2	2.5	2.3
Total reinsurers' share of insurance liabilities	24.7	18.6	46.7
	2014 £'m	2013 £'m	2012 £'m
Net
Claims outstanding	508.6	500.6	429.2
Provision for unearned premiums	157.2	176.4	200.5
Total net insurance liabilities	665.8	677.0	629.7

22 Insurance contract liabilities and reinsurance assets (continued)

Reconciliation of movements in claims outstanding

	2014	2013	2012
	£'m	£'m	£'m
Gross claims outstanding at 1 February	516.7	473.6	388.6
Less: reinsurance claims outstanding	(16.1)	(44.4)	(49.0)
Net claims outstanding at 1 February	500.6	429.2	339.6
Gross claims incurred	242.6	291.3	330.6
Less: reinsurance recoveries	(5.6)	(4.3)	(29.0)
Net claims incurred (note 4b)	237.0	287.0	301.6
Gross claims paid	(230.2)	(248.2)	(245.6)
Less: received from reinsurance	1.2	32.6	33.6
Net claims paid	(229.0)	(215.6)	(212.0)
Gross claims outstanding at 31 January	529.1	516.7	473.6
Less: reinsurance claims outstanding	(20.5)	(16.1)	(44.4)
Net claims outstanding at 31 January	508.6	500.6	429.2

Reconciliation of movements in the provision for net unearned premiums

	2014	2013	2012
	£'m	£'m	£'m
Gross unearned premiums at 1 February	178.9	202.8	188.8
Less: unearned reinsurance premiums	(2.5)	(2.3)	(2.2)
Net unearned premiums at 1 February	176.4	200.5	186.6
Gross premiums written	358.2	400.8	442.2
Less: outward reinsurance premium	(8.4)	(5.3)	(30.5)
Net premiums written	349.8	395.5	411.7
Gross premiums earned	(375.7)	(424.7)	(428.2)
Less reinsurance premium earned	6.7	5.1	30.4
Net premiums earned (note 4a)	(369.0)	(419.6)	(397.8)
Gross unearned premiums at 31 January	161.4	178.9	202.8
Less: unearned reinsurance premiums	(4.2)	(2.5)	(2.3)
Net unearned premiums at 31 January	157.2	176.4	200.5

The total loss on purchasing reinsurance in 2014 was £1.1m (2013: £0.8m loss; 2012: £1.4m loss)

Analysis of Net Claims Incurred: Claims development tables

The following table details the Group's initial estimate of ultimate net claims incurred over the past five years and the re-estimation at subsequent financial period ends. The table details the net incurred claims (net of reinsurance recoveries) on an accident year basis.

		Financial Year ended 31 January
		2010 £'m	2011 £'m	2012 £'m	2013 £'m	2014 £'m	Total £'m	Claims	Claims Paid Outstanding
	2009 and earlier	(5.5)	–	(9.2)	(11.0)	(1.2)			47.5
Accident Year	2010 2011 2012	202.1	– 266.0	(4.3) (2.8) 302.3	(4.0) (5.2) (25.6)	(5.5) (4.6) (31.1)	188.3 253.4 245.6	(158.9) (188.0) (174.2)	29.4 65.4 71.4
	2013 2014				315.4	(14.6) 276.8	300.8 276.8	(174.1) (117.3)	126.7 159.5
	Claims handling	196.6	266.0	286.0	269.6	219.8			499.9
	costs Net claims	9.0	10.3	15.6	17.4	17.2			8.7
	incurred	205.6	276.3	301.6	287.0	237.0			508.6

22 Insurance contract liabilities and reinsurance assets (continued)

The development of the associated loss ratios on the same basis is as follow:

			Financial Year ended 31 January
		2010 £'m	2011 £'m	2012 £'m	2013 £'m	2014 £'m
Accident Year	2010 2011 2012 2013 2014	73%	73% 78%	72% 78% 76%	70% 76% 70% 76%	68% 75% 62% 72% 75%

23 Provisions

	Property			Property
	Leases £'m	Dilapidations £'m	Other £'m	Total £'m
At 1 February 2011	–	–	1.2	1.2
Acquired with subsidiaries	4.3	1.8	0.6	6.7
Utilised during the year	(1.2)	(0.1)	(0.4)	(1.7)
Unwinding of discount rate	0.3	–	–	0.3
Charge for the year	0.1	0.3	0.2	0.6
At 31 January 2012	3.5	2.0	1.6	7.1
Utilised during the year	(2.0)	(0.3)	(0.4)	(2.7)
Released unutilised during the year	(0.2)	(0.1)	(0.7)	(1.0)
Unwinding of discount rate	0.6	–	–	0.6
Charge for the year	1.7	0.3	3.3	5.3
At 31 January 2013	3.6	1.9	3.8	9.3
Utilised during the year	(1.3)	(0.3)	(1.3)	(2.9)
Released unutilised during the year	(0.2)	–	–	(0.2)
Unwinding of discount rate	0.1	–	–	0.1
Charge for the year	–	0.4	2.5	2.9
At 31 January 2014	2.2	2.0	5.0	9.2
Current	0.7	0.6	4.2	5.5
Non-current	1.5	1.4	0.8	3.7
At 31 January 2014	2.2	2.0	5.0	9.2
Current	0.8	0.2	3.7	4.7
Non-current	2.8	1.7	0.1	4.6
At 31 January 2013	3.6	1.9	3.8	9.3
Current	0.7	0.3	1.5	2.5
Non-current	2.8	1.7	0.1	4.6
At 31 January 2012	3.5	2.0	1.6	7.1

The property lease provision relates to future onerous lease costs of vacant properties for the remaining period of each lease, net of expected sub-letting income. This provision relates to sites acquired with the Healthcare acquisitions in the year ended 31 January 2012. These sums are expected to be paid out annually over the next 15 years. The provision has been calculated on a pre-tax discounted basis. The property dilapidations provision relates to future costs anticipated to be utilised at the end of the leases on these properties.

Other provisions primarily comprise claims in respect of clinical incidents, provisions for the return of insurance commission in respect of policies cancelled mid-term after the reporting date, credit hire claims handling provision, and fleet insurance at the estimated cost of settling all outstanding incidents at the reporting date. These items are reviewed and updated annually.

24 Other liabilities

	2014	2013	2012
	£'m	£'m	£'m
Advance receipts	99.3	103.6	90.8
Deferred revenue	9.8	10.7	14.5
Government grants	–	1.9	2.0
Other liabilities	4.1	4.5	4.3
	113.2	120.7	111.6
Current	108.8	114.0	104.4
Non-current	4.4	6.7	7.2
	113.2	120.7	111.6

Advance receipts comprises amounts received within the Travel segment for holidays and cruises with departure dates after the reporting date, and insurance premiums and sales revenues received in the Financial Services segment in respect of insurance policies which commence after the reporting date.

Deferred revenue represents the unearned elements of revenue relating to the Media and central costs segment. The amount comprises subscriptions for magazines to be delivered after the reporting date and revenue for advertising to be included after the reporting date.

25 Trade and other payables

	2014 £'m	2013 £'m	2012 £'m
Trade payables	92.1	96.7	98.9
Other taxes and social security costs	12.3	12.8	14.1
Other payables	16.3	13.7	24.6
Accruals	44.2	47.9	50.3
	164.9	171.1	187.9

All trade and other payables are current in nature.

26 Commitments and contingencies

Operating lease commitments – Group as lessee

The Group has entered into commercial leases on certain land and buildings and plant and machinery. There are no restrictions placed upon the Group by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 31 January are as follows:

	Land and Buildings			Plant and Machinery
	2014 £'m	2013 £'m	2012 £'m	2014 £'m	2013 £'m	2012 £'m
Within one year	4.2	4.2	2.6	0.5	0.6	0.6
Between one and five years	8.5	8.5	6.8	0.3	0.6	0.6
After five years	21.5	9.8	11.9	–	–	–
	34.2	22.5	21.3	0.8	1.2	1.2

Finance lease and hire purchase commitments

The Group has finance leases and hire purchase contracts for various items of plant and machinery. These leases have terms of renewal and no purchase options. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance leases and hire purchase contracts together with the present values of the net minimum lease payments are as follows:

	2014 £'m	2013 £'m	2012 £'m
Within one year	0.5	1.5	2.0
Between one and five years	0.1	0.5	2.0
After five years	–	–	–
Total minimum lease payments	0.6	2.0	4.0
Less amounts representing finance charge	–	(0.1)	(0.2)
Present value of minimum lease payments	0.6	1.9	3.8

26 Commitments and contingencies (continued)

Commitments

The Group's capital amounts contracted for but not provided in the financial statements amounted to £nil (2013: £0.1m, 2012: £6.1m).

Cross company guarantees

Certain key trading subsidiaries of the Group act as Obligor on bank loans made to Acromas Mid Co Limited, an intermediate parent company. At the reporting date, the principal, accrued interest, guarantees and other facilities outstanding on these bank loans was £1,295.8m (2013: £5,132.1m, 2012: £5,098.2m).

On 25 April 2014, the Group entered into new debt financing arrangements and the bank loans held by Acromas Mid Co Limited were repaid (see note 31). Further to this repayment, the obligations of the key trading subsidiaries of the Group in respect of those bank loans have been discharged. Guarantees and other facilities totalling £39.5 million issued against the Acromas Mid Co Limited revolving credit facility which relate to the Group are in the process of being moved across to the revolving credit facility associated with the new Senior Facilities Agreement.

27 Related party transactions

The following table provides the total value of transactions that have been entered into with related parties during each financial year.

	2014	2013	2012
	£'m	£'m	£'m
Sales to the AA group
Insurance underwriting related	52.7	52.7	63.1
Non insurance underwriting related	10.4	13.6	13.3
Purchases from the AA group
Insurance underwriting related	14.8	16.6	12.4
Non insurance underwriting related	0.8	1.0	0.7
Reinsurance transactions with the AA group
Reinsurance premium payments	0.8	–	25.8
Reinsurance claims receipts	0.3	6.2	32.7
Receipts from / (payments to) related parties
Parent undertaking	814.7	(153.1)	(144.2)
AA group	(1,262.2)	209.6	256.7

Details of amounts owed to and by related parties can be found in note 14.

The receipts from the AA group arise in part as a result of cash balances being swept centrally by Acromas treasury in order to efficiently manage all of the cash balances of the Acromas Group.

The amounts owed to / by parent undertakings and the AA group are unsecured, have no repayment terms and bear no interest. On 2 July 2013 amounts owed to the AA group were settled in full. Subsequent to the reporting date, the net amount owed to the parent undertaking were settled in full (see note 31).

Compensation of key management personnel of the Group

The amounts recognised as an expense during the financial year in respect of key management personnel are as follows:

	2014 £'m	2013 £'m	2012 £'m
Short-term benefits	4.4	4.1	3.9
Termination payments	–	0.4	–
	4.4	4.5	3.9

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and comprise the Directors of the Company and the Chief Executive Officers of the major businesses within the trading segments.

28 Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

For the purposes of the Group's capital management, capital includes issued capital, share premium and all other capital reserves attributable to the equity holders of the parent. It also includes capital, share premium and all other capital reserves of any subsidiaries within the Group which are required to comply with any specific requirements in respect of its capital or other resources.

The Group operates in a number of regulated markets. Its Financial Services businesses are regulated primarily by the Financial Services Commission ('FSC') in Gibraltar and by the Financial Conduct Authority ('FCA') in the UK; and the capital requirements of its Travel businesses are regulated by the Civil Aviation Authority ('CAA') in the UK. It is the Group's policy to comply with the requirements of these regulators in respect of capital adequacy or other similar tests at all times.

No changes were made to the objectives, policies or processes for managing capital during the years ended 31 January 2014, 31 January 2013 or 31 January 2012, other than those driven from changes to the requirements of the various regulators.

The Group's regulated underwriting business is based in the Gibraltar and regulated by the FSC. The underwriting business is required to comply with various tests to ensure that it has a sufficient level of capitalisation. The FSC requires the underwriting business to hold solvency capital of at least twice the required minimum margin ('RMM'), and current levels are approximately 225% of the RMM. The Group monitors its compliance with this and other tests on a monthly basis including forward-looking compliance using budgets and forecasts.

The Group's underwriting business will be required to comply with the European Union's Solvency II Directive for insurance companies when it comes into force. Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry which establishes a revised set of capital requirements and risk management standards with the aim of increasing protection for policyholders. The new regime applies to all insurance companies with gross premium income exceeding €5m or gross technical provisions in excess of €25m, and is expected to be effective from January 2016. The Group has been monitoring its ability to comply with the requirements of Solvency II when it comes into force and current calculations indicate comfortable margins using both the standard formula and the business's internal model.

The Group's regulated insurance distribution businesses are based in the UK and regulated by the FCA. Due to the nature of these businesses, the capital requirements are less significant than the underwriting business but the Group is required to comply with the Adequate Resources requirements of Threshold Condition 4 of the FCA Handbook. The Group undertakes a rigorous assessment against the requirements of this Condition on an annual basis and, as a consequence of this, calculates and holds an appropriate amount of capital in respect of these businesses.

The regulated Travel businesses are required to comply with two main tests which have historically covered liquidity and net assets, although the latter has been replaced going forward with a leverage test. The Group monitors its compliance with these tests on a monthly basis including forward-looking compliance using budgets and forecasts, and is required to comply with agreed covenants on the last day of each quarter in respect of these tests.

The Group treats all cash and other financial assets held within its regulated businesses as restricted and not therefore available to be used by the Group for any purposes outside of those of the relevant restricted business. The Group enters into regular open communication with its regulators and any distribution of capital from those businesses to the Group is agreed in advance.

29 Cash flow from operating activities

	2014 £'m	2013 £'m	2012 £'m
Operating activities
Profit before tax	149.2	149.6	148.2
Depreciation and impairment of property, plant and equipment	28.3	24.9	32.5
Amortisation and impairment of intangible assets	29.3	40.3	32.7
Loss / (profit) on disposal of property, plant and equipment	1.6	(0.1)	0.1
Finance costs	11.1	2.2	2.5
Finance income	–	(3.3)	(1.4)
Interest income from investments	(12.7)	(15.6)	(13.7)
Movements in other liabilities	(7.5)	9.1	2.3
Movements in provisions	(0.2)	1.6	(0.3)
Movements in reinsurance	(5.8)	28.1	5.3
Movements in insurance contract liabilities	(5.1)	19.2	99.1
Movements in pensions	(5.1)	(5.1)	(15.3)
Working capital adjustments:
Decrease/(increase) in inventories	1.6	(1.1)	(2.0)
Decrease/(increase) in prepayments	6.4	2.2	(6.3)
Decrease/(increase) in trade and other receivables	33.0	(10.2)	12.5
(Decrease)/increase in trade and other payables	(5.6)	(6.0)	(26.3)
	218.5	235.8	269.9
Interest received	12.6	17.9	15.5
Interest paid	–	(0.1)	(0.1)
Interest on finance lease agreements	(0.1)	(0.2)	(0.3)
Income tax paid	(56.9)	(18.9)	(66.5)
Net cash flows from operating activities	174.1	234.5	218.5

30 Standards issued but not yet effective

The following is a list of standards that are in issue but are not effective as at 31 January 2014 but have been endorsed for use in the EU. Accordingly they have been adopted by the Group for the purpose of preparing the combined financial information:

• IFRS 10: Consolidated financial statements (effective 1 January 2014);
• IFRS 11: Joint arrangements (effective 1 January 2014);
• IFRS 12: Disclosure of interests in other entities (effective 1 January 2014);
• IAS 19: Amendment: Defined benefit plans: Employee Contributions (effective 1 July 2014)
• IAS 27: Amendment: Separate financial statements (effective 1 January 2014);
• IAS 28: Amendment: Investments in associates and joint ventures (effective 1 January 2014);
• IAS 32: Amendment: Offsetting financial assets and financial liabilities (effective 1 January 2014);
• IAS 36: Amendment: Recoverable amount disclosures for non-financial assets (effective 1 January 2014);
• IAS 39: Amendment: Novation of derivatives and continuation of hedge accounting (effective 1 January 2014); and
• IFRIC 21: Levies.

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these standards when they become effective.

IFRS 9 Financial Instruments

IFRS 9 "Financial Instruments" will eventually replace IAS 39 but currently only details the requirements for recognition and measurement of financial assets. The timing of IFRS 9 is still uncertain and, as such, the Group is monitoring developments and considering the associated impact on the Group financial statements.

31 Events after the reporting period

On 17 April 2014, the Company and certain members of the Group entered into a Senior Facilities Agreement in order to provide appropriate debt finance and to ensure the availability of sufficient liquidity reserves for the Group.

The amounts available to the Group under the Senior Facilities Agreement include (i) a term loan facility of £825.0 million maturing in 2019 ("Facility A"), (ii) a term loan facility of £425.0 million maturing in 2020 ("Facility B") and (iii) a multicurrency revolving credit facility of £150.0 million.

Prior to entering into the Senior Facilities Agreement, the Group's existing debt facilities were provided via Acromas Mid Co Limited, an intermediate parent company, and distributed to the Group via intercompany loans. On 25 April 2014, the Group drew £825.0 million under Facility A and £425.0 million under Facility B and passed these funds to Acromas Mid Co Limited by way of a distribution to facilitate the repayment of the existing finance.

Interest on the new debt is incurred at a variable rate based on LIBOR. However, to protect the Group from significant increases in interest rates, interest rate caps previously in place to cover the Acromas debt have been acquired by the Group and are in place to cover the full amount of the debt until March 2016. The interest rate caps were acquired at their fair value of £0.6 million.

Subsequent to all transactions associated with the refinancing, the Group has utilised part of its distributable reserves to release its parent undertakings from the remaining balance due to it. Following this release, the amounts owed by and to parent undertakings have been reduced to £nil.

PART 12 UNAUDITED PRO FORMA FINANCIAL INFORMATION

SECTION A – PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma statement of net assets set out below has been prepared to illustrate the effect of the Offer and refinancing of certain Group debt on the combined net assets of the Group as if the Offer and refinancing of certain Group debt had occurred on 31 January 2014.

This unaudited pro forma statement of net assets has been prepared for illustrative purposes only and, because of its nature, the pro forma statement of net assets addresses a hypothetical situation and does not represent the Group's real financial position or results. It may not, therefore, give a true picture of the Group's financial position or results nor is it indicative of the results that may or may not be expected to be achieved in the future. The unaudited pro forma statement of net assets is compiled on the basis consistent with the accounting policies of the Group and on the basis set out in the notes below, and in accordance with Annex II to the Prospectus Directive Regulation. It should be read in conjunction with the notes below.

Ernst & Young LLP's report on the unaudited pro forma statement of net assets is set out at the end of this Part.

Pro forma Group's Proceeds from Group's statement of the Offer net of statement of net assets as at expenses and net assets as at 31 January Refinancing of related 31 January 2014 Group debt application 2014 (note 1) (note 2) (note 3) (note 4) (£ millions) Assets Goodwill 1,636.2 1,636.2 Intangible fixed assets 47.4 47.4 Property, plant and equipment 139.8 139.8 Financial assets Amounts owed by Acromas Group 1,030.7 (1,030.7) – Other financial assets 651.0 0.6 651.6 Deferred tax assets 19.9 19.9 Current tax assets 5.1 5.1 Reinsurance assets 24.7 24.7 Inventories 4.8 4.8 Trade and other receivables 193.9 193.9 Prepayments and other assets 22.5 22.5 Assets held for sale – – Cash and short term deposits Available cash 84.5 (47.0) (37.6) (0.1) Restricted cash 66.8 66.8 Total assets 3,927.3 (1,077.1) (37.6) 2,812.6 Liabilities Pension scheme obligations 24.3 24.3 Gross insurance contract liabilities 690.5 690.5 Provisions 9.2 9.2 Financial liabilities Amounts owed to Acromas Group 1,779.9 (1,779.9) – Bank debt – 1,224.5 (538.8) 685.7 Other financial liabilities 18.5 18.5 Deferred tax liabilities 7.0 7.0 Current tax liabilities – – Other liabilities 113.2 113.2 Trade and other payables 164.9 164.9 Total liabilities 2,807.5 (555.4) (538.8) 1,713.3 Net assets 1,119.8 (521.7) 501.2 1,099.3		Adjustments

Notes:

(1) The combined statement of net assets of the Group at 31 January 2014 has been extracted without material adjustment from Part 11 "Historical Financial Information" to this document.

(2) As at 31 January 2014, the Group's debt facilities were held by the Acromas Group and distributed to the Group via intercompany loans. On 17 April 2014, the Group entered into a new Senior Facilities Agreement and on 25 April 2014, the Group drew term loan facilities of £825.0 million maturing in 2019 and £425.0 million maturing in 2020, incurring fees of £27.0 million (of which £1.5 million was expensed immediately).

The net proceeds of £1,223.0 million together with existing cash resources of £47.0 million were loaned to Acromas to facilitate repayment of its existing debt including accrued, interest totalling £1,270.0 million. Interest rate cap instruments covering the full amount of the debt through to March 2016 were acquired by the Group from the Acromas Group at their fair value of £0.6 million. The net amount due to the Group from these two transactions was settled by way of a distribution of £1,269.5 million.

As part of the transactions associated with the refinancing, the Group utilised part of its distributable reserves to release the Acromas Group from the remaining balance due to the Group. Following this release, the amounts owed by and to the Acromas Group have been reduced to £nil, and bank debt totalling £1,250.0 million less capitalised fees of £25.5 million has been incurred and reflected in the Group's balance sheet.

(3) The Company expects to receive approximately £550.0 million from the subscription of New Shares in the Offer before estimated underwriting commissions and other taxes, fees and expenses incurred in connection with the Offer of approximately £37.6 million.

As a result, the Company expects to receive net proceeds of £512.4 million from the Offer which it intends to use together with existing cash resources to reduce the Group's indebtedness by repaying the full amount (£425.0 million) of the bank debt maturing in 2020 and £125.0 million of the bank debt maturing in 2019. On repayment of the debt, £11.2 million of capitalised fees will be expensed.

(4) No adjustment has been made to reflect any trading or other transactions undertaken by the Group since 31 January 2014.

SECTION B – ACCOUNTANTS' REPORT

Ernst & Young LLP 1 More London Place London SE1 2AF

Tel: + 44 207 951 2000 Fax: + 44 207 951 1345 ey.com

Tel: 023 8038 2000 Fax: 023 8038 2001 www.ey.com/uk

The Board of Directors 8 May 2014 Saga plc Enbrook Park Folkestone Kent CT20 3SE

Dear Sirs

We report on the pro forma financial information (the "Pro Forma Financial Information") set out in Part 12 of the Prospectus dated 8 May 2014, which has been prepared on the basis described in notes 1 to 4, for illustrative purposes only, to provide information about how the Offer and refinancing of certain Group debt might have affected the financial information presented on the basis of the accounting policies adopted by Saga plc being those adopted in preparing the Operating Group combined historical financial information for the year ended 31 January 2014 included in the Prospectus. This report is required by item 7 of Annex II of Commission Regulation (EC) No 809/2004 and is given for the purpose of complying with that item and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with item 23.1 of Annex I to Commission Regulation (EC) No 809/2004, consenting to its inclusion in the Prospectus.

Responsibilities

It is the responsibility of the directors of Saga plc to prepare the Pro Forma Financial Information in accordance with items 1 to 6 of Annex II of Commission Regulation (EC) No 809/2004.

It is our responsibility to form an opinion, as required by item 7 of Annex II of the Commission Regulation (EC) No 809/2004, as to the proper compilation of the Pro Forma Financial Information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro Forma Financial Information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro Forma Financial Information with the directors of Saga plc.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of Saga plc.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

• the Pro Forma Financial Information has been properly compiled on the basis stated; and
• such basis is consistent with the accounting policies of Saga plc.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with item 1.2 of Annex I of Commission Regulation (EC) No 809/2004.

Yours faithfully

Ernst & Young LLP

PART 13 INDEPENDENT EXTERNAL ACTUARIES' STATEMENT

Saddlers Court 64-74 East Street Epsom Surrey KT17 1HB United Kingdom

T +44 1372 751060 F +44 1372 751061

towerswatson.com

8 May 2014

The Directors Saga plc Enbrook Park Sandgate Folkestone Kent CT20 3SE

Dear Sirs

Independent External Actuaries' Statement

Introduction

At your request, Towers Watson Limited trading as Towers Watson ("we" or "Towers Watson") has undertaken an independent actuarial review of specified segments of the outstanding claims provision excluding allowance for claims handling expense costs and reinsurance bad debts of Acromas Insurance Company Limited ("AICL") in respect of loss occurrences from earned exposures up to 31 January 2014. AICL is a subsidiary company of Saga plc ("Saga") and underwrites all of Saga's insurance business. Our review has been undertaken in connection with the proposed offering of ordinary shares of Saga and the admission to listing in the premium segment of the Official List maintained by the FCA and to trading on the London Stock Exchange.

This report, which has been produced for inclusion in the Prospectus issued by Saga dated 8 May 2014 sets out the scope of the work we have undertaken and summarises the conclusions of our work.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any person or entity other than Saga for any loss suffered by any such other person or entity as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with paragraph 23.1 of Annex I of the Prospectus Directive Regulation, consenting to its inclusion in the Prospectus.

Our opinion based on this review is set out below.

Scope of Work

This opinion addresses specified segments of the net of outwards reinsurance outstanding claims provision of Saga excluding allowance for claims handling expense costs and reinsurance bad debts in respect of loss occurrences from earned exposures up to 31 January 2014. Our review excludes consideration of future profit commissions, reinstatement premiums for reinsurance and any provision in respect of unearned exposures such as unearned premium reserves and additional unexpired risk reserves.

Our actuarial review is in respect of the Motor, Caravan, Van, Breakdown and Home Legal Expenses classes of business and covers over 97 per cent. of Saga's total booked net of outwards reinsurance outstanding claims provision for its insurance business as at 31 January 2014 excluding allowance for claims handling expense costs and reinsurance bad debts.

Our claim projections are calculated on an undiscounted basis with the exception of existing and projected future Periodical Payment Order claims which are included on a discounted capitalised basis consistent with UK financial reporting.

Opinion

Based on the scope of work set out above, and subject to the reliances and limitations set out below, we report our conclusions as follows:

Saga establishes an outstanding claims provision for its insurance business that includes a margin over and above its corresponding internal best estimate of the provision. For the business within the scope of our review, we have reviewed Saga's corresponding internal best estimate of its net of reinsurance outstanding claims provision excluding allowance for claims handling expense costs and reinsurance bad debts. In our opinion, for the business that we reviewed, Saga's internal best estimate of its net outstanding claims provision excluding claims handling expense costs and reinsurance bad debts as at 31 January 2014 is reasonable in that it falls within a range that is regarded as reasonable by Towers Watson as a best estimate.

Reliances and Limitations

In our work, we have relied on audited and unaudited information and data supplied to us by Saga, including information given orally and on information from a range of other sources. We relied on the accuracy and completeness of this information without independent verification. In particular, reliance was placed on, but not limited to the accuracy of data and supplementary information provided relating to earned premiums, claim payments, case estimates on open claims and reinsurance arrangements.

The results shown in this report are based on a series of assumptions regarding the future. It should be recognised that actual future claim experience is likely to deviate, perhaps materially, from our estimates. This is because the ultimate liability for claims will be affected by future external events; for example, the likelihood of claimants bringing suit, the size of judicial awards, changes in standards of liability, and the attitudes of claimants towards the settlement of their claims. We have employed appropriate techniques and assumptions, and the conclusions presented in this opinion are reasonable, given the information currently available.

We have not anticipated any extraordinary changes to the legal, social, inflationary or economic environment, or to the interpretation of policy language, that might affect the cost, frequency, or future reporting of claims. In addition, our estimates make no provision for potential future claims arising from causes not substantially recognised in the historical data (such as new types of mass torts, latent injuries or pandemic events), except in so far as claims of these types are included incidentally in the reported claims and are implicitly developed.

We have not attempted to determine the quality of the current asset portfolio of Saga, and we have assumed throughout our analysis that Saga's outstanding claims provision is backed by valid assets with suitably scheduled maturities and/or adequate liquidity to meet cash flow requirements. To the extent that the assets backing the outstanding claims provision are not held in matching currencies, future changes in exchange rates may lead to exchange gains or losses.

We have not reviewed the adequacy of the balance sheet provisions except as otherwise disclosed herein.

In accordance with our scope, we have assumed for the purposes of this opinion that all of Saga's reinsurance protection will be valid and collectible. We understand that there are no known disputes and uncollectable amounts from outstanding reinsurance recoveries.

The scope of our analysis does not include comment on capital requirements. In particular we have not investigated the level of capital required to protect Saga from adverse claims experience.

The results shown in this report are not intended to represent an opinion of market value and should not be interpreted in that manner. This report does not purport to encompass all of the many factors that may bear upon a market value.

Our analysis of the liabilities was carried out based on data and documentation that was made available to us as at 31 December 2013 and updates as at 31 January 2014 and does not reflect subsequent data and information. Therefore, our results, opinions and conclusions presented herein may be rendered inaccurate by developments or information after 31 January 2014.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance with paragraph 1.2 of Annex I of the Prospectus Directive Regulation.

Yours faithfully

For and on behalf of Towers Watson Limited

Karl P Murphy MA FIA FSAI Fellow of the Institute and Faculty of Actuaries

PART 14

ADDITIONAL INFORMATION

1. Incorporation and share capital

• 1.1 The Company was incorporated and registered in England and Wales on 5 December 2013 as a private company limited by shares under the Act with the name Sequoia Newco 1 Limited and with the registered number 08804263. On 23 December 2013, the Company was renamed Saga Limited.
• 1.2 On 2 May 2014 the Company was re-registered as a public limited company under the Act with the name Saga plc.
• 1.3 The Company's registered office and principal place of business is at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE and its telephone number is 01303 77111.
• 1.4 The principal laws and legislation under which the Company operates and the ordinary shares have been created are the Act and regulations made thereunder.
• 1.5 The share capital history of the Company is as follows:
• 1.5.1 on incorporation the share capital of the Company was £1 made up of one ordinary share of £1. One subscriber share of £1 was issued for cash consideration at par pursuant to the authority to issue shares set out in the Company's articles of association;
• 1.5.2 on 4 March 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company issued two ordinary shares of £1 each to Acromas Bid Co as consideration for the transfer by Acromas Bid Co of the entire issued share capital of Saga Mid Co Limited;
• 1.5.3 on 1 May 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company issued 7,999,997 ordinary shares of £1 each to Acromas Bid Co by way of a bonus issue; and
• 1.5.4 on 1 May 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company subdivided each ordinary share of £1 each into 100 ordinary shares of one pence each. Following the subdivision, the share capital of the Company was £8,000,000, made up of 800,000,000 ordinary shares of one pence each.
• 1.6 On 7 May 2014, the following resolutions were passed by the Company's sole shareholder:
• 1.6.1 that the directors be authorised, in accordance with Article 187 of the Articles, to capitalise the undistributed profits of the Company (whether or not available for distribution), or any sum standing to the credit of any reserve or other fund, including without limitation the Company's share premium account and capital redemption reserve, if any, in an amount equal to the aggregate nominal amount (the "Bonus Amount") of the Free Shares to be issued on or shortly following the first anniversary of Admission (but by no later than 31 August 2015) pursuant to the Customer Offer and the Employee Offer, and to appropriate the Bonus Amount to the relevant members, and to apply the Bonus Amount on their behalf in paying up in full shares with a nominal amount equal to the Bonus Amount; and
• 1.6.2 in substitution for any prior authority conferred upon the Board of Directors of the Company, the authority conferred on the Board of Directors by Article 12 of the Articles was conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the annual general meeting of the Company to be held in 2015 (or, if earlier, at the close of business on 31 July 2015) and for that period the section 551 amount shall comprise:
• (a) conditional on Admission, up to £3,000,000 in connection with the issue of New Shares on Admission by the Company as part of the Offer;

• (b) conditional on Admission, an amount equal to the aggregate nominal amount of any Free Shares to be issued by way of bonus issue on or shortly following the first anniversary of Admission (but by no later than by 31 August 2015) to Eligible Customers and Eligible Employees who qualify for such Shares under the Customer Offer and/or the Employee Offer; and

• (c) following Admission, and in substitution for any unused authority under paragraph 1.6.2 (a) on the day following Admission, (i) up to an aggregate nominal amount equal to one third of the aggregate nominal value of the share capital of the Company on the day following Admission, and (ii) in connection with an offer by way of a rights issue only to holders of Shares in proportion (as nearly as practicable) to their existing holdings and to people who are holders of other equity securities if this is required by the rights of those equity securities, of if the Directors of the Company consider it necessary, as permitted by the rights of those equity securities, up to an aggregate nominal amount equal to two thirds of the aggregate nominal value of the share capital of the Company on the day following Admission (including within such limit any shares or rights issued or guaranteed under (i) above).

• 1.6.3 in substitution for any prior authority conferred upon the Board of Directors of the Company, the power conferred on the Board of Directors by Article 13 of the Articles was conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the annual general meeting of the Company to be held in 2015 (or, if earlier, at the close of business on 31 July 2015), and for that period the section 561 amount shall comprise:
• (a) conditional on Admission, and in connection with the issues of Shares referred to in paragraph 1.6.2 (a), up to £3,000,000; and
• (b) following Admission, and in substitution for any unused power conferred under paragraph 1.6.3 (a) on the day following Admission, up to an aggregate nominal amount equal to five per cent. of the aggregate nominal value of the share capital of the Company on the day following Admission;
• 1.6.4 conditional on Admission, the Company was generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of Shares each subject to the following conditions:
• (a) the number of Shares authorised to be purchased shall be such number of Shares as has an aggregate nominal value equal to ten per cent. of the aggregate nominal value of the share capital of the Company on the day following Admission;
• (b) the minimum price (excluding expenses) which may be paid for each Share is one pence (being the nominal value of a Share);
• (c) the maximum price (excluding expenses) which may be paid for each Share is the higher of: (i) 105 per cent. of the average of the middle market quotations for the Shares as derived from the London Stock Exchange Daily Official List for the five Business Days immediately preceding the day on which the share is contracted to be purchased; and (ii) an amount equal to the higher of the price of the last independent trade of a Share and the highest current independent bid for a Share as derived from the London Stock Exchange Trading System; and
• (d) the authority shall expire on 31 July 2015 or, if earlier, at the end of the annual general meeting of the Company to be held in 2015 so that the Company may, before the expiry of the authority enter into a contract to purchase Shares which will or may be executed wholly or partly after the expiry of such authority;
• 1.6.5 the Company was authorised in accordance with the Articles, until the Company's next annual general meeting, to call general meetings on 14 clear days' notice;
• 1.6.6 the Company and all companies that are its subsidiaries at any time up to the end of the annual general meeting of the Company to be held in 2015, were authorised, in aggregate, to:
• (a) make political donations to political parties and/or independent election candidates not exceeding £100,000 in total;
• (b) make political donations to political organisations other than political parties not exceeding £100,000 in total; and
• (c) incur political expenditure not exceeding £100,000 in total.

For the purposes of this authority the terms "political donation", "political parties", "independent election candidates", "political organisation" and "political expenditure" have the meanings given by sections 363 to 365 of the Act.

The Company notes that it is not its policy to make political donations and that it has no intention of using the authority for that purpose.

• 1.7 Save as disclosed:
• 1.7.1 no share or loan capital of the Company has, within three years of the date of this document, been issued or agreed to be issued, or is now proposed to be issued, fully or partly paid, either for cash or for a consideration other than cash, to any person;
• 1.7.2 no commissions, discounts, brokerages or other special terms have been granted by the Company in connection with the issue or sale of any share or loan capital of the Company; and
• 1.7.3 no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put under option.
• 1.8 The Company will be subject to the continuing obligations of the FCA with regard to the issue of shares for cash. The provisions of section 561(1) of the Act (which confer on shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash other than by way of allotment to employees under an employees' share scheme as defined in section 1166 of the Act) apply to the issue of shares in the capital of the Company except to the extent such provisions have been disapplied as referred to in paragraph 1.6.3 above.
• 1.9 The issued share capital of the Company is currently £8,000,000, comprising 800,000,000 Shares of one pence each (all of which were fully paid or credited as fully paid). Immediately following completion of the Offer and assuming the Offer Price is set at the mid-point of the Price Range, the issued share capital of the Company is expected to be £10,673,512 million comprising 1,067,351,162 million Shares of one pence each (all of which will be fully paid or credited as fully paid).
• 1.10 The following table shows the existing ordinary share capital of the Company and the ordinary share capital as it is expected to be on the day of Admission (as assuming the Offer Price is set at the midpoint of the Price Range).

Existing	Amount	Number
Ordinary shares of one pence each	£8,000,000	800,000,000
On the day of Admission	Amount	Number
Ordinary shares of one pence each	£10,673,512	1,067,351,162

• 1.11 Assuming the Offer Price is set at the mid-point of the Price Range, on 29 May 2014, 255,813,953 New Shares will, subject to Admission, be issued in connection with the Offer. In addition, 11,537,209 Shares will be issued to certain members of management. In aggregate, this will dilute the existing shareholder by 25 per cent.
• 1.12 The Shares are in registered form and, subject to the provisions of the Regulations, the Directors may permit the holding of Shares of any class in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the Regulations). Where Shares are held in certificated form, share certificates will be sent to the registered members by first class post. Where Shares are held in CREST, the relevant CREST stock account of the registered members will be credited.
• 1.13 The New Shares being issued pursuant to the Offer will be issued at a price of between 185 pence and 245 pence per New Share, representing a premium of between 184 and 244 pence over their nominal value of one pence each, which price is payable in full on application.

2. Articles of Association

The Articles of Association of the Company (the "Articles") include provisions to the following effect.

2.1 Share rights

Subject to the provisions of the Act, and without prejudice to any rights attached to any existing shares or class of shares: (i) any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine; and (ii) shares may be issued which are to be redeemed or are liable to be redeemed at the option of the Company or the holder and the Board may determine the terms, conditions and manner of redemption of such shares provided that it does so prior to the allotment of those shares.

2.2 Voting rights

Subject to any rights or restrictions attached to any shares, on a show of hands every member who is present in person shall have one vote and on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder.

No member shall be entitled to vote at any general meeting in respect of a share unless all moneys presently payable by him in respect of that share have been paid.

If at any time the Board is satisfied that any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under section 793 of the Act and is in default for the prescribed period in supplying to the Company the information thereby required, or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to such member direct that, in respect of the shares in relation to which the default occurred, the member shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares or on a poll.

2.3 Dividends and other distributions

Subject to the provisions of the Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board. Except as otherwise provided by the rights and restrictions attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, but no amount paid on a share in advance of the date on which a call is payable shall be treated for these purposes as paid on the share.

Subject to the provisions of the Act, the Board may pay interim dividends if it appears to the Board that they are justified by the profits of the Company available for distribution.

If the share capital is divided into different classes, the Board may also pay, at intervals determined by it, any dividend payable at a fixed rate if it appears to the Board that the profits available for distribution justify the payment. If the Board acts in good faith it shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.

No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.

Except as otherwise provided by the rights and restrictions attached to any class of shares, all dividends will be declared and paid according to the amounts paid-up on the shares on which the dividend is paid.

The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares the right to elect to receive shares, credited as fully paid, by way of scrip dividend instead of cash in respect of the whole (or some part, to be determined by the Board) of all or any dividend.

Any dividend which has remained unclaimed for 12 years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company.

Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company's shares will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and any other sanction required by the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.

2.4 Variation of rights

Rights attached to any class of shares may be varied or abrogated with the written consent of the holders of three-quarters in nominal value of the issued shares of the class, or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.

2.5 Lien and forfeiture

The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys payable to the Company (whether presently or not) in respect of that share. The Company may sell, in such manner as the Board determines, any share on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after notice has been sent to the holder of the share demanding payment and stating that if the notice is not complied with the share may be sold.

The Board may from time to time make calls on the members in respect of any moneys unpaid on their shares. Each member shall (subject to receiving at least 14 clear days' notice) pay to the Company the amount called on the member's shares. If a call or any instalment of a call remains unpaid in whole or in part after it has become due and payable, the board may give the person from whom it is due not less than 14 clear days' notice requiring payment of the amount unpaid together with any interest which may have accrued and any costs, charges and expenses incurred by the Company by reason of such non-payment. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.

2.6 Transfer of shares

A member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. An instrument of transfer shall be signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. An instrument of transfer need not be under seal unless expressly required otherwise.

The Board may, in its absolute discretion, refuse to register the transfer of a certificated share which is not a fully paid share, provided that the refusal does not prevent dealings in shares in the Company from taking place on an open and proper basis. The Board may also refuse to register the transfer of a certificated share unless the instrument of transfer:

• 2.6.1 is lodged, duly stamped (if stampable), at the office or at another place appointed by the Board accompanied by the certificate for the share to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer;
• 2.6.2 is in respect of one class of share only; and
• 2.6.3 is in favour of not more than four transferees.

If the Board refuses to register a transfer of a share in certificated form, it shall send the transferee notice of its refusal within two months after the date on which the instrument of transfer was lodged with the Company.

No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to a share.

Subject to the provisions of the Regulations, the Board may permit the holding of shares in any class of shares in uncertificated form and the transfer of title to shares in that class by means of a relevant system and may determine that any class of shares shall cease to be a participating security.

2.7 Alteration of share capital

Subject to the Act, the Company may by ordinary resolution increase, consolidate or sub-divide its share capital.

2.8 General meetings

The Board shall convene and the Company shall hold general meetings as annual general meetings in accordance with the requirements of the Act. Subject to the Act, the Board may call general meetings whenever and at such times and places as it shall determine.

2.9 Directors

2.9.1 Appointment of Directors

Unless otherwise determined by ordinary resolution, the number of Directors shall be not less than two but shall not be subject to any maximum in number. Directors may be appointed by ordinary resolution of Shareholders or by the Board.

2.9.2 No share qualification

A Director shall not be required to hold any shares in the capital of the Company by way of qualification.

2.9.3 Annual retirement of Directors

At every annual general meeting of the Company, all Directors at the date of notice of annual general meeting shall retire from office.

2.9.4 Remuneration of Directors

The emoluments of any Director holding executive office for their services as such shall be determined by the Board, and may be of any description.

The ordinary remuneration of the Directors who do not hold executive office for their services (excluding amounts payable under any other provision of the Articles) shall not exceed in aggregate £2,000,000 per annum or such higher amount as the Company may from time to time by ordinary resolution determine. Subject thereto, each such Director shall be paid a fee for that service (which shall be deemed to accrue from day to day) at such rate as may from time to time be determined by the Board.

In addition to any remuneration to which the Directors are entitled under the Articles, they may be paid all travelling, hotel and other expenses properly incurred by them in connection with their attendance at meetings of the Board or committees of the Board, general meetings or separate meetings of the holders of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties.

The Board may provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any past or present Director or employee of the Company or any of its subsidiary undertakings or any body corporate associated with, or any business acquired by, any of them, and for any member of his family or any person who is or was dependent on him.

2.9.5 Permitted interests of Directors

Subject to the provisions of the Act, and provided that the relevant Director has disclosed to the Board the nature and extent of his interest (unless the circumstances referred to in section 177(5) or section 177(6) of the Act apply, in which case no such disclosure is required), a Director notwithstanding his office:

• 2.9.5.1 may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise (directly or indirectly) interested;
• 2.9.5.2 may act by himself or for his firm in a professional capacity for the Company (otherwise than as auditor), and the Director or the Director's firm shall be entitled to remuneration for professional services as if the individual were not a Director;
• 2.9.5.3 may be a director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate in which the Company is (directly or indirectly) interested as a shareholder or otherwise or with which the Director has such relationship at the request or direction of the Company; and
• 2.9.5.4 shall not, by reason of his office, be accountable to the Company for any remuneration or other benefit which the Director derives from any such office or employment or from any such transaction or arrangement or from any interest in any such body corporate the acceptance, entry into or existence of which has been approved by the Board pursuant to Article 146 of the Articles or which the Director is permitted to hold or enter into by virtue of sections 2.10.5.1, 2.10.5.2 or 2.10.5.3.

2.9.6 Restrictions on voting

A Director shall not vote on any resolution of the Board concerning a matter in which they have an interest which can reasonably be regarded as likely to give rise to a conflict with the interests of the Company, unless his interest arises only because the resolution concerns one or more of the following matters:

2.9.6.1 the giving of a guarantee, security or indemnity in respect of money lent or obligations incurred by him or any other person at the request of, or for the benefit of, the Company or any of its subsidiary undertakings;

• 2.9.6.2 the giving of a guarantee, security or indemnity in respect of a debt or obligation of the Company or any of its subsidiary undertakings for which the Director has assumed responsibility (in whole or part and whether alone or jointly with others) under a guarantee or indemnity or by the giving of security;
• 2.9.6.3 a contract, arrangement, transaction or proposal concerning an offer of shares, debentures or other securities of the Company or any of its subsidiary undertakings for subscription or purchase, in which offer they are or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which they are to participate;
• 2.9.6.4 a contract, arrangement, transaction or proposal concerning any other body corporate in which the Director or any person connected with him is interested, directly or indirectly, and whether as an officer, shareholder, creditor or otherwise, if the Director and any persons connected with him do not to his knowledge hold an interest (as that term is used in sections 820 to 825 of the Act) representing one per cent. or more of either any class of the equity share capital (excluding any shares of that class held as treasury shares) of such body corporate (or any other body corporate through which his interest is derived) or of the voting rights available to members of the relevant body corporate (any such interest being deemed for the purpose of this Article to be likely to give rise to a conflict with the interests of the Company in all circumstances):
• 2.9.6.5 a contract, arrangement, transaction or proposal for the benefit of employees of the Company or of any of its subsidiary undertakings which does not award him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and
• 2.9.6.6 a contract, arrangement, transaction or proposal concerning any insurance which the Company is empowered to purchase or maintain for, or for the benefit of, any Directors or for persons who include Directors.

2.9.7 Indemnity of officers

Subject to the provisions of the Act, but without prejudice to any indemnity to which the person concerned may otherwise be entitled, every Director or other officer of the Company (other than any person (whether an officer or not) engaged by the Company as auditor) shall be indemnified out of the assets of the Company against any liability incurred by him for negligence, default, breach of duty or breach of trust in relation to the affairs of the Company, provided that this Article shall be deemed not to provide for, or entitle any such person to, indemnification to the extent that it would cause this Article, or any element of it, to be treated as void under the Act.

3. Directors and Senior Managers

3.1 The Directors and their functions are set out in Part 8 "Directors, Senior Managers and Corporate Governance".

3.2 Executive Directors

• 3.2.1 Andrew Goodsell is engaged as Executive Chairman under a service agreement with the Company dated 2 May 2014 which takes effect on and from Admission. He receives a salary of £777,462 per annum. He is eligible to participate in the Company's bonus plan with the opportunity to earn up to a maximum of 150 per cent. of his salary. On and from Admission, he will be eligible to participate in the Company's Long Term Incentive Plan (described at section 4.2 below) under which he is eligible to receive annual awards of performance shares up to a maximum opportunity of 150 per cent. of salary. He is also eligible for private medical insurance for himself, his spouse and his dependent children, life insurance of four times salary and permanent health insurance (with cover equal to 90 per cent. of his salary). The Company contributes to the defined benefit section of the Saga Pension Scheme on his behalf. Under that scheme, his annual accrual rate is 1/30th of the earnings cap on pensionable remuneration (currently £138,000). In addition, he is paid a cash allowance equal to 28 per cent. of the amount his salary exceeds that earnings cap. The Company also provides Mr. Goodsell with the use of a car (which it taxes and insures for him) and meets his fuel, maintenance and repair expenses. His service agreement is terminable by the Company giving 12 months' notice or Mr. Goodsell giving six months' notice.
• 3.2.2 On a transition by Mr. Goodsell to a Non-Executive Chairman role, he would not be entitled to any compensation or other payment for the termination of his employment or otherwise. He would,

however, be entitled to a pro-rata bonus in respect of actual service prior to the transition and any long term incentive awards would be treated in accordance with the rules of the relevant plans. He would enter into a letter of appointment with the Company as Non-Executive Chairman on standard terms appropriate for a non-executive chairman (based on the Company's template letter of appointment for non-executive directors but including additional post-termination restrictions) with remuneration (comprising a fee only) to be agreed at the time to reflect the Company's market capitalisation and the size and complexity of its business.

• 3.2.3 Lance Batchelor is engaged as Group Chief Executive under a service agreement with the Company dated 2 May 2014 which takes effect on and from Admission. He receives a salary of £650,000 per annum. He is eligible to participate in the Company's bonus plan with the opportunity to earn up to a maximum of 150 per cent. of his salary. On and from Admission, he will be eligible to participate in the Company's Long Term Incentive Plan (described at section 4.2 below) under which he is eligible to receive annual awards of performance shares up to a maximum opportunity of 200 per cent. of salary. He is also eligible for private medical insurance for himself, his spouse and his dependent children, life insurance of four times salary (or two times salary or such other amount as the Company determines if he is not a member of the Saga Pension Scheme) and permanent health insurance (with cover equal to 75 per cent. of his salary or such other amount as the Company determines). The Company makes an additional monthly contribution equal to 15 per cent. of Mr. Batchelor's salary payable in one or more of the following ways (i) by way of a cash allowance; (ii) by way of contribution to a personal pension plan of Mr. Batchelor's choosing; and/or (iii) as a contribution to the Saga Pension Scheme up to a maximum of 11.7 per cent. of the earnings cap on pensionable earnings (currently £138,000). The Company also provides Mr. Batchelor with the use of a car (which it taxes and insures for him) and meets his business and home to work fuel expenses and all maintenance and repair expenses. He is entitled to elect to receive an annual car allowance of £12,000 in lieu of a car. His service agreement is terminable by either party on six months' notice.
• 3.2.4 As part of his recruitment arrangements as Group Chief Executive, Mr. Batchelor is entitled under his service agreement to receive a cash payment of £2.0 million payable in two equal instalments, with the first being paid on Admission and the second being paid on the first anniversary of Admission provided, in each case, that he is not a bad leaver on the payment date. For these purposes, he will be deemed to be a bad leaver if he has ceased employment with a group company (or is under notice to terminate his employment with a group company) whether given or received by him as the result of resignation or termination by his employer in circumstances entitling his employer to terminate his employment without an obligation to pay him during or in lieu of his notice period. Mr. Batchelor is also entitled under his service agreement to an additional cash payment of £2.0 million on the second anniversary of Admission unless he ceases to be employed by a group company or is under notice to terminate his employment with a group company (whether given or received by him) for any reason whatsoever. In addition, on Admission he is entitled under his service agreement to be granted options over Shares with an aggregate value of £4.0 million (these are described at section 4.1 below).
• 3.2.5 Stuart Howard is engaged as Group Finance Director under a service agreement with the Company dated 2 May 2014 which takes effect on and from Admission. He receives a salary of £472,781 per annum. He is eligible to participate in the Company's bonus plan with the opportunity to earn up to a maximum of 125 per cent. of his salary. On and from Admission, he will be eligible to participate in the Company's Long Term Incentive Plan (described at section 4.2 below) under which he is eligible to receive annual awards of performance shares up to a maximum opportunity of 125 per cent. of salary. He is also eligible for private medical insurance for himself, his spouse and his dependent children, life insurance of four times salary and permanent health insurance (with cover equal to 90 per cent. of his salary). The Company contributes to the defined benefit section of the Saga Pension Scheme on his behalf. Under that scheme, his annual accrual rate is 1/30th of the earnings cap on pensionable remuneration (currently £138,000). In addition, he is paid a cash allowance equal to 25 per cent. of the amount his salary exceeds that earnings cap. The Company also provides Mr. Howard with the use of a car (which it taxes and insures for him) and meets his fuel, maintenance and repair expenses. His service agreement is terminable by the Company giving 12 months' notice or Mr. Howard giving six months' notice.
• 3.2.6 The Company also has the ability to terminate the service agreements of the Executive Directors by the payment of a cash sum in lieu of notice equal to the aggregate of (i) salary; (ii) the cost to the Company of providing the Executive Director's pension benefits; and (iii) the cost to the Company of

providing private medical insurance, permanent health insurance, life insurance (for Mr. Goodsell and Mr. Howard only) and the Company car or car allowance, in each case during the notice period. The payment in lieu of notice can, at the Company's discretion, be paid as a lump sum or in equal monthly instalments over the notice period. There is a mechanism to reduce the monthly instalments if the Executive Director commences alternative employment during the notice period. In addition, on termination the Executive Directors are entitled to be paid in lieu of accrued but untaken holiday.

• 3.2.7 In order to be eligible for a bonus for a financial year, the Executive Directors must not have given or received notice to terminate their employment as at the payment date save that the Executive Directors will remain eligible for a pro-rata bonus for actual service in the bonus year in which termination occurs unless the Executive Director resigns or is summarily dismissed by the Company. Such bonus is calculated on the same basis and paid at the same time as such bonuses (if any) are paid to other eligible employees. No bonus is payable in respect of the notice period.
• 3.2.8 Mr. Goodsell and Mr. Howard are entitled to 30 days' holiday exclusive of bank and public holidays (as they have more than 10 years' service with the Group). Mr. Batchelor is entitled to 25 days' holiday exclusive of bank and public holidays (as he has less than 10 years' service with the Group).
• 3.2.9 Each Executive Director is subject to a confidentiality undertaking without limitation in time and to non-competition and non-solicitation (of employees) restrictive covenants for a period of 12 months (less any period spent on garden leave) after the termination of their employment arrangements.
• 3.2.10 The Company has customary directors' and officers' indemnity insurance in place in respect of the Executive Directors and has entered into a qualifying third party indemnity (the terms of which are in accordance with the Companies Act 2006) with each of them.
• 3.2.11 As required by the Act, the Executive Directors' remuneration will be subject to shareholder approval. In the event that such approval is not obtained when required, the service agreements provide that the Executive Directors will have no entitlement to compensation or damages in respect of loss suffered as a consequence.

3.3 Non-Executive Directors

• 3.3.1 Philip Green, Ray King, Orna Ni-Chionna and Gareth Williams will be engaged by the Company as independent non-executive directors under letters of appointment which take effect on and from Admission. They are each entitled to an annual fee of £60,000. Philip Green is entitled to an additional annual fee of £30,000 for his role as Senior Independent Director and for chairing the nomination committee. Ray King, is entitled to an additional annual fee of £20,000 for chairing the audit committee and the risk committee, Gareth Williams is entitled to an additional annual fee of £10,000 for chairing the remuneration committee.
• 3.3.2 James Arnell, Pev Hooper and Charles Sherwood are engaged by the Company as non-independent non-executive directors under letters of appointment dated 2 May 2014 which took effect on and from 5 May 2014. They are not entitled to any fee.
• 3.3.3 The appointments of all the Non-Executive Directors may be terminated at any time upon three months' written notice (though they are not entitled to any fee or damages if the Company terminates their appointment before the expiry of such notice). They may also be terminated at any time if they vacate their office pursuant to the Articles or as otherwise required by law, if they are removed from office by the Company's shareholders or are guilty of serious misconduct. They are all subject to annual re-election by the Company in general meeting. They are not entitled to receive any compensation on termination of their appointment and are not entitled to participate in the Company's share, bonus or pension schemes. They are all entitled to the reimbursement of reasonable expenses. They are all subject to confidentiality undertakings without limitation in time. The Company has customary directors' and officers' indemnity insurance in place in respect of each of them and has entered into a qualifying third party indemnity (the terms of which are in accordance with the Act) with each of them.
• 3.3.4 As required by the Act, the Non-Executive Directors' remuneration will be subject to shareholder approval. In the event that such approval is not obtained when required, the letters of appointment provide that the Non-Executive Directors will have no entitlement to compensation or damages in respect of loss suffered as a consequence.
• 3.4 Save as set out in section 3.2 and 3.3 above, there are no existing or proposed service agreements or letters of appointment between the Directors and any member of the Group.

3.5 Directors' and Senior Managers' Remuneration

Under the terms of their service contracts, letters of appointment and applicable incentive plans, in the year ended 31 January 2014, the aggregate remuneration and benefits to the Directors and Senior Managers of the Group who served during the year ended 31 January 2014, consisting of seven individuals, was £3,631,090 million.

Under the terms of their service contracts, letters of appointment and applicable incentive plans, in the year ended 31 January 2014, the Directors were remunerated as set out below:

		Annual	Other
		Salary	Benefits	Date of Joining
Name	Position	(£)	(£)	the Group
Andrew Goodsell	Executive Chairman	777,462	817,918	27 July 1992
Lance Batchelor	Group Chief Executive	–	–	24 March 2014
Stuart Howard	Group Finance Director	472,781	428,560	1 April 2000
Philip Green	Senior Independent Non-Executive Director	–	–	Admission
James Arnell	Non-Executive Director	–	–	5 May 2014
Pev Hooper	Non-Executive Director	–	–	5 May 2014
Ray King	Independent Non-Executive Director	–	–	Admission
Orna Ni-Chionna	Independent Non-Executive Director	–	–	Admission
Charles Sherwood	Non-Executive Director	–	–	5 May 2014
Gareth Williams	Independent Non-Executive Director	–	–	Admission

3.6 There is no arrangement under which any Director has waived or agreed to waive future emoluments nor has there been any waiver of emoluments during the financial year immediately preceding the date of this document.

3.7 Directors' and Senior Managers' current and past directorships and partnerships

Set out below are the directorships and partnerships held by the Directors and Senior Managers (other than, where applicable, directorships held in subsidiaries of the Company), in the five years prior to the date of this document:

Name	Current directorships / partnerships	Past directorships / partnerships
Andrew Goodsell	AA Financial Services Limited	AA Acquisition Co Limited
	AA Limited	AA Corporation Limited
	Acromas Bid Co Limited	AA Intermediate Co Limited
	Acromas Holdings Limited	AA Junior Mezzanine Co Limited
	Acromas Mid Co Limited	AA Mid Co Limited
	Acromas SPC Co Limited	AA SPC Co Limited
	Gvintajek	AA Road Services Limited
		Automobile Association Developments
		Limited
		Automobile Association (Gilbraltar)
		The Automobile Association Limited
Lance Batchelor	National Gallery Company Limited	AKS Partners Limited
		D A Hall Trading Limited
		DAHT Limited
		David Thomas Wine Merchant Ltd
		DIJLA Newport Limited
		Domino's Leasing Limited
		Domino's Pizza Germany (Holdings)
		Limited
		Domino's Pizza Germany Limited
		Domino's Pizza Group Plc
		Domino's Pizza UK & Ireland Limited
		Domino's Pizza West Country Limited
		DP Beach A Limited
		DP Beach B Limited
		DP Capital Limited
		DP Group Developments Limited
		D.P. Newcastle Limited
		DP Realty Limited
		DP Shayban Limited
		DPG Holdings Limited
		Dunnhumby Limited
		Live Bait Limited
		Mesan Limited
		MLS Ltd
		Tesco Mobile Communications Limited
		Tesco Mobile Limited
		Tesco Tech Support Limited
		The American Pizza Company Limited
		Zens Limited

Name Current directorships / partnerships Past directorships / partnerships

Stuart Howard AA Financial Services Limited AA Limited Acromas Bid Co Limited Acromas Holdings Limited Acromas Mid Co Limited Acromas SPC Co Limited Automobile Association Insurance Services Limited BJA Homes Limited Galibier Investments Limited SCI Vines

1 Stop Travel Insurance Services Limited AA Acquisition Co Limited AA Assistance Limited AA Corporation Limited AA Intermediate Co Limited AA Legal Services Limited AA Media Limited AA Mid Co Limited AA Road Services Limited AA Senior Co Limited AA The Driving School Agency Limited Automobile Association Travel Services Limited AA Underwriting Limited Acromas Breakdown Services Limited Acromas Care Limited Acromas Care Services Limited Acromas Cruises Limited Acromas Europe Limited Acromas Group Limited Acromas Homes Limited Acromas Insurance Agents Limited Acromas Insurance Consultants Limited Acromas Insurance Services Limited Acromas International Limited Acromas Investments Services Limited Acromas Investments Limited Acromas Limited Acromas Media Limited Acromas Personal Finance Limited Acromas Publishing Limited Acromas Road Services Limited Acromas Roadside Services Limited Acromas Services Limited Acromas Reinsurance Company Limited Automobile Association (Gibraltar) Automobile Association Developments Limited Automobile Association Holdings Limited Automobile Association Insurance Services Holdings Limited Automobile Association Insurance Services Limited Automobile Association Personal Finance Limited Automobile Association Protection and Investment Planning Limited Automobile Association Services Limited Automobile Association Travel Limited Automobile Association Underwriting Services Limited Clientassist Limited Clinicassist Limited Drakefield Group Limited Drakefield Holdings Limited Drakefield Insurance Services Limited Drakefield Services Limited Drivetech (UK) Limited Drivetech Advantage Agency Limited Driving Services UK Limited E Travel Insurance Services Limited E-go Software Limited Fanum Guernsey Limited Fanum Services Limited Go Insurance Services Limited

Name Current directorships / partnerships Past directorships / partnerships

Philip Green BakerCorp International Holdings Carillion plc Sentebale Philharmonia Trust Limited Williams & Glyn James Arnell 26/30 Brunswick Street East Hove Limited AA Limited Acromas Holdings Limited Areas SA Bercy Presidence SAS Charterhouse Capital Limited Charterhouse Capital Partners LLP Charterhouse Corporate Directors Limited Charterhouse Development Capital Limited Gourmet Acquisition Holdings Inc Holding Bercy Investisements SCA PHS Group Holdings Limited PHS Group plc Safety International Lux S.a.r.l. The Council of Almoners of Christ's Hospital The Pebble Trust Watling Street Capital Partners LLP Watling Street Limited Pev Hooper ActiveTopCo Limited AA Limited ActiveTopCo Limited Acromas Holdings Limited Darwin Holdings Sarl Galaxy Midco 1 Limited Galaxy Midco 2 Limited Galaxy Finco Limited Galaxy Bidco Limited

Ray King Infinis Energy Plc

Orna Ni-Chionna The National Trust Soane Museum Enterprises Ltd Royal Mail plc The Soil Association Limited

Charles Sherwood Acromas Holdings Limited Permira Advisers LLP Permira Holdings Limited (Guernsey) The Foundation and Friends of the Royal Botanic Gardens, Kew

Gareth Williams Newinco1232 Limited (trading as YSC) WNS (Holdings) Limited

Go Travel Insurance Services Limited Gogay Limited GTD Solutions Limited Intelligent Data Systems (UK) Limited Just Travel Insurance Services Limited Nationwide 4 x 4 Ltd Personal Insurance Mortgages and Savings Limited Quotebanana Limited The Automobile Association Limited The British School of Motoring Limited Clarkson plc Lloyds Banking Group More Than Gold United Utilities Group plc

FL Investco SAS TSL Education Group Limited

Drakkar G.P. Limited Luck Topco Limited Luck UK Bidco 1 Limited Luck Bidco 2 Limited Rafferty 2 Limited Rasindeck Limited Thistlehaven Limited Virgin Active Asia Pacific Holdings Limited Virgin Active Health Club Holdings Limited Virgin Active Health Fitness & Racquets Limited Virgin Active IPCO Limited Rothesay Holdco UK Limited The British United Provident Association Limited Friends Provident plc Bank of Ireland UK Holdings plc The British United Provident Association Limited Greenham Common Community Trust Ltd HMV Group plc Northern Foods plc Royal Mail Holdings plc Royal Mail Group Limited The British United Provident Association Limited Just Retirement Group Holdings Limited Just Retirement (Holdings) Limited Just Retirement Limited Just Retirement Solutions Limited Permira Holdings LLP Provimi Holdings S.A. Suitcase One Limited Diageo Pension Trust Limited

Name Current directorships / partnerships Past directorships / partnerships Darryn Gibson Emerald B Limited Serco Ltd

Tim Pethick Cicada Mobile Pty Ltd None Higgle Group Pty Ltd ID of Me Pty Ltd Macalmo Pty Ltd Tall Tim Pty Ltd Tiffluck Pty Ltd Wink Group Pty Ltd Roger Ramsden Kellet Consulting Limited None David Slater Motor Insurers' Bureau Automobile Association (Gibraltar) Andrew Strong None AA Acquisition Co Limited

Serco Regional Services Ltd Serco Listening Company Ltd Agbar Serco Technology Solutions Ltd

Automobile Association Underwriting Services AA Assistance Limited AA Bond Co Limited AA Brand Management Limited AA Buyacar Limited AA Corporation Limited AA Distribution Services Limited AA Financial Services Limited AA Fleet Services Limited AA Insurance Services Limited AA The Driving School Agency Limited AA Intermediate Co Limited AA Law Limited AA Legal Services Limited AA Limited AA Media Limited AA Mid Co Limited AA Parking Solutions Limited AA Pension Funding GP Limited AA Road Services Limited AA Senior Co Limited AA Signs Limited AA Top Co Limited AA Underwriting Limited Automobile Association Commercial Services Limited Automobile Association Developments Limited Automobile Association Holdings Limited Automobile Association Insurance Services Holdings Limited Automobile Association Insurance Services Limited Automobile Association Protection and Investment Planning Limited Automobile Association Services Limited Automobile Association Travel Services Limited Automobile Association Underwriting Services Limited Autowindshields (UK) Limited Bailey Toon Limited Dedicated Roadside Assistance Limited Drakefield Group Limited Drakefield Holdings Limited Drakefield Insurance Services Limited Drakefield Services Limited Drive Publications Limited Drivetech (UK) Limited Drivetech Advantage Agency Limited Driving Services UK Limited Fanum Services Limited Intelligent Data Systems (UK) Limited Nationwide 4 x 4 Ltd. Peak Performance Management Limited Personal Insurance Mortgages and Savings Limited The Automobile Association Limited

• 3.7.1 Within the period of five years preceding the date of this document, none of the Directors:
• (i) has had any convictions in relation to fraudulent offences;
• (ii) has been a member of the administrative, management or supervisory bodies or director or senior manager (who is relevant in establishing that a company has the appropriate expertise and experience for management of that company) of any company at the time of any bankruptcy, receivership or liquidation of such company; or
• (iii) has received any official public incrimination and/or sanction by any statutory or regulatory authorities (including designated professional bodies) or has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of affairs of a company.

3.8 Directors' and Senior Managers' interests

3.8.1 The Directors and Senior Managers do not hold any direct interests in Shares in the Company at the date of the Prospectus. On the day of Admission, the voting rights in the share capital of the Company of the Directors and Senior Managers (all of whom, unless otherwise stated, are beneficial or are interests of a person connected with a Director or a Senior Manager) will be as follows (assuming that the Offer Price is set at the mid-point of the Price Range):

		Number of	Percentage of issued ordinary share capital on the day of
Director / Senior Managers(1)	Amount	Shares(2)(3)	Admission(3)
Andrew Goodsell	£5,000,000	2,325,581	0.2%
Lance Batchelor(4)	£4,000,000	1,860,465	0.2%
Stuart Howard	£3,000,000	1,395,349	0.1%
Gareth Williams(5)	£60,000	27,907	0.0%
Darryn Gibson	£1,000,000	465,116	0.0%
Tim Pethick	£2,000,000	930,233	0.1%
Roger Ramsden	£2,000,000	930,233	0.1%
David Slater	£2,000,000	930,233	0.1%
Andrew Strong	£2,000,000	930,233	0.1%

• (1) Certain of the Directors and Senior Managers are also shareholders of Acromas and are owed subordinated shareholder debt by an Acromas subsidiary. See "Interests of Directors, Senior Managers and employees of the Group in Acromas" in Part 8 "Directors, Senior Managers and Corporate Governance".
• (2) In the case of Andrew Goodsell, Stuart Howard, Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong, these interests in Shares (the number of which will be set by reference to the final Offer Price) comprise nil cost options to be granted on the day of Admission.
• (3) Assuming the Offer Price is set at the mid-point of the Price Range.
• (4) In the case of Lance Batchelor, his interest in Shares comprises an option with an exercise price set at the Offer Price to be granted under the LTIP on the day of Admission.
• (5) Gareth Williams intends to subscribe for Shares with a value of £60,000 at the Offer Price. The Company intends to meet this subscription for Shares in full.
• 3.8.2 In so far as is known to the Directors, the following are the interests (within the meaning of Part VI of the Act) (other than interests held by the Directors) which represent, or will represent, directly or indirectly, three per cent. or more of the issued share capital of the Company on the date of this document and on the day of Admission assuming various points of the Price Range and no exercise of the Over-allotment Option:

	Immediately prior to Admission Percentage of			Immediately following Admission(1)
Acromas Bid Co Limited	Number of ordinary shares	issued ordinary share capital	Number of ordinary shares	Percentage of issued ordinary share capital
Mid-point of the Price Range	800,000,000	100	653,591,327	61%
Bottom of the Price Range	800,000,000	100	800,000,000	72%
Top of the Price Range	800,000,000	100	507,182,653	49%

(1) Assuming no exercise of the Over-allotment Option. If the Over-allotment Option is exercised in full, Acromas will sell further Shares, representing 15 per cent. of the Offer Size.

The business address of the Selling Shareholder is Enbrook Park, Folkestone, Kent CT20 3SE.

Save as disclosed above, in so far as is known to the Directors, there is no other person who has or will have immediately following Admission, directly or indirectly, voting rights in three per cent. or more of the issued share capital of the Company, or of any other person who can, will or could, directly or indirectly, jointly or severally, exercise control over the Company. The Directors have no knowledge of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. None of the Company's major shareholders have or will have different voting rights attached to the shares they hold in the Company.

3.9 No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Group or any of its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed.

4. Share plans and remuneration policy

Following Admission, the Company intends to operate two discretionary executive share plans: the Saga plc Long Term Incentive Plan (the "LTIP") and the Saga plc Deferred Bonus Plan (the "DBP"). In addition, the Company has also established an all-employee share incentive plan, the Saga plc Share Incentive Plan (the "SIP).

The LTIP and DBP are, together, the "Discretionary Plans" and the Discretionary Plans and SIP are, together, the "New Plans".

A reference in this section 4 to the Board includes any designated committee of the Board.

Information on certain awards to be made at or following Admission and the principal features of the New Plans are summarised below.

4.1 Awards granted at or following Admission

A number of awards over Shares will be made to employees at or shortly after Admission.

Nil cost options will be granted on the day of Admission to the Executive Chairman, Group Finance Director and 55 other employees of the Group to recognise their contribution to the business in the lead up to Admission. Options will be granted to Directors and Senior Managers with a financial value of £17 million in respect of a number of Shares to be set by reference to the final Offer Price (an indicative number of Shares is set out in section 3.8.1 above) Options with a financial value of £7.8 million will be granted to the remaining employees (representing a total of 3,630,233 Shares (assuming that the Offer Price is set at the mid-point of the Price Range)). The options will be exercisable for ten years from grant, except that following cessation of employment they will instead be exercisable for six months (or such longer period as permitted by the Board) from such cessation and in the event of the relevant individual's death, twelve months from the individual's death. For the avoidance of doubt, the options are to be irrevocable and cannot be cancelled. In addition, they will not be subject to malus or clawback provisions or continuing employment requirements. Shares acquired on exercise of the options will be subject to the lock-up arrangements described in section 12 of Part 6 "Details of the Offer" of the Securities Note, which permit a sale of Shares to meet any tax liability arising on the issue of Shares to the relevant employee.

Under a schedule to the LTIP, the Group Chief Executive will be granted options pursuant to his service agreement to acquire Shares at or shortly after Admission with the total number of Shares determined by dividing £4.0 million by the Offer Price. The price payable per Share on exercise of the options shall be the Offer Price. 25 per cent. of the Shares under the options will vest on the third anniversary of Admission, a further 25 per cent. on the fourth anniversary of Admission and the final 50 per cent. on the fifth anniversary of Admission. The options will only vest if the Group Chief Executive has not ceased to be an employee of a group company and is not under notice to terminate his employment with a group company (whether given or received by him) for any reason. Any options which have previously vested but which remain unexercised at the date that the Group Chief Executive ceases to be an employee of a group company or is under notice to terminate his employment with a group company (whether given or received by him) for any reason shall immediately and automatically lapse. Any unexercised options shall lapse on the tenth anniversary of Admission. The options will not be subject to malus or clawback provisions.

In addition, an offer will be made before Admission under the SIP, as described in paragraph 4.5.14 below.

4.2 The LTIP

The LTIP was adopted by the Board and approved by the Company's shareholders on 1 May 2014.

4.2.1 Status

The LTIP is a discretionary executive share plan. Under the LTIP, the Board may, within certain limits and subject to any applicable performance conditions, grant to eligible employees (i) nil cost options over Shares ("LTIP Options") and/or (ii) conditional awards (i.e. a conditional right to acquire Shares) ("LTIP Conditional Awards") and/or (iii) Shares which are subject to restrictions and the risk of forfeiture ("LTIP Restricted Shares"). The Company has also established a sub-plan to the LTIP which permits the grant of options ("LTIP CSOP Options", and together with LTIP Options, LTIP Conditional Awards and LTIP Restricted Shares, "LTIP Awards") over Shares meeting the requirements of a company share option plan ("CSOP" ) for the purposes of the Income Tax (Earnings and Pensions) Act 2003. The provisions of the LTIP apply to CSOP LTIP Options subject to and insofar as permitted by the applicable requirements of the CSOP legislation. No payment is required for the grant of an LTIP Award.

4.2.2 Eligibility

All employees (including Executive Directors) of the Group are eligible for selection to participate in the LTIP at the discretion of the Board.

4.2.3 Grant of LTIP Awards

The Board may grant LTIP Awards over Shares to eligible employees with a maximum total market value in any financial year of up to 250 per cent. of the relevant individual's annual base salary. It is anticipated that the first grant of LTIP Awards shall be made at or shortly after Admission to the Executive Directors and up to a further 55 senior employees of the Group. The initial grant to each Executive Director shall be over Shares with a market value of between 125 and 200 per cent. of his salary. The sub-plan to the LTIP permits the grant of LTIP CSOP Options over Shares with a total market value of up to the permitted limit from time to time applying to options granted under a CSOP (currently £30,000). For the first grant of LTIP Awards, which it is anticipated will take place at or shortly after Admission, the Board reserves the right to calculate market value by reference to the Offer Price.

Where an employee is granted an LTIP Option, he may also be granted an LTIP CSOP Option over further Shares up to the permitted limit applicable to options granted under a CSOP (see above). The exercise price payable for each Share subject to an LTIP CSOP Option shall be determined by the Board and shall not be less than the market value of a Share determined in accordance with the requirements of the applicable CSOP legislation. The number of Shares under the LTIP Option which may be exercised will be reduced by such number of Shares as has a market value (as at the date of exercise of the LTIP CSOP Option) equal to the gain made on the exercise of the LTIP CSOP Option. Overall the economic gain from the LTIP Award before tax is the same as if the LTIP CSOP Option was not in place. LTIP Awards may be granted during the 42 days beginning on: (i) Admission; (ii) the day after the announcement of the Company's results for any period; (iii) any day on which the Board determines that circumstances are sufficiently exceptional to justify the making of the LTIP Award at that time; or (iv) the day after the lifting of any dealing restrictions.

However, no LTIP Awards may be granted more than five years from the date when the LTIP was adopted.

4.2.4 Holding period

At its discretion, the Board may grant LTIP Awards subject to a holding period of a maximum of two years following vesting.

4.2.5 Performance and other conditions

The Board may impose performance conditions on the vesting of LTIP Awards. Where performance conditions are specified for LTIP Awards, the underlying measurement period for such conditions will ordinarily be three years. The proposed performance conditions for the first grant of LTIP Awards is set out in section 4.7.

Any performance conditions applying to LTIP Awards may be varied, substituted or waived if the Board considers it appropriate, provided the Board considers that the new performance conditions are reasonable and are not materially less difficult to satisfy than the original conditions (except in the case of waiver).

The Board may also impose other conditions on the vesting of LTIP Awards.

4.2.6 Malus

The Board may decide, at any time prior to the vesting of LTIP Awards, that the number of Shares subject to an LTIP Award shall be reduced (including to nil) on such basis that the Board in its discretion considers to be fair and reasonable. where the Board determines:

• there has been a material misstatement of the audited accounts of the Group or any Group company,
• that the assessment of any performance condition in respect of an LTIP Award was based on error, or inaccurate or misleading information,
• that there has been action or conduct of a participant or participants which amounts to gross misconduct, or
• that events or the behaviour of a participant or participants have a significant detrimental impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant or participants were responsible for the reputational damage and that the reputational damage is attributable to them.

4.2.7 Vesting and exercise

LTIP Awards will normally vest, and LTIP Options and LTIP CSOP Options will normally become exercisable, on the third anniversary of the date of grant of the LTIP Award to the extent that any applicable performance conditions have been satisfied and to the extent permitted under any operation of malus or clawback. LTIP Options and LTIP CSOP Options will normally remain exercisable for a period determined by the Board at grant which shall not exceed 10 years from grant.

4.2.8 Cessation of employment

Except in certain circumstances, set out below, an LTIP Award will lapse immediately upon a participant ceasing to be employed by or holding office with the Group.

However, if a participant so ceases because of his ill-health, injury, disability, redundancy, retirement with the agreement of his employer, the participant being employed by a company which ceases to be a Group company or being employed in an undertaking which is transferred to a person who is not a Group company or in other circumstances at the discretion of the Board (each an "LTIP Good Leaver Reason"), his LTIP Award will ordinarily vest on the date when it would have vested if he had not so ceased to be a Group employee or director, subject to the satisfaction of any applicable performance conditions measured over the original performance period and the operation of malus or clawback. In addition, unless the Board decides otherwise, vesting will be pro-rated to reflect the reduced period of time between grant and the participant's cessation of employment as a proportion of the normal vesting period.

If a participant ceases to be a Group employee or director for an LTIP Good Leaver Reason, the Board can alternatively decide that his LTIP Award will vest early when he leaves. If a participant dies, a proportion of his LTIP Award will vest on the date of his death. The extent to which an LTIP Award will vest in these situations will be determined by the Board at its absolute discretion taking into account, among other factors, the period of time the LTIP Award has been held and the extent to which any applicable performance conditions have been satisfied at the date of cessation of employment and the operation of malus or clawback. In addition, unless the Board decides otherwise, vesting will be pro rated to reflect the reduced period of time between grant and the participant's cessation of employment as a proportion of the normal vesting period.

To the extent that LTIP Options and LTIP CSOP Options vest for an LTIP Good Leaver Reason, they may be exercised for a period of six months following vesting (or such longer period as the Board determines) and will otherwise lapse at the end of that period. To the extent that LTIP Options vest following death of a participant, they may be exercised for a period of 12 months following death and will otherwise lapse at the end of that period.

4.2.9 Corporate events

In the event of a takeover, reconstruction, amalgamation or winding-up of the Company, the LTIP Awards will vest early. The proportion of the LTIP Awards which vest shall be determined by the Board taking into account, among other factors, the period of time the LTIP Award has been held by the participant and the extent to which any applicable performance conditions have been satisfied at that time.

To the extent that LTIP Options and LTIP CSOP Options vest in the event of a takeover, winding-up or reconstruction or amalgamation of the Company they may be exercised for a period of six months measured from the relevant event (or in the case of takeover such longer period as the Board determines) and will otherwise lapse at the end of that period.

In the event of a demerger, distribution or any other corporate event, the Board may determine that LTIP Awards shall vest. The proportion of the LTIP Awards which vest shall be determined by the Board taking into account, among other factors, the period of time the LTIP Award has been held by the participant and the extent to which any applicable performance conditions have been satisfied at that time. LTIP Options and LTIP CSOP Options that vest in these circumstances may be exercised during such period as the Board determines and will otherwise lapse at the end of that period.

If there is a corporate event resulting in a new person or company acquiring control of the Company, the Board may (with the consent of the acquiring company) alternatively decide that LTIP Awards will not vest or lapse but will be replaced by equivalent new awards over shares in the new acquiring company.

4.2.10 Clawback

The Board may require the participant to transfer to the Company all or some of the Shares acquired following vesting of an LTIP Award or the exercise of an LTIP Option in the same circumstances as apply to malus (see section 4.2.6 above).

4.3 The DBP

The DBP was adopted by the Board and approved by the Company's shareholders on 1 May 2014. The DBP will operate in conjunction with the Company's executive bonus scheme. The DBP will operate in respect of the annual bonus earned for the 2014 financial year, with the first awards under the DBP to be made in 2015.

4.3.1 Status

The DBP is a discretionary executive share plan. Under the DBP, the Board may, within certain limits, grant to eligible employees (i) nil cost options over Shares ("DBP Options") and/or (ii) conditional awards (i.e. a conditional right to acquire Shares) ("DBP Conditional Awards") and/or (iii) Shares which are subject to restrictions and the risk of forfeiture ("DBP Restricted Shares" and, together with DBP Options and DBP Conditional Awards, "DBP Awards"). No payment is required for the grant of a DBP Award.

4.3.2 Eligibility

All employees (including Executive Directors) of the Group are eligible for selection to participate in the DBP at the discretion of the Board.

4.3.3 Grant of DBP Awards

The Board may determine that a proportion of a participant's annual bonus will be deferred into a DBP Award.

There is a maximum limit on the market value of Shares granted to any employee under a DBP Award of 50 per cent. of the total annual bonus for that individual. For the first grant of DBP Awards will be made in 2015 in respect of the annual bonus earned in the 2014 financial year. The maximum limit on the market value of Shares granted to the Executive Directors will be no more than 50 per cent of their basic annual salary. DBP Awards may be granted during the 42 days beginning on: (i) Admission; (ii) the day after the announcement of the Company's results for any period; (iii) any day on which the Board determines that circumstances are sufficiently exceptional to justify the making of the DBP Award at that time; or (iv) the day after the lifting of any dealing restrictions.

However, no DBP Awards may be granted more than five years from the date when the DBP was adopted.

4.3.4 Holding period

At its discretion, the Board may grant DBP Awards subject to a holding period of a maximum of up to two years following vesting.

4.3.5 Malus

The Board may decide, at any time prior to the vesting of DBP Awards, that the number of Shares subject to a DBP Award shall be reduced (including to nil) on such basis that the Board in its discretion considers to be fair and reasonable where the Board determines:

• there has been a material misstatement of the audited accounts of the Group or any Group company,

• that the assessment of any performance condition in respect of a DBP Award was based on error, or inaccurate or misleading information,

• that there has been action or conduct of a participant or participants which amounts to gross misconduct, or

• that events or the behaviour of a participant or participants have a significant detrimental impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant or participants were responsible for the reputational damage and that the reputational damage is attributable to them.

4.3.6 Vesting and exercise

DBP Awards will normally vest on the third anniversary of the date of grant of the DBP Award to the extent permitted under any operation of malus or clawback. DBP Options will normally remain exercisable for a period determined by the Board at grant which shall not exceed 10 years from the date of grant.

4.3.7 Cessation of employment

Except in certain circumstances, set out below, a DBP Award will lapse immediately upon a participant ceasing to be employed by or holding office with the Group.

However, if a participant so ceases because of his ill-health, injury, disability, redundancy, retirement with the agreement of his employer, the participant being employed by a company which ceases to be a Group company or being employed in an undertaking which is transferred to a person who is not a Group company or in other circumstances at the discretion of the Board (each an "DBP Good Leaver Reason"), his DBP Award will ordinarily vest on the date when it would have vested if he had not so ceased to be a Group employee or director, subject to the operation of malus or clawback. In addition, unless the Board decides otherwise, vesting will be pro-rated to reflect the reduced period of time between grant and the participant's cessation of employment as a proportion of the normal vesting period.

If a participant ceases to be a Group employee or director for a DBP Good Leaver Reason, the Board can alternatively decide that his DBP Award will vest early when he leaves. If an employee dies, a proportion of his DBP Award will vest on the date of his death. The extent to which a DBP Award will vest in these situations will be determined by the Board at its absolute discretion taking into account, among other factors, the period of time the DBP Award has been held and the operation of malus or clawback. In addition, unless the Board decides otherwise, vesting will be pro rated to reflect the reduced period of time between grant and the participant's cessation of employment as a proportion of the normal vesting period.

To the extent that DBP Options vest for a DBP Good Leaver Reason, they may be exercised for a period of six months following vesting (or such longer period as the Board determines) and will otherwise lapse at the end of that period. To the extent that DBP Options vest following death of a participant, they may be exercised for a period of 12 months following death and will otherwise lapse at the end of that period.

4.3.8 Corporate events

In the event of a takeover, reconstruction, amalgamation or winding-up of the Company, the DBP Awards will vest early. The proportion of the DBP Awards which vest shall be determined by the Board taking into account, among other factors, the period of time the DBP Award has been held by the participant.

To the extent that DBP Options vest in the event of a takeover, winding-up or reconstruction or amalgamation of the Company they may be exercised for a period of six months measured from the relevant event (or in the case of takeover such longer period as the Board determines) and will otherwise lapse at the end of that period.

In the event of a demerger, distribution or any other corporate event, the Board may determine that DBP Awards shall vest. The proportion of the DBP Awards which vest shall be determined by the Board taking into account, among other factors, the period of time the DBP Award has been held by the participant and the extent to which any applicable performance conditions have been satisfied at that time. DBP Options that vest in these circumstances may be exercised during such period as the Board determines and will otherwise lapse at the end of that period.

If there is a corporate event resulting in a new person or company acquiring control of the Company, the Board may (with the consent of the acquiring company) alternatively decide that DBP Awards will not vest or lapse but will be replaced by equivalent new awards over shares in the new acquiring company.

4.3.9 Clawback

The Board may require the participant to transfer to the Company all or some of the Shares acquired following vesting of a DBP Award or the exercise of a DBP Option in the same circumstances as apply to malus (see section 4.3.5 above).

4.4 Provisions applying to each of the Discretionary Plans

4.4.1 Awards not transferable

Awards granted under the Discretionary Plans are not transferable other than to the participant's personal representatives in the event of his death provided that awards and Shares may be held by the trustees of an employee as nominee for the participants.

4.4.2 Limits

The Discretionary Plans may operate over new issue Shares, treasury Shares or Shares purchased in the market. The rules of each of the Discretionary Plans provide that, in any period of 10 calendar years, not more than 10 per cent. of the Company's issued ordinary share capital may be issued under the relevant plan and under any other employees' share scheme operated by the Company. In addition, the rules of each of the Discretionary Plans provide that, in any period of 10 calendar years, not more than five per cent. of the Company's issued ordinary share capital may be issued under the relevant plan and under any other executive share scheme adopted by the Company. Shares issued out of treasury under the relevant Discretionary Plan will count towards these limits for so long as this is required under institutional shareholder guidelines. Shares issued or to be issued pursuant to awards granted before Admission or within 42 days beginning on Admission will not count towards these limits. In addition, awards which are renounced or lapse shall be disregarded for the purposes of these limits.

4.4.3 Variation of capital

If there is a variation of share capital of the Company or in the event of a demerger or other distribution, special dividend or distribution, the Board may make such adjustments to awards granted under each of the Discretionary Plans, including the number of Shares subject to awards and the option exercise price (if any), as it considers to be fair and reasonable.

4.4.4 Dividend equivalents

In respect of any award granted under any of the Discretionary Plans, the Board may decide that participants will receive a payment (in cash and/or additional Shares) equal in value to any dividends that would have been paid on the Shares which vest under that award by reference to the period between the time when the relevant award was granted and the time when the relevant award vested. This amount may assume the reinvestment of dividends and exclude or include special dividends or dividends in specie.

4.4.5 Alternative settlement

At its discretion, the Board may decide to satisfy awards granted under the Discretionary Plans with a cash payment equal to any gain that a participant would have made had the relevant award been satisfied with Shares.

4.4.6 Rights attaching to Shares

Except in relation to the award of Shares subject to restrictions, Shares issued and/or transferred under the Discretionary Plans will not confer any rights on any participant until the relevant award has vested or the relevant option has been exercised and the participant in question has received the underlying Shares. Any Shares allotted when an option is exercised or an award vests will rank equally with Shares then in issue (except for rights arising by reference to a record date prior to their issue). A participant awarded Shares subject to restrictions shall have the same rights as a holder of Shares in issue at the time that the participant acquires the Shares, save to the extent set out in the agreement with the participant relating to those Shares.

4.4.7 Amendments

The Board may, at any time, amend the provisions of any of the Discretionary Plans in any respect. The prior approval of Shareholders at a general meeting of the Company must be obtained in the case of any amendment to the advantage of participants which is made to the provisions relating to eligibility, individual or overall limits, the persons to whom an award can be made under the relevant Discretionary Plan, the price at which Shares can be acquired under an award under the relevant Discretionary Plan, the adjustments that may be made in the event of any variation to the share capital of the Company and/or the rule relating to such prior approval, save that there are exceptions for any minor amendment to benefit the administration of the relevant Discretionary Plan, to take account of the provisions of any proposed or existing legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants, the Company and/or its other Group companies. Amendments may not adversely affect the rights of participants except where participants are notified of such amendment and the majority of participants approve such amendment.

4.4.8 Overseas plans

The Board may, at any time, establish further plans based on the LTIP and the DBP for overseas territories. Any such plan shall be similar to the LTIP or DBP, as relevant, but modified to take account of local tax, exchange control or securities laws. Any Shares made available under such further overseas plans must be treated as counting against the limits on individual and overall participation under the relevant plan.

4.4.9 Benefits not pensionable

The benefits received under the Discretionary Plans are not pensionable.

4.5 The SIP

The SIP was adopted by the Board and approved by the Company's shareholders on 1 May 2014. The first offer of Shares under the SIP is described in more detail in section 4.5.14 below.

4.5.1 Status

The SIP is an all-employee share ownership plan which has been designed to meet the requirements of Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 so that Shares can be provided to UK employees under the SIP in a tax-efficient manner. The summary of its anticipated features below has been prepared on the basis of clauses amending the requirements for share incentive plans falling within Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 as set out in the draft of the Finance Bill 2014 as at 27 March 2014 and on the assumption that the Finance Bill 2014, in that form, will receive Royal Assent and that the relevant provisions take effect on 6 April 2014.

Under the SIP, eligible employees may be: (i) awarded up to £3,600 worth of free Shares ("SIP Employee Free Shares") each year; (ii) offered the opportunity to buy Shares with a value of up to the lower of £1,800 and 10 per cent. of the employee's pre-tax salary a year ("Partnership Shares"); (iii) given up to two free Shares ("Matching Shares") for each Partnership Share bought; and/or (iv) allowed or required to purchase Shares using any dividends received on Shares held in the SIP ("Dividend Shares"). The Board may determine that different limits shall apply in the future should the relevant legislation change in this respect.

4.5.2 SIP Trust

The SIP operates through a UK-resident trust (the "SIP Trust"). The trustee of the SIP Trust purchases or subscribes for shares that are awarded to or purchased on behalf of participants in the SIP. A participant will be the beneficial owner of any Shares held on his behalf by the trustee of the SIP Trust. Any Shares held in the SIP Trust will rank equally with Shares then in issue.

If a participant ceases to be in relevant employment, he will be required to withdraw his SIP Employee Free Shares, Partnership Shares, Matching Shares and Dividend Shares from the SIP Trust (or the SIP Employee Free Shares and Partnership Shares, Matching Shares may be forfeited as described below).

4.5.3 Eligibility

Each time that the Board decides to operate the SIP, all UK resident tax-paying employees of the Company and its subsidiaries participating in the SIP must be offered the opportunity to participate. Other employees may be permitted to participate. Participants invited to participate must have completed a minimum qualifying period of employment before they can participate, as determined by the Board in relation to any award of Shares under the SIP which may be different for each type of award from time to time. In the case of SIP Employee Free Shares (and, in certain circumstances, Partnership and Matching Shares) that period must not exceed 18 months or, in certain other circumstances and only in the case of Partnership Shares or Matching Shares, six months.

4.5.4 Limits

The SIP may operate over new issue Shares, treasury Shares or Shares purchased in the market. The rules of the SIP provide that, in any period of 10 calendar years, not more than 10 per cent. of the Company's issued ordinary share capital may be issued under the SIP and under any other employees' share scheme operated by the Company. Shares issued out of treasury for the SIP will count towards this limit for so long as this is required under institutional shareholder guidelines. Shares issued or to be issued pursuant to awards granted before Admission or within 42 days beginning on Admission will not count towards these limits. In addition, awards which are renounced or lapse shall be disregarded for the purposes of these limits.

4.5.5 SIP Employee Free Shares

Up to £3,600 worth of SIP Employee Free Shares may be awarded to each employee in a tax year. SIP Employee Free Shares must be awarded on the same terms to each employee, but the number of SIP Employee Free Shares awarded can be determined by reference to the employee's remuneration, length of service, number of hours worked and, if the Company so chooses, the satisfaction of performance targets based on business results or other objective criteria. There is a holding period of between three and five years (the precise duration to be determined by the Board) during which the participant cannot withdraw the SIP Employee Free Shares from the SIP Trust (or otherwise dispose of the SIP Employee Free Shares) unless the participant leaves relevant employment.

The Board, at its discretion, may provide that the SIP Employee Free Shares will be forfeited if the participant leaves relevant employment other than in the circumstances of injury, disability, redundancy, retirement, by reason of a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 or if the relevant employment is employment by an associated company by reason of a change of control or other circumstances ending that company's status as an associated company (each a "SIP Good Leaver Reason") or on death. Forfeiture can only take place within three years of the SIP Employee Free Shares being awarded.

4.5.6 Partnership Shares

The Board may allow an employee to use pre-tax salary to buy Partnership Shares. The maximum limit is the lower of £1,800 or 10 per cent. of pre-tax salary in any tax year. The minimum salary deduction permitted, as determined by the Board, must be no greater than £10 on any occasion. The salary deductions allocated to Partnership Shares can be accumulated for a period of up to 12 months (the "Accumulation Period") or Partnership Shares can be purchased out of deductions from the participant's pretax salary when those deductions are made. A participant and the Company may agree to vary the amount of salary deductions and the intervals of those deductions. If there is an Accumulation Period, the number of Shares purchased shall be determined by dividing the participant's aggregate pay deducted during the Accumulation Period by the market value of the Partnership Shares.

Once acquired, Partnership Shares may be withdrawn from the SIP by the participant at any time.

At the discretion of the Board, Partnership Shares may be subject to forfeiture on cessation of employment (except for a SIP Good Leaver Reason or on death), provided they are offered for sale for a price equal to the lower of the market value of the Partnership Shares at the time of their sale or the price paid for those Partnership Shares.

4.5.7 Matching Shares

The Board may, at its discretion, offer Matching Shares free to an employee who has purchased Partnership Shares. If awarded, Matching Shares must be awarded on the same basis to all participants up to a maximum of two Matching Shares for every Partnership Share purchased (or such other maximum as may be provided by statute). There is a holding period of between three and five years (the precise duration to be determined by the Board) during which the participant cannot withdraw the Matching Shares from the SIP Trust unless the participant leaves relevant employment.

The Board, at its discretion, may provide that the Matching Shares will be forfeited if the participant leaves relevant employment other than for a SIP Good Leaver Reason or on death. Forfeiture can only take place within three years of the Matching Shares being awarded.

4.5.8 Re-investment of dividends

The Board may allow or require a participant to re-invest the whole or part of any dividends paid on Shares held in the SIP. Dividend Shares must be held in the SIP Trust for no less than three years.

Once acquired, on cessation of employment, Dividend Shares may be subject to forfeiture (except for a SIP Good Leaver Reason, or on death), provided they are offered for sale for a price equal to the lower of the market value of the Dividend Shares at the time of their sale or the amount of dividends originally reinvested into the Dividend Shares.

4.5.9 Corporate events

In the event of a general offer being made to Shareholders (or a similar takeover event taking place) during a holding period, participants will be able to direct the trustee of the SIP Trust as to how to act in relation to their Shares held in the SIP. In the event of a corporate re-organisation, any Shares held by participants may be replaced by equivalent shares in a new holding company.

4.5.10 Variation of capital

Shares acquired on a variation of share capital of the Company will usually be treated in the same way as the Shares acquired or awarded under the SIP, in respect of which the rights were conferred and as if they were acquired or awarded at the same time.

4.5.11 Rights attaching to Shares

Any Shares allotted under the SIP will rank equally with Shares then in issue (except for rights arising by reference to a record date prior to their allotment).

4.5.12 Amendments

The Company may at any time amend the rules of the SIP by resolution of the Board and may amend the SIP trust deed by way of a supplemental deed. The prior approval of Shareholders at a general meeting of the Company must be obtained in the case of any amendment to the advantage of participants which is made to the provisions relating to eligibility, persons to whom the award must or may be made, individual or overall limits, the basis for determining a participant's entitlement to and the terms of Shares provided under the SIP, the price payable for SIP Shares by eligible employees and/or the adjustments that may be made in the event of any variation to the share capital of the Company; save that there are exceptions for any minor amendment to benefit the administration of the SIP, to take account of any change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants, the Company and/or its subsidiaries or the trustees of the SIP Trust. No modification can be made which would alter, to the disadvantage of any participant, the rights he accrued under the SIP.

4.5.13 Benefits not pensionable

The benefits received under the SIP are not pensionable.

4.5.14 Overseas plans

The Board may, at any time, establish further plans for overseas territories, any such plan to be similar to the SIP but modified to take account of local tax, exchange control or securities laws. Any Shares made available under such further overseas plans must be treated as counting against the limits on individual and overall participation in the SIP.

4.5.15 First offer under the SIP

An offer under the SIP will be made before Admission to UK employees of the Company and its subsidiaries who were employed on 2 May 2014 and remain so employed on 30 May 2014 ("Partnership Shares Eligible Employees") under the SIP to apply to buy Partnership Shares. The pay allocated to Partnership Shares will be accumulated over an Accumulation Period of six months and the total amount which can be used to buy Partnership Shares will be the maximum individual limit of the lower of £1,800 in any tax year or 10 per cent. of the employee's pre-tax annual earnings in any tax year. The number of Partnership Shares purchased shall be determined by dividing the participant's aggregate pay deducted during the Accumulation Period by the market value of the Partnership Shares using the lower of market value of a Share at the beginning and when the Shares are acquired after the end of the Accumulation Period. If a Partnership Share Eligible Employee was to elect to purchase the maximum possible £1,800 allocation under the SIP Partnership Shares Offer, 837 Shares would be made available to him/her under this arrangement (assuming that Shares are purchased at the Offer Price and that the Offer Price is set at the mid-point of the Price Range). In the event that the market value of a Share at acquisition is less than 50 per cent. of the Offer Price, the amount of pay deductions used by each such employee to purchase Shares will be scaled back such that the number of Shares required to meet each such employee's entitlement under the SIP Partnership Shares Offer will not exceed double the number referred to in the previous sentence. The Shares required to give effect to the SIP Partnership Shares Offer will be derived from a subscription or purchase of Shares by the SIP Trust.

Dividends paid on Partnership Shares held in the SIP will be reinvested in Shares which will be held in the SIP Trust.

In accordance with the terms of the SIP, Partnership Shares Eligible Employees who are awarded Partnership Shares can withdraw the Partnership Shares they acquire. On cessation of employment, SIP Partnership Eligible Employees can keep their Partnership Shares (and dividends on Partnership Shares which are reinvested in Shares), outside the SIP Trust, irrespective of when they leave and the reason for leaving. No fractional entitlements to Partnership Shares will be awarded.

The Partnership Shares will be subject to the other provisions applicable to Partnership Shares awarded under the SIP as summarised above.

For the avoidance of doubt, the SIP Partnership Shares Offer is not being made pursuant to this Prospectus and is not underwritten. If Admission does not take place, the SIP Partnership Shares Offer will be void and of no effect. In addition, the SIP Partnership Shares Offer is conditional on the Company being satisfied that the SIP meets the requirements of a share incentive plan for the purposes of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003. In such circumstances no employee shall have any right of compensation or other right or claim against the Company and no Shares will be allocated to employees under the SIP. Employees' entitlement to Shares in respect of the SIP Partnership Shares Offer is in addition to any right they may have to participate in the Employee Offer. The Employee Offer forms part of the Retail Offer, details of which are set out in Part 6 of the Securities Note.

4.6 The Company's employee trust

The Company is setting up an employee trust (the "Saga plc Employee Trust" or "EBT"). This will be established by a trust deed entered into between the Company and Appleby Trust (Jersey) Limited. The Company has the power to appoint and remove the trustee.

The EBT can be used to benefit employees and former employees of the Company and its subsidiaries and certain members of their families. The trustee of the EBT has the power to acquire the Shares. Any Shares acquired may be used for the purposes of the New Plans or other employee share plans established by the Group from time to time.

The Group may fund the EBT by loan or gift to acquire Shares either by market purchase or by subscription. Any awards to subscribe for Shares granted to the EBT or Shares issued to the EBT will be treated as counting against the dilution limits that apply to the relevant plan save to the extent set out in section 4.4.2.

The EBT will not make an acquisition of Shares if that acquisition would mean that (after deducting any Shares held as nominee for beneficiaries under the EBT) it held more than five per cent. of the Company's ordinary share capital, without prior shareholder approval.

4.7 Remuneration policy

Overview of Remuneration Policy

The Company's aim is to attract, retain and motivate the best talent to help ensure continued growth and success as it enters its next stage of its development operating in a listed company environment.

The remuneration policy aims to align the interests of the Executive Directors, Senior Managers and employees to the long-term interests of shareholders and aims to support a high performance culture with appropriate reward for superior performance without creating incentives that will encourage excessive risk taking or unsustainable Company performance.

Overall remuneration levels have been set at a level that are considered by the Remuneration Committee (the "Committee") to be appropriate for the size and nature of the business, having taken specialist, independent advice where necessary, in order to ensure that the policies and remuneration structure is appropriate for the listed company environment.

To support this aim, the Board has adopted for Executive Directors and Senior Managers, the Annual Bonus Plan and two share-based long-term incentive plans – the Saga plc Deferred Bonus Plan (the "DBP") and the Saga plc Long-Term Incentive Plan (the "LTIP"). In addition, the Board has also adopted an allemployee share incentive plan, the Saga plc Share Incentive Plan (the "SIP").

The Annual Bonus Plan, the DBP, the LTIP and the SIP are described in section 4 of this Part, and a summary of the incentive arrangements that will be in place on or around Admission pursuant to these Plans is set out in section 4 of this Part.

The Remuneration Committee will review annually the remuneration arrangements for the Executive Directors and key Senior Managers drawing on trends and adjustments made to all employees across the Group and taking into consideration:

• business strategy over the period;
• overall corporate performance;
• market conditions affecting the Company;
• the recruitment market;
• changing practice in the market where the Company compete for talent; and
• changing views of institutional shareholders and their representative bodies.

The details of the group's Executive Director remuneration arrangements, including the operation of the Group's incentive plans and payments made under them, will be set out each year in a remuneration report contained in the Group's annual report.

The following table summarises the key components of the Executive Director remuneration arrangements which will form part of the remuneration policy subject to formal approval by shareholders at the first Annual General Meeting ("AGM") of the Company following Admission in accordance with the regulations set out in the Large and Medium-sized Companies and Groups (Accounts and Report) (Amendment) Regulations 2013.

It is the current intention of the Remuneration Committee that the remuneration policy would apply for three years from its date of approval. It is also the intention of the Committee to operate this policy from Admission.

All references to a policy level (e.g. median) are in relation to the Company's comparator group for remuneration.

The Company currently has an Executive Chairman, who will be treated as an Executive Director for the purposes of this policy until such time as he ceases to hold executive status.

It should be noted that the awards described in section 4.1 comprising nil cost options being granted at Admission to the Executive Chairman, Group Finance Director and 55 other employees of the Group, fall outside the terms of the policy because they will be made in recognition of their contribution to the business in the lead up to Admission.

In addition, the cash and option awards described in sections 3.2.4 and 4.1 in respect of the Group Chief Executive, which were agreed as part of his recruitment arrangements, pre-date and fall outside the terms of the policy.

	How it supports the Company's short and long
Element of Remuneration	term strategic objectives	Operation	Opportunity
Salary Policy Median	Provides a base level of remuneration to support recruitment and retention of Executive Directors with the necessary experience	An Executive Director's basic salary is set on appointment and reviewed annually or when there is a change in position or responsibility.	The Committee wishes to ensure that fixed costs are minimised and accordingly it has set the maximum salary at up to the median level relative to the current comparator group of companies.
	and expertise to deliver the Group's strategy.	When determining an appropriate level of salary, the Committee considers: • remuneration practices within the group; • the general performance of the group; • salaries within the ranges paid by the companies in the comparator group used for remuneration benchmarking; and • the economic environment.	The companies in the comparator group are the constituents of the FTSE 75-125 (excluding financial services and real estate companies). The Committee intends to review the list of companies each year and may add or remove companies from the group as it considers appropriate. Any changes to the comparator group will be disclosed in the part of the report setting out the operation of the policy for the future year. In general salary rises to Executive Directors will be in line with the rise to employees.
Benefits Policy Market	Provides a minimum level of benefits to support a low fixed cost and a performance based remuneration policy.	The Executive Directors receive family private health cover and death in service life assurance and subsistence expenses. The Committee recognises the need to maintain suitable flexibility in the determination of benefits that ensure it is able to support the objective of attracting and retaining personnel. The maximum will be set at the	See description of benefits in adjacent column.
		cost of providing the benefits described.
Pensions Policy Lower Quartile to Median	Provides a minimum level of pension provision to support a low fixed cost and a performance based remuneration policy.	Employer retirement funding is determined as a percentage of gross basic salary, up to a maximum limit of 20 per cent. Where this exceeds the maximum annual pension contribution that can benefit from tax relief, any excess may be provided in the form of a salary supplement, which would not itself be pensionable or form part of salary for the purposes of determining the extent of participation in the Company's incentive arrangements.	The Company pension contribution as a percentage of salary for 2014 are:
			Andrew Goodsell	11.7%
			Lance Batchelor Stuart Howard	15.0% 11.7%

Element of	How it supports the Company's short and long term strategic
Remuneration Annual Bonus Plan Policy Median to Upper Quartile	objectives The Plan provides a significant incentive to the Executive Directors linked to achievement in delivering goals that are closely aligned with the Company's strategy and the creation of value for shareholders.	Operation The Committee will determine the maximum annual participation in the Plan for each year, which will not exceed 150 per cent. of salary.	Opportunity The current Bonus Maximum as a percentage of salary:		Performance metrics The Plan is based on a mix of financial and strategic/ operational conditions and is measured over a period of one financial year. The financial measures will account for no less than 50 per cent. of the bonus opportunity.
	In particular, the Plan supports the Company's objectives allowing the setting of annual targets based on the businesses' strategic objectives at that				The Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance
	time, meaning that a wider range of performance metrics can be used that		Andrew Goodsell	150%	measures part-way through a performance year if there is a significant and material
	are relevant and achievable.		Lance Batchelor	150%	event which causes the Committee to believe the
			Stuart	125%	original measures, weightings and targets are
			Howard Percentage of bonus maximum earned for levels of performance:		no longer appropriate. Discretion may also be exercised in cases where
			Threshold	0%	the Committee believe that the bonus outcome is not a
			On Target Maximum	60% 100%	fair and accurate reflection of business performance.
Deferred Annual Bonus Plan ("DBP")	The Committee has discretion to defer part of the annual bonus earned in shares under the Deferred Annual Bonus Plan. The advantage of deferral is: • ongoing risk adjustment due to the link to the share price over the deferral period; and • amounts deferred in shares are also forfeitable on a Director's voluntary cessation of employment which provides an effective lock-in.	The Committee can determine that part of the bonus earned under the Annual Bonus Plan is provided in the form of an award of shares under the Deferred Annual Bonus Plan. The maximum value of deferred shares is 50 per cent. of the bonus earned. The main terms of these awards are: • minimum deferral period of 3 years; • the participant's continued employment at the end of the deferral period unless he is a good leaver. The Committee may award dividend equivalents on those shares to plan participants to the extent that they	The annual bonus will be paid in cash and deferred shares. For Executive Directors annual bonus up to 60 per cent. of base salary will be paid in cash. For annual bonuses earned over 60 per cent. of salary, two-thirds of the total bonus to be paid immediately in cash and one-third deferred into shares.		The DBP contains clawback and malus provisions.
Current Bonus	The current bonus conditions and weighting are set out below:	vest.
Targets	1. EBITDA (80 per cent.);
	2.				Non-financial measures including strategic operational measures, risk management, regulatory compliance

(20 per cent.). EBITDA and key non-financial measures have been selected as these performance metrics are measures demonstrating the successful execution of a number of the Company's strategic objectives.

Element of	How it supports the Company's short and long term strategic
Remuneration	objectives	Operation	Opportunity	Performance metrics
Long-Term Incentive Plan (LTIP) Policy Median to Upper Quartile	Awards are designed to incentivise the Executive Directors to maximise total shareholder returns by successfully delivering the Company's	Awards are granted annually to Executive Directors in the form of a conditional share award or nil cost option. These will vest at the end of a three	Maximum value of 200 per cent. of salary p.a. based on the market value at the date of grant set in accordance with the rules of the Plan.	The performance conditions for awards are currently earnings per share ("EPS") growth and comparative total shareholder return ("TSR"). The Committee has the power to
	objectives over the longer term and to share in the resulting increase in total	year period subject to: • the Executive Director's continued employment at the		review the performance conditions set and may change the level of the performance conditions for subsequent periods according to the rules of
	shareholder value.	date of vesting unless he is a good leaver; and		the Plan. The LTIP contains clawback and malus provisions.
		• satisfaction of the performance conditions.
		The Committee may award dividend equivalents on awards to the extent that these vest.
Performance Conditions and Level of Grant	The performance conditions for the grant of awards under the LTIP on Admission are as follows:		Awards equivalent to the following percentages of salary will be granted to	Full details of the performance conditions and targets will be disclosed at the date of grant.
on Admission	• 50 per cent. on earnings per share growth; and		the Executive Directors on Admission:
	• 50 per cent. on the Company's comparative total shareholder return performance.		Andrew 150% Goodsell
	The use of EPS gives Executive Directors a focus on ensuring the annual profit performance targeted		Lance 200% Batchelor
	by the Annual Bonus Plan flows through to long term sustainable EPS growth.		Stuart 125% Howard
	The use of comparative TSR measures the success of the implementation of the Company's strategy in delivering an above market level of return.		Awards will also be made on Admission to 55 key employees with award values of between 40 per cent. and 100 per cent. of the relevant key employees' salary.
SIP	The purpose of the SIP is to encourage all employees to become shareholders in the Company and thereby align their interests with shareholders.		The maximums set by legislation from time to time.	The Company in accordance with the legislation may impose objective conditions on awards of free shares to employees.

Minimum Shareholding Requirement

The Remuneration Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up over a five year period and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to these guidelines is a condition of continued participation in the equity incentive arrangements. This policy ensures that the interests of Executive Directors and those of shareholders are closely aligned. The following table sets out the minimum shareholding requirements:

Role	Shareholding Requirement (percentage of Salary)
Executive Directors	100%

Element of Remuneration	How it supports the Company's short and long term strategic objectives	Operation	Opportunity	Performance metrics
Non-Executive Director Fees Policy Median	Provides a level of fees to support recruitment and retention of non executive Directors with the necessary experience to advise and assist with establishing and monitoring the group's strategic objectives.	The Board as a whole is responsible for setting the remuneration of the Non Executive Directors. Non-Executive Directors are paid a base fee and additional fees for chairmanship of committees. The chairman does not receive any additional fees for membership of committees. Fees are reviewed annually based on equivalent roles in the comparator group used to review salaries paid to the Executive Directors. Fees are set at broadly the median of the comparator group. Non-Executive Directors do not participate in any	The fees for Non Executive Directors are set at broadly the median of the comparator group. In general the level of fee increase for the Non Executive Directors will be set taking account of any change in responsibility and will take into account the general rise in salaries across the UK workforce.	None.
		variable remuneration or benefits arrangements.

Discretion

The Committee has discretion in several areas of policy as set out in this report. The Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules. In addition, the Committee has the discretion to amend policy with regard to minor or administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.

It is the Committee's intention that commitments made in line with its policies prior to Admission will be honoured, even if satisfaction of such commitments is made after the Company's first AGM following Admission and may be inconsistent with the above policies.

Recruitment Policy

The Company's policy when setting remuneration for the appointment of Executive Directors is summarised in the table below:

Remuneration element	Recruitment policy
Salary	Salary will be set in line with the policy for existing Executive Directors.
Benefits	The standard benefit package for existing Executive Directors will apply.
Pension	The maximum employer contribution will be set in line with the Company's policy for existing Executive Directors.
Annual Bonus	Maximum annual participation will be set in line with the Company's policy for existing Executive Directors and will not exceed 150 per cent. of salary.
LTIP	Maximum annual participation will be set in line with the Company's policy for existing Executive Directors and will not exceed 200 per cent. of salary.
Maximum variable pay (incentive opportunity)	In the year of recruitment the maximum variable pay will be 350 per cent. of salary (500 per cent. if maximum sign-on compensation is provided).
Sign-on compensation	The Committee's policy is not to provide sign-on compensation.
	However, in exceptional circumstances where the Committee decides to provide this type of compensation it will endeavour to provide the compensation in equity, subject to a holding period during which cessation of employment will generally result in forfeiture and subject to the satisfaction of performance targets. The maximum value of this one-off compensation will be proportionate to the overall remuneration offered by the Company and in all circumstances is limited to 150 per cent. of salary.
"Buy Out" of incentives forfeited on cessation of employment	The Committee's policy is not to provide buy outs as a matter of course. However, should the Committee determine that the individual circumstances of recruitment justified the provision of a buyout, the equivalent value of any incentives that will be forfeited on cessation of an Executive Director's previous employment will be calculated taking into account the following:
	• the proportion of the performance period completed on the date of the Executive Director's cessation of employment;
	• the performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied; and
	• any other terms and condition having a material effect on their value ("lapsed value");
	The Committee may then grant up to the same value as the lapsed value, where possible, under the Company's incentive plans. To the extent that it was not possible or practical to provide the buyout within the terms of the Company's existing incentive plans, a bespoke arrangement would be used.

Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned. These would be disclosed to shareholders in the remuneration report for the relevant financial year.

The Company's policy when setting fees for the appointment of new non-executive Directors is to apply the policy which applies to current non-executive Directors.

Service Agreements and Letters of Appointment

Each of the Executive Director's service agreements is as described at section 3.2 above.

The Committee's policy for setting notice periods is that a six month period will apply for Executive Directors unless the Committee determines that 12 months would be more appropriate in the circumstances. The Committee may in exceptional circumstances arising on recruitment, allow a longer period, which would in any event reduce to 12 or six months (as deemed appropriate) following the first year of employment.

The Non-Executive Directors of the Company do not have service contracts. The Non-Executive Directors are appointed by letters of appointment. Each independent Non-Executive Director's term of office runs for a three year period.

All Directors will be put forward for re-election by shareholders on an annual basis.

Payment for Loss of Office

The Committee will honour Executive Directors' contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There are no contractual arrangements that would guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement between the Company and its Executive Directors or employees, providing for compensation for loss of office or employment that occurs because of a takeover bid. Subject to the Act, the Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an Executive Director's office or employment.

Remuneration element	Treatment on exit
Salary	Salary will be paid over the notice period. The Company has discretion to make a payment in lieu of notice in accordance with the Executive Director's service agreement. In all cases the Company will seek to mitigate any payments due, normally via the operation of the payment in lieu of notice clause.
Benefits	Benefits will normally be provided over the notice period. The payment in lieu of notice referred to in Salary above would cover the value of the benefits payable during the notice period. In all cases the Company will seek to mitigate any payments due as described above.
Pension	Company pension contributions will be normally be provided over the notice period. The payment in lieu of notice referred to in Salary above would cover the value of the Company pension contributions during the notice period. In all cases the Company will seek to mitigate any payments due as described above.
Annual Bonus Plan	Good Leaver Reason		Other Reason
	Pro-rated to time and performance for year of cessation.		No bonus payable for year of cessation.
Deferred Bonus Plan	Good Leaver Reason	Other Reason	Discretion
& LTIP	Pro-rated to time and performance in respect of each subsisting deferred share award or LTIP award.	Lapse of any unvested deferred share awards or LTIP awards.	The Committee has the following elements of discretion: • to determine that an executive is a good leaver. It is the Committee's intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders; • to measure performance over the original performance period or at the date of cessation. The Committee will make this determination depending on the type of good leaver reason resulting in the cessation; • whether to pro-rate the maximum number of shares to the time from the date of grant to the date of cessation. The Committee's policy is generally to pro-rate to time. It is the Committee's intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders.

A good leaver reason is defined as cessation in the following circumstances:

• death;
• ill-health;
• injury or disability;
• retirement;
• employing company ceasing to be a Group company;
• transfer of employment to a company which is not a Group company; and
• at the discretion of the Remuneration Committee (as described above).

Cessation of employment in circumstances other than those set out above is cessation for other reasons.

Change of Control

The Committee's policy on the vesting of incentives on a change of control is summarised below:

Name of Incentive Plan	Change of Control	Discretion
Annual Bonus Plan	Pro-rated to time and performance to the date of the change of control.	The Committee has discretion to continue the operation of the Plan to the end of the bonus year.
Deferred Bonus Plan	The number of shares subject to subsisting deferred share awards on a change of control will be pro rated to time.	There is a presumption that the Committee will pro rate to time. The Committee will only waive pro rating in circumstances where it views the change of control as an event which has maximised value to shareholders.
LTIP	The number of shares subject to subsisting deferred LTIP awards on a change of control will be pro-rated to time and performance.	There is a presumption that the Committee will pro rate to time. The Committee will only waive pro rating in exceptional circumstances where it views the change of control as an event which has provided a material enhanced value to shareholders which will be fully explained to shareholders.

5. Pensions

The Group operates three defined benefit pension schemes: (i) the Saga Pension Scheme which is currently governed by a trust deed and rules dated 18 August 2003 (as amended) (the "Saga Pension Scheme"); (ii) the Nestor Healthcare Group Retirement Benefits Scheme which is currently governed by a trust deed and rules dated 13 October 2005 (as amended) (the "Nestor Scheme"), and; (iii) the Healthcall Group Limited Pension Scheme which is currently governed by a trust deed and rules dated 2 April 2001 (as amended) (the "Healthcall Scheme") (together the "Saga Group Defined Benefit Schemes").

5.1 The Saga Pension Scheme

The Saga Pension Scheme is the largest scheme operated by the Group and sponsoring employers of the Saga Pension Scheme are original obligors of the Saga Pension Scheme. The 31 January 2014 triennial actuarial valuation for the Saga Pension Scheme is currently being carried out and, in accordance with applicable pensions legislation, should be agreed no later than 15 months following the effective date of the valuation. Saga estimates that the funding deficit with respect to the Saga Pension Scheme was £14.9 million as at 31 January 2014. There can be no assurance that the funding deficit will decrease (or that it will not increase) in the future, which may result in payments under a recovery plan becoming payable following either the next triennial valuation due in 2014.

5.2 The Nestor Scheme

The current sponsoring employers of the Nestor Scheme are not original obligors but they may become obligors. At the date of its last triennial actuarial valuation carried out as at 5 April 2012 (the "2012 Nestor Valuation"), the Nestor Scheme had a funding deficit of £14.3 million and assets of £25.0 million. There can be no assurance that the funding deficit of the Nestor Scheme will not increase in the future, which may result in higher payments under the recovery plan.

5.3 The Healthcall Scheme

The current sponsoring employers of the Healthcall Scheme are not original obligors but they may become obligors. The Healthcall Scheme had a funding deficit of £7.7 million and assets of £15.0 million at the date of its last triennial actuarial valuation carried out as at 31 October 2012 (the "2012 Healthcall Valuation"). There can be no assurance that the funding deficit of the Healthcall Scheme will not increase in the future, which may result in higher payments under the recovery plan.

6. Subsidiaries and principal establishments

The Company is the principal operating and holding company of the Group. The principal subsidiaries and subsidiary undertakings of the Company, each of which is wholly owned by the Company, are as follows:

Name	Country of incorporation and registered office	Field of activity
Acromas Financial Services Limited	England	Regulated investment products
Acromas Holidays Limited	England	Tour Operating
Acromas Insurance Company Limited	Gibraltar	Insurance underwriting
Acromas Shipping Limited	England	Cruising
Allied Healthcare International LLC	United States	Holding company
Allied Healthcare Group Limited	England	Primary and social care
CHMC Limited	England	Motor accident management
Direct Choice Insurance Services Limited	England	Insurance services
Nestor Healthcare Group Limited	England	Holding company
Nestor Primecare Services Limited	England	Primary and social care
Saga Group Limited	England	Holding company
Saga Leisure Limited	England	Holding company
Saga Mid Co Limited	England	Holding company
Saga Publishing Limited	England	Publishing
Saga Services Limited	England	Financial services

The following table sets forth the principal establishments of the Group. All properties are in the UK except the Bel Jou Hotel, which is located in St. Lucia.

Location	Interest	Type of Facility
Enbrook Park, Sandgate, Folkestone, Kent, and adjoining property at 20, 22 and 24 Sandgate Hill, Folkestone, Kent	Freehold	Saga Head Office
85 Buckingham Gate, London SW1E 6PD	Freehold	Saga London Office
Cheriton Road, Folkestone, Kent	Freehold	Saga Call Centre, ClaimFast Operations, Group IT
		Services
Middelburg Square, Folkestone, Kent	Freehold	Saga Call Centre
One Priory Square, Hastings, Sussex	Freehold	Saga Call Centre
Hitours House, Redhill, Surrey	Freehold	Titan Travel Operations
Eurokent Business Park, Ramsgate, Thanet, Kent	Freehold	Saga Administration and Call Centre
Bel Jou Hotel, St. Lucia	Freehold	Hotel exclusive to Saga Holidays customers
5-6 Fox Cover Enterprise Park, Seaham, County Durham	Leasehold	MetroMail Facility

Saga also leases 146 branches in connection with the domiciliary care services Saga provides through its healthcare services segment.

7. Statutory auditors

The auditors of the Company for the period from incorporation on 5 December 2013 to the present have been Ernst & Young LLP, whose registered address is at 1 More London Place, London SE1 2AF. Ernst & Young LLP is registered to carry out audit work by the Institute of Chartered Accountants in England and Wales. Ernst & Young LLP was the auditor of the Group for the whole period covered by the combined historical financial information included in Part 11 "Historical Financial Information".

8. Material contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or another member of the Group: (a) within the two years immediately preceding the date of this document which are, or may be, material to the Company or the Group, or (b) at any time and contain provisions under which the Company or any member of the Group has an obligation or entitlement which is, or may be, material to the Company or the Group as at the date of this document:

8.1 Underwriting Agreement

The Underwriting Agreement described in section 3.1 of Part 8 "Additional Information – Underwriting arrangements" of the Securities Note.

8.2 Intermediaries Terms and Conditions

The Intermediaries Terms and Conditions described in section 7.1 of Part 6 "Additional Information – Intermediaries Terms and Conditions" of the Securities Note.

8.3 Relationship Agreement

The Relationship Agreement is described in Part 8 "Directors, Senior Managers and Corporate Governance – Relationship Agreement with Acromas and its principal shareholders".

8.4 The Umbrella Services Agreement

The Umbrella Services Agreement is described in section 12.1 of this Part 14 "Additional information – Related party transactions".

8.5 Senior Facilities Agreement

The Senior Facilities Agreement is described in "Banking facilities" in section 9 of this Part 14 "Additional information – Banking facilities".

9. Banking facilities

On 17 April 2014, the Company and Saga Mid Co Limited entered into a Senior Facilities Agreement with Bank of America Merrill Lynch International Limited, Credit Suisse AG, London Branch, Citigroup Global Markets Limited, Goldman Sachs Bank USA, HSBC Bank plc, ING Bank, Ltd., J.P. Morgan Limited, Lloyds Bank plc, Mizuho Bank, Ltd, the Royal Bank of Scotland plc and UBS Limited (the "Arrangers") (the "Senior Facilities Agreement"). Pursuant to the terms of the Senior Facilities Agreement, the Arrangers have made available to certain members of the Group (i) a term loan facility in an aggregate amount of £825.0 million maturing in 2019 ("Facility A"), (ii) a term loan facility in an aggregate amount of £425.0 million maturing in 2020 ("Facility B") and (iii) a multicurrency revolving credit facility in an aggregate amount of £150.0 million (the "Revolving Facility").

As discussed in Part 6 "Details of the Offer" of the Securities Note, a portion of the proceeds of the Offer will be used to repay a portion of the amounts drawn by Saga under the Senior Facilities Agreement.

10. Enforcement and civil liabilities under US federal securities laws

The Company is a public limited company incorporated under English law. Many of the Directors are citizens of the United Kingdom (or other non-US jurisdictions), and the Company's assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Directors or to enforce against them in the US courts judgments obtained in US courts predicated upon the civil liability provisions of the US federal securities laws. There is doubt as to the enforceability in England, in original actions or in actions for enforcement of judgments of the US courts, of civil liabilities predicated upon US federal securities laws.

11. Litigation

There are no governmental, legal or arbitration proceedings (including such proceedings which are pending or threatened of which the Company is aware) during the 12 months preceding the date of this document, which may have, or have had, a significant effect on the Company's and/or the Group's financial position or profitability.

12. Related party transactions

Save as described below and in the Group's audited combined financial information for the three years ended 31 January 2014, 2013 and 2012 set out in Part 11 "Historical Financial Information", there are no related party transactions between the Company or members of the Group that were entered into during the financial years ended 31 January 2014, 2013 and 2012 and during the period between 1 February 2014 and the date of this document.

12.1 The Umbrella Services Agreement

The Amended and Restated Umbrella Services Agreement dated 31 March 2014 is between the Company, AA Intermediate Co Limited ("AAIL") and various members of their respective groups and takes effect from 1 February 2013 ("Umbrella Services Agreement").

Under the Umbrella Services Agreement, Saga and AAIL agree to procure that their respective groups provide certain specified services to the other, including fleet management, sales and marketing services relating to certain AA financial products, and certain IT services. There are also a number of specific additional contracts in place for the provision of services between various members of the respective groups ("Additional Contracts"), including in particular relating to the provision of underwriting by AICL for various AA Group products, such as motor insurance, home insurance, and home emergency cover.

The Umbrella Services Agreement provides that in circumstances where AICL is the sole underwriter of an AA product (rather than being a member of an underwriting panel), the net rates provided by AICL will be set with the objective of achieving a three per cent. return on premiums net of underwriting expenses, unless otherwise agreed in an Additional Contract.

The services provided under the Umbrella Services Agreement may only be terminated on at least six months' notice given at any time after 30 June 2016, unless the recipient no longer requires a particular service, in which case the service may be terminated on six months' notice. Termination may be immediate in the case of material breach or insolvency, provided that in the event of appointment of an administrator or administrative receiver to a member of the AA Group, Saga may not terminate as a result of such appointment provided the members of the AA Group continue to pay for services on the due date and perform their obligations. The services provided under the Additional Contracts may only be terminated on at least six months' notice given at any time after 30 June 2016, without prejudice to any rights in the Additional Contracts to terminate early for matters such as material breach or insolvency.

The Umbrella Services Agreement contains restrictions on both Saga and the AA Group in relation to the use and disclosure of data provided to them pursuant to the Umbrella Services Agreement and the Additional Contracts, including in relation to data provided by AICL to the AA group in relation to products underwritten by AICL as part of an underwriting panel, and also provides that when either Saga or the AA Group undertakes an initial public offering or is otherwise no longer indirectly wholly owned by Acromas each group will remove from its database such data flags as indicate that a person is a customer of the other group.

Until 31 December 2016 neither group will employ or engage as a consultant any person who is currently an employee of the other group earning a salary in excess of £30,000 per annum.

12.2 Acromas Services Agreement

On 6 May 2014, the Company, Acromas and certain other entities within the Group and the Acromas Group entered into a services agreement (the "Acromas Services Agreement") that sets forth the terms and conditions on which certain services will be provided by the Group to certain entities within the Acromas Group.

The Acromas Services Agreement determines: (i) the services to be provided by the Group to certain entities within the Acromas Group (such as tax services, treasury services, internal accounting, audit and budget services, company secretarial and related services, legal services and public relations services); (ii) the standards of service; (iii) payment by Acromas to the Group for such services; and (iv) the procedure for varying the nature and duration of the services.

The Acromas Services Agreement will continue for an indefinite term. Services provided under the Acromas Services Agreement may be (1) terminated by either party on six months' notice or (2) terminated immediately by the other party in the event that (i) either party becomes subject to an administration order, winding up, or appointment of a receiver, (ii) makes an arrangement or composition with its creditors generally or makes an application to a court for protection from its creditors, (iii) material breach of the Acromas Services Agreement or (iv) failure to pay for any of the services provided.

13. Working capital

In the opinion of the Company, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of this document.

14. No significant change

There has been no significant change in the financial or trading position of the Group since 31 January 2014, the date to which the last audited combined accounts of the Group were prepared. There has been no significant change in the financial or trading position of the Company since 5 December 2013, being the date of its incorporation.

15. Consents

Ernst & Young LLP has given and has not withdrawn its written consent to the inclusion of its reports in Part 11 "Historical Financial Information" or Part 12 "Unaudited Pro Forma Financial Information", in the form and context in which they appear and has authorised the contents of those parts of this document which comprise its reports for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.

Towers Watson Limited has given and has not withdrawn its written consent to the inclusion of its report in Part 13 "Independent External Actuaries' Statement" in the form and context in which it appears and has authorised the contents of those parts of this document which comprise its report for the purposes of Rule 5.5.3R(2)(f) of the Prospectus Rules.

16. City Code on Takeovers and Mergers

As the Company is a public limited company and its shares will be listed on the main market of the London Stock Exchange, it will be subject to the City Code on Takeovers and Mergers issued by the Takeover Panel.

17. Documents available for inspection

Copies of the following documents will be available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following Admission at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS:

• (a) the Articles of Association of the Company;
• (b) the financial information set out in Part 11 "Historical Financial Information" together with the related report from Ernst & Young LLP;
• (c) the unaudited pro forma financial information and the report therein by Ernst & Young LLP, which is set out in Part 12 "Unaudited Pro Forma Financial Information";
• (d) the independent external actuaries' statement included in Part 13 "Independent External Actuaries' Statement" from Towers Watson Limited;
• (e) the consent letters referred to in "Consents" in section 15 of this Part 14 "Additional Information"; and
• (f) this document, the Securities Note and the Summary.

Dated: 8 May 2014

PART 15

DEFINITIONS AND GLOSSARY

Definitions

The following definitions apply throughout this document unless the context requires otherwise:

"AA Group"	AA Limited and its consolidated subsidiaries and subsidiary undertakings from time to time
"Acromas"	Acromas Holdings Limited, the ultimate holding company of the Company
"Acromas Group"	Acromas and its subsidiary undertakings from time to time but excluding the Group and the AA Group
"Acromas Shareholders' Agreement"	the agreement between the Charterhouse Funds, the CVC Funds, the Permira Funds, Andrew Goodsell and Stuart Howard, among others, dated 18 September 2007 and amended on 28 January 2013 pursuant to which they agreed to regulate their relationship as shareholders of Acromas
"Act"	the Companies Act 2006, as amended
"Admission"	the admission of the Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities
"AFSL"	Acromas Financial Services Limited
"AICL"	Acromas Insurance Company Limited
"Allied"	Allied Healthcare International LLC
"Application Form"	the form of application for Shares in connection with the Customer Offer, the Non-Customer Offer or the Employee Offer, including an Online Application
"Articles"	the Articles of Association of the Company to be adopted upon Admission
"Banks"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International, Mizuho International plc and UBS Limited
"Board"	the board of directors of the Company
"Business Day"	any day which is not a Saturday or Sunday or a public or bank holiday in England
"Charterhouse Funds"	CCP VII LP No. 1.1, CCP VII LP No. 1.2, CCP VII LP No. 2.1, CCP VII LP No. 2.2, CCP VII Co-investment LP A, CCP VII Co-investment LP B, CCP VII Co-investment LP C, CCP VII Co-investment LP D, CCP VII Co-investment LP E, Charterhouse Saga LP, CCP VII GmbH & Co. KG, CCP VIII LP No 1.1, CCP VIII LP No 1.2, CCP VIII LP No 2.1, CCP VIII LP No 2.2 and CCP VIII Co-investment LP
"CHMC"	CHMC Limited
"City Code"	the City Code on Take-overs and Mergers
"Co-Lead Manager"	Mizuho International plc
"Company"	Saga plc

"CREST"	the computerised settlement system operated by Euroclear UK & Ireland Limited to facilitate the transfer of title to shares in uncertificated form
"Customer Application Form"	means the online or hard copy application form pursuant to which the Group's customers apply to subscribe for or purchase Shares in the Customer Offer
"Customer Offer"	means the offer of Shares in the UK, the Channel Islands and the Isle of Man to the Group's Eligible Customers
"CVC Funds"	CVC European Equity Partners IV (A) L.P., CVC European Equity Partners IV (B) L.P., CVC European Equity Partners IV (C) L.P., CVC European Equity Partners IV (D) L.P., CVC European Equity Partners IV (E) L.P., CVC European Equity Partners Tandem Fund (A) LP, CVC European Equity Partners Tandem Fund (B) LP and CVC European Equity Partners Tandem Fund (C) LP
"DCIS"	Direct Choice Insurance Services Ltd
"Directors"	the Executive Directors and the Non-Executive Directors
"Direct Retail Offer"	means the Customer Offer, the Non-Customer Offer and the Employee Offer
"EBITDA"	earnings before interest payable, taxation, depreciation and amortisation
"EEA"	the European Economic Area
"Eligible Customers"	customers eligible for the Customer Offer as defined in, and pursuant to, the terms and conditions of the Customer Offer
"Eligible Employees"	for purposes of the Employee Offer, employees of the Company or one of its subsidiaries as at 2 May 2014 in the UK, Channel Islands or the Isle of Man
"Employee Offer"	means the direct offer of Shares to Eligible Employees as described in, and pursuant to, the terms and conditions of the Employee Offer set out in section 5.4 of Part 6 "Details of the Offer" of the Securities Note
"EU"	the European Union
"European Economic Area"	the European Union, Iceland, Norway and Liechtenstein
"Executive Directors"	the executive directors of the Company
"Existing Share Offer Size"	the number of Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Existing Share Offer Size Range"	the range within which the Existing Share Offer Size is currently expected to be set, being between no Shares and 292,817,347 Shares
"Existing Shares"	Shares to be sold as part of the Offer by the Selling Shareholder (excluding, for the avoidance of doubt, the Over-allotment Shares)
"FCA"	the Financial Conduct Authority
"Free Shares"	the Shares to be issued to eligible Shareholders (as bonus shares) on or shortly after the first anniversary of Admission pursuant to the terms of the Customer Offer and the Employee Offer
"FSMA"	the Financial Services and Markets Act 2000
"Healthcall Scheme"	the Healthcall Group Limited Pension Scheme which is currently governed by a trust deed and rules dated 2 April 2001 (as amended)
"Governance Code"	the UK Corporate Governance Code issued by the Financial Reporting Council, as amended from time to time

"Group"	the Company and its consolidated subsidiaries and subsidiary undertakings and, prior to the completion of the Reorganisation, Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"HMRC"	HM Revenue and Customs
"IFRS"	International Financial Reporting Standards, as adopted by the European Union
"Institutional Offer"	the offer of Shares to certain institutional and other investors as described in Part 15 "Details of the Offer of the Securities Note
"Intermediaries"	the entities listed in section 7 of Part 8 "Additional Information" of the Securities Note, together with any other intermediary (if any) that is appointed by the Company in connection with the Intermediaries Offer after the date of this document
"Intermediaries Offer"	the offer of Shares to the Intermediaries as described in section 5.3 of Part 6 "Details of the Offer" of the Securities Note
"Intermediaries Offer Application Form"	the form of application for Shares in the Intermediaries Offer used by the Intermediaries
"Intermediaries Terms and Conditions"	the terms and conditions on which each Intermediary has agreed to be appointed by the Company to act as an Intermediary in the Intermediaries Offer and pursuant to which Intermediaries may apply for Shares in the Intermediaries Offer, details of which are set out at section 7.1 of Part 8 "Additional Information" of the Securities Note
"IRS"	United States Inland Revenue Service
"ISA"	Individual Savings Account
"Joint Bookrunners"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Joint Global Co-ordinators"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International and Merrill Lynch International
"Joint Lead Manager"	Investec Bank plc
"Listing Rules"	the listing rules of the FCA made under section 74(4) of the FSMA
"London Stock Exchange"	London Stock Exchange plc
"Main Market"	the London Stock Exchange's main market for listed securities
"Member State"	a member state of the European Union
"Nestor"	Nestor Healthcare Group Limited
"Nestor Scheme"	the Nestor Healthcare Group Retirement Benefits Scheme which is currently governed by a trust deed and rules dated 13 October 2005 (as amended)
"New Share Offer Size"	the number of New Shares to be issued pursuant to the Offer, to be set out in the Pricing Statement
"New Share Offer Size Range"	the range within which the New Share Offer Size is currently expected to be set, being between 224,489,796 New Shares and 297,297,297 New Shares
"New Shares"	new Shares in the Company to be issued as part of the Offer

"Non-Customer Offer"	means the direct offer of Shares to retail investors in the UK, the Channel Islands and the Isle of Man as described in, and pursuant to, the terms and conditions of the Non-Customer Offer set out in section 5.2 of Part 6 "Details of the Offer"
"Non-Executive Directors"	the non-executive directors of the Company, including the four directors appointed from Admission
"Offer"	the issue of New Shares by the Company and the sale of Existing Shares by the Selling Shareholder described in Part 6 "Details of the Offer" of the Securities Note
"Offer Price"	the price at which each Share is to be issued or sold under the Offer
"Offer Size"	the aggregate of the New Shares to be issued and sold pursuant to the Offer and the Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Offer Website"	www.saga.co.uk/shares
"Official List"	the Official List of the FCA
"Online Application"	an application for Shares in Retail Offer completed and submitted online on the Offer Website
"Operating Group"	Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"Over-allotment Option"	the option granted to the Stabilising Manager by the Selling Shareholder to purchase, or procure purchasers for additional Shares (representing up to 15 per cent. of the total number of Shares that are subject to the Offer)
"Over-allotment Shares"	the existing Shares the subject of the Over-allotment Option
"PCAOB"	the Public Company Accounting Oversight Board (United States)
"Permira Funds"	Permira Europe III L.P.1, Permira Europe III L.P.2, Permira Europe III GmbH & Co. KG, Permira Europe III Co-investment Scheme and Permira Investments Limited
"Pensions Regulator"	the statutory regulator for occupational pension schemes in the UK.
"Prescribed Application Amount"	the application amount set out in section 5 of Part 6 "Details of the Offer" of the Securities Note
"Price Range"	185p to 245p per Share
"Pricing Statement"	the pricing statement to be published on or about 23 May 2014 by the Company detailing the Offer Price and the number of Shares which are the subject of the Offer
"Private Equity Investors"	the Charterhouse Funds, the CVC Funds and the Permira Funds
"Private Placement Provinces"	the Canadian provinces of Ontario and Quebec
"Prospectus"	the final prospectus approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA, comprising this document, the Securities Note and the Summary
"Prospectus Directive"	Directive (2003/71/EC)
"Prospectus Directive Amending Directive"	Directive (2010/73/EU)

"Qualified Investors"	persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive
"Receiving Agent"	Capita Asset Services, a trading name of Capita Registrars Limited
"Registrar"	Capita Asset Services, a trading name of Capita Registrars Limited
"Regulation S"	Regulation S under the US Securities Act
"Relationship Agreement"	the relationship agreement entered into between the Company, Acromas, certain general partners of the Charterhouse Funds, the CVC Funds, the Permira Funds, the Selling Shareholder, Andrew Goodsell and Stuart Howard on 8 May 2014 as described in Part 8 "Directors, Senior Managers and Corporate Governance – Relationship Agreement with Acromas and its principal shareholders"
"Reorganisation"	the group reorganisation completed on 4 March 2014 in preparation for the Offer, as a result of which the Company became the holding company of the Group, as described in section 1 of Part 14 "Additional Information – Incorporation and share capital"
"Retail Offer"	means the retail offer of Shares in the UK, the Channel Islands and the Isle of Man pursuant to the Customer Offer, the Non-Customer Offer, the Employee Offer and the Intermediaries Offer
"Retail Offer Advisor"	Solid Solutions (Associates) UK Limited
"Rule 144A"	Rule 144A under the US Securities Act
"Saga"	the Company and its consolidated subsidiaries and subsidiary undertakings
"Saga Group Defined Benefit Schemes"	the three defined benefit pension schemes operated by the Group: (i) the Saga Pension Scheme, (ii) the Nestor Scheme and (iii) the Healthcall Scheme
"Saga Shareholder Account"	the arrangements for the holding of the Shares provided by the Saga Shareholder Account Nominee
"Saga Shareholder Account Nominee"	Capita Asset Services, a trading name of Capita IRG Trustees Limited
"Saga Pension Scheme"	the Saga Pension Scheme which is currently governed by a trust deed and rules dated 18 August 2003 (as amended)
"SDRT"	stamp duty reserve tax
"Securities Note"	means the Securities Note produced under the Prospectus Rules, which, together with this document and the Summary, constitutes the Prospectus
"Selling Shareholder"	Acromas Bid Co Limited
"Senior Facilities Agreement"	the senior facilities agreement entered into by the Company and others members of the Group for (i) a term loan facility in an aggregate amount of £825.0 million maturing in 2019, (ii) a term loan facility in an aggregate amount of £425.0 million maturing in 2020 and (iii) a multicurrency revolving credit facility in an aggregate amount of £150.0 million.
"Senior Managers"	Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong
"Share Account Statement"	a statement of a person's holding of Shares in the Saga Shareholder Account
"Shareholders"	the holders of Shares in the capital of the Company

"Shares"	the ordinary shares of the Company, having the rights set out in the Articles
"SIPP"	Self Invested Personal Pension
"Sponsor"	Citigroup Global Markets Limited
"SSL"	Saga Services Limited
"Stabilising Manager"	Merrill Lynch International
"Summary"	means the Summary produced under the Prospectus Rules, which, together with this document and the Securities Note, constitutes the Prospectus
"TIA"	The Insurance Application software
"UK"	the United Kingdom of Great Britain and Northern Ireland
"Underlying Applicants"	retail investors in the United Kingdom, the Channel Islands and the Isle of Man who wish to acquire Shares under the Intermediaries Offer
"Underwriters"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Underwriting Agreement"	the underwriting agreement entered into between the Company, the Directors, the Selling Shareholder and the Banks described in section 3.1 of Part 8 "Additional Information – Underwriting arrangements" of the Securities Note
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States of America, and the District of Columbia
"US Exchange Act"	United States Securities Exchange Act of 1934, as amended
"US GAAP"	accounting principles generally accepted in the United States
"US GAAS"	auditing standards generally accepted in the United States
"US Securities Act"	United States Securities Act of 1933, as amended

Glossary

The following terms have the meanings provided below unless the context requires otherwise:

"ABI"	Association of British Insurers
"A&E"	accident and emergency
"CAGR"	compound annual growth rate
"CCG"	clinical commissioning groups
"contactable household"	households included in the Group Marketing Database, excluding those that have opted out of all marketing under the UK Data Protection Act 1998, suppressed buyers (those individuals who have opted out of Saga marketing contact) and those who have been removed from the Group Marketing Database following data cleansing routines
"domiciliary care"	provision of social care services to individuals in their homes
"GP"	general practitioner
"Group Marketing Database"	the Group's proprietary database containing customer and other data used in the Group's marketing operations
"household"	an individual or couple (married or unmarried) living at a single address
"IMD II"	Insurance Mediation Directive II
"IPT"	insurance premium tax
"LA"	local authority
"LASPO"	Legal Aid Sentencing and Punishing of Offenders Act 2012
"locum doctors"	a doctor who works in the place of the regular doctor when that doctor is absent
"OFT"	Office of Fair Trading
"PCT"	primary care trust
"PCW"	price comparison website
"payback model"	the discounted cost-benefit appraisal of the various marketing campaigns that the Group undertakes, whereby it calculates whether the anticipated contribution towards fixed costs and profit generated from a given campaign will be outweighed by up-front costs involved
"primary care"	healthcare services including out-of-hours primary care services, equitable access to primary care centres, secure or detainee healthcare, and dentistry, as well as locum clinical and medical staff provision.
"PPO"	periodical payment order
"RDR"	retail distribution review
"SOS"	emergency alarm systems in the home
"UK car parc"	census of total motor vehicles in the UK conducted by the UK government

This document, the Registration Document and the Summary together comprise a prospectus (the "Prospectus") for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended (the "Prospectus Directive") relating to Saga plc (the "Company") prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the "FCA") made under section 73A of the Financial Services and Markets Act 2000 (the "FSMA"). The Prospectus will be made available to the public in accordance with the Prospectus Rules.

Application will be made to the FCA for all of the ordinary shares of the Company (the "Shares") issued and to be issued in connection with the Offer to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange plc (the "London Stock Exchange") for all of the Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together, "Admission"). Conditional dealings in the Shares are expected to commence on the London Stock Exchange, on 23 May 2014. It is expected that Admission will become effective, and that unconditional dealings in the Shares will commence on 29 May 2014. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application is currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange. The new Shares issued by the Company will rank, upon Admission, pari passu in all respects with the existing Shares including the right to receive dividends or other distributions declared, made or paid after Admission.

The directors of the Company, whose names appear on page 11 of this document (the "Directors"), including those individuals who will become Directors on Admission, and the Company accept responsibility for the information contained in the Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in the Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.

Prospective investors should read this document in its entirety, together with the Registration Document and the Summary and, in particular, the discussion of certain risks and other factors that should be considered prior to any investment in the Shares as set out in the sections entitled "Risk Factors" in this document and the Registration Document.

Saga plc

(Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 08804263)

Offer of up to 555,352,703 Shares of one pence each at an Offer Price expected to be between 185 pence and 245 pence per Share and admission to the premium listing segment of the Official List and to trading on the London Stock Exchange

			Joint Global Co-ordinators
	BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International
			Joint Bookrunners
BofA Merrill Lynch	Citigroup	Credit Suisse	Goldman Sachs International	J.P. Morgan Cazenove	UBS
			Joint Lead Manager Investec
Co-Lead Manager
			Mizuho International
			Sponsor
			Citigroup

ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION (assuming the Offer Price is set at the mid-point of the Price Range)

	Issued and fully paid
Number	Nominal Value
1,067,351,162	£10,673,512

Price Range and the New Share Offer Size Range have been set by the Company and the Existing Share Offer Size Range has been set by the Selling Shareholder. It is currently expected that the Offer Price, New Share Offer Size and Existing Share Offer Size will be set within the Price Range, the New Share Offer Size Range and the Existing Share Offer Size Range, respectively. A number of factors will be considered in determining the Offer Price, the New Share Offer Size, the Existing Share Offer Size and the basis of allocation, including the level and nature of demand for the Shares during the bookbuilding process, the level of demand in the Retail Offer, prevailing market conditions, the Company's historical performance estimates of its business potential and earning prospects and the objective of establishing an orderly aftermarket in the Shares. Unless required to do so by law or regulation, the Company does not envisage publishing a supplementary prospectus or an announcement triggering the right to withdraw applications for Shares pursuant to section 87Q of FSMA on determination of the Offer Price, the New Share Offer Size or the Existing Share Offer Size. If the Offer Price is set within the Price Range, the New Share Offer Size is set within the New Share Offer Size Range and the Existing Share Offer Size is set within the Existing Share Offer Size Range, a pricing statement containing the Offer Price and confirming the number of New Shares and Existing Shares which are comprised in the Offer (the "Pricing Statement") and related disclosures are expected to be published on or about 23 May 2014 and will be available on the Offer Website at www.saga.co.uk/shares.

In connection with the Offer, Merrill Lynch International, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law over-allot Shares up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

Each of Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited (the "Underwriters") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom. Mizuho International plc (together with the Underwriters, the "Banks") is authorised and regulated by the Financial Conduct Authority. Each of the Banks is acting exclusively for the Company and no one else in connection with the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Offer or any transaction or arrangement referred to in the Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the Prospectus including its accuracy, completeness and verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of the Prospectus or any such statement. No representation or warranty, express or implied, is made by any of the Banks or any of their respective affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in the Prospectus, and nothing in the Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future.

This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities other than the securities to which it relates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances in which such offer or solicitation is unlawful.

The Company consents to the use of the Prospectus by the Intermediaries in connection with the Intermediaries Offer in the UK, the Channel Islands and the Isle of Man on the following terms: (i) in respect of Intermediaries who are appointed by the Company prior to the date of this document, from the date of this document and (ii) in respect of Intermediaries who are appointed by the Company after the date of this document, from the date on which they are appointed to participate in the Intermediaries Offer and agree to adhere to and be bound by the terms of the Intermediaries Terms and Conditions, in each case until the closing of the Intermediaries Offer. The Company accepts responsibility for the information contained in the Prospectus with respect to any purchaser of Shares pursuant to the Offer. Any Intermediary that uses the Prospectus must state on its website that it uses this document in accordance with the Company's consent. Intermediaries are required to provide, at the time of such offer, the terms and conditions of the Intermediaries Offer to any prospective investor who has expressed an interest to such Intermediary in participating in the Intermediaries Offer. Any application made by investors to any Intermediary is subject to the terms and conditions which apply to the transaction between such investor and such Intermediary.

Notice to overseas shareholders

The Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "US Securities Act"). The Shares offered by the Prospectus may not be offered or sold in the United States, except to qualified institutional buyers ("QIBs"), as defined in, and in reliance on, the exemption from the registration requirements of the US Securities Act provided in Rule 144A under the US Securities Act ("Rule 144A") or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Prospective investors are hereby notified that the sellers of the Shares may be relying on the exemption from the provisions of section 5 of the US Securities Act provided by Rule 144A or another relevant exemption. The Shares have not been recommended by any US federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of the Prospectus. Any representation to the contrary is a criminal offence in the United States.

The Shares have not been and will not be registered under the applicable securities laws of Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Shares may not be offered or sold in Australia, Canada, Japan or South Africa, or to or for the account or benefit of any national, resident or citizen in Australia, Canada, Japan or South Africa. No actions have been taken to allow a public offering of the Shares under the applicable securities laws of any jurisdiction, including Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen of any jurisdiction, including Australia, Canada, Japan or South Africa. The Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or purchase, any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.

The distribution of the Prospectus and the offer and sale of the Shares in certain jurisdictions may be restricted by law. Other than in the United Kingdom, the Channel Islands and the Isle of Man, no action has been or will be taken by the Company, the Selling Shareholder or the Banks to permit a public offering of the Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom the Channel Islands and the Isle of Man, no action has been taken or will be taken to permit the possession or distribution of the Prospectus (or any other offering or publicity materials relating to the Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither the Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession the Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421 B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421 B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

Available information

For so long as any of the Shares are in issue and are "restricted securities" within the meaning of Rule 144(a)(3) under the US Securities Act, the Company will, during any period in which it is not subject to section 13 or 15(d) under the US Securities Exchange Act of 1934, as amended (the "US Exchange Act"), nor exempt from reporting under the US Exchange Act pursuant to Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of a Share, or to any prospective purchaser of a Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the US Securities Act.

Withdrawals

In the event that the Company is required to publish a supplementary prospectus, applicants who have applied to subscribe for or purchase Shares in the Offer will have at least two Business Days following the publication of the supplementary prospectus within which to withdraw their offer to acquire Shares in the Offer.

In addition, in the event that (i) the Offer Price is set above the Price Range or the Price Range is revised higher; and/or (ii) the number of New Shares to be issued by the Company is set above or below the New Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority); and/or (iii) the number of Existing Shares to be sold by the Selling Shareholder is set above or below the Existing Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority), then applicants who have applied to subscribe for or purchase Shares in the Offer would have a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer in its entirety pursuant to section 87Q of FSMA before the end of a period of two Business Days commencing on the first Business Day after the date on which an announcement of this is published via a Regulatory Information Service announcement (or such later date as may be specified in that announcement).

If the application is not withdrawn within the stipulated period, any offer to apply for Shares in the Offer will remain valid and binding. Institutional investors wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer must do so by lodging a written notice of withdrawal by hand (during normal business hours only) at the offices of any of the Joint Global Co-ordinators at their respective address set out in Part 3 "Directors, Secretary, Registered and Head Office and Advisers" so as to be received by no later than two Business Days after the date on which the supplementary prospectus is published or the date on which an announcement is made (as described above). Investors in the Direct Retail Offer wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer must do so by registering the withdrawal on the Offer Website at www.saga.co.uk/shares or notifying the Receiving Agent, Capita Registrars Limited, (during normal business hours only) by telephone on 0800 015 5429. Notice of withdrawal given by any other means or which is deposited with or received after the expiry of such period will not constitute a valid withdrawal. Applicants who have applied for Shares via the Intermediaries, who wish to withdraw an application following publication of a supplementary prospectus or an announcement is made (as described above), should contact the Intermediary through whom they applied for Shares for details of how to withdraw an application.

Company's website

Information contained on the Company's website is not incorporated into and does not form part of this document.

The date of this document is 8 May 2014.

CONTENTS

PART		Page
PART 1	EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS	6
PART 2	RISK FACTORS	8
PART 3	DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS .	11
PART 4	PRESENTATION OF FINANCIAL AND OTHER INFORMATION	13
PART 5	CAPITALISATION AND INDEBTEDNESS	16
PART 6	DETAILS OF THE OFFER .	18
PART 7	TERMS AND CONDITIONS OF THE SAGA SHAREHOLDER ACCOUNT .	49
PART 8	ADDITIONAL INFORMATION	64
PART 9	DEFINITIONS	80

PART 1

EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND OFFER STATISTICS

Expected timetable of principal events

	Time and Date(1)(2)
Event Latest time and date for receipt of completed Online Applications and hard copy Application Forms in respect of the Direct Retail Offer	2014 11:59 pm on 20 May 2014
Latest date for receipt by the Intermediaries of completed application forms from retail investors in the Intermediaries Offer	20 May 2014
Latest time and date for receipt by the Receiving Agent of applications from Intermediaries in respect of the Intermediaries Offer	12:00 pm on 21 May 2014
Latest time and date for receipt of indications of interest in the Institutional Offer	2:00 pm on 22 May 2014
Announcement of the Offer Price and Offer Size, publication of the Pricing Statement and notification of allocations of Shares(3)	7:00 am on 23 May 2014
Commencement of conditional dealings in Shares on the London Stock Exchange	8:00 am on 23 May 2014
Notification by e-mail of share allocation for Shareholders who submitted an Online Application and elected to hold their Shares through the Saga Shareholder Account or Saga Share Direct(4) (5)	23 May 2014
Admission and commencement of unconditional dealings in Shares on the London Stock Exchange	8:00 am on 29 May 2014
CREST accounts credited in respect of Shares in uncertificated form	29 May 2014
Despatch by post of: (i) Share Account Statements to Shareholders holding Shares in the Saga Shareholder Account; (ii) definitive share certificates to Shareholders for Shares in certificated form; and (iii) allocation statements to Shareholders who elected to hold their Shares with Saga Share Direct (excluding, in each case, those Shareholders who are sent a notification by e-mail) together with, in each case (if applicable), payment of any refund by cheque	From 29 May 2014
Payment of any refund (as applicable) to debit card accounts of
Shareholders who submitted an Online Application	From 29 May 2014

Notes:

• (1) Times and dates set out in the timetable above and mentioned throughout this document that fall after the date of publication of this document are indicative only and may be subject to change without further notice.
• (2) All references to time in this timetable are to UK time.
• (3) The Offer Price and Offer Size will be set out in the Pricing Statement. The Pricing Statement will not automatically be sent to persons who receive this document but it will be available free of charge at the Company's registered office at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE. In addition, the Pricing Statement will (subject to certain restrictions) be published on the Company's website at www.saga.co.uk/shares.
• (4) Shareholders who submitted an Online Application and elected to hold their Shares in the Saga Shareholder Account or Saga Share Direct will be able to deal in Shares on a conditional basis prior to Admission. For further details on how to effect sales and purchases prior to and from Admission, and the charges payable, please refer to section 5 of Part 6 "Details of the Offer" of the Securities Note.
• (5) Shareholders who applied for Shares in the Intermediaries Offer should consult their Intermediary as to when they will be sent documents in respect of any Shares they have been allocated and when they may commence dealing in any such Shares.

It should be noted that, if Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of the parties concerned.

Offer statistics

Price Range (per Share)(1)	185 pence to 245 pence
Expected minimum number of Shares in the Offer	258,653,571
Expected maximum number of Shares in the Offer(2)	555,352,703
– New Shares	297,297,297
– Existing Shares	258,055,406
Number of existing Shares subject to the Over-allotment Option(3)	83,302,905
Number of Shares in issue following the Offer(4)	1,067,351,162
Market capitalisation of the Company at the Offer Price(4)	£2.3 billion
Estimated net proceeds of the Offer receivable by the Company(5)	£512.4 million
Estimated net proceeds of the Offer receivable by the Selling Shareholder(6)(7)	£304.9 million

• Notes:
• (1) It is currently expected that the Offer Price will be within the Price Range. It is expected that the Pricing Statement containing the Offer Price and the number of Shares which are comprised in the Offer will be published on or about 23 May 2014 and will be available (subject to certain restrictions) on the Company's website at www.saga.co.uk/shares. If the Offer Price is set above the Price Range, the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA.
• (2) It is currently expected that the Offer Size will be set by the Company within the Offer Size Range. If the Offer Size is set above or below the Offer Size Range, then the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA. It is expected that the Pricing Statement containing the Offer Price and the number of New Shares and Existing Shares which are comprised in the Offer will be published on or about 23 May 2014 and will be available (subject to certain restrictions) on the Company's website at www.saga.co.uk/shares.
• (3) The maximum number of existing Shares comprised in the Over-allotment Option is, in aggregate, equal to 15 per cent. of the maximum number of Shares comprised in the Offer.
• (4) Assuming the Offer Price is set at the mid-point of the Price Range. The market capitalisation of the Company at any given time will depend on the market price of the Shares at that time. There can be no assurance that the market price of a Share will be equal to or exceed the Offer Price.
• (5) The estimated net proceeds receivable by the Company are stated after deduction of the estimated underwriting commissions and other fees and expenses of the Offer (including VAT) payable by the Company, which are currently expected to be approximately £37.6 million. The Company will not receive any of the net proceeds from the sale of the Existing Shares in the Offer by the Selling Shareholder or the sale of Shares pursuant to the Over-allotment Option.
• (6) The number of Shares to be delivered on settlement of the Retail Offer (or thereafter) is subject to minor adjustment to the extent Shares are retained by the Selling Shareholder following defaults by applicants under the terms of the Retail Offer and/or if the Selling Shareholder determines to increase the number of Shares sold to rectify any operational or administrative errors in the Retail Offer.
• (7) The estimated net proceeds receivable by the Selling Shareholder are stated after deduction of the estimated underwriting commissions and other fees and expenses of the Offer (including VAT) payable by the Selling Shareholder, which are currently expected to be approximately £9.8 million.

PART 2

RISK FACTORS

Any investment in the Shares is subject to a number of risks. Prior to investing in the Shares, prospective investors should carefully consider risk factors associated with the Offer and the Shares, described below, together with all other information contained in this document, the Registration Document and the Summary. In particular and in addition to the risk factors included below, prospective investors should carefully review the risks relating to the Group's business and the industry in which it operates detailed in the section entitled "Risk Factors" in the Registration Document.

Prospective investors should note that the risks relating to the Group, its industries and the Shares summarised in the Summary are the risks that the Directors and the Company believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the Summary but also, among other things, the risks and uncertainties described below and in the section entitled "Risk Factors" in the Registration Document.

The risk factors described below and in the section entitled "Risk Factors" in the Registration Document are not an exhaustive list or explanation of all risks which investors may face when making an investment in the Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's business, results of operations and/or financial condition and, if any such risk should occur, the price of the Shares may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Shares is suitable for them in the light of the information in this document and their personal circumstances.

Risks Relating to the Offer and the Shares

Acromas will retain a significant interest in and will continue to exert substantial influence over the Group following the Offer and its interests may differ from or conflict with those of other shareholders.

Immediately following Admission, Acromas will continue to own beneficially between 48.8 per cent. and 74.0 per cent. of the issued share capital of the Company (assuming no exercise of the Over-allotment Option and between 41.3 per cent. and 70.3 per cent. if the Over-allotment Option is exercised in full). As a result, Acromas will possess sufficient voting power to have a significant influence over all matters requiring shareholder approval, including the approval of significant corporate transactions. The interests of Acromas may not always be aligned with those of other holders of the Shares. In particular, Acromas may hold interests in, or may make acquisitions of or investments in, other businesses that may be, or may become, competitors of the Group.

The market price of the Shares could be negatively affected by sales of substantial amounts of such shares in the public markets, including following the expiry of the lock-up period, or the perception that these sales could occur.

Following Admission, Acromas and the Directors and Senior Managers will own beneficially, in aggregate, between 49.6 per cent. and 74.7 per cent. of the Company's issued share capital (assuming no exercise of the Over-allotment Option and between 42.1 per cent. and 70.9 per cent. if the Over-allotment Option is exercised in full). The Company, Acromas, the Directors and Senior Managers are subject to restrictions on the sale and/or transfer of their respective holdings in the Company's issued share capital as described in section 12 of Part 6 "Details of the Offer—Lock-up arrangements". The issue or sale of a substantial number of Shares by the Directors, Senior Managers or Acromas in the public market after the lock-up restrictions in the Underwriting Agreement expire (or are waived by the Joint Global Co-ordinators), or the perception that these sales may occur, may depress the market price of the Shares and could impair the Group's ability to raise capital through the sale of additional equity securities.

There is no existing market for the Shares and an active trading market for the Shares may not develop or be sustained.

Prior to Admission, there has been no public trading market for the Shares. Although the Company has applied to the UK Listing Authority for admission to the premium listing segment of the Official List and has applied to the London Stock Exchange for admission to trading on its main market for listed securities, the Company can give no assurance that an active trading market for the Shares will develop or, if developed, could be sustained following the closing of the Offer. If an active trading market is not developed or maintained, the liquidity and trading price of the Shares could be adversely affected.

Shares in the Company may be subject to market price volatility and the market price of the Shares in the Company may decline disproportionately in response to developments that are unrelated to the Company's operating performance.

The Offer Price is not indicative of the market price of the Shares following Admission. The market price of the Shares may be volatile and subject to wide fluctuations. The market price of the Shares may fluctuate as a result of a variety of factors, including, but not limited to, those referred to in these Risk Factors, as well as period-to-period variations in operating results or changes in revenue or profit estimates by the Group, industry participants or financial analysts. The market price could also be adversely affected by developments unrelated to the Group's operating performance, such as the operating and share price performance of other companies that investors may consider comparable to the Group, speculation about the Group or its subsidiaries in the press or the investment community, unfavourable press, strategic actions by competitors (including acquisitions and restructurings), changes in market conditions and regulatory changes. Any or all of these factors could result in material fluctuations in the price of Shares, which could lead to investors getting back less than they invested or a total loss of their investment.

Shareholders in the United States and other jurisdictions may not be able to participate in future equity offerings.

The Articles provide for pre-emption rights to be granted to shareholders in the Company, unless such rights are disapplied by a shareholder resolution. However, securities laws of certain jurisdictions may restrict the Group's ability to allow participation by shareholders in future offerings. In particular, shareholders in the United States may not be entitled to exercise these rights, unless either the Shares and any other securities that are offered and sold are registered under the Securities Act, or the Shares and such other securities are offered pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company cannot assure prospective investors that any exemption from such overseas securities law requirements would be available to enable US or other shareholders to exercise their preemption rights or, if available, that the Company will utilise any such exemption.

Not all rights available to shareholders under US law will be available to holders of the Shares.

Rights afforded to shareholders under English law differ in certain respects from the rights of shareholders in typical US companies. The rights of holders of the Shares are governed by English law and the Articles. In particular, English law currently limits significantly the circumstances under which the shareholders of English companies may bring derivative actions. Under English law, in most cases, only the Company may be the proper plaintiff for the purposes of maintaining proceedings in respect of wrongful acts committed against it and, generally, neither an individual shareholder, nor any group of shareholders, has any right of action in such circumstances. In addition, English law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders in a US company.

The issuance of additional Shares in the Company in connection with the offer of Free Shares to Eligible Customers or Eligible Employees of the Group, any share incentive or share option plan, future acquisitions or otherwise may dilute all other shareholdings.

The Company has provided in the Retail Offer terms that Eligible Customers and Eligible Employees who acquire Shares under the Customer Offer and the Employee Offer, respectively, and hold them for a continuous period of one year following Admission will be eligible to receive at the end of that one year period one Free Share for every twenty Shares acquired, subject to certain conditions. The Company may, in connection with its share incentive and share option plans (including in particular as part of the LTIP and the SIP Employee Free Shares Offer), issue additional equity or convertible equity securities to its employees. The Company may also seek to raise financing to fund future acquisitions and other growth opportunities through the issue of additional equity or convertible equity securities. As a result, existing Shareholders may suffer dilution in their percentage ownership or the market price of the Shares may be adversely affected.

The Company's ability to pay dividends in the future depends, among other things, on the Group's financial performance and capital requirements and is therefore not guaranteed.

There can be no guarantee that the Group's historic performance will be repeated in the future, particularly given the competitive nature of the industry in which it operates, and its sales, profit and cash flow may significantly underperform market expectations. If the Group's cash flow underperforms market expectations, then its capacity to pay a dividend will suffer. While the Directors intend to adopt a dividend policy reflecting the Group's ability to generate surplus cash while undertaking the Group's planned expansion of its business segments, there can be no assurance that the Group will pay dividends in the future. Any decision to declare and pay dividends will be made at the discretion of the Directors and will depend on, among other things, applicable law, regulation, restrictions, the Group's financial position, regulatory capital requirements, working capital requirements, finance costs, general economic conditions and other factors the Directors deem significant from time to time.

Overseas shareholders may be subject to exchange rate risk.

The Shares are, and any dividends to be paid in respect of them will be, denominated in pounds sterling. An investment in Shares by an investor whose principal currency is not pounds sterling exposes the investor to foreign currency exchange rate risk. Any depreciation of pounds sterling in relation to such foreign currency will reduce the value of the investment in the Shares or any dividends in foreign currency terms.

PART 3

DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS

Directors	Andrew Goodsell, Executive Chairman Lance Batchelor, Group Chief Executive Stuart Howard, Group Finance Director Philip Green, Senior Independent Non-Executive Director James Arnell, Non-Executive Director Pev Hooper, Non-Executive Director Ray King, Independent Non-Executive Director Orna Ni-Chionna, Independent Non-Executive Director Charles Sherwood, Non-Executive Director Gareth Williams, Independent Non-Executive Director
Company Secretary	Vicki Haynes
Registered and head office of the Company	Enbrook Park Sandgate Folkestone Kent CT20 3SE
Joint Global Co-ordinator, Joint Bookrunner and Sponsor	Citigroup Global Markets Limited Citigroup Centre 33 Canada Square London E14 5LB
Joint Global Co-ordinator and Joint Bookrunner	Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ
Joint Global Co-ordinator and Joint Bookrunner	Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB
Joint Global Co-ordinator and Joint Bookrunner	Merrill Lynch International 2 King Edward Street London EC1A 1HQ
Joint Bookrunner	J.P. Morgan Securities plc 25 Bank Street, London E14 5JP
Joint Bookrunner	UBS Limited 1 Finsbury Avenue London EC2M 2PP
Joint Lead Manager	Investec Bank plc 2 Gresham Street London EC2V 7QP
Co-Lead Manager	Mizuho International plc Bracken House One Friday Street London EC4M 9JA
English and US legal advisors to the Company	Freshfields Bruckhaus Deringer LLP 65 Fleet Street London EC4Y 1HS
English and US legal advisors to the Sponsor and Banks	Linklaters LLP 1 Silk Street London EC2Y 1HQ

Auditors and Reporting Accountant	Ernst & Young LLP 1 More London Place London SE1 2AF
Reporting Accountant	PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT
Independent External Actuaries	Towers Watson Limited Watson House London Road Reigate Surrey RH2 9PQ
Registrar and Receiving Agent	Capita Asset Services, a trading name of Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Retail Offer Advisor	Solid Solutions Associates (UK) Limited 5 St John's Lane London EC1M 4BH

PART 4

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Certain terms used in this document, including all capitalised terms and certain technical and other items, are defined and explained in Part 9 "Definitions".

Investors should only rely on the information in the Prospectus. No person has been authorised to give any information or to make any representations in connection with the Offer, other than those contained in the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Company, the Directors, the Selling Shareholder or any of the Banks. No representation or warranty, express or implied, is made by any of the Banks or any selling agent as to the accuracy or completeness of such information, and nothing contained in this document is, or shall be relied upon as, a promise or representation by any of the Banks or any selling agent as to the past, present or future. Without prejudice to any obligation of the Company to publish a supplementary prospectus pursuant to FSMA, neither the delivery of this document nor any subscription or sale of Shares pursuant to the Offer shall, under any circumstances, create any implication that there has been no change in the business or affairs of the Group since the date of this document or that the information contained herein is correct as of any time subsequent to its date.

The Company will update the information provided in the Prospectus by means of a supplement if a significant new factor that may affect the evaluation by prospective investors of the Offer occurs after the publication of the Prospectus or if this document contains any mistake or substantial inaccuracy. The Prospectus and any supplement thereto will be subject to approval by the FCA and will be made public in accordance with the Prospectus Rules. If a supplement to the Prospectus is published prior to Admission, investors shall have the right to withdraw their applications for Shares made prior to the publication of the supplement. Such withdrawal must be made within the time limits and in the manner set out in any such supplement (which shall not be shorter than two Business Days after publication of the supplement).

The contents of this document are not to be construed as legal, business or tax advice. Each prospective investor should consult his or her own advisors for legal, financial, business, tax advice and related aspects of a purchase of the Shares. In making an investment decision, each investor must rely on their own examination, analysis and enquiry of the Company and the terms of the Offer, including the merits and risks involved.

This document is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Company, the Directors, the Selling Shareholder or any of the Banks or any of their representatives that any recipient of this document should subscribe for or purchase the Shares. Prior to making any decision as to whether to subscribe for or purchase the Shares, prospective investors should read this document. Investors should ensure that they read the whole of this document carefully and not just rely on key information or information summarised within it. In making an investment decision, prospective investors must rely upon their own examination of the Company and the terms of this document, including the risks involved.

Investors who subscribe for or purchase Shares in the Offer will be deemed to have acknowledged that: (i) they have not relied on any of the Banks or any person affiliated with any of them in connection with any investigation of the accuracy of any information contained in this document or their investment decision; and (ii) they have relied on the information contained in this document, and no person has been authorised to give any information or to make any representation concerning the Group or the Shares (other than as contained in this document) and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Company, the Directors, the Selling Shareholder or any of the Banks.

None of the Company, the Directors, the Selling Shareholder or any of the Banks or any of their representatives is making any representation to any offeree, subscriber or purchaser of the Shares regarding the legality of an investment in the Shares by such offeree, subscriber or purchaser.

Each of the Banks is acting exclusively for the Company and no one else in connection with the Offer. None of the Banks will regard any other person (whether or not a recipient of this document) as a client in relation to the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for the giving of advice in relation to the Offer or any transaction, matter or arrangement referred to in this document. Apart from the responsibilities and liabilities, if any, which may be imposed on the Banks by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respective affiliates accepts any responsibility whatsoever for the contents of this document including its accuracy, completeness and verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Shares or the Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of this document or any such statement.

In connection with the Offer, the Banks and any of their respective affiliates, acting as investors for their own accounts, may subscribe for and/or acquire Shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company or related investments in connection with the Offer or otherwise. Accordingly, references in this document to the Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any or issue, offer, subscription, acquisition, dealing or placing by, the Banks and any of their affiliates acting as investors for their own accounts. None of the Banks intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligations to do so. In addition, certain of the Banks or their affiliates may enter into financing arrangements (including swaps) with investors in connection with which such Banks (or their affiliates) may from time to time acquire, hold or dispose of Shares.

The Banks and their respective affiliates may have engaged in transactions with, and provided various investment banking, financial advisory and other services to the Company and the Selling Shareholder, for which they would have received customary fees. The Banks and any of their respective affiliates may provide such services to the Company, the Selling Shareholder and any of their respective affiliates in the future.

Presentation of Financial Information

The financial information in this document has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The significant IFRS accounting policies applied in the financial information of the Company are applied consistently in the financial information in this document.

Currency Presentation

Unless otherwise indicated, all references in this document to "sterling", "pounds sterling", "GBP", "£", or "pence" are to the lawful currency of the United Kingdom. The Company prepares its financial statements in pounds sterling. All references to the "euro" or "€" are to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community, as amended. All references to "US dollars" or "US\$" are to the lawful currency of the United States.

Roundings

Certain data in this document, including financial, statistical, and operating information has been rounded. As a result of the rounding, the totals of data presented in this document may vary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to 100 per cent.

Market, Economic and Industry Data

The Company confirms that all market, economic and industry data contained in this document has been accurately reproduced and, so far as the Company is aware and able to ascertain, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where third-party information has been used in this document, the source of such information has been identified.

No Incorporation of Website Information

The contents of the Group's websites do not form part of this document.

Information Not Contained in This Document

No person has been authorised to give any information or make any representation other than those contained in this document and, if given or made, such information or representation must not be relied upon as having been so authorised. Neither the delivery of this document nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information in this document is correct as of any time subsequent to the date hereof.

Information Regarding Forward-Looking Statements

This document includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes indentified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements include all matters that are not historical facts.

These forward-looking statements and other statements contained in this document regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements. Such forward-looking statements contained in this document speak only as of the date of this document. The Company, the Directors, the Selling Shareholder and the Banks expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, or the Disclosure and Transparency Rules of the FCA.

Over-Allotment and Stabilisation

In connection with the Offer, Merrill Lynch International, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilisation transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Offer.

PART 5

CAPITALISATION AND INDEBTEDNESS

Capitalisation and Indebtedness

The table below sets out the Group's capitalisation and indebtedness. The capitalisation information has been extracted without material adjustment from the Group's financial information as at 31 January 2014 included in Part 11 "Historical Financial Information" of the Prospectus.

31 January 2014 (£ millions)
0.6
749.5
1,119.8
1,869.9

Notes:

(1) This comprises obligations under finance leases and hire purchase contracts.

• (2) This comprises the net amount due to the Acromas Group, representing amounts payable by the Group of £1,779.9 million less amounts receivable by the Group of £1,030.7 million; and bank overdrafts of £0.3 million (which excludes bank overdrafts of £4.9 million relating to the Group's travel and insurance businesses which are subject to contractual and regulatory restrictions).
• (3) Net amounts due to the AA Group, a related party, of £4.2m have been excluded as, further to the repayment of amounts due on 2 July 2013, these represent trading balances rather than debt.

As at 31 January 2014 the Group had invested capital of £1,119.8 million and debts of £750.1 million. The Group's existing debt facilities at this date were held by Acromas Group and distributed to the Group via intercompany loans. On 25 April 2014, the Group drew term loans totalling £1,250.0 million under a new Senior Facilities Agreement and utilised these funds to repay the existing debt facilities held by Acromas Group. The transfer of these funds together with various other transactions have eliminated all intercompany balances with the Acromas Group. There have been no other material changes in the Group's capitalisation since 31 January 2014.

Recent changes to the issued share capital of the Company are described in section 1 of Part 14 "Additional Information—Incorporation and share capital" of the Registration Document.

The following table sets out the Group's net indebtedness as at 31 March 2014. The statement of indebtedness is unaudited and has been extracted from management accounts that have been prepared using policies that are materially consistent with those used in the preparation of the Group's combined historical financial information as at 31 January 2014 included in Part 11 "Historical Financial Information" of the Prospectus.

	31 March 2014 (£ millions)
Cash at bank and in hand(1) Short term deposits(1)	47.6 38.0
Liquidity	85.6
Other current financial debt(2)	731.3
Current Financial Debt	731.3
Net Current Financial Indebtedness	645.7
Net Financial Indebtedness	645.7

Notes:

• (1) Cash at bank and in hand and short-term deposits exclude amounts held by the Group's travel and insurance businesses which are subject to contractual and regulatory restrictions and which are, therefore, not readily available to be used for other purposes by the Group. Cash at bank and in hand is stated net of overdrafts.
• (2) This comprises the net amount due to the Acromas Group of £730.9 million, representing amounts payable by the Group of £1,779.9 million less amounts receivable by the Group of £1,049.0 million, and obligations under finance leases and hire purchase contracts of £0.4 million.

As at 31 March 2014, certain key trading subsidiaries of the Group acted as Obligor on bank loans made to Acromas Group. At 31 March 2014, the principal, accrued interest, guarantees and other facilities outstanding on these bank loans was £1,305.1 million.

On 25 April 2014, the Group entered into new debt financing arrangements and the bank loans held by Acromas Group were repaid. Further to this repayment, the obligations of the key trading subsidiaries of the Group in respect of those bank loans have been discharged. Guarantees and other facilities totalling £39.5 million issued against the revolving credit facility of the Acromas Group are in the process of being moved across to the revolving credit facility associated with the new Senior Facilities Agreement.

PART 6

DETAILS OF THE OFFER

1. BACKGROUND AND OVERVIEW OF THE OFFER

The Company is offering New Shares in the Offer so as to raise expected gross proceeds for the Company of up to £550.0 million. The Selling Shareholder is expected to offer between 0 and 292,817,347 Existing Shares so as to raise expected gross proceeds for the Selling Shareholder of up to £717.4 million. The Company will not receive any of the proceeds from the sale of the Existing Shares, all of which will be paid to the Selling Shareholder.

The Offer is being made by way of:

• an Institutional Offer by the Company and the Selling Shareholder to certain institutional investors in the UK and elsewhere outside the United States in reliance on Regulation S and in accordance with locally applicable laws and regulations, and in the United States, only to QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act; and
• a Retail Offer by the Company and the Selling Shareholder to investors in the UK, the Channel Islands and the Isle of Man pursuant to:
• a Customer Offer to the Group's Eligible Customers;
• a Non-Customer Offer to retail investors;
• an Intermediaries Offer to Intermediaries for onward distribution to underlying applicants; and
• an Employee Offer to Eligible Employees of the Group.

Certain restrictions that apply to the distribution of this document and the Shares being issued and sold under the Offer in jurisdictions outside the United Kingdom are described below.

When admitted to trading, the Shares will be registered with ISIN number GB00BLT1Y088 and SEDOL (Stock Exchange Daily Official List) number BLT1Y08 and trade under the symbol "SAGA".

Following Admission, it is expected that between 25.0 per cent. and 50.0 per cent. of the Shares will be held in public hands (within the meaning of paragraph 6.1.19 of the Listing Rules) (assuming that the Overallotment Option is not exercised) and between 28.7 per cent. and 57.5 per cent. will be held in public hands if the Over-allotment Option is exercised in full.

The Company, the Selling Shareholder and the Joint Global Co-ordinators are not bound to proceed with the Offer. Completion of the Offer will be subject, inter alia, to the determination of the Offer Price and the Offer Size and each of the Company's, the Selling Shareholder's and the Joint Global Co-ordinators' decisions to proceed with the Offer. It will also be subject to the satisfaction of conditions contained in the Underwriting Agreement including Admission occurring and to the Underwriting Agreement not having been terminated. The Offer cannot be terminated once unconditional dealings in the Shares have commenced. Further details of the Underwriting Agreement are set out in section 3.1 of Part 8 "Additional Information".

The rights attaching to the Shares issued or sold pursuant to the Offer, including any Shares sold pursuant to the Over-allotment Option, will be uniform in all respects, including the right to vote and the right to receive all dividends and other distributions declared, made or paid in respect of the Company's share capital after Admission. The Shares will, immediately on and from Admission, be freely transferable under the Articles of Association.

Pursuant to the Offer and Shares issued in connection with the nil cost options granted to certain members of management, the Selling Shareholder will experience dilution of between 22.7 and 28.0 per cent.

2. REASONS FOR THE OFFER AND USE OF PROCEEDS

The Company is making the Offer and is seeking Admission in order to raise further consumer and investor awareness of Saga and to provide the Company with a structure for future growth and development. Saga has generated extensive publicity in the UK in anticipation of the Offer which has served to further enhance the Group's public profile and raise Saga's brand awareness. The Retail Offer has been structured to enable Saga's existing and prospective customers, along with other retail investors in the UK, to become shareholders in the Company.

The Directors believe that:

• the increased publicity surrounding Saga as a result of the Offer, coupled with the increased brand affinity resulting from its customers becoming shareholders in the Company, will further strengthen the Saga brand and lead to new business; and
• the Retail Offer will provide Saga with a number of additional contactable names for the Group Marketing Database, which Saga intends to use to generate incremental business over time.

The Company expects to receive approximately £550.0 million from the subscription of New Shares in the Offer before estimated underwriting commissions, fees and expenses incurred in connection with the Offer of approximately £37.6 million. As a result, the Company expects to receive net proceeds of approximately £512.4 million from the Offer.

The Company intends to use the net proceeds of the Offer of £512.4 million, together with existing cash resources, to reduce the Group's indebtedness by repaying £550.0 million drawn under the Group's senior facilities agreement (the "Senior Facilities Agreement"), which is expected to give the Company greater financial flexibility to drive the future growth of the business.

Through the sale of Existing Shares pursuant to the Offer, the Company expects the Selling Shareholder to raise in aggregate approximately £717.4 million (assuming that the Offer Price is set at the mid-point of the Price Range, the Existing Share Offer Size is set at the mid-point of the Existing Share Offer Size Range and no exercise of the Over-allotment Option) before taking into account expenses. On that basis, the aggregate underwriting commissions and amounts in respect of stamp duty or SDRT payable by the Selling Shareholder in connection with the Offer are estimated to be up to approximately £9.8 million.

For more information regarding the effect of the Offer on the financial position of the Group, see Part 11 "Unaudited Pro Forma Financial Information" of the Registration Document.

3. OFFER SIZE, OFFER PRICE, BOOKBUILDING AND ALLOCATIONS

This section should be read in conjunction with the section entitled Part 1 "Expected Timetable of Principal Events and Offer Statistics".

The Offer comprises an offer of up to 555,352,703 Shares, of which:

• up to 297,297,297 are New Shares being offered for subscription by the Company; and
• up to 258,055,406 are Existing Shares being offered for sale by the Selling Shareholder.

It is currently expected that the New Share Offer Size and the Existing Share Offer Size will be set within the New Share Offer Size Range and the Existing Share Offer Size Range, respectively. However, the number of New Shares to be issued may fall outside the New Share Offer Size Range and/or the number of Existing Shares to be sold may fall outside the Existing Share Offer Size Range. See section 13 of this Part 6 "Details of the Offer" for the steps the Company will take should the New Share Offer Size be set above or below the New Share Offer Size Range and/or the Existing Share Offer Size be set above or below the Existing Share Offer Size Range. The actual number of New Shares to be issued by the Company and Existing Shares to be sold by the Selling Shareholder in the Offer will only be determined at the time the Offer Price is determined and could be higher or lower than those ranges. In addition, further Shares representing 15 per cent. of the Offer will be made available by the Selling Shareholder pursuant to the Over-allotment Option described below.

All Shares issued or sold pursuant to the Offer will be issued or sold at the Offer Price. It is currently expected that the Offer Price will be in the price range of 185 pence to 245 pence per Share but the Offer Price may be set within, above or below that Price Range. See section 13 of this Part 6 "Details of the Offer" for the steps the Company will take should the Offer Price be set above the Price Range or the Price Range is revised higher.

A number of factors will be considered in deciding the Offer Price and the Offer Size, including prevailing market conditions, the level and the nature of the demand for Shares, the Company's historical performance estimates of its business potential and earning prospects and the objective of encouraging the development of an orderly and liquid after-market in the Shares. The Offer Price and the Offer Size will be established at a level determined in accordance with these arrangements, taking into account indications of interest received (whether before or after the times and/or dates stated). Accordingly, the Offer Price will not necessarily be the highest price at which all of the Shares subject to the Offer could be issued or sold. The Offer Price will be determined by the Company and the Selling Shareholder in consultation with the Joint Bookrunners.

The Underwriters will solicit from prospective investors indications of interest in acquiring Shares under the Institutional Offer. Prospective institutional investors will be required to specify the number of Shares which they would be prepared to acquire either at specified prices or at the Offer Price (as finally determined). There is no minimum or maximum number of Shares which can be applied for in the Institutional Offer. In addition, applications for Shares are expected to be sought by the Company and the Selling Shareholder in the Customer Offer, the Non-Customer Offer and the Employee Offer and sought by the Intermediaries from their retail clients under the Intermediaries Offer, each on the basis that the number of Shares which may be allocated will vary depending on the Offer Price. Applications will then be aggregated and submitted by each Intermediary on behalf of its clients and this demand will be taken into account by the Company alongside indications of interest in the Institutional Offer, the Customer Offer, the Non-Customer Offer and the Employee Offer in establishing the Offer Price and the Offer Size as described above in respect of the Offer.

In the event that demand for the Shares being offered exceeds the number of Shares made available in the Offer, allocations may be scaled down in any manner by the Company and the Selling Shareholder in consultation with the Joint Bookrunners, and applicants may be allocated Shares having an aggregate value which is less than the sum applied for. The Company and the Selling Shareholder may allocate such Shares in consultation with the Joint Bookrunners, provided that the final determination as to allocation will be made by the Company (and there is no obligation to allocate such Shares proportionately).

If there is more demand for Shares than the number of Shares available in the Offer, applications for Shares will be scaled back. In such circumstances, within the Retail Offer, the Company and the Selling Shareholder intend, after having consulted with the Joint Bookrunners, to give a preference to applications made in the Customer Offer and the Employee Offer over applications made in the Non-Customer Offer and the Intermediaries Offer. The same allocation policy will apply to retail investors applying through the Non-Customer Offer or the Intermediaries Offer.

The Offer Price, the New Share Offer Size and the Existing Share Offer Size will be determined by the Company and the Selling Shareholder in consultation with the Joint Bookrunners and are expected to be announced on 23 May 2014. The Pricing Statement, which will contain the Offer Price, the New Share Offer Size and the Existing Share Offer Size, will be published in printed form and available free of charge at the registered office of the Company at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE until 14 days after Admission. In addition, the Pricing Statement will be published in electronic form and available on the Offer Website at www.saga.co.uk/shares. The Company and the Selling Shareholder, in consultation with the Joint Bookrunners, reserve the right to increase or decrease the aggregate number of Shares issued and/or sold under the Offer.

If (i) the Offer Price is set above the Price Range or the Price Range is revised higher; and/or (ii) the number of New Shares to be issued by the Company is set above or below the New Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority); and/ or (iii) the number of Existing Shares to be sold by the Selling Shareholder is set above or below the Existing Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority), then the Company would make an announcement via a Regulatory Information Service and prospective investors would have a statutory right to withdraw their application for Shares pursuant to section 87Q of FSMA. In such circumstances, the Pricing Statement would not be published until the period for exercising such withdrawal rights has ended. Therefore, the expected day of publication of the Pricing Statement would be extended. The arrangements for withdrawing offers to subscribe for or purchase Shares would be made clear in the announcement. Full details of the statutory right to withdraw an offer to purchase Shares pursuant to section 87Q of FSMA are set out in section 13 of this Part 6 "Details of the Offer".

The Selling Shareholder has agreed to pay the stamp duty chargeable on a transfer of Existing Shares and/ or SDRT chargeable on agreements to transfer Existing Shares arising in the UK (currently at a rate of 0.5 per cent.) on the initial sale of Existing Shares under the Offer and the sale of Existing Shares pursuant to the exercise of the Over-allotment Option. Each investor which acquires Existing Shares in the Offer will be deemed to undertake that such investor shall not submit any reclaim to HMRC in respect of any stamp duty or SDRT so paid or accounted for by the Selling Shareholder in respect of the Offer.

4. THE INSTITUTIONAL OFFER

Under the Institutional Offer, the Shares will be offered to (i) certain institutional investors in the UK and elsewhere outside the United States in reliance on Regulation S and in accordance with locally applicable laws and regulations, and (ii) in the United States, only to QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Certain restrictions that apply to the distribution of the Prospectus and the offer and sale of the Shares in jurisdictions outside the UK are described below in section 15 of this Part 6 "Details of the Offer".

The latest time and date for indications of interest in acquiring Shares under the Institutional Offer is set out in Part 1 "Expected Timetable of Principal Events and Offer Statistics" but that time may be extended at the discretion of the Joint Global Co-ordinators (with the agreement of the Company).

Each investor in the Institutional Offer will be required to undertake to pay the Offer Price for the Shares sold to such investor in such manner as shall be directed by the Underwriters, which is the same price at which all Shares are to be sold in the Offer.

Participants in the Institutional Offer will be notified verbally or by email of the number of Shares that they have been allocated as soon as practicable following pricing and allocation, and in any event by 23 May 2014. Each prospective investor in the Institutional Offer will be contractually committed to acquire the number of Shares allocated to it at the Offer Price and, to the fullest extent permitted by law, will be deemed to have agreed that it will not be entitled to exercise any rights to rescind or terminate or, subject to any statutory withdrawal rights, otherwise withdraw from, such commitment.

Under the Institutional Offer, Shares will be offered to (i) certain institutional investors in the United Kingdom and elsewhere outside the United States in reliance on Regulation S and (ii) in the United States, only to persons reasonably believed to be QIBs in reliance on Rule 144A or pursuant to another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Certain restrictions that apply to the distribution of this document and offer and sale of the Shares in jurisdictions outside the United Kingdom are described in section 15 of this Part 6 "Details of the Offer".

The latest time and date for indications of interest in acquiring Shares under the Institutional Offer are set out in Part 1 "Expected Timetable of Principal Events and Offer Statistics" but that time may be extended at the discretion of the Joint Global Co-ordinators (with the agreement of the Company and the Selling Shareholder).

5. THE RETAIL OFFER

Investors in the Retail Offer will be deemed to have invested solely on the basis of the Prospectus, together with any supplements thereto.

	In the Retail Offer, for investors other than Eligible Employees, the minimum application amount is £1,000
	and applications must be for one of the following amounts:

£1,000	£1,500	£2,000	£2,500	£3,000	£4,000
£5,000	£6,000	£7,000	£8,000	£9,000	£10,000
£15,000	£20,000	£25,000	£30,000	£40,000	£50,000

To apply to invest an amount of more than £50,000, it must be in a multiple of £10,000 (together, the "Prescribed Application Amounts").

For Eligible Employees applying in the Employee Offer, lower minimum application amounts of £500 and £750 apply. For further details of the Employee Offer, see section 5.4 of this Part 6 "Details of the Offer".

Joint applications from more than one investor are not permitted in the Customer Offer, Non-Customer Offer or Employee Offer, but are permitted in the Intermediaries Offer. Eligible Employees may make one application for Shares in the Employee Offer and a second application in the Customer Offer (provided that the applicant is an Eligible Customer), the Intermediaries Offer or the Non-Customer Offer. Any such second application will be subject to the terms and conditions of the Customer Offer, the Intermediaries Offer or the Non-Customer Offer (as appropriate) and will not be subject to the terms and conditions of the Employee Offer. Other investors acting on their own behalf are only permitted to make one application in the Retail Offer (whether directly or through other means). This means that investors acting on their own behalf, other than Eligible Employees, are permitted to submit one application in the Customer Offer, the Non-Customer Offer or Intermediaries Offer but not in more than one of them.

Allocations of Shares under the Retail Offer will be determined after the Offer Period has ended at the discretion of the Company and the Selling Shareholder after having consulted with the Joint Bookrunners. The amount which an applicant in the Retail Offer offers to invest may be scaled back on a basis to be determined by the Company in its absolute discretion. Accordingly, persons who apply for Shares under the Retail Offer may not receive all of the Shares that they apply for and it is possible that they may not receive any. There is, however, no guaranteed minimum amount for which valid applications will be successful. It is expected that the Company will publish the basis of allocation for the Retail Offer on the date that the Offer Price is announced and the Pricing Statement is published.

As the Offer Price will not be known until after the closing date for applications, applications for Shares are required to be based on the amount in Pounds Sterling that retail investors wish to invest and not the number of Shares they wish to acquire.

The Banks and their affiliates are not in any way involved in the procurement of applications under the Retail Offer (save where an Underwriter or an affiliate is acting as an Intermediary).

5.1 Customer Offer

In addition to the terms of the Direct Retail Offer described in section 16 of this Part 6 "Details of the Offer", the following are additional terms which apply to the Customer Offer.

• Eligible Customers who are aged 18 or over and who are in the UK, the Channel Islands or the Isle of Man will have the opportunity to acquire Shares in the manner outlined below.
• Eligible Customers who acquire Shares under the Customer Offer and hold them for a continuous period of one year following Admission will be eligible to receive at the end of that one year period one Free Share for every twenty Shares acquired in the Customer Offer, subject to certain conditions described below.
• If there is more demand for Shares than the number of Shares available in the Offer, applications for Shares will be scaled back. In such circumstances, within the Retail Offer, the Company and the Selling Shareholder intend, after having consulted with the Joint Bookrunners, to give a preference to applications made in the Customer Offer and the Employee Offer over applications made in the Non-Customer Offer and the Intermediaries Offer. The same allocation policy will apply to retail investors applying through the Non-Customer Offer or the Intermediaries Offer.

Eligible Customers in the UK, the Channel Islands or the Isle of Man who wish to apply for Shares in the Customer Offer should:

• visit www.saga.co.uk/shares and complete and submit an online Customer Application Form together with the applicant's UK debit card details for an amount up to £10,000 which they wish to invest, by the date shown below; or
• if they wish to pay by cheque or apply for an amount more than £10,000, download a Customer Application Form from www.saga.co.uk/shares, and then complete, sign and return the Customer Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc" (with details of the application number written on the back of the cheque), for the total amount which they wish to invest, so as to be received by the date shown below; or
• where they have requested that an application form be mailed to them, complete, sign and return the hard copy Customer Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc" (with details of the application number written on the back of the cheque), for the total amount which they wish to invest, so as to be received by the date shown below.

Payments made by cheque or bankers' draft must be made in pounds sterling, drawn at a branch in the United Kingdom of a bank or building society. Cheques, which must be drawn on the personal account of the individual applicant where they have sole or joint title to the funds, should be made payable to 'Capita Registrars Limited re: Saga plc (crossed A/C payee only). Third party cheques will not be accepted, with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/bankers' draft to such effect.

Eligible Customers will only receive the preferential allocation and eligibility for Free Shares to which they are entitled if they apply on the Customer Application Form and not on the Application Form for use by investors other than Eligible Customers (unless such an Eligible Customer also applies as an Eligible Employee in the Employee Offer on the Employee Application Form).

• The following are "Eligible Customers" for the purposes of the Customer Offer provided they are resident in the UK, Channel Islands or the Isle of Man:

Personal finance customers

• Any person who held any of the following personal finance products or policies if such product or policy was in force at any time between 5 January 2013 and 30 April 2014:
• a financial product or policy purchased through Saga Financial Planning;
• a Saga care fee annuity;
• a Saga equity release product or policy purchased through Saga Equity Release Advice Service;
• a Saga guaranteed or term life insurance product or policy where the inception date or cover start date has passed; or
• a Saga annuity product or policy;
• any person who held a Saga share dealing account on which a trade was made between 5 January 2013 and 30 April 2014;
• any person who held a Saga savings account at any time between 5 January 2013 and 30 April 2014 that had a positive balance; or
• any person who held and used an activated Saga credit card at any time between 5 January 2013 and 30 April 2014.

Financial services customers

• Any person who held any of the following policies if the start date or end date of the policy cover period was between 5 January 2013 and 30 April 2014 or if the policy was in force for the entirety of that period:
• any of the following policies provided by Saga: motor insurance; home insurance; motor breakdown or motorhome breakdown assistance; motorhome insurance; caravan insurance; holiday home insurance; home emergency insurance; pet insurance; private medical insurance; health cash plan; personal accident insurance; accidental death benefit; annual travel insurance; single trip travel insurance; boat insurance; legal solutions; or SOS personal alarm;
• any of the following policies provided by DCIS: motor insurance; home insurance; motorhome insurance; caravan insurance; holiday home insurance; motorbike insurance; van insurance; or commercial liability insurance; or
• any of the following policies provided by Saga Select: motor insurance policy; home insurance; motorbike insurance; or van insurance;
• any person who purchased foreign exchange currency from Saga between 5 January 2013 and 30 April 2014; or
• any person who had an international payments account with Saga and made at least one international payment between 5 January 2013 and 30 April 2014.

Travel customers

• Any person who booked a Saga or Titan holiday or cruise between 5 January 2011 and 30 April 2014 and any passengers travelling on the same booking with such a person provided that, if the holiday or cruise started or starts after 30 April 2014, the booking was confirmed or an option with a payment was made by 30 April 2014 but excluding any such person who has an agency only relationship.

Saga Magazine customers

• Any person who held a Saga Magazine subscription where the start date or end date of the subscription period was between 5 January 2013 and 30 April 2014.

Healthcare customers

• Any person who has purchased or received the benefit of Saga private healthcare services between 5 January 2013 and 30 April 2014.

• The below is a list of persons who are not "Eligible Customers" for the purposes of the Customer Offer. For the avoidance of doubt, an Eligible Customer's status for the purposes of the Customer Offer will not be affected if that person has also purchased or used any of the products or services listed below under "Excluded customers"

Excluded customers

• Any person who has purchased Saga home phone and broadband services;
• any person who has used or purchased the Saga directory enquiries services;
• any person who has used or purchased the Saga Car Direct service;
• any person who has used or purchased holiday partnership services from Saga;
• any person who has used or purchased the Saga "Road to Health" service; or
• any person who has used or purchased the Saga nutritional supplements service.

There is no maximum limit on the monetary amount applicants may apply to invest in the Customer Offer.

The latest time for receipt of applications in the Customer Offer by the Receiving Agent is 11:59 p.m. (UK time) on Tuesday, 20 May 2014 for prospective investors completing and submitting an online Customer Application Form or a hard copy Customer Application Form.

Investors should ensure that they allow sufficient time in order to complete an online Customer Application Form or, as the case may be, sufficient time for the Customer Application Form to be sent by post in order that the application or form is received by the Receiving Agent by the relevant time and date specified above.

All applications under the Customer Offer will be made on the terms and conditions of the Direct Retail Offer set out in section 16 of this Part 6 "Details of the Offer". If no part of an application is accepted, all monies paid on application will be returned, without interest. No fractional entitlements to Shares will be allocated and therefore allocations will be satisfied by rounding down to the nearest whole Share. If an application is accepted in part, refunds in respect of the difference between the aggregate Offer Price of the Shares applied for and the application monies tendered will be paid to relevant applicants without interest. However, any sums less than the Offer Price of one Share will not be refunded but will be given by the Company to charity.

Payments made by cheque or bankers' draft must be made in pounds sterling, drawn at a branch in the United Kingdom of a bank or building society. Cheques, which must be drawn on the personal account of the individual applicant where they have sole or joint title to the funds, should be made payable to 'Capita Registrars Limited re: Saga plc (crossed A/C payee only). Third party cheques will not be accepted, with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/bankers' draft to such effect.

Children under the age of 18 are not permitted to apply for Shares in the Customer Offer in their own name. If a parent, grandparent or guardian wishes to apply for Shares in the Customer Offer with the intention of transferring those Shares to a particular child at a later date once he/ she is aged 18 or over, they can include the child's initials on their Application Form. The same process can be followed by applicants who wish to hold Shares in the Saga Shareholder Account. The designation is for the parent, grandparent or guardian's benefit only in respect of their own record keeping purposes. The Company and, where relevant, the Saga Shareholder Account Nominee, will treat the parent, grandparent or guardian (as applicable) as the owner of the Shares and will not recognise any child as the beneficiary of those Shares. For example, the Company and, where relevant, the Saga Shareholder Account Nominee will only accept the instructions of a Shareholder (or a person authorised to act on behalf of a Shareholder) in respect of a transfer of a Shareholder's Shares and the payment of dividends on any such Shares and will not accept instructions from a child whose initials have been designated in respect of such Shares.

Up to two members of an Eligible Customer's household can be Eligible Customers for the purposes of the Customer Offer. If a second person has not already been nominated by Saga, an additional person the Eligible Customer nominates can apply online using the Eligible Customer's registration reference number details.

Applicants in the Customer Offer who have any questions about how to complete their Application Form should access the Offer Website at www.saga.co.uk/shares or contact 0800 015 5429.

Applicants under the Customer Offer will have their Shares held in the Saga Shareholder Account unless they elect on their Application Form to transfer their shares into an existing Saga Share Direct nominee account or receive a share certificate instead. The terms and conditions of the Saga Shareholder Account are set out in Part 7 "Terms and Conditions of the Saga Shareholder Account". If an investor whose Shares are held in the Saga Shareholder Account wishes to transfer their shares to their Saga Share Direct nominee account or to receive a share certificate after Admission, the investor will be able to request such a change from the Saga Shareholder Account Nominee, however there will be a charge for the issuing of a share certificate.

5.2 The Non-Customer Offer

In addition to the terms of the Direct Retail Offer described in section 16 of this Part 6 "Details of the Offer", the following are additional terms which apply to the Non-Customer Offer.

Individuals who are aged 18 or over and who are in the UK, the Channel Islands or the Isle of Man will have the opportunity to acquire at the Offer Price (subject to it being determined) Shares in the manner outlined below.

Prospective investors in the UK, the Channel Islands or the Isle of Man who wish to apply for Shares in the Non-Customer Offer should:

• visit www.saga.co.uk/shares and complete and submit an online Application Form together with the applicant's UK debit card details for an amount up to £10,000 which they wish to invest, by the date shown below; or
• if they wish to pay by cheque or apply for an amount more than £10,000, download an Application Form from www.saga.co.uk/shares, and then complete, sign and return the Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc", for the total amount which they wish to invest, so as to be received by the date shown below; or
• where they have requested that an application form be mailed to them, complete, sign and return the hard copy Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc", for the total amount which they wish to invest, so as to be received by the date shown below.

There is no maximum limit on the monetary amount applicants may apply to invest in the Non-Customer Offer.

The latest time for receipt of applications in the Non-Customer Offer by the Receiving Agent is 11:59 (UK time) on 20 May 2014 for prospective investors completing and submitting an Online Application or a hard copy Application Form;

Investors should ensure that they allow sufficient time in order to complete an Online Application or, as the case may be, sufficient time for the Application Form to be sent by post in order that the application is received by the Receiving Agent by the relevant time and date specified above.

All applications under the Non-Customer Offer will be made on the terms and conditions of the Direct Retail Offer set out in section 16 of this Part 6 "Details of the Offer". If no part of an application is accepted, all monies paid on application will be returned, without interest. No fractional entitlements to Shares will be allocated and therefore allocations will be satisfied by rounding down to the nearest whole Share. If an application is accepted in part, refunds in respect of the difference between the aggregate Offer Price of the Shares applied for and the application monies tendered will be paid to relevant applicants without interest. However, any sums less than the Offer Price of one Share will not be refunded but will be given by the Company to charity.

Payments made by cheque or bankers' draft must be made in pounds sterling, drawn at a branch in the United Kingdom of a bank or building society. Cheques, which must be drawn on the personal account of the individual applicant where they have sole or joint title to the funds, should be made payable to 'Capita Registrars Limited re: Saga plc (crossed A/C payee only). Third party cheques will not be accepted, with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/bankers' draft to such effect.

Children under the age of 18 are not permitted to apply for Shares in the Non-Customer Offer in their own name. If a parent, grandparent or guardian wishes to apply for Shares in the Non-Customer Offer with the intention of transferring those Shares to a particular child at a later date once he/ she is aged 18 or over, they can include the child's initials on their Application Form. The same process can be followed by applicants who wish to hold Shares in the Saga Shareholder Account. The designation is for the parent, grandparent or guardian's benefit only in respect of their own record keeping purposes. The Company and, where relevant, the Saga Shareholder Account Nominee, will treat the parent, grandparent or guardian (as applicable) as the owner of the Shares and will not recognise any child as the beneficiary of those Shares. For example, the Company and, where relevant, the Saga Shareholder Account Nominee will only accept the instructions of a Shareholder (or a person authorised to act on behalf of a Shareholder) in respect of a transfer of a Shareholder's Shares and the payment of dividends on any such Shares and will not accept instructions from a child whose initials have been designated in respect of such Shares.

Applicants in the Non-Customer Offer who have any questions about how to complete their Application Form should access the Offer Website at www.saga.co.uk/shares or contact 0800 015 5429.

Applicants under the Non-Customer Offer will have their Shares held on their behalf by the Saga Shareholder Account Nominee in the Saga Shareholder Account unless they elect on their Application Form to receive a share certificate instead. The terms and conditions of the Saga Shareholder Account are set out in section 10.1 of this Part 6 "Details of the Offer". If an investor whose Shares are held in the Saga Shareholder Account wishes to receive a share certificate in respect of their Shares after Admission, section 10.1 of this Part 6 "Details of the Offer" sets out what the investor should do and the charges that are payable to the Saga Shareholder Account Nominee, respectively.

5.3 The Intermediaries Offer

Members of the general public in the United Kingdom, the Channel Islands and the Isle of Man may be eligible to apply for Shares through the Intermediaries, by following their relevant application procedures, by no later than 20 May 2014. Underlying Applicants are responsible for ensuring that they do not make more than one application under the Intermediaries Offer (whether on their own behalf or through other means, including, but without limitation, through a trust or pension plan) and if they make an application under the Intermediaries Offer are not permitted to make an application under the Non-Customer Offer or the Customer Offer but they may make an application as an Eligible Employee under the Employee Offer. Eligible Customers and Eligible Employees wishing to apply for Shares through the Customer Offer and Employee Offer and receive the preference in allocation and eligibility for Free Shares can only do so by applying in the Customer Offer and the Employee Offer and not by applying for Shares through the Intermediaries.

The Intermediaries Offer is being made to retail investors in the United Kingdom, the Channel Islands and the Isle of Man only. Individuals who are aged 18 or over, companies and other bodies corporate, partnerships, trusts, associations and other unincorporated organisations are permitted to apply to subscribe for or purchase Shares in the Intermediaries Offer.

No Shares allocated under the Intermediaries Offer will be registered in the name of any person whose registered address is outside the United Kingdom, the Channel Islands and the Isle of Man except in certain limited circumstances and with the consent of the Joint Global Co-ordinators. Applications under the Intermediaries Offer must be by reference to the total monetary amount the applicant wishes to invest and not by reference to a number of Shares or the Offer Price.

An application for Shares in the Intermediaries Offer means that the applicant agrees to acquire the Shares at the Offer Price. Each applicant must comply with the appropriate money laundering checks required by the relevant Intermediary. Where an application is not accepted or there are insufficient Shares available to satisfy an application in full, the relevant Intermediary will be obliged to refund the applicant as required and all such refunds will be in accordance with the terms provided by the Intermediary to the applicant. The Company, the Banks and the Selling Shareholder accept no responsibility with respect to the obligation of the Intermediaries to refund monies in such circumstances.

Intermediaries may charge retail investors a fee for buying or holding the allocated Shares for them (including any fees relating to the opening of an individual savings account or a self-invested personal pension for that purpose) provided that the Intermediary has disclosed the fees and terms and conditions of providing those services to the retail investor prior to the underlying application being made.

In making an application, each Intermediary will also be required to represent and warrant, among other things, that they are not located in the United States and are not acting on behalf of anyone located in the United States.

The Intermediaries may prepare certain materials for distribution or may otherwise provide formation or advice to retail investors in the United Kingdom, the Channel Islands and the Isle of Man, subject to the terms of the Intermediaries Terms and Conditions (further details of which are set out at section 7.1 of Part 8 "Additional Information"). Any such materials, information or advice are solely the responsibility of the Intermediaries and will not be reviewed or approved by any of the Banks, the Selling Shareholder or the Company. Any liability relating to such documents will be for the Intermediaries only. If an Intermediary makes an offer to a retail investor pursuant to the Intermediaries Offer, that Intermediary shall provide to such retail investor at the time the offer is made (i) a copy of the Prospectus or a hyperlink from which the Prospectus may be obtained and (ii) the terms and conditions of the relevant offer made by the Intermediary to the retail investor.

Each Intermediary will be informed by the Receiving Agent, after consultation with the Joint Bookrunners by fax or email of the aggregate number of Shares allocated in aggregate to their underlying clients (or to the Intermediaries themselves) and the total amount payable in respect thereof. The aggregate allocation of Shares as between the Institutional Offer and the various components of the Retail Offer including the Intermediaries Offer will be determined by the Company and the Selling Shareholder after having consulted with the Joint Bookrunners (on behalf of the Underwriters). The allocation policy for the Intermediaries Offer will be determined by the Company and the Selling Shareholder after having consulted with the Joint Bookrunners. Other than Eligible Customers who apply for Shares in the Customer Offer and Eligible Employees who apply for Shares in the Employee Offer who will receive preference in allocation, the same allocation policy will apply to all other applications. Each Intermediary will be required to apply the allocation policy to each of its underlying applications from retail investors. The allocation policy will be made available to Intermediaries prior to the commencement of conditional dealings in the Shares. Under the Intermediaries Offer, the Shares will be offered outside the United States only in offshore transactions as defined in, and in reliance on, Regulation S.

Pursuant to the Intermediaries Terms and Conditions, the Intermediaries have undertaken to make payment on their own behalf (not on behalf of any other person) of the consideration for the Shares allocated, at the Offer Price, to the Receiving Agent, in accordance with details to be communicated on or after the time of allocation, by means of CREST against the delivery of the Shares at the time and/or date set out in Part 1 "Expected Timetable of Principal Events and Offer Statistics" or at such other time and/or date after the day of publication of the Offer Price as may be agreed by the Company, the Selling Shareholder and the Joint Global Co-ordinators and notified to the Intermediaries.

The publication of this document and/or any supplementary prospectus and any other actions of the Company, the Selling Shareholder, the Banks, the Intermediaries or other persons in connection with the Offer should not be taken as any representation or assurance by any such person as to the basis on which the number of Shares to be offered under the Intermediaries Offer or allocations within the Intermediaries Offer will be determined, and all liabilities for any such action or statement are hereby disclaimed by the Company, the Selling Shareholder and the Banks.

Each investor who applies for Shares in the Intermediaries Offer through an Intermediary shall, by submitting an application to such Intermediary, be deemed to acknowledge and agree that such investor is not relying on any information or representation other than as is contained in the Prospectus, the Pricing Statement or any supplementary prospectus, that if the laws of any jurisdiction outside the UK, the Channel Islands and the Isle of Man are applicable to such investor's agreement to purchase Shares, such investor has complied with all such laws and none of the Company, the Selling Shareholder or the Banks will infringe any laws of any jurisdiction outside the UK, the Channel Islands and the Isle of Man as a result of such investor's rights and obligations under such investor's agreement to purchase Shares and under the Articles of Association, and that such investor's personal information may be held and used by the Intermediary, the Selling Shareholder or the Company for purposes relating to the Intermediaries Offer, which may include providing its details to third parties for the purpose of performing credit reference checks, money laundering checks and making tax returns, and keeping a record of applicants under the Intermediaries Offer for a reasonable period of time.

Intermediaries will be informed by the Receiving Agent by approximately 7:00 am (London time) on 23 May 2014 by fax or e-mail of the aggregate number of Shares allocated to such Intermediaries and the total amount payable in respect thereof.

Each Intermediary has irrevocably undertaken to the Company and the Underwriters to make payment of the consideration for the Shares allocated, at the Offer Price (on a delivery versus payment basis), to the Receiving Agent in accordance with details to be communicated on or after the time of allocation on, or at such other time and/or date after the day of publication of the Offer Price as may be agreed by the Company and the Receiving Agent and notified to the Intermediaries.

5.4 The Employee Offer

In addition to the terms of the Direct Retail Offer described in section 16 of this Part 6 "Details of the Offer", the following are additional terms which apply to the Employee Offer.

• Eligible Employees who are in the UK, the Channel Islands or the Isle of Man will have the opportunity to acquire Shares in the manner outlined below.
• Eligible Employees who acquire Shares under the Employee Offer and hold them for a continuous period of one year following Admission will be eligible to receive at the end of that one year period one Free Share for every twenty Shares acquired in the Employee Offer, subject to certain conditions described below.
• If there is more demand for Shares than the number of Shares available in the Offer, applications for Shares will be scaled back. In such circumstances, within the Retail Offer, the Company and the Selling Shareholder intend, after having consulted with the Joint Bookrunners, to give a preference to applications made in the Customer Offer and the Employee Offer over applications made in the Non-Customer Offer and the Intermediaries Offer. The same allocation policy will apply to retail investors applying through the Non-Customer Offer or the Intermediaries Offer.

Eligible Employees in the UK, the Channel Islands or the Isle of Man who wish to apply for Shares in the Employee Offer should:

• visit www.saga.co.uk/shares and complete and submit an online Employee Application Form together with the applicant's UK debit card details for an amount up to £10,000 which they wish to invest, by the date shown below; or
• if they wish to pay by cheque or apply for an amount more than £10,000, download an Employee Application Form from www.saga.co.uk/shares, and then complete, sign and return the Employee Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc" (with details of the application number written on the back of the cheque), for the total amount which they wish to invest, so as to be received by the date shown below; or
• where they have requested that an application form be mailed to them, complete, sign and return the hard copy Employee Application Form, by post, together with their cheque or a bankers' draft crossed "account payee" and made payable to "Capita Registrars Limited re: Saga plc" (with details of the application number written on the back of the cheque), for the total amount which they wish to invest, so as to be received by the date shown below.

Payments made by cheque or bankers' draft must be made in pounds sterling, drawn at a branch in the United Kingdom of a bank or building society. Cheques, which must be drawn on the personal account of the individual applicant where they have sole or joint title to the funds, should be made payable to 'Capita Registrars Limited re: Saga plc (crossed A/C payee only). Third party cheques will not be accepted, with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/bankers' draft to such effect.

Eligible Employees will only receive the preferential allocation and eligibility for Free Shares to which they are entitled if they apply on the Employee Application Form and not on the Application Form for use by investors other than Eligible Employees (unless such an Eligible Employee also applies as an Eligible Customer in the Customer Offer on the Customer Application Form).

"Eligible Employees" for the purposes of the Employee Offer are employees of the Company or one of its subsidiaries as at 2 May 2014 in the UK, Channel Islands or the Isle of Man.

For Eligible Employees applying in the Employee Offer, lower minimum application amounts of £500 and £750 apply. There is no maximum limit on the monetary amount applicants may apply to invest in the Employee Offer. The minimum application amounts of £500 and £750 is lower than the minimum application amount of £1,000 which applies to other applicants in the Direct Retail Offer.

The latest time for receipt of applications in the Employee Offer by the Receiving Agent is 11:59 p.m. (UK time) on Tuesday, 20 May 2014 for prospective investors completing and submitting an online Employee Application Form or a hard copy Employee Application Form.

Investors should ensure that they allow sufficient time in order to complete an online Employee Application Form or, as the case may be, sufficient time for the Employee Application Form to be sent by post in order that the application or form is received by the Receiving Agent by the relevant time and date specified above.

All applications under the Employee Offer will be made on the terms and conditions of the Direct Retail Offer set out in section 16 of this Part 6 "Details of the Offer". If no part of an application is accepted, all monies paid on application will be returned, without interest. No fractional entitlements to Shares will be allocated and therefore allocations will be satisfied by rounding down to the nearest whole Share. If an application is accepted in part, refunds in respect of the difference between the aggregate Offer Price of the Shares applied for and the application monies tendered will be paid to relevant applicants without interest. However, any sums less than the Offer Price of one Share will not be refunded but will be given by the Company to charity.

Applicants in the Employee Offer who have any questions about how to complete their Application Form should access the Offer Website at www.saga.co.uk/shares or contact 0800 121 7643.

Applicants under the Employee Offer will have their Shares held in the Saga Shareholder Account unless they elect on their Application Form to transfer their shares into an existing Saga Share Direct nominee account or receive a share certificate instead. The terms and conditions of the Saga Shareholder Account are set out in Part 7 "Terms and Conditions of the Saga Shareholder Account". If an investor whose Shares are held in the Saga Shareholder Account wishes to transfer their shares to their Saga Share Direct nominee account or to receive a share certificate after Admission, the investor will be able to request such a change from the Saga Shareholder Account Nominee, however there will be a charge for the issuing of a share certificate.

Free Shares received under the Employee Offer by Eligible Employees who cease to be employed by the Company or its subsidiaries will not be released to them until they have paid the funds necessary to cover income tax and National Insurance Contributions due under PAYE in respect of the receipt of the Free Shares.

5.5 ISAs

The Shares will be "qualifying investments" for the stocks and shares component of an ISA and the Board will use its reasonable endeavours to manage the affairs of the Company so as to enable this status to be maintained. Save where an account manager is acquiring Shares using available funds in an existing ISA, an investment in Shares by means of ISA is subject to the usual annual subscription limits applicable to new investments into an ISA: (for the tax year 2014/15 an individual may currently invest £11,880 worth of stocks and shares in a stocks and shares ISA; this limit will rise to £15,000 with effect from 1 July 2014 if the Finance (No 2) Bill is enacted in its most recently published form).

Sums received by a Shareholder on a disposal of Shares will not count towards the Shareholder's annual limit but a disposal of Shares held in an ISA will not serve to make available again any part of the annual subscription limit that has already been used by the Shareholder in that tax year. Individuals wishing to invest in Shares through an ISA should contact their professional advisors regarding their eligibility.

5.6 Free Shares under the Customer Offer and the Employee Offer

• Eligible Customers who acquire Shares under the Customer Offer and Eligible Employees who acquire Shares under the Employee Offer and hold them for a continuous period of one year following Admission will be eligible to receive at the end of that one year period one Free Share for every twenty Shares acquired in the Customer Offer or the Employee Offer (as applicable), subject to certain conditions described below.

• Persons who dispose of, or transfer, the beneficial interest in all of the Shares they acquire pursuant to the Customer Offer or the Employee Offer (as applicable) on or before the first anniversary of Admission will not be eligible to receive any Free Shares, even if further Shares are subsequently acquired. Persons who dispose of, or transfer only some of, the Shares they acquire pursuant to the Customer Offer or the Employee Offer (as applicable) will be eligible to receive a proportionately reduced number of Free Shares.
• Pursuant to the terms and conditions of the Saga Shareholder Account, each person who holds their Shares in the Saga Shareholder Account will have any Free Shares for which they are eligible automatically credited to their account as soon as reasonably practicable after the first anniversary of Admission. Persons who hold their Shares outside the Saga Shareholder Account may be required to satisfy the Company that they are eligible to receive Free Shares.
• All entitlements of shareholders to claim Free Shares will cease, and no Free Shares will be issued any later than, three years after the end of the relevant required holding period.
• The tax consequences of a receipt of Free Shares are described in sections 4.3 and 4.4 of Part 8 "Additional Information".
• Entitlements to Free Shares will be rounded down to the next lowest whole number and fractions of Free Shares will not be allotted to Shareholders.
• In the event of a change of control of the Company in the year following Admission, the continuous period referred to above for which the Shares must be held in order to be eligible for Free Shares will end on the day before such change of control occurs. If following such a change of control, Free Shares are not issued to a person who would otherwise have been eligible to receive them, the Company will make arrangements to compensate that person accordingly.

6. OVER-ALLOTMENT AND STABILISATION

In connection with the Offer, Merrill Lynch International, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Shares or effect other stabilising transactions with a view to supporting the market price of the Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings in the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. In no event will measures be taken to stabilise the market price of the Shares above the Offer Price. Except as required by law or regulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilising transactions conducted in relation to the Offer.

In connection with the Offer, the Stabilising Manager may, for stabilisation purposes, over-allot Shares up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer. For the purposes of allowing the Stabilising Manager to cover short positions resulting from any such over-allotments and/or from sales of Shares effected by it during the stabilising period, the Selling Shareholder will have granted to the Stabilisation Manager the Over-allotment Option, pursuant to which the Stabilising Manager may purchase or procure purchasers for additional Shares up to a maximum of 15 per cent. of the Over-allotment Shares at the Offer Price. The Over-allotment Option will be exercisable in whole or in part, upon notice by the Stabilising Manager, at any time on or before the 30th calendar day after the commencement of conditional dealings of the Shares on the London Stock Exchange. Any Over-allotment Shares made available pursuant to the Over-allotment Option will rank pari passu in all respects with the Shares, including for all dividends and other distributions declared, made or paid on the Shares, will be purchased on the same terms and conditions as the Shares being issued or sold in the Offer and will form a single class for all purposes with the other Shares.

7. STOCK LENDING AGREEMENT

In connection with the arrangements detailed in section 6 of this Part 6 "Details of the Offer", the Stabilising Manager has entered into a Stock Lending Agreement with the Selling Shareholder, pursuant to which the Stabilising Manager will be able to borrower, from the Selling Shareholder free of charge, Shares on Admissions up to an amount equal to 15 per cent. of the size of the Offer for the purposes, amongst other things, of allowing the Stabilising Manager to settle, at Admission, over-allocations, if any, made in connection with the Offer. If the Stabilising Manager borrows any Shares pursuant to the Stock Lending Agreement it will be required to return equivalent securities to the Selling Shareholder by no later than three Business Days following the end of the Stabilising Period.

8. LISTING, DEALING AND SETTLEMENT ARRANGEMENTS

The Offer is subject to the satisfaction of certain conditions contained in the Underwriting Agreement, including Admission occurring and becoming effective by 8.00 a.m. (London time) on 29 May 2014 or such later date as may be determined in accordance with such agreement, and to the Underwriting Agreement not have having been terminated. Further details of the Underwriting Agreement are set out in section 3.1 of Part 8 "Additional Information".

Application will be made to the FCA for all the Shares to be listed on the Official List and Application will be made to the London Stock Exchange for all the Shares to be admitted to trading on the London Stock Exchange's main market for listed securities.

It is expected that dealings in the Shares will commence on a conditional basis on the London Stock Exchange at 8.00 a.m. (London time) on 23 May 2014 and Shareholders who submit an Online Application and effect payment by debit card on the Offer Website and choose to hold their Shares in the Saga Shareholder Account will be able to deal in any Shares they are allocated on a conditional basis from this date and time. The expected date for settlement of such dealings will be 29 May 2014. All dealings between the commencement of conditional dealings and the commencement of unconditional dealings will be on a "when issued basis". If the Offer does not become unconditional in all respects, any such dealings will be of no effect and any such dealings will be at the risk of the parties concerned. Investors should note that only investors who apply for, and are allocated, Shares in the Institutional Offer or (save in certain circumstances) the Intermediaries Offer or who submit an Online Application and effect payment by debit card on the Offer Website and choose to hold their Shares in the Saga Shareholder Account or Saga Share Direct will be able to deal in any Shares they are allocated on a conditional basis. Other investors who apply for, and are allocated, Shares in the Non-Customer Offer, the Customer Offer or the Employee Offer will not be able to deal in Shares on a conditional basis. Therefore the earliest time at which such other investors will be able to deal in Shares is at the start of unconditional dealings on Admission.

It is expected that Admission will become effective and that dealings in the Shares will commence on an unconditional basis on the London Stock Exchange at 8.00 a.m. (London time) on 29 May 2014. It is intended that the issue of Shares allocated to investors who wish to hold Shares in uncertificated form will take place through CREST on Admission. It is intended that, where applicable, definitive share certificates in respect of the Offer will be distributed from 29 May 2014 or as soon as practicable thereafter by first class post. Temporary documents of title will not be issued. Dealings in advance of crediting of the relevant CREST stock account will be at the risk of the person concerned.

In connection with the Offer, each of the Banks and any affiliate acting as an investor for its own account may take up the Shares and in such capacity may retain, purchase or sell for its own account such securities and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Offer. Accordingly, references in this document to the Shares being offered or placed should be read as including any offering or placement of securities to any of the Banks and any affiliate acting in such capacity. The Banks do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

9. CREST

CREST is a paperless settlement system allowing securities to be transferred from one person's CREST account to another's without the need to use share certificates or written instruments of transfer. With effect from Admission, the Articles will permit the holding of Shares in the CREST system.

Application will be made for the Shares to be admitted to CREST with effect from Admission. Accordingly, settlement of transactions in the Shares following Admission may take place within the CREST system if any shareholder so wishes. CREST is a voluntary system and holders of Shares who wish to receive and retain share certificates will be able to do so.

10. HOLDING AND DEALING IN SHARES ACQUIRED IN THE RETAIL OFFER

The Company's shareholders, depending on their circumstances, will be able to hold their Shares in a number of ways. The principal options available are to have their Shares held on their behalf in the Saga Shareholder Account or to receive a share certificate in respect of their Shares.

All Shares acquired in the Customer Offer, the Non-Customer Offer or the Employee Offer will be held either in the Saga Shareholder Account or in certificated form, and will automatically be held in the Saga Shareholder Account unless the share certificate box on the relevant valid Application Form is ticked. After Admission, such shareholders will be able to withdraw their Shares from the Saga Shareholder Account upon payment of an administration charge to the Saga Shareholder Account Nominee.

The Company expects that most non-institutional shareholders will find the Saga Shareholder Account to be a convenient way of holding Shares.

10.1 Saga Shareholder Account

This section and section 10.2 below should be read in conjunction with the terms and conditions of the Saga Shareholder Account set out in Part 7 "Terms and Conditions of the Saga Shareholder Account". This section 10.1 and section 10.2 below only apply to Shareholders who acquire Shares through the Customer Offer, the Non-Customer Offer or the Employee Offer and not the Intermediaries Offer. The Saga Shareholder Account will only be available to persons who acquire Shares in the Customer Offer, the Non-Customer Offer or the Employee Offer if they have a registered address in the UK, the Channel Islands or the Isle of Man. Following Admission, the Saga Shareholder Account will be available to all persons holding Shares who have a registered address in the UK, the Channel Islands or the Isle of Man.

The Saga Shareholder Account, a Company-sponsored nominee arrangement, provides a convenient way of holding Shares, which removes the need to have a share certificate which has to be kept safe and secure. In addition, individuals' names will not appear on the Company's shareholder register, which is a public register, so their details remain confidential. Instead, the Shares will be held on behalf of those individuals in the name of Capita IRG Trustees (Nominees) Limited. The Saga Shareholder Account has been set up exclusively for persons who hold Shares in the Company and will hold those Shares electronically within the CREST system.

Persons holding Shares in the Saga Shareholder Account:

• will have similar rights to those Shareholders who hold share certificates (including the right to receive the same annual and other financial information as is sent to Shareholders who hold a share certificate, should they wish to receive it, and to attend, speak and vote on a show of hands and on a poll at general meetings of the Company);
• will receive Share Account Statements showing the number of Shares held at the point at which they become members and at least once every 12 months thereafter; and
• are entitled to leave the Saga Shareholder Account at any time and obtain a share certificate instead or have their Shares transferred into another nominee arrangement or deposit account. However, there may be an administration charge for removing Shares from the Saga Shareholder Account.

Children under the age of 18 are not permitted to apply for Shares in the Customer Offer or the Non-Customer Offer in their own name. If a parent, grandparent or guardian wishes to apply for Shares in the Customer Offer or Non-Customer Offer with the intention of transferring those Shares to a particular child at a later date once he/ she is aged 18 or over, they can include the child's initials on their Application Form. The same process can be followed by applicants who wish to hold Shares in the Saga Shareholder Account. The designation is for the parent, grandparent or guardian's benefit only in respect of their own record keeping purposes. The Company and, where relevant, the Saga Shareholder Account Nominee, will treat the parent, grandparent or guardian (as applicable) as the owner of the Shares and will not recognise any child as the beneficiary of those Shares. For example, the Company and, where relevant, the Saga Shareholder Account Nominee will only accept the instructions of a Shareholder (or a person authorised to act on behalf of a Shareholder) in respect of a transfer of a Shareholder's Shares and the payment of dividends on any such Shares and will not accept instructions from a child whose initials have been designated in respect of such Shares.

10.2 Dealing in Shares held through the Saga Shareholder Account

Share dealing services will be available to persons holding Shares in the Saga Shareholder Account once they have received their shareholder reference numbers. It is expected that Shareholders who applied and successfully paid for Shares in the Customer Offer, the Non-Customer Offer or the Employee Offer through an Online Application (but excluding any applications where payment was made by cheque or bankers' draft) will be sent their shareholder reference number by email within two days following commencement of conditional dealings. It is expected that Shareholders who applied for Shares in the Customer Offer, the Non-Customer Offer or the Employee Offer through a postal Application Form or paid by cheque or bankers' draft will be sent their shareholder reference number by post within one week following Admission.

Shareholders holding Shares in the Saga Shareholder Account will have access to a range of share dealing services. These services are provided by Capita Asset Services which is a trading name of Capita IRG Trustees Limited, authorised and regulated by the FCA.

Online dealing at www.sagashareholder.co.uk. Shareholders can access the online facility which will provide real-time share price quotes during UK stock market opening hours (normally 8am-4.30pm weekdays, excluding bank holidays) for Shareholders wishing to buy more or sell some or all of their Shares. The facility will normally be available 24 hours per day but, outside UK stock market hours, Shareholders can only give a 'limit-price' instruction which will be acted upon as soon as the market re-opens. The cost for share dealing online is £11.95 where Shares are held in the Saga Shareholder Account, and start from £15.00 where Shares are held in the form of a share certificate.

Using the telephone helpline on 0800 121 7641 (or 0203 471 2273 where calling from outside the UK). Shareholders can call the share dealing helpline which will provide real-time share price quotes during UK stock market opening hours (normally 8am-4.30pm weekdays, excluding bank holidays) for Shareholders wishing to buy more or sell some or all of their Shares. The cost for share dealing through the telephone helpline start from £17.50 where Shares are held in the Saga Shareholder Account, or from £25.00 where Shares are held in the form of a share certificate.

By post. Shareholders wishing to sell all of their Shares can use a postal instruction. This facility will be available from the date of Admission until Friday 27 June 2014. Shareholders can only apply to sell all their Shares by post using the postal dealing form which will be enclosed with the confirmation of allocation or a form obtained by calling the telephone helpline number shown above. Postal sale instructions will be aggregated together and sold once per day during the duration of the facility. The sale price for the Shares will normally be determined on the next Business Day following which a valid postal instruction form is received at Capita IRG Trustees Limited. The costs for using this service will start from £15.00.

The charges referred to above are correct as at the date of this document. Please refer to the latest terms and conditions of the relevant share dealing service which will be available at www.sagashareholder.co.uk for up-to-date charges after the date of this document.

10.3 Share certificates

Applicants in the Customer Offer, the Non-Customer Offeror the Employee Offer may alternatively elect to receive a share certificate in respect of their holding of Shares. Share certificates are valuable documents and should be looked after carefully. If a share certificate is lost, damaged or defaced, a charge may be made for its replacement.

Shareholders who hold their Shares in certificated form will, subject to certain conditions, be able to buy and sell Shares through banks, stockbrokers or intermediaries offering share dealing facilities.

10.4 Saga Share Direct

Saga Share Direct is Saga's nominee share dealing service which Saga has offered since 1996. Saga Share Direct, which is provided by Barclays Stockbrokers, offers customers the ability to buy, sell and hold UK-listed shares as well as gilts, bonds, funds and exchange-traded funds. Saga Share Direct customers can choose to invest online, using Saga Share Direct's website or over the phone. As 'an execution-only' service, Saga Share Direct does not offer investment advice.

Saga Share Direct nominee customers who wish to apply in the Customer Offer must apply directly to the Receiving Agent either online using an Online Application Form or by returning a Customer Application Form. Applicants under the Customer Offer will have their Shares held in the Saga Shareholder Account unless they elect on their Application Form to transfer their shares into an existing Saga Share Direct nominee account or receive a share certificate instead. If an applicant under the Customer Offer elects to transfer their Shares into an existing Saga Share Direct nominee account then, prior to the commencement of conditional dealings in the Shares, the Shares will be transferred into the individual's Saga Share Direct nominee account. It is not possible to apply directly from Saga Share Direct in the Offer.

Any Shareholder whose Shares are held in the Saga Shareholder Account and wishes to transfer their Shares to their Saga Share Direct nominee account after Admission can request such a change from the Saga Shareholder Account Nominee. After Admission further information about how to open and transfer other shares into a Saga Share Direct nominee account will be provided.

The Company may, in certain circumstances, require Saga Share Direct nominee customers or any Shareholder holding Shares in the Saga Shareholder Account who wishes to transfer their Shares to a Saga Share Direct nominee account (to initially be operated by Barclays) after Admission to hold, or to continue to hold, their Shares in the Saga Shareholder Account (to be operated by Saga) on a temporary or a permanent basis. Any Shares so held in the Saga Shareholder Account to be operated by Saga will be subject to the terms and conditions of the Saga Shareholder Account set out in Part 7 "Terms and Conditions of the Saga Shareholder Account" and the arrangements described in sections 10.1, 10.2 and 10.3 above will apply. The Company may subsequently move such Shares from the Saga Shareholder Account operated by Saga to a Saga Share Direct nominee account in accordance with the election in the Shareholder's original application in the Customer Offer (to initially be operated by Barclays).

11. UNDERWRITING ARRANGEMENTS

The Underwriters have entered into commitments under the Underwriting Agreement pursuant to which they have agreed, subject to certain conditions, to use reasonable endeavours to procure subscribers for the New Shares to be issued by the Company and purchasers for the Existing Shares to be sold by the Selling Shareholder in the Offer, or, failing which, themselves to subscribe for or purchase such Shares, at the Offer Price. The Underwriting Agreement contains provisions entitling the Underwriters to terminate the Offer (and the arrangements associated with it) at any time prior to Admission in certain circumstances. If this right is exercised, the Offer and these arrangements will lapse and any moneys received in respect of the Offer will be returned to applicants without interest. The Underwriting Agreement provides for the Underwriters to be paid commission in respect of the New Shares issued, the Existing Shares sold and any Over-allotment Shares sold following exercise of the Over-allotment Option. Any commissions received by the Underwriters may be retained, and any Shares acquired by them may be retained or dealt in, by them, for their own benefit (save in respect of certain commissions due to intermediaries).

Further details of the terms of the Underwriting Agreement are set out in section 3.1 of Part 8 "Additional Information – Underwriting arrangements". Certain selling and transfer restrictions are set out below.

The Company, the Selling Shareholder and the Joint Global Co-ordinators expressly reserve the right to determine, at any time prior to Admission, not to proceed with the Offer. If such right is exercised, the Offer will lapse and any monies received in respect of the Offer will be returned to investors without interest.

12. LOCK-UP ARRANGEMENTS

Pursuant to the Underwriting Agreement, the Company has agreed that, subject to certain exceptions, during the period of 180 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), issue, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Pursuant to the Underwriting Agreement, the Selling Shareholder has agreed that, subject to certain exceptions (including to meet tax liabilities incurred as a result of the Offer), during the period of 180 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing. Part of the proceeds of any sale of Shares by the Selling Shareholder will benefit certain of the Executive Directors, Senior Managers and other employees of the Group who have Acromas shareholder debt outstanding, which will be partly repaid from the proceeds of any such sale.

In addition to their interest in the shares and debt of the Selling Shareholder, the Executive Directors and Senior Managers will be issued nil paid options, entitling them to call for Shares in the Company, on the day of Admission. Pursuant to the Underwriting Agreement and related agreements, each Director and Senior Manager has agreed that, subject to certain exceptions (including to meet tax liabilities incurred as a result of the Offer or by share awards received in connection with Admission), during the period of 365 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Coordinators (not to be unreasonably withheld or delayed), offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Further details of these arrangements, which are contained in the Underwriting Agreement, are set out in section 3.1 of Part 8 "Additional Information – Underwriting arrangements".

13. WITHDRAWAL RIGHTS

In the event that the Company is required to publish a supplementary prospectus, applicants who have applied to subscribe for or purchase Shares in the Offer will have at least two Business Days following the publication of the supplementary prospectus within which to withdraw their offer to acquire Shares in the Offer.

In addition, in the event that (i) the Offer Price is set above the Price Range or the Price Range is revised higher; and/or (ii) the number of new Shares to be issued by the Company is set above or below the New Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority); and/or (iii) the number of Existing Shares to be sold by the Selling Shareholder is set above or below the Existing Share Offer Size Range (subject to the minimum free float requirements agreed by the Company with the UK Listing Authority) then applicants who have applied to subscribe for or purchase Shares in the Offer would have a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer in its entirety pursuant to section 87Q of FSMA before the end of a period of two Business Days commencing on the first Business Day after the date on which an announcement of this is published via a Regulatory Information Service announcement for each later date as may be specified in that announcement). in those circumstances, the Pricing Statement would not be issued until this deadline for exercising such statutory withdrawal rights has ended.

If the application is not withdrawn within the stipulated period, any offer to apply for Shares in the Offer will remain valid and binding. Institutional investors wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer must do so by lodging a written notice of withdrawal by hand (during normal business hours only) at the offices of any of the Joint Global Co-ordinators at their respective address set out in Part 3 "Directors, Secretary, Registered and Head Office and Advisers" so as to be received no later than two Business Days after the date on which the supplementary prospectus is published or the date on which an announcement is made (as described above). Notice of withdrawal given by any other means or which is deposited with or received after the expiry of such period will not constitute a valid withdrawal. Applicants who have applied for Shares via the Intermediaries, who wish to withdraw an application following publication of a supplementary prospectus or an announcement is made (as described above) should contact the Intermediary through whom they applied for details of how to withdraw an application. Following publication of a supplementary prospectus or an announcement is made (as described above), applicants who have applied for Shares via the Direct Retail Offer wishing to exercise a statutory right to withdraw their offer to subscribe for or purchase Shares in the Offer may do so by:

• registering the withdrawal on the Offer Website at www.saga.co.uk/shares; or
• calling and notifying the Receiving Agent, Capita Registrars Limited (during normal business hours only) on 0800 015 5429.

In each of the cases above, such notification must provide (i) the investor's name, (ii) the investor's address and postcode, (iii) the method by which the investor submitted its application (i.e. whether by posting an Application Form or by submitting an Online Application), (iv) their Application Form reference number and (v) the amount in Pounds Sterling of Shares that such investor has applied for, and it must be received by the Receiving Agent no later than the end of the period stipulated in the supplementary prospectus or announcement (as described above) (which will be at least a period of two Business Days commencing on the first Business Day after the date on which the supplementary prospectus or announcement, as the case may be, is published).

14. FTSE ELIGIBILITY

Subject to satisfying the appropriate criteria, it is anticipated that following completion of the Offer the Company will be included in the FTSE UK Index Series at the quarterly review in June 2014.

15. SELLING RESTRICTIONS

The distribution of this document and the offer of Shares in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

Other than in the United Kingdom, the Channel Islands and the Isle of Man, no action has been or will be taken in any jurisdiction that would permit a public offering of the Shares, or possession or distribution of this document or any other offering material in any country or jurisdiction where action for that purpose is required. Accordingly, the Shares may not be offered or sold, directly or indirectly, and neither this document nor any other offering material or advertisement in connection with the Shares may be distributed or published in or from any country or jurisdiction except in circumstances that will result in compliance with any and all applicable rules and regulations of any such country or jurisdiction. Persons into whose possession this document comes should inform themselves about and observe any restrictions on the distribution of this document and the offer of Shares contained in this document. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This document does not constitute an offer to subscribe for or purchase any of the Shares to any person in any jurisdiction to whom it is unlawful to make such offer of solicitation in such jurisdiction.

European Economic Area

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State") no Shares have been offered or will be offered pursuant to the Offer to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that offers of Shares may be made to the public in that Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State:

• (a) to any legal entity which is a qualified investor as defined under the Prospectus Directive;
• (b) to fewer than 100, or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Joint Global Co-ordinators for any such offer; or
• (c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State.

For the purposes of this provision, the expression an "offer to the public" in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any Shares, as the same may be varied in that member state by any measure implementing the Prospectus Directive in that member state. The expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

In the case of any Shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged and agreed that the Shares acquired by it in the Offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances which may give rise to an offer of any Shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the Joint Global Co-ordinators has been obtained to each such proposed offer or resale. The Company, the Selling Shareholder, the Banks and their affiliates, and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified investor and who has notified the Banks of such fact in writing may, with the prior consent of the Joint Global Co-ordinators, be permitted to acquire Shares in the Offer.

United States

The Shares have not been and will not be registered under the US Securities Act or under any applicable securities laws or regulations of any state of the United States and, subject to certain exceptions, may not be offered or sold within the United States except to persons reasonably believed to be QIBs in reliance on Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Shares are being offered and sold outside the United States in offshore transactions in reliance on Regulation S.

In addition, until 40 days after the commencement of the Offer of the Shares an offer or sale of Shares within the United States by any dealer (whether or not participating in the Offer) may violate the registration requirements of the US Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the US Securities Act.

The Underwriting Agreement provides that the Underwriters may directly or through their respective United States broker-dealer affiliates arrange for the offer and resale of Shares within the United States only to QIBs in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the US Securities Act.

Each acquirer of Shares within the United States, by accepting delivery of this document, will be deemed to have represented, agreed and acknowledged that it has received a copy of this document and such other information as it deems necessary to make an investment decision and that:

• (a) it is (a) a QIB within the meaning of Rule 144A, (b) acquiring the Shares for its own account or for the account of one or more QIBs with respect to whom it has the authority to make, and does make, the representations and warranties set forth herein, (c) acquiring the Shares for investment purposes, and not with a view to further distribution of such Shares, and (d) aware, and each beneficial owner of the Shares has been advised, that the sale of the Shares to it is being made in reliance on Rule 144A or in reliance on another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.
• (b) it understands that the Shares are being offered and sold in the United States only in a transaction not involving any public offering within the meaning of the US Securities Act and that the Shares have not been and will not be registered under the US Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged or otherwise transferred except (a) to a person that it and any person acting on its behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A, or another exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act, (b) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, (c) pursuant to an exemption from registration under the US Securities Act provided by Rule 144 thereunder (if available) or (d) pursuant to an effective registration statement under the US Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. It further (a) understands that the Shares may not be deposited into any unrestricted depositary receipt facility in respect of the Shares established or maintained by a depositary bank, (b) acknowledges that the Shares (whether in physical certificated form or in uncertificated form held in CREST) are "restricted securities" within the meaning of Rule 144(a)(3) under the US Securities Act and that no representation is made as to the availability of the exemption provided by Rule 144 for resales of the Shares and (c) understands that the Company may not recognise any offer, sale, resale, pledge or other transfer of the Shares made other than in compliance with the above-stated restrictions.
• (c) it understands that the Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE "US SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE US SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE US SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE US SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE US SECURITIES ACT FOR RESALES OF THE SHARES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, THE SHARES REPRESENTED HEREBY MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF THE SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK. EACH HOLDER, BY ITS ACCEPTANCE OF SHARES, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOING RESTRICTIONS; and

(d) it represents that if, in the future, it offers, resells, pledges or otherwise transfers such Shares while they remain "restricted securities" within the meaning of Rule 144, it shall notify such subsequent transferee of the restrictions set out above.

The Company, the Banks and their affiliates and others will rely on the truth and accuracy of the foregoing acknowledgements, representations and agreements.

Australia

This document (a) does not constitute a prospectus or a product disclosure statement under the Corporations Act 2001 of the Commonwealth of Australia ("Corporations Act"); (b) does not purport to include the information required of a prospectus under Part 6D.2 of the Corporations Act or a product disclosure statement under Part 7.9 of the Corporations Act; has not been, nor will it be, lodged as a disclosure document with the Australian Securities and Investments Commission ("ASIC"), the Australian Securities Exchange operated by ASX Limited or any other regulatory body or agency in Australia; and (c) may not be provided in Australia other than to select investors ("Exempt Investors") who are able to demonstrate that they (i) fall within one or more of the categories of investors under section 708 of the Corporations Act to whom an offer may be made without disclosure under Part 6D.2 of the Corporations Act and (ii) are "wholesale clients" for the purpose of section 761G of the Corporations Act.

The Shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for, or buy, the Shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any Shares may be distributed, received or published in Australia, except where disclosure to investors is not required under Chapters 6D and 7 of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the Shares, each purchaser or subscriber of Shares represents and warrants to the Company, the Selling Shareholder, the Banks and their affiliates that such purchaser or subscriber is an Exempt Investor.

As any offer of Shares under this document, any supplement or the accompanying prospectus or other document will be made without disclosure in Australia under Parts 6D.2 and 7.9 of the Corporations Act, the offer of those Shares for resale in Australia within 12 months may, under the Corporations Act, require disclosure to investors if none of the exemptions in the Corporations Act applies to that resale. By applying for the Shares each purchaser or subscriber of Shares undertakes to the Company, the Selling Shareholder, the Underwriters that such purchaser or subscriber will not, for a period of 12 months from the date of issue or purchase of the Shares, offer, transfer, assign or otherwise alienate those Shares to investors in Australia except in circumstances where disclosure to investors is not required under the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

Guernsey

To the extent to which any promotion of the Shares which are comprised in the Offer is deemed to take place in Guernsey, the Shares are only being promoted in or from within the Bailiwick of Guernsey either (i) by persons licensed to do so under the Protection of Investors (Bailiwick of Guernsey) Law 1987 (as amended) or (ii) to persons licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended), the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended), the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended) or the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 (as amended). Promotion is not being made in any other way.

Isle of Man

The Company is not subject to any form of authorisation or approval in the Isle of Man. Investors in the Company are not protected by any statutory compensation arrangements in the event of the Company's failure and the Isle of Man Financial Supervision Commission does not vouch for the financial soundness of the Company or for the correctness of any statements made or opinions expressed with regard to it.

Japan

The Shares have not been, and will not be, registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948 as amended, the "FIEL") and disclosure under the FIEL has not been, and will not be, made with respect to the Shares. Neither the Shares nor any interest therein may be offered, sold, resold, or otherwise transferred, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and all other applicable laws, regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities. As used in this paragraph, a resident of Japan is any person that is resident in Japan, including any corporation or other entity organized under the laws of Japan.

Jersey

The Prospectus constitutes a "financial service advertisement" under the Financial Services (Advertising) (Jersey) Order 2008. Consent under the Control of Borrowing (Jersey) Order 1958 has not been obtained for the circulation of the Prospectus. Accordingly, the offer that is the subject of the Prospectus, may only be made in Jersey where the offer is valid in the United Kingdom or Guernsey and is circulated in Jersey only to persons similar to those to whom, and in a manner similar to that in which, it is for the time being circulated in the United Kingdom or Guernsey as the case may be. The Directors may, but are not obliged to, apply for such consent in the future.

DIFC

This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The Shares may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares should conduct their own due diligence on the Shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

Switzerland

The Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the Shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, the Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of Shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of Shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes ("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of Shares.

16. TERMS AND CONDITIONS OF THE DIRECT RETAIL OFFER

These terms and conditions apply to investors agreeing to purchase Shares under the Direct Retail Offer. Each investor in the Direct Retail Offer agrees with each of the Company, the Selling Shareholder and the Banks to be bound by these terms and conditions as being the terms and conditions upon which Shares will be sold under the Direct Retail Offer.

If you are an Eligible Customer applying in the Customer Offer, the terms and conditions of the Customer Offer set out in section 5.1 of this Part 6 "Details of the Offer" form part of, and are incorporated into, the terms and conditions of the Direct Retail Offer.

If you are applying in the Non-Customer Offer, the terms and conditions of the Non-Customer Offer set out in section 5.2 of this Part 6 "Details of the Offer" form part of, and are incorporated into, the terms and conditions of the Direct Retail Offer.

If you are an Eligible Employee applying in the Employee Offer, the terms and conditions of the Employee Offer set out in section 5.4 of this Part 6 "Details of the Offer" form part of, and are incorporated into, the terms and conditions of the Direct Retail Offer.

16.1 Introduction

For the purposes of these terms and conditions only, references to "you" are to the person applying to buy Shares in the Direct Retail Offer using the Application Form.

If you apply for Shares in the Direct Retail Offer you will be agreeing with the Company, the Selling Shareholder and the Banks to the terms and conditions set out below.

16.2 Offer to Purchase Shares

Applications must be made on an Application Form. By completing and submitting an Application Form, you, as the applicant (or, if you sign or submit the Application Form on behalf of somebody else, that person, and references in this section 16.2 to "you" shall be to that person) shall:

• (A) offer to acquire at the Offer Price the maximum number of Shares (rounded down to the nearest whole Share) that may be acquired with the amount that you have specified in your Application Form as the amount which you wish to invest (or any smaller amount in respect of which your application to acquire Shares in the Direct Retail Offer is accepted), subject to the provisions of the Prospectus, these terms and conditions, the terms of the Application Form, the Pricing Statement, any supplementary prospectus and the Articles of Association;
• (B) agree that your application to acquire Shares in the Direct Retail Offer must be for one of the Prescribed Application Amounts at the Offer Price, with a minimum investment of £1,000 except for Eligible Employees who are applying for Shares in the Employee Offer for which minimum application amounts of £500 and £750 apply;
• (C) acknowledge and agree that if the Offer Price is set above the Price Range and/or the number of New Shares to be issued by the Company and/or the number of Existing Shares to be sold by the Selling Shareholder is set above or below the New Share Offer Size Range or the Existing Share Offer Size Range, as the case may be, prospective investors would have a statutory right to withdraw their offer to purchase Shares pursuant to section 87Q of FSMA, but if the application for Shares is not withdrawn within the period stipulated in any supplementary prospectus or announcement (as described above), any offer to apply for Shares in the Offer will remain valid and binding;
• (D) agree that there is no minimum allocation of Shares in the Direct Retail Offer and that, in the event your application is scaled back by the Company in its absolute discretion, you may not receive Shares representing the full value or any (based on the Offer Price) of the amount you applied to invest;
• (E) agree that the Company has absolute discretion in determining whether or not you qualify as an Eligible Customer for the purposes of the Customer Offer or an Eligible Employee for the purposes of the Employee Offer;

• (F) authorise the Receiving Agent to send on behalf of the Company and/or the Selling Shareholder (i) a Share Account Statement or share certificate and/or (ii) a Pounds Sterling cheque crossed "account payee" for any monies returnable (without interest) or your cheque or bankers' draft, used by you to pay the application monies payable by you in each case by post to your address or, in the case of investors who submitted an Online Application, a refund back to the debit card used for payment, and (iii) to do all things and, where applicable, to take all actions necessary to procure that your name or the name of the Saga Shareholder Account Nominee is placed on the register of members of the Company in respect of the Shares for which your application is accepted;

• (G) in consideration of the Company and the Selling Shareholder agreeing that it will not, prior to the date of Admission (or such later date as the Company may determine), sell to any person or assist in the sale to any person of any of the Shares comprised in the Offer other than by means of the procedures referred to in the Prospectus and as a collateral contract between you, the Company, the Selling Shareholder, and the Banks which will become binding on you on despatch by post or delivery to the Receiving Agent of your Application Form:

• (i) agree that, subject to any statutory rights of withdrawal, your application may not be revoked or withdrawn by you until after 29 May 2014 in the event that Admission has not taken place by that date;
• (ii) undertake to pay the Offer Price for the Shares (payable in full on application) in respect of which your application to subscribe or acquire (as the case may be) Shares from the Company or the Selling Shareholder is accepted (in the manner indicated in section 16.3 below);
• (iii) warrant that your cheque or bankers' draft accompanying your Application Form will be honoured on first presentation (or your debit card payment, in the case of an Online Application, will be honoured at the time such application is made) and agree that, if such remittance is not so honoured, you will not be entitled to receive a Share Account Statement (notwithstanding that the Saga Shareholder Account Nominee (or its nominee) may have been entered on the register of members of the Company) or a share certificate, as relevant, in respect of the Shares applied for and that any proceeds of sale in respect of the Shares applied for (including whether the sale is at your instruction) shall be held by the Receiving Agent for the benefit of the Company and the Selling Shareholder or to enjoy or receive any rights, dividend, distribution or other payment in respect of such Shares unless and until you make payment in cleared funds for such Shares and such payment is accepted by the Receiving Agent (which acceptance shall be in its absolute discretion and on the basis that you indemnify the Company, the Selling Shareholder, the Receiving Agent and the Banks against all costs, damages, losses, expenses and liabilities arising out of or in connection with, the failure of your remittance to be honoured on first presentation) and you agree that no claim will be made against the Company, the Selling Shareholder, the Receiving Agent or the Banks or any of their respective officers, agents, or employees in respect of the non-receipt of Shares by you or the proceeds of any sale of Shares, or primary loss arising from such non-receipt of Shares or proceeds of sale of Shares;
• (iv) agree that, at any time prior to unconditional acceptance by the Receiving Agent of such late payment pursuant to sub-section 16.2(F)(iii) above, the Receiving Agent may (on behalf of the Company and the Selling Shareholder and without prejudice to any other rights) terminate the agreement (if any) to allocate such Shares to you without liability to you and may reallocate the Shares to some other person, in which case you will not be entitled to any refund or payment in respect of such Shares (other than the refund to you of any proceeds or remittance accompanying your Application Form at your own risk, without interest) and, in the event of termination, any Shares which have been issued to you will be sold as soon as is reasonably practicable (and for which purpose you hereby irrevocably authorise the Company, or any person appointed by it for this purpose, to execute on your behalf any instrument of transfer which may be necessary to effect such sale) and consent to the proceeds of such sale being paid to and retained by the Company or any Selling Shareholder and you will pay the Receiving Agent (on behalf of itself and the Company), on demand, such amount as may be necessary to compensate the Company and the Selling Shareholder, the Company, the Receiving Agent and the Banks for any losses, costs and expenses incurred or expected to be incurred as a result of the remittance not being honoured on first presentation or as a result of termination of the agreement. Any decision by the Receiving Agent to accept payment shall be without prejudice to the decision of the Company and/or the Selling Shareholder to accept the whole or any part of your application as described in section 16.3 of this Part 6 "Details of the Offer";

• (v) agree, on request by the Company, the Selling Shareholder, the Receiving Agent or the Banks, to disclose promptly in writing to the Company, the Selling Shareholder, the Receiving Agent or the Banks such information as they may request in connection with your application and authorise the Company, the Selling Shareholder, the Receiving Agent and the Banks to disclose any information relating to your application which it may consider appropriate;

• (vi) agree that any Share Account Statement or share certificate to which you may become entitled and monies returnable to you may be retained pending clearance of your remittance, investigation of any suspected breach of these terms and conditions and any verification of identity which is, or which the Company, the Selling Shareholder or the Receiving Agent in its absolute discretion considers may be required for the purposes of the UK Money Laundering Regulations 2007 and that any interest accruing on such retained monies shall accrue to and for the benefit of the Company;

• (vii) agree that, if evidence of identity satisfactory to the Company, the Selling Shareholder and/or the Receiving Agent is not provided on or before 29 May 2014 or such later date as the Company and the Joint Global Co-ordinators (on behalf of themselves and the other Banks) may agree, the Company and the Selling Shareholder may terminate your contract of allocation and may reallocate or sell such shares and, in such case, your application monies, less any amount retained by the Company and/or the Selling Shareholder (or their respective agents) as compensation for breach of contract, or an amount equal to the proceeds of reallocation or sale net of all expenses, will be returned without interest to the bank or other account on which the cheque or other remittance accompanying the application was drawn or, in the case of an Online Application, to your debit card, and you agree that, in such event, you will have no claim against the Company, the Selling Shareholder, the Receiving Agent or the Banks or any of their respective officers, agents or employees in respect of the balance of your application monies, if any, retained by the Company and/or the Selling Shareholder (or their respective agents), or for any loss arising from the price, the timing or the manner of reallocation or sale, or otherwise in connection therewith;
• (viii) undertake to ensure that, in the case of an application signed by someone else on your behalf, the original of the relevant power of attorney or other appropriate authority (or a complete copy certified by a solicitor or notary) is enclosed with your Application Form;
• (ix) agree that any future communications sent by the Company to you in your capacity as a shareholder of the Company will be in the English language;
• (x) agree that by submitting an Application Form, your personal information may be held and used by the Company, the Selling Shareholder, the Retail Offer Advisor, the Banks and the Receiving Agent for purposes relating to the Retail Offer, which may include providing your details to third parties for the purpose of performing credit reference checks, money laundering checks and making tax returns, and keeping a record of applicants under the Retail Offer for a reasonable period of time, and may also include providing your details to third parties for the purposes of verifying your identity, which may involve those third parties checking your details against any database (public or otherwise) to which they have access and retaining records of those searches, and using your details in the future to assist other companies for verification purposes. You also agree that if you are allocated shares under the Direct Retail Offer, your personal information will be shared with the Company, the Receiving Agent and the Saga Shareholder Account Nominee and held and used by the Company, the Receiving Agent and the Saga Shareholder Account Nominee for purposes relating to the Retail Offer and for their ongoing purposes that require the keeping records of, and dealing with, the Company's shareholders in the ordinary course of business (which may involve providing your personal information to third parties, such as Euroclear UK);
• (xi) agree that the Company and the Selling Shareholder reserve the right to alter any arrangements in connection with the Direct Retail Offer (including the timetable and terms and conditions of application);
• (xii) agree that if you are (a) a Saga Share Direct nominee customer or (b) a Shareholder holding Shares in the Saga Shareholder Account who wishes to transfer their Shares to a Saga Share Direct nominee account after Admission, you authorise the Company (in the case of (a)) to move your Shares from the Saga Share Direct nominee to the Saga Shareholder Account or (in the case of (b)) to continue to hold your Shares in the Saga Shareholder Account, which is in each case subject to the terms and conditions of Part 7 ("Terms and Conditions of the Saga Shareholder Account"). You further authorise the Company subsequently to move such Shares from the Saga Shareholder Account to a Saga Share Direct nominee account at its absolute discretion; and

(xiii) agree that the contract arising from acceptance of all or part of your application under the Direct Retail Offer will be, or will be deemed to be, entered into by you, the Company and the Selling Shareholder on these terms and conditions (subject to section 16.2(F)(xi) of this Part 6 "Details of the Offer") and that any changes, additions or alterations made to the Application Form will have no effect.

If (a) your Application Form is not completed correctly, or the pre-printed name and/or address (if applicable) is amended, (b) your Application Form is completed with any information other than as specifically required on the Application Form, (c) your Application Form (other than an Online Application) is received at the return address specified on your Application Form after 11:59 pm on 20 May 2014, or your Online Application is received after 11:59 pm on 20 May 2014, (d) the cheque or bankers' draft accompanying your Application Form (other than an Online Application) is for the wrong amount, (e) you applied via an Online Application and the surname of the holder of the debit card used for payment is different to the surname provided on the Online Application, (f) your Application Form (other than an Online Application) is not accompanied by a power of attorney or other authority (or a copy certified by a solicitor or notary) where required or (g) you submit, or are suspected to have submitted, more than one application in the Retail Offer, your application may be rejected by the Receiving Agent on behalf of the Company. In these circumstances, the Company's and/or the Selling Shareholder's decision as to whether to reject or treat your application as valid (which could occur before or after Admission) shall be final and binding on you. None of the Company, the Selling Shareholder, the Receiving Agent, the Banks nor any of their respective officers, agents or employees will accept any liability for any such decision and no claim will be made against any such persons in respect of your non-delivery of Shares, or for any loss resulting from such non-delivery.

Payments made by cheque or bankers' draft must be made in pounds sterling, drawn at a branch in the United Kingdom of a bank or building society. Cheques, which must be drawn on the personal account of the individual applicant where they have sole or joint title to the funds, should be made payable to 'Capita Registrars Limited re: Saga plc (crossed A/C payee only). Third party cheques will not be accepted, with the exception of building society cheques or bankers' drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/bankers' draft to such effect.

Notwithstanding the above, any application may be rejected in whole or in part by the Company or any Selling Shareholder in its absolute discretion.

The Company and those acting on its behalf (including the Receiving Agent) reserve the right to treat as valid any application which does not comply fully with these terms and conditions or is not completed in all respects or is not sent in accordance with the instructions on the Application Form. This decision could occur before or after Admission. The Company and the Selling Shareholder and those acting on its or their behalf (including the Receiving Agent) reserve the right to waive in whole or in part any of the provisions of these terms and conditions, either generally or in respect of one or more applications. In these circumstances, the decision of the Company and/or a Selling Shareholder as to whether to treat the application as valid and how to construe, amend or complete it shall be final. You will not, however, be treated as having offered to invest a higher amount than is indicated in the Application Form.

16.3 Acceptance of your offer

The Company and/or a Selling Shareholder may accept your application if your application is received, validated (or treated as valid), processed and not rejected either:

• (A) by notifying, publishing or announcing the Offer Price, Offer Size and the basis of allocation for the Retail Offer (in which case the acceptance will be on that basis); or
• (B) by notifying acceptance to the Receiving Agent.

The acceptance may (at the absolute discretion of the Company or any Selling Shareholder) be of the whole or any part of your application and the amount you have offered to invest may be scaled down. The basis of allocation for applications will be determined by the Company. In the event that applications in the Direct Retail Offer are scaled back, the allocation policy will be as described in section 3 of this Part 6 "Details of the Offer".

No fractional entitlements to Shares will be allocated and therefore allocations will be satisfied by rounding down to the nearest whole number of Shares.

16.4 Conditions

The contract arising from acceptance of an application (in whole or in part) in the Direct Retail Offer will be entered into by you (if you are a successful applicant), the Company and the Selling Shareholder. Under this contract, you will be required to acquire the Shares at the Offer Price. This contract will be conditional upon (i) the Underwriting Agreement becoming unconditional (save for Admission) and not having been terminated in accordance with its terms prior to Admission and (ii) Admission occurring on or prior to 29 May 2014 or such later date as the Company, the Selling Shareholder and the Joint Global Co-ordinators (on behalf of the Underwriters) may agree.

Subject to applicable law, you will not be entitled to exercise any remedy of rescission or for innocent misrepresentation (including pre-contractual representations) at any time after acceptance of your application. This does not affect any other rights you may have, including, for the avoidance of doubt, any statutory withdrawal rights.

The Company expressly reserves the right to determine, at any time prior to Admission, not to proceed with the Direct Retail Offer or any part of it. If the Direct Retail Offer or any part of it is terminated prior to Admission, applications received up to the date of termination will automatically lapse, applications received after that date will be of no effect and any application monies relating thereto will be returned to applicants in accordance with section 16.5 of this Part 6 "Details of the Offer".

16.5 Return of applicable monies

If any application is invalid or not accepted or if any contract created by acceptance does not become unconditional or if any application is accepted for an amount lower than that offered, subject as hereinafter provided, the application monies or the balance of the amount paid on application (as the case may be) will be returned, without interest by cheque crossed "account payee" or, in the case of investors who submitted an Online Application, a refund back to the debit card used for payment. Any such cheque will be posted to you, or any such bank refund instruction will be made, by no later than 5 June 2014. Prior to that time, application monies will be retained by the Receiving Agent in an account designated for these purposes and any interest accrued on the application monies will be retained by, and for the benefit of, the Company and/ or the Selling Shareholder. The cheque and/or bankers' draft accompanying your application may be presented on receipt and before acceptance of your application, but this will not constitute acceptance of your application, either in whole or in part. The proceeds of this presentation will be held pending acceptance and, if your application is accepted and the conditions in section 16.4 of this Part 6 "Details of the Offer" are satisfied, will be applied in discharging the total amount due for the Shares you have been allocated. Share Account Statements or share certificates and surplus application monies (if any) may be retained pending clearance of your cheque and/or bankers' draft. The right is also reserved to reject any application in respect of which your cheque, bankers' draft or debit card payment, as the case may be, has not been cleared on first presentation or the first attempt to take the payment (as the case may be) and, in any event, by 5.00 pm on 5 June 2014. The Company and/or the Selling Shareholder may require you to pay interest or other resulting costs (or both) if the cheque, bankers' draft or debit card payment accompanying your application is not honoured on first presentation or the first attempt to take the payment (as the case may be).

Amounts of less than the Offer Price of one Share will not be refunded but will be given by the Company to charity. Sums refunded will, in all cases, be paid in Pounds Sterling without interest.

16.6 Allocation

The aggregate number of Shares to be allocated in the Direct Retail Offer will be at the discretion of the Company and the Selling Shareholder after having consulted with the Joint Bookrunners after the Offer Period has ended. The Company has absolute discretion to decide in any individual case whether the conditions of eligibility for the Direct Retail Offer have been satisfied. To participate in the Direct Retail Offer, individuals in the UK, the Channel Islands or the Isle of Man must complete an Application Form (which includes an Online Application).

16.7 Representations and warranties

By completing and submitting an Application Form, you:

• (A) represent and warrant that, if you sign or submit an Application Form on behalf of somebody else, you have the authority to do so and that such other person will be bound accordingly and will be deemed also to have given the confirmations, representations, warranties and undertakings contained in these terms and conditions and undertake to enclose your power of attorney or other appropriate authority (or a complete copy thereof duly certified by a solicitor or notary);
• (B) confirm that, in making an application, neither you nor any person on whose behalf you are applying are relying on any information or representation in relation to the Company, the Selling Shareholder, any member of the Group, or any of them, other than as is contained in the Prospectus, the Pricing Statement and any supplementary prospectus and agree that none of the Company, the Directors, the Selling Shareholder, the Receiving Agent or any person acting on behalf of them (including the Banks) or any person responsible solely or jointly for the Prospectus, the Pricing Statement and/or any supplementary prospectus, or any part of any of them, shall have any liability for any such information or representation (excluding for fraudulent misrepresentation);
• (C) agree that, having had the opportunity to obtain and read the Prospectus, the Pricing Statement and any supplementary prospectus you shall be deemed to have read all such documents in their entirety and to have noted all information concerning the Company, the Selling Shareholder or any member of the Group and the Offer contained in the Prospectus, the Pricing Statement and/or any supplementary prospectus;
• (D) agree that no person is authorised in connection with the Offer to give any information or make any representation other than as contained in the Prospectus, the Pricing Statement and any supplementary prospectus and, if given or made, any information or representation must not be relied upon as having been authorised by the Company, the Directors, the Selling Shareholder, any of the Banks or any other person;
• (E) confirm that you have reviewed the restrictions contained in section 16.10 of this Part 6 "Details of the Offer" and represent and warrant, to the extent relevant, that you (and any person on whose behalf you apply) comply or have complied with the provisions of section 16.10 of this Part 6 "Details of the Offer";
• (F) warrant that, if you are making an application with the intention of transferring those Shares to a particular child at a later date once he/ she is aged 18 or over, you will sign and submit an Application Form in your own name and include the child's initials on the Application Form, and that you will be the registered holder of any Shares allocated to such application;
• (G) agree that you are liable for any capital duty, stamp duty, stamp duty reserve tax and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by you or any other person on the acquisition by you of any Shares or the agreement by you to acquire any Shares;
• (H) agree that all documents in connection with the Offer and any returned monies may be sent by post to you at your address set out in your Application Form and any such documents and return monies will be sent at your own risk;
• (I) represent and warrant that (i) you are (or, if you are applying on behalf of another person, that other person is) eligible to participate in the Direct Retail Offer as an individual to whom the offer of Shares in the Direct Retail Offer was made in the UK, the Channel Islands or Isle of Man and (ii) subject as hereinafter provided, the Application Form is completed and delivered solely for and on behalf of the applicant and not directly or indirectly, in whole or in part, for or on behalf of any other person;
• (J) represent and warrant that you are not applying as, or as nominee or agent of, a person who is or may be a person mentioned in any of sections 67, 70, 93 or 96 of the Finance Act 1986 (concerning depositary receipts and clearance services);

• (K) confirm that, if the laws of any jurisdiction outside the UK are applicable to your agreement to purchase Shares, you have complied with all such laws and none of the Company, the Selling Shareholder or the Banks will infringe any laws of any jurisdiction outside the UK as a result of your rights and obligations under your agreement to purchase Shares and under the Articles of Association (and, in making this representation and warranty, you confirm that you are aware of the selling and transfer restrictions set out in section 15 of this Part 6 "Details of the Offer");

• (L) represent and warrant that the offer of Shares in the Direct Retail Offer or Offer was made to you (and any person on whose behalf you are applying) in the UK, the Channel Islands or the Isle of Man and you are (or are acting on behalf of) a person in the UK, the Channel Islands or Isle of Man and, in all cases, you are not applying for Shares, nor are you applying for Shares on behalf of a party, with a view to the reoffer, resale or delivery of the Shares, directly or indirectly in or into the United States, Australia, Canada, Japan, South Africa or any jurisdiction other than the UK, the Channel Islands or Isle of Man or to a person located or resident in the United States, Australia, Canada, Japan, South Africa or any jurisdiction other than the UK, the Channel Islands or Isle of Man or to any person who you believe is purchasing the Shares for the purpose of such resale, reoffer or delivery;

• (M) represent and warrant that your application to purchase Shares is not a joint application for more than one investor;
• (N) represent and warrant that only one application is being made for your benefit in the Retail Offer (whether directly or through other means) (unless you are an Eligible Employee);
• (O) represent and warrant that your application to purchase Shares is not and will not be funded using funds provided by another person under an arrangement whereby any Shares allocated to you or all or substantially all of the value of such Shares are to be transferred to that other person;
• (P) represent, warrant and undertake that you are not, and you are not applying on behalf of a person engaged in, or whom you know or have reason to believe is, engaged in money laundering;
• (Q) represent and warrant that, if you are submitting an Employee Application Form in the Employee Offer, you are (at the date of submitting the Employee Application Form) an Eligible Employee;
• (R) represent and warrant that, if you are submitting a Customer Application Form in the Customer Offer, you are (at the date of submitting the Customer Application Form) an Eligible Customer;
• (S) agree that any material downloaded from the Group's websites in relation to the Direct Retail Offer (i) is done at your own risk and that you will be solely responsible for any damage or loss of data that results from the download of any material and (ii) will be used solely for personal use and will not be distributed in or into the United States, Australia, Canada, Japan, South Africa or to any other person wherever located or resident; and
• (T) agree that none of the Company, the Selling Shareholder, or the Banks is liable for any loss of data in the course of receiving and/or processing the Application Forms or responsible for the loss or accidental destruction of any Application Form or personal data relating to the investors or any financial or other loss or damage which may result, directly or indirectly, therefrom, including any loss in relation to the non-allocation or non-delivery of any Shares as a result of such loss or destruction.

16.8 Money laundering

You agree that in order to ensure compliance with any applicable money laundering regulations (including, without limitation, the UK Money Laundering Regulations 2007), the Receiving Agent may, at its absolute discretion, require verification of identity from any person lodging an Application Form. Failure to provide the necessary evidence of identity may result in application(s) being rejected or delays in the despatch of documents.

In addition, verification of the identity of applicants may be required if the value (based on the Offer Price) of the Shares applied for under the Direct Retail Offer, whether in one or more applications (if permissible), exceeds the Pounds Sterling equivalent of €15,000. If, in such circumstances, you do not use your own personal cheque and use a bank or building society cheque or bankers' draft you should ensure that the institution issuing the cheque or bankers' draft confirms the name, address and account number of the account holder on the reverse of the cheque or bankers' draft and adds its stamp. Other third-party cheques may not be accepted.

For Online Applications the surname of the holder of the debit card used for payment must not be different to the surname provided on the Online Application. Applications where the application name and payment name differ may be subsequently rejected and the funds returned.

You agree that in any of the circumstances set out in the paragraphs above in this section 16.8 of this Part 6 "Details of the Offer", the Receiving Agent may make a search using one or more credit reference agencies of electronic databases in order to verify your identity. Where deemed necessary by the Receiving Agent in its sole and absolute discretion, a copy of the search will be retained.

16.9 Overseas investors

No person receiving a copy of the Prospectus and/or an Application Form in any territory outside the UK, the Channel Islands or the Isle of Man may treat the Application Form as constituting an invitation or offer to him nor should he in any event use such Application Form. No documents relating to the Offer have been submitted to the clearance procedures of any authorities other than the Financial Conduct Authority of the UK. Any application made in the Direct Retail Offer by or on behalf of a person who received the Offer outside of the UK, the Channel Islands or the Isle of Man will be rejected.

16.10 Miscellaneous

Persons applying for Shares under the Offer who are allocated Shares may only rely on the information contained in the Prospectus and, to the fullest extent permitted by law, any liability for representations, warranties and conditions, express or implied and whether statutory or otherwise (including, without limitation, pre-contractual representations but excluding any fraudulent misrepresentations), are expressly excluded in relation to the Shares and the Offer.

Save where otherwise stated or where the context otherwise requires, terms used in these terms and conditions are as defined in the Prospectus (as supplemented by any supplementary prospectus issued by the Company in relation to the Offer).

The rights and remedies of the Company, the Selling Shareholder, the Banks and the Receiving Agent under these terms and conditions are in addition to any rights and remedies which would otherwise be available to any of them and the exercise or partial exercise of any one will not prevent the exercise of others or full exercise.

The Company (with the agreement of the Joint Global Co-ordinators (on behalf of themselves and the other Banks)) reserves the right to delay the closing time of the Direct Retail Offer by giving notice through a Regulatory Information Service. In this event, the revised closing time will be published in such manner as the Company in its absolute discretion determines subject, and having regard, to the requirements of the Financial Conduct Authority.

The Offer may be terminated without any obligation to you whatsoever at any time prior to Admission. If the Offer is terminated, the Offer will lapse and any monies received in respect of your application will be returned to you without interest.

In the event that the Company is required to publish any supplementary prospectus, applicants who have applied for Shares in the Offer shall have a statutory right to withdraw their offer to purchase Shares in the Offer in its entirety before the end of a period of two Business Days commencing on the first Business Day after the date on which the supplementary prospectus is published (or such later date as may be specified in the supplementary prospectus). If a supplementary prospectus is published, it will be made available in the same manner in which the Prospectus is being made available, including on the Offer Website at www.saga.co.uk/shares.

In addition, in the event that the Offer Price is set by the Company above the Price Range and/or the number of Shares to be sold by the Selling Shareholder is set by the Company above or below the Offer Size Range (subject to the minimum free float requirements of the UK Listing Authority), then applicants who have applied for Shares in the Offer would have a statutory right to withdraw their offer to purchase Shares in the Offer in its entirety pursuant to section 87Q of FSMA before the end of a period of two Business Days commencing on the first Business Day after the date on which an announcement of this is published by the Company via a Regulatory Information Service announcement (or such later date as may be specified in that announcement). The arrangements for withdrawing offers to purchase Shares would be made clear in the announcement.

If you do not notify the Company of your intention to withdraw in the required manner within the stipulated period set out in any supplementary prospectus or announcement (as described above), your application to buy Shares in the Direct Retail Offer will remain valid and binding upon you.

Investors in the Direct Retail Offer wishing to withdraw their offer to purchase Shares after the publication of any supplementary prospectus or announcement (as described above) must do so by:

• registering the withdrawal on the Offer Website at www.saga.co.uk/shares; or
• calling and notifying the Receiving Agent, Capita Registrars Limited (during normal business hours only) on 0800 015 5429.

In each of the cases above, such notification must provide (i) the investor's name, (ii) the investor's address and postcode, (iii) the method by which the investor submitted its application (i.e. whether by posting an Application Form or by submitting an Online Application), (iv) their Application Form reference number and (v) the amount in Pounds Sterling of Shares that such investor has applied for, and it must be received by the Receiving Agent no later than the end of the period stipulated in the supplementary prospectus or announcement (as described above) (which will be at least a period of two Business Days commencing on the first Business Day after the date on which the supplementary prospectus or announcement, as the case may be, is published).

Notice of withdrawal given by any other means or which is deposited with or received by the Receiving Agent after expiry of such period will not constitute a valid withdrawal. Applicants who have applied for Shares in the Intermediaries Offer through an Intermediary should contact the relevant Intermediary for details on how to withdraw an application.

You agree that all applications, acceptances of applications and contracts resulting from them under the Direct Retail Offer shall be exclusively governed by and construed in accordance with English law and that you irrevocably submit to the exclusive jurisdiction of the English courts and agree that nothing shall limit the right of the Company, the Selling Shareholder, the Receiving Agent or the Banks to bring any action, suit or proceedings arising out of or in connection with any such application, acceptances or contracts in any other manner permitted by law or in any court of competent jurisdiction.

You authorise the Company and/or the Selling Shareholder and their respective agents, on your behalf, to make any appropriate returns to HMRC in relation to stamp duty chargeable on a transfer on sale of Shares or SDRT chargeable on an agreement to transfer Shares (if any) arising in the UK (currently at a rate of 0.5 per cent.) on any contract arising on acceptance of your application or on any transfer of Shares as a result of such contract (as applicable).

You agree and acknowledge that none of the Banks acts for you nor will they treat you as their customer by virtue of an application being accepted under the Direct Retail Offer and you agree that the Banks are acting for the Company and the Selling Shareholder and no one else in connection with the Offer and will not be responsible for providing to you the protections afforded to its customers and that none of the Banks owes you any duties or responsibilities concerning the price of the Shares or the suitability of the Shares for you as an investment or otherwise in connection with the Offer.

You authorise the Company, the Selling Shareholder, the Receiving Agent and their respective agents to do all things necessary to effect registration into your name (or the name of the Saga Shareholder Account Nominee) (or its nominee) (as applicable) of any Shares acquired by you and authorise any representative of the Company, the Selling Shareholder or the Receiving Agent to execute and/or complete any document of title required therefor.

The dates and times referred to in these terms and conditions are based on the expectation that Admission will occur on 29 May 2014 and may be altered by the Company in its absolute discretion (with the agreement of the Joint Global Co-ordinators (on behalf of themselves and the other Banks)) where the Company considers it necessary to do so.

All correspondence, documents and remittances sent or delivered to or by applicants under the Direct Retail Offer will be sent or delivered at the applicant's own risk.

All enquiries in relation to the Application Form should be addressed to the Retail Offer helpline on 0800 015 5429, UK network providers' standard geographic call charges apply (plus network extras). Lines are open from 8:30 am to 8:00 pm (UK time) Mondays to Fridays (except UK public holidays), from 9:00 am to 5:00 pm (UK time) on Saturdays and from 10:00 am to 2:00 pm (UK time) on Sundays. Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones. Calls may be recorded and/or monitored for security and training purposes. For legal reasons the Receiving Agent will only be able to provide information contained in the Prospectus and will be unable to provide advice on the merits of the Direct Retail Offer or to provide personal legal, financial, tax or investment advice.

TERMS AND CONDITIONS OF THE SAGA SHAREHOLDER ACCOUNT

The Nominee Service is a convenient way to hold shares in a company without needing share certificates. Your shares are held by us on trust for you. You will remain the beneficial owner of your shares and will still be able to benefit from shareholder rights, as described in this document.

The Nominee Service is provided by Capita Asset Services which is a trading name of Capita IRG Trustees Limited ("CIRGT"). These Nominee Service terms and conditions ("Terms and Conditions") together with any Application Form constitute an agreement which is legally binding on CIRGT and you.

For your own benefit and protection you should read these Terms and Conditions carefully. Enquiries about the Nominee Service, or these Terms and Conditions, can be addressed by: (i) post, to Capita Asset Services, Nominee Service, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU; and (ii) by e-mail, to: enquiries@sagashareholder.co.uk.

Please note that you may remove all or part of your Shares from the Nominee Service at any time. The procedure to follow is set out in clause 17.

The Nominee Service is administered by CIRGT, or any successor administrator that may be appointed. The main business of CIRGT is the provision of nominee, administration and trustee services. CIRGT is authorised and regulated by the Financial Conduct Authority ("FCA") and is entered on the FCA register with registration number 184113. Further information may be obtained from the FCA's register by visiting the FCA's website http://www.fca.org.uk/register/ or by contacting the FCA on 0800 111 6768. The FCA's current address is 25 The North Colonnade, Canary Wharf, London E14 5HS.

TERMS AND CONDITIONS

1. Definitions and Interpretation

1.1 In these Terms and Conditions the following words and expressions have the meanings and interpretation set out below:

"Affiliated Company" means a company in the same group of companies as CIRGT;

"Agreement" means the legally binding agreement between us and you, incorporating these Terms and Conditions and any Application Form;

"Applicable Regulations" means all the statutory and other rules (including FCA Rules and FSMA), regulations and provisions in force from time to time, applicable to us or to the provision of the Nominee Service, including the rules, principles and codes of practice stipulated by any regulatory authority to which we are subject;

"Application Form" means, where applicable, the application form or a form of acknowledgement to be completed and signed by a person requesting to become a Member;

"Business Day" means any day which is not a Saturday or Sunday and on which the banks are open for business in London and in any other city where the Shares are listed;

"CIRGT" Capita IRG Trustees Limited whose registered office address is at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU. Registered in England, No. 2729260; "Company" means Saga plc, a company registered in England and Wales with registered number 8804263 and having its registered office situated at Enbrook Park, Sandgate, Folkestone, Kent CT20 3SE;

"CREST" the computer based system operated by Euroclear UK & Ireland Limited (a subsidiary of Euroclear SA) for the transfer of uncertificated securities;

"Dealing Service" means the share dealing service provided by Capita Share Dealing Services, a trading name of CIRGT; "DRIP Service" means a dividend reinvestment plan service which may be provided by CIRGT at the request of the Company;

if you are uncertain whether the DRIP Service is available to you, please contact CIRGT;

"FCA" means the Financial Conduct Authority and any successor entity or entities to the FCA from time to time;

"FSMA" means the Financial Services and Markets Act 2000 (as amended from time to time);

"FCA Rules" means principles, guidance and rules issued by the FCA as amended, extended or re-enacted from time to time; "Investor Code" means the unique reference number given to every Member, which can be found on your personal statements referred to in clause 8;

"Nominee" in respect of the Shares which are listed on the premium listing segment of the Official List of the UK Listing Authority in the United Kingdom, Capita IRG Trustees (Nominees) Limited (a wholly-owned subsidiary of CIRGT);

"Nominee Account" means the account which we open for each Member, in order for that Member to have access to the Nominee Service;

"Nominee Register" the register of beneficial holders of Shares held through the Nominee Service maintained by CIRGT showing, inter alia, the name, address and number of Shares held on your behalf together with similar details in respect of every other Member;

"Nominee Service" means the Saga Shareholder Account share nominee custody service as described in these Terms and Conditions;

"Representative" means a person who is authorised to act on your behalf in relation to your Nominee Account and who has provided us with such proof of their authority to act, as we may reasonably require. Proof may include but shall not be limited to a duly executed Power of Attorney, Court of Protection Order and Grant of Representation;

"Shares" means shares in the Company held or to be held on your behalf through the Nominee Service;

"Specified Event" means any of the events listed in clause 19.1; "we/us" means Capita IRG Trustees Limited and, where relevant, the Nominee, or any successor company appointed to replace us; and

"you" or "Member" the person(s) on whose behalf we are holding the Shares or, if appropriate, the Representative(s) of such person(s) and "your" and "yourself" shall be construed accordingly.

1.2 The headings to the clauses are for convenience only and shall not affect the interpretation or construction of these Terms and Conditions. References to "clauses" are references to clauses of these Terms and Conditions.

1.3 Reference to any statute or statutory provision includes a reference to that statute or statutory provision as from time to time amended, extended or re-enacted.

2. HOW TO JOIN THE NOMINEE SERVICE

2.1 Who is eligible to become a Member

The Nominee Service is only available to individuals (including Representatives) who are: (a) aged 18 years or over; and (b) resident in the United Kingdom, the Channel Islands or the Isle of Man.

2.2 How to become a Member

• (a) A Member of the Nominee Service must either:
• (i) complete and sign an Application Form and return it to us; or
• (ii) if an electronic sign on facility is provided by us, sign up to the Nominee Service and accept these Terms and Conditions by 'ticking' the appropriate box or otherwise evidencing such sign up and acceptance of the Terms and Conditions in the manner specified in such electronic sign on facility,

and, in each case, providing any other documents and information reasonably requested by us in order for your Shares to be held in the Nominee Service.

• (b) By requesting us to hold your Shares for you under the Nominee Service, you agree to be bound by these Terms and Conditions.

• (c) If we agree to hold your Shares in the Nominee Service, we will open a Nominee Account in your name and you will be provided with an Investor Code. You are responsible for keeping your account details secure and you must not disclose details to any other person (who is not your Representative).

• (d) For the purposes of the FCA Rules, we are classifying you as a 'Retail Client'. These Terms and Conditions and any Application Form will, for the purposes of satisfying the FCA Rules, be regarded as the Client Agreement.

• (e) The Nominee Service is provided by us to you and not the Company. We are not acting as principal in relation to any transactions with you.

2.3 Verification of Identity and Account Opening

• (a) To comply with Applicable Regulations (including compliance with the UK Money Laundering Regulations), we are required to verify your identity. You authorise us (either independently or by using a third party) to make credit reference, identity (including searching the electoral roll), fraud and other such searches and enquiries that may be necessary for the purpose of opening the Nominee Account with us. The relevant third party may check the details you supply against any particulars on any database (public or otherwise) to which they have access. They may also use your details in the future to assist other companies for verification purposes. You also authorise us to undertake further similar searches at regular intervals. A record of the search will be retained. You may also be required to provide additional information.
• (b) Account opening and registration is always at our discretion. We may therefore refuse to open the Nominee Account for you without informing you of our reasons for doing so and you agree that we will have no liability to you for any loss you may incur if we decide not to open a Nominee Account in your name.

2.4 Joint holdings

• (a) We will open joint Nominee Accounts for up to four joint holders, and all references in these Terms and Conditions to "you" or a "Member" apply to each joint holder individually, except where the context otherwise requires. All joint holders wishing to become Members must sign the Application Form. We will only accept transfer instructions signed by or on behalf of all the joint holders.
• (b) Each joint holder agrees that: (i) all obligations, undertakings and agreements on our part are given to the joint holders taken together and not separately to each of them; and (ii) all obligations, undertakings, agreements and liabilities arising out of or pursuant to these Terms and Conditions constitute joint and several obligations of each joint holder.

3. HOW THE NOMINEE SERVICE WORKS

3.1 We will hold your Shares in the name of the Nominee in uncertificated form on your behalf as trustee subject to the provisions of the Company's Articles of Association (as may be amended from time to time) and any other document governing the terms on which the Shares are issued or transferred. Although we will therefore be the legal owner of the Shares, you will remain the beneficial owner of the Shares which means that, subject to our legal obligations, we will treat the Shares as if they belonged to you. This means that they continue to belong to you in respect of beneficial ownership even if the Nominee becomes insolvent.

3.2 The Shares will be registered in the name of the Nominee and we will hold the Shares as you direct. Neither CIRGT nor the Nominee will have or claim any interest in your Shares except under clauses 9.10, 16.5 and 19.2 of these Terms and Conditions or under any separate arrangement which you may have with CIRGT. CIRGT will be responsible to you for any acts or omissions of the Nominee in connection with your Shares.

3.3 You agree to provide promptly any information which the Company is entitled to request from the Nominee in respect of your holding of Shares which are registered in the Nominee's name (for example, information relating to beneficial ownership).

3.4 You can obtain the appropriate forms to transfer Shares or to provide us with instructions by contacting us using the CIRGT contact details on the first page. Except where otherwise stated in these Terms and Conditions (see clause 5.1(d)), we will only act on written instructions which contain your Investor Code.

3.5 We will only accept transfers of Shares into the name of the Nominee and to be held in your Nominee Account if there is no change of beneficial owner in the Shares being transferred and all applicable stamp duty has been paid.

3.6 You may instruct us to hold your Shares in the name of another person (provided they are over 18 years of age and eligible) by issuing written instructions on the appropriate form stating that such a transfer is by way of a gift to another person (for example, a family member). The proposed recipient must sign his or her agreement to the Terms and Conditions. You should seek independent tax advice if you are in any doubt as to the tax treatment of such a gift. Other than pursuant to such an instruction, you cannot transfer your Shares to another person in the Nominee Service.

3.7 Subject to clause 3.8, if you wish to transfer your Shares you must first either:

• (a) ask for your Shares to be transferred into your own name in certificated form; or
• (b) instruct us to transfer your Shares to another custodian to hold your Shares on your behalf.

We will arrange for this on receipt of your written instruction to do so on the appropriate form and payment of any applicable charges (including stamp duty). If you ask for your Shares to be transferred into your name, they will be registered in your name on the main register of shareholders of the Company and a share certificate will be issued to you in accordance with the Company's Articles of Association. All transfers of Shares to and from the Nominee Account are subject to any applicable rules of London Stock Exchange plc and any other applicable laws, rules or regulations.

3.8 In respect of transfers of Shares to Saga Share Direct provided by Barclays Stockbrokers, a trading name of Barclays Bank PLC ("Barclays"), you may complete a broker to broker form provided by Barclays instead of a CIRGT form. You hereby agree (i) that completion of such form constitutes an instruction from you to CIRGT to transfer your Shares and any associated unclaimed sums to Barclays, and (ii) that we may accept such form delivered by Barclays on your behalf.

3.9 You may not cancel or change any instructions in relation to a transfer of Shares once they have been sent to us. We may refuse to act on instructions from you: (a) which are not given on the correct form; (b) which are incomplete or not given in writing; or (c) if we believe that complying with such instructions would breach the FCA Rules or any applicable legal requirements.

3.10 We may also delay acting on your instructions if we reasonably feel that it is necessary (i) to obtain additional information from you to comply with any legal or regulatory requirement (including compliance with the UK Money Laundering Regulations) or (ii) to investigate any concerns we may have as to the validity of your instructions. Where further enquiries are required, you authorise us to make credit reference, identity, fraud and other enquiries that we reasonably deem necessary for these purposes. We accept no liability for any financial loss arising from such a delay. Instructions that are not accepted will be returned to you, where appropriate.

3.11 Instructions to transfer are acknowledged by the issue of a statement. Any other instructions will only be acknowledged by us acting on them and are not otherwise acknowledged.

3.12 If you instruct CIRGT to sell some or all of your Shares they can only be sold by using the Dealing Service. The terms of the Dealing Service may change from time to time. Full details and terms of the Dealing Service are available upon request. If you want to use another dealing service you will need to transfer the Shares out of your account and into a third party in CREST (for example a broker through which you wish to sell), to another custodian, or into your own name in certificated form (so that you or the custodian can arrange for the sale of your shares through a broker of your choice). We will arrange for this on receipt of your written instruction to do so (such instruction to be provided in accordance with these Terms and Conditions) and payment of any applicable charge.

3.13 If a DRIP Service is available to you, you will be notified in writing whether the DRIP Service is voluntary or mandatory. If the DRIP Service is voluntary, you may choose whether or not you wish to participate in the DRIP Service. If the DRIP Service is mandatory, you will automatically benefit from the DRIP Service if you elect to participate in the Nominee Service. You will not be able to withdraw from the DRIP Service or cancel your participation in the DRIP Service unless you withdraw from and cancel your participation in the Nominee Service.

4. OUR SERVICE

4.1 We will deal with you on an execution-only basis at all times. This means that our services are limited to the execution of your instructions. We shall not provide you with any advice on the merits or suitability of you holding your Shares or deciding to have your Shares held through the Nominee Service, or any transaction contemplated by these Terms and Conditions.

4.2 We will never provide you with any investment, trading, tax or financial advice or any investment management services. Nothing in these Terms and Conditions should be taken as a recommendation to buy, sell or hold shares in any company. You should rely on your own judgment when deciding whether or not to enter into any transaction contemplated by this Agreement or seek any advice or assistance you may need from an appropriate independent professional adviser.

4.3 CIRGT provides a Nominee Service to you only in relation to the Shares, which are traded on a regulated market. CIRGT will not assess the suitability of the Shares or the service provided or offered to you. As a result, the FCA Rules on assessing suitability do not apply. Therefore, we will not assess whether:

• (a) the relevant product or service meets your investment objectives;
• (b) you would be able financially to bear the risk of any loss that the product or service may cause; or (c) you have the necessary knowledge and experience to understand the risks involved. CIRGT is also not required to assess the appropriateness for you of the Nominee Service or any transaction connected to the Nominee Service.

5. COMMUNICATIONS BETWEEN YOU AND US

5.1 General

• (a) You may give certain instructions by email or via a designated web portal (where the Company has agreed to this service) as specified by CIRGT from time to time. All communications between you and us, pursuant to these Terms and Conditions, must be in English.
• (b) Except as otherwise stated in these Terms and Conditions, all communications sent by you under these Terms and Conditions must be given in writing and sent to:

Capita Asset Services, Nominee Service, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU

• (c) In all communications with us relating to your Nominee Account (for example any change of address or instructions about receipt of dividends), you should quote: (i) the name of the Company; (ii) your full name; and (iii) your Investor Code.
• (d) You will be responsible for all instructions in respect of transactions contemplated by these Terms and Conditions and for the accuracy of all information given to us. We shall be entitled to act upon any instructions or orders transmitted using your Investor Code or which we reasonably consider to be genuine. We do not have to establish the authority of anyone quoting or using your Investor Code in any communications provided that we have acted with all due care in accepting such communications. We may (in our sole discretion) accept communications which are not in writing or do not quote or use an Investor Code. We shall not be liable for forged or fraudulent instructions. If you are aware or suspect that your Investor Code is no longer confidential or any of your other details have been used by another person in communications regarding your Nominee Account then you should contact us as soon as possible.

5.2 Representatives

• (a) You may also appoint a Representative in writing to give us instructions on your behalf. You may change your Representative or cancel the appointment of your Representative by written notice to us, but we shall not be bound by any such variation until we have actually received your written notice and obtained such proof of their authority to act as we may reasonably require.
• (b) We shall be entitled to act upon the instructions of your Representative unless and until we have received written notice by you that their authority has been revoked. You agree that all instructions received from your Representative shall be treated as your instructions and you accept full responsibility in respect of any instruction or any error in any instruction given by you or a Representative.

5.3 Communications with you

• (a) You authorise us to communicate with you by letter or electronic mail, unless specifically requested otherwise by you in writing.
• (b) All communications sent by us will be sent to your last address or email address as recorded on the Nominee Register. Communications sent to you by post will be treated as received by you on the

second Business Day following the day they were sent in the case of an address in the United Kingdom, or on the fifth Business Day following the day they were sent in the case of an address outside of the United Kingdom. In respect of joint holders, we will send all communications and payments to the first named joint holder at the address or email address on the Nominee Register and it is the responsibility of any joint holder who has been sent the communication or payment to inform and account to the other joint holders.

• (c) You are responsible for keeping your details on the Nominee Register up-to-date by notifying us in writing of any change of name, address or bank account details and providing us with the supporting documentation where required.
• (d) Any documents or cheques sent to you by us and any documents or cheques sent by you to us will be sent at your risk and we accept no liability prior to receipt by us of any document or cheque or, where relevant, after despatch of any document or cheque to you.

6. COMPANY MEETINGS/COMPANY INFORMATION

6.1 We will send you information about shareholder meetings of the Company every time we receive notice that a shareholder meeting is being convened. We will also provide an instruction form and you will be able to use this to instruct the Nominee how to cast votes in respect of the Shares held in your Nominee Account on any poll called at the meeting. In such case, we must have received the relevant instructions from you on a correctly completed form before the deadline notified to you on the relevant form. In the absence of your instructions, no votes will be exercised in respect of your Shares.

6.2 Depending on the Articles of Association of the Company, you may also be able to instruct the Nominee to appoint yourself or another person of your choice, including the chairman of the meeting, as your proxy in respect of the Shares held in the Nominee Account. This will enable you or the proxy to attend and vote on a poll and, provided this is possible legally and is permitted by the Articles of Association of the Company, on a show of hands.

6.3 Please note that the procedures described in this clause 6 will be subject to any matters regarding voting, attendance at meetings etc provided for in the Company's Articles of Association and any policy decisions implemented by the Company in respect of the conduct of general meetings.

6.4 Except as provided for in this clause 6 and when you provide instructions to us, we shall have no duty or responsibility to attend shareholders' meetings on your behalf or to vote in respect of your Shares.

6.5 We will ensure that any copies of summary financial statements and interim accounts sent by the Company to its registered shareholders and received by CIRGT are also sent to you (or made available to you in electronic form where you have requested electronic form and this service is available). All other documents issued by the Company to registered holders generally will be forwarded by us to Members, at or around the same time as registered holders (subject to us receiving sufficient copies from the Company for Members).

7. DIVIDENDS, PAYMENTS AND CORPORATE ACTIONS

7.1 Subject to clause 7.4, we will on your behalf claim and receive cash dividends and other entitlements accruing on your Shares. Cash dividends and other entitlements will be distributed to Members as soon as reasonably practicable after receipt by us from the Company, by means of cheque or, at our discretion, electronic payment. Bank fees (if any) in respect of electronic payment or telegraphic transfer shall be charged to the Member's account. Payments will be made in pounds sterling.

7.2 If required to do so to comply with any legal or regulatory requirements, we may deduct or withhold for such purposes sums on account of tax and pay the net amount to you. If this happens, we will communicate this to you on or around the date of the payment. If you are in any doubt as to your taxation position you should consult your own professional adviser immediately.

7.3 If a payment made to you in respect of your Shares is returned to us and after reasonable enquiry we cannot find your current address, we will not send you another payment until you notify us in writing of your new address.

7.4 If the Company offers its shareholders (including any Members) the right to choose to receive further Shares instead of a cash dividend pursuant to the terms of a dividend reinvestment plan and if you wish to participate in the plan and validly elect to receive further Shares, we will ensure that we receive the relevant Shares and hold them on your behalf in the Nominee Account and any cash residue will be dealt with in accordance with the terms of the dividend reinvestment plan issued by the Company.

7.5 In the event of a takeover, a capital reorganisation, conversion or other corporate action relating to the Company, we will endeavour to notify you promptly and implement any instructions you give us provided that the Company gives us adequate notice of the proposals and also that we receive your instructions in good time so as to allow us to take appropriate action (however we will not be liable if, for any reason, any notification by us does not reach you in time). We will however not be obliged to do anything in such an event unless the Company gives us adequate notice and we receive written instructions from you in reasonable time to allow us to take action in respect of the Shares held in your Nominee Account.

7.6 We will not accept a takeover offer or other offer for any of the Shares held in your Nominee Account in the absence of your instructions except where your Shares are compulsorily acquired. In the event of a compulsory acquisition, we will accept the basic terms of the acquisition on your behalf, but will not exercise choices or elections, in the absence of your specific instructions received before relevant deadline.

7.7 Where the Company issues offer documents in respect of an optional corporate action (for example, a tender offer, rights issue, placing and open offer, merger, scheme of arrangement or amalgamation or reconstruction) we are not obliged to forward such documents to you. Where appropriate you should contact the Company directly to obtain offer documents.

7.8 We will not be responsible for taking any corporate action in respect of the Shares held in your Nominee Account and may allow the event to lapse if your instructions: (a) are not received by us by the stated time; (b) are incomplete or given by a third party who does not have the relevant authority; or (c) require payment on your behalf and you have insufficient funds in your Nominee Account.

• 7.9 Unless we receive instructions to the contrary, you authorise us to take all actions described below:
• (a) make payments to ourselves or others for properly incurred expenses in handling your Shares (for example costs of translation of foreign documents, foreign currency conversion or bank charges) or other matters relating to our duties under these Terms and Conditions;
• (b) receive and collect all income with respect to Shares and to credit cash receipts to your Nominee Account;
• (c) execute in your name such ownership and other certificates as may be required to obtain the payment of income from the Shares;
• (d) pay or cause to be paid from your Nominee Account any and all taxes, levies or withholdings imposed on the Shares by any governmental authority in connection with custody of and transactions in such Shares;
• (e) use reasonable efforts to promptly reclaim any foreign withholding tax relating to the Shares; and
• (f) make payments to ourselves for our reasonable fees if we are required by any Applicable Regulation to carry out additional services to those set out in these Terms and Conditions.

8. STATEMENTS

8.1 You will receive an opening balance statement on joining the Nominee Service showing the number of Shares you have. Statements will be sent to you at least once a year (usually, at the same time as the Company's Annual Report and Accounts are despatched to shareholders), together with details of the composition of your Nominee Account as at the end of the period covered by the statement. In the event that the Nominee Service ceases to be provided to you for any reason, a closing statement will be issued to you. These statements are provided free of charge. If you require an interim statement or duplicate statement of your holding in writing, we may make a charge to supply it (see clause 9.1). You may check your holding at any time via a designated web portal (where the Company has agreed to this service) as specified by CIRGT from time to time.

8.2 It is your responsibility to check any statement which you receive from us. If you have any query or concern in relation to the matters disclosed in the statement you must contact us as soon as possible but, in any event, within two months of receipt of the statement. We shall correct any mistaken credits or debits to the records maintained for your Nominee Account and will notify you of any changes relevant to you.

8.3 If we have sent documents to your address on two separate occasions and they have been returned and, after making all reasonable enquiries, we cannot find your current address, we will not send any more documentation to you until you provide us with your correct address.

9. CHARGES, EXPENSES AND PAYMENTS

9.1 There is no initial charge for becoming a Member of the Nominee Service. We may make charges in respect of other operations, for example, the transfer of Shares and the issue of duplicate documentation.

9.2 A copy of our charges will be provided to you when you apply to become a member of the Nominee Service and additional copies may be obtained on request by contacting us using the CIRGT contact details on the first page.

9.3 Our charges are subject to review and modification from time to time in the future for the following reasons:

• (a) to reflect reasonable changes in the way we provide the Service to you;
• (b) as a result of new services which we may make available to you;
• (c) where reasonably required as a result of changes in market conditions or market practice;
• (d) to take account of changes or anticipated changes to, or to comply better with, applicable laws or the interpretation of those laws, regulatory requirements, industry guidance or codes of practice that we follow, or the way that we are regulated;
• (e) to reflect a decision or recommendation of a court, ombudsman, regulator or similar body which is relevant to us or to the Service; or
• (f) to take account of, in a proportionate manner, the cost to us of providing the Service.

9.4 We will give you at least 30 days' prior notice of any increase in our charges payable by you. If you are unhappy with such increase, you may cancel your agreement with us at any time without charge within 30 days of our sending you the notice of such increase.

9.5 In addition to the above charges, you will be charged Value Added Tax (VAT) on any fees and charges payable by you (for example, broker's fees).

9.6 In addition to our fees and charges, you are responsible for paying any stamp duties applicable to share transactions, VAT, other duties and taxes in respect of your Shares, where applicable. You should note that there may be other taxes or costs that may exist that are not paid through us or imposed by us.

9.7 You may make any payments due to us under this Agreement as follows: (a) by authorising us in writing to deduct the charges from your Nominee Account or annual dividends, if any; or (b) if no such authority is provided under (a) above, you may pay by personal cheque crossed and made payable to 'Capita IRG Trustees Limited', drawn on a United Kingdom bank or building society account.

9.8 If any payment is not received by us on the due date for payment then, without limitation of any other rights which we may have, we will be entitled to charge interest on the overdue amount (both before and after judgement) at the rate of one per cent. above the sterling base rate from time to time of our main UK bank from the due date until the actual date of payment.

9.9 Subject to clause 9.10, 16.5 and 19.2 below, we and our agents will not have any lien (right to keep possession of) or claim security interest in your Shares.

9.10 We do however reserve the right to sell any of your Shares or connected rights and to retain the value of the amount which at any time is due and payable to us in respect of the provision of the Nominee Service. In these circumstances, you authorise us to execute any stock transfer form or other document or give any instruction necessary to give effect to any such sale and, by appointing us to provide the Nominee Service under these Terms and Conditions, you acknowledge and declare that in these circumstances we shall have a legal charge over your Shares and your rights and interests in or in relation to your Nominee Account. If you owe us money in respect of the provision of the Nominee Service, we reserve the right not to act on instructions from you until you have paid us in full.

10. CLIENT MONEY

10.1 We will treat all money, including dividend payments and other entitlements of a similar nature, awaiting distribution to you as client money under the FCA Rules on client money. Your money will be segregated from our own funds. We will hold all money held in sterling in a non-interest bearing client bank account in the United Kingdom, with an approved bank in the United Kingdom. Client Money in a foreign currency will be held in a client bank account denominated in the relevant foreign currency with an approved bank in the United Kingdom. No interest shall be payable to you in respect of such client money. The money will not be used by us in any transactions other than as specified in these Terms and Conditions.

10.2 Please note that, whilst the cash balance for each Member will be recorded separately, it will be pooled with the funds of other clients of CIRGT. Where a pooling event occurs, such as a default by CIRGT or the Nominee or their bankers, you will not have a claim against a specific sum of money in a specific account; your claim would be against the client money pool, held by us in general. The funds may then be distributed on a pro rata basis to all Members which could result in each Member receiving less back than that which is held on their behalf before such an event.

10.3 You agree that any balance due to you which is unclaimed after six years will cease to be treated as Client Money, as defined under the FCA Rules, and we shall be entitled to remove any such balance from your Nominee Account and retain it subject to us having taken reasonable steps to locate you and to give you at least 28 days from the date of notification to make a claim. We undertake to make good any valid claim which may subsequently be made against any balances retained in this way and reserve the right to request such evidence as we feel reasonably necessary to confirm the identity of the person claiming these funds in order to validate any claim prior to settlement in respect of funds so removed from the Client Money account. Subject to clause 16.8, we will not be liable for any losses or claims for interest whatsoever in respect of such amounts unless such losses or claims were caused by our fraud, wilful default, negligence or breach of the FCA Rules or FSMA.

11. FRACTIONAL BENEFITS

Due to us holding your investments in the Nominee Account on a pooled basis, additional amounts may arise that would not otherwise have occurred had such investments been registered in your own name, (for example, following certain corporate actions). You consent that we shall determine in our sole discretion, having regard to the size of the balance and the number of participants, whether we shall distribute the balance to you or retain the balance for our own account. Consequently, you may not be entitled to these additional amounts.

12. RISKS

12.1 While details of your Shares are recorded in your Nominee Account, we will pool your Shares with other customers' Shares and as a result individual entitlements may not be identifiable by separate certificates or other physical documents of title or equivalent electronic record. In the event of an unreconcilable shortfall following any default by a custodian appointed by us, you may not receive your full entitlement and any shortfall may be shared by all persons in proportion to their original holdings in the pool.

12.2 There are risks involved in investing in and holding Shares. As we only provide a Nominee Service, we take no responsibility for the decision of a Member to buy, sell, hold or exercise rights in relation to Shares. A share is a portion of the capital stock of a company which typically entitles the holder to vote at general meetings, receive income in the form of dividends and to share in the surplus assets of the company in the event of winding up.

12.3 The market information relating to the past performance of Shares is not an indication to their future performance. The value of Shares or income from them may go down as well as up. As Shares are valued from second to second, their bid and offer value fluctuates sometimes widely. The value of Shares may rise or fall due to the volatility of world markets, interest rates and capital values or, for Shares held in overseas markets, due to changes in the exchange rate in the currency in which the investments are denominated. You may not necessarily get back the amount you invested.

12.4 Instructions, given by you or on your behalf constitute a binding contract and they cannot be amended or cancelled after they have been given.

12.5 Taxes may affect the net value of your investments and income received from them. Levels and bases of, and relief from taxation depends on the individual circumstances of each customer and are subject to change as UK tax legislation may change from time to time. As we only provide a Nominee Service, we do not accept any responsibility for tax advice.

13. COMPLIANCE WITH APPLICABLE REGULATIONS

13.1 The Terms and Conditions and all transactions between you and us are subject to Applicable Regulations. If there is any conflict between these Terms and Conditions and any Applicable Regulations, the Applicable Regulations will prevail to the extent necessary to avoid the conflict. Nothing in these Terms and Conditions will exclude or restrict any obligations which we have to you under the Applicable Regulations.

13.2 We may refrain from doing anything which could or might, in our reasonable opinion, be contrary to any Applicable Regulations which would or might otherwise in our reasonable opinion render us liable to any person. We may do anything which, in our reasonable opinion, is necessary to comply with any such Applicable Regulations or to avoid any such liability.

13.3 CIRGT is authorised and regulated by the FCA to provide the Nominee Service in the United Kingdom and nothing in these Terms and Conditions requires or implies that such services will be provided in any territory in which CIRGT is not appropriately authorised.

14. REPRESENTATIONS AND WARRANTIES

• 14.1 By applying to become a Member, you warrant and represent to us that:
• (a) all information that you supply to us is complete, true, accurate and not misleading in any material respect;
• (b) you enter into this Agreement and any transactions contemplated by this Agreement, as principal and not as another person's agent or representative;
• (c) you are not under any legal disability with respect to, and are not subject to any law or regulation which prevents your performance of, this Agreement and any transactions contemplated by this Agreement;
• (d) you are the legal and beneficial owner of all property provided by you to us under this Agreement and you are entitled to pass to us full legal ownership of such property, free from all liens, charges and encumbrances whatsoever and you will not create any security interest of any kind over such property;
• (e) you have obtained all necessary consents and have the authority to enter into this Agreement and any transaction contemplated by this Agreement; and
• (f) you are in compliance with all Applicable Regulations to which you are subject including, without limitation, all tax laws and regulations, exchange control requirements and registration requirements.

14.2 The above warranties and representations shall be deemed to be repeated each time you provide us with instructions or enter into any transaction contemplated by this Agreement.

14.3 You undertake that, throughout the duration of this Agreement, you will promptly notify us of any change to the details supplied by you or any change or anticipated change in your financial circumstances (including any actual litigation concerning your shares or your beneficial interest in them) which would affect the basis upon which we undertake business with you.

15. CREST AND OTHER CLEARING SYSTEMS

15.1 Neither CIRGT nor the Nominee accepts responsibility for any delays or liabilities suffered by you as a result of:

• (a) the operation, failure or suspension of CREST or the insolvency or other default of Euroclear UK & Ireland Limited or of any participants in CREST; or
• (b) the operation, failure or suspension of any other clearing system used by us or the insolvency or other default of the operator of such clearing system or of any participants in such clearing system; or
• (c) the failure by any CREST or other clearing system's settlement bank to make, receive, credit or debit any payment.

Neither CIRGT nor the Nominee accept responsibility for any delays and liabilities suffered by you as a result of the suspension or removal of the sponsor by CREST or any other clearing system as a CREST sponsor or a sponsor in respect of such other clearing system (as applicable), unless the suspension or removal is due to negligence, wilful default or fraud on the part of CIRGT or the Nominee.

15.2 You will pay our reasonable costs or liabilities incurred in connection with an instruction to transfer your Shares (whether or not involving Euroclear UK & Ireland Limited) that cannot be completed for any reason caused by you. You undertake to notify us if you know of any person (e.g. a bank) who has the right to prevent you from transferring your Shares.

16. LIMITATION OF LIABILITY AND INDEMNITY

16.1 We will take all reasonable care and skill in the set up and administration of the Nominee Service.

16.2 If we cannot provide the Nominee Service due to: (i) circumstances beyond our reasonable control (for example, failure of computer systems/ telecommunications links, natural disasters, failure of third parties to carry out their obligations, the suspension of trading by any exchange or clearing house, the acts of governmental or regulatory authority); or (ii) the absence of, or inaccuracy in any information provided to us by you or on your behalf; we will, where possible, take such reasonable steps as we can to provide the Nominee Service as soon as possible following any delay or failure.

16.3 Subject to this clause 16, our liability to you for providing the Nominee Service is limited to any losses directly associated with the act or omission that gave rise to the liability. We will not be liable for any damage or loss suffered by you which we could not reasonably have foreseen (for example the loss of an alternative investment opportunity or any tax benefit).

16.4 Neither CIRGT nor the Nominee is acting as agent for the Company and they accept no responsibility for the Company's acts and omissions, including any decision by the Company to suspend or terminate the Nominee Service.

16.5 Neither CIRGT nor the Nominee will be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties or in the exercise of any of its rights or powers under these Terms and Conditions. If, notwithstanding this provision, either CIRGT or the Nominee does so, CIRGT will be entitled upon notice to you to make such deductions from the Shares or any income or capital arising from them or to sell all or any of the Shares and make such deductions from the proceeds of sale as may be required to reimburse any loss or liability suffered.

16.6 Subject to clause 16.8, we will not be responsible for any acts or omissions of the Company, or any broker, settlement agent, depository, clearing or settlement agent or system.

16.7 We may employ agents and delegates on such terms as we think fit to carry out any part of our obligations or discretions in connection with the Nominee Service and, save as otherwise provided in these Terms and Conditions, we shall be liable for the acts and omissions of such agents and delegates as if they were our acts or omissions.

16.8 Nothing in this Agreement shall exclude or limit:

• (a) our liability for death or personal injury resulting from the negligence caused by us or the Nominee; or
• (b) liability for any losses or expenses (including loss of Shares) suffered by you as a direct result of the negligence, wilful default or fraud of either CIRGT or the Nominee; or
• (c) any other liability which cannot be excluded or limited by law, including FCA Rules and FSMA.

17. TERMINATION

By you:

17.1 You may terminate this Agreement by removing all of your Shares from the Nominee Service, in accordance with clause 3.7 or clause 3.8. If we cease to hold Shares for you, you will need to enter into a new agreement if, at a later date, you acquire Shares which are to be held through the Nominee Service.

17.2 Removing all or part of your Shares from the Nominee Service will not affect any of your rights or obligations arising prior to the date of such removal or which arise in consequence of such removal or which relate to our provision of the Nominee Service to you and all such rights and obligations shall continue to be subject to the Terms and Conditions prevailing at the time of the removal. You will be required to pay any charges that are reasonably incurred for transferring Shares from the Nominee Service (see also clause 9.2), but will not be required to make any additional payment to us in respect of the termination of your Agreement with us.

17.3 The Nominee Service will automatically terminate if you die. If we receive adequate proof of your death, we will follow the instructions of your personal representative (appointed pursuant to a grant of probate, letters of administration or other legally effective appointment (or overseas equivalent)).

By us:

17.4 If, at any time, you do not satisfy the eligibility criteria set out in clause 2.1, including, without limitation, if you cease to be resident in the in the United Kingdom, the Channel Islands or the Isle of Man, your participation in the Nominee Service and your Agreement with us on these Terms and Conditions may be terminated and we will notify you of this in writing.

17.5 We may withdraw the Nominee Service from you and terminate our Agreement with you on not less than 30 days' written notice if, in our opinion, you are in material breach of these Terms and Conditions or the Nominee is unable to comply with any obligations to which it may be subject in respect of your Shares under the Company's Articles of Association or under any applicable laws or regulations.

17.6 The provision of the Nominee Service is at the discretion of the Company. If the agreement between the Company and CIRGT for the provision of the Nominee Service terminates, our Agreement with you will automatically terminate and we will notify you of this in writing.

17.7 No penalty will be payable by either party on termination of these Terms and Conditions. On termination by either party and after the relevant notice period, we will arrange for your Shares to be transferred into your name on the register of shareholders as soon as practicable and shall with immediate effect (but subject to clause 17.8) cease to process instructions from you. The Company will send you either a share certificate in respect of your holding of Shares or, if the Company does not issue share certificates, a share statement evidencing your holding of Shares. We may deduct all amounts due to us before transferring to you any credit balances on your Nominee Account.

17.8 Termination of your Agreement with us will be without prejudice to the completion of transactions already initiated. All transactions in progress will be executed in accordance with your instructions and such transactions will be subject to our current charges (see clause 9).

18. CONFLICTS OF INTEREST

18.1 You acknowledge and agree that when we (or our agents or delegates) enter into a transaction for you, we may:

• (a) share charges with our Affiliated Company and other third parties, or receive and retain remuneration from them in respect of transactions carried out on your behalf. Details of any such remuneration or sharing arrangements are available to you on request;
• (b) be acting as agent or making arrangements for you on your instructions in relation to transactions in which we are also acting for other customers; or
• (c) be in a position where we have some other material interest in relation to the transaction.

18.2 In accordance with FCA Rules, CIRGT has in place arrangements, which may be updated from time to time, to manage conflicts of interest that arise between itself and its clients or between its clients. CIRGT will deal with potential conflicts of interest in accordance with its Conflicts of Interests Policy which provides that it will identify and manage conflicts of interest to ensure fair treatment of all clients and ensure that it acts in the client's best interests. If it is not possible to manage or avoid a potential conflict of interest then CIRGT may seek to disclose the general nature and/or sources of conflict to you before undertaking business for you. CIRGT will provide full details of the Conflicts of Interest Policy upon receipt of a written request from you.

19. DEFAULT

19.1 We may in our absolute discretion refuse to accept any further orders or instructions from you and/or terminate this Agreement upon any of the following Specified Events:

• (a) you do not perform your obligations to us under this Agreement or any transaction contemplated by this Agreement;
• (b) any warranty or representation made by you as set out at clause 14 is or becomes incomplete, untrue, inaccurate or misleading;
• (c) a bankruptcy petition is presented to the Court in respect of you;
• (d) any regulator of our business or its rules so require; or
• (e) we reasonably believe that any of the circumstances set out in clauses 19.1(a) to 19.1(d) above are likely to happen and we reasonably believe that such action would be necessary or desirable to protect our position.

19.2 Upon the happening of a Specified Event and without prejudice to CIRGT's other rights, we may at our discretion, without notice:

• (a) refuse to perform or reverse any outstanding transaction between us;
• (b) sell any of your investments or other assets held by us (the time, place and method of any sale and the price shall be at our discretion and we shall inform you of the outcome of the sale);
• (c) buy in investments, bring any claim for damages or exercise any other right which we may have at law or otherwise or take any other action which appears appropriate to avoid or reduce our risk of loss; and/or
• (d) combine, close or consolidate all or any of your accounts with us or any of our Affiliated Companies and off-set any and all amounts owed to, or by, us or any of our Affiliated Companies in such manner as we may reasonably determine.

19.3 You will bear any costs or associated costs of sale and for reasonable costs, losses, damages or expenses (including without limitation any legal fees) incurred or suffered by us as a direct consequence of a Specified Event or our taking any action as a consequence of such Specified Event.

20. Protection of Information

20.1 The Data Protection Act 1998 provides protection to individuals by governing, amongst other things, the way in which personal information is held and used. Individuals are also afforded rights of access to such information held about them. CIRGT will protect your personal information in accordance with the principles of the Data Protection Act 1998.

20.2 By becoming a Member of the Nominee Service, you agree that we may:

• (a) keep personal details which you or others have provided to us, and any information we know from running your account on a database, and use such information to carry out the Nominee Service described in these Terms and Conditions and dealing with your enquiries and requests connected with the Nominee Service; and
• (b) may disclose information concerning you to the Company, the Nominee, the Company's registrar, Euroclear UK & Ireland Limited (if entitled to such information) all of which may disclose the information to regulatory, tax or governmental authorities as appropriate; to any person with legal, administrative or regulatory power over us in respect of the Nominee Service, to the broker, or Affiliated Companies who are involved in carrying out functions related to the Nominee Service administration including such Affiliated Companies which are outside of the EEA in countries (including India) which do not have similar protections in place regarding your personal information and its use. However, we are committed to protecting the confidentiality and security of information we collect about you and we will ensure that such transfers are made in accordance with the requirements of the Data Protection Act 1998.

20.3 You agree that the purposes for which we may process your personal information may be amended from time to time to include other uses or disclosures of personal information subject to us notifying you of such amendment.

20.4 Under the Data Protection Act 1998, you are entitled, on payment of a fee (of £10 currently), to a copy of the information we hold about you. If you believe that any information held about you is incorrect or incomplete, you may request it to be completed or corrected. Please address any requests for information under this clause to the Data Protection Officer, Capita IRG Trustees Limited, Nominee Service, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU and quoting your full name and address, the name of the Company and your Investor Code which may be found on your personal statement.

20.5 By using the Nominee Service you agree that information relating to you may be disclosed to other Affiliated Companies so that you may be told about any products or services which might be of interest to you. You may request that information is not used for this purpose by writing to the Data Protection Officer, Capita IRG Trustees Limited, Nominee Service, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU and quoting your full name and address, the name of the Company and your Investor Code which may be found on your personal statement.

21. TAPE RECORDING OF CONVERSATIONS AND RECORD KEEPING

21.1 You agree that we may: (a) record all telephone conversations between you and us; and (b) use such recordings, or transcripts from such recordings, as evidence in any dispute or anticipated dispute between you and us. Recordings or transcripts made by us may be destroyed under our normal practice (usually, but not necessarily, six (6) calendar months from the date of the conversation). We may deliver copies or transcripts of such recordings to any court or regulatory body.

21.2 We strongly recommend that you keep your own records of all communications between you and us (such as instructions and orders) including details of the times, dates and nature of your instructions as these details will be important if there is a dispute between you and us.

22. COMPLAINTS AND COMPENSATION SCHEME

22.1 If you think that you have reason to make a complaint please contact us the first instance using the CIRGT contact details on the first page. Your complaint will be fully investigated and a full resolution sought. Our complaints procedure is available upon request, but a copy will be provided automatically to you in the event of a complaint being received.

22.2 If you are unhappy or dissatisfied with our handling or findings in relation to your dispute or complaint you may refer the matter to the Financial Ombudsman Service for further investigation at Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR.

22.3 In the event of a dispute or complaint being notified to us, we reserve the right to take any action necessary for the purpose of limiting the amounts involved in such dispute or complaint. We will inform you if we exercise this right, which shall be without prejudice to either your rights and remedies or our rights and remedies. Any action taken by us pursuant to this clause 22.3 will not be deemed to be an admission on our part.

22.4 CIRGT is a member of the Financial Services Compensation Scheme ("Scheme"). If we cannot meet our obligations you may be entitled to compensation from the Scheme. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for 100 per cent. of the first £50,000 (a maximum of £50,000) as at the date of these Terms and Conditions. The amounts of compensation may be changed from time to time and you should check your entitlement with the Scheme. Further information about compensation arrangements is available from the Scheme. You can contact the Scheme by calling their Helpline on 0207 741 4100, logging onto their website at www.fscs.org.uk or writing to the Financial Services Compensation Scheme, 10th Floor, Beaufort House, 15 St Botolph Street, London EC3A 7QU. You may request further information concerning the conditions governing compensation and the formalities which must be completed to obtain compensation by writing to Capita Asset Services, Capita IRG Trustees Limited, Nominee Service, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or by e-mail to: enquiries@sagashareholder.co.uk.

23. TRANSFER OF THE NOMINEE SERVICE

We may transfer our duties to any company within the Capita group. If the new company writes to you confirming that it will undertake all of our duties, we will cease to have any duties and obligations in relation to the Service.

24. VARIATION/REPLACEMENT OF THESE TERMS AND CONDITIONS

24.1 We may change these terms and conditions in the future for the following reasons:

• (a) to reflect reasonable changes in the way we provide the Service to you;
• (b) as a result of new services which we may make available to you;
• (c) to take account of any corporate restructuring within the Capita group of companies;
• (d) where reasonably required as a result of changes in market conditions or market practice;
• (e) to take account of changes or anticipated changes to, or to comply better with, applicable laws or the interpretation of those laws, regulatory requirements, industry guidance or codes of practice that we follow, or the way that we are regulated;

• (f) to reflect a decision or recommendation of a court, ombudsman, regulator or similar body which is relevant to us or to the Service;

• (g) to reflect changes in the Bank of England base rate, other specified market rates or indices or tax rates;

• (h) to rectify errors, inaccuracies or ambiguities;
• (i) to reflect alterations in the scope and nature of the Nominee Service provided to you under these Terms and Conditions resulting from the alterations made to our agreement with the Company or our system capabilities or administration procedures;
• (j) to prevent misuse of the Service;
• (k) to take account of, in a proportionate manner, the cost to us of providing the Service;
• (l) to prevent fraud or to enhance the security of the Service; or
• (m) to make these Conditions easier to understand, fairer to you, or to correct mistakes.

24.2 We will give you at least 30 days' prior notice of any change to these Terms and Conditions that is to your disadvantage. You may cancel your agreement with us at any time without charge within 30 days' of our sending you notice of such change. If you do not cancel your agreement with us within this 30 day period then you will be deemed to have been accepted such change.

24.3 We may, as mentioned in clause 9.3, review and notify you of revised charging rates from time to time.

24.4 If you have received our written notice and do not agree with the proposed changes, you may terminate our Agreement at any time without charge (see clause 17 above). Any change will be deemed to have been accepted by you if you have already instructed us to trade on your behalf after the change has taken effect.

25. GENERAL

25.1 We will not take notice of any trust affecting the Shares whether express, implied or constructive.

25.2 No conduct or delay on our part shall be taken as a waiver or variation of any rights which we may have unless we waive or vary a particular right in writing. No waiver or variation on a particular occasion will operate as a waiver or variation of our rights in respect of any other matter.

25.3 If any of the provisions of these Terms and Conditions is held invalid, illegal or unenforceable for any reason, such provision shall be severed and the remainder of the provisions in these Terms and Conditions shall continue in full force and effect as if they had been executed with the invalid provision eliminated.

25.4 The Nominee has the right to enforce these Terms and Conditions in accordance with the provisions of the Contracts (Rights of Third Parties) Act 1999. Except for the Nominee, nothing in these Terms and Conditions shall confer or is intended to confer on any third party any benefit or the right to enforce any terms contained herein for the purposes of the Contracts (Rights of Third Parties) Act 1999.

25.5 This Agreement and all non-contractual obligations arising out of or in connection with it are governed by, and construed in accordance with. English law and you submit to the exclusive jurisdiction of the English courts.

If you would like these Terms and Conditions in a larger print, please contact us using the CIRGT contact details on the first page.

PART 8

ADDITIONAL INFORMATION

1. Share Capital of the Company

• 1.1 The principal laws and legislation under which the Company operates and the ordinary shares have been created are the Act and regulations made thereunder.
• 1.2 The share capital history of the Company is as follows:
• 1.2.1 on incorporation the share capital of the Company was £1 made up of one ordinary share of £1. One subscriber share of £1 was issued for cash consideration at par pursuant to the authority to issue shares set out in the Company's articles of association;
• 1.2.2 on 4 March 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company issued two ordinary shares of £1 each to Acromas Bid Co as consideration for the transfer by Acromas Bid Co of the entire issued share capital of Saga Mid Co Limited;
• 1.2.3 on 1 May 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company issued 7,999,997 ordinary shares of £1 each to Acromas Bid Co by way of a bonus issue; and
• 1.2.4 on 1 May 2014, by a resolution passed by the Company's sole shareholder as a written resolution, the Company subdivided each ordinary share of £1 each into 100 ordinary shares of one pence each. Following the subdivision, the share capital of the Company was £8,000,000, made up of 800,000,000 ordinary shares of one pence each.
• 1.3 On 7 May 2014, the following resolutions were passed by the Company's sole shareholder:
• 1.3.1 that the directors be authorised, in accordance with Article 187 of the Articles, to capitalise the undistributed profits of the Company (whether or not available for distribution), or any sum standing to the credit of any reserve or other fund, including without limitation the Company's share premium account and capital redemption reserve, if any, in an amount equal to the aggregate nominal amount (the "Bonus Amount") of the Free Shares to be issued on or shortly following the first anniversary of Admission (but by no later than 31 August 2015) pursuant to the Customer Offer and the Employee Offer, and to appropriate the Bonus Amount to the relevant members, and to apply the Bonus Amount on their behalf in paying up in full shares with a nominal amount equal to the Bonus Amount; and
• 1.3.2 in substitution for any prior authority conferred upon the Board of Directors of the Company, the authority conferred on the Board of Directors by Article 12 of the Articles was conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the annual general meeting of the Company to be held in 2015 (or, if earlier, at the close of business on 31 July 2015) and for that period the section 551 amount shall comprise:
• (a) conditional on Admission, up to £3,000,000 in connection with the issue of New Shares on Admission by the Company as part of the Offer;
• (b) conditional on Admission, an amount equal to the aggregate nominal amount of any Free Shares to be issued by way of bonus issue on or shortly following the first anniversary of Admission (but by no later than by 31 August 2015) to Eligible Customers and Eligible Employees who qualify for such Shares under the Customer Offer and/or the Employee Offer; and

• (c) following Admission, and in substitution for any unused authority under paragraph 1.3.2 (a) on the day following Admission, (i) up to an aggregate nominal amount equal to one third of the aggregate nominal value of the share capital of the Company on the day following Admission, and (ii) in connection with an offer by way of a rights issue only to holders of Shares in proportion (as nearly as practicable) to their existing holdings and to people who are holders of other equity securities if this is required by the rights of those equity securities, of if the Directors of the Company consider it necessary, as permitted by the rights of those equity securities, up to an aggregate nominal amount equal to two thirds of the aggregate nominal value of the share capital of the Company on the day following Admission (including within such limit any shares or rights issued or guaranteed under (i) above);

• 1.3.3 in substitution for any prior authority conferred upon the Board of Directors of the Company, the power conferred on the Board of Directors by Article 13 of the Articles was conferred for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the end of the annual general meeting of the Company to be held in 2015 (or, if earlier, at the close of business on 31 July 2015), and for that period the section 561 amount shall comprise:

• (a) conditional on Admission, and in connection with the issues of Shares referred to in paragraph 1.3.2 (a), up to £3,000,000; and
• (b) following Admission, and in substitution for any unused power conferred under paragraph 1.3.3 (a) on the day following Admission, up to an aggregate nominal amount equal to five per cent. of the aggregate nominal value of the share capital of the Company on the day following Admission;
• 1.3.4 conditional on Admission, the Company was generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Companies Act 2006) of Shares each subject to the following conditions:
• (a) the number of Shares authorised to be purchased shall be such number of Shares as has an aggregate nominal value equal to ten per cent. of the aggregate nominal value of the share capital of the Company on the day following Admission;
• (b) the minimum price (excluding expenses) which may be paid for each Share is one pence (being the nominal value of a Share);
• (c) the maximum price (excluding expenses) which may be paid for each Share is the higher of: (i) 105 per cent. of the average of the middle market quotations for the Shares as derived from the London Stock Exchange Daily Official List for the five Business Days immediately preceding the day on which the share is contracted to be purchased; and (ii) an amount equal to the higher of the price of the last independent trade of a Share and the highest current independent bid for a Share as derived from the London Stock Exchange Trading System; and
• (d) the authority shall expire on 31 July 2015 or, if earlier, at the end of the annual general meeting of the Company to be held in 2015 so that the Company may, before the expiry of the authority enter into a contract to purchase Shares which will or may be executed wholly or partly after the expiry of such authority;
• 1.3.5 the Company was authorised in accordance with the Articles, until the Company's next annual general meeting, to call general meetings on 14 clear days' notice;
• 1.3.6 the Company and all companies that are its subsidiaries at any time up to the end of the annual general meeting of the Company to be held in 2015, were authorised, in aggregate, to:
• (a) make political donations to political parties and/or independent election candidates not exceeding £100,000 in total;
• (b) make political donations to political organisations other than political parties not exceeding £100,000 in total; and
• (c) incur political expenditure not exceeding £100,000 in total.

For the purposes of this authority the terms "political donation", "political parties", "independent election candidates", "political organisation" and "political expenditure" have the meanings given by sections 363 to 365 of the Act.

The Company notes that it is not its policy to make political donations and that it has no intention of using the authority for that purpose.

1.4 Articles of Association relating to the Shares

The Articles of Association of the Company (the "Articles") include the following provisions relating to the Shares.

1.4.1 Share rights

Subject to the provisions of the Act, and without prejudice to any rights attached to any existing shares or class of shares: (i) any share may be issued with such rights or restrictions as the Company may by ordinary resolution determine or, subject to and in default of such determination, as the Board shall determine; and (ii) shares may be issued which are to be redeemed or are liable to be redeemed at the option of the Company or the holder and the Board may determine the terms, conditions and manner of redemption of such shares provided that it does so prior to the allotment of those shares.

1.4.2 Voting rights

Subject to any rights or restrictions attached to any shares, on a show of hands every member who is present in person shall have one vote and on a poll every member present in person or by proxy shall have one vote for every share of which he is the holder.

No member shall be entitled to vote at any general meeting in respect of a share unless all moneys presently payable by him in respect of that share have been paid.

If at any time the Board is satisfied that any member, or any other person appearing to be interested in shares held by such member, has been duly served with a notice under section 793 of the Act and is in default for the prescribed period in supplying to the Company the information thereby required, or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to such member direct that, in respect of the shares in relation to which the default occurred, the member shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares or on a poll.

1.4.3 Dividends and other distributions

Subject to the provisions of the Act, the Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Board. Except as otherwise provided by the rights and restrictions attached to shares, all dividends shall be declared and paid according to the amounts paid up on the shares on which the dividend is paid, but no amount paid on a share in advance of the date on which a call is payable shall be treated for these purposes as paid on the share.

Subject to the provisions of the Act, the Board may pay interim dividends if it appears to the Board that they are justified by the profits of the Company available for distribution.

If the share capital is divided into different classes, the Board may also pay, at intervals determined by it, any dividend payable at a fixed rate if it appears to the Board that the profits available for distribution justify the payment. If the Board acts in good faith it shall not incur any liability to the holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an interim dividend on any shares having deferred or non-preferred rights.

No dividend or other moneys payable in respect of a share shall bear interest against the Company unless otherwise provided by the rights attached to the share.

Except as otherwise provided by the rights and restrictions attached to any class of shares, all dividends will be declared and paid according to the amounts paid-up on the shares on which the dividend is paid.

The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares the right to elect to receive shares, credited as fully paid, by way of scrip dividend instead of cash in respect of the whole (or some part, to be determined by the Board) of all or any dividend.

Any dividend which has remained unclaimed for 12 years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company.

Except as provided by the rights and restrictions attached to any class of shares, the holders of the Company's shares will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and any other sanction required by the Insolvency Act 1986, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or different classes of members.

1.4.4 Variation of rights

Rights attached to any class of shares may be varied or abrogated with the written consent of the holders of three-quarters in nominal value of the issued shares of the class, or the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.

1.4.5 Lien and forfeiture

The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys payable to the Company (whether presently or not) in respect of that share. The Company may sell, in such manner as the Board determines, any share on which the Company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after notice has been sent to the holder of the share demanding payment and stating that if the notice is not complied with the share may be sold.

The Board may from time to time make calls on the members in respect of any moneys unpaid on their shares. Each member shall (subject to receiving at least 14 clear days' notice) pay to the Company the amount called on the member's shares. If a call or any instalment of a call remains unpaid in whole or in part after it has become due and payable, the board may give the person from whom it is due not less than 14 clear days' notice requiring payment of the amount unpaid together with any interest which may have accrued and any costs, charges and expenses incurred by the Company by reason of such non-payment. The notice shall name the place where payment is to be made and shall state that if the notice is not complied with the shares in respect of which the call was made will be liable to be forfeited.

1.4.6 Transfer of shares

A member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the Board may approve. An instrument of transfer shall be signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the transferee. An instrument of transfer need not be under seal unless expressly required otherwise.

The Board may, in its absolute discretion, refuse to register the transfer of a certificated share which is not a fully paid share, provided that the refusal does not prevent dealings in shares in the Company from taking place on an open and proper basis. The Board may also refuse to register the transfer of a certificated share unless the instrument of transfer:

• 1.4.6.1 is lodged, duly stamped (if stampable), at the office or at another place appointed by the Board accompanied by the certificate for the share to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer;
• 1.4.6.2 is in respect of one class of share only; and

1.4.6.3 is in favour of not more than four transferees.

If the Board refuses to register a transfer of a share in certificated form, it shall send the transferee notice of its refusal within two months after the date on which the instrument of transfer was lodged with the Company.

No fee shall be charged for the registration of any instrument of transfer or other document relating to or affecting the title to a share.

Subject to the provisions of the Regulations, the Board may permit the holding of shares in any class of shares in uncertificated form and the transfer of title to shares in that class by means of a relevant system and may determine that any class of shares shall cease to be a participating security.

1.4.7 Alteration of share capital

Subject to the Act, the Company may by ordinary resolution increase, consolidate or sub-divide its share capital.

2. Directors' and Senior Managers' interests

2.1 The Directors and Senior Managers do not hold any direct interests in Shares in the Company at the date of the Prospectus. On the day of Admission, the voting rights in the share capital of the Company of the Directors and Senior Managers (all of whom, unless otherwise stated, are beneficial or are interests of a person connected with a Director or a Senior Manager) will be as follows (assuming that the Offer Price is set at the mid-point of the Price Range):

			Percentage of issued ordinary share capital
Director / Senior Managers(1)	Amount	Number of Shares(2)(3)	on the day of Admission(3)
Andrew Goodsell	£5,000,000	2,325,581	0.2%
Lance Batchelor(4)	£4,000,000	1,860,465	0.2%
Stuart Howard	£3,000,000	1,395,349	0.1%
Gareth Williams(5)	£60,000	27,907	0.0%
Darryn Gibson	£1,000,000	465,116	0.0%
Tim Pethick	£2,000,000	930,233	0.1%
Roger Ramsden	£2,000,000	930,233	0.1%
David Slater	£2,000,000	930,233	0.1%
Andrew Strong	£2,000,000	930,233	0.1%

(1) Certain of the Directors and Senior Managers are also shareholders of Acromas and are owed subordinated shareholder debt by an Acromas subsidiary. See "Interests of Directors, Senior Managers and employees of the Group in Acromas" in Part 8 "Directors, Senior Managers and Corporate Governance".

(2) In the case of Andrew Goodsell, Stuart Howard, Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong, these interests in Shares (the number of which will be set by reference to the final Offer Price) comprise nil cost options to be granted on the day of Admission.

(3) Assuming the Offer Price is set at the mid-point of the Price Range.

(4) In the case of Lance Batchelor, his interest in Shares comprises an option with an exercise price set at the Offer Price to be granted under the LTIP on the day of Admission.

(5) Gareth Williams intends to subscribe for Shares with a value of £60,000 at the Offer Price. The Company intends to meet this subscription for Shares in full.

2.2 In so far as is known to the Directors, the following are the interests (within the meaning of Part VI of the Act) (other than interests held by the Directors) which represent, or will represent, directly or indirectly, three per cent. or more of the issued share capital of the Company on the date of this document and on the day of Admission assuming various points of the Price Range and no exercise of the Over-allotment Option:

Admission			Immediately following Admission(1)
Number of	issued		Percentage of issued
shares	share capital	shares	ordinary share capital
800,000,000	100	653,591,327	61%
800,000,000	100	800,000,000	72%
800,000,000	100	507,182,653	49%
	ordinary	Immediately prior to Percentage of ordinary	Number of ordinary

(1) Assuming no exercise of the Over-allotment Option. If the Over-allotment Option is exercised in full, Acromas will sell further Shares, representing 15 per cent. of the Offer Size.

The business address of the Selling Shareholder is Enbrook Park, Folkestone, Kent CT20 3SE.

Save as disclosed above, in so far as is known to the Directors, there is no other person who is or will be immediately following Admission, directly or indirectly, interested in three per cent. or more of the issued share capital of the Company, or of any other person who can, will or could, directly or indirectly, jointly or severally, exercise control over the Company. The Directors have no knowledge of any arrangements the operation of which may at a subsequent date result in a change of control of the Company. None of the Company's major shareholders have or will have different voting rights attached to the shares they hold in the Company.

2.3 No Director has or has had any interest in any transactions which are or were unusual in their nature or conditions or are or were significant to the business of the Group or any of its subsidiary undertakings and which were effected by the Group or any of its subsidiaries during the current or immediately preceding financial year or during an earlier financial year and which remain in any respect outstanding or unperformed.

2.4 There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of the Directors.

3. Underwriting arrangements

3.1 Underwriting Agreement

On 8 May 2014 the Company, the Directors, the Selling Shareholder and the Banks entered into the Underwriting Agreement. The Underwriting Agreement is conditional upon Admission occurring no later than 8.00 a.m. on 29 May 2014 or such later time or date as the Company, the Selling Shareholder and the Joint Global Co-ordinators (on behalf of the Underwriters) may agree in writing.

Pursuant to the Underwriting Agreement:

• 3.1.1 the Company has agreed, subject to the determination of the Offer Price and certain other conditions, to allot and issue, at the Offer Price, the New Shares to be issued in connection with the Offer;
• 3.1.2 the Selling Shareholder has agreed, subject to the determination of the Offer Price and certain other conditions, to sell the Shares in the Offer at the Offer Price;
• 3.1.3 the Underwriters have severally agreed, subject to the determination of the Offer Price and certain other conditions, to use reasonable endeavours to procure subscribers or, failing which, themselves to subscribe for the New Shares (in such proportions as are set out in the Underwriting Agreement) and to procure purchasers or purchase themselves the Existing Shares pursuant to the Offer (in such proportions as are set out in the Underwriting Agreement);
• 3.1.4 the Underwriters will deduct from the proceeds of the Institutional Offer to the Company a commission of 1.25 per cent. of the product of the Offer Price and the number of New Shares allotted pursuant to the Institutional Offer and from the proceeds of the Institutional Offer to the Selling Shareholder a commission of 1.25 per cent. of the product of the Offer Price and the number of Shares sold in the Institutional Offer (including following any exercise of the Over-allotment Option);
• 3.1.5 the Underwriters will deduct from the proceeds of the Intermediaries Offer to the Company a commission of 1.25 per cent. of the product of the Offer Price and the number of New Shares allotted pursuant to the Intermediaries Offer and from the proceeds of the Intermediaries Offer to the Selling Shareholder a commission of 1.25 per cent. of the product of the Offer Price and the number of Shares sold in the Intermediaries Offer (including following any exercise of the Over-allotment Option);
• 3.1.6 the Underwriters will deduct from the proceeds of the Direct Retail Offer to the Company a commission of 0.5 per cent. of the product of the Offer Price and the number of New Shares allotted pursuant to the Direct Retail Offer and from the proceeds of the Direct Retail Offer to the Selling Shareholder a commission of 0.5 per cent. of the product of the Offer Price and the number of Shares sold in the Direct Retail Offer (including following any exercise of the Over-allotment Option);
• 3.1.7 in addition, the Company may, in its absolute discretion, pay an additional commission of up to 1.75 per cent. of the product of the Offer Price and the number of New Shares and the Selling Shareholder may, in its absolute discretion, pay an additional commission of up to 1.75 per cent. of the product of the Offer Price and the number of Existing Shares sold in the Offer (including following any exercise of the Over-allotment Option);
• 3.1.8 in respect of the Intermediaries Offer, the Company and the Underwriters have agreed that a commission of 0.75 per cent. of the amount equal to the Offer Price multiplied by the number of Shares allocated to and paid for by an Intermediary (the "Intermediary Fee"), together with an amount equal to any value added tax payable thereon, shall be paid to each Intermediary by the settlement manager (on behalf of the Company) out of the aggregate proceeds to be received by the Company, in connection with the Offer. The aggregate commissions payable to the Underwriters by the Company in connection with the Offer shall be reduced by the aggregate of the Intermediary Fee paid to each Intermediary;

• 3.1.9 the obligations of the Underwriters to use reasonable endeavours to procure subscribers and/or purchasers for or, failing which, themselves to subscribe for or purchase Shares on the terms of the Underwriting Agreement are subject to certain conditions. These conditions include the absence of any breach of representation or warranty under the Underwriting Agreement, the execution of the pricing memorandum in respect of the Offer Price and Admission taking place at 8:00 am on 29 May 2014 (or such later date as the Company, the Selling Shareholder and the Joint Global Co-ordinators may agree). In addition, the Joint Global Co-ordinators have the right to terminate the Underwriting Agreement, exercisable in certain circumstances, prior to Admission;

• 3.1.10 Merrill Lynch International, as Stabilising Manager, has been granted the Over-allotment Option by the Selling Shareholder pursuant to which it may purchase or procure purchasers for Over-allotment Shares (representing up to 15 per cent. of the total number of Shares that are subject to the Offer) at the Offer Price for the purposes of covering short positions arising from over-allocations, if any, in connection with the Offer and/or from sales of Shares, if any, effected during the stabilising period. Except as required by law or regulation, neither the Stabilising Manager, nor any of its agents, intends to disclose the extent of any over-allotments and/or stabilising transactions conducted in relation to the Offer. The number of Over-allotment Shares to be transferred pursuant to the Overallotment Option, if any, will be determined not later than 22 June 2014. Settlement of any purchase of Over-allotment Shares will take place shortly after such determination (or if acquired on Admission, at Admission). If any Over-allotment Shares are acquired pursuant to the Over-allotment Option, the Selling Shareholder will be committed to pay to the Selling Shareholder, or procure that payment is made to it of, an amount equal to the Offer Price multiplied by the number of Over-allotment Shares purchased from such Selling Shareholder, less commissions and expenses;

• 3.1.9 the Company has agreed that, subject to certain exceptions, during the period of 180 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), issue, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing;
• 3.1.10 the Selling Shareholder has agreed that, subject to certain exceptions (including to meet tax liabilities incurred as a result of the Offer), during the period of 180 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing;
• 3.1.11 each Director and Senior Manager has agreed that, subject to certain exceptions (including to meet tax liabilities incurred as a result of the Offer or by share awards received in connection with Admission), during the period of 365 days from the date of the Prospectus, it will not, without the prior written consent of a majority of the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing;
• 3.1.12 the Selling Shareholder has agreed to pay any stamp duty and/or stamp duty reserve tax arising on the sale of Shares;
• 3.1.13 the Company has agreed to pay the costs, charges, fees and expenses of the Offer (together with any related value added tax);
• 3.1.14 each of the Company, the Directors and the Selling Shareholder has given certain representations, warranties and undertakings, subject to certain limits, to the Banks and the Company has given an indemnity to the Banks on customary terms; and
• 3.1.15 the parties to the Underwriting Agreement have given certain covenants to each other regarding compliance with laws and regulations affecting the making of the Offer in relevant jurisdictions.

3.2 Stock lending agreement

In connection with settlement and stabilisation, Merrill Lynch International, as Stabilising Manager, has entered into a stock lending agreement with the Selling Shareholder. Pursuant to this agreement, the Stabilising Manager will be able to borrow up to a maximum of 15 per cent. of the total number of Shares comprised in the Offer (excluding the existing Shares subject to the Over-allotment Option) on Admission for the purposes, amongst other things, of allowing the Stabilising Manager to settle, on Admission, overallotments, if any, made in connection with the Offer. If the Stabilising Manager borrows any Shares pursuant to the stock lending agreement, it will be required to return equivalent securities to the Selling Shareholder by no later than the third business day after the date that is the 30th day after the commencement of conditional dealings of the Shares on the London Stock Exchange.

4. UK taxation

The following statements are intended only as a general guide to certain UK tax considerations and do not purport to be a complete analysis of all potential UK tax consequences of acquiring, holding or disposing of Shares. They are based on current UK legislation and what is understood to be the current practice of HMRC as at the date of this Prospectus, both of which may change, possibly with retroactive effect. They also assume that UK legislation that has been announced as at the date of this Prospectus, including the Finance (No.2) Bill published on 27 March 2014, will be enacted in the form of the most recently published draft.

These statements apply only to Shareholders who are resident (and, in the case of individuals, domiciled) for tax purposes in (and only in) the UK (except insofar as express reference is made to the treatment of non-UK residents), who hold their Shares as an investment (other than under an individual savings account) and who are the absolute beneficial owner of both the Shares and any dividends paid on them.

The tax position of certain categories of Shareholders who are subject to special rules (such as persons acquiring their Shares in connection with employment, dealers in securities, insurance companies and collective investment schemes or those who hold 10 per cent. or more of the Shares) is not considered.

Prospective investors who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the UK are strongly recommended to consult their own professional advisors.

4.1 Taxation of Dividends

The Company is not required to withhold tax when paying a dividend. Liability to tax on dividends paid by the Company will depend upon the individual circumstances of a Shareholder.

4.1.1 UK resident individual shareholders

An individual Shareholder who is resident for tax purposes in the UK and who receives a dividend from the Company will generally be entitled to a tax credit equal to one-ninth of the amount of the dividend received, which is equivalent to 10 per cent. of the aggregate of the dividend received and the tax credit (the "gross dividend"), and will be subject to income tax on the gross dividend. An individual UK resident Shareholder who would otherwise be subject to income tax on the gross dividend at the basic rate only will be liable to tax on the gross dividend at the rate of 10 per cent., so that the tax credit will satisfy the income tax liability of such a Shareholder in full.

An individual UK resident Shareholder who is subject to income tax on the gross dividend at the higher rate will be liable to income tax on the gross dividend at the rate of 32.5 per cent. to the extent that such sum, when treated as the top slice of that Shareholder's income, exceeds the threshold for higher rate income tax but falls below the threshold for the additional rate of income tax. After taking into account the 10 per cent. tax credit, a higher rate taxpayer will therefore be liable to additional income tax of 22.5 per cent. of the gross dividend, equal to 25 per cent. of the cash dividend.

An individual UK resident Shareholder who is subject to income tax at the additional rate will be subject to tax on the gross dividend at 37.5 per cent. to the extent that, when treated as the top slice of that Shareholder's income, the gross dividend exceeds the threshold for the additional rate. After taking into account the 10 per cent. tax credit, an additional rate taxpayer will be liable to additional income tax of 27.5 per cent. of the gross dividend, equal to 30.6 per cent. of the net dividend.

Where the tax credit exceeds the Shareholder's tax liability, the Shareholder (whether subject to income tax at the basic rate, the higher rate or the additional rate) cannot claim repayment of the tax credit from HMRC.

4.1.2 UK resident corporate shareholders

It is likely that most dividends paid on the Shares to UK resident corporate Shareholders would fall within one or more of the classes of dividend qualifying for exemption from corporation tax. However, it should be noted that the exemptions are not comprehensive and are subject to anti-avoidance rules. Shareholders within the charge to corporation tax should consult their own professional advisers.

4.1.3 UK resident exempt shareholders

UK resident Shareholders who are not liable to UK tax on dividends, including pension funds and charities, are not entitled to claim repayment of the tax credit.

4.1.4 Non-UK resident shareholders

Shareholders who are resident outside the UK for tax purposes will not generally be able to claim repayment of any part of the tax credit attaching to dividends received from the Company, although this will depend on the existence and terms of any double taxation convention between the UK and the country in which such Shareholder is resident. A Shareholder resident outside the UK may also be subject to taxation on dividend income under local law. A Shareholder who is resident outside the UK for tax purposes should consult his own tax adviser concerning his tax position on dividends received from the Company.

4.2 Taxation of Disposals

A disposal or deemed disposal of Shares by a Shareholder who is resident in the UK for tax purposes may, depending upon the Shareholder's circumstances and subject to any available exemption or relief (such as the annual exempt amount for individuals and indexation for corporate shareholders), give rise to a chargeable gain or an allowable loss for the purposes of UK taxation of capital gains.

Shareholders who are not resident in the UK will not generally be subject to UK taxation of capital gains on the disposal or deemed disposal of Shares unless they are carrying on a trade, profession or vocation in the UK through a branch or agency (or, in the case of a corporate Shareholder, a permanent establishment) in connection with which the Shares are used, held or acquired.

An individual Shareholder who has ceased to be resident for tax purposes in the UK or is treated as resident outside the UK for the purposes of a double tax treaty (a "Treaty non-resident") for a period of five years or less (or, for departures before 6 April 2013, ceases to be resident or ordinarily resident or becomes Treaty non-resident for a period of less than five tax years) and who disposes of all or part of his Shares during that period may be liable to capital gains tax on his return to the UK, subject to any available exemptions or reliefs.

4.3 Taxation treatment of Free Shares acquired in the Customer Offer

If a Shareholder receives one or more Free Shares pursuant to the terms of Shares acquired in the Customer Offer, then for the purposes of UK taxation of chargeable gains that receipt should give rise to a part disposal by the Shareholder of the Shares in respect of which the Free Shares were acquired (the "Original Shareholding"). The deemed disposal may give rise to a chargeable gain or allowable loss for the Shareholder, depending on the Shareholder's circumstances.

However, if, at the time at which they are received, the value of the Free Shares is "small" compared to the value of the Original Shareholding, and the Shareholder's allowable expenditure (base cost) in the Original Shareholding exceeds the value of the Free Shares, then the Shareholder should be entitled to make a claim for the purposes of UK taxation on chargeable gains to the effect that:

• (i) the receipt of Free Shares will not be treated as a part disposal; and
• (ii) instead, the Shareholder's base cost in the Original Shareholding will be reduced by the value of the Free Shares at the time of their receipt (which will be relevant on a future disposal of the Original Shareholding).

HMRC's published practice indicates that it will regard the value of the Free Shares as "small" for these purposes if, at the time at which they are acquired, their value is no more than £3,000, or their value is no more than five per cent. of the value of the Original Shareholding (whether or not it is also no more than £3,000).

Individual Shareholders should note that if all or part of an individual Shareholder's capital gains tax annual exempt amount in the tax year in which the Free Shares are received would otherwise go unused, it may be to the Shareholder's advantage not to make the claim referred to above (since making the claim results in a reduction in the base cost available on any future disposal). The annual exempt amount for the tax year 2014/15 will be £11,000.

4.4 Taxation treatment of Free Shares acquired in the Employee Offer

If an Eligible Employee receives one or more Free Shares pursuant to the terms of Shares acquired in the Employee Offer then, for the purposes of UK taxation, that receipt will normally give rise to earnings subject to income tax and National Insurance Contributions for the Eligible Employee.

The Company or Group company that employs the Eligible Employee will normally be required to collect the income tax and National Insurance Contributions chargeable on the Free Shares via PAYE, even if the Eligible Employee has ceased employment by the time he receives the Free Shares.

It is currently intended that any income tax and National Insurance Contributions arising on the Free Shares will be collected from the salary of an Eligible Employee who is still employed by the Group when he receives those Shares. Eligible Employees who have ceased employment must make sufficient payment to the appropriate company to cover the tax liability arising before the Free Shares will be released to them.

If an Eligible Employee sells the Free Shares immediately on acquisition, no further UK taxation should arise. If the Eligible Employee retains the Free Shares and sells them at a later date, capital gains tax may be due on any increase in value of the Free Shares from the date of their receipt to the date of their disposal.

4.5 Stamp duty and Stamp Duty Reserve Tax ("SDRT")

4.5.1 The Offer

The stamp duty and SDRT treatment of the subscription or purchase of Shares under the Offer will be as follows:

• (a) The issue of Shares direct to persons acquiring Shares pursuant to the Offer will not generally give rise to stamp duty or SDRT.
• (b) The transfer of, or agreement to transfer, Shares sold by the Selling Shareholder under the Offer will generally give rise to a liability to stamp duty and/or SDRT at a rate of 0.5 per cent. of the Offer Price (in the case of stamp duty, rounded up to the nearest multiple of £5). The Selling Shareholder has agreed to meet such liability. An exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions in respect of which the aggregate amount or value of the consideration exceeds £1,000.

4.5.2 Subsequent Transfers

Stamp duty at the rate of 0.5 per cent. (rounded up to the next multiple of £5) of the amount or value of the consideration given is generally payable on an instrument transferring Shares. As noted above, an exemption from stamp duty is available on an instrument transferring Shares where the amount or value of the consideration is £1,000 or less, and it is certified on the instrument that the transaction effected by the instrument does not form part of a larger transaction or series of transactions in respect of which the aggregate amount or value of the consideration exceeds £1,000. Alternatively, a charge to SDRT will arise on an unconditional agreement to transfer Shares (at the rate of 0.5 per cent. of the amount or value of the consideration payable). However, if within six years of the date of the agreement becoming unconditional an instrument of transfer is executed pursuant to the agreement, and stamp duty is paid on that instrument, any SDRT already paid will be refunded (generally, but not necessarily, with interest) provided that a claim for repayment is made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp duty or SDRT is generally satisfied by the purchaser or transferee.

4.5.3 Shares held through CREST

Paperless transfers of Shares within CREST are generally liable to SDRT, rather than stamp duty, at the rate of 0.5 per cent. of the amount or value of the consideration. CREST is obliged to collect SDRT on relevant transactions settled within the system. The charge is generally borne by the purchaser. Under the CREST system, no stamp duty or SDRT will arise on a transfer of Shares into the system unless such a transfer is made for a consideration in money or money's worth, in which case a liability to SDRT (usually at a rate of 0.5 per cent.) will arise.

4.5.4 Shares held through Clearance Systems or Depositary Receipt Arrangements

Special rules apply where Shares are issued or transferred to, or to a nominee or agent for, either a person whose business is or includes issuing depositary receipts within section 67 or section 93 of the Finance Act 1986 or a person providing a clearance service within section 70 or section 96 of the Finance Act 1986, under which SDRT or stamp duty may be charged at a rate of 1.5 per cent. Following litigation, HMRC have confirmed that they will no longer seek to apply the 1.5 per cent. SDRT charge on the issue of shares into a clearance service or depositary receipt arrangement, on the basis that the charge is not compatible with EU law. HMRC's view is that the 1.5 per cent. SDRT or stamp duty charge will continue to apply to transfers of shares into a clearance service or depositary receipt arrangement unless they are an integral part of an issue of share capital. This view is currently being challenged in further litigation. Accordingly, specific professional advice should be sought before incurring the cost of the 1.5 per cent. stamp duty or SDRT charge in any circumstances.

The statements in this section 4.5.4 apply to any holders of Shares irrespective of their residence, summarise the current position and are intended as a general guide only. Special rules apply to agreements made by, amongst others, intermediaries.

4.6 Inheritance Tax

The Shares will be assets situated in the UK for the purposes of UK inheritance tax. A gift or settlement of such assets by, or on the death of, an individual holder of such assets may (subject to certain exemptions and reliefs) give rise to a liability to UK inheritance tax even if the holder is neither domiciled in the UK nor deemed to be domiciled there under certain rules relating to long residence or previous domicile. For inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to gifts where the donor reserves or retains some benefit.

Special rules also apply to close companies and to trustees of settlements who hold Shares, bringing them within the charge to inheritance tax. Shareholders should consult an appropriate tax adviser if they make a gift or transfer at less than market value or intend to hold any Shares through trust arrangements.

5. US federal income taxation

The following discussion is a general summary based on present law of certain US federal income tax consequences of the acquisition, ownership and disposition of Shares. The discussion is not a complete description of all tax considerations that may be relevant. It applies only to US Holders (as defined below) that acquire Shares in the Offer, hold Shares as capital assets and use the US dollar as their functional currency. The discussion is a general summary; it is not a substitute for tax advice. It does not address the tax treatment of investors subject to special rules, such as banks or other financial institutions, tax-exempt entities, insurance companies, dealers, traders in securities that elect to mark-to-market, investors liable for alternative minimum tax, US expatriates, investors that directly, indirectly or constructively own 10 per cent. or more of the Company's voting stock, individual retirement accounts and other tax-deferred accounts, real estate investment trusts or investors that hold Shares as part of a straddle, hedging, conversion or other integrated transaction. It also does not address US state and local or non-US tax considerations.

THE STATEMENTS ABOUT US FEDERAL TAX CONSIDERATIONS ARE MADE TO SUPPORT THE MARKETING OF THE SHARES. NO TAXPAYER CAN RELY ON THEM TO AVOID TAX PENALTIES. EACH PROSPECTIVE PURCHASER SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR ABOUT THE TAX CONSEQUENCES UNDER ITS OWN PARTICULAR CIRCUMSTANCES OF INVESTING IN THE SHARES UNDER THE LAWS OF THE UNITED KINGDOM, THE UNITED STATES AND ITS CONSTITUENT JURISDICTIONS AND ANY OTHER JURISDICTIONS WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION.

As used here, a "US Holder" means a beneficial owner of the Shares that is for US federal income tax purposes (i) a citizen or individual resident of the United States, (ii) a corporation created or organised under the laws of the United States or its political subdivisions, (iii) a trust subject to the control of one or more US persons and the primary supervision of a US court and (iv) an estate the income of which is subject to US federal income tax without regard to its source.

The US federal income tax treatment of a partner in a partnership that holds Shares will depend on the status of the partner and the activities of the partnership. Partnerships should consult their tax advisors concerning the US federal income tax consequences to their partners of the acquisition, ownership and disposition of Shares by the partnership.

5.1 Dividends

Distributions on Shares will generally be dividend income from foreign sources. The dividends will not be eligible for the dividends-received deduction available to US corporations. Dividends received by eligible non-corporate US Holders, however, should be taxed at the preferential rate applicable to qualified dividend income if the Company qualifies for the benefits of the income tax treaty between the United States and the United Kingdom (the "Treaty") and the Company is not a passive foreign investment company ("PFIC") in the year of distribution or the Company's preceding tax year.

Dividends paid in foreign currency will be included in income in a US dollar amount based on the exchange rate in effect on the day the dividends are actually or constructively received by the US Holder, whether or not the currency is converted into US dollars at that time. A US Holder's tax basis in the foreign currency will equal the US dollar value on the date of receipt. Generally, any gain or loss on a subsequent conversion or other disposition of the foreign currency for a different US dollar amount will be exchange gain or loss and will be treated as US source ordinary income or loss for foreign tax credit limitation purposes. If dividends received in foreign currency are converted into US dollars on the day they are received, the US Holder generally will not be required to recognise foreign currency gain or loss in respect of the dividend income.

5.2 Dispositions

A US Holder generally will recognise capital gain or loss on the sale, exchange or other disposition of Shares equal to the difference between the US dollar value of the amount realised and the US Holder's tax basis in the Shares. A US Holder's adjusted tax basis in the Shares will generally be the US dollar cost of the Shares. The US dollar cost of a Share purchased with foreign currency generally will be the US dollar value of the purchase price paid in the Offer. Any gain or loss generally will be treated as arising from US sources. The gain or loss will be long-term capital gain or loss if the US Holder's holding period exceeds one year. Deductions for capital loss are subject to significant limitations.

A US Holder that receives foreign currency on the sale, exchange or other disposition of the Shares will realise an amount equal to the US dollar value of the foreign currency received at the spot rate on the date of sale, exchange or other disposition (or in the case of Shares traded on an "established securities market" that are sold by a cash basis or electing accrual basis taxpayer, at the spot rate on the settlement date). A US Holder will recognise currency gain or loss if the US dollar value of the currency received at the spot rate on the settlement date differs from the amount realised. A US Holder will have a tax basis in the foreign currency received equal to its US dollar value at the spot rate on the settlement date. Any currency gain or loss realised on the settlement date or on a subsequent conversion of the foreign currency into US dollars will be US source ordinary income or loss for foreign tax credit limitation purposes. However, if such non-US currency is converted into US dollars on the date received by the US Holder, the US Holder generally should not be required to recognise any gain or loss on such conversion.

5.3 Passive Foreign Investment Company

Based on the Company's income, assets and business activities, the Company believes that it is not and has not been classified as a PFIC for US federal income tax purposes for the current or prior taxable year and will not be classified as a PFIC in the foreseeable future. Whether the Company is a PFIC must be determined annually and will depend on the Company's activities, its gross income and the nature and quarterly market value of its assets. A non-US corporation will be considered a PFIC for a taxable year if, taking into account the income and assets of 25 per cent. or more owned subsidiaries, either (i) at least 75 per cent. of its gross income is passive income or (ii) at least 50 per cent. of the quarterly average market value of its assets is attributable to assets that produce or are held for the production of passive income. For these purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC rules provide that income derived in the active conduct of an insurance business by a corporation which is predominantly engaged in an insurance business and which would be taxed as an insurance company if it were a US corporation is not treated as passive income. Income attributable to financial reserves in excess of the reasonable needs of the insurance business will not be treated as active income under the insurance company exception. The Company believes that its income from and assets held in connection with its insurance business segment qualify for the insurance company exception so that its reserves and other assets held in connection with its insurance business should not be treated as passive. Because the market value of the Company's assets generally will be determined in large part by the market price of the Shares, which is likely to fluctuate after the Offer, there can be no assurance that the Company will not be a PFIC for any taxable year.

If the Company were a PFIC in any taxable year during which a US Holder owns Shares, the US Holder generally would be subject in that and subsequent years to additional taxes (including taxation at ordinary income rates and an interest charge) on any "excess distributions" received from the Company and on any gain realised from a sale or other disposition of the Shares (regardless whether the Company continued to be a PFIC). A US Holder would have an excess distribution to the extent that distributions on Shares during a taxable year exceed 125 per cent. of the average amount received during the three preceding taxable years (or, if shorter, the US Holder's holding period). To compute the tax on excess distributions or any gain, (i) the excess distribution or gain would be allocated ratably over the US Holder's holding period, (ii) the amount allocated to the current taxable year and any taxable year before the Company became a PFIC would be taxed as ordinary income in the current year and (iii) the amount allocated to other taxable years would be taxed at the highest applicable marginal rate in effect for each year (i.e., at ordinary income tax rates) and an interest charge would be imposed to recover the deemed benefit from the deferred payment of the tax attributable to each earlier year. In addition, dividends on the Shares also would not be eligible for the preferential tax rate applicable to qualified dividend income.

Moreover, under certain attribution rules, if the Company were a PFIC, US Holders of Shares would be deemed to own their proportionate share of any member of the Group that is a PFIC (a "Lower-tier PFIC"), and would be subject to US federal income tax on excess distributions on the shares of a Lower-tier PFIC and gain recognized by the Group on disposition of shares of a Lower-tier PFIC, both as if such US person directly held the shares of such Lower-tier PFIC.

A US Holder may be able to avoid some of the adverse impacts of the PFIC rules described above with respect to Shares by electing to mark the Shares to market annually. The election is available only if Shares are traded in more than de minimis quantities on the London Stock Exchange. Any gain from marking Shares to market or from disposing of them would be ordinary income. Any loss from marking Shares to market would be recognised only to the extent of unreversed gains previously included in income. Loss from marking Shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of mark-to-market gains previously included in income. Each US Holder should ask its own tax advisor whether a mark-to-market election is available or desirable. A valid mark-to-market election cannot be revoked without the consent of the US Internal Revenue Service ("IRS") unless the Shares cease to be marketable.

A US Holder would not be able to avoid the tax consequences described above by electing to treat the Company as a qualified electing fund ("QEF") because the Company does not intend to provide US Holders with the information that would be necessary to make a QEF election with respect to the Shares.

US Holders should consult their own tax advisors concerning the Company's possible PFIC status and the consequences to them if the Company were a PFIC for any taxable year.

5.4 Medicare Surtax on Net Investment Income

Non-corporate US Holders whose income exceeds certain thresholds generally will be subject to a 3.8 per cent. surtax on their "net investment income" (which generally includes, among other things, dividends on, and capital gain from the sale or other taxable disposition of, Shares). US Holders should consult their own tax advisors regarding the possible effect of such tax on their ownership and disposition of Shares.

5.5 Reporting and Backup Withholding

Dividends on Shares and proceeds from the sale, exchange or other disposition of Shares may be reported to the IRS unless the holder establishes a basis for exemption. Backup withholding tax may apply to amounts subject to reporting. Any amount withheld from a payment to a US Holder will be refunded or credited against the holder's US federal income tax liability, if any, provided the required information is timely furnished to the IRS. Prospective holders are urged to consult with their own tax advisors regarding their qualification for exemption from backup withholding and the procedure for establishing an exemption.

Certain US Holders will be required to report to the IRS information with respect to their investment in Shares not held through an account with a financial institution. Investors who fail to report required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding information reporting requirements with respect to their investment in Shares.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN SHARES IN LIGHT OF THE INVESTOR'S OWN CIRCUMSTANCES.

6. Working capital

In the opinion of the Company, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months following the date of this document.

7. Intermediaries

The Intermediaries authorised at the date of this document to use this document in connection with the Intermediaries Offer are:

Name	Address
Beaufort Asset Clearing Services Limited (trading as Beaufort Sharedealing)	131 Finsbury Pavement, London EC2A 1NT
Cornhill Capital Limited	18 St Swithins Lane, 4th Floor, London EC4N 8AD
Dowgate Capital Stockbrokers Limited	Talisman House, Jubilee Walk, Three Bridges, Crawley RH10 1LQ
Hargreave Hale Limited	9-11 Neptune Court, Hallam Way, Blackpool FY4 5LZ
Hargreaves Lansdown Asset Management Limited	One College Square South, Anchor Road, Bristol BS1 5HL
Interactive Investor Trading Limited (trading as Interactive Investor and SharePrice & Trustnet Direct)	21 Mansell Street, London E1 8AA
Killik & Co LLP	46 Grosvenor Street, London W1K 3HN
Midas Investment Management Limited	Arthur House, Chorlton Street, Manchester M1 3FH
Redmayne-Bentley	9 Bond Court, Leeds LS1 2JZ
Reyker Securities Plc	17 Moorgate, London EC2R 6AR
Rowan Dartington & Company Limited	Colston Tower, Colston Street, Bristol BS1 4RD
The Share Centre Limited	Oxford House, Oxford Road, Aylesbury HP21 8SZ

Any new information with respect to financial intermediaries unknown at this time of publication of this document including in respect of: (i) any intermediary financial institution that is appointed by the Company in connection with the Intermediaries Offer after the date of this document following its agreement to adhere to and be bound by the Intermediaries Terms and Conditions, and (ii) any Intermediary that ceases to participate in the Intermediaries Offer, will be made available on the Offer Website at www.saga.co.uk/shares.

Intermediaries are prohibited from charging any fees, charges or commissions to a retail investor for making an application for Shares on behalf of such retail investor in the Intermediaries Offer. However, Intermediaries may charge retail investors a fee for holding the allocated Shares for them (including any fees relating to the opening of an Individual Savings Account or a Self-Invested Personal Pension for that purpose), provided that the Intermediary has disclosed the fees and terms and conditions of providing those services to each retail investor prior to the underlying application being made. Any application made by investors through any Intermediary is subject to the terms and conditions agreed with each Intermediary.

7.1 Intermediaries Terms and Conditions

The Intermediaries Terms and Conditions regulate the relationship between the Company, the Selling Shareholder, the Retail Offer Advisor, the Banks and each of the Intermediaries that is accepted by the Company to act as an Intermediary after making an application for appointment in accordance with the Intermediaries Terms and Conditions.

The Intermediaries Offer is subject to a minimum application amount of £1,000 per application from investors in the United Kingdom, the Channel Islands and the Isle of Man. There is no maximum limit on the monetary amount that underlying applicants may apply to invest in the Intermediaries Offer. All applications will be subject to potential scaling back, on the basis set out below, in the event of oversubscription of the Offer and to all other applicable allocation policies which may be applied to the Offer, and which may be notified by the Receiving Agent in relation to the Offer and/or the Intermediaries Offer.

The Company and the Selling Shareholder have agreed to pay Intermediaries a commission of 0.75 per cent. of the amount equal to the Offer Price multiplied by the aggregate number of, respectively, New Shares subscribed and Existing Shares Sold pursuant to the Intermediaries Offer. The aggregate commissions payable by the Company and the Selling Shareholder to the Underwriters shall be reduced by the amount of such commission paid to the Intermediaries.

7.1.1 Capacity and liability

The Intermediaries have agreed that, in connection with the Intermediaries Offer, they will be acting as agent for retail investors in the United Kingdom, the Channel Islands and the Isle of Man who wish to acquire Shares under the Intermediaries Offer (the "Underlying Applicants"). None of the Company, any of the Selling Shareholder, the Retail Offer Advisor or any of the Banks will have any responsibility for any liability, costs or expenses incurred by any Intermediary.

7.1.2 Eligibility to be appointed as an Intermediary

In order to be eligible to be considered by the Company for appointment as an Intermediary, each intermediary must be:

• (a) authorised by the FCA or the Prudential Regulatory Authority in the United Kingdom; or
• (b) a member firm of the London Stock Exchange conducting business in the Channel Islands or the Isle or Man; or
• (c) in respect of acting as agents for Underlying Applicants in Jersey, authorised by the Jersey Financial Services Commission to carry on the relevant class of investment business in Jersey; or
• (d) a person licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) to carry on restricted activities in respect of category 2 controlled investments under such Law,

and in each case have appropriate permissions, licences, consents and approvals to act as Intermediary in the United Kingdom, Jersey, Guernsey or the Isle of Man, as applicable. Each Intermediary must also:

• (a) be a member of CREST; or
• (b) have arrangements with a clearing firm that is a member of CREST.

Each Intermediary must also, to the extent applicable, conduct its business in the Isle of Man in compliance with the licensing requirements of the Isle of Man Financial Services Act 2008 or any relevant exclusion or exemption therefrom and all other relevant Isle of Man laws and regulations.

7.1.3 Applications for Shares

A minimum of £1,000 per Underlying Applicant will apply. The Intermediaries have agreed not to make more than one application per Underlying Applicant.

Allocations of Shares under the Intermediaries Offer will be at the absolute discretion of the Company and the Selling Shareholder, after consultation with the Joint Bookrunners. If there is excess demand for Shares in the Intermediaries Offer, allocations of Shares may be scaled down to an aggregate value which is less than that applied for. Each Intermediary will be required by the Company to apply the basis of allocation to all allocations to Underlying Applicants who have applied through such Intermediary.

7.1.4 Effect of Intermediaries Offer Application Form

By completing and returning the Intermediaries Offer Application Form, the Intermediary will be deemed to have irrevocably agreed to invest or procure the investment in Shares of the aggregate amount stated on the Intermediaries Offer Application Form or such lesser amounts in respect of which such application may be accepted. The Company, the Selling Shareholder and the Joint Global Co-ordinators reserve the right to reject, in whole or in part, or to scale down, any application for Shares in the Intermediaries Offer.

7.1.5 Commission

Conditional upon Admission, the Company will pay each Intermediary a commission rate of 0.75 per cent. of the aggregate value (based on the final Offer Price) of the Shares allocated to and paid for by such Intermediary.

7.1.6 Information and communications

The Intermediaries have agreed to give certain undertakings regarding the use of information provided to them in connection with the Intermediaries Offer (both prior to and following publication of the Prospectus). The Intermediaries have given certain undertakings regarding their role and responsibilities in the Intermediaries Offer and are subject to certain restrictions on their conduct in connection with the Intermediaries Offer, including in relation to their responsibility for information, communications, websites, advertisements and their communications with clients and the press.

7.1.7 Representations and warranties

The Intermediaries have given representations and warranties that are relevant for the Intermediaries Offer, and have agreed to indemnify the Company, the Selling Shareholder, the Retail Offer Advisor and the Banks against any loss or claim arising out of any breach by them of the Intermediaries Terms and Conditions or as a result of a breach of any duties or obligations under FSMA or under any rules of the FCA or any applicable laws.

The Company and the Selling Shareholder, after consultation with the Joint Bookrunners (on behalf of the Banks) will determine, in their absolute discretion, the final number of Shares to be allocated under the Intermediaries Offer and the basis of allocation of the Shares in the Intermediaries Offer which the Intermediaries will be required to follow. Accordingly, persons who apply to an Intermediary for Shares under the Intermediaries Offer may not receive all of the Shares that they apply for and it is possible that they may not receive any.

8. General

8.1 The fees and expenses to be borne by the Company in connection with Admission including the Banks' commission, the FCA's fees, professional fees and expenses and the costs of printing and distribution of documents are estimated to amount to approximately £37.6 million (including VAT). In addition the Selling Shareholder has agreed to pay its expenses in connection with the sale of Shares including underwriting commissions of up to approximately £9.8 million (assuming that no Over-allotment Shares are acquired pursuant to the Over-allotment option).

8.2 The financial information contained in this document does not amount to statutory accounts within the meaning of section 434(3) of the Act. Full audited accounts have been delivered to the Registrar of Companies for the Group for the period from 1 February 2013 to 31 January 2014, from 1 February 2012 to 31 January 2013 and from 1 February 2011 to 31 January 2012.

8.3 Each New Share is expected to be issued at a premium of 214 pence to its nominal value of one pence, assuming the Offer Price is set at the mid-point of the Offer Price Range.

9. Documents available for inspection

Copies of the following documents will be available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following Admission at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS:

• (a) the Articles of Association of the Company;
• (b) the financial information set out in Part 11 "Historical Financial Information" of the Registration Document together with the related report from Ernst & Young LLP;
• (c) the unaudited pro forma financial information and the report therein by Ernst & Young LLP, which is set out in Part 12 "Unaudited Pro Forma Financial Information" of the Registration Document;
• (d) the independent external actuaries' statement included in Part 13 "Independent External Actuaries' Statement" of the Registration Document from Towers Watson Limited;
• (e) the consent letters referred to in "Consents" in section 15 of Part 14 "Additional Information" of the Registration Document; and
• (f) this document, the Registration Document and the Summary.

Dated: 8 May 2014

PART 9

DEFINITIONS

Definitions

The following definitions apply throughout this document unless the context requires otherwise:

"AA Group"	AA Limited and its consolidated subsidiaries and subsidiary undertakings from time to time
"Acromas"	Acromas Holdings Limited, the ultimate holding company of the Company
"Acromas Shareholders' Agreement"	the agreement between the Charterhouse Funds, the CVC Funds, Permira Funds, Andrew Goodsell and Stuart Howard, among others, dated 18 September 2007 and amended on 28 January 2013 pursuant to which they agreed to regulate their relationship as shareholders of Acromas
"Act"	the Companies Act 2006, as amended
"Admission"	the admission of the Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities
"Application Form"	the form of application for Shares in connection with the Customer Offer, the Non-Customer Offer or the Employee Offer, including an Online Application
"Articles"	the Articles of Association of the Company to be adopted upon Admission
"Banks"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International, Mizuho International plc and UBS Limited
"Board"	the board of directors of the Company
"Business Day"	any day which is not a Saturday or Sunday or a public or bank holiday in England
"Charterhouse Funds"	CCP VII LP No. 1.1, CCP VII LP No. 1.2, CCP VII LP No. 2.1, CCP VII LP No. 2.2, CCP VII Co-investment LP A, CCP VII Co investment LP B, CCP VII Co-investment LP C, CCP VII Co investment LP D, CCP VII Co-investment LP E, Charterhouse Saga LP, CCP VII GmbH & Co. KG, CCP VIII LP No 1.1, CCP VIII LP No 1.2, CCP VIII LP No 2.1, CCP VIII LP No 2.2 and CCP VIII Co investment LP
"Co-Lead Manager"	Mizuho International plc
"Company"	Saga plc
"CREST"	the computerised settlement system operated by Euroclear UK & Ireland Limited to facilitate the transfer of title to shares in uncertificated form
"Customer Application Form"	means the online or hard copy application form pursuant to which the Group's customers apply to subscribe for or purchase Shares in the Customer Offer
"Customer Offer"	means the offer of Shares in the UK, the Channel Islands and the Isle of Man pursuant to the Customer Offer

"Directors"	the Executive Directors and the Non-Executive Directors
"Direct Retail Offer"	means the Customer Offer, the Non-Customer Offer and the Employee Offer
"EEA"	the European Economic Area
"Eligible Customers"	customers eligible for the Customer Offer as defined in, and pursuant to, the terms and conditions of the Customer Offer
"Eligible Employees"	for purposes of the Employee Offer, employees of the Company or one of its subsidiaries as at 2 May 2014 in the UK, Channel Islands or the Isle of Man
"Employee Offer"	means the direct offer of Shares to Eligible Employees as described in, and pursuant to, the terms and conditions of the Employee Offer set out in section 5.4 of Part 15 "Details of the Offer"
"EU"	the European Union
"European Economic Area"	the European Union, Iceland, Norway and Liechtenstein
"Executive Directors"	the executive directors of the Company
"Existing Share Offer Size"	the number of Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Existing Share Offer Size Range"	the range within which the Existing Share Offer Size is currently expected to be set, being between no Shares and 292,817,347 Shares
"Existing Shares"	Shares to be sold as part of the Offer by the Selling Shareholder (excluding, for the avoidance of doubt, the Over-allotment Shares)
"FCA"	the Financial Conduct Authority
"Free Shares"	the Shares to be issued to eligible Shareholders (as bonus shares) on or shortly after the first anniversary of Admission pursuant to the terms of the Customer Offer and the Employee Offer
"FSMA"	the Financial Services and Markets Act 2000
"Governance Code"	the UK Corporate Governance Code issued by the Financial Reporting Council, as amended from time to time
"Group"	the Company and its consolidated subsidiaries and subsidiary undertakings and, prior to the completion of the Reorganisation, Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"HMRC"	HM Revenue and Customs
"IFRS"	International Financial Reporting Standards, as adopted by the European Union
"Institutional Offer"	the offer of Shares to certain institutional and other investors as described in Part 6 "Details of the Offer
"Intermediaries"	the entities listed in section 7 of Part 8 "Additional Information", together with any other intermediary (if any) that is appointed by the Company in connection with the Intermediaries Offer after the date of this document
"Intermediaries Offer"	the offer of Shares to the Intermediaries as described in section 5.3 of Part 6 "Details of the Offer"
"Intermediaries Offer Application Form"	the form of application for Shares in the Intermediaries Offer used by the Intermediaries

"Intermediaries Terms and Conditions"	the terms and conditions on which each Intermediary has agreed to be appointed by the Company to act as an Intermediary in the Intermediaries Offer and pursuant to which Intermediaries may apply for Shares in the Intermediaries Offer, details of which are set out at section 7.1 of Part 8 "Additional Information"
"IRS"	United States Inland Revenue Service
"ISA"	Individual Savings Account
"Joint Bookrunners"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Joint Global Co-ordinators"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International and Merrill Lynch International
"Joint Lead Manager"	Investec Bank plc
"Listing Rules"	the listing rules of the FCA made under section 74(4) of the FSMA
"London Stock Exchange"	London Stock Exchange plc
"Main Market"	the London Stock Exchange's main market for listed securities
"Member State"	a member state of the European Union
"New Share Offer Size"	the number of New Shares to be issued pursuant to the Offer, to be set out in the Pricing Statement
"New Share Offer Size Range"	the range within which the New Share Offer Size is currently expected to be set, being between 224,489,796 New Shares and 297,297,297 New Shares
"New Shares"	new Shares in the Company to be issued as part of the Offer
"Non-Customer Offer"	means the direct offer of Shares to non-Eligible Customer retail investors in the UK, the Channel Islands and the Isle of Man as described in, and pursuant to, the terms and conditions of the Non Customer Offer set out in section 5.2 of Part 6 "Details of the Offer"
"Non-Executive Directors"	the non-executive directors of the Company, including the four directors appointed from Admission
"Offer"	the issue of New Shares by the Company and the sale of Existing Shares by the Selling Shareholder described in Part 6 "Details of the Offer"
"Offer Price"	the price at which each Share is to be issued or sold under the Offer
"Offer Size"	the aggregate of the New Shares to be issued and sold pursuant to the Offer and the Existing Shares to be sold pursuant to the Offer, to be set out in the Pricing Statement
"Offer Website"	www.saga.co.uk/shares
"Official List"	the Official List of the FCA
"Online Application"	an application for Shares in the Retail Offer completed and submitted online on the Offer Website
"Operating Group"	Saga Limited, Saga Holdings Limited, Saga Leisure Limited, Acromas Insurance Company Limited, Nestor Healthcare Group Limited, Allied Healthcare International LLC and their respective subsidiaries and subsidiary undertakings
"Over-allotment Option"	the option granted to the Stabilising Manager by the Selling Shareholder to purchase, or procure purchasers for, additional Shares (representing up to 15 per cent. of the total number of Shares that are subject to the Offer)

"Over-allotment Shares"	the existing Shares the subject of the Over-allotment Option
"PCAOB"	the Public Company Accounting Oversight Board (United States)
"Permira Funds"	Permira Europe III L.P.1, Permira Europe III L.P.2, Permira Europe III GmbH & Co. KG, Permira Europe III Co-investment Scheme and Permira Investments Limited
"Prescribed Application Amount"	the application amount set out in section 5 of Part 6 "Details of the Offer"
"Price Range"	185p to 245p per Share
"Pricing Statement"	the pricing statement to be published on or about 23 May 2014 by the Company detailing the Offer Price and the number of Shares which are the subject of the Offer
"Private Placement Provinces"	the Canadian provinces of Ontario and Quebec
"Prospectus"	the final prospectus approved by the FCA as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA, comprising this document, the Registration Document and the Summary
"Prospectus Directive"	Directive (2003/71/EC)
"Prospectus Directive Amending Directive"	Directive (2010/73/EU)
"qualified institutional buyers" or "QIBs"	has the meaning given by Rule 144A
"Qualified Investors"	persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive
"Receiving Agent"	Capita Asset Services, a trading name of Capita Registrars Limited
"Registrar"	Capita Asset Services, a trading name of Capita Registrars Limited
"Registration Document"	means the Registration Document produced under the Prospectus Rules, which, together with this document and the Summary, constitutes the Prospectus
"Regulation S"	Regulation S under the US Securities Act
"Relationship Agreement"	the relationship agreement entered into between the Company, Acromas, certain general partners of the Charterhouse Funds, the CVC Funds, the Permira Funds, the Selling Shareholder, Andrew Goodsell and Stuart Howard on 8 May 2014 as described in Part 8 "Directors, Senior Managers and Corporate Governance – Relationship Agreement with Acromas and its principal shareholders" of the Registration Document
"Reorganisation"	the group reorganisation completed on 4 March 2014 in preparation for the Offer, as a result of which the Company became the holding company of the Group, as described in section 1 of Part 14 "Additional Information – Incorporation and share capital" of the Registration Document
"Retail Offer"	means the retail offer of Shares in the UK, the Channel Islands and the Isle of Man pursuant to the Customer Offer, the Non-Customer Offer, the Employee Offer and the Intermediaries Offer
"Retail Offer Advisor"	Solid Solutions (Associates) UK Limited
"Rule 144A"	Rule 144A under the US Securities Act
"Saga"	the Company and its consolidated subsidiaries and subsidiary undertakings

"Saga Shareholder Account"	the arrangements for the holding of the Shares provided by the Saga Shareholder Account Nominee, the terms and conditions of which are set out in Part 7 "Details of the Offer" of this Securities Note
"Saga Shareholder Account Nominee"	Capita Asset Service, a trading name of Capita IRG Trustees Limited
"Saga Select"	the trading name of DCIS when used to offer Saga Services Limited customers access to the DCIS panel of insurance providers
"SDRT"	stamp duty reserve tax
"Selling Shareholder"	Acromas Bid Co Limited
"Senior Facilities Agreement"	the senior facilities agreement entered into by the Company and others members of the Group for (i) a term loan facility in an aggregate amount of £825.0 million maturing in 2019, (ii) a term loan facility in an aggregate amount of £425.0 million maturing in 2020 and (iii) a multicurrency revolving credit facility in an aggregate amount of £150.0 million.
"Senior Managers"	Darryn Gibson, Tim Pethick, Roger Ramsden, David Slater and Andrew Strong
"Share Account Statement"	a statement of a person's holding of Shares in the Saga Shareholder Account
"Shareholders"	the holders of Shares in the capital of the Company
"Share Offers"	the Retail Offer and the Institutional Offer
"Shares"	the ordinary shares of the Company, having the rights set out in the Articles
"SIPP"	Self Invested Personal Pension
"Sponsor"	Citigroup Global Markets Limited
"Stabilising Manager"	Merrill Lynch International
"Summary"	means the summary produced under the Prospectus Rules, which, together with this document and the Registration Document, constitutes the Prospectus
"UK"	the United Kingdom of Great Britain and Northern Ireland
"Underlying Applicants"	retail investors in the United Kingdom, the Channel Islands and the Isle of Man who wish to acquire Shares under the Intermediaries Offer
"Underwriters"	Citigroup Global Markets Limited, Credit Suisse Securities (Europe) Limited, Goldman Sachs International, Investec Bank plc, J.P. Morgan Securities plc, Merrill Lynch International and UBS Limited
"Underwriting Agreement"	the underwriting agreement entered into between the Company, the Directors, the Selling Shareholder and the Banks described in section 3.1 of Part 8 "Additional Information – Underwriting arrangements"
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States of America, and the District of Columbia
"US Exchange Act"	United States Securities Exchange Act of 1934, as amended
"US GAAP"	accounting principles generally accepted in the United States
"US GAAS"	auditing standards generally accepted in the United States
"US Securities Act"	United States Securities Act of 1933, as amended