Quilter PLC — Capital/Financing Update 2018

Apr 9, 2018

PROSPECTUS DATED 9 APRIL 2018

Quilter plc

(Incorporated with limited liability in England and Wales with registered number 6404270)

£200,000,000 4.478% Fixed Rate Reset Subordinated Notes due 2028

The £200,000,000 4.478% Fixed Rate Reset Subordinated Notes due 2028 (the "Notes") are issued by Quilter plc (the "Issuer" or the "Company") and are constituted by a trust deed dated 28 February 2018 (as amended or supplemented from time to time, the "Trust Deed") between the Issuer (formerly Old Mutual Wealth Management Limited) and the Trustee (as defined in "Terms and Conditions of the Notes" (the "Conditions", and references herein to a numbered "Condition" shall be construed accordingly)).

Application has been made to the UK Financial Conduct Authority (the "FCA") in its capacity as competent authority under the Financial Services and Markets Act 2000 (the "UKLA" and the "FSMA", respectively) for the Notes to be admitted to the official list of the UKLA (the "Official List") and to the London Stock Exchange plc (the "London Stock Exchange") for the Notes to be admitted to trading on the London Stock Exchange's regulated market. The London Stock Exchange's regulated market is a regulated market for the purposes of Directive 2004/39/EC (the "Markets in Financial Instruments Directive"). This Prospectus has been approved by the UKLA for the purposes of Article 5.4 of Directive 2003/71/EC, as amended (the "Prospectus Directive"). This document comprises a prospectus for the purposes of the Prospectus Directive.

The Notes bear interest from (and including) 28 February 2018 (the "Issue Date") to (but excluding) 28 February 2023 at the rate of 4.478% per annum, and thereafter at the Reset Interest Rate as provided in Condition 4, in each case payable (subject to the following proviso) semi-annually in arrear on 28 August and 28 February in each year commencing on 28 August 2018; provided that the Issuer will be required to defer any payment of interest which is otherwise scheduled to be paid if (i) such payment cannot be made in compliance with the solvency condition described in Condition 3(b) (the "Solvency Condition") or (ii) a Regulatory Deficiency Interest Deferral Event (as defined herein) has occurred and is continuing, or would occur if such interest payment were made. Any interest so deferred shall, for so long as the same remains unpaid, constitute "Arrears of Interest". Arrears of Interest will not themselves bear interest, and may, or will, be payable as provided in Condition 5(b).

Unless previously redeemed or purchased and cancelled, the Notes will mature on 28 February 2028 (the "Maturity Date") and shall, subject to the satisfaction of the Solvency Condition and provided that no Regulatory Deficiency Redemption Deferral Event (as defined herein) has occurred and is continuing or would occur if the Notes were redeemed, be redeemed on the Maturity Date. Prior to any notice of redemption before the Maturity Date or any substitution, variation or purchase of the Notes, the Issuer will be required to have complied with relevant regulatory rules including as to notifications to, or consent or nonobjection from, (in each case, if and to the extent required) the Relevant Regulator (as defined herein) and to be in continued compliance with the Relevant Rules (as defined herein) applicable to it. Subject to the above, to the Relevant Rules, to satisfaction of the Solvency Condition and to no Regulatory Deficiency Redemption Deferral Event having occurred and continuing, the Notes may be redeemed at the option of the Issuer before the Maturity Date on the First Call Date (as defined herein) or upon the occurrence of certain specified events relating to taxation, a Capital Disqualification Event or Rating Methodology Event (as each such term is defined herein) at their principal amount together with any accrued but unpaid interest to (but excluding) the date of redemption and any Arrears of Interest and the Issuer will, upon the occurrence of such events, also have the right to substitute the Notes for, or vary the terms of the Notes so that they remain or become (as applicable), Qualifying Tier 2 Securities or Rating Agency Compliant Securities (as applicable), as described in Condition 6.

The Notes are direct, unsecured and subordinated obligations of the Issuer, ranking pari passu and without preference amongst themselves, and will, in the event of the winding-up of the Issuer or in the event of an administrator of the Issuer being appointed and giving notice that it intends to declare and distribute a dividend, be subordinated to the claims of all Senior Creditors (as defined herein) of the Issuer.

The Notes have been rated BBB- by Fitch Ratings Ltd ("Fitch"), which is established in the European Union (the "EU") and is registered under Regulation (EC) No. 1060/2009 (as amended) of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (the "CRA Regulation"). As such, Fitch is included in the list of credit rating agencies published by the European Securities and Markets Authority ("ESMA") on its website in accordance with the CRA Regulation. A rating is not a recommendation to buy, sell or hold notes and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

The Notes are in registered form and are represented by a registered global certificate registered in the name of a nominee for a common depositary ("Common Depositary") for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking SA ("Clearstream, Luxembourg" and together with Euroclear, the "Clearing Systems"). Definitive Certificates (as defined in the Trust Deed) will be issued only in limited circumstances – see "Overview of the Notes while in Global Form". The denomination of the Notes shall be £200,000 and integral multiples of £1,000 in excess thereof.

An investment in the Notes involves certain risks. Prospective investors should have regard to the factors described under the section headed "Risk Factors" in this Prospectus.

Sole Lead Manager

J.P. Morgan Cazenove

MIFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPS ONLY TARGET

MARKET – Solely for the purposes of the manufacturer's (as defined in MiFID II) product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market of the Notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for the distribution of the Notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the Notes (a "distributor") should take into consideration the manufacturer's target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer's target market assessment) and determining appropriate distribution channels.

PRIIPS REGULATION – PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive 2002/92/EC, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by the PRIIPs Regulation for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer (having taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information.

Any information contained in this Prospectus which has been sourced from a third party has been accurately reproduced and, as far as the Issuer is aware and is able to ascertain from information published by the relevant third party, no facts have been omitted which would render the reproduced information inaccurate or misleading.

No person is or has been authorised to give any information or to make any representation other than those contained in or consistent with this Prospectus in connection with the issue or sale of the Notes and, if given or made, such information or representations must not be relied upon as having been authorised by or on behalf of the Issuer, the Sole Lead Manager (as defined in "Subscription and Sale" below) or the Trustee. Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer since the date hereof or that there has been no adverse change in the financial position of the Issuer since the date hereof or that any other information supplied in connection with the Notes is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same.

The Sole Lead Manager and the Trustee have not separately verified the information contained in this Prospectus. Neither the Sole Lead Manager nor the Trustee makes any representation, express or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the information contained in this Prospectus or any other information provided by the Issuer in connection with the listing of the Notes. Neither the Sole Lead Manager nor the Trustee accepts any liability in

relation to the information contained in this Prospectus or any other information provided by the Issuer in connection with the listing of the Notes. Neither this Prospectus nor any other information supplied in connection with the listing of the Notes is intended to constitute, and should not be considered as, a recommendation by any of the Issuer, the Sole Lead Manager or the Trustee that any recipient of this Prospectus or any other information supplied in connection with the Notes should purchase the Notes. Each potential purchaser of Notes should determine for itself the relevance of the information contained in this Prospectus and its purchase of Notes should be based upon such investigation as it deems necessary. Neither the Sole Lead Manager nor the Trustee undertakes to review the financial condition or affairs of the Issuer during the life of the arrangements contemplated by this Prospectus nor to advise any investor or potential investor in the Notes of any information coming to their attention.

Neither this Prospectus nor any other information provided by the Issuer in connection with the listing of the Notes constitutes an offer of, or an invitation by or on behalf of, the Issuer or the Sole Lead Manager or the Trustee or any of them to subscribe for, or purchase, any of the Notes (see "Subscription and Sale" below). This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. The Issuer, the Trustee and the Sole Lead Manager do not represent that this Prospectus may be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Trustee or the Sole Lead Manager or any of them which is intended to permit a public offering of the Notes or the distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no Notes may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or 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 this Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Notes in the U.S., the United Kingdom and the EEA. Persons in receipt of this Prospectus are required by the Issuer, the Trustee and the Sole Lead Manager to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Notes and distribution of this Prospectus, see "Subscription and Sale" below.

The Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"). Subject to certain exceptions, Notes may not be offered, sold or delivered within the U.S. or to U.S. persons, as defined in Regulation S under the Securities Act. For a description of certain restrictions on offers and sales of Notes and on distribution of this Prospectus, see "Subscription and Sale" below.

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Notes are legal investments for it, (2) the Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.

Table of Contents

Overview of the Principal Features of the Notes	6
Risk Factors	12
Presentation of Financial and Other Information	70
Industry Overview	79
Business Description	94
Regulatory Overview	148
Directors, Senior Management and Corporate Governance	167
Selected Financial Information	180
Operating and Financial Review	187
Historical Financial Information	243
Unaudited Pro Forma Financial Information	336
Managed Separation	344
Terms and Conditions of the Notes	345
Overview of the Notes while in Global Form	374
Taxation	377
Subscription and Sale	379
Additional Information	381
Definitions and Glossary of Technical Terms	394

Overview of the Principal Features of the Notes

The following overview refers to certain provisions of the Conditions of the Notes and the Trust Deed and is qualified by the more detailed information contained elsewhere in this Prospectus. Terms which are defined in the Conditions have the same meaning when used in this overview, and references herein to a numbered "Condition" shall refer to the relevant Condition in "Terms and Conditions of the Notes".

Issue £200,000,000 4.478% Fixed Rate Reset Subordinated Notes due 2028.

Issuer Quilter plc.

Trustee Citicorp Trustee Company Limited.

Principal Paying Agent and Agent Bank

Citibank, N.A., London Branch.

Registrar and Transfer Agent

Citibank, N.A., London Branch.

Status and Subordination The Notes constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu and without any preference among themselves. The rights and claims of the Noteholders against the Issuer are subordinated in a winding-up of the Issuer in accordance with Condition 3(a) and the provisions of the Trust Deed.

Solvency Condition Except in a winding-up, all payments in respect of the Notes (including, without limitation, payments of interest, Arrears of Interest and principal) will be conditional upon the Issuer being solvent at the time of the relevant payment (and still being solvent immediately thereafter), as described in Condition 3(b) (the "Solvency Condition"), and no amount will be payable in respect of the Notes until such time as the same can be paid in compliance with the Solvency Condition.

Interest The Notes bear interest:

• (i) from (and including) the Issue Date to (but excluding) 28 February 2023 (the "First Call Date") at the rate of 4.478% per annum; and
• (ii) for the Reset Period thereafter, at the Reset Interest Rate (as defined in Condition 17),

in each case payable (subject as provided under "Deferral of Interest" below) semi-annually in arrear on each Interest Payment Date.

Interest Payment Dates 28 February and 28 August of each year, from (and including) 28 August 2018 to (and including) the Maturity Date.

Deferral of Interest The Issuer will be required to defer any payments of interest on the Notes which would otherwise be due on any Interest Payment Date if (i) such payment cannot be made in compliance with the Solvency Condition or (ii) a Regulatory Deficiency Interest Deferral Event has occurred and is continuing or would occur if such payment of interest was made on such Interest Payment Date. See Condition 5(a).

"Regulatory Deficiency Interest Deferral Event" means any event (including, without limitation, any event which causes any Solvency Capital Requirement or Minimum Capital Requirement applicable to the Issuer or all or part of the Group (which part includes the Issuer) to be breached and such breach is an event) which under the Relevant Rules requires the Issuer to defer payment of interest (or, if applicable, Arrears of Interest) in respect of the Notes and where the Relevant Regulator has not waived the requirement to defer payment of interest under the Notes in accordance with any pre-conditions to such waiver being capable of being granted as prescribed by the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules).

Arrears of Interest Any interest in respect of the Notes not paid on an Interest Payment Date due to the obligation on the Issuer to defer pursuant to Condition 5(a) or due to the operation of the Solvency Condition together with any other interest in respect of Notes not paid on an earlier Interest Payment Date will, so long as the same remains unpaid, constitute "Arrears of Interest". Arrears of Interest shall not themselves bear interest.

Arrears of Interest will be payable, in whole or in part, at any time at the option of the Issuer (subject to regulatory consent (if then required) and to the Solvency Condition and provided that a Regulatory Deficiency Interest Deferral Event is not subsisting and would not occur upon payment of the same) upon notice to the Trustee, the Principal Paying Agent, the Registrar and the Noteholders, and in any event all Arrears of Interest will (subject, in the case of (i) and (iii) below, to regulatory consent (if then required) and to the Solvency Condition) become payable in whole (and not in part) upon the earliest of the following dates:

• (i) the next Interest Payment Date which is not a Mandatory Interest Deferral Date; or
• (ii) the date on which an order is made or a resolution is passed for the winding-up of the Issuer (other than a solvent winding-up solely for the purposes of a reconstruction or amalgamation or the substitution in place of the Issuer of a successor in business of the Issuer, the terms of which reconstruction, amalgamation or substitution (A) have previously been approved in writing by the Trustee or by an Extraordinary Resolution and (B) do not provide that the Notes shall thereby become payable) or the date on which any administrator of the Issuer gives notice that it intends to

declare and distribute a dividend; or

(iii) the date of any redemption or purchase of the Notes by or on behalf of the Issuer or any of its Subsidiaries.

Redemption at Maturity The Notes will, subject as provided under "Deferral of Redemption" below and subject to compliance by the Issuer with regulatory rules and provided that such redemption is permitted under the Relevant Rules, be redeemed on 28 February 2028.

Deferral of Redemption The Issuer will be required to defer any scheduled redemption of the Notes (whether at maturity or if it has given notice of early redemption in the circumstances described below under "Early Redemption at the Option of the Issuer" and "Early Redemption at the Option of the Issuer upon the occurrence of a Tax Event, Capital Disqualification Event or Rating Methodology Event") if (i) the Notes cannot be redeemed in compliance with the Solvency Condition, (ii) a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing or would occur if the Notes were redeemed or (iii) (if then required) regulatory consent has not been obtained or redemption cannot be made in compliance with the Relevant Rules at such time.

In the event of any deferral of redemption of the Notes, the Notes will become due for redemption only in the circumstances described in Condition 6(a).

"Regulatory Deficiency Redemption Deferral Event" means any event (including, without limitation, where an Insolvent Insurer Winding-up has occurred and is continuing and any event which causes any Solvency Capital Requirement or Minimum Capital Requirement applicable to the Issuer or all or part of the Group (which part includes the Issuer) to be breached and the continuation of such Insolvent Insurer Winding-up is, or as the case may be, such breach is, an event) which under the Relevant Rules requires the Issuer to defer or suspend repayment or redemption of the Notes and where the Relevant Regulator has not waived the requirement to defer or suspend repayment or redemption of the Notes in accordance with any pre-conditions to such waiver being capable of being granted as prescribed by the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules).

Early Redemption at the Option of the Issuer

The Issuer may, subject to certain conditions and upon notice to Noteholders, elect to redeem the Notes, at their principal amount together with Arrears of Interest (if any) and any other accrued and unpaid interest on the First Call Date.

Early Redemption at the Option of the Issuer upon the

The Issuer may, subject to certain conditions and upon notice to Noteholders, at any time elect to redeem the Notes, at their principal amount together with Arrears of Interest (if any) and any other accrued

occurrence of a Tax Event, Capital Disqualification Event or Rating Methodology Event

and unpaid interest, if a Tax Event, Capital Disqualification Event or Rating Methodology Event has occurred and is continuing.

The Issuer may elect to redeem the Notes due to taxation if:

• (i) as a result of a Tax Law Change (as defined in Condition 6(c)(i)), in making any payments on the Notes, the Issuer has paid or will or would on the next payment date be required to pay Additional Amounts (as defined in Condition 8) on the Notes and the Issuer cannot avoid the foregoing in connection with the Notes by taking measures reasonably available to it; or
• (ii) as a result of a Tax Law Change, in respect of the Issuer's obligation to make any payment of interest on the next following Interest Payment Date, (a) the Issuer would not be entitled to claim a deduction in respect of computing its taxation liabilities in the United Kingdom, or such entitlement is reduced; (b) the Issuer would not to any extent be entitled to have a loss (if any) that has been computed taking such a deduction into account set against the profits of companies with which it is grouped for applicable United Kingdom tax purposes (whether under the group relief system current as at the date of the Tax Law Change or any similar system or systems having like effect as may from time to time exist); (c) the Notes are prevented from being treated as loan relationships for United Kingdom tax purposes; (d) the Notes or any part thereof are treated as a derivative or an embedded derivative for United Kingdom tax purposes; or (e) the Issuer would otherwise suffer adverse tax consequences, and in each such case the Issuer cannot avoid the foregoing in connection with the Notes by taking measures reasonably available to it, ((i) and (ii) above each a "Tax Event").

A "Capital Disqualification Event" will be deemed to have occurred if as a result of any replacement of or change to (or change to the interpretation by any court or authority entitled to do so of) the Relevant Rules the principal amount of the Notes then outstanding is excluded (in whole or in part) from counting as Tier 2 Capital for the purposes of the Issuer or the Group, whether on a solo, group or consolidated basis, except (in any case) where such non-qualification is only as a result of any applicable limitation on the amount of such capital. See Condition 6(e).

A "Rating Methodology Event" means at any time, as a consequence of a change in, or clarification to, the rating methodology (or the interpretation thereof) of Fitch on or after the Issue Date, the equity credit in the capital adequacy assessment assigned by Fitch to the Notes as at such time is materially reduced when compared to the equity credit in the capital adequacy assessment assigned by Fitch on or around the Issue

Date. See Condition 6(f).

Substitution and Variation

The Issuer may, subject to certain conditions and upon notice to Noteholders, at any time elect to substitute the Notes for, or vary the terms of the Notes so that they remain or become (as applicable), (in the case of a Tax Event or a Capital Disqualification Event) Qualifying Tier 2 Securities or (in the case of a Rating Methodology Event) Rating Agency Compliant Securities if, immediately prior to the giving of the relevant notice to Noteholders, a Tax Event, Capital Disqualification Event or Rating Methodology Event has occurred and is continuing.

Additional Amounts Payments on the Notes will be made without deduction or withholding for or on account of any tax imposed by any Taxing Territory, unless such withholding or deduction is required by law. In the event that any such withholding or deduction is required by law, the Issuer will pay such additional amounts as shall be necessary in order that the amounts received by the Noteholders after such withholding or deduction shall equal the respective amounts which would have been receivable in respect of the Notes, as the case may be, in the absence of the withholding or deduction ("Additional Amounts"), subject to some exceptions, as described in Condition 8.

Events of Default and Enforcement

If default is made for a period of 14 days or more in the payment of any interest due (including, without limitation, Arrears of Interest, if any) or principal due in respect of the Notes or any of them, the Trustee in its discretion may, and if so requested by Noteholders of at least one-quarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to Condition 10(d)) institute proceedings for the winding-up of the Issuer and/or prove in the winding-up or administration of the Issuer and/or claim in the liquidation of the Issuer for such payment, but may take no further or other action to enforce, prove or claim for any such payment. No payment in respect of the Notes or the Trust Deed may be made by the Issuer pursuant to Condition 10(a), nor will the Trustee accept the same, otherwise than during or after a winding-up of the Issuer or after an administrator of the Issuer has given notice that it intends to declare and distribute a dividend, unless the Issuer has given prior written notice (with a copy to the Trustee) to, and received consent or non-objection (if required) from, the Relevant Regulator, which the Issuer shall provide or confirm in writing to the Trustee.

Form and Denomination

The Notes are in registered form and are represented by a registered global certificate registered in the name of a nominee for a common depositary for Clearstream Banking SA and Euroclear Bank SA/NV. Save in limited circumstances, definitive Certificates will not be issued in exchange for interests in the registered global certificate.

The Notes are in denominations of £200,000 and integral multiples of

£1,000 in excess thereof.

Listing Application has been made for the Notes to be admitted to the Official List

of the UKLA and for the Notes to be admitted to trading on the London

Stock Exchange's regulated market.

Ratings The Notes have been rated BBB- by Fitch. A rating is not a

recommendation to buy, sell or hold notes and may be subject to suspension, reduction or withdrawal at any time by the assigning rating

agency.

Governing Law The Notes and the Trust Deed, and any non-contractual obligations

arising out of or in connection therewith, will be governed by and

construed in accordance with English law.

MiFID II Product Governance/PRIIPs Regulation

Solely for the purposes of the manufacturer's product approval processes, the manufacturer has concluded that: (i) the target market for the Notes is eligible counterparties and professional clients only; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. No PRIIPs Regulation KID has been prepared as

the Notes are not available to retail investors in the EEA.

Risk Factors

The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. All of these factors are contingencies which may or may not occur and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring.

Any of these risk factors, individually or in the aggregate, could have an adverse effect on the Issuer or the Group and the impact each risk could have on the Issuer or the Group is set out below. References to the "Group" shall mean the Issuer and each of its consolidated subsidiaries and subsidiary undertakings, excluding the Single Strategy Business (as defined below) (unless otherwise indicated).

Factors which the Issuer believes may be material for the purpose of assessing the market risks associated with the Notes are also described below.

The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the Issuer may be unable to pay interest, principal or other amounts on or in connection with the Notes for other reasons, and the Issuer does not represent that the statements below regarding the risks of holding the Notes are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision.

RISKS RELATING TO THE GROUP

• 1. Risks relating to the Group's industry
• 1.1 Difficult conditions or volatility in the global capital markets, the global economy generally and the UK economy specifically may adversely affect the investment portfolios, sales of investment products and fees, which in turn could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group's results may be materially adversely affected by conditions in global capital markets, the global economy generally and the UK economy in particular that result in a decrease in the value of customer investment portfolios, because a significant portion of the Group's income is derived from fees which are calculated as a percentage of assets under management ("AuM") or assets under administration ("AuA"). A wide variety of factors could lead to volatility in financial markets and market or trading liquidity. Factors that have had, and may continue to have, a material adverse impact on investment portfolios include political change or uncertainty, the UK's exit from the EU ("Brexit"), concerns over low levels of growth in developed and emerging economies and corporate profits, high levels of sovereign debt, rapid rises and falls in currency exchange rates, changes in inflation expectations and long-term low, negative or increasing interest rates and bond yields. The trade, tax and immigration policies of the UK (particularly post-Brexit), Europe or the United States could also lead to major changes in global trade flows, which in turn could have a material impact on the global economy, or could lead to volatility and a decline in capital markets or particular asset classes, which could reduce the demand for or value of investment assets.

In the recent past, a combination of stable growth and a loose monetary policy has generally resulted in low volatility across financial markets; however, this backdrop could change, and strong performance in financial markets (particularly equity markets) is unlikely to continue indefinitely. Quantitative easing measures implemented by record low interest rates set by central banks, including the Bank of England, the US Federal Reserve and the European Central Bank, to support recovery since the global financial crisis, have helped loosen financial conditions and reduce borrowing costs. These measures may have led to the emergence of asset and liquidity bubbles that could be vulnerable to rapid price corrections as financial conditions tighten, including in the stock markets, bond markets and property markets, which will directly reduce the investment returns on the Group's products and solutions, thereby reducing the Group's fee income.

The monetary policy and future trajectory of interest rates by major central banks and the means of implementation remain uncertain. There is some market expectation that certain central banks, including the Bank of England and the European Central Bank, may tighten their monetary policy to increase interest rates back to levels closer to historical norms and reduce or eliminate quantitative easing. The US Federal Reserve Board of Governors has also continued to normalise interest rates in recent periods. However, it remains unclear when central banks will return to monetary policies which are more aligned to historical patterns. The withdrawal of accommodative policies may cause losses to investors and raise the risk of default on fixed income securities, including those in assets managed by the Group and marketed to the Group's advisers and customers. Higher interest rates may make investing in the Group's investment products less attractive.

Factors such as consumer spending, business investment, government spending, the volatility and strength of both debt and equity markets, the direction and pace of change of interest rates and inflation all affect the economic environment, investor confidence and, ultimately, the volume and profitability of the Group's business. In an economic downturn characterised by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for financial products and solutions could be adversely affected. Further, customer sentiment regarding the future prospects of investment markets, and of the economy more generally, could impact customer behaviour and reduce demand for the Group's products and services, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Economic uncertainty and volatility may have a material adverse effect on the Group, in part because it manages large investment portfolios and is affected by customer behaviour, adviser views on suitability of investments and the performance of capital markets. This could lead to a decline in sales or fees related to the value of AuM and AuA, and profit margins could erode. In addition, the Group may experience a decline in the value of AuM or AuA, which are each exposed to declines or depressions in particular economies or sectors.

The Group may also experience, for example, cancellation of policies and products and termination of customers that could affect the current and future profitability of the business. A prolonged economic crisis, downturn or period of low growth could result in lower fees or sales figures for the Group in the future. These adverse changes in the economy could affect earnings negatively and could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.2 Exposure to domestic and global political developments and their impact on financial markets could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Political change has the potential to directly impact the businesses of the Group through the introduction of new laws (including tax laws) or regulations or indirectly by altering adviser, investor and customer sentiment.

The current government in the UK is a minority government and any future change in government in the UK could significantly impact the Group due to changes in government policy, legislation or regulatory interpretation. This may ultimately influence investor decisions in particular markets in which the Group operates, change the structure of those markets and the products offered or increase the costs of doing business in those markets. For example, changes in taxation legislation and policy could affect investor sentiment, making investment generally, and specific types of investment products and solutions in particular, either more or less appealing.

The Group also may be affected by geopolitical events, including instability within the Eurozone, a second independence referendum in Scotland, uncertainty as to the global impact of the current US administration, strained relations with North Korea and Russia, tensions in the South China Sea, tensions in Iran and the Middle East and widespread increases in global tariffs. Additional developments may also occur that the Group cannot currently know or anticipate, or which may be impossible to plan for or protect against. It is possible that the effects of such geopolitical events will include further financial instability and slower economic growth, significant regulatory changes, currency fluctuations and higher unemployment and inflation in the UK, continental Europe and the global economy, at least in the short to medium term. It could also create constraints on the ability of the Group to operate efficiently in the future political environment. Any of the foregoing could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.3 The UK's withdrawal from the EU could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

On 29 March 2017, Prime Minister Theresa May notified the European Council in accordance with Article 50(2) of the Treaty on European Union of the UK's intention to withdraw from the European Union. Detailed negotiations are now taking place to determine the future terms of the UK's relationship with the EU, but the long-term nature of the UK's relationship with the EU remains unclear. There is uncertainty relating to, for example, how long it will take to negotiate the UK's withdrawal from the EU within the two year limit established by the Treaty on European Union, which EU laws and regulations may continue to apply in the UK, and what changes there may be to the application of these laws and regulations. The effect of Brexit on the UK economy generally remains unknown but could cause a recession or a reduced rate of growth, or create other negative effects that already impact the Group's business. The long-term effects of Brexit will depend on any agreements (or lack thereof) between the UK and the EU and, in particular, on any arrangements for the UK to retain access to EU markets either during a transitional period or more permanently.

There is a risk that Brexit, other political developments or developments otherwise affecting market confidence may result in outflows of assets from investment portfolios with exposure to the UK, which could include multi-asset portfolios held by the Group's Advice & Wealth Management segment, or funds administered by the Group but invested with third party fund managers. Due to the size and importance of the UK economy in the global economy, particularly with respect to the UK financial services market, as well as the uncertainty and unpredictability concerning the UK's legal, political, financial and economic relationship with the EU after Brexit, there may continue to be instability in the national and international financial markets, significant currency fluctuations and otherwise adverse effects on consumer confidence for the foreseeable future, including beyond the date of the UK's withdrawal from the EU.

The Group includes financial institutions authorised and regulated in the UK. The regulatory environment that applies to such entities is in large part derived from EU financial services legislation. While the UK is currently required to implement and apply such legislation, this may no longer be the case following its departure from the EU. This may have a significant impact on UK financial services legislation and the regulatory environment in which the Group operates, which may in turn have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

It is also unclear how Brexit will affect UK financial institutions with assets or operations (including branches) in the EU (and vice versa). At present, EU legislation grants passporting rights to certain categories of financial institution, including insurers, investment firms, Undertakings for Collective Investment in Transferable Securities ("UCITS") management companies and Alternative Investment Fund Managers ("AIFMs"). EU legislation also facilitates mutual rights of access to EU market infrastructure such as payment and settlement systems. Once the UK ceases to be a member state of the EU, the current passporting arrangements may cease to be effective, as may the current mutual rights of access to market infrastructure. The Group contains entities that rely on such passporting arrangements and market infrastructure. For example, the Group has a limited number of residual policies in closed European books, including across Germany, Sweden and Norway, which could result in increased costs relating to cross-border transfers or a loss from the sale of these policies.

As a result of the foregoing, the UK's departure from the EU may have material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.4 The Group's business is conducted in a competitive environment and, if the Group is not successful in anticipating and responding to competitive change, adviser or customer preferences or demographic trends in a timely and cost-effective manner, its business, financial condition, results of operations and prospects could be materially adversely affected.

The markets for financial advice, investment solutions, platforms and wealth management markets in the UK and internationally are competitive, and the Group expects such competition to intensify in response to competitor behaviour, consumer preferences, technological changes, the impact of consolidation, regulatory actions and other factors. The Group faces the risk that advisers and customers do not prefer the Group's platforms or its savings and investment product offerings to those of competitors.

The factors affecting the Group's ability to sell its products and services and achieve continued profitability include investment management performance, price and yields offered, financial strength and ratings, range of product lines and product and service quality, choice of distributor and distribution method, quality of advice, customer perception of the Group's multi-channel (advised and open market) offering, brand strength, innovation of competitors, developing demographic trends and customer appetite for certain savings products. For example, as is common place in an investment business, many of the Group's customers are in their fifties or older, since older customers tend to have more significant assets to invest. The Group will lose assets if customers withdraw assets for use in retirement or due to their passing away. There will therefore be a continued need for the Group to attract new clients in the future to compensate for this natural loss of assets under management and under administration ("AuMA") or clients and for the Group to develop its product set to keep pace with the demographic trends, such as with regard to decumulation products and intergenerational transfers. If the Group is unable to attract new clients in the future, or if younger generations of clients do not generate wealth at a rate similar to historical periods, the Group may experience decreased demand for its services or products.

The Group may face competitors that are larger, have greater financial resources or a greater market share, offer a broader range of products or offer greater technology-enabled solutions. The Group's competitors could offer similar products or services at a lower price and thereby undercut its offerings. The Group's ability to generate an appropriate return depends significantly upon its capacity to anticipate and respond appropriately to these competitive pressures and trends. The Group could also be impacted by consolidation in the advice market in the future. If advice firms in the Group's network sell down their business and are acquired by rival networks or by firms in rival networks, the Group could lose a significant number of advisers, the primary distribution channel for the Group's advice business. As such, if there is a significant amount of market consolidation with regard to advice firms, it could adversely impact the Group's AuMA. In addition, the Group's profit margins could be impacted, in part, by increased competition if it is unable to maintain its market share, service levels, quality of service or ability to respond to consumer preferences, including with regard to the increasing popularity of technology-based advice solutions.

As an advice-led business with a significant proportion of its investment portfolios actively managed, the Group aims to attract advisers and customers to its products and platforms by adding value rather than providing solely automated, index based or other passive solutions. Given that 84% of the Group's net AuMA was intermediated through advisers (excluding investment managers) as at 31 December 2017, the Group faces competition from direct-toconsumer advice models, such as emerging financial technology competitors. The Group thus faces the risk that its advice-led proposition may not appeal to customers or that customers withdraw assets from their financial advisers in favour of competing models. Equally, customers may move away from advice-based models to self-directed execution-only models.

If the Group is not successful in anticipating and responding to competitive change, adviser or customer preferences or demographic trends in a timely and cost-effective manner, its business, financial condition, results of operations and prospects could be materially adversely affected.

1.5 The Group is exposed to a deterioration in demand or an increase in supply for wealth management and retirement related products, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Historically, supply and demand for wealth management and retirement-related products have been variable, and the operating results of wealth management and retirement solution companies have fluctuated significantly because of volatile and sometimes unpredictable developments, many of which are beyond the direct control of any company.

The supply of wealth management and retirement related products is related to, amongst other factors, prevailing prices, 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 industry, changing business opportunities, legislative changes, opportunities from technological change as well as other social, economic, legal and political changes. As a result, the wealth management and retirement-related products industry has historically been variable. Increases in the supply of wealth management and retirement related products (whether through an increase in the number of competitors, an increase in the capitalisation available to wealth managers, or otherwise) and, similarly, reduction in consumer demand for wealth management and retirement related products, could have adverse consequences for the Group, including lower fees or higher expenses for the Group, any of which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Although the Group has a diverse range of products and solutions, the Group could experience the effects of this variable nature, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.6 The following risks may adversely affect the level of customer investment portfolios and the Group's AuMA, which in turn could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.6.1 Decline in equity markets

A decline in the equity markets, including as a result of decreased investor confidence in specific markets or globally, could reduce revenues by reducing the value of the investment assets managed or administered by the applicable business. Equity markets have been rising since March 2009, and a proportion of the Group's AuM is invested in equity markets globally. The Group's fee income is therefore directly exposed to fluctuations in equity markets as its fees and commissions tend to be charged as a percentage of AuM. Profits could also be reduced as a result of current investors withdrawing assets in volatile equity markets or reducing their rates of ongoing investment with the Group's products and solutions.

1.6.2 Rise in interest rates

Because the Group's business depends, in part, on fees related primarily to the value of AuM and AuA, a rise in interest rates could reduce revenues by reducing the volume and value of the investment assets the Group manages. Moreover, changes to interest rates may impact customer behaviour and where they choose to invest their assets, which could create a difficult environment for investment performance in Quilter Investors and Quilter Cheviot. As a

result, the Group may experience a reduction in the level of AuM or AuA and, as a result, lower fee income.

1.6.3 Fluctuations in currency exchange rates

Certain parts of the Group operate internationally and are exposed to foreign currency exchange risk arising from fluctuations in exchange rates of various currencies, including euros, US dollars and Swedish krona. Customer portfolios managed by the Group include a range of assets that are denominated in foreign currencies, including foreign equities, bonds and property. The effect of exchange rate fluctuations on these assets could lead to significant fluctuations in the amount of fee income generated. Exposure to foreign exchange risk is of particular concern in light of the uncertainty over the final terms of the UK's relationship with the EU. In the short to medium term, volatility of financial markets may have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.6.4 Widening in credit spreads

Widening credit spreads may reduce the level of the Group's AuMA, which could impact Group profitability in several ways. Profits from fees taken on unit-linked funds and other third party assets invested in corporate bonds would fall when spreads widen. In addition, market volatility can make it difficult to value certain securities (for example, emerging market debt or high yield bonds) if trading becomes less frequent. Accordingly, valuations of investments may include assumptions or estimates that may have significant period-to-period changes due to market conditions, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

1.6.5 Falls in property prices

The Group is subject to property price risk indirectly due to customer holdings of investment properties in various portfolios, which are made up of funds typically managed by third parties. Profits from fees taken on unit-linked funds and other assets invested in property would fall when the value of underlying properties falls. A fall in property prices could have an adverse impact on AuM and AuA, would reduce the attractiveness of related products, services and portfolios to customers, and would directly reduce the fee income the Group generates calculated as a percentage of the value of AuM and AuA.

1.6.6 Changes in short or long-term inflation

The Group is subject to inflation risk through its holdings of fixed interest and other investments on behalf of customers and as a result of the potential for the cost of claims and expenses to rise faster than anticipated in the Group's respective pricing or reserving. Changes in inflation could also affect the value perceived to be offered by the Group's policies and so adversely affect persistency levels.

1.6.7 Liquidity risk

The Group may hold certain investments within investment portfolios on behalf of customers that may lack liquidity, such as privately placed fixed-maturity securities, high yield bonds, emerging market debt, private equity investments and unlisted equities, as the inputs used for their valuation are not directly observable in the market.

If significant amounts of cash are required at short notice in excess of expected cash requirements, it may be difficult to sell these investments in a timely manner. In such circumstances, the Group may be forced to sell them for less than they otherwise would have been able to. The reported values of relatively illiquid types of investments, investments in the asset classes described in the paragraph above and, at times, high quality, generally liquid asset classes, do not necessarily reflect the lowest current market price for the asset. If the Group were forced to sell certain assets in the current market, there can be no assurance that the Group would be able to sell them for the prices at which they were recorded and the Group may be forced to sell them at significantly lower prices. While this is unlikely to impact the Group's liquidity position, it may have a material adverse effect on the value and liquidity of the Group's customers' portfolios.

1.6.8 Decline in fixed income markets

A decline in the fixed income markets, including as a result of decreased investor confidence in specific markets or globally, increases in interest rates, changes in relative yield among instruments with different maturities, available liquidity in the markets in which a security trades, an issuer's actual or perceived creditworthiness, an issuer's ability to meet its obligations, could reduce revenues by reducing the value of the investment assets managed or administered by the applicable business. A proportion of the Group's AuM is invested in fixed income markets globally. The Group's fee income is therefore exposed to fluctuations in fixed income markets as its fees and commissions are generally charged as a percentage of AuM.

2. Risks relating to the Group's business

2.1 Failure by the Group to offer products, services and platforms that meet adviser and customer needs and which are considered suitable could result in advisers ceasing to recommend the Group's products or services, or recommending fewer of the Group's products or services, and declining persistency of the Group's products.

The Group is reliant on its ability to offer products and platforms that meet customers' needs so that advisers will continue to recommend investment solutions that are managed or administered by the Group. As part of the Group's advised channel, restricted financial planners ("RFPs") choose from a panel of products and providers pre-researched by the Group to provide choices that meet the needs of the advisers' customer base, but can choose from a wider solution base if the restricted suite of solutions does not meet a particular customer's needs. Third party advisers, which form the Group's open market distribution channel, advise across products provided by a number of other providers. The successful distribution of the Group's products and services therefore depends, in part, on the choices an adviser may make with regard to the advice it gives to customers. The Group therefore depends on its ability to provide products and services that advisers believe are suited to customers' needs.

An adviser may make judgements as to wealth management products and services on the basis of suitability for its customers by considering, among other things, the tolerance for risk and prospects for future investment returns in light of the product offering, past investment performance, perceived financial strength and stability, credit and other ratings (if applicable), the quality of the service, price, technical support and other product features. An adviser may choose a preferred platform on which to operate its accounts for customers, based on ease of use, breadth of products and fund managers offered, perceived reliability and service, technological features and other factors. Additional factors may also impact the decisions that advisers make with respect to their use of the Group's products and services, such as the degree of success the Group has in maintaining a competitive UK investment platform, including by completing the Quilter Wealth Solutions IT transformation (the "UK Platform Transformation Programme") on a timely basis. An unfavourable assessment of the Group or its products or services based on any of these factors could result in the Group generally, or certain of its products or services, not being actively marketed by advisers to the Group's customers, with the consequence that the Group's sales volumes may decrease, or withdrawals may increase, resulting in reduced fees and other income.

The Group is also exposed to the risk that advisers may change their business models in ways that affect how they recommend the Group's products or services, either in response to changing business priorities or as a result of shifts in regulatory supervision or potential changes in applicable laws and regulations. This may concern, for instance, requirements and standards applicable to the distribution of the Group's products or services, as well as changes in distribution trends. For example, the increasing popularity of internet-based investing systems and platforms in recent years has led to the growth of advisers offering simplified investment management services to certain segments of the market. Each of these factors may result in advisers ceasing to recommend the Group's products or services, or recommending fewer of the Group's products or services, and a lowering of the persistency of the Group's products.

2.2 The asset classes or investment strategies underlying the portfolios managed by the Group may become less attractive to customers or their advisers, which could reduce demand for the Group's products and have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group's product offering includes outcome-oriented, multi-asset solutions that combine products from a range of providers and in various asset classes. These include multi-asset investments managed by Quilter Investors (including Cirilium) and bespoke investment portfolios managed by Quilter Cheviot. These investment products and solutions are, in part, determined by the relative attractiveness to investors of the respective asset classes or portfolio mix, as relevant. If these asset classes or investment strategies were to become unsuitable for customers or if there were to be a further significant shift towards investors investing through competing products, such as passive or index-based investment products, or investment vehicles representing asset classes that the Group does not offer, there may be reduced sales or increased redemptions from the Group's products. Such developments could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.3 If the Group fails to capture new business resulting from increased demand following the Pension Freedom or if the trends or regulations change, the Group's business, financial condition, results of operations and prospects could be materially adversely affected.

Historically, individual annuities, which are not offered by the Group, played a central role in most UK retirees' post-retirement financial arrangements with defined contribution ("DC") pension contracts (and their subsequent annuity purchase) or alternatively, defined benefit ("DB") schemes, offering a tax efficient method of saving for retirement. However, UK pension reform legislation that took effect from April 2015 ("Pension Freedom") has given retirees greater flexibility in how to access and invest eligible pensions at retirement, including through platforms like Quilter Wealth Solutions. Under Pension Freedom, consumers approaching retirement have the option to take the entirety of their pension savings as cash (the first 25% tax free, with the balance taxed at the individual's marginal rate). In addition, consumers who do not draw down their pensions immediately have significantly more control and flexibility with respect to how their pensions are invested.

As a result of the Pension Freedom, the Group has experienced an increase in demand for pension products, potentially as an alternative to annuities products. For example, sales from pension related products represented approximately 48%, 56% and 61% of Quilter Wealth Solutions' gross sales in the years ended 31 December 2015, 2016 and 2017, respectively. However, there can be no assurance that the Group will continue to capture new business in this manner or remain competitive in designing alternatives to annuities products, or that the trends experienced in the aftermath of Pension Freedom will not reverse, as there is still uncertainty over the longer-term impact of the Pension Freedom on the sales of individual annuities and alternatives thereto. Moreover, the Group currently does not offer a selfinvested pension plan ("SIPP"), which has gained significantly in popularity since Pension Freedom, and any delays in the planned implementation of the new SIPP functionality expected to be delivered as part of the UK Platform Transformation Programme may lead to the loss of customers or assets. For a further discussion of the UK Platform Transformation Programme and potential reasons for the delay in implementation, see "—2.12 The Group may fail to deliver on its UK Platform Transformation Programme".

In addition, the Group cannot be certain that the relevant laws will not be changed further. If the Group fails to attract retirees into its investment products or achieve the expected growth following the Pension Freedom or respond effectively to any further changes, its business, financial condition, results of operations and prospects could be materially adversely affected.

2.4 Actual or perceived underperformance of customer assets that are managed by the Group could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

A significant part of the Group's Advice & Wealth management offering involves the delivery of advice-led wealth solutions (through Quilter Financial Planning) and the management of multi-asset solutions and investment portfolios (through Quilter Investors and Quilter Cheviot). As a result, an important factor in the Group's ability to maintain and grow its customer base and its network of advisers is the investment performance of the customer assets that the Group manages. Any sustained period of actual or perceived underperformance of products, solutions or portfolios delivered by the Group (through portfolios managed by it or through its

network, including third party assets invested through Quilter Cheviot), whether relative to peer, customer expectations, benchmarks or internal targets, could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

When financial advisers select investment products or when customers select a wealth manager, one of the most important considerations for such customers and/or such intermediaries and advisers is the historical investment performance of the products or solutions offered. If the Group were to fail to provide satisfactory investment returns in its managed portfolios or wealth management solutions, customers of such solutions (or customers generally) may decide to reduce their investments or withdraw assets altogether in favour of better performing services or competing investment managers, which would lead to a direct reduction in the level of the Group's AuM and, as a result, lower fee income.

Investment underperformance relative to competitors, customer or adviser expectations or relevant benchmarks would also make it more difficult for the Group to attract new customers and advisers and could damage the Group's reputation and brands, which have in part been built around its investment performance generally. As a result, the Group's ability to attract assets from existing and new customers and advisers might diminish, particularly given the competitive nature of the wealth management market. Independent financial advisers ("IFAs"), RFPs and other intermediaries, who typically play a significant role in referring new customers to the Group and distributing the Group's products, may reduce the frequency at which they recommend or cease to recommend some or all of the Group's products to their customers. Any sustained period of underperformance by the Group across a range of its managed portfolios or other wealth management products (including as a result of model errors or manipulations) could have a material adverse effect on its business, results of operations, financial condition and prospects.

In addition, the Group relies on representations made to it by distributors or other persons when assessing whether to accept products requested by such distributors and other persons on behalf of their advised clients onto its platforms as part of the onboarding review process. If the representations made to it are incorrect, the Group may be exposed to claims, including potential class actions, regulatory actions and other proceedings, as well as reputational damage, in circumstances where products accepted onto its platforms have performed poorly and customers have suffered losses as a result. This could also result in the Group incurring costs and devoting resources to legal or regulatory proceedings arising from such matters. It may also be more likely that the Group is subject to such claims or reputational damage in jurisdictions outside the United Kingdom, such as the Isle of Man, where the regulatory regime is adapting to heightened international standards.

2.5 The Group may not be able to successfully execute its strategic initiatives.

The Group's aims to grow its customers and assets through a multi-channel strategy comprising both its own advised and open market distribution channels, with a focus on the UK wealth market and, in particular, on the Group's core target market of affluent customers whose liquid assets are or will be between £100,000 and £5 million. Its business model is built around customer needs and brings together financial advice, platforms, tax efficient vehicles or 'wrappers', integrated wealth management and multi-asset investment solutions. If the Group fails to execute on or benefit from its strategy of aiming to be the leading UK wealth manager by continuing to focus on delivering good customer outcomes, it may have a

material adverse effect on the Group's business, financial condition, results of operations and prospects. In addition, the Group is targeting to grow NCCF (excluding Quilter Life Assurance) at 5% of opening AuMA per annum over the medium term. While the Group has exceeded this target in recent periods (excluding Quilter Life Assurance), there can be no assurance that the Group will be able to continue this growth to maintain its financial performance either at historical or targeted future levels.

Successful execution of the strategy is not assured, and depends upon such factors as the Group's ability to accurately predict the type of products and the level of advice required by its target customer base, and to price such products and services competitively. If one or more of the assumptions that the Group has made in setting its targets or objectives are inaccurate, or if one or more of the risks described in this section occur, the Group may be unable to achieve one or more of its targets or objectives. If the Group's strategy is not implemented successfully, if the Group's strategy does not yield the anticipated benefits, or if the Group is unable to control costs in delivering its strategy, the Group may be unable to achieve its targets, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.6 The Group faces risks relating to the disposal of OMGI.

On 18 December 2017, the Company and Mintaka Bidco Limited ("Bidco") (a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of the Old Mutual Global Investors (UK) Limited ("OMGIUK") management) entered into a sale and purchase agreement (the "OMGI SPA") pursuant to which the Company agreed, subject to certain conditions, to sell all of the shares in Old Mutual Global Investors Holdings Limited ("OMGI") to Bidco (the "OMGI Transaction").

The sale of OMGI is subject to certain conditions precedent, including in relation to a reorganisation pursuant to which Old Mutual Investment Management Limited ("OMIML") and the Quilter Investors "multi-asset" business (the "Multi-Asset Business") will be separated and retained by the Group. Therefore, while the OMGI SPA relates to a sale of all of the shares in OMGI, given the separation and retention by the Group of the Multi-Asset Business (and OMIML which will operate the Multi-Asset Business in the future), the commercial effect of such a sale is the disposal by the Group of the Group's "single strategy" asset management business (the "Single Strategy Business") and the retention of the Multi-Asset Business.

Any of the following factors relating to the OMGI Transaction could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.6.1 Failure to complete the OMGI Transaction

The Group may be unable to successfully complete the OMGI Transaction, including if the conditions precedent (which include regulatory approvals as well as the separation of the Multi-Asset Business and OMIML as referred to above) are not satisfied. If the Group is unable to complete the OMGI Transaction, the Group would expect to have a leverage position of approximately £500 million, which would be in excess of the Company's risk appetite, in which case the Group would consider potential actions to reduce its leverage position. The Group's heightened leverage position could subject the Group to increased risks

relating to its debt obligations, as described in "—2.7 The Group's debt obligations could adversely affect the Group's business". In addition, in order to retain certain key fund managers with the business, desk profit share arrangement may require reconsideration, which could result in a reduction of profit generated by the business. If the Group fails to retain certain key fund managers or other staff, the performance of the Single Strategy Business may deteriorate. Any of the above could have a material adverse effect on the Group's business, financial condition and results of operations.

2.6.2 Regulatory approval of Bidco as the purchaser

Completion is subject to Bidco (and its controllers) being approved as the new controllers of OMGI's regulated subsidiaries by regulators which have jurisdiction over OMGI's regulated subsidiaries, with the outstanding approvals being the Financial Conduct Authority ("FCA") in the United Kingdom and the Securities & Futures Commission (the "Hong Kong SFC") (together, the "outstanding regulatory approvals"). It is possible that the outstanding regulatory approvals will take longer than expected to be granted, which would delay completion of the OMGI Transaction, or that any of the relevant regulators decline to approve Bidco (and/or its controllers) as new controllers of one of OMGI's regulated subsidiaries. If any of the outstanding regulatory approvals are not granted prior to the long stop date for the OMGI Transaction (being 17 December 2018) then (unless such long stop date was amended by the parties) the OMGI SPA would automatically terminate as, in accordance with applicable law, the OMGI SPA does not permit either party to waive these regulatory conditions and proceed to completion where all of the outstanding regulatory approvals have not been granted.

2.6.3 Separation and establishment of the Multi-Asset Business

The conditions to completion of the OMGI Transaction include certain steps to separate the Multi-Asset Business, which will be retained by the Group. These steps include (i) preparing the Multi-Asset Business to be moved (including by ensuring it is able to operate on a stand alone basis in compliance with applicable law and regulation), (ii) the reorganisation of the management of certain funds and (iii) the transfer of certain assets that form part of the Multi-Asset Business into new funds separate from the Single Strategy Business. The completion of the reorganisation and transfer steps depend, in part, upon regulatory approvals and on the speed with which certain third party suppliers are able to take actions required to establish such funds and implement such transfers. A delay in completion of this process may lead to a delay in the completion of the OMGI Transaction.

The separation of the Multi-Asset Business from OMGI, its establishment within OMIML and the re-integration of OMIML within the Group may not complete on time and on budget. In particular, the required business functions, associated organisational structure, recruitment and retention of people, business processes, data required by those processes, systems that process those data, and underlying infrastructure that support the systems may not be completed and integrated sufficiently to effectively support the establishment of the Multi-Asset Business. This may inhibit the daily asset management activities and the necessary underlying operational activities, which may have a material adverse impact on the performance of OMIML's funds, especially under adverse market conditions. In addition, existing critical service providers may take advantage of the Group's rapid and significant operating model changes and, in doing so, may inflate ongoing charges for services and products.

2.6.4 Consideration adjustments

The base consideration agreed to be paid by Bidco under the SPA is subject to upward and downward adjustment on the basis of both the regulatory capital position of OMGI as at 31 December 2017 and other factors at the disposal date. The adjustments will not be finalised until shortly before the disposal date (although it is possible in certain circumstances for these to be finalised after the disposal date) and it is possible that a lower aggregate consideration than expected will finally be paid to the Company under the OMGI SPA. These values are subject to a number of potential price adjustments, depending on the net asset value of the business and other factors at the disposal date. The calculation of the consideration adjustments may also be subject to a dispute between the parties which would ultimately be referable to an expert for determination.

2.6.5 Transitional service agreements

The process and steps required to separate OMGI from the Group, establish the Multi-Asset Business within OMIML and re-integrate OMIML within the Group are complex and include the requirement to set up a transitional service agreement (the "OMGI TSA") and a reverse transitional service agreement (the "OMGI Reverse TSA") to provide services between the two parts of the business for a specified period of time for each service, with a maximum service term of 36 months. Pursuant to the OMGI Reverse TSA, OMGIUK will continue to provide certain IT, operational and other services to OMIML in order to assist OMIML in continuing the Multi-Asset Business following completion of the OMGI Transaction. Pursuant to the OMGI TSA, Old Mutual Wealth Business Services Limited will continue to provide certain IT, human resources, finance and facilities management services to OMGI in order to assist OMGI in continuing to operate the Single Strategy Business following completion of the OMGI Transaction. The complexity and time required to establish these transitional service agreements could give rise to ineffective or inefficient operations for a transitionary period.

In addition, while there are no indemnities in the OMGI TSA, the Group may be exposed to liability, with an annual cap of 100% of the service fees paid and payable for the year (subject to customary exclusions from the cap, namely for fraud, willful misconduct, death or personal injury caused by negligence and other liabilities which cannot be lawfully excluded) if there are failures to provide the relevant services to the required standard. Failures by OMGI under the Reverse OMGI TSA are subject to a similar cap on liability, so the Group is exposed to the risk that failures by OMGI to provide the relevant services to the required standard may not be fully compensated.

OMIML will continue to act as authorised corporate director and alternative investment fund manager for certain single strategy funds until a new entity being established by Bidco and OMGI takes over this role, which may be after completion of the OMGI Transaction. During this time, investment management of all the relevant funds will be fully delegated to OMGIUK (as is currently the case). OMIML is entitled to recover its costs, and OMIML benefits from an indemnity from OMGIUK. However, there are certain carve outs and exclusions from OMIML's rights to recover, and there is a risk that OMIML could suffer loss which is not fully compensated.

2.6.6 Impact on Group resources

The concurrence of the Company's planned separation from Old Mutual plc (the "Quilter Separation") and the OMGI Transaction (including the associated separation of the Single Strategy Business from the Group and the separation of the Multi-Asset Business from OMGI in order for it to be retained by the Group) may increase the risk of delays in key decisions being taken or ineffective decision making occurring. The OMGI Transaction could also place additional strain on the Group's senior management, in particular on the Group's executives, which will increase the risk of resource stretch which is already high across the Group. This will further impact the broader resource pool required to support the establishment of the Multi-Asset Business within OMIML, and increases the risk of resignation of or failures by key individuals.

2.6.7 Indemnities and warranties

The Group has also given certain indemnities and warranties to Bidco and OMGIUK, which will survive post-Quilter Separation. This may result in claims being brought against the Group.

2.6.8 Potential payments to Bidco

The Company will have to make certain payments to Bidco if the management fee revenue of OMGI from assets under management derived from certain distribution channels is below given targets in calendar years 2020 and 2022. The maximum payment by the Company is £15 million in respect of each year. While the targets have been set to include headroom over the current levels, there is a risk that some or all of these payments could be triggered.

2.7 The Group's debt obligations could adversely affect the Group's business.

The Group currently has debt service obligations, and is subject to customary financial covenants under the terms of its debt. On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, a £300 million senior unsecured term loan with a number of relationship banks with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating (the "New Term Loan"). The New Term Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction. On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478%. In addition, the Group has entered into a £125 million revolving credit facility which is currently undrawn and is expected to remain undrawn during 2018 (the "New Revolving Facility").

At 31 December 2017, the Group had total gross intercompany indebtedness to other companies within the Old Mutual plc group totalling £782 million, offset by a £16 million receivable. Subsequent to the year end, and as part of a series of internal transactions, £566 million of intercompany indebtedness to other companies within the Old Mutual plc group has been effectively equitised, with the indebtedness to other companies within the Old Mutual plc group being replaced with equity in the form of share capital and a merger reserve. The overall indebtedness also reduced by £16 million from ordinary course transactions. The remaining £200 million intercompany indebtedness was repaid in full from the new facilities referred to above and from existing cash resources on 28 February 2018. On the same date, the £70 million revolving credit facility with Old Mutual plc was cancelled.

The Group's debt obligations may in the future require it to dedicate a greater portion of its cash flow from operations to making payments on its debt, thereby reducing the availability of assets for other purposes. Such debt obligations may also increase the Group's vulnerability to adverse general economic or industry conditions that are beyond its control, and may place the Group at a competitive disadvantage compared to its competitors that may have less debt. Increased interest rates could also increase the Group's debt interest costs under its variable rate debt. A significant increase in the amount of interest payable by the Group could adversely affect the Group's business, financial condition, results of operations and prospects. In addition, if in the longer term the Group wishes to take on additional borrowings (for example, to finance future growth), the Group's current debt obligations may increase the cost of such additional borrowings. This could have a material adverse effect on the Group's business, financial condition and results of operations.

2.8 If the Group fails to manage conflicts of interest between its advice channel and other businesses across the Group, it could result in reputational damage, regulatory liability or customer restitution, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group faces significant potential and actual conflicts of interest, including those which result from the Group's advised distribution channel. In particular, the risk of perceived or actual conflicts arise as a result of the fact that other businesses within the Group receive NCCF as a result of advice delivered through the Quilter Financial Planning network. Additionally, potential conflicts of interest include conflicts around fee arrangements, crossselling, inducements, the management of the Quilter Financial Planning panel and inclusion of Quilter Investment Solutions products therein, adviser disclosures (relating to ownership and restricted status), advice, rebates, gifts and hospitality.

While the Directors believe these potential and actual conflicts of interest have been adequately identified and the Group has policies and procedures to manage the risk of conflicts of interests, there can be no assurance that the Group will not suffer reputational damage or potential regulatory liability if its information barriers, procedures and systems to identify, record and manage potential and actual conflicts of interest fail or are insufficient. Any such failure could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. In addition, the Group is subject to the risk that poor decisions or actions will arise from any unidentified conflicts of interest, which may result in customer detriment, financial loss, reputational damage, regulatory action or customer restitution.

2.9 A computer system failure, security breach or cyber-attack could significantly disrupt the Group's ability to trade, manage systems and platforms on behalf of customers and advisers, or otherwise operate its business.

The Group uses computer systems to conduct its business, which involves managing and administering assets on behalf of customers in its wealth portfolios and on its platforms. The Group's business is highly dependent on its ability to access these systems to perform necessary business functions and to provide adviser and customer support, administer products, make changes to existing policies, file and pay claims, manage customers' investment portfolios and produce financial statements and regulatory returns. The Group has in the past experienced, and may in the future experience, incidents with its IT systems.

Although none of these incidents have resulted in any adverse impact on the Group's customers, there can be no assurance that IT incidents will not result in material disruptions to the Group's systems which adversely affect the Group's customer experiences. If serious breaches, errors or breakdowns in the Group's IT systems are prolonged or occur on a regular basis then the Group could lose fee and commission income, lose valuable and sensitive customer data, damage the goodwill its advisers or customers accord to it and damage its reputation, and could also materially breach contracts it has with its advisers or customers.

The Group is increasingly exposed to the risk that third parties or malicious insiders may attempt to use cyber-crime techniques, including distributed denial of service attacks to disrupt the availability, confidentiality and integrity of its IT systems, which could result in disruption to key operations, make it difficult to recover critical services, and damage assets. Moreover, if the Group is subject to a cyber-attack, its systems may be subject to down-time in an effort to prevent a security breach. Such an outage may lead to reputational damage or customer confusion, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects or damage its reputation. The Group continues to invest in its information security controls in response to emerging threats, such as cyber-crime and fraud, and to seek to ensure that controls for known threats remain robust. The risks associated with cyber-attacks, where an individual or group seeks to exploit vulnerabilities in IT systems for financial gain or to disrupt services, are a material risk to the Group and the UK financial system, which has a high degree of interconnectedness between market participants, centralised market infrastructure and in some cases complex legacy IT systems.

In addition, the Group's risk of cyber-crime and fraud may be compounded by the fact that each of the Group's business units operates largely independently. The Group cannot be certain that its infrastructure and controls will prove effective in all circumstances and any failure of the controls could result in significant financial losses and a material adverse effect on the Group's operational performance and reputation. The Group may also face increased risk of cyber-crime as a result of the Quilter Separation, given the Group's increased business profile and heightened media attention.

Furthermore, the Group's computer systems may be vulnerable to disruptions or breaches as a result of human error, natural disasters, man-made disasters, pandemics or other events beyond the Group's control, and disaster recovery and business continuity protocols may not prove effective. This could result in loss of trust from the Group's advisers or customers, causing reputational damage, regulatory action and financial loss.

2.10 The Group possesses highly sensitive data in relation to its customers and adviser network. A security breach or data theft could damage the Group's reputation and have a material adverse effect on its business, financial condition, results of operations and prospects.

The Group's business, by its nature, requires it to store, retrieve, evaluate and utilise customer and company data and information, which is highly sensitive. The Group is subject to the risk of actual or attempted IT security breaches from parties with criminal or malicious intent. Should the Group's intrusion detection and anti-penetration software not anticipate, prevent or mitigate a network failure or disruption, or should an incident occur in a system for

which there is no duplication, it may have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

If attempts by malicious third parties or insiders to disrupt the Group's IT systems compromise its sensitive data (whether corporate, adviser or customer), such a breach could result in loss of trust from the Group's advisers or customers, causing reputational damage and financial loss. Cyber-attacks can be technologically sophisticated and may be difficult or impossible to detect and defend against. In addition, there can be no assurance that the Group will successfully detect a cyber-attack if one has occurred on a timely basis, or at all. As a result, there can be no assurance that such attacks will not be successful and result in a material adverse effect on the Group's business, financial condition, results of operations and prospects or damage its reputation. If the Group is the victim of a cyber-attack, the Group may also be subject to down time to prevent a security breach.

Any breach in security of the Group's systems, for example from increasingly sophisticated attacks by cyber-crime groups or fraudulent activity in connection with adviser or customer accounts, could disrupt the Group's business, result in the disclosure of confidential information, create significant financial or legal exposure and damage the Group's reputation or brands, any of which may in turn have material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.11 The Group may fail to maintain or adapt its current and legacy IT systems and it may fail to implement its IT initiatives on budget, on time or at all.

The Group's IT systems are critical to the operation of its business and the delivery of products and services to customers. Failure to devote significant resources to support existing systems and upgrade legacy systems, including the Group's Quilter Life Assurance platform, could result in the failure to accurately record customer information or the inability to gather information for pricing, underwriting and reserving, and to attract and retain advisers and customers, for whom online functionality is becoming increasingly important. If the Group fails to maintain and develop adequate IT systems, it could also incur higher administrative costs both from the processing of business and remediation of disputes. Furthermore, the inability of the Group to keep pace with software and infrastructure investment requirements and innovation may have an adverse impact on its ability to remain competitive within the relevant markets. The Group is currently engaged in a number of IT initiatives, including the UK Platform Transformation Programme (as discussed in "—2.12 The Group may fail to deliver on its UK Platform Transformation Programme." below), the Platform Stabilisation Review and the transfer and integration of Global Edge Technologies ("GET"). However, the Group's IT initiatives may not deliver what is required either on time or within budget, or provide the performance levels required to support the current and future needs of the Group's business.

Following material outages in 2015 in Quilter Wealth Solutions and Quilter Life Assurance, the Group initiated the Platform Stabilisation Review programme in an effort to remediate identified risks in the UK platform and deliver stability across the Group's UK platforms. However, there can be no assurance that the Group will be able to remediate the service stability issues or prevent a future major system outage within the UK IT platform through the Platform Stabilisation Review. The Group has also carried out similar risk assessments on the Quilter International platforms (Wealth Interactive and International Heritage) and is producing remediation and stabilisation plans for these systems and the infrastructure which underpins

these systems. However, Quilter International may experience residual issues from the recent implementation of these platforms, including further system outages and functionality gaps, which may require re-coding or re-engineering. If Quilter International is unable to remediate the issues, the business may be interrupted or suffer reputational damage.

As part of the planned managed separation of the four largely independent businesses within the Old Mutual Group (the "Managed Separation"), Old Mutual plc has transferred GET to the Group. GET is important to the operation of the Group's IT activities, in particular the technologies used by Quilter Wealth Solutions. If the Group is unable to successfully manage the transition and integration of GET into the Group's framework and the increased complexity and size of the IT estate, there could be a disruption to the Group's platforms or other material adverse effect on the Group's business.

2.12 The Group may fail to deliver on its UK Platform Transformation Programme.

The Group is currently undergoing a material change in its UK IT platform, with the UK Platform Transformation Programme. The UK Platform Transformation Programme is being designed to migrate the Group's UK customers and advisers from the Group's current platform onto the new platform. The new platform is intended to enhance the Group's service levels, support the Group's advisers and customers and enrich the Group's proposition. The UK Platform Transformation Programme is currently in the development and testing phase, and the total cost is estimated to be £120-160 million from the restart of the programme in May 2017. The Group continues to plan for a soft launch of the enhanced customer and adviser proposition supplied by FNZ by late 2018 or early 2019, with migration of existing advisers and customers to follow shortly thereafter. However, budget overruns, delays to the launch timetable or other challenges to implementation may occur. In the past, the Group has encountered challenges to upgrade its IT infrastructure, notably with regard to a previous replatforming programme which was terminated in 2017 due to increased costs and timescales.

The scope, complexity, cost and timeline of the UK Platform Transformation Programme will continue to require careful management over the near to medium term. The Group may fail to deliver on the UK Platform Transformation Programme on time, within budget or at all, or may otherwise fail to meet market expectations for delivery of the project. In addition, the UK Platform Transformation Programme could lead to disruptions in the Group's business, including potentially material outages or failure to migrate customers and advisers to the new systems, which could result in regulatory action or reputational damage.

If the Group fails to deliver the UK Platform Transformation Programme on a timely or cost effective basis or if the new platform fails to gain acceptance by the Group's advisers and customers that use the current platform, it could damage the Group's relationships with its customers and counterparties, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.13 If the Group is unable to continually attract talented advisers, and to retain and build its Quilter Financial Planning network, the Group may fail to achieve its strategy, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The primary distribution channel for the Group's advice business is its network of RFPs and third party advisers through which it sells and distributes its products and solutions. The Group depends on its ability to continually attract, train and retain high calibre advisers, as well as appointed representative firms ("AR firms"), in a competitive market. As at 31 December 2017, the Group's network of RFPs included approximately 9% of the total market of advisers who are approved by the FCA to carry out a customer function and may provide investment advice ("CF30 Advisers"). The Directors believe RFPs are a key element to driving growth and delivering integrated net client cash flows ("Integrated NCCF") within the Group. The number of RFPs in Quilter Financial Planning has grown from 930 as at 31 December 2014 to 1,561 as at 31 December 2017. If the Group is unable to continue to grow its number of advisers, either through organic recruitment or acquisition activity, the Group may fail to achieve its strategy or achieve the anticipated benefits of its strategy, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. Furthermore, the Group may be unable to retain the existing advisers or AR firms on the Quilter Financial Planning network. The most significant of the Group's AR firms accounted for 8.9% of the Group's total advisers as at 31 December 2017. If the Group loses one or more of its significant AR firms, either as a result of factors outside of the Group's control (such as the acquisition of the AR firm by one of the Group's competitors) or factors within the Group's control (such as failure to offer competitive incentive plans or deliver good customer service), the Group may be unable to replace the lost advisers, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Going forward, a long-term challenge for the Group, and for the industry as a whole, will be the supply of suitably qualified advisers, given that the current supply of qualified advisers relative to the UK population is low (with approximately 25,000 total advisers and 2,000 adults per adviser in the UK as at 31 December 2017), the average age of advisers in the UK is approximately 50, and the Group expects many advisers will retire in the next ten years. If the Group is unable to attract and retain suitably qualified advisers as a result of the tightening supply, the Group may fail to compete with its competitors and may ultimately fail to realise its business strategy. In addition, the Group's efforts to attract and retain suitably qualified advisers may require significant continued investment to ensure they do not prefer the Group's competitors, including potentially with regard to long-term incentive plans. If the Group is not able to successfully recruit and retain advisers, its business, financial condition, results of operations and prospects could be materially adversely affected.

2.14 The Group is reliant on its ability to attract and retain talented investment managers and portfolio managers. The loss of a number of such managers could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The continued success of the Group depends on its ability to attract and retain talented investment managers and portfolio managers. Quilter Cheviot employs 164 investment managers who actively manage over £23.6 billion (as at 31 December 2017) in investment portfolios individually tailored for the Group's customers. Quilter Investors is a retail asset manager in the UK with £16.9 billion of AuM (year ended 31 December 2017) and with a core team of 7 multi-asset portfolio managers utilising investment processes and tools. The Group's overall business depends on continued significant contribution to its growth by these multi-asset portfolio managers. Within these portfolios, managers have considerable freedom (within the stated objectives and mandate of the product or portfolio) to manage the investments and portfolios for which they are responsible.

The loss a number of the managers described above could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. The Group could experience a decline in the performance of affected assets, which may reduce AuMA and revenues. As the Group is particularly reliant on the performance of its principal investment managers and portfolio managers, it is important that it retains such managers, and, where necessary, replaces them, either internally or from external sources. There can be no guarantee that the Group will be able to retain them or, should they leave, replace them (either internally or from external sources).

In order to retain its principal investment managers and portfolio managers and, when necessary, attract new managers, the Group must offer competitive compensation arrangements, the costs of which may be significant. The rates of compensation vary depending on the particular role of individual managers, but may be substantial. In less successful years, the compensation arrangements may be insufficient for the Group to meet the expectations of these managers and other employees, potentially constraining the Group's ability to retain or recruit. If the Group needs to replace one or a team of its principal managers with external hires, it may face difficulty as the market for experienced and talented managers is extremely competitive. Even if the Group were successful in attracting a replacement manager from external sources, the costs of such recruitment may be significant. If the Group is unable to attract and retain experienced and talented managers, whether as a result of cost constraints or otherwise, its business, financial condition, results of operations and prospects could be materially adversely affected.

2.15 The failure to attract or retain senior management or other necessary personnel could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Failure to attract and retain senior management and key employees could have a material adverse effect on the Group's business, financial condition, results of operations and prospects, and presents a significant risk to the delivery of the Group's overall strategy.

As a financial services organisation, the Group relies, to a considerable extent, on the quality of key talent and business leaders in the locations in which it operates. The success of the Group's operations is dependent on, among other things, its ability to attract and retain highly qualified professionals. It is therefore important that individuals identified as having key talents and skills critical to the success of the business are engaged and retained and, where necessary, in the event of any unexpected departures, are replaced with the best available talent from either internal or external sources. In addition, the Group may fail to, or may experience a delay in, receiving approval for certain senior persons by the relevant regulator.

Competition for highly qualified professional people in the industry and jurisdictions in which the Group operates is intense. The Group's ability to attract, retain and develop key people and, in particular, directors and specialists, is dependent on a number of factors, including prevailing market conditions, the Group's culture and working environment, and the Group's ability to offer competitive compensation packages.

2.16 If the Group fails to alleviate resource stretch and capacity constraints, the Group may fail to implement its significant change initiatives.

The Group is in the process of planning and executing significant change across all business units, and resource contention and capacity constraints are a material delivery risk given the breadth and depth of the change project portfolio. The Group's significant change initiatives include the UK Platform Transformation Programme, the disposal of OMGI, the Platform Stabilisation Review, regulatory change initiatives (including the Markets in Financial Instruments Directive II ("MiFID II") and the General Data Protection Regulation ("GDPR")), the Wealth Interactive enhancement programme and the Information Security Improvement Programme.

The Group is currently facing significant resource stretch due to the high degree of regulatory change and heightened demands on staff during the Group's significant change initiatives in addition to the ordinary course of business. As a result, whilst additional resources are being made available, there is an increased risk of failures regarding retention, reward and development of employees across all of the Group's businesses. The Group may experience a loss of talent from stress, overwork and lack of recognition. The Group may also experience increased employee errors in light of the capacity constraints. If the Group is unable to provide additional support and assurance for key individuals and operational staff through this period of sustained overstretch, the Group's ability to conduct business might be adversely affected and the Group may fail to deliver on its significant change initiatives, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.17 The Group is dependent on the strength of its brands, which are vulnerable to adverse market perception or negative publicity, and the Group may face challenges with regard to its ongoing rebranding initiative.

On 15 November 2017, the Group announced its intention to rebrand the Group to "Quilter". Prior to the rebranding, the Group marketed a significant portion of its products and services using the "Old Mutual Wealth" brand name and logo. The Directors believe the association with Old Mutual, and the use of Old Mutual's brand, may have contributed to its preferred status among customers, advisers and other persons due to Old Mutual's globally recognised brand, and the perception that Old Mutual provides high quality products and services and has a strong capital base and financial strength. The planned separation of the Group from Old Mutual could change this perception and adversely affect the Group's ability to attract and retain advisers and customers, which could result in reduced sales of its products and services. Furthermore, as the Group intends to rebrand its businesses over a period of approximately two years from the Quilter Separation, which will result in several brands in the marketplace at one time, there is a risk of customer and third party confusion, which could lead to a loss of brand loyalty. In addition, this will be the Group's second rebrand since 2014, which could also contribute to customer and third party confusion and a loss of brand loyalty.

The Group may also face challenges due to operating under the "Quilter" brand name. If advisers are concerned about appearing closely associated with the "Quilter" brand, they may recommend products and solutions from competitors to avoid the perception of a conflict of interest, even where one does not exist. This could result in reduced profitability for the Group.

Furthermore, as part of the Quilter Separation, Old Mutual plc and, once it is the new holding company of the Old Mutual Limited group, Old Mutual Limited are expected to implement restrictions on the use of a name or brand containing the words "Old Mutual" in the United Kingdom for businesses that compete with the businesses of the Group. These restrictions are expected to apply during the period from the Quilter Separation until 31 March 2020, being the period during which the Group intends to rebrand its businesses. After 31 March 2020, these restrictions would no longer apply. If the Group has not finalised its rebranding before 31 March 2020 and another company uses a name or brand containing "Old Mutual" to compete with the Group in the United Kingdom, there is a risk of customer and third party confusion, which could lead to a loss of brand loyalty. There are also not expected to be any restrictions on the use of the name "Old Mutual" outside of the United Kingdom and, accordingly, the Group's international operations (in particular Quilter International) could experience such risk from the date of Quilter Separation.

The Group's success and results are to a certain extent, dependent on the strength of its reputation and existing brands and sub-brands, including Quilter Cheviot, Cirilium, Creation, Generation, WealthSelect and other brands, which may become vulnerable to adverse market and customer perception. The Group operates in industries where integrity, trust and confidence are paramount. The Group is exposed to the risk that litigation, employee misconduct, operational failures, the outcome of regulatory investigations, press speculation and negative publicity, disclosure of confidential customer information, cyber security breaches and inadequate services, among other factors, whether or not well founded, could significantly impact its brands or reputation.

The Group's brands or reputation could also be affected if the Group or advisers recommend products or services that do not perform as expected (whether or not the expectations are well founded) or in line with the customers' expectations for the product range. If customers have experienced financial losses or do not achieve expected performance levels as a result of advice given by their advisers, these customers may cease to do business with the Group, may complain or may bring claims against the Group. As a result, the Group may face reputational damage or regulatory sanctions, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Any of the foregoing could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.18 The Group is exposed to conduct risk.

Conduct risk is the risk that decisions and behaviours of a company, its employees, its advisers or its appointed representatives lead to its customers being treated unfairly or otherwise result in detrimental customer outcomes. Conduct risk may arise where the Group fails to design, implement or adhere to appropriate policies and procedures, offer products, services or other propositions that do not meet the needs of customers or fails to perform in accordance with its intended design, fails to communicate appropriately with customers, fails to deal with complaints effectively, sells or recommends unsuitable products or solutions to customers, fails to provide them with adequate information to make informed decisions or provide unsuitable investment or financial planning advice to customers, or fails to do any of the foregoing on an ongoing basis after initial sales, among other things. This risk may also arise as a result of employee (mis)conduct.

The Group is regulated to provide financial advice through Quilter Financial Planning, and this advice, including in respect of mortgage and protection products, is provided by over 3,500 financial advisers within its network. As a consequence, the Group is exposed to conduct risk arising from the activities and advice practices of these financial advisers. This advice is provided across a complex range of products and investment choices. The financial advice industry in the UK has been exposed to mis-selling advice practices, such as banking advice, which has resulted in significant costs of redress. During the period April 2016 to March 2017, the Financial Ombudsman Service (the "FOS") reported that 4.5% of complaints it received during that year related to investments and pensions.

Conduct risk remains the subject of close regulatory scrutiny. Failing to protect the interests of customers in this way and failing to demonstrate sufficient suitability processes and monitoring could lead to legal proceedings or regulatory enforcement action. Moreover, regulators may deem certain customers of the Group's advisers to be 'vulnerable' customers, which may result in a higher standard of conduct being required of the Group in relation to products and services offered to such customers. Given that regulation includes principlesbased rules and regulations, the rules and regulations may be subject to differing applications and interpretations by regulators or market participants over time. This could in turn lead to financial penalties, reputational damage and, in the case of regulatory enforcement action, the suspension or revocation of regulatory permissions, licences or approvals. Moreover, if the Group fails to detect misconduct on a timely basis, or at all, the Group may face further reputational or financial damage. This could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.19 The Group's customers may withdraw assets under management or assets under administration at short notice.

The Group's revenues are predominantly derived from management and administration fees, the quantum of which is based on the value of AuM and AuA in most of the Group's business units. A high proportion of the Group's wealth management products permit investors or customers to reduce the aggregate amount of their investment with no, or only short periods of, notice, or to withdraw altogether from such portfolios or contracts. If interest rates rise, stock markets decline or the Group's investment performance underperforms, the pace of redemptions and withdrawals could accelerate. A significant or systemic withdrawal of AuM or AuA would result in lower management fees and therefore revenues and, depending on the extent of such withdrawals, could impact the Group's ability to achieve its financial targets and strategic initiatives.

Redemptions and withdrawals of investment assets may also be requested more quickly than assets can be sold to meet such redemptions and withdrawals, especially in products where the underlying assets are less liquid. In exceptional circumstances, a third party fund manager that manages assets which comprise a portion of a portfolio managed by the Group may suspend dealing in a fund or in a range of funds, or take other mitigating actions, if the manager determines it would be in the best interests of investors. In addition, if such funds hold a large portion of illiquid assets, the Group may be exposed to further risks if the investors seek to redeem their investments before or during the fund's suspension.

2.20 The Group's international business is exposed to additional local political, economic, regulatory and business risks and challenges which may affect the demand for its products and services or adversely affect the Group's reputation.

While the Group operates primarily in the UK, it has a presence in a number of cross-border markets. For instance, the Group currently offers products and services in continental Europe, Latin America, the Middle East, the Asia Pacific region and elsewhere around the world. The Group's international operations expose the Group to additional risks, including in relation to local political, economic, regulatory and business challenges which may affect the demand for the Group's products and services, its reputation, the level of the Group's AuMA, the credit quality of local counterparties or capital requirements of the Group. These risks include, for example, political, social or economic instability in countries in which the Group operates, credit risk of counterparties, lack of local business experience in certain markets and risks of regulatory non-compliance. The nature of some of the jurisdictions in which the Group operates means that these risks can be more acute internationally than in the UK market. These risks, including the risk of remediation and redress, also exist in respect of historical and legacy international business of the Group, given the Group historically has had a broad geographic footprint in over 100 countries. Over the last few years, the Group has made the strategic decision to focus on fewer core worldwide regions, which has resulted in the Group ceasing to write new business in a large number of countries. Whilst a "back book" of business continues to be maintained in such "closed" countries, the number of countries of client residency that Quilter International considers accepting new business from has decreased significantly.

Because the Group operates in a number of international jurisdictions, the Group may also face increased costs due to the complexity of managing operations in a number of markets, including with regard to changing regulatory frameworks. See "—3. Risks relating to regulation and legislation—3.6 Differing regulatory requirements in the jurisdictions where the Group operates may increase the costs and risks of doing business in such locations, may impede further international growth and may present barriers to growing the customer base of the business". The pace of regulatory change in the international market is typically accelerated in the offshore jurisdictions in which the Group operates as these jurisdictions catch up with international standards. For example, the Isle of Man FSA is currently modernising its regulatory framework to align with international standards, including the implementation of a new risk-based capital regime similar to Solvency II and new Conduct of Business rules. Given the pace of regulatory change internationally, the Group may face increased execution risk and compliance costs. See "—3. Risks relating to regulation and legislation—3.4 A number of complex regulatory change initiatives have recently been delivered or are expected to be delivered in the short term, and the effect of these regulatory initiatives is uncertain". In addition, international regulations may change in such a way as to prohibit or restrict the sale of certain products or services in one or more of the jurisdictions in which the Group operates, including as a result of increased regulatory attention on improved customer outcomes.

The distributors who distribute on behalf of the Group internationally operate under a framework which sets out what products they can sell into what markets. If the Group's distributors transgress from this framework and sell unauthorised products into the unauthorised jurisdictions in an unapproved manner, the Group may be subject to reputational damage or significant regulatory penalties.

The Group's international business (and particularly the Quilter International business located in the Isle of Man) may also be adversely affected by public perception of holding assets offshore in low tax jurisdictions, which has been subject to increased scrutiny following the leak of papers from a law firm in Bermuda and other offshore territories in late 2017 (the "Paradise Papers") and the leak of papers from a Panamanian law firm in early 2016 (the "Panama Papers"). As a result of the negative press surrounding the Paradise Papers and the Panama Papers, the Group may experience decreased demand for certain of its products and services due to social and political pressure concerning offshore investing.

Any of the preceding factors could have a material adverse effect on the Group's reputation and business, financial condition, results of operations and prospects.

2.21 All of the Group's businesses are subject to operational risks, including the risk of direct or indirect loss resulting from inadequate or failed internal and external processes, systems, poor data handling and human error or from external events.

The Group's business is dependent on its ability to manage a range of internal and external processes, systems and data, including, for example, (i) processing and reporting on a large number of transactions across numerous and diverse products; (ii) platform administration and reporting services to advisers; (iii) its ability to correctly manage customer policies and assets; (iv) compliance with relevant regulatory reporting requirements; and (v) its ability to maintain the integrity of a large volume of data. Furthermore, the long-term nature of certain businesses within the Group means that accurate records have to be maintained for significant periods.

The Group cannot predict or anticipate the specifics or timing of all possible operational and systems failures which may adversely impact the Group's business. The systems and processes on which the Group is dependent to serve customers and advisers may fail due to IT malfunctions, human error, intentional interference, business interruptions, nonperformance by third parties or other external events. If systematic or human errors or failed internal or external processes were to materialise with respect to any of the foregoing or similar risks, this could disrupt business operations, resulting in material brand and reputational damage, loss of customers or advisers, and regulatory action, any of which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. The Group may also be required to conduct thorough investigations of the circumstances surrounding the breach and regulatory investigations may also follow. The costs involved in such investigations, including management's time and professional fees, could be material to the Group.

2.22 The Group is subject to various risks relating to the outsourcing and procurement of services to third party contractors, suppliers, agents and service providers.

The Group outsources and procures certain functions and services externally to third parties and may increase its use of outsourcing in the future. If the Group does not effectively develop and implement its outsourcing strategies and its internal capability to manage such strategies, third party providers do not perform as anticipated, or the Group experiences technological or other problems with a transition, it may not realise productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and a loss of business. Moreover, if the contracts with any of these third party providers were terminated,

the Group may not find alternative service providers on a timely basis or on comparable terms or may suffer disruption as a result of the transition of functions to the new service provider. Furthermore, mistakes by third party providers, for example in relation to pricing functions, could result in reputational damage, a requirement to pay compensation to customers or regulatory action or fines. The Group may be unable to recover losses from third party providers, for example in the event of a provider's financial distress or limitations on liability. In addition, the ability to receive services from third party providers outside the UK (or the jurisdictions in which subsidiaries operate) might be impacted by cultural differences, political instability, unanticipated regulatory requirements or policies inside or outside the UK. As a result, the Group's ability to conduct business might be adversely affected and result in regulatory action. The Group has in the past experienced issues relating to outsourcing, notably with regard to the Group's previous re-platforming IT programme. See "—2.12 The Group may fail to deliver on its UK Platform Transformation Programme".

The Group also depends upon third-party suppliers to provide key equipment, technology and services for the provision of the Group's services, certain of which is only available from a limited number of third parties. While the Group has contractual protections in place with its third party suppliers, the Group does not have operational or financial control over them, and the Group has limited or no influence with respect to the manner in which they conduct their business. Therefore, the Group is also exposed to risks associated with cyber-crime and fraud with respect to its third party contractors, suppliers, agents and service providers. If these third parties fail to provide equipment, technology or administrative services on a timely basis, the Group may be unable to provide services to its advisers and customers until an alternative source can be found, which may not be available on favourable terms or at all. The Group's key counterparties in relation to outsourcing include Citi (providing middle and back office services for Quilter Investors, including registrar services, trade processing, accounting services, custodial services and depositary functions), HCL Technologies (providing infrastructure, application development and maintenance services for Quilter Wealth Solutions and Quilter Life Assurance) and TCS (providing the BaNCS platform and the associated development and maintenance services). The Group is also dependent on FNZ, with respect to the Group's UK Platform Transformation Programme and related business process outsourcing. If any of the Group's contracts with key suppliers are terminated, if the Group is unable to renew these contracts on favourable terms, or if the Group is unable to find suitable replacement providers, this could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.23 The markets in which the Group operates are characterised by continued improvements in operational infrastructure. Failure to keep pace with such changes could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The markets in which the Group operates are characterised by continued improvements in operational infrastructure, including changes in use and adviser or customer requirements and preferences, frequent product and service introductions employing new technologies, and the emergence of new industry standards and practices that could render the Group's existing technology and systems obsolete.

There can be no assurance that the Group will be able to anticipate and respond to the demand for new services, products and technologies in a timely and cost-effective manner, to adapt its infrastructure to technology advancements and changing standards or to retain the Group's advisers or customers. The Group's failure to meet any of these demands could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.24 Errors may affect the calculation of unit prices or deduction of charges for the Group's unit-linked products or mutual funds which may require it to compensate customers retrospectively.

As at 31 December 2017, approximately half of the Group's business was comprised of unitlinked contracts, where product benefits are linked to the prices of underlying unit funds, and mutual funds business. There is a risk of error in the calculation of the prices of these funds, which may be due to human error in data entry, IT-related issues, the improper configuration of transaction reporting systems, the failure of outsourcing parties to perform required duties or other causes. Additionally, it is possible that policy or fund charges which are, or will be, deducted from these contracts or funds are taken incorrectly, or the methodology is subsequently challenged by policyholders, investors or regulators and changed retrospectively. The Group also faces risks related to end user computing, where solutions are used on a decentralised basis and are not under the Group's formal IT governance or control. Any of these factors could give rise to future liabilities, such as compensation payments to customers. The Group has in the past experienced, and may in the future experience, such errors. Payments due to errors or compensation could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.25 Breaches by the Group of investment mandates could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group is generally required to invest in accordance with specific investment mandates or objectives established for the particular portfolio or product (or in the case of segregated mandates set by the customer or its adviser). If investments are made or managed in breach of an investment mandate, including with regard to the use of benchmark indices, the Group could be required to unwind the relevant transactions, could suffer reputational and brand damage and likely would be liable for any losses suffered by an affected party in doing so. Such losses could be significant and exceed amounts recoverable under the Group's insurance policies, if any. The potential reputational and brand damage and the obligation to compensate for such losses could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.26 Risk management policies and procedures may leave the Group exposed to unidentified or unanticipated risk, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Management of risk requires, among other things, policies and procedures to identify, quantify, manage and mitigate risks and to anticipate emerging risks. Some risk exposures are quantified using mathematical models which are calibrated using a combination of historical data and expert judgement. As a result, these methods may not fully predict future exposures, which can be significantly greater than historical measures indicate, particularly in unusual markets and environments. Other risk management methods depend upon the evaluation of information, regarding markets, customers, catastrophe occurrence or other matters, that is, or will be, accessible to the Group. This information may not always be accurate, complete, up to date or properly evaluated. Although the Group makes use of forward-looking risk indicators and other risk management tools where appropriate, it is not possible for these indicators to precisely predict future outcomes which may result in the Group being exposed to unforeseen financial impacts or reputational damage.

2.27 Counterparty default risk could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group is exposed to credit default risk through its investments including those in corporate bonds, unsecured cash instruments and structured credit assets, as well as exposures through counterparty risks in derivatives contracts and other financial instruments. The risks in these assets and exposures may be borne by the Group, by unit holders or by the policyholders whose policies the assets back, or a mixture of the two. A counterparty default could create an immediate loss or a reduction in future profits, depending on where the loss occurred in the business.

With respect to secured transactions, the Group's credit risk may be impacted where the collateral held cannot be realised or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to it. Partnership agreements may also be terminated on certain dates or subject to certain conditions and could be subject to renewal on less favourable terms or not at all. There can be no assurance that any such nonrenewals, losses or impairments to the carrying value of these assets would not have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.28 Adverse capital and credit market conditions may significantly affect the Group's ability to meet liquidity needs, access to capital and cost of capital.

The capital and credit markets have been experiencing volatility and disruption over recent years. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for certain groups and the ability to access equity capital.

The Group depends on liquidity to pay operating expenses, dividends on ordinary shares, interest on debt and to meet other liabilities. Without sufficient liquidity, the Group will be forced to curtail operations, and the business will suffer. The principal sources of liquidity are fees related primarily to the value of AuM and AuA, insurance premiums and cash flow from the assets held for the account of the business, consisting mainly of cash or assets that are readily convertible into cash. Sources of liquidity in normal markets may include a variety of short-term and long-term instruments, including repurchase agreements, commercial paper, medium-term and long-term debt, junior subordinated debt securities, capital securities and shareholders' equity. The Group may not have access to all of these short-term and long-term instruments.

The availability of additional financing will depend on a variety of factors, such as market conditions, the general availability of credit, the overall availability of credit to the financial services industry, the Group's credit capacity and credit ratings, as well as the possibility that lenders could develop a negative perception of the Group's long-term or short-term financial prospects if the Group incurs large investment losses or if the level of business activity

decreased due to a market downturn. In tight credit markets, an unwillingness by providers of finance to extend credit may lead to difficulties and additional costs in financing investment portfolios or certain credit sensitive instruments which form part of those portfolios. Internal sources of liquidity may prove to be insufficient, and in such case, the Group may not be able to successfully obtain additional financing on favourable terms, or at all.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit the Group's access to capital required to operate its businesses. Such market conditions may limit the Group's ability to replace any maturing liabilities in a timely manner, satisfy statutory capital requirements, generate fee income and market-related revenue to meet liquidity needs, and access the capital necessary to grow the Group's business. As such, the Group may be forced to delay raising capital, issue shorter-term securities than would be preferable, bear an unattractive cost of capital or scale back business activities, sell parts of the business or take other mitigating actions which could decrease profitability and significantly reduce financial flexibility. Consequently, the Group's business, financial condition, results of operations and prospects, as well as its statutory capital position could be materially adversely affected by disruptions in the financial markets.

2.29 The Group may be subject to over-exposure with regard to its insurance risks due to a failure in the underwriting process or an inability to secure appropriate reinsurance coverage.

The Group has exposure to mortality risk (the risk related to the frequency of deaths) and morbidity risk (the risk related to the prevalence of a disease) from its life assurance business, which issues policies that carry certain guaranteed benefits upon the death, or defined illness, of the policyholder. These risks could be aggravated by any potential failure in underwriting processes and standards designed to identify sub-standard lives at the new business stage.

The Group may decide not to, or be unable to, secure reinsurance coverage that is fully aligned with the exposures carried by the Group, as the policies written by the Group may diverge from the terms of its reinsurance. In addition, when the Group obtains reinsurance, it remains primarily liable for the reinsured risks, regardless of whether the reinsurer meets its reinsurance obligations. Therefore, the inability or unwillingness of the Group's reinsurers to meet their financial obligations or disputes on, and defects in, reinsurance contract coverage wording and processes, could materially affect the Group's operations. Reinsurers may also become insolvent. Due to the nature of the reinsurance market and the restricted range of reinsurers that have acceptable capital ratings, the Group is exposed to concentrations of risk with a small number of individual reinsurers.

2.30 The Group's borrowing costs and access to the debt capital markets depend significantly on its credit ratings.

Rating agencies assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to general economic conditions and circumstances outside the rated company's control. The Group cannot predict what actions rating agencies may take, or what actions may be taken in response to the actions of rating agencies, which could adversely affect the Group's business. In addition, changes in methodologies and criteria used by rating agencies to determine credit ratings could result in ratings downgrades that do not reflect changes in the general economic conditions or the

Group's financial condition. As with other companies in the financial services industry, the ratings could be downgraded at any time and potentially without notice by any rating agency, including potentially as a result of failure to complete the OMGI Transaction or the Proposed Listing. See "—2.6 The Group faces risks relating to the disposal of OMGI—2.6.1 Failure to complete the OMGI Transaction".

A downgrade may adversely affect the Group's ability to market products and retain existing customers and clients, which may negatively impact new sales and adversely affect its ability to compete. In addition, the interest rates paid on the Group's borrowings and the Group's financial flexibility may be impacted by its credit ratings. Any future adverse changes in the credit ratings of the Group could negatively impact the volume and pricing of the Group's funding, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.31 Price and earnings inflation could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

A significant proportion of the Group's operating costs are staff related. If such costs are not controlled or cannot be passed through to customers, the profitability of the Group may be impacted. In addition, significant increases in inflation could impact the Group's unit costs in other ways and potentially impact profitability and capital position, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.32 The inability of the Group to adequately insure against specific risks could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group's business entails the risk of liability related to litigation from customers, shareholders, employees or third party service providers and actions taken by regulatory agencies, which may not be adequately covered by insurance or at all. Specifically, there is a risk that claims may arise in relation to damage resulting from the Group's employees' or service providers' operational errors or negligence, or misconduct or misrepresentation by its employees, agents and other operational personnel, including the Group's RFPs, IFAs and Mortgage & Protection Advisers. There can be no assurance that a claim or claims will be covered by insurance or, if covered, that any such claim will not exceed the limits of available insurance coverage or that any insurer will meet its obligations to insure. There can also be no assurance that insurance coverage with sufficient limits will continue to be available at a reasonable cost. Renewals of insurance policies or claims under existing policies may expose the Group to additional costs through higher premiums or the assumption of higher deductibles or co-insurance liability. A significant increase in the costs of maintaining insurance cover or the costs of meeting liabilities not covered by insurance could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.33 The Group may be unable to fully capture the expected value from acquisitions and disposals or may be subject to liabilities from historical corporate transactions, either of which could materially and adversely affect the Group's results of operations, financial conditions or prospects.

The Group may from time to time undertake acquisitions and disposals as part of its strategy, which could subject the Group to a number of risks. Some of these risks may affect the expected future value of an acquisition. For example, the rationale and assumptions underlying the business plans supporting the valuation of a target business may prove inaccurate, in particular with respect to synergies and expected commercial demand. Moreover, the Group may fail to successfully integrate any acquired business, including its technologies, products and personnel. The Group may also fail to retain key employees, advisers, customers and suppliers of any acquired business, which could reduce its value to the Group. Additionally, the Group may fail to capture the fair or expected value of disposals it undertakes.

Acquisitions and disposals may also pose risks to the Group's existing businesses. For example, the acquisitions and disposals may divert management's attention and resources from existing operations. Furthermore, the Group may be required to obtain regulatory and other approvals in connection with certain acquisitions and there can be no assurance that such approvals will be obtained and, even if granted, that there will be no burdensome conditions attached to such approvals. The Group may also be required or wish to terminate pre-existing contractual relationships, which could prove costly or be executed at unfavourable terms and conditions.

Finally, acquisitions and disposals may expose the Group to the risk of liabilities from historical corporate transactions. For example, the Group may fail to discover certain contingent or undisclosed liabilities in businesses that it acquires, or its due diligence to discover any such liabilities may be inadequate. The Group may also be subject to legacy conduct and other exposures with respect to the businesses the Group has or will acquire, including with regard to legacy advice on the books and advice provided by unregulated IFAs in unregulated markets. Moreover, the Group may be exposed to claims of breach of representations and warranties under the sale agreements of disposed businesses. If any of the aforementioned transpire, the Group could suffer reputational and brand damage and may be liable for losses suffered by an affected party.

Any of the above could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.34 There are inherent risks associated with participations in defined benefit staff pension schemes.

The Group operates two DB (final salary) pension schemes within Quilter Cheviot, the Quilter Cheviot Limited Retirement Benefits Scheme (the "UK Final Salary Scheme") and the Quilter Cheviot Channel Islands Retirement Benefits Scheme (the "CI Final Salary Scheme"). The UK Final Salary Scheme was closed to new entrants from 31 December 1997 and the CI Final Salary Scheme was closed to new entrants from 29 April 2005. In addition, the schemes are closed to future accruals, all members are now deferred members or pensioners (not accruing any further service benefits) and pension increases are linked to salary at the time of

closure (1 January 2015) and now receive statutory increases, predominantly based on the Consumer Price Index.

There are inherent risks associated with DB schemes, including the UK Final Salary Scheme and the CI Final Salary Scheme. A variety of events could result in a material deterioration in the strength of the schemes in respect of funding, IAS19 and other valuation bases. In some cases, a deficit between the pension scheme's assets and liabilities could develop or increase and this could lead to the need for additional contributions to be paid. The UK Final Salary Scheme and the CI Final Salary Scheme are both subject to risks that the respective value of their assets, which move in line with markets, may not fully cover the amount of their DB liabilities, which are affected by changes in life expectancy, inflation and the discount factor used by the scheme actuaries to calculate the present value of future benefit payments. Moreover, the schemes may be subject to errors in the underlying actuarial models, which could lead to liabilities being understated, or errors in the calculation of pension already in payment, which could lead to increased liabilities. Any of the above could require the Group to recognise an increased funding deficit on its balance sheet, and therefore its contribution requirements in respect of the schemes.

Factors that affect the position of the schemes include: investment performance of the scheme's assets; contributions; assumption changes and experience relative to the assumptions. Changes in fixed income, credit, equity, property, derivative and other markets may impact both the value of scheme assets and the value placed on scheme liabilities. Other changes in market conditions, the economic environment (such as inflation), demographics (including, but not limited to, member longevity) and the choices of scheme members can also impact the financial position of the schemes. Additionally, the strength and reported position of each scheme could be affected by applicable changes in regulation and legislation and relevant changes in financial reporting standards, guidance and interpretation.

Following a material change in the financial standing of a scheme, appropriate action would be agreed with the trustees. Upon a funding deficit arising, this may require a funding plan to be agreed to make good the deficit over a period of time, but could also include a range of other actions to manage the liabilities. The funding position of the schemes and the requirement to make contributions into the relevant schemes by the Group are reviewed regularly as required by the regulator. The financial position of the DB pension schemes may affect the Group's financial performance and financial statements. As at 31 December 2017, both schemes were in surplus on an IAS19 basis. The triennial actuarial valuation for the UK Final Salary Scheme is currently in progress, but the results of this valuation will not be known until after the publication of this Prospectus, and the triennial actuarial valuation for the CI Final Salary Scheme will take place next year.

2.35 Catastrophic events, which are often unpredictable by nature, could result in material losses and abruptly and significantly interrupt business activities.

Whilst the Group does not generally take principal risk in these areas, the Group is indirectly exposed to volatile natural and man-made disasters such as pandemics, hurricanes, floods, windstorms, earthquakes, terrorism, riots, fires and explosions. Such events could adversely impact investment markets and cause falls in the value of customers' investment portfolios. Furthermore, pandemics, natural disasters, terrorism and fires could disrupt operations and result in significant loss of property, key personnel and commercial information. Because the

majority of the Group's operations are centralised in one location, the Group may be more vulnerable to such catastrophic events. If the Group's business continuity plans have not included effective contingencies for such events, or if the Group's disaster recovery processes are insufficient, these events could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

In addition, the Group is exposed to the risk of catastrophic mortality through its life insurance operations, so that an event such as a pandemic or other event that causes a large number of deaths in the UK could have an adverse impact on the Group's financial results in any period. Catastrophic events could also harm the financial condition of the Group's reinsurers and thereby increase the probability of default on reinsurance recoveries. Catastrophic events, depending on their severity, could therefore have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

2.36 The Group's financial statements are based, in part, on judgements, assumptions and estimates.

The preparation of the Group's financial statements requires management to make judgements, assumptions and estimates that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those estimates. Judgements, assumptions and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The areas where judgements, assumptions and estimates have the most significant effect on the amounts recognised in the consolidated financial statements include consolidation; recognition and measurement of insurance contracts; provisions and contingent liabilities; deferred tax; and goodwill and intangible assets. Examples of these judgements, assumptions and estimates include those made in relation to the implementation costs of the UK Platform Transformation Programme, the acquisition of Caerus and the FCA's industry-wide thematic review into the treatment of long-standing customers invested in closed-book products sold by the life insurance sector. The critical accounting judgements, assumptions and estimates, and the associated accounting policies are set out in Note 1 and Note 4 of the Group's historical financial information.

If one or more of these judgements, estimates and assumptions is subsequently revised as a result of new factors or circumstances emerging, the Group may face reputational damage, which could, in turn, have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3. Risks relating to regulation and legislation

3.1 The Group's regulated businesses are subject to extensive regulation both in the UK and internationally, and the Group faces risks associated with compliance with these regulations.

The Group is subject to extensive regulation in each of the jurisdictions in which it conducts business. Likewise, some of the investment vehicles it uses (such as UCITS funds operated under the UCITS Directive) also have to satisfy various regulatory requirements in order to be authorised for distribution in some jurisdictions. The Group is also obliged to complete extensive and complex disclosures relating to assets held within the Group to meet UK and international regulations. Regulatory agencies have broad regulatory and administrative powers over many aspects of financial services businesses such as the Group, which may include governance, systems and controls requirements, conduct of business requirements (including marketing and selling practices, advertising, customer documentation and service standards), market conduct, product authorisation and governance, solvency, liquidity, intragroup transactions, risk concentration and permitted investments. Regulators are concerned primarily with financial stability, market integrity and the protection of customers rather than with the interests of the shareholders or creditors of financial services firms.

In the UK, the Group's business is subject to regulation by the FCA and the Prudential Regulation Authority ("PRA"). The FCA and the PRA have broad powers, including the authority to grant, vary the terms of or cancel a regulated firm's authorisation, to investigate marketing and sales or advice practices and to require the maintenance of adequate financial resources. The FCA and the PRA have the power to take a range of investigative, disciplinary or enforcement actions, including public censure, customer restitution, fines or sanctions and (in practice) to require compensation. The Group has been subject to increased levels of engagement with the FCA and PRA in the months preceding publication of this Prospectus, and there is the risk that this level of engagement will continue, which could divert management's attention from the day-to-day running of the Group's business. The FCA and the PRA may make enquiries of the companies that they regulate regarding compliance matters and, like all UK regulated financial services firms, the Group faces the risk that the FCA or the PRA could find that it has failed to comply with applicable regulations or has not undertaken corrective action as required. A Group company is currently under regulatory investigation by the FCA. See "—3.2 A Group company is under regulatory investigation by the FCA, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects."

Companies within the Group are responsible for contributing to compensation schemes such as the UK Financial Services Compensation Scheme (the "FSCS") in respect of banks and other authorised financial services firms that are unable to meet their obligations to customers. Going forward, increased provisions in respect of these costs are likely to be necessary for firms required to make FSCS contributions, including the Group. The ultimate cost to the industry, which will also include the cost of any compensation payments made by the FSCS and, if necessary, the cost of meeting any shortfall after recoveries on the borrowings entered into by the FSCS, remains uncertain but may be significant and may have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Outside the UK, the Group's businesses are regulated by local regulators that often have similar powers to the FCA or PRA, including the Isle of Man Financial Services Authority (the "Isle of Man FSA"), the Central Bank of Ireland ("CBI"), the Monetary Authority of Singapore ("MAS"), the Dubai Financial Services Authority ("DFSA"), the Jersey Financial Services Commission ("JFSC") and the Hong Kong SFC and the Insurance Authority in Hong Kong. The Group has also recently established a branch of the Group's service company in Uruguay, which is regulated by the Central Bank of Uruguay.

Under Sections 1471 through 1474 of the US Internal Revenue Code of 1986, as amended (the "Revenue Code") commonly referred to as the Foreign Account Tax Compliance Act ("FATCA"), the Group is subject to the FATCA reporting regime, which may lead to a compliance risk for the Group. Some countries (including the UK) have entered into, and other countries are expected to enter into, intergovernmental agreements with the United States to facilitate the reporting of information required under FATCA. Intergovernmental agreements often require financial institutions in those countries to report information on their US account-holders to the taxing authorities of those countries, which will then pass the information on to the US Internal Revenue Service (the "IRS"). Various companies in the Group are financial institutions for purposes of FATCA and the intergovernmental agreement between the United States and the UK. While the Directors believe the Group has taken all necessary steps to comply with FATCA and any legislation implementing the intergovernmental agreement between the United States and the UK, if the Group is deemed not to be FATCA compliant, the Group could face certain withholding penalties, which may lead to reputational damage, regulatory fines, loss of market share, financial losses and legal risk.

Enforcement or other action taken by regulators against the Group could have a detrimental impact on the Group's reputation or have a material adverse effect on the Group's business, financial condition, results of operations and prospects. Costs relating to skilled person reviews on areas of regulatory concern and subsequent remediation projects can be significant. Fines imposed by regulators for breaching regulatory requirements can also be substantial. In addition, if the FCA's Senior Managers & Certification Regime (the "SMCR") is extended to all UK authorised firms in 2019 as anticipated, enforcement or other action could also be taken against key individuals at the Group, including senior management. Any such actions may last a number of years and could divert management's attention from the day-today running of the Group's business, result in increased turnover if senior staff elect to leave the Group due to exposure, and involve considerable cost and expense.

The Group is also exposed to risk from potential non-compliance by staff with policies, employee misconduct or negligence and fraud, which could result in regulatory sanctions and serious reputational or financial harm. In recent years, a number of financial institutions have suffered material losses due to the actions of 'rogue traders' or other employees. It is not always possible to deter or prevent employee misconduct, and the precautions the Group takes to detect and prevent this activity may not always be effective or up to date.

A determination that the Group has failed to comply with applicable regulation could have an adverse impact on the Group's reported results or on relations with the Group's regulators and current and potential customers. Regulatory action against a member of the Group could result in the suspension or revocation of regulatory authorisations, permissions or approvals, financial penalties, customer restitution, and adverse publicity for, or negative perceptions regarding, the Group. This may result in regulators subjecting the Group to closer scrutiny than would otherwise be the case, which in turn may result in higher compliance costs, fines or other sanctions for the Group. The Group may also be subject to regulatory action and restitution payments to customers with respect to historical business and legacy products, whether or not still managed or administered, including where the Group no longer sells into a jurisdiction or no longer sells certain products or solutions. Any of these matters may have a material adverse effect on the Group's business, financial condition, results of operations and

prospects, and it could divert management's attention from the day-to-day running of the Group's business.

3.2 A Group company is under regulatory investigation by the FCA, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

On 3 March 2016, the FCA issued a report detailing the findings of its industry-wide thematic review into the treatment of long-standing customers invested in closed-book products sold by the life insurance sector, with a focus on four areas or "outcomes": strategy and governance, communications, fund performance and charges (in particular exit charges and paid-up charges) (the "Thematic Review"). At the same time, the FCA announced that its enforcement division was initiating investigations into six firms in connection with the findings of the Thematic Review. The FCA discontinued its investigation into one of these firms on 7 September 2017. The FCA's investigations into the five remaining firms are ongoing.

One of the firms being investigated by the FCA in relation to the findings of the Thematic Review is Old Mutual Wealth Life Assurance Limited ("OMWLA"). OMWLA is a subsidiary of the Group which will be rebranded, and is referred to elsewhere in this Prospectus, as Quilter Life Assurance.

The FCA's investigation into OMWLA commenced on 2 March 2016 (the "Investigation"). As noted above, the Investigation relates to the outcomes/areas of focus identified in the Thematic Review. In particular, as described in the FCA's press release dated 3 March 2016 relating to the Thematic Review, the Investigation relates to:

• (a) OMWLA's "behaviour in respect of the disclosure of exit and paid-up charges […] after December 2008" (Outcomes 2 and 4 in the Thematic Review); and
• (b) whether OMWLA contravened regulatory requirements across a number of other areas assessed in the Thematic Review. These other areas are aspects of OMWLA's strategy and governance in relation to its closed-book customers (Outcome 1 in the Thematic Review) and aspects of fund performance, again in relation to OMWLA's closed-book customers (Outcome 3 in the Thematic Review).

OMWLA is working with the FCA and is cooperating with its Investigation. To date, the FCA has issued, and OMWLA has given responses in respect of, a number of information requirements.

As with any regulatory investigation of this nature it is difficult to predict when the investigation will be completed or its outcome. If the FCA takes further action, the Group may incur a public censure, customer restitution, fines or sanctions, adverse publicity or reputational damage, and individuals employed by the Group could be censured, any of which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. There can be no assurance at this stage as to the outcome of the matter.

3.3 The Group's businesses are subject to the risk of adverse changes in the laws, regulations and regulatory requirements in the markets in which they operate.

Financial services laws, regulations and regulatory requirements currently affecting the Group (and the financial products that it manufactures) may change at any time in ways that could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. It is difficult to accurately predict the timing, scope or form of future regulatory initiatives, although it is widely expected that there will continue to be a substantial amount of regulatory change and a high degree of supervisory oversight of regulated financial services firms. In addition, under certain principles-based rules and regulations, there may be different industry views about how to achieve particular outcomes. Regulators may from time to time have different views about how market participants should meet regulatory outcomes and interpretations may differ from generally accepted market practice.

The Group will not always be able to predict accurately the impact of future legislation or regulation or changes in the interpretation or operation of existing legislation or regulation on its business, financial condition, results of operations and prospects. Changes in government policy, legislation or regulatory interpretation applying to companies in financial services industries in any of the markets in which the Group operates, which may be applied retrospectively, may adversely affect the Group's product range, distribution channels, capital requirements, results and financing requirements. For example, the Group may be unable to sell, or may decide not to sell, products or solutions in certain jurisdictions if regulations or interpretations change. In addition, the Group may face regulatory action on products or solutions, which were designed to meet legislation in force at the time of design or sale that has subsequently been amended, including potentially with regard to DB transfers.

Such changes could include, for example, alterations to the regulatory framework for pension arrangements and policies or the regulation of selling or advice practices and solvency requirements. The Group may face increased compliance costs due to the need to establish additional compliance controls or the direct cost of such compliance because of changes to financial services legislation or regulation. The Group faces significant compliance challenges because the regulatory environment is evolving rapidly and supervisory authorities around the world are assuming an increasingly active and assertive role in introducing, interpreting and enforcing regulations in the jurisdictions in which the Group operates. For example, in the UK the regulator has, in recent years, had a renewed focus on the way in which financial services providers provide investment advice or sell and administer insurance policies, investment solutions and other financial products.

In addition, regulations may change in such a way as to prohibit or restrict "vertically integrated" wealth firms from recommending their own products or solutions, including potentially as a result of the FCA's ongoing market study on the retail investment platforms market in the UK. See "—3.5 Regulatory authorities or customers may attempt to seek redress against the Group where it is alleged that advice given generally or in relation to products or services was unsuitable or unfairly priced, or otherwise failed to meet regulatory requirements or customer expectations".

3.4 A number of complex regulatory change initiatives have recently been delivered or are expected to be delivered in the short term, and the effect of these regulatory initiatives is uncertain.

Regulatory reform initiatives could lead to increased compliance costs or other adverse consequences for firms within the financial services industry, including the Group. Recent and ongoing regulatory reform initiatives which could impact the Group include, in particular, the MiFID II, GDPR, the Packaged Retail and Insurance-Based Investment Products ("PRIIPs") Regulation, the SMCR, the Insurance Distribution Directive ("IDD") and changes to the Isle of Man Conduct of Business regime.

MiFID II, which came into force on 3 January 2018, involves the introduction of extensive new rules, including new requirements in relation to costs and charges disclosure, a ban on soft commission and a new product governance regime. While the Group continues to adapt to MiFID II, a degree of uncertainty persists around changes to market practice and how certain requirements should be interpreted. As a result, there is a risk that implementing the changes required as a result of MiFID II could give rise to unforeseen compliance costs for the Group. Failure to comply with MiFID II requirements could lead to enforcement action by the FCA or PRA, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. More generally, the implementation of MiFID II is likely to have a substantial impact on the economics of the investment services sector generally (including the asset management and investment advice sectors). It is possible that this may be intensified in the longer term by EU plans for the Capital Markets Union. The additional reporting required by MiFID II could also result in confusion for customers (for example, a 10% drop in portfolio value triggers automatic reporting to customers), and the increased disclosure may lead to customers seeking lower cost alternatives or choosing not to invest at all.

UK data protection law is also likely to be subject to material change in the medium term, following the introduction of GDPR in May 2018. See "—3.10 The Group must comply with data protection regulations, and the Group will be required to comply with the proposed General Data Protection Regulation" below for a further discussion.

Under the SMCR, certain firms (including banks, building societies, credit unions and PRAdesignated investment firms) are required to allocate responsibility for certain senior management functions to individuals which, in certain roles, must be pre-approved by the FCA and PRA. While no entities in the Group were subject to the SMCR as at the date of this Prospectus, the Group expects the FCA to extend the SMCR to all UK authorised firms in 2019.

There is an ongoing focus by the FCA on the fair treatment of customers, in particular on the way in which the banking, insurance and asset management industries sell and administer products. There is also a strong regulatory focus on conflicts of interest and value for money. IDD came into force on 22 February 2016 and EU member states had until 23 February 2018 to transpose and implement its provisions. Notwithstanding the UK's proposed exit from the EU, the UK government has transposed IDD into UK law within this time frame. The EU has also developed the PRIIPs Regulation, entered into force on 1 January 2018 and aims to harmonise pre-contractual disclosures and selling practices for such products.

The Group's international business is regulated, principally, by the Isle of Man FSA (with selling and marketing activities in various jurisdictions being regulated on a country specific basis). The Isle of Man FSA is currently focused on the modernisation of its regulatory framework to align with international standards under the banner of the Isle of Man FSA Roadmap (the "Roadmap"). The Roadmap covers a number of areas including enhanced regulatory powers and changes to primary legislation, supervision and policyholder protection. However, the two primary areas of impact are the implementation of a new risk-based capital regime similar to Solvency II and new Conduct of Business rules. In particular, the Isle of Man FSA's regulatory change may result in fewer distributors available to Quilter International's core markets if a number of distributors fail to adapt to the new regulatory environment, which could result in less support for the Group in this jurisdiction.

In the United Arab Emirates, the Emirates Securities and Commodities Authority ("ESCA") has recently implemented new licence and product registration requirements, and there is a risk that Quilter International's current product could be interpreted to fall between two regulatory regimes. Any potential uncertainty or confusion caused by the new ESCA requirements could negatively impact Quilter International's sales. In addition, a transition period is expected for both product providers and brokers which may also create potential uncertainty or confusion.

The continuing introduction of new regulation, if applicable to the Group, could significantly impact the manner in which it operates and could materially and adversely impact the profitability of one or more of the Group's business lines or the level of capital required to support its activities. Although the full impact of the regulations described above cannot be determined, many of their requirements could have material and adverse consequences on the Group and the industry in which the Group operates. These regulations could make it more expensive for the Group to conduct its business, require that the Group makes changes to its business model, require that the Group satisfies increased capital requirements, necessitate time-consuming and costly implementation measures, or subject the Group to greater regulatory scrutiny. In addition, the Group's multi-channel business model may mean that regulatory changes impact aspects of the Group's business which would not be relevant to some of its competitors. Individually or in aggregate, these regulations could therefore have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

From time to time, regulators may launch a review of a particular industry or product. While the Group may not be specifically targeted, these reviews could negatively impact the Group's reputation or demand for the Group's products. For example, the FCA announced in January 2017 a thematic review of pension transfers, which have been a key part of the Group's recent flows. If the review results in new rules on how advice should be provided to customers in this area, it could lead to reduced demand for pensions transfers, which could in turn have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.5 Regulatory authorities or customers may attempt to seek redress against the Group where it is alleged that advice given generally or in relation to products or services was unsuitable or unfairly priced, or otherwise failed to meet regulatory requirements or customer expectations.

The Group is exposed to the risk of regulatory action or claims from customers regarding unsuitable advice or misleading information from advisers, including within Quilter Financial Planning and Quilter Cheviot. For example, regulators or customers could allege that customers were recommended products or solutions that were not suitable for them, or that the terms and conditions of relevant products or solutions, the nature of the products or solutions, or the circumstances under which the products or solutions were recommended, were misrepresented to them. In the UK, any such issues or disputes arising in relation to private individuals that cannot be resolved privately may be resolved ultimately by the FOS, by FCA enforcement action or by litigation.

Complaints may also arise if customers feel that they have not been treated reasonably or fairly, or that the duty of care which they are owed has been breached. Issues may also arise if it is alleged that investment decisions for discretionary portfolios do not properly match investments to objectives or adequately balance risk against performance, leading to inappropriate risk exposure for customers, financial loss or reputational damage. The Group may also receive complaints resulting from recommendations for products or services that were not or are not suitable, with the potential for customer detriment, resulting in the Group's financial loss, damage to reputation, or regulatory fines or censure. In the UK, suitability has been an important area of regulatory focus, as demonstrated by FCA thematic reviews and proposed follow-up work. The FCA's supervisory focus on suitability could result in additional skilled person reviews and enforcement actions, which may increase the Group's exposure in this area.

The Group may be exposed, in particular, to risks relating to "vulnerable customers", which the FCA has defined as someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care. The FCA has noted that vulnerability can affect consumers across all financial products and services. Failure to identify customer vulnerability could lead to poor customer outcomes and detriment, including if a customer is not able to fully understand products or services or if information is not provided in an appropriate format for the customer's needs. If the Group does not have adequate policies to identify vulnerable customers, or if such policies are not embedded in a way that promotes the fair treatment of all customers, the Group's UK regulated firms could fall below regulatory expectations in this area, which could result in regulatory action.

In addition, in recent years the industry in general has experienced an increase in the use of social media by customers, commentators and claims management companies to exert influence over financial services firms in their decision making (including with regard to Payment Protection Insurance claims). While a considerable amount of time and resources may have been invested in reviewing and assessing historical sales or advice practices and in the maintenance of risk management, legal and compliance procedures to monitor current sales practices, there can be no assurance that all of the issues associated with current and historical practices have been, or will be, identified in the course of any review by the Group, nor that any issues already identified will not be more widespread than presently estimated. The negative publicity associated with issues identified in any sales or advice practices, any compensation payable in respect of any such issues and regulatory changes resulting from such issues, have had, and may continue to have, a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Issues and disputes may arise from time to time from the way in which the insurance, banking, asset management and advisory industries has sold or administered an insurance policy, investment solution or other product or in the way in which they have treated policyholders, investors or customers, either individually or collectively. The regulator may intervene directly where larger groups or matters of public policy are concerned. There have been several industry-wide financial product mis-selling issues in the past in which the regulator in the UK has intervened directly, including the sale of personal pensions, the sale of mortgage-related endowments and investments in split capital investment trusts. Certain designated consumer bodies are also empowered under FSMA to make "super-complaints" to the FCA in relation to issues causing detriment to large numbers of consumers.

The FCA launched a market study into the asset management sector in November 2015, publishing its interim findings in November 2016 and a final report in June 2017. The final report identified a number of concerns in relation to the UK asset management industry, including a concern that there is weak competition in a number of areas in the market, that on average the funds reviewed in the study did not outperform their own benchmarks after fees, that there is little evidence of persistent outperformance and that a number of funds in the UK market are priced in line with active rather than passive management but closely mirror the market. The FCA also expressed concerns as to how asset managers communicate their objectives to customers. The final report also concluded that investors' awareness of charges is often poor and that sustained, high profits have been generated by firms from such charges in this market over a number of years. The FCA has proposed remedies to address some of these concerns and on 5 April 2018 published a policy statement regarding the implementation of final rules and guidance. The remedies included measures to strengthen the rules on authorised fund managers to act in their investors' best interests, governance reforms to hold asset managers to greater account, a requirement for more independent directors on fund management boards, and more express regulatory requirements on fund managers to consider value for money. From April 2019, managers of dual-priced authorised funds that make risk-free profits when dealing as principal in the units of their funds will be required to repay such profits to the funds or individual investors rather than retaining them. Although the Group's wealth management business primarily invests customer assets in portfolios managed by third party asset managers rather than by the Group itself, there can be no assurance that the foregoing remedies will not ultimately result in increased compliance costs by the Group or otherwise have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Following on the asset management market study, the FCA launched a market study on the retail investment platforms market in the UK in 2017. The FCA has noted, in particular, that a number of platforms operate within a "vertically integrated" business model and is seeking to explore whether this has the potential to distort competition and give rise to conflicts of interest, to the potential detriment of customers. While the outcome of the market study is uncertain as the interim report with findings and recommendations has not yet been published, if reforms are introduced as a result of the FCA's market studies over time, the Group may face reduced margins, increased compliance costs or may be prohibited or

restricted from selling products within its multi-channel business model, which could in turn have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.6 Differing regulatory requirements in the jurisdictions where the Group operates may increase the costs and risks of doing business in such locations, may impede further international growth and may present barriers to growing the customer base of the business.

The laws and regulations to which the Group is subject are becoming increasingly extensive and complex and regulators are placing increased scrutiny on the sectors in which the Group operates, and on the Group itself, leading to an increasing burden on the Group's resources and expertise, including through costly implementation and monitoring measures. In some cases, the laws and regulations to which the Group is subject have increased because governments are increasingly enacting laws with extra-territorial jurisdiction, such as GDPR, FATCA, the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act. As compliance with applicable laws and regulations across multiple jurisdictions is time-consuming and personnel-intensive, and changes in laws and regulations have increased, and may further increase, the cost of compliance has risen and is expected to continue to rise. Such increased costs may impede further international growth and may present barriers to growing the international customer base of the business.

Over the last few years, the Group has made the strategic decision to focus on fewer core worldwide regions, which has resulted in the Group ceasing to write new business in a large number of countries. Whilst a "back book" of business continues to be maintained in such "closed" countries, the number of countries of client residency that Quilter International considers accepting new business from has decreased significantly. The Group has historically written business in these jurisdictions and may be exposed to risks in respect of historical and legacy business in these jurisdictions, which could lead to reputational damage, regulatory action or litigation.

Financial regulation in the EU Member States in which the Group operates is primarily based on EU directives, which are required to be implemented into national law. Due to differences in the way EU Member States may implement EU directives, and their discretion to impose more stringent requirements in certain areas, financial regulation is not fully harmonised across the EU. Different approaches to implementing EU directives in the EU Member States in which the Group operates may increase compliance costs and place the Group's business at a competitive disadvantage to financial services groups operating in fewer or certain other EU jurisdictions. Such regulatory divergence also increases the risk of the Group failing to comply with certain regulations. In addition, changes in the local regulatory regimes and conduct of business requirements of non-European jurisdictions in which the Group operates could affect the calculation of the Group's solvency position.

3.7 Changes in the interpretation of tax laws, changes to tax rates or the introduction of new tax legislation could impact demand for the Group's products or otherwise have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

Adverse changes in taxation laws (including changes to rates of taxation) and adverse changes in the interpretation and application of existing taxation laws by courts or taxation authorities in any of the jurisdictions in which the Group operates could impact demand for the Group's products, which could in turn have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group currently benefits from customer demand supported by government policies aimed at encouraging personal savings through the application of tax relief to certain types of investment. The Group also benefits from tax policies which offer customers cross-border tax benefits, in particular with regard to Quilter International's single premium portfolio bonds. Changes in taxation legislation and policy, either as a result of a change in government or otherwise, could affect investor sentiment, making investment generally, and specific types of investment products or solutions in particular, either more or less appealing. For example, the Group may be adversely affected by the loss of favourable tax treatment on savings by individuals through Individual Savings Accounts ("ISAs") or tax wrapper products, an increase in rates of capital gains tax, an increase in tax rates on cross-border products for UK residents or a reduction in disposable income as a result of an increase in income tax or the introduction of wealth taxes.

The Group cannot predict the impact of future adverse changes in tax legislation on the tax efficiency and attractiveness of its products and services or its business generally. Amendments to existing legislation (particularly if there is a withdrawal of any tax relief or an increase in tax rates) or the introduction of new rules in the UK or other jurisdictions where the Group operates may have an impact on the investment decisions of either existing or potential customers or the advice provided to customers. Changes from time to time in the interpretation of existing tax laws, amendments to existing tax rates or the introduction of new tax legislation could significantly change saving and investment patterns, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.8 The Group is involved in various legal and regulatory proceedings and may be involved in more in the future.

The Group, like other financial services firms, is, and may in the future be, subject to legal proceedings, ombudsman processes, regulatory investigations and general litigation. Depending on the context, these may be initiated by regulators, customers or other third parties and arise in the normal course of its business (together, "proceedings"). Due to the nature of these proceedings, it is not feasible to forecast or determine the final results of all such proceedings. It is also possible that a regulator in one of the jurisdictions in which the Group conducts its business may carry out a review of products previously sold or services previously supplied, whether as part of an industry-wide review, a firm-specific assessment or otherwise. It is not possible to predict the outcome of such reviews. Possible outcomes include a requirement to compensate customers for losses they have incurred as a result of the products they were sold or services they received or the initiation of regulatory enforcement action against the Group, which could result in various possible remedies such as the imposition of a fine. This may have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.9 The Group may fail to detect or prevent money laundering and other financial crime activities if financial crime risks are not correctly identified and if effective controls to mitigate those risks are not implemented. This could expose the Group to heavy fines, additional regulatory scrutiny and reputational risk.

The Group is required to comply with applicable anti-money laundering, anti-terrorism, sanctions, anti-tax evasion, anti-fraud, anti-bribery and corruption, insider dealing and other laws and regulations in the jurisdictions in which it operates, including the UK Bribery Act 2010, the UK Criminal Finances Act 2017 and the extra-jurisdictional reach of international laws such as the US Foreign Corrupt Practices Act. These laws and regulations require the Group, among other things, to conduct customer due diligence regarding fiscal evasion, antimoney laundering, sanctions and politically exposed persons screening, keep customer and supplier account and transaction information up to date and implement effective financial crime policies and procedures. Where applicable, these laws restrict or prohibit transactions with certain countries and with certain companies and individuals identified on lists maintained by the US government, the EU, various EU Member States and other governments.

Financial crime has become the subject of enhanced scrutiny and supervision by regulators globally. Anti-money laundering, anti-bribery and anti-corruption, and insider dealing and economic sanctions laws and regulations are increasingly complex and detailed and have become the subject of enhanced regulatory supervision, requiring businesses to invest in improved systems, sophisticated monitoring and skilled compliance personnel. The FCA and other regulatory authorities may from time to time make enquiries of companies within their respective jurisdictions regarding compliance with regulations governing the conduct of business or the operation of a regulated business (including the degree and sufficiency of supervision of the business) and the handling and treatment of customers or conduct investigations when it is alleged that regulations have been breached. Responding to such enquiries may be time-consuming and expensive.

Financial crime is continually evolving, and the expectations of regulators are increasing. This requires similarly proactive and adaptable responses from the Group so that it is able to effectively deter threats and criminality. Even known threats can never be fully eliminated, and there may in the future be instances where the Group may be used by other parties to engage in money laundering and other illegal or improper activities. In addition, the Group relies on its employees, external administrators and certain other third parties to identify and report such activities. There is a risk that they will fail to do so or otherwise fail to comply with or implement the Group's policies and procedures relating to financial crime.

Where the Group is unable to comply with applicable laws, regulations and expectations, regulators and relevant law enforcement agencies have the ability and authority to impose significant fines and other penalties, including requiring a complete review of business systems, day-to-day supervision by external consultants and ultimately the revocation of regulatory authorisations and licences. In the UK, anti-money laundering and financial crime compliance is expected to remain a key regulatory priority from a supervisory and enforcement perspective. The reputational damage to the Group's business and global brands could be severe if it were found to have breached anti-money laundering or sanctions requirements. The Group's financial position and reputation could also suffer if it were unable to protect customers or prevent the business from being used by criminals for illegal or improper purposes.

The Group cannot guarantee that its current policies and procedures are sufficient to completely prevent situations of fiscal evasion, money laundering, bribery, fraud or corruption, including actions by the Group's employees, for which the Group might be held responsible. Any such event may have severe consequences, including sanctions, fines and reputational consequences, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.10 The Group must comply with data protection regulations, and the Group will be required to comply with the proposed General Data Protection Regulation.

The Group is subject to regulations in the jurisdictions in which the Group operates regarding the use of personal data. The Group collects and processes personal data (including name, address, age, bank and credit card details and other personal data) from its customers, third party claimants, business contacts and employees as part of the operation of its business, and therefore it must comply with data protection and privacy laws. Those laws generally impose certain requirements on the Group in respect of the collection, retention, use and processing of such personal information. Failure to operate effective data collection controls could potentially lead to regulatory censure, fines, reputational and financial costs as well as result in potential inaccurate rating of policies or overpayment of claims. The Group seeks to ensure that procedures are in place to comply with the relevant data protection regulations by its employees and any third party service providers, and also implement security measures to help prevent cyber-theft, including as part of the Information Security Improvement Programme. Notwithstanding such efforts, the Group is exposed to the risk that this data could be wrongfully appropriated, lost or disclosed, stolen or processed in breach of data protection laws. In addition, the Group may not have the appropriate controls in place today and may be unable to invest on an ongoing basis to ensure such controls are current and keep pace with the growing threat. Within Quilter Financial Planning, both the Group and AR firms are data controllers for the same data, which adds complexity to the delivery and increases the requirements for the business post-deployment.

In particular, UK data protection law is subject to material change. In 2012, the European Commission published a proposal for the GDPR, which would replace the current UK Data Protection Act 1998 (and the equivalent laws in other EU and EEA Member States) with an EU regulation having direct effect in the UK and all other EU and EEA Member States. The European Commission, European Parliament and the Council of Ministers agreed the GDPR on 15 December 2015 and the GDPR will apply from 25 May 2018. The GDPR is likely to increase the regulatory burden on the Group in processing personal customer, employee and other data in the conduct of its business and may also increase the potential sanctions for breach as the GDPR includes significant financial penalties of up to 4% of the annual worldwide turnover of company groups. The Group is undertaking a detailed program to develop and implement further data protection policies and procedures designed to comply with the GDPR, which is expected to continue into 2019. The Group may not be fully compliant with its obligations under the GDPR when it becomes effective, and therefore the Group may be subject to regulatory action or financial penalties, which could also result in adverse publicity and reputational damage.

If the Group or any of the third party service providers on which it relies (including nonsubsidiary affiliates of the Group) fails to comply with existing data protection laws or fails to adapt to new or amended data protection laws, including the GDPR, due to any failure to

store or transmit customer information in a secure manner or any loss or wrongful processing of personal customer data, the Group could be subject to investigative and enforcement action by relevant regulatory authorities, claims or complaints from the individuals to whom the data relates or could face liability under data protection laws. Any of these events could also result in the Group suffering reputational damage as well as the loss of new or repeat business, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.11 The Group may be subject to regulatory action or financial penalties if it fails to comply with the CASS rules.

As the Group holds and controls client money and safe custody assets, it must comply with the FCA's Client Asset sourcebook ("CASS") rules. The CASS requirements help to protect clients' assets and money when a firm is responsible for them and helps to ensure that client assets and money could be returned within a reasonable timeframe in the event of a firm's insolvency. Client money and asset protection remains at the core of the FCA's agenda, and larger firms (such as those within the Group) are therefore required to submit monthly Client Money and Asset Returns to the FCA to provide key data in relation to CASS processing. This enables the FCA to oversee firms' CASS processing and to discuss any potential areas of concern. Adherence to CASS requirements relies on a number of complex operational processes and systems, both internal and external, resulting in a high inherent risk of noncompliance. Any CASS breaches are reported to the FCA, including as part of the firms' annual external CASS audit, and the FCA would be immediately notified of any material breaches. If any such breaches were not fully remediated, or the FCA considered the Group does not have sufficient regard for the protection of clients' assets, the Group may be subject to regulatory action or financial penalties, which could also result in adverse publicity and reputational damage, and ultimately have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.12 The Group is subject to the risk of having insufficient capital resources to meet the minimum required by regulators.

Following the Quilter Separation, the Group will be subject to the Solvency II Directive (Directive 2009/138/EC) and the related implementing legislation ("Solvency II") regulations in relation to the overall Group capital and solvency. However, three life assurance companies based within the European Economic Area ("EEA") (Old Mutual Wealth Life & Pensions Limited, Old Mutual Wealth Life Assurance Limited and Old Mutual International Ireland dac) are already subject to Solvency II supervision at an entity level. Solvency II is a risk-based capital regime which includes requirements for the calculation of the regulatory balance sheet and capital requirements, systems of governance for insurance entities and groups, risk management system and the Own Risk and Solvency Assessment ("ORSA") and public and private reporting requirements. Solvency II requires insurance firms and groups to identify, assess and quantify the broad range of risks facing the firm and make judgements in relation to calculation methodologies and assumptions on future experience. Several of the Group's international business entities are also subject to capital requirements overseas. For example, the business on the Isle of Man is subject to the Solvency I Directive ("Solvency I"), but the jurisdiction is moving toward a new risk-based capital regime similar to Solvency II.

Non-insurance entities within the Group will be included within the overall Solvency II balance sheet for the Group based on local sectoral rules. In particular, this applies to the group of entities subject to prudential regulation under the Internal Capital Adequacy Assessment Process ("ICAAP") under the European Capital Requirements Directive IV (Directive 2013/36/EU) and the Capital Requirements Regulation (Regulation 575/2013), as well as the PRA and FCA's rules and policy statements.

The ICAAP regulations require financial institutions to conduct an ICAAP assessment to demonstrate that they have implemented methods and procedures to ensure adequate capital resources, with due attention to all material risk. Regulators then must conduct a Supervisory Review and Evaluation Process to assess the soundness of the financial institution's ICAAP and take any appropriate actions that may be required. In addition, the FCA can impose a capital add-on, which would require the Group's ICAAP companies to increase capital if the FCA believes the internal assessment does not adequately reflect the risks within the firm. Old Mutual plc contributed additional equity into the Group following the most recent guidance from the FCA.

In certain respects ICAAP marks a change from rules based applications to principles based interpretation, which could introduce regulatory uncertainty. ICAAP also requires more advanced and complex financial modelling than was the case under the prior regime.

In the future, the Group may also be subject to the requirements of the Financial Conglomerates Directive ("FICOD"), pending an application made by the Group in December 2017 under the FCA General Prudential Sourcebook ("GENPRU") 3, which sets out a prudential regime for Financial Conglomerates (as defined therein). FICOD is also known as the Financial Groups Directive. Financial Conglomerates are supervised on a group basis under FICOD and the parent is considered to be a mixed financial holding company ("MFHC"). A MFHC must be treated as being a member of the relevant financial sector (i.e. banking and investment or insurance).

FICOD has been adopted by the UK regulatory authorities and is primarily contained within the PRA Financial Conglomerates Rulebook, and the GENPRU Rulebook. These rulebooks set out the rules and guidance to firms when assessing whether or not a firm is Financial Conglomerate. FICOD provides for a supplementary supervisory framework for Financial Conglomerates to be applied in addition to the sectoral rules.

FICOD contains various provisions under which the relevant regulator can modify the rules or waive the PRA Rulebook rules which apply to Financial Conglomerates. These approvals are given affect under Section 138A of the Financial Services and Markets Act 2000.

In addition, the Group may become subject to additional capital requirements as a result of new regulations, including new prudential requirements for investment management firms currently under consultation by the European Banking Authority, adjustments to Solvency II implementation following the UK House of Commons Treasury Select Committee report on Solvency II implementation, or any other adjustments from the European Insurance and Occupational Pensions Authority regarding Solvency II, such as the potential re-calibration of Standard Formula stresses which would impact the level of capital requirements the Group is required to hold. A perceived or actual shortage of capital could result in actions or sanctions, which may have a material adverse effect on the Group's business, financial condition, results

of operations and prospects. This, in turn, may affect the Group's capacity to continue its business operations, pay future dividends or pursue acquisitions or other strategic opportunities, impacting future growth potential. Furthermore, if in the event of a stressed scenario the Group has insufficient capital to absorb all losses up to a confidence level defined in the Group's capital risk appetite, it could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

The Group's regulatory positions under the Solvency II, ICAAP and FICOD regimes require management to make judgements, estimates and assumptions. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, there can be no assurance that one or more of these judgements, estimates and assumptions will not be subsequently revised as a result of new factors or circumstances emerging, which could result in the Group having insufficient capital resources and could, in turn, have a material adverse effect on the Group's business, financial condition, results of operations and prospects. While management's assumptions are subject to the Directors' approval, regulators can challenge this approval and may come to a different view on what capital requirement consequences that may have. In certain circumstances, management actions may require regulatory approval, which, if not granted, may have an impact on the Group's solvency position.

The Group may be unable to meet its regulatory solvency and capital requirements for a number of reasons. For example, the Group's capital bases could be eroded over time due to poor trading and losses therefrom or other impacts outside of the Group's control, such as regulatory fines or increased compliance costs. If the Group's capital bases are eroded significantly, the Group may have insufficient capital resources to meet the minimum required by regulators. Any of the above could lead to reputational damage as a result of decreased investor confidence or regulatory action, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

3.13 The Group is subject to risks relating to tax, including transfer pricing.

The Group is subject to risks relating to transfer pricing, including as a result of changes in law and practice arising from the Organisation for Economic Cooperation and Development base erosion and profit sharing ("BEPS") recommendations. Any future taxation audits of companies within the Group could result in pricing adjustments which are deemed to be required from a transfer pricing perspective. The Group's tax position could thus change through a decision by relevant authorities, as well as other tax matters, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

4. Risks relating to the Quilter Separation

4.1 The actual costs incurred to create infrastructure necessary to operate as an independent public company and the expected ongoing costs in connection with being an independent public company could be higher and could extend for a period longer than expected.

As part of the planning for the Quilter Separation, the Group has incurred significant one-off costs of £32 million in the financial year ended 31 December 2017. The Group will incur

additional one-off restructuring and separation costs in 2018. These costs are likely to be significant, and the Group currently expects to incur approximately £36 million of further Quilter Separation one-off costs, including costs incurred in connection with the proposed listing of the Company's ordinary shares on the premium listing segment of the Official List of the UKLA and the admission to trading on the London Stock Exchange's main market for listed securities and the Main Board of the JSE Limited (the "Proposed Listing"). These comprise a mixture of standalone, advisor and other transaction costs, and will be charged outside of operating profit to reflect their one-off nature. Of these, approximately £12 million are expected to be in respect of the rebrand of the business from "Old Mutual Wealth" to "Quilter".

In addition, the Group expects up to £30 million per annum of additional fixed costs above operating expense levels reported in the year ended 31 December 2016 as a consequence of the Quilter Separation and the Group's operating on a fully standalone basis. Of the additional expenses, approximately £16 million on an annual basis were reflected in 2017 year-end reported results, and the Directors expect incremental costs of up to approximately £14 million will be incurred during 2018. The actual costs of these one-off and recurring costs could be higher and the period over which they are incurred could be longer than expected. All of the above cost estimates are stated before any applicable tax deductions.

The Group's restructuring costs include those incurred in the establishment of the Group's stand-alone arrangements in a wide range of areas including finance, investor relations, risk and governance functions, which it either did not previously require or where it previously relied on support and services from Old Mutual plc. While these services and functions are relatively new to the Group, they have been subject to pilot testing and are now fully implemented into the ordinary operational and reporting processes of the Group. However, as with any business, there remains a risk that the Group could suffer operational difficulties in due course, which, either directly or as a result of the need for further investment in these new services and functions, could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. In addition, the Group has not previously been required to manage capital and liquidity as an independent company, which may require additional resources in the longer term, particularly in light of the heightened costs incurred as part of the Quilter Separation, and which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

4.2 The Separation Agreements and other agreements to be entered into by the Group with Old Mutual plc in connection with the Quilter Separation may expose the Group to counterparty risk with Old Mutual plc.

In anticipation of, and in connection with, the Quilter Separation, the Group is expected to enter into several agreements (the "Separation Agreements") with Old Mutual plc, including the Separation Agreement and the Tax Matters Agreement. As part of the Managed Separation, Old Mutual plc will become a non-operating subsidiary of Old Mutual Limited, holding certain residual non-operating entities and legacy liabilities and potential future liabilities that do not directly relate to the business of Old Mutual Limited. Neither Old Mutual plc, nor any of its subsidiaries, is currently expected to generate any material operating revenue. Whilst Quilter has been informed that, at the time of Quilter Separation, Old Mutual plc is expected by its directors to maintain assets intended to satisfy its legacy and potential future liabilities, including any liabilities owed to the Group under the Separation Agreements

and the Tax Matters Agreement, Quilter has no contractual rights to ensure that such assets will either remain within Old Mutual plc, nor can it be certain that those assets will be sufficient to meet all of its liabilities including any under the Separation Agreements and the Tax Matters Agreement. As a result, Old Mutual plc may fail to discharge its obligations in respect of those liabilities in the absence of support from Old Mutual Limited at the relevant time, and such failure could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

4.3 As a result of the Quilter Separation, the Group's ability to attract and retain customers may be negatively impacted, third parties may re-price, modify or terminate their relationships with the Group and the Group may be forced to lower the prices of its products.

The Quilter Separation could change customers' perception of the Group and adversely affect its ability to attract and retain customers, which could result in reduced sales of its products. In addition, the Quilter Separation may prompt some third parties to re-price, modify or terminate their distribution or other relationships with the Group. The Group's ability to maintain a competitive network of distributors for the sale and distribution of its products may also be negatively affected. The Group may be required to lower the prices of its products, increase its fees, change long-term selling and marketing agreements and take other action to maintain its relationships with its customers and third party distributors. Should any of the consequences set out above occur, individually or in combination with others, they could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

4.4 The Group faces potential risks associated with its acquisitions relating to the Quilter Separation.

As part of the Quilter Separation, the Group acquired Skandia UK Limited ("Skandia UK") from Old Mutual plc and Old Mutual plc has transferred GET to the Group. The integration of these acquisitions may not be successful or in line with the Group's expectations. In addition, the Group will be exposed, whether known or unknown at the time of the Quilter Separation, to historical liabilities as a result of these acquisitions, which may result in the Group receiving claims from counterparties. If the Group does or did not know about any such liabilities at the time of the Quilter Separation, or if the Group has incorrectly quantified any such liabilities, the Group may be exposed to unexpected liabilities, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

In connection with the GET transaction, the Group has also entered into a transitional services agreement with Old Mutual Life Assurance Company (South Africa) Limited ("OMLACSA"), pursuant to which OMLACSA will continue to provide certain operational services to GET under a transitional services agreement for a limited period (the "GET TSA"). If OMLASCA fails to provide the services envisaged, or provide them in a timely manner, under the GET TSA, such failure could negatively impact the Group's operations or the orderly separation of OMLACSA and GET as part of the broader Managed Separation. This could, in turn, have a material adverse effect on the Group's business, financial condition, results of operations and prospects.

4.5 If Managed Separation (including the Quilter Separation) does not take effect as anticipated, there may be a material adverse impact on the price of the Notes.

It is possible that Managed Separation (including the Quilter Separation) may not take effect either at all or in the manner currently envisaged by the Issuer (for example, if the requisite approvals, including approval by Old Mutual plc shareholders and the UK Court approved scheme of arrangement process which will facilitate the Quilter Separation, are not obtained or, at the relevant time, the board of Old Mutual plc no longer considers that it continues to be in the best interests of the Old Mutual plc shareholders that Managed Separation be implemented). In such circumstances, the Issuer will continue to be owned (in whole or in part) by Old Mutual plc. Old Mutual plc may choose to continue to hold shares in the Issuer or to dispose of its shareholding in the Issuer in whole or in part to third party purchasers. There can be no guarantee as to the identity of such third party purchasers or, moreover, whether there will be any such third party purchasers.

The circumstances described above may have a material adverse effect on the price of and market for the Notes.

RISKS RELATING TO THE NOTES

Defined terms used in these risk factors have the same meaning as in the Conditions

Risks relating to the structure of the Notes

The Issuer may redeem the Notes at par before maturity in certain circumstances, and an investor may not be able to reinvest the redemption proceeds at as effective a rate of return as that in respect of the Notes.

The Notes may, subject as provided in the Conditions, be redeemed before the Maturity Date (i) at the sole discretion of the Issuer on the First Call Date, (ii) at any time following a Tax Event, (iii) at any time following a Capital Disqualification Event or (iv) at any time following a Rating Methodology Event, in each case at their principal amount together with interest accrued but unpaid to (but excluding) the date specified for redemption in accordance with the Conditions and any Arrears of Interest.

An optional redemption feature is likely to limit the market value of the Notes. During any period when the Issuer may elect, or is perceived to be able to elect, to redeem the Notes, the market value of the Notes generally will not rise substantially above the price at which they can be redeemed.

The cash paid to Noteholders upon such a redemption may be less than the then current market value of the Notes or the price at which such Noteholders purchased the Notes. Subject to the contractual and regulatory restrictions on doing so set out in the Conditions, the Issuer might redeem the Notes when its cost of borrowing for an instrument with a comparable regulatory and rating agency capital treatment at the time is lower than the interest payable on them. At those times, an investor generally may not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest payable on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in the light of other investments available at that time.

The Notes are unsecured and subordinated obligations of the Issuer. On a winding-up of the Issuer, if the Issuer's assets are insufficient to meet all its obligations to senior-ranking and pari passu creditors, investors in the Notes will lose all or some of their investment in the Notes.

The Issuer's payment obligations under the Notes will be unsecured and will be subordinated to the claims of all Senior Creditors of the Issuer (i) on a winding-up of the Issuer (other than in certain limited circumstances) or (ii) in the event that an administrator is appointed to the Issuer and gives notice that it intends to declare and distribute a dividend and, in each case, shall rank junior to the claims of all policyholders and other unsubordinated creditors of the Issuer and to claims in respect of any subordinated indebtedness of the Issuer other than indebtedness which ranks, or is expressed to rank, pari passu with or junior to the Notes. Accordingly, the assets of the Issuer would be applied first in satisfying all senior-ranking claims in full, and payments would be made to holders of the Notes, pro rata and proportionately with payments made to holders of any other pari passu instruments (if any), only if and to the extent that there are any assets remaining after satisfaction in full of all such senior-ranking claims. If the Issuer's assets are insufficient to meet all its obligations to senior-ranking and pari passu creditors, the holders of the Notes will lose all or some of their investment in the Notes.

There is no restriction on the amount of securities which the Issuer may issue and which rank senior to, or pari passu with, the Notes and, accordingly, the Issuer may at any time incur further obligations (including by issue of further debt securities) which rank senior to, or pari passu with, the Notes. Consequently, there can be no assurance that the current level of senior or pari passu debt of the Issuer will not change. The issue of any such securities may reduce the amount (if any) recoverable by Noteholders on a winding-up of the Issuer and/or may increase the likelihood of a deferral of payments under the Notes.

If the Issuer's financial condition deteriorates such that there is an increased risk that the Issuer may be wound-up or enter into administration, such circumstances can be expected to have a material adverse effect on the market price of the Notes. Investors in the Notes may find it difficult to sell their Notes in such circumstances, or may only be able to sell their Notes at a price which may be significantly lower than the price at which they purchased their Notes. In such a sale, investors may lose some or substantially all of their investment in the Notes, whether or not the Issuer is wound-up or enters into administration.

Although the Notes may pay a higher rate of interest than comparable notes which are not subordinated, an investor in the Notes will lose all or some of its investment should the Issuer become insolvent and its assets are insufficient to meet all its obligations to senior ranking and pari passu creditors.

Waiver of set-off.

The holders of the Notes waive any right of set-off, compensation or retention in relation to the Notes insofar as permitted by applicable law.

In certain circumstances, payments of interest on, and redemption of, the Notes must be deferred by the Issuer.

The payment obligations by the Issuer under the Notes are conditional upon (i) there being no breach of the Solvency Condition (as described in Condition 3(b)) at the time of such payment and no such breach occurring as a result of such payment, (ii) in the case of the payment of interest, there being no Regulatory Deficiency Interest Deferral Event at the time of such payment and no such event occurring as a result of such payment, (iii) in the case of the redemption of the Notes, there being no Regulatory Deficiency Redemption Deferral Event at the time of such payment and no such event occurring as a result of such payment and (iv) (if then required) regulatory consent having been obtained and such redemption being made in compliance with the Relevant Rules at such time, and notification to, or consent or non-objection from, the Relevant Regulator (to the extent then required by the Relevant Regulator or the Relevant Rules). Any amounts of principal, interest, Arrears of Interest and any other amounts in respect of the Notes which cannot be paid on the scheduled payment date by virtue of such provisions must be deferred by the Issuer, and non-payment of the amounts so deferred shall not constitute a default under the Notes or the Trust Deed for any purpose, including enforcement action against the Issuer.

Any interest in respect of the Notes so deferred will, so long as the same remains unpaid, constitute Arrears of Interest. Arrears of Interest will not themselves bear interest. The holders of the Notes have no right to require payment of Arrears of Interest, and Arrears of Interest will become payable only at the discretion of the Issuer or upon the earliest of the dates set out in Condition 5(b)(i) to (iii).

If redemption of the Notes is deferred, the Notes will only become due for redemption in the circumstances described in Condition 6(a)(iv) and (v).

The circumstances in which a Regulatory Deficiency Interest Deferral Event or a Regulatory Deficiency Redemption Deferral Event may occur are dependent upon the solvency position of the Issuer and the Group (i.e. the Issuer and its subsidiaries) under the Relevant Rules and the requirements of the Relevant Rules. Events which constitute a Regulatory Deficiency Interest Deferral Event or a Regulatory Deficiency Redemption Deferral Event could include, without limitation, any event which causes any Solvency Capital Requirement or Minimum Capital Requirement applicable to the Issuer or all or part of the Group (which part includes the Issuer) to be breached and (in respect of a Regulatory Deficiency Redemption Deferral Event only) the occurrence and continuation of an Insolvent Insurer Winding-up, in each case, where such event is an event which under the Relevant Rules means that the Issuer must defer or suspend payments on, and/or the redemption of, the Notes and where the Relevant Regulator has not waived the requirement to defer payment under, and/or redemption of, the Notes in accordance with any pre-conditions to such waiver being capable of being granted as prescribed by the Relevant Rules, in each case on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules.

Any actual or anticipated deferral of interest or redemption can be expected to have a material adverse effect on the market price of the Notes. Investors in the Notes may find it difficult to sell their Notes in such circumstances, or may only be able to sell their Notes at a price which may be significantly lower than the price at which they purchased their Notes. In such a sale, investors may lose some or substantially all of their investment in the Notes. In addition, as a result of the deferral provisions of the Notes, the market price of the Notes may be more volatile than the market prices of other securities or instruments that do not require deferral of interest or principal, and may be more sensitive generally to adverse changes in the Issuer's financial condition.

The terms of the Notes may be modified, or the Notes may be substituted, by the Issuer without the consent of the Noteholders in certain circumstances, subject to certain restrictions.

In the event of certain specified events due to a Tax Event, a Capital Disqualification Event or a Rating Methodology Event, the Issuer may (subject to certain conditions) at any time substitute all (but not some only) of the Notes for, or vary the terms of the Notes so that they remain or become (as applicable), (in the case of a Tax Event or a Capital Disqualification Event) Qualifying Tier 2 Securities or (in the case of a Rating Methodology Event) Rating Agency Compliant Securities, without the consent of the Noteholders.

Qualifying Tier 2 Securities and Rating Agency Compliant Securities must, inter alia, have terms not materially less favourable to holders than the terms of the Notes, as reasonably determined by the Issuer in consultation with an independent investment bank of international standing. Rating Agency Compliant Securities must also be assigned substantially the same equity credit in the capital adequacy assessment or, at the absolute discretion of the Issuer, a lower equity credit in the capital adequacy assessment (provided such equity credit is still higher than the equity credit assigned to the Notes immediately after the occurrence of the relevant Rating Methodology Event) as that which was assigned to the Notes on or around the Issue Date. However, there can be no assurance that, due to the particular circumstances of a holder of Notes, such Qualifying Tier 2 Securities or Rating Agency Compliant Securities will be as favourable to each investor in all respects or that, if it were entitled to do so, a particular investor would make the same determination as the Issuer as to whether the terms of the Qualifying Tier 2 Securities or Rating Agency Compliant Securities (as the case may be) are not materially less favourable to holders than the terms of the Notes. In addition, the tax and stamp duty consequences of holding the Qualifying Tier 2 Securities or Rating Agency Compliant Securities could be different for some categories of Noteholders from the stamp and tax duty consequences for them of holding the Notes prior to such substitution.

The terms of the Notes may be modified with the consent of specified majorities of the Noteholders at a duly convened meeting, and the Trustee may consent to certain modifications to the Notes, or substitution of the Issuer, without the consent of the Noteholders.

The Trust Deed constituting the Notes contains provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The Trust Deed constituting the Notes also provides that, subject to the prior consent of the Relevant Regulator being obtained (to the extent that such consent is required), the Trustee may (except as set out in the Trust Deed), without the consent of Noteholders, agree to certain modifications of, or to the waiver or authorisation of any breach or proposed breach of, any of the provisions of the Notes or to the substitution of another company as principal debtor under the Notes in place of the Issuer in the circumstances described in Condition 11.

Restricted remedy for non-payment when due.

In accordance with the current requirements for eligible Tier 2 Capital, the sole remedy against the Issuer available to the Trustee or (where the Trustee has failed to proceed against the Issuer as provided in the Conditions) any Noteholder for recovery of amounts which have become due in respect of the Notes will be the institution of proceedings for the winding-up of the Issuer and/or proving in such winding-up or administration and/or claiming in the liquidation of the Issuer. In particular, a deferral of payments as described in the risk headed "In certain circumstances, payments of interest on, and redemption of, the Notes must be deferred by the Issuer" above shall not constitute a default under the Notes or the Trust Deed for any purpose, including enforcement action against the Issuer.

The Issuer is the ultimate holding company of the Group and therefore payments on the Notes are structurally subordinated to the liabilities and obligations of the Issuer's subsidiaries.

The Issuer is the ultimate holding company of the Group, with certain of its operations being conducted by operating subsidiaries. Accordingly, in the event of a winding up or administration of the Issuer or a subsidiary, creditors of a subsidiary would have to be paid in full before sums would be available to the shareholders of that subsidiary (i.e. the Issuer or a subsidiary of the Issuer) and so to Noteholders. The Conditions do not limit the amount of liabilities that the Issuer's subsidiaries may incur. In addition, the Issuer may not necessarily have access to the full amount of cash flows generated by its operating subsidiaries, due in particular to legal or tax constraints, contractual restrictions and the subsidiary's financial requirements and regulatory capital requirements.

Limitation on gross-up obligation under the Notes

The Issuer's obligation, if any, to pay additional amounts in respect of any withholding or deduction in respect of taxes imposed in a Taxing Territory under the terms of the Notes applies only to payments of interest and not to payments of principal.

As such, the Issuer would not be required to pay any additional amounts under the terms of the Notes to the extent any withholding or deduction applied to payments of principal. Accordingly, if any such withholding or deduction were to apply to any payments of principal under the Notes, Noteholders will receive less than the full amount which would otherwise be due to them under the Notes, and the market value of the Notes may be adversely affected.

Risks relating to the Notes generally

Change of law.

The Conditions are based on English law in effect as at the date of issue of the Notes. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of issue of the Notes.

Integral multiples of less than £200,000.

The denomination of the Notes is £200,000 and integral multiples of £1,000 in excess thereof. Accordingly, it is possible that the Notes may be traded in the clearing systems in amounts in excess

of £200,000 that are not integral multiples of £200,000. Should definitive Certificates be required to be issued, they will be issued in principal amounts of £200,000 and higher integral multiples of £1,000 but will in no circumstances be issued to Noteholders who hold Notes in the relevant clearing system in amounts that are less than £200,000.

If definitive Certificates are issued, Noteholders should be aware that definitive Certificates which have a denomination that is not an integral multiple of £200,000 may be illiquid and difficult to trade.

Risks related to the market generally

The secondary market generally.

The Notes have no established trading market when issued, and one may never develop. If a market for the Notes does develop it may not be liquid. Investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market and/or which are rated. Illiquidity may have a severely adverse effect on the market value of the Notes.

If the Issuer's financial condition deteriorates such that there is an increased risk that the Issuer may be wound-up or enter into administration, or if at any time there is any actual or anticipated deferral of interest or redemption and/or any risk of early redemption in accordance with the Conditions, such circumstances can be expected to have a material adverse effect on the market price of the Notes. Investors in the Notes may find it difficult to sell their Notes in such circumstances, or may only be able to sell their Notes at a price which may be significantly lower than the price at which they purchased their Notes. In such a sale, investors may lose some or substantially all of their investment in the Notes.

Exchange rate risks and exchange controls.

The Issuer will pay principal and interest on Notes in Sterling. This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the "Investor's Currency") other than Sterling. These include the risk that exchange rates may significantly change (including changes due to devaluation of Sterling or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to Sterling would decrease (1) the Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency-equivalent value of the principal payable on the Notes and (3) the Investor's Currencyequivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

Interest rate risks.

Investment in the Notes, which initially bear a fixed rate of interest, involves the risk that subsequent increases in market interest rates may adversely affect the market value of the Notes. In particular, the Notes are subject to reset provisions. Accordingly, the Notes will initially bear interest at a fixed rate of interest from (and including) the Issue Date to (but excluding) the First Call Date. From (and including) the First Call Date, however, the interest rate will be reset to the Reset Interest Rate (as described in Condition 4). This reset rate could be less than the Initial Interest Rate, which could affect the amount of any interest payments under the Notes and so the market value of an investment in the Notes. In addition, since the Notes are resettable securities, the future yield is uncertain. Such uncertainty may also adversely affect the market value of the Notes.

Investors will have to rely on the procedures of Euroclear and Clearstream, Luxembourg for transfer, payment and communication with the Issuer.

The Notes will be represented by a Global Certificate (as defined in the Trust Deed). The Global Certificate will be deposited with a common depositary for, and registered in the name of the common nominee of, Euroclear and Clearstream, Luxembourg. Except in the limited circumstances described in the Global Certificate, investors will not be entitled to receive definitive registered notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Certificate.

While the Notes are represented by the Global Certificate, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. The Issuer will discharge its payment obligations under the Notes by making payments to the common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note Certificate must rely on the procedures of Euroclear or Clearstream, Luxembourg to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Certificate.

Credit ratings may not reflect all risks.

The credit ratings assigned to the Notes may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the relevant Notes. A credit rating is not a recommendation to buy, sell or hold Notes and may be revised or withdrawn by the rating agency at any time.

In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended). The list of registered and certified credit rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list.

The Notes have been rated BBB- by Fitch. As at the date of this Prospectus, Fitch is a credit rating agency established in the EU and is registered under the CRA Regulation. As such, Fitch is included in the list of credit rating agencies published by ESMA on its website in accordance with the CRA Regulation. A rating is not a recommendation to buy, sell or hold notes and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

Presentation of Financial and Other Information

1. Presentation of Financial Information

Unless otherwise stated, the financial information in this Prospectus has been prepared in accordance with the requirements of the Prospectus Directive and the Listing Rules and International Financial Reporting Standards as adopted by the European Union ("IFRS"). The significant accounting policies applied in the financial information of the Group are applied consistently in the financial information in this Prospectus and are set out within Note 4 in "Historical Financial Information".

The Company's financial year ends on 31 December. The Group's financial information for the three years ended and as at 31 December 2015, 2016 and 2017 included in Section B of "Historical Financial Information" is covered by the accountants' report included in Section A of "Historical Financial Information", which was prepared in accordance with Standards for Investment Reporting issued by the Financial Reporting Council.

Unless otherwise stated in this document, financial information in relation to the Group referred to in this Prospectus has been extracted without material adjustment from the historical financial information in "Historical Financial Information" of this Prospectus or has been extracted from those of the Group's accounting records and its financial reporting and management systems that have been used to prepare that financial information. Investors should ensure that they read the whole of this Prospectus and not only rely on the key information or information summarised within it.

Unless otherwise indicated, none of the financial information relating to the Group or any operating data or key performance indicators relating to the Group have been audited (even where such operating data or key performance indicators include certain financial metrics).

2. Non-IFRS Financial Measures

This Prospectus contains certain financial measures that are not defined or recognised under IFRS, including operating profit from continuing operations, normalised operating profit from continuing operations, normalised net management fee, normalised other revenue and normalised expenses (the "Non-IFRS Financial Measures").

Operating profit from continuing operations, as used in this Prospectus, represents operating profit before tax attributable to shareholders' profits. The key adjustments are for goodwill and amortisation of purchased intangibles, business transformation costs, finance costs, Quilter Separation one-off costs and voluntary customer remediation costs. Goodwill and amortisation of purchased intangibles reflect acquisition costs and the amortisation of intangible assets acquired by the Group in relation to policies sold by acquired businesses pre-acquisition. Business transformation costs primarily represent the costs the Group has incurred in connection with its UK Platform Transformation Programme. The cost of developing the new technology typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services are excluded from operating profit from continuing operations. Only costs that are directly attributable to the programme are excluded from operating profit from continuing operations. Finance costs represent the cost of interest and finance charges on the Group's

borrowings from Old Mutual plc, borrowed to primarily fund acquisitions, including Quilter Cheviot in 2015. Quilter Separation one-off costs represent the one-off transition costs to separate the Group from Old Mutual plc to become standalone and any additional one-off costs associated with the Proposed Listing. In addition to the aforementioned adjustments, there may be other one-off costs arising in the future which require adjustment in order for operating profit to continue to reflect the Directors' view of the underlying long-term performance of the Group. Voluntary customer remediation costs represent the costs the Group expects to incur in relation to the decision to commence voluntary remediation of customers in certain legacy products within Quilter Life Assurance.

The Directors use operating profit from continuing operations as a key measure of the Group's financial results. The Group uses operating profit from continuing operations in its business to, among other things, evaluate the performance of its operations, develop budgets and measure performance against those budgets. The Directors view operating profit from continuing operations as a supplemental tool to assist in evaluating business performance as it excludes the impact of the separately disclosed items described above. The Directors believe that operating profit from continuing operations is a more accurate reflection of the normal operating performance of the Group and believe that this measure provides additional useful information for prospective investors on the Group's performance, enhances comparability from period to period and with other companies in its industry, and is consistent with how business performance is measured internally. For a reconciliation of operating profit from continuing operations to profit for the year after tax, see "Selected Financial Information-Non-IFRS Financial Information".

• Normalised operating profit from continuing operations, as used in this Prospectus, represents operating profit from continuing operations adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments. The Quilter Life Assurance fee restructure adjustment relates to the removal of the impact of the Quilter Life Assurance fee restructure, a fee restructure exercise conducted on Quilter Life Assurance's pension products in the year ended 31 December 2016 following the FCA Thematic Review. This includes the one-off revenue impact, expenses incurred in relation to the Thematic Review and compensation paid to policyholders for the understatement of fund rebates. Other normalisation adjustments relate to certain one-time adjustments and rebates. These adjustments include (i) the normalised investment return on shareholder funds, determined and calculated assuming a long term investment return to eliminate any fluctuations in results due to unrealised gains, (ii) the release of non-utilised property provisions directly attributable to the Wealth Platform segment which were booked as a result of the Group's prior platform transformation initiative, (iii) staff and non-staff expenses incurred in relation to the Quilter Separation in the year ended 31 December 2016 and (iv) an expense and provision relating to rebate errors discovered in Quilter Investors during the year ended 31 December 2016.
• Normalised net management fee, as used in this Prospectus, represents revenue generated from AuMA, fixed fee revenues and policyholder tax contributions, netted off by trail commissions payable and adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments (each as described above).
• Normalised other revenue, as used in this Prospectus, represents revenue not directly linked to AuMA (i.e. early encashment charges, risk result, adviser initial fees

and adviser fees linked to AuMA in Quilter Financial Planning (recurring fees)), adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments (each as described above).

Normalised expenses, as used in this Prospectus, represents expenses adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments (each as described above).

The Non-IFRS Financial Measures are not defined under IFRS and other companies may calculate such measures differently or may use such measures for different purposes than the Group does, limiting the usefulness of such measures as comparative measures. Prospective investors should not consider the Non-IFRS Financial Measures in isolation, as an alternative to consolidated profit before tax, as an indication of operating performance, as an alternative to cash flows from operations or as a measure of the Company's profitability or liquidity.

For a reconciliation of the Non-IFRS Financial Measures, see "Selected Financial Information-Non-IFRS Financial Information".

3. Key Performance Indicators

To assist prospective investors in comparing the Group's historical financial performance from period to period, certain key performance indicators and other operating metrics have been presented in this Prospectus, and are defined as follows:

• NCCF, as used in this Prospectus, represents the difference between money received from and returned to customers during the relevant period for the Group (excluding Quilter Life Assurance) or for the business indicated.
• Closing AuMA, as used in this Prospectus, represents the total market value of all financial assets managed and administered on behalf of customers as at 31 December for each financial year.
• Average AuMA, as used in this Prospectus, represents the average total market value of all financial assets managed and administered on behalf of customers during the financial year ended 31 December. Average AuMA is calculated using a 13-point average of monthly closing AuMA.
• Operating margin, as used in this Prospectus, represents reported operating profit from continuing operations divided by total revenue, including policyholder tax and adviser fees. Operating margin excludes financing costs.
• Revenue margin, as used in this Prospectus, represents net management fee, including policyholder tax, divided by average AuMA.

The key performance indicators and other metrics included in this Prospectus and described above are derived from management estimates, are not part of Quilter's financial statements or financial accounting records and have not been audited or otherwise reviewed by outside auditors, consultants or experts. Quilter's use or computation of these terms may not be comparable to the use or computation of similarly titled measures reported by other companies in the Group's industry. Any or all of these terms should not be considered in isolation or as an alternative measure of performance under IFRS. For definitions of certain other terms relating to key performance indicators, please see "Definitions and Glossary of Technical Terms".

4. Currency Presentation

Unless otherwise indicated, all references in this document to "British pounds sterling", "sterling", "pounds sterling", "GBP", "£" or "pence" are to the lawful currency of the UK. The Company prepares its financial information 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.

5. 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%.

6. Market, economic and industry data

Certain information regarding market size, market data, market share, market position, growth rates and other industry data pertaining to the Group and its business contained in this document consist of Directors' estimates based on data compiled by professional organisations and on data from other external sources. In addition, the following sources have been cited throughout this Prospectus:

• Association of Professional Financial Advisers ("APFA"), including "2016/FCA's Product Sales Data Q2 2016" and "2016/NMG Consulting's Financial Adviser Census Quarterly Trends";
• Association of British Insurers ("ABI"), 2016;
• Asset Risk Consultants ("ARC"), June 2017;
• Boston Consulting Group ("BCG"), including "Global Asset Management 2016";
• Compeer UK Wealth Management Industry Report 2017;
• Defaqto DFM market update 2016 and April 2015;
• Deloitte, "Funding our future: Meeting the long-term savings challenge";
• EY Global Wealth and Asset Management Industry Outlook;
• FCA Assessing Suitability Review 2016;
• Financial Express;

• Financial Ombudsman website;

• Financial Times top 100 Financial Advisers 2017;

• Fundscape Platform Report, Q3 2017 and Q4 2017;
• GlobalData, including "Wealth in the UK: Sizing the Market Opportunity 2017" and "HNW Offshore Investment: Drivers and Motivations 2017, April 2017";
• Investment Association ("IA") statistics;
• IA Echoweb;
• Investment Trends, including "UK Adviser Technology & Business Report 2017";
• Office of National Statistics ("ONS");
• Private Asset Managers ("PAM"), including the 2017 Report;
• Pridham Report;
• PricewaterhouseCoopers ("PwC"), including "Asset & Wealth Management Revolution: Embracing Exponential Change"; and
• Rathbones, including "Five-Minute Guide to Discretionary Fund Management" report April 2016.

Industry publications and market research generally state that the information they contain has been obtained from sources the Directors believe to be reliable but that the accuracy and completeness of such information is not guaranteed and any estimates or projections they contain are based on a number of significant assumptions.

In some cases there is no readily available external information (whether from trade and business organisations and associations, government bodies or other organisations) to validate market related analyses and estimates, requiring the Group to rely on internally developed estimates. The Group does not intend, and does not assume any obligation, to update industry or market data set forth in this document. Because market behaviour, preferences and trends are subject to change, prospective investors should be aware that market and industry information in this document and estimates based on any data therein may not be reliable indicators of future market performance or the Group's future results of operations.

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.

7. No incorporation of website information

The contents of the Company's website do not form part of this document.

8. Definitions and glossary

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

9. 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.

10. 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 identified by the use of forwardlooking 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 "Risk Factors", "Business Description" and "Operating and Financial Review" regarding the Company's strategy, targets and expectations in respect of the Group's expected net revenue, growth, capital expenditures, corporate segment costs, separately disclosed items, depreciation and amortisation and accounting tax rates as well as other expressions of the Group's targets and expectations 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. Important factors that could cause the Group's actual results to so vary include, but are not limited to:

• difficult conditions or volatility in the global capital markets and the global economy generally and the UK economy specifically;

• exposure to domestic and global political developments and their impact on financial markets, including the UK's withdrawal from the EU;

• the ability of the Group to anticipate and respond to competitive change, adviser or customer preferences or demographic trends in a timely and cost-effective manner;

• a deterioration in demand or an increase in supply for wealth management and retirement related products;
• factors which may adversely affect the level of customer investment portfolios and the Group's AuMA, including a decline in equity markets, a rise in interest rates, fluctuations in currency exchange rates, a widening in credit spreads, a fall in property prices, changes in short or long-term inflation or liquidity risk;
• failure by the Group to offer products, services and platforms that meet adviser and customer needs and which are considered suitable;
• a decline in demand for the Group's products as a result of the asset classes or investment strategies underlying the portfolios managed by the Group becoming less attractive to customers or their advisers;
• failure by the Group to capture new business resulting from increased demand following the Pension Freedom or changing trends or regulations;
• actual or perceived underperformance of customer assets that are managed by the Group;
• the ability of the Group to successfully execute its strategic initiatives;
• risks relating to the disposal of OMGI;
• failure by the Group to manage conflicts of interest between its advice channel and other businesses across the Group;
• a computer system failure, security breach or cyber-attack;
• the Group's ability to maintain or adapt its current and legacy IT systems, or failure to implement its IT initiatives;
• failure to deliver on the Group's UK Platform Transformation Programme;
• the ability of the Group to continually attract or retain talented advisers, investment managers and portfolio managers;
• failure by the Group to attract or retain senior management or other necessary personnel;
• the Group's ability to implement its significant change initiatives;
• the ability of the Group to maintain the strength of its brands, which are vulnerable to adverse market perception or negative publicity, or to successfully complete its ongoing rebranding initiative;

• conduct risk, including with regard to decisions and behaviours by the Group, its employees, its advisers or its appointed representatives;

• exposure to heightened local political, economic, regulatory and business risks and challenges in international jurisdictions in which the Group operates;

• operational risks, including the risk of direct or indirect loss resulting from inadequate or failed internal and external processes, systems and human error or from external events;
• the Group's reliance on the outsourcing and procurement of services to third party contractors, suppliers, agents and service providers;
• the Group's ability to keep pace with continued improvements in operational infrastructure;
• errors affecting the calculation of unit prices or deduction of charges for the Group's unit-linked products or mutual funds;
• breaches by the Group of investment mandates;
• counterparty default;
• over-exposure with regard to its insurance risks due to a failure in the underwriting process or an inability to secure appropriate reinsurance coverage;
• the ability of the Group to adequately insure against specific risks;
• the Group's to fully capture the expected value from acquisitions, or the Group's exposure to liabilities arising from historical corporate transactions;
• catastrophic events;
• the Group's ability to comply with regulations in the UK and internationally;
• adverse changes in the laws, regulations and regulatory requirements (including tax laws and rates) in the markets in which the Group operates;
• regulatory action or claims from customers alleging that advice given generally or in relation to products or services was unsuitable or unfairly priced, or otherwise failed to meet regulatory requirements or customer expectations;
• legal proceedings, ombudsman processes, regulatory investigations or general litigation;
• failure by the Group to detect or prevent money laundering and other financial crime activities if financial crime risks are not correctly identified and if effective controls to mitigate those risks are not implemented;
• the ability of the Group to comply with data protection regulations, including the proposed GDPR;
• third parties' perception of the Group following the Quilter Separation;

and other factors described in "Risk Factors".

Forward-looking statements contained in this Prospectus speak only as of the date of this Prospectus. The Company and the Sole Lead Manager expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the 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 made under section 73A of the FSMA (the "Disclosure and Transparency Rules").

Industry Overview

The information in the following section has been provided for background purposes. The information has been extracted from a variety of sources released by public and private organisations as described in "Presentation of Financial and Other Information".

The Company confirms that the information in this section has been accurately reproduced from these sources and, as far as the Company is aware and is able to ascertain from information published by these sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The Company believes that these industry publications, surveys and forecasts are reliable but the Company has not independently verified them and cannot guarantee their accuracy or completeness.

The projections and forward-looking statements in this section are not guarantees of future performance and actual events and circumstances could differ materially from current expectations. Numerous factors could cause or contribute to such differences. See "Risk Factors" and "Presentation of Financial and Other Information-10. Forward-looking statements".

1. UK Macroeconomic Context

After a challenging period following the global financial crisis, the UK economy returned to growth in the third quarter of 2009 to post-crisis peak growth of 3.3% in 2014, benefitting from a continued low interest rate environment, with the services industries, particularly financial services, leading that growth. At the same time, the labour market recovered quickly, with the unemployment rate coming down from a post-crisis high of 8.5% in October 2011 to 4.4% in the three months to December 2017 (Source: Bank of England, February 2018 Inflation Report). CPI inflation, meanwhile, though slightly exceeding the Bank of England's 2.0% target in 2012 and 2013, fell back below that threshold in 2014 to 1.5%, even reaching a period of slight deflation in 2015 amidst an environment of low oil prices, supermarket price cuts and a strong sterling.

In June 2016, following the EU referendum vote (commonly referred to as Brexit), the UK economy entered a period of significant uncertainty with immediate downgrades to its credit rating and outlook by each of S&P, Moody's and Fitch, GDP forecasts revised lower by the Bank of England and IMF in subsequent months and expectations of significantly reduced business investment. However, the UK economy demonstrated relative resilience in 2016, with growth for the year of 1.9%, the second highest amongst the G7 economies, driven by strong consumer spending, a continued expansion of the services industry and the sharp depreciation in sterling (falling to a thirty year low vs. the US dollar) which supported exports.

Within the context of this macroeconomic background, liquid assets in the UK grew by over 8% in 2016 to £2.9 trillion, the highest growth rate recorded since the financial crisis, in part due to the strong performance of mutual funds, which benefited from continued low interest rates and strong stock market performance in the UK. This strong stock market momentum continued into 2017 and 2018, with UK indices, including the FTSE 100, FTSE 250 and FTSE All Share as well as international indices such as the S&P 500, hitting all-time highs over the period.

Against the continued backdrop of Brexit uncertainty, however, the economy began to show signs of a slowdown in 2017, with household purchasing power coming under pressure from higher inflation (driven by higher import costs), and quarterly GDP growth declining from 0.7% in the fourth quarter of 2016 to 0.3% for the two subsequent quarters in the first half of 2017. Nevertheless, GDP growth picked up in the second half of 2017. The housing market also experienced a slowdown, with annualised growth falling from above 8.2% in June 2016 to a low of 3.8% in March 2017. In November 2017, reacting to the higher inflation rate, the Bank of England's Monetary Policy Committee increased interest rates for the first time in 10 years, from 0.25% to 0.50%, though their outlook for both inflation and economic activity remained broadly the same compared to their previous projections in August 2017. In their latest February 2018 Inflation Report, the Bank of England left these inflation expectations unchanged, whilst raising their 2018 GDP growth forecast to account for stronger global growth and a lessening draft from the fiscal tightening announced in November.

Although the unemployment rate has continued to decline, the pace of improvement also began to slow in 2017. Productivity levels, meanwhile, remain only marginally above pre-crisis levels, whilst wage growth has been muted and remains below historical levels, suggesting a certain degree of spare resources in the labour market. As a consequence of a continued strong consumer spending, inflation and subdued wage growth, household saving ratios have experienced a steady decline since 30 September 2015, falling from 9.5% to 3.7% in the first quarter of 2017, the lowest savings ratio in 20 years, before recovering slightly to 5.2% by the third quarter of 2017. However, the net financial wealth of the UK has continued to trend upwards to an all-time high, with total net worth(1) of £9.8 trillion in 2016, a 9% increase on the previous year, boosted to a large extent by higher house prices.

Going forward, given the significant uncertainty relating to Brexit and continued pressure on household incomes, the Bank of England expects growth to remain sluggish in 2018 and 2019 at 1.7% and 1.8%, respectively (Source: Bank of England, February 2018 Inflation Report). However, in the medium-term, assuming a "smooth" transition to post-Brexit trading arrangements, the Bank of England expects growth to rebound slowly with strong global demand, support from export growth and a pickup in business investment growth supporting UK economic growth. CPI, meanwhile, having risen to 3.3% in November 2017, is expected to fall back gradually to 2.3% over the course of 2019, reflecting continued gradual passthrough of higher import prices due to the weak sterling.

In terms of demographics, the UK's population has continued to expand, reaching a peak of 65.6 million in 2016, and the Office for National Statistics expect the population to exceed 69 million in 2026. With the population steadily rising, improvements in healthcare and lifestyles mean that it is also getting older: in 2016, 18.0% of the UK population was aged 65 or over, compared to 15.9% in 2006. With the proportion of those of a working age shrinking whilst the proportion of those of a pensionable age increases, such demographic changes will result in individuals increasingly needing to save more to provide security in retirement, adding to the UK's savings gap, which is already estimated to be one of the largest in Western Europe and estimated by Deloitte to reach £350 billion by 2050.

	2012A	2013A	2014A	2015A	2016A	2017A	2018E
Metric (%)
Real GDP Growth YoY at Constant
Prices (2)	1.5	2.1	3.1	2.3	1.9	1.7	1.7
Annual CPI Inflation (2) (3)	2.8	2.6	1.5	0.0	0.7	2.7	2.9
Bank of England Base Rate (2) (4)	0.50	0.50	0.50	0.50	0.25	0.50	0.75
Average Unemployment Rate (2)	8.0	7.6	6.2	5.4	4.9	4.4	4.3

⁽¹⁾ Estimated market value of financial assets (e.g. shares and deposits) and non-financial assets (e.g. dwellings and machinery), net of liabilities.

____________

2. Overall UK wealth and liquid assets

2.1 Overview

The UK is one of the largest wealth markets globally with an estimated £2.9 trillion of onshore liquid assets as of 2017. Since 2012, the total UK wealth market has grown at a compound annual growth rate ("CAGR") of 6%. Looking forward, the UK wealth market is expected to reach a total of £3.3 trillion of onshore liquid assets by 2020 (Source: GlobalData, Wealth in the UK: Sizing the Market Opportunity 2017).

Based on 2016 estimates, £0.4 trillion of liquid assets is held in the high net worth segments (defined as individuals with investable assets of £5 million or more), £1.7 trillion is held in the affluent segment, and £0.8 trillion is held in the mass retail segment (defined as individuals with investable assets of less than £100,000). Affluent individuals in the UK, with liquid assets between £100,000 and £5 million, hold 57% of liquid wealth but represent only 10% of the UK adult population as of 2016 (Source: Globaldata). There also exists a large degree of regional disparity in the distribution of assets in the high net worth and affluent segments, with significant concentration in London and the surrounding South East region. According to Globaldata, London accounts for 13.8% of total liquid assets in the UK, the South East 15.5%, the North West 10.2% and East Anglia 10.1%, as of 2016.

⁽²⁾ Historical data from the Office of National Statistics. Forecasts from the Bank of England, February 2018 Inflation Report.

⁽³⁾ Forecasts on a four-quarter basis.

⁽⁴⁾ As at 31 December each year and forecast based on market-implied path as disclosed by the Bank of England.

Wealth management and financial advice in the UK is provided by a number of different types of firms and is typically correlated to a customer segment and the complexity of the customer's financial needs:

• Private banks provide wealth management and advice to the high net worth customer segments. Products provided often include lending and deposit-taking services. Examples would include Coutts, UBS and Pictet.
• Wealth managers provide advice, platforms, investment management and wealth solutions. Some firms target a specific segment of the value chain, while some firms pursue an integrated model with provision of services across all aspects of the value chain. Examples would include Quilter and St. James's Place.
• Insurers focus on retirement and pension solutions, often via the provision of products held through tax efficient wrappers such as ISAs or SIPPs. Examples would include Prudential and Aviva.
• Retail banks target the lower mass affluent segment of the market, typically through self-directed fund platforms or risk-based model portfolio services, with limited provision of financial advice. Examples would include Santander UK and Lloyds Banking Group.
• Direct-to-consumer ("D2C") platforms are self-directed stock broking type services where no advice or investment management service is provided. An example would be Hargreaves Lansdown.

It is estimated that, as of 2017, there are approximately 25,000 high net worth individuals, with over £5 million in liquid assets, in the UK who are mostly served by global private banks. In the affluent segment, there are approximately 5 million individuals. This segment remains a highly fragmented market served by traditional life insurers, platforms and wealth managers. In the mass retail segment, there are approximately 45 million individuals, where many rely on auto enrolment to serve their savings and retirement needs (Source: GlobalData, Wealth in the UK: Sizing the Market Opportunity 2017).

2.2 Market Trends

There are a number of long-term structural trends and regulatory drivers that are expected to continue to drive flows into the UK wealth market and increase the demand for financial advice and wealth solutions.

2.2.1 Favourable macro, structural and demographic trends

The long term trend of an increase in the saver population segment (aged 30 to 60) is expected to drive continued growth of wealth market flows. According to Globaldata, the population of affluent individuals (as defined above) is expected to grow at a CAGR of 4% from an estimated approximately 5.3 million individuals in 2017 to an estimated approximately 6.0 million individuals by 2020.

Furthermore, according to the World Bank, UK average life expectancy (male and female) has increased from 71 years in 1960 to 82 years in 2015, increasing the savings requirement of individuals to see them through retirement. The proportion of the UK that is over the age of 65 has increased from 16% in 1991 to 18% in 2016, and is forecast to increase further to 24% of the population by 2041 (Source: Office for National Statistics).

The savings gap, defined as the difference between retirement income expectations and the cost of funding such projections, is forecast to reach £350 billion in the UK by 2050. This means that, the average adult in the UK would need to save an additional £10,000 per year between now and retirement. This is likely to increase the propensity of customers to utilise financial advice and wealth management products in the UK (Source: Deloitte).

Lastly, the continued transition from DB to DC pension schemes is expected to continue to drive flows in the wealth management market. Pensions represent the largest share of net sales in the platform market, arising from the Pension Freedom legislative change in April 2015. This represented a fundamental change to the structure of the UK pensions market, removing the legal requirement to buy an annuity with pension savings at retirement and allowing for a range of flexible, alternative solutions.

2.2.2 Search for yield and solutions

The current "lower for longer" interest rate environment, with negative real interest rates on many savings accounts, has precipitated the search for yield by investors and savers in the UK. This is driving demand for investment solutions products that deliver a risk-adjusted return. This has driven increased flows into mutual funds, growing from 18% of retail and savings allocations in 2010, to an expected 23% by 2019 (Source: Globaldata). These mutual funds are predominantly invested in equities, as of 2016, representing 50% of assets versus 16% of assets invested in fixed income products (Source: Globaldata).

2.2.3 Government policy initiatives

There have also been a number of regulatory changes and government initiatives which have contributed to the growth in demand for financial advice and wealth management products in the UK, including the pension reforms in 2014, which saw the end of compulsory annuitisation, and policies designed to stimulate and encourage higher savings such as pensions auto-enrolment and increasing ISA subscription limits.

2.2.4 Ongoing regulatory focus

Following the financial crisis, regulators worldwide have intensified their approach to the regulation of financial services.

In the UK wealth and asset management sector, in addition to an increased focus from the PRA, the FCA has focused specifically on ensuring good customer outcomes. The Retail Distribution Review ("RDR") was implemented by the FCA in 2013 and amongst other things, led to changes in the way advice was provided and charged for in the UK. In addition, MiFID II came into force on 3 January 2018 and introduced changes for financial markets across a multitude of areas, primarily focused on managing conflicts of interest. MiFID II introduced additional disclosure requirements around costs and charges providing greater transparency to retail customers. This may impact the provision of advice and on-going servicing as the value of the services being provided is assessed.

In addition, the FCA has also recently carried out a number of thematic reviews and market studies on the broader UK wealth and asset management industry, including the Asset Management Market Study, the Investment Platforms Market Study and the Assessing Suitability Review. Through these market studies and reviews, the FCA appears to be increasingly focused on the transparency of customer fees and charges and treating customers fairly. See "Regulatory Overview".

2.2.5 Changing customer behaviour and preferences

Customer behaviour and preferences are constantly evolving, and customers today increasingly value ease of access and interaction via an online or digital interface, including web-based browsers or applications on a mobile device. This is increasingly true for millennials, defined as individuals born after 1980, who demonstrate different preferences and investing habits compared to the previous generation. Millennials are also becoming an increasingly important segment given they are expected to benefit significantly from intergenerational wealth transfer. It is estimated that £920 billion of wealth will be transferred from those over the age of 55 to younger generations over the next 30 years (Source: St James's Place/Capital Economics). Consequently, the rise in popularity of digital and technology driven wealth and asset management solutions in response to evolving customer preferences mean cyber security is becoming increasingly important.

3. UK Advice Market

3.1 Overview

Financial advisers provide planning and advice services ranging from wealth and investments, retirement, estate, tax and inheritance. There are also a number of mortgage and protection advisers in the UK, who provide advice specifically on mortgage applications and life insurance products. Typically, financial advisers do not have a mandate to buy, sell or execute investment decisions on a discretionary basis and are instead focused on the provision of financial advice and recommendations that are most suited to the customer's risk profile and financial objectives.

Financial advice can be either independent or restricted. IFAs provide unrestricted advice based on a comprehensive analysis of retail investment products and options available to the customer across the whole market. RFPs can only give advice on certain types of products, or on products from one or a limited number of providers. In the case of restricted advice, regulations require that customers must be informed up front that the advice provided is restricted advice and specifically how it is restricted - by product or by provider.

Volumes of protection and retail investment product sales by financial advisers have been dominated by pension products, which accounted for 63% of total advice sales in the UK as of 30 June 2016, while protection products accounted for 16% of total advice sales in the UK and ISAs, Open Ended Investment Collective Schemes and Investment Trusts accounted for a combined 13% of total advice sales in the UK (Source: APFA 2016/FCA's Product Sales Data Q2 2016).

Following the implementation of RDR in 2013, fees must be charged in exchange for advice provided instead of via commission from the product provider. These fees are usually charged as a percentage of assets under advice. In 2012, prior to the implementation of RDR, 84% of

total advice income from retail investments in the UK was in the form of net commission and 11% was in the form of fee income. In 2016, net commission only made up 25% of total advice revenues in the UK while fee income made up 73% of total advice revenues in the UK, illustrating the changing customer charging model (Source: APFA).

3.2 Competitive Landscape

As of December 2016, there were a total of 14,054 financial advice firms and a total of 24,761 financial advisers in the UK. This compares to 14,648 financial advice firms and a total of 27,080 advisers in the UK as of December 2009 (Source: APFA 2016). The UK advice market remains highly fragmented with only two businesses in the market with more than 1,000 CF30 Advisers in 2017, being St James's Place with 4,206 CF30 Advisers providing restricted advice and the Group with 2,323 CF30 Advisers (excluding 46 CF30 Advisers within the Single Strategy Business), composed of a mix of restricted and independent advisers, the majority of which are within Quilter Financial Planning. The third largest financial advisory network in the UK in 2017 was Openwork, with 946 financial advisers (Source: Financial Times).

3.3 Market Trends

3.3.1 Increasing need for financial advice

A number of regulatory changes and government initiatives in the UK, including Pension Freedom, increasing ISA subscription limits and the continued shift from DB to DC pensions has put the onus of long-term and retirement savings on the individual. However, the availability of financial advice remains relatively scarce. There are only approximately 25,000 financial advisers for the approximately 50 million adults in the UK aged 20 and above, equating to approximately 2,000 adults per adviser (Source: ONS/APFA). Although this ratio is a blunt measure, it provides an indicative view of the potential demand for financial advice in the UK market. The accessible number of customers is likely to in fact be lower than 50 million as for a considerable number of these adults, personalised financial advice may not be economical. Furthermore, the 25,000 financial advisers includes a number of qualified individuals who do not provide financial advice to retail customers, such as licensed para planners and business owners. As financial complexities for the retail customer increase, the need for quality advice increases and this is expected to drive the continued growth in demand for financial advice.

3.3.2 Impacts of RDR and other regulatory changes to the market for financial advice

Post RDR, financial advisers are required to charge the customer a fee for their services, as opposed to the prior predominant model of earning a commission from the sale of products that they had recommended. Accordingly, the revenue model of the industry has shifted away from commissions and towards a fee-based model. As of 2016, ongoing advisory fees made up the majority of UK advisory income at 41%, with initial advisory fees making up a further 31% (Source: APFA).

Another consequence of RDR was the expansion of the definition of "whole of market" and "independent". Under these new rules, if an adviser cannot meet the definition for independence, they are deemed to be restricted. This has caused a shift in the number of advisers from being classified as independent to restricted.

Furthermore, RDR created a greater compliance and administration burden for financial advisers and financial advisory firms. As a result, many advisers are moving flows onto adviser platforms, which provide the necessary tools and administration support to be fully compliant with RDR and to simplify their back office processes. Higher regulatory and overhead costs for financial advisers have also driven consolidation in the market, resulting in larger advisory networks acquiring smaller firms.

3.3.3 Outsourcing of investment management

There is also an increasing trend of financial advisers preferring to outsource investment management and fund selection as an attempt to reduce costs and the risk of mis-selling. This has resulted in an increase in the usage of multi-asset funds and discretionary fund management ("DFM") services.

3.3.4 Focus on suitability and disclosure

The FCA has been increasing its focus on the suitability of advice provided to customers and providing fair outcomes for customers. In April 2016, it carried out the Assessing Suitability Review, which assessed 1,142 individual pieces of advice given by 656 firms against the suitability and disclosure rules in the FCA's Conduct of Business Sourcebook ("COBS"). The results concluded that in 93.1% of cases, the sector provides suitable advice. Disclosure was found to be an area requiring further focus, with only 52.9% of cases deemed acceptable. The majority of cases of unacceptable disclosure related to initial disclosures around costs and services, specifically the disclosure of a wide range of charging structures and firms using hourly charging rates while failing to provide indication of the number of hours for the provision of each service (Source: FCA Assessing Suitability Review 2016).

4. Wealth solutions

4.1 Overview

4.1.1 Multi-asset market

The UK multi-asset market is a product segment within the broader UK asset management industry, focused on the development of solutions-based retail and institutional investment management products. Multi-asset funds allocate different asset classes into one portfolio with the aim of maximising the absolute investment return, while achieving greater diversification and lower volatility when compared to single asset class funds.

The UK multi-asset market's total AuM has increased from £131 billion in December 2012 to £222 billion as at December 2017, corresponding to a CAGR of 11% during this period (Source: Investment Association).

Net retail sales in multi-asset funds amounted to £13.4 billion in 2017, representing 29% of total net retail sales during this period. The largest category by sales was fixed income funds, with net retail sales of £14.3 billion whilst third largest category was equity funds, with net retail sales of £10.6 billion (Source: Investment Association).

Retail fund management products in the UK are distributed to the end customer via a number of channels: direct, execution only intermediaries, discretionary fund managers, platforms and other intermediaries including financial advisers. In 2017, gross retail sales on platforms amounted to approximately 44% of total sales, with IFAs and other intermediaries accounting for approximately 27%, discretionary fund managers accounting for approximately 13% and direct sales accounting for approximately 1% (Source: Investment Association).

4.1.2 Discretionary Fund Management

DFM is a form of wealth management whereby the client fully delegates portfolio asset allocation and all investment decisions to an investment manager, who designs and manages the investment portfolio in order to meet the client's specific needs and in line with their preagreed risk appetite. As of 2016, there were £473 billion of AuM under discretionary mandates, representing approximately 71% of total UK assets managed by wealth managers. Discretionary AuM has been growing at a CAGR of 11% since 2012, versus 1% for advisory AuM and 9% for non-managed AuM (Source: Compeer UK Wealth Management Industry Report 2017).

There are two types of portfolios. (i) Managed Portfolio Service ("MPS") portfolios are riskbased model portfolios managed by the investment manager on a centralised basis, typically addressing the affluent market. These products are typically available either direct with the discretionary fund manager, or through a third-party platform. (ii) Bespoke Discretionary portfolios are individually tailored mandates where the investment strategy is unique to a client, typically aimed at higher net worth client segments.

DFM products and services are typically distributed either direct or through a financial adviser. DFM solutions, especially MPS, are also increasingly available through a platform rather than direct with a DFM. Since 2012, the number of new launches of MPS products on platforms have outnumbered launches of MPS through the DFM. Some firms only make their discretionary solutions available through a platform (Source: Defaqto 2016).

4.2 Competitive Landscape

4.2.1 Multi-asset market

Over the last 6-7 years, the UK multi-asset market has expanded and become more sophisticated. Traditionally, there were only a few providers offering multi-asset funds or ranges, mainly limited to the large fund houses and some life insurance companies. Today, the majority of fund houses offer a multi-asset product or fund range, with a lot of niche players gathering increasing net flows.

According to the Pridham Report, Quilter Investors is the number one UK multi-asset manager by net sales for 2017, capturing £2.1 billion, with its top four competitors capturing £0.7 billion, £0.7 billion, £0.5 billion and £0.2 billion of total net sales, respectively (Source: Pridham Report).

4.2.2 Discretionary Fund Management

As of December 2016, Brewin Dolphin was the largest discretionary fund manager in the UK with £38 billion of total AuM. This is followed by Investec Wealth & Investment with £31 billion, Rathbones with £30 billion, Cazenove with £29 billion and Quilter Cheviot, with £21 billion (Source: PAM 2017 report, excluding private banks and St James's Place). Brooks Macdonald is also another key competitor in the space, with £9.3 billion of discretionary AuM as of December 2016.

4.3 Market Trends

4.3.1 Increasing demand for sophisticated solutions

Investment solutions accounted for 13% of global AuM in 2015 and are expected to capture an outsized share of net flows in coming years, forecasted to capture 51% of the expected flows from 2016 to 2020 (Source: BCG Global Asset Management 2016, where investment solutions flows include absolute return, target date, global asset-allocation, flexible, income and volatility funds; LDIs; and multi-asset and traditional balanced products).

RDR has been a key driver of the UK trend of financial advisers outsourcing investment management and fund selection to manage advice risk and ensure fair customer outcomes. Smaller financial advisory firms tend to lack sufficient scale to support the compliance costs associated with advice provision and in-house portfolio construction capabilities. As a result, an increased number of advisers are using risk based multi-asset solutions and discretionary outsourcing to reduce their advice risk associated with managing client assets and the overall administration of managing funds. In 2016, 66% of financial advisers said they expected to use an outsourced portfolio management service in the next few years, with 54% of advisers saying that reducing risk is a key benefit of outsourcing (Source: Rathbones, "Five-Minute Guide to Discretionary Fund Management" report April 2016).

A benign asset return environment where investment yields remain low and are likely to remain lower for longer, has also contributed to the demand for higher-yielding, risk-adjusted solutions products as investors seek to broaden the scope of their investment universe with enhanced diversification and greater flexibility. In addition to the number and range of multiasset funds increasing in recent years, they have also evolved from simple balanced equity and bond strategies into highly diversified, outcome driven funds, often with volatility targets. Many multi-asset funds are also managed to a risk level and not return targeted. Providers are deploying increasingly sophisticated approaches to asset allocation, including a greater use of alternatives.

In addition, Pension Freedom and the end of compulsory annuitisation created a structural need for decumulation and income products to support retirees in the drawdown phase. Data published by the FCA show that income drawdown accounted for 76% of retirement income sales (decumulation products only) between April and June 2017, with a total of 42,776 products sold during the three-month period. This compares with just 13,875 annuity sales, which represented 24% of the total market sales. Compared to the period between January and March 2014, being the last quarter prior to the announcement of the Pension Freedom, annuities accounted for 81% of sales (with 62,774 products sold) while drawdown accounted for 19% of sales (with 14,827 products sold).

4.3.2 FCA focus on customer outcomes and the fair treatment of customers

The FCA has also been increasingly focused on firms in the wealth and asset management industry delivering good customer outcomes and treating customers fairly. This has been beneficial to demand for multi-asset products given they are perceived to be more transparent and designed for a specific customer need given its risk targeted nature and flexibility (for example, providing drawdown functionality). As a result, demand for multi-asset solutions from financial advisers has increased significantly, contributing to the trend of increasing flows and AuM. Per the Investment Association, Mixed Asset is the fastest growing asset class (excluding Money Market and Other) over the last 10 years in the UK, growing at a CAGR of approximately 16% over the period 2008 to 2017.

4.3.3 Rise of passive investment strategies and ongoing fee compression

PwC forecasts that active management will represent just 60% of global AuM by 2025, down from 71% in 2016, while passives will gain significant market share, rising from 17% of AuM in 2016 to 25% by 2025 (equivalent to a more than doubling of passive AuM, from US\$14.2 trillion to US\$36.6 trillion). In part, this is driven by a period of relatively poor performance by active funds, coinciding with the advent of low-cost passive funds and increased cost transparency in what has been several years of strong equity market growth. Furthermore, transparent, flexible, cheap, passive exchange-traded funds ("ETFs") are expected to continue to grow, primarily led by demand from younger investors, and also as a result of the rising popularity of "robo-advisers" and other forms of digital advice, which will further increase the take up of these inexpensive funds globally (Source: Asset & Wealth Management Revolution: Embracing Exponential Change, PwC). As a result, this is leading to a level of fee compression across the whole asset management industry, which means scale becomes increasingly important to compete effectively. This trend may drive consolidation amongst smaller players in the industry.

4.3.4 Declining revenue and profitability margins in DFM segment

RDR precipitated a change in revenue model for DFMs, away from trail and rebate income, towards all-encompassing fee structures, which are usually based on the total value of the portfolio. Fee margin has been further impacted by the sustained low interest rate environment, which has eroded interest spreads. Such pricing levels may not be sustainable for smaller, less efficient players in a scaled sector.

4.3.5 Consolidation in a saturated DFM market

The DFM market in the UK remains fragmented and, with increasing regulatory overheads, firms who lack sufficient scale may struggle to generate profits. As a result, drive the potential for consolidation in the discretionary market. A recent example would be the proposed merger between Rathbones and Smith & Williamson in August 2017, although the transaction did not ultimately go ahead.

5. UK Retail Platform Market

5.1 Overview

A retail platform is a vehicle to hold and consolidate investments, providing customers and financial advisers an interface to view, manage and administer investments online. They are the most widely used solution for modern financial planning. As a value proposition for customers, the retail platforms allow consolidation of investment holdings in one interface, access to online valuations and financial information, provision of tax efficient products and the provision of customer services, such as performance tracking and financial reporting. For

advisers, retail platforms provide tools and technical support, aggregate customer relationships in one interface and provide back office functionality and reporting services.

The platform market is an attractive segment which has captured a significant share of UK retail savings and pension flows, with strong growth in both assets and flows in the UK. The total UK platform market has grown at a CAGR of 22% from approximately £401 billion of AuA as at 31 December 2015 to approximately £592 billion as at 31 December 2017 (Source: Fundscape Platform Report, Q4 2017).

The platform market can be segmented into three categories: (i) the retail advised platforms play an intermediary role between financial advisers and customers, (ii) the corporate and institutional platforms are primarily used by discretionary fund managers, employee benefit consultants and workplace pension product providers, (iii) D2C platforms offer customers the opportunity to directly invest in stocks, bonds, mutual funds and other investment products on their own account and at their own discretion. Each of the three segments has grown over the past three years, with total closing AuA increasing at a CAGR of 22%, from £400 billion as at 31 December 2015 to £592 billion as at 31 December 2017 (Source: Fundscape Platform Report, Q4 2017).

The retail advised segment represents the largest channel, with £352 billion of AuA as of 31 December 2017 (approximately 60% of total AuA) and gross sales of £70 billion for 2017 (approximately 56% of total gross sales). Additionally, the corporate and institutional segment accounts for £114 billion of AuA (approximately 19% of total AuA) as of 31 December 2017 with £34 billion of gross sales (approximately 27% of total gross sales), and finally D2C representing £126 billion of AuA (approximately 21% of total AuA) and £22 billion of gross sales for 2017 (approximately 17% of total gross sales) (Source: Fundscape Platform Report, Q4 2017).

In the retail advised segment, there are two sources of fund flows onto platforms; the open market channel and the advised channel. Through the open market channel, third party IFAs direct flows onto the platform. Alternatively, in the advised channel, flows are directed by RFPs who are linked to the platform provider.

Retail products offered on UK retail platforms typically belong to one of two sub-segments, "wrappers" or "non-wrapped" (Source: Fundscape Platform Report, Q4 2017). Tax-efficient "wrappers" include ISAs, personal pension plans, such as flexible drawdown and SIPPs, other pension products and investment bonds. Whereas "non-wrapped" products include general investment accounts ("GIAs"), typically used by customers once they have utilised their tax-free ISA allowance. Some providers may also hold old-style, legacy assets on their retail platforms which are closed to new business and managed for run-off.

During 2017, SIPPs represented the largest proportion of gross sales on platforms, accounting for 39% of total gross sales. This was followed by non-wrapped products with 33%, ISAs with 16%, other pension products with 10% and bonds with 1% (Source: Fundscape Platform Report, Q4 2017).

5.2 Competitive Landscape

In 2017, the top five retail advised platforms by AuA account for 57% of the total platform market. The largest retail advised platform player is Standard Life with approximately £54 billion, followed by Quilter Wealth Solutions (approximately £51 billion), Aegon including Cofunds (approximately £40 billion), Fidelity (approximately £34 billion) and AJ Bell (approximately £30 billion). Comparatively, by gross sales made during the fourth quarter of 2017, the best performing provider was Standard Life (£2.5 billion), followed by Quilter Wealth Solutions (£2.3 billion), Aegon including Cofunds (£2.3 billion), Aviva (£1.8 billion) and AJ Bell (£1.6 billion) (Source: Fundscape Platform Report, Q4 2017).

5.3 Market Trends

5.3.1 Platforms capturing majority of retail flows

Currently, 78% of all retail fund flows in the UK are onto platforms as customers access more flexible drawdown products and consolidate maturing investments from older-style pensions or savings products (Source: FCA Investment Platforms Market Study Terms of Reference). This has been assisted by Pension Freedom which was initiated in 2015, whereby pension savers are no longer required to buy an annuity at retirement, but rather have flexibility on withdrawing pensions saving. This has also resulted in the growth of decumulation products, which are offered on UK retail platforms. The shift by employers from old-style DB to newstyle DC pension schemes has also contributed to the growth in flows onto platforms. Platform AuA is forecast to reach £1.4 trillion by 2022, growing at 20% per annum (Source: Fundscape Platform Report, Q3 2017).

5.3.2 Differentiated competitive strategies

While price generally remains a differentiating factor between platforms, certain providers opt to compete and differentiate on other value-based factors. Value-added services are critical in differentiating between platforms and an important source of competitive advantage. For example, online reporting and risk profiling tools, information services, data analytics and efficiency-generating technologies. Furthermore, some differentiate by the product supported on the platform. For example, some platforms do not support DFM products, or the purchase of single equities. Still, price competition is sufficient to contribute to margin pressure in the space and given lower relative margins, scale is increasingly critical to compete effectively. It is also worth noting that for integrated players, capturing flows into multi-asset solutions may be as important as maintaining margin.

5.3.3 Re-platforming

A number of players, including major players in the platform market such as Fidelity, Quilter Wealth Solutions, Aviva and Aegon, have recently been through or are currently undergoing re-platforming exercises. This process involves upgrading the system and related technology to meet the evolving needs of advisers and their clients and to enhance functionality to positively differentiate in a relatively commoditised industry.

5.3.4 Consolidation

There are currently over 20 retail platforms in the UK, although many are considered to be sub-scale. Market commentators, including Calastone, believe there will likely be consolidation in the years ahead as increased competition and regulation add downward pressure to margins in an industry where scale matters. This builds on a growing trend in the platform sector with recent transactions including AXA UK selling its Elevate platform to Standard Life, Aegon acquiring the Cofunds platform from Legal & General and Lloyds Banking Group acquiring Zurich's workplace pensions intermediary platform. In addition, the Aegon and Cofunds transaction represents the first transaction which will involve the integration of two different technology platforms and could prove an important milestone in the platform market place.

5.3.5 FCA Investment Platforms Market Study

As part of increasing regulatory scrutiny across all segments of the UK wealth management value chain, in 2017 the FCA launched a market review on the retail investment platforms market in the UK. The study makes reference to the increasing use of platforms across the UK, and hence the greater imperative to assess the level of competition within the industry and determine whether providers are delivering beneficial outcomes to customers. An interim report with findings and recommendations is due to be published in 2018.

6. International

6.1 Overview

At a global level, approximately 19% of high net worth wealth is invested outside an individual's country of residence. The most important driver for UK investors in offshoring assets is a desire to achieve tax efficiencies, followed by geographic diversification reasons, access to better investment options and then the expectation that wealth managed offshore will generate better returns (Source: GlobalData, HNW Offshore Investment: Drivers and Motivations 2017, April 2017).

Providers of cross-border investment solutions and tax wrappers serve three main customer segments, namely high net worth and affluent clients seeking jurisdictional diversification; expatriates living overseas; and high net worth and affluent residents who have reached their domestic tax efficient investment limits. Providers based in the Isle of Man and Dublin tend to focus on UK high net worth, affluent and expatriate clients.

The primary insurance-wrapped offshore product offered by the Isle of Man and Dublin providers is a single premium portfolio bond product, which tends to be a multi-currency, taxefficient wrapper that can hold an extensive range of underlying investments. UK residents who have exhausted their contribution limits for ISAs and pensions can use international portfolio bonds for additional financial planning. It is estimated that this UK resident offshore market recorded £3.2 billion total sales in 2016 (Source: ABI 2016). The cross-border, multicurrency investment platform also serves working UK and international expatriates who are more likely to travel during their careers. Other UK and international investors, including high net worth investors, are principally attracted to the ability to invest in a politically and economically stable jurisdiction with a wide variety of investment choice.

6.2 Competitive Landscape

The main competitors in the UK offshore market are Quilter International, Canada Life, Prudential and Standard Life. In each international market, there are also domestic competitors. In Singapore, Quilter International has the largest market share with 50% of the single premium individual linked market as at 30 June 2017, followed by St. James's Place (23% market share) (Source: Life Insurance Association of Singapore). In Hong Kong, the largest players in the single premium individual linked market are Manulife International (70% market share), AXA China (10% market share) and Quilter International (5% market share), each as at 30 September 2017 (Source: Hong Kong Insurance Authority).

6.3 Market Trends

6.3.1 Growth in offshore bond markets for affluent and high net worth customers

Global wealth has continued to grow, driven by economic development and growth supporting wealth creation and accumulation of savings, particularly in the high net worth and affluent segments. This global structural growth supports continued demand for offshore wealth and demand for portfolio bonds as clients continue to seek access to global markets and to diversify their investments outside of their home country.

6.3.2 Transformational regulatory change and increased scrutiny on offshore investment products and vehicles

The Isle of Man FSA is introducing commission disclosure and asset suitability controls from 1 January 2019, which is likely to negatively impact the product proposition and reduce the number of distributors in the market, particularly in markets where Quilter International competes with domestic providers who are not subject to the same disclosure requirements.

Furthermore, there were recently a number of leaks which resulted in negative press surrounding the use of offshore investments in low tax jurisdictions. This included the leak of the Paradise Papers in late 2017 and the Panama Papers in early 2016.

Business Description

The following should be read in conjunction with the other information regarding the Group in this Prospectus, including "Risk Factors", "Operating and Financial Review" and the Group's consolidated historical financial information and the related notes included in "Historical Financial Information". Unless otherwise stated, the financial information relating to the Group set out in this part of the document has been extracted without material adjustment from the Financial Information in "Historical Financial Information" of this Prospectus.

This section includes forward-looking statements that reflect the current view of the Directors and involve risks and uncertainties. The actual results of the Group could differ materially from those contained in any forward-looking statements as a result of factors discussed below and elsewhere in this Prospectus.

1. Overview

The Group is a leader in the UK and in selected offshore markets in wealth management, providing advice-led investment solutions and investment platforms to over 900,000 customers, principally in the affluent market segment. At the core of the Group are a multichannel wealth management proposition and a strong investment performance track record, driving Integrated NCCF and long term customer relationships. As at 31 December 2017, the Group had £114.4 billion of AuMA following the elimination of intra-Group assets.

The Group operates through two segments, Advice & Wealth Management and Wealth Platforms.

The Group's Advice & Wealth Management segment, with £41.7 billion of AuM as at 31 December 2017, comprises:

• Quilter Financial Planning, which is a network of over 3,500 financial advisers, including approximately 2,000 CF30 Advisers, of which 1,561 are RFPs, who deliver face-to-face financial advice tailored to meet the specific needs of the customer. Quilter Financial Planning is the second largest restricted advice network in the UK, as measured by the number of CF30 Advisers as at 31 December 2017 (Source: Financial Times);
• Quilter Investors, which is a leading provider of multi-asset investment solutions in the UK, offering a broad range of solutions for its customers' accumulation and decumulation needs; and
• Quilter Cheviot, which is a leading UK-based private-client wealth manager providing discretionary and advisory wealth management services to private clients, corporates, pension funds, trusts and charities.

The Group's Wealth Platforms segment, with £84.6 billion of AuA as at 31 December 2017, comprises:

Quilter Wealth Solutions, which is a leading investment platform provider of advicebased wealth management products and services in the UK. Quilter Wealth Solutions serves a largely affluent customer base through both Quilter Financial Planning and third party advisers. The UK Platform Transformation Programme is expected to be a major enhancement of Quilter Wealth Solutions' range of products and capabilities and is designed to improve clients' and advisers' experience and expand the proposition;

• Quilter Life Assurance, the Group's book of legacy UK life insurance, insurance bonds and pension business, as well as the Group's open protection book of business. It also includes the Group's institutional life business, which is closed to new business and the majority of which the Group expects will run off over the next one to two years. Quilter Life Assurance's retail book is also in a steady managed run-off expected to be at around 15% per annum; and
• Quilter International, which is a leading investment platform provider of cross-border investment solutions (portfolio bonds and unit-linked products) aimed primarily at affluent and high net worth UK residents seeking investment solutions outside of the UK, as well as expatriates and international investors in selected offshore markets.

The Group has adopted a multi-channel access model, using both advised and open market approaches, designed for better customer outcomes by giving customers greater accessibility and choice. As at 31 December 2017, the Group's advised channel included approximately 200,000 advised customers paying ongoing advice fees, 1,561 RFPs (who advise on a range of investment solutions offered by the Group and from third parties that have been preresearched by the Group) and 422 IFAs on the Quilter Financial Planning network (who advise on an unrestricted whole of market basis). The Group's open market channel included approximately 700,000 customers (of which approximately 400,000 are customers of Quilter Wealth Solutions) who are primarily serviced by over 4,000 active third party UK advice firms using the Group's platforms and investment solutions. The Directors believe that the Group's multi-channel wealth management proposition provides greater market breadth and customer and adviser choice which support long-term customer relationships. The Group's multichannel wealth management proposition has also contributed to growth in the Group's Integrated NCCF (excluding Quilter Life Assurance), which has increased from £1.6 billion in the year ended 31 December 2015 to £5.2 billion in the year ended 31 December 2017. The Group's open market NCCF (excluding Quilter Life Assurance) has decreased from £2.7 billion in the year ended 31 December 2015 to £2.4 billion in the year ended 31 December 2017. Growth in Integrated NCCF has also been supported by the increase in the Group's RFPs from 930 as at 31 December 2014 to 1,561 as at 31 December 2017, an increase of 68% as a result of acquisitions, organic growth and transition of advisers from IFAs to RFPs.

The Group has delivered attractive top-line growth in recent years. From 31 December 2015 to 31 December 2017, AuMA has increased from £85.3 billion to £114.4 billion following the elimination of intra-Group assets, NCCF (excluding Quilter Life Assurance) has increased from £4.3 billion to £7.6 billion and normalised operating profit from continuing operations has decreased from £213 million to £209 million.

2. Competitive Strengths

The Group is one of the UK's leading wealth management businesses, with more than £114.4 billion of AuMA as at 31 December 2017 and a demonstrated track record of growth (16% AuMA compound annual growth and 11% revenue compound annual growth over the three year period to December 2017). Through its unique combination of capabilities and scale across each segment of the value chain, the Group offers its customers choice through a multi-channel wealth proposition. The Group provides financial advice, investment solutions and discretionary fund management for affluent customers, alongside its wealth platforms which offer a range of modern retirement and investment wrappers. The Directors believe that the Group benefits from the following key strengths.

2.1 The Group operates in one of the world's largest wealth markets with strong structural growth drivers

The UK is one of the world's largest wealth markets, with an estimated UK onshore wealth of £3.0 trillion, measured in liquid assets, as at 31 December 2017, according to GlobalData Financial, 2017. The UK onshore wealth market has grown at a CAGR of 6% since 2012 (Source: GlobalData Financial, 2017). The Group has made a strategic choice to focus primarily on the affluent customer segment of the UK wealth market, which comprises approximately five million adults with liquid assets of between £100,000 and £5 million. This segment in aggregate represented approximately £1.7 trillion of liquid assets, or 57% of onshore wealth in the UK in 2017 (Source: GlobalData Financial, 2017).

The Directors believe that the Group's full service and multi-channel wealth management offering is competitively positioned in the affluent customer segment and has the greatest potential for growth as compared to the mass retail segment. Typically, affluent customers need and place value on financial advice and more sophisticated investment solutions. In turn, financial advisers are increasingly outsourcing investment decisions, including asset allocation and fund selection, to specialist investment firms, such as Quilter Investors or Quilter Cheviot, and administering customers' assets through wealth platforms.

The UK wealth market has strong structural drivers of growth and the Directors expect these to continue, particularly in the affluent customer segment in which the Group operates:

• The need for financial advice is growing in the UK, yet since implementation of RDR in 2012, the number of advisers in the UK remains broadly unchanged. In the UK, there are approximately 2,000 adults per adviser (Source: ONS; APFA, 2016). The on-going shift in responsibility for long term savings and retirement provision from the state or companies towards individuals means customers increasingly need to make their own financial plans. Changes in legislation and regulation, including Pension Freedom, have served to increase the complexity that individuals face, further increasing the relevance of professional financial advice. The Directors believe that the Group's established advice business, Quilter Financial Planning, positions the Group well to meet this growing demand.

• Demographic trends and changes in legislation and regulation support long-term growth in assets. The UK has the second largest savings gap in Europe (estimated annual savings gap of approximately £300 billion in 2016 (Source: Deloitte)). Any closing of this savings gap can be expected to lead to growth in the wealth management market. This growth is expected to be supported by the existing government policy to stimulate higher savings, combined with the shift towards individual responsibility for long-term savings. Pensions reform in the UK, which removed compulsory annuitisation for the majority of savers at retirement, allows individuals to keep their pension savings rather than transferring those funds into an annuity. This is expected to increase the opportunity for wealth managers to retain and continue to advise on and manage customers' funds beyond the savings phase into the retirement phase, potentially significantly extending the longevity of customer relationships and increasing the size of the market.

• Investment solutions have experienced rapid adoption by customers and advisers yielding strong growth in the UK and globally. Total UK mutual fund AuM has grown 73% over the last five years to 31 December 2017. These trends are expected to continue as customers (and their advisers) focus increasingly on assessing their future financial objectives against their appetite for risk and demanding outcomeorientated solutions designed to meet their needs, rather than traditional benchmarkorientated solutions. The market size for UK investment solutions is expected to increase due to flows driven by the financial advisers who are increasingly outsourcing this activity to specialist investment firms due to lack of financial adviser investment expertise. The trend is evidenced globally and estimates from BCG indicate that, approximately 51% of total net flows across the asset management industry globally over the five years to 2020 are expected to be into multi-asset solutions (Source: BCG, 2016). Quilter Cheviot operates in the £473 billion discretionary wealth market, which has been growing at an 11% CAGR from 2012 to 2016. This growth has primarily been driven by RDR, industry consolidation, increasing demand, demographic and digital developments. Through Quilter Investor's leading range of multi-asset funds and Quilter Cheviot's discretionary portfolios, the Directors believe the Group is well positioned to continue to capture these trends.

• The UK platform market also has experienced strong growth, which is expected to continue. As at 31 December 2017, there were approximately £592 billion of AuA on platforms in the UK, having grown at a CAGR of 22% from £401 billion of AuA as at 31 December 2015, with the retail advised segment representing the largest channel with approximately 60% of total AuA (Source: Fundscape Platform Report, Q4 2017). Growth in the UK platform market has been driven by a number of trends which are expected to continue in the medium-term, including pension and investment consolidation onto platforms, favourable regulatory developments and consolidation. Platforms allow advisers to have their customer's investments in one place, enabling access to a full range of wrappers, financial planning tools, administrative support and service, while receiving scale benefits as they grow the size of customer assets on the platform. As such, platforms have become critical service components in the wealth management market, and the Group's platforms support not only its own financial advisers, but also third party advisers, positioning the Group well to capture the on-going shift towards platform use. The strong competitive positioning of the Group's UK platform is evidenced by the proportion of the Group's NCCF and AuA having been sourced through third party advisers.

These trends combine to support continued strong growth in the UK wealth market and the Directors believe that the Group is well positioned to take advantage of this growth.

2.2 The Group has leading market positions in its chosen segments, which positions the Group to benefit from the market's structural growth dynamics

The Group's market leading positions reflect its strong customer franchise in the UK wealth market. The strength of its full service wealth offering has resulted in attractive levels of growth in NCCF, AuMA and revenues in recent years.

In Advice & Wealth Management:

The Group had 2,323 CF30 Advisers (excluding 46 CF30 Advisers within the Single Strategy Business) as at 30 June 2017 (Source: Financial Times), the majority of which were in Quilter Financial Planning, making it the second-largest financial adviser in the UK by number of CF30 Advisers. Quilter Financial Planning provides on going advice to more than 200,000 customers. Including Quilter Financial Planning, there are only two businesses in the market with more than 1,000 CF30 Advisers. St James's Place is the largest in the market with 4,206 CF30 Advisers as at 30 June 2017 (Source: Financial Times).

• Quilter Investors is one of the leading providers of multi-asset investment solutions in the UK by net flows, with £16.9 billion of AuM as at 31 December 2017, and generating £3.3 billion of net sales in the year ended 31 December 2017. As reported by Pridham, Quilter Investors generated £2.1 billion of net multi-manager sales in the year ended 31 December 2017. In comparison, Quilter Investors' four primary competitors generated £0.7 billion, £0.7 billion, £0.5 billion and £0.2 billion of net multi-manager sales in the year ended 31 December 2017, respectively (Source: Pridham Report).
• Quilter Cheviot is the fifth-largest discretionary wealth manger in the UK by AuM, with £23.6 billion of AuM as at 31 December 2017, and generating £1.1 billion of NCCF in the year ended 31 December 2017. As at December 2016, Brewin Dolphin was the largest discretionary wealth manger with £38 billion AuM, followed by Investec (£31 billion), Rathbones (£30 billion), Cazenove (£29 billion) and Quilter Cheviot (£21 billion, as at December 2016) (Source: Private Asset Managers 2017 report, excluding private banks and St James's Place).

In Wealth Platforms:

• Quilter Wealth Solutions is the second-largest retail advised platform in the UK by AuA, with £50.2 billion of AuA as at 31 December 2017, NCCF of £4.5 billion as at 31 December 2017, with over 4,000 active third party UK advice firm relationships. These advisers use Wealth Solutions' services on behalf of more than 700,000 customers. The top five players in the segment represent a market share of 60% on an AuA basis. As reported by Fundscape, Standard Life is the leader with £54 billion AuA as at 31 December 2017 followed by Quilter Wealth Solutions (£51 billion), Aegon (including the Cofunds retail platform, £40 billion), Fidelity (£34 billion) and AJ Bell (£30 billion) (Source: Fundscape Platform Report, Q4 2017).
• Quilter International is a leading provider of offshore bonds and was ranked fourth by total UK offshore sales with £622 million in the year ended 31 December 2017 (Source: ABI). Canada Life leads the market with £803 million of offshore sales followed by Prudential (£596 million) and Standard Life (£554 million) as at 30 September 2017 (Source: ABI). Quilter International also has a broad geographical footprint, servicing UK and International expatriates in selected markets globally. It is a leader in this market in Singapore and positioned third in Hong Kong in the single premium individual linked market, which demonstrates focus on a clear cross-border competitive advantage.

Competition in the UK wealth market remains fragmented, with traditional life and pensions companies, platform firms, specialised wealth managers and retail and private banks all participating in the provision of wealth management services. The fragmentation is more evident in the upper affluent wealth segment in which the Group operates, relative to high net worth and mass affluent segment. The Directors believe that the Group's scale and leading market positions in each of its chosen segments should enable the Group to benefit from strong structural growth dynamics and capture an increased share of the market.

2.3 The Group is a full service wealth manager, focused on delivering good customer outcomes

Over a number of years, the management of the Group has led the transformation of the business, through a combination of organic investment, acquisitions and disposals, from a traditional UK and European life assurance firm into a modern, full service UK wealth manager. The Directors believe its business model today is positioned to benefit from recent and on going industry and regulatory trends, in particular through its differentiated multichannel model.

The Group's ability to provide good customer outcomes and bespoke solutions in line with risk appetites and time horizons, represents a compelling proposition for customers and its customers have the flexibility of seamless access between its Financial Advice, Platform and Investment Solutions products. The Group's unbundled pricing offers flexibility to use any component, pay for that product or service only at comparable levels to the market, and maintain oversight of the Group's transparent charging structure.

The quality of the Group's customer franchise, its competitive positioning and the growth in AuMA over recent years is, in part, due to its focus on and track record of delivering good customer outcomes, in terms of quality of advice, investment performance, and customer service.

The Directors believe the Group has delivered good outcomes for customers across its segments:

• Both Quilter Investors and Quilter Cheviot have delivered strong investment returns. Quilter Investors' leading and largest range of funds, Cirilium Balanced, Moderate and Dynamic have delivered strong risk adjusted returns, outperforming comparable peer fund strategies over the nine years since launch to 31 December 2017 (Source: Financial Express). Of the funds measured against the peers, 70% have performed above median over a 3-year period and of those measured against an index or target, 80% have outperformed over the same period. Quilter Investors and Quilter Cheviot also have a strong track record of developing services and products that provide the desired outcomes for our advisers and customers. With its wide range of funds, Quilter Investors provides customers with optionality and performance. Quilter Cheviot's investment performance across its Balanced discretionary portfolio has been consistently in the first and second quartiles over the last ten years ended 31 December 2017 (Source: ARC, December 2017). The Directors believe that the combination of above elements has been a strong driver of NCCF.

• Through its network of over 3,500 financial advisers (including 1,584 Mortgage & Protection Advisers) in Quilter Financial Planning, the Group provides high quality, professional financial planning advice, including the identification of, and ongoing monitoring of, customers' risk appetites to deliver desired outcomes. For example, the ratio of complaints upheld for Quilter Financial Planning over the six months ended 30 June 2017 was 21%, compared to an industry average of 36% for the same period (Source: FOS). The Group's robust risk management and compliance processes are designed to ensure suitability of advice and the highest standards are maintained.

• Quilter Wealth Platforms is the most widely used platform among advisers, with over 4,000 active third party UK advice firm relationships (Source: May 2017 Investment Trends UK Adviser Technology & Business Report). Over 70% of those advisers regard it as their primary or secondary platform (Source: Fundscape). Furthermore, the Directors expect the UK Platform Transformation Programme to enhance the Group's platform and service offering. The new platform will offer a wider product and investment range to customers including SIPP functionality, cash accounts, adding a Junior ISA, ETFs and investment trusts, thereby providing greater accessibility and functionality to advisers and customers. The Group is focused on delivering good customer outcomes and helping customers create a financially secure future.

• The Group offers unbundled and transparent pricing for its products. Customers are charged separately and at comparable levels to the market for different services, depending on the service selected.

By seeking to deliver good customer outcomes, the Group has developed a strong customer franchise and reputation in the provision of wealth management services in the UK. This is evident in the growth in NCCF and AuMA delivered by the Group in recent years. Furthermore, it has contributed to strong retention of both customers and customer assets by the Group. The Group has also won a number of awards for excellent customer service, in particular from Defaqto, where Quilter Wealth Solutions was the only company in 2017 to receive a gold rating across all elements of the proposition - platform, pension, onshore bond and protection.

2.4 The Group's multi-channel wealth management proposition is driving Integrated NCCF, open market NCCF and long-term customer relationships

The Group has achieved annual NCCF (excluding Quilter Life Assurance) of 6%, 6% and 9% of opening AuMA in the years ended 31 December 2015, 2016 and 2017, respectively, ahead of the target stated in 2016 of delivering NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term. In addition to a full service wealth management offering, the Group has built a multi-channel distribution model. These channels combine to provide customers and advisers with choice in the way they use the Group's services and have enabled increasing integration between the Group's business segments, while supporting strong NCCF and growth in AuMA at attractive revenue margins.

The Directors believe that the Group is differentiated from many of its competitors in the flexibility it offers customers and advisers to use its services. Customers may use one of the 3,567 financial advisers within the Quilter Financial Planning network (including 1,584 Mortgage & Protection Advisers) or one of the approximately 4,000 active third party UK advice firms that use the Group's investment solutions and/or wealth platforms. The restricted platform proposition for the Group's RFPs consists of three platforms, enabling RFPs to choose between Quilter Wealth Solutions and two third party platforms to best meet the needs of their customers. This choice benefits customers and their advisers, while enabling the Group to maximise its opportunity to capture share in the UK wealth market. The Directors believe that growth in the number and productivity of advisers and investment managers will support continued strong levels of Integrated NCCF, following the recent trend. NCCF from Quilter Financial Planning to Quilter Investors has increased from £1.0 billion in the year ended 31 December 2015 to £2.5 billion in the year ended 31 December 2017.

Increasingly, customers and advisers are choosing to use more than one of the Group's services. This integration of the Group's wealth management propositions offers benefits for both customers and advisers through the various elements of the proposition aligning to meet the needs of customers. It also supports strong NCCF through increased Integrated NCCF (excluding Quilter Life Assurance), which has increased from £1.6 billion in the year ended 31 December 2015 to £5.2 billion in the year ended 31 December 2017. In the year ended 31 December 2017, Integrated NCCF comprised £2.7 billion of NCCF into Quilter Investors or Quilter Cheviot, which originated from the Group's advisers, and £1.0 billion of NCCF from third party independent advisers, which is managed by Quilter Investors or Quilter Cheviot and is held on one of the Group's wealth platforms.

Furthermore, the Directors expect the implementation of the UK Platform Transformation Programme to provide enhanced DFM functionality and this could provide the opportunity for the UK platform to expand its offering to include more sophisticated MPS propositions.

The Directors believe that the Group's business model supports long-term customer relationships, as evidenced by the high asset retention over the last three financial years ended 31 December 2017. Excluding Quilter Life Assurance, total Group asset retention (calculated as 1 - (gross outflows / opening AuMA)) has been 90%, 86% and 85% for the years ended 31 December 2015, 2016 and 2017, respectively. In addition, the full service multi-channel wealth model enables the Group to meet the changing needs of affluent customers over their life cycle, with an opportunity to serve customers for approximately 60 years. Longer term customer relationships, combined with many of the trends previously outlined in this section, underpin good levels of retention of customer assets and the Directors currently expect this trend to continue.

The Group's multi-channel model also provides it with the ability to diversify across market segments, asset classes, customer types and products as its distribution covers a significant part of the asset and product spectrum. The Directors believe that the Group's strong positions in each of its market segments also offer strategic flexibility to respond to and capitalise on changing market and regulatory conditions over time.

2.5 The Group has a strong track record of delivering growth in NCCF, AuMA and Revenues

The Group has delivered strong growth across its business in recent years, which reflects a combination of continued growth in the UK wealth market, supportive financial markets and the Group's increasing market shares (driven by the various factors outlined above). The table below shows the growth in Quilter Financial Planning advisers, NCCF, AuMA, and revenues over the three years ended 31 December 2017.

	As at 31 December
	2015	2016	2017
Adviser numbers (RFPs + PCA)	1,230	1,423	1,561
Total NCCF (£bn)	3.9	3.3	6.3
Total NCCF (excluding Quilter Life Assurance)
(£bn)	4.3	4.2	7.6
Total AuMA (£bn)	85.3	98.2	114.4
Total normalised revenue (£m)	587	646	728

The growth in Advice & Wealth Management has been strong, with AuMA up 51% and revenue up 51% over the three year period ended 31 December 2017. Substantial growth in the number of advisers has resulted in strong Integrated NCCF into the Group's investment solutions and wealth platforms. NCCF growth in Advice & Wealth Management has been strong, increasing 159% over the three year period ended 31 December 2017. Management is focused on continuing to grow the number of advisers and improve their productivity, which the Directors expect will continue to support attractive NCCF into Quilter Investors, onto the Wealth Platforms, and increasingly into Quilter Cheviot. Over the three year period, Advice & Wealth Management has delivered NCCF over opening AuMA of 13%, in excess of the Group's target of delivering NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term.

The growth in Wealth Platforms has been robust, with AuMA up 33% and revenue up 9% over the three year period ended 31 December 2017. While third party adviser numbers have remained stable, NCCF (excluding outflows from Quilter Life Assurance) has been strong, up 84% to £5.9 billion for the year ended 31 December 2017, representing a CAGR of 59%. In the year ended 31 December 2017, Wealth Platforms has delivered NCCF over opening AuMA of 10% (excluding Quilter Life Assurance). The investment into the platform is expected to enhance the functionality and quality of services for advisers. The Directors expect the Group to achieve better adoption by both its own advisers and third party financial advisers, supporting higher Integrated NCCF and open market NCCF to support the Group's annualised NCCF target.

The Directors believe that the positive structural growth dynamics in the UK wealth market and the Group's leading market positions and full service, multi-channel model, position the Group for continued success and should enable the Group to continue to target delivering NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term. In recent periods, the Group has exceeded this medium-term target (excluding Quilter Life Assurance) and, should market conditions remain supportive, the Directors expect the Group to exceed the annualised NCCF target in the financial year ending 31 December 2018. In particular, the Directors expect this elevated near-term NCCF to be driven by the continued growth of inflows into Quilter Investors as a result of the Group's planned adviser growth and adviser productivity initiatives. As evidenced in prior periods, the Directors also expect the NCCF growth profile to continue to be different between segments, with higher percentages of NCCF over opening AuMA in the Advice & Wealth Management segment.

2.6 The Group has undertaken considerable investment as part of its transformation, underpinning the opportunity for operating leverage over the medium term

The Group has delivered attractive top-line growth in recent years and has undertaken considerable investment as a part of its transformation to be a full-service, multi-channel wealth manager including investing in order to operate on a fully standalone basis. Whilst this has resulted in declining operating margins, costs as a percentage of AuMA have remained broadly stable over this period, as set out in the table below.

	As at 31 December
	2015	2016	2017
AuMA (£bn)	85.3	98.2	114.4
Total normalised expenses (£m)	374	438	519

The Group has largely completed the transformation from a traditional UK and European life assurance firm into a modern, multi-channel UK wealth manager through a combination of investment, acquisitions and disposals.

Recent and on-going investment has been focused more on building the business and the integration of the front-end parts of the model to maximise the ability to capture customers and NCCF, as well as the planned separation from Old Mutual plc. Over this period there has been a reduced focus on the integration, optimisation and efficiency of the Group's operations. Going forward, the Group intends to focus more on business optimisation and scaling areas for potential increased efficiency by improving processes and optimising infrastructures, and by identifying and removing, where appropriate, any areas of duplication or inefficient hand-offs. Investment in the UK Platform Transformation Programme is expected to provide enhanced functionality, integrated systems, increased straight through processing and scalability for the years ahead. The Directors believe that increasing levels of NCCF and AuMA should result in the potential for improvement in the operating margin in the medium term from 29% in the year ended 31 December 2017. The Directors currently expect the Group should achieve an operating margin, before interest costs, of 30% for the year ending 31 December 2020 after the full impact of the additional expenses expected in 2018, but before it implements (and benefits from) any future optimisation initiatives that the Group intends to consider.

Following Quilter Separation, management expects to review the standalone cost base and operating model of the Group to identify long term optimisation initiatives to improve expense efficiency. However, at this stage, the initiatives, potential efficiency savings and restructuring costs to achieve this optimisation have not yet been scoped. The Directors expect that this review will be conducted commencing in the second half of 2018, and that an update will be provided at the time of publication of the results for the financial year ending 31 December 2018.

2.7 The Group's strong balance sheet and improving cash generation is expected to drive attractive shareholder returns

The Group plans to maintain a strong solvency and liquidity position through disciplined management of capital resources and risks. The backing of a financially strong group is important for the Group's businesses given the security and peace of mind that it affords customers and advisers.

The Company maintains a disciplined approach to capital, in order to balance its current and anticipated liquidity, regulatory capital and investment needs, with a view to returning any excess capital to shareholders as appropriate. As part of its disciplined approach to capital, the Group has a prudent capital management and liquidity policy. The Group also currently maintains a high quality of capital, with unrestricted Tier 1 capital accounting for £1.9 billion or 90% of total Own Funds as at 31 December 2017, adjusted to include the Notes.

At 31 December 2017, the Group had a Solvency II ratio of 155% after the 14% adjustment following the European Insurance and Occupations Pensions Authority ("EIOPA") update of the Individual Capital Guidance requirements in investment firms subject to the ICAAP regime. In developing the appropriate capital and liquidity position as part of the Managed

Separation process, the Group entered into the New Term Loan on 23 February 2018, a £300 million senior unsecured term loan with a number of relationship banks with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating. On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478%.

Adjusting to include the New Term Loan and the Notes, the pro forma Solvency II ratio would have been 171% at 31 December 2017. This pro forma ratio is stronger than the reported year end ratio and allows for the Group's near-term cash needs. The New Term Loan, the Notes and the New Revolving Facility have been issued to ensure that the Group has sufficient capital and liquidity to maintain strong capital ratios and free cash balances in line with its prudent capital management and liquidity policy. The Group aims to maintain sufficient holding company liquid resources to complete all committed strategic investments (including the UK Platform Transformation Programme); to allow for any further potential costs associated with the FCA's Thematic Review, including for any potential fine which may be levied by the FCA and in respect of which no provision has yet been made to date; and to withstand severe but plausible stress scenarios. These include, despite the Directors considering it to be a remote event, the sale of the Single Strategy Business failing to complete. The impact of this prudent policy is that the Group expects to maintain a solvency position in excess of its policy in the near-term.

The pro forma ratio of 171% does not include the expected Solvency II benefit arising on completion of the sale of the Single Strategy Business. The Solvency II impact of the completion of the sale of the Single Strategy Business would have increased the pro forma 31 December 2017 Solvency II ratio by approximately 40 percentage points before taking into account any potential distribution of surplus proceeds to the Company's shareholders.

The Group will reduce the amount of gross debt by repaying the New Term Loan in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction.

The Group defines cash generated in a financial year as free cash generated by the Group's operating profit from continuing operations, net of tax and normal cash movements supporting changes in the capital requirements of the business but before the payment of debt servicing costs and non-expensed investments in distribution. The cash generated from continuing operations in the year ended 31 December 2017 was £163 million, equivalent to 83% cash conversion of post-tax operating profit from continuing operations.

The Directors believe that the level of cash conversion from post-tax operating profit should remain strong given the recent significant levels of investment in the business, the Directors' expectations for future normal incremental capital requirements of the business on an annual basis, and the disciplined management of costs. The Directors continue to expect conversion of approximately 80% of post-tax operating profit from continuing operations into free cash.

In future, the cash generated will be partially utilised to fund debt servicing costs and targeted acquisitions of distribution (which are currently expected to be up to £20 million per annum). For the avoidance of doubt, the levels of targeted acquisitions of distribution noted here are those which the Directors expect will result in balance sheet accounting as they are driven principally by acquisitions of intangible assets and goodwill. This is separate from, and different in nature to, the investments in distribution and distribution capabilities which are generally staff and staff related and the Group expenses against operating profit as incurred.

Over the three years ended 31 December 2017 cash generation has been utilised to fund a number of significant actions for the Group and as a result the overall net generation of cash available to be distributed to Old Mutual plc has been significantly lower. These significant actions have included: the investments in the UK platform transformation programmes; the costs of distribution growth and strategic investments; one-off costs for the Quilter Separation; and the costs related to the Thematic Review.

As noted above, the Group aims to maintain sufficient holding company liquid resources to complete all committed strategic investments (including the UK Platform Transformation Programme) and to allow for any further potential costs associated with the Thematic Review, including for any potential fine which may be levied by the FCA. As a result, the Directors do not believe that there will be any demand on cash generated from operating earnings for these matters. However, the Group does currently expect further one-off costs of approximately £36 million, charged outside of operating profit, in respect of the completion of the Quilter Separation, which will utilise cash generated. These comprise a mixture of standalone, advisor and other transaction costs. Of these, approximately £12 million is expected to be incurred in respect of the rebrand of the business from Old Mutual Wealth to Quilter.

The Directors expect the combination of a strong balance sheet and improved net cash conversion to provide the resources from which the Group can continue to invest in its businesses for growth and deliver returns to shareholders through the Company's stated dividend policy.

The Company's dividend policy is to target a dividend pay-out range of 40 to 60% of post-tax operating earnings and it is expected that the split of interim and final dividends will be approximately one-third and two-thirds, respectively, of the total dividends payable in respect of a financial year, taking into account the underlying cash generation, cash resources, capital position, distributable reserves and market conditions at the time. The first dividend payment the Company will make following the Proposed Listing is expected to be the final dividend in respect of the year ending 31 December 2018, which would be paid following approval of the financial statements for the year ending 31 December 2018 at the Annual General Meeting of the Company, currently expected to be held in May 2019. The Directors currently expect this dividend to be determined by a pay-out at the lower end of the target range and to reflect the expected split of interim and final dividends.

Subject to the Group's prudent capital management and liquidity policy, following the completion of the sale of the Single Strategy Business, the Directors will also consider a distribution by the Company from the surplus sale proceeds to its shareholders. In determining the size of any potential return to shareholders, the Company will take into account a number of factors including certain matters directly related to that sale such as: (i) the repayment in full of the senior unsecured term loan, (ii) the costs associated with the sale of the Single Strategy Business, and (iii) the costs associated with the establishment of the standalone Quilter Investors Multi-Asset Business. Any distribution by the Company from the surplus proceeds of the sale of the Single Strategy Business would be outside the scope of the Company's dividend policy.

3. Strategy

The Group aims to be the leading UK wealth manager by continuing to focus on delivering good customer outcomes. The breadth of the Group's model helps to create wealth for customers through providing the services to develop suitable financial plans, manage customers' investments in attractive solutions (in line with their objectives and risk appetites) and by helping customers access modern wealth wrappers via the Group's platforms. The Group's purpose and strategy are underpinned by core beliefs, which include: better choice for customers, sound financial advice and modern, simple and transparent products that are easily accessible. The Directors believe that the Group's competitive advantage lies in its strong market positions in attractive markets and its ability to offer high quality solutions across each element of the value chain at a competitive, transparent and unbundled price; allowing advisers and customers the choice to select the solutions that best meet their individual needs. See "-2. Competitive Strengths" above.

The breadth of the Group's offering allows it to source NCCF both from existing and new customers from across the market spectrum. The Group has the benefit of being able to support and source new customers through both an advised channel with a growing restricted advice base, as well as an open market channel with access to a large group of independent advisers. Through the successful implementation of its strategy, the Group aims to continue to grow its business through both of these channels, improving its market position and increasing NCCF. The Directors believe that based on the specific strategic initiatives described below, the Group can continue to deliver annualised NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term and, should market conditions remain supportive, exceed the targeted annualised level of 5% of opening AuMA in 2018. Subject to delivering currently expected AuMA volumes and business mix from these growth initiatives, the Directors believe that the Group's overall annual rate of revenue margin decline should slow in the near-term, and the Group's revenue margin should become increasingly stable. At a business unit level, the businesses will be managed with the intention of delivering revenue and profit growth, which may lead to mix driven changes in segment revenue margins over time. A greater proportion of flows into the higher revenue margin Advice & Wealth Management segment, and the run-off of the Quilter Life Assurance Institutional book over the next one to two years, are each expected to provide support to the Group's revenue margin in the near term. In addition, the Directors expect that the growth of Integrated NCCF will support the Group's revenue margin going forward.

Furthermore, the Directors currently expect that the Group should achieve an operating margin, before interest costs, of 30% for the year ending 31 December 2020 including the full impact of the additional expenses expected in 2018, but before it implements (and benefits from) any future optimisation initiatives that the Group intends to consider from the review which will be conducted following Quilter Separation.

The Group intends to achieve these targets while maintaining a disciplined approach to capital in order to balance its current and anticipated liquidity, regulatory capital and investment needs, with a view to returning any excess capital to shareholders as appropriate.

Specifically, the Group aims to pursue the strategic initiatives described below.

3.1 Expand the number of RFPs in its Quilter Financial Planning network and in PCA as well as investment managers in Quilter Cheviot

Over the three years ended 31 December 2017, the Group has focused on delivering growth and increasing Integrated NCCF by expanding the number of RFPs through acquisitions and organic recruitment. RFPs numbers have grown by 930 since the beginning of 2014 to 1,561 as at 31 December 2017. This increase in RFPs is 28% due to organic growth, 31% due to transition of IFAs to RFPs, and 41% due to acquisitions. Continuing to expand the number of RFPs in the network and Quilter Private Client Advisers ("PCA") through recruitment, small acquisitions and training and retention, is an important component to the Group's growth strategy. The Directors believe that the fragmented market place gives the Group further acquisition opportunities to bring more RFPs into both the network and PCA. The establishment of the Financial Adviser School ("FAS") has already started to add new RFPs to the Group and is expected to continue. Adviser retention is also important to the Group's strategy. In 2015, Quilter Financial Planning established a Practice Buyout Scheme to provide an exit for retiring advisers and a safe transition for customers, retaining customers within the Group and providing continuity of service. As at 31 December 2017, Quilter Financial Planning had facilitated 41 Practice Buyouts since the Practice Buyout Scheme was established.

RFP growth will also be supplemented, in Quilter Cheviot, by pursuing targeted investment manager recruitment to expand the regional coverage of that business.

3.2 Improve the productivity of the Group's RFPs and investment managers

The Group's 1,561 RFPs have a broad regional coverage, and the age demographic of the Group's RFPs is believed to be younger than peers, with 53% of RFPs under 50, compared to 45% under 50 across the broader industry. Furthermore, nearly two-thirds of the RFPs have been with the Group for fewer than five years as a result of recent adviser acquisitions. In the year ended 31 December 2017, RFP productivity (measured as average NCCF per adviser) was £1.8 million, as compared to £0.9 million in 2015, an increase of 100%. The performance in 2017 was exceptionally strong, driven by both markets and demand for pensions, including defined benefit transfers. Although this level is not expected to continue every financial year, increasing the level of productivity of the Group's RFPs is a strategic focus of the Group. Increasing productivity is driven by three key elements: (i) demand in the market; (ii) inherent growth in the restricted model; and (iii) increased support and coordination across the Group. Accordingly, the Directors believe that there are opportunities for growth in productivity as the Group's RFP model matures, as it seeks to improve its services and support that it provides to RFPs, as it develops a wider range of appropriate products for customers, and as RFPs and their customers become more established with the Group's propositions.

The strong levels of Integrated NCCF in recent periods have helped the Group exceed its target of delivering NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term and, should market conditions remain supportive, the Directors expect to exceed this target in 2018. In particular, the Directors expect this elevated near-term NCCF to be driven by the continued growth of inflows into Quilter Investors as a result of the Group's planned adviser growth and productivity initiatives. As evidenced in prior periods, the Directors also expect the NCCF growth profile to continue to be different between segments, with higher percentages of NCCF over opening AuMA in the Advice & Wealth Management segment.

3.3 Continue the development of the Group's investment propositions and solutions

Quilter Investors' objective is to deliver institutional quality multi-asset management to the retail market and to provide excellent outcomes to its customers. In the last three years, Quilter Investors has delivered strong performance across its range of products, in particular the Cirilium range has been consistently first quartile over the period. All funds investment performance is assessed either by assessing performance relative to the median fund in each peer group or, in the case of those funds without a peer group, the performance above the published target (on an AuM weighted basis). 84% of the funds that were measured against peers performed above the peer median over a three year period. Delivering the right outcomes from the Group's range of investment solutions is particularly important and the Group will continue to focus on sustaining its record of investment outperformance for its customers.

Being an integral part of the Group provides distinct advantages and allows for close collaboration between the Group's entities. Quilter Financial Planning, Quilter Wealth Solutions and other Group entities understand their customers and the financial needs of their customers, along with the current range of investment solutions available in the broader market. This knowledge, coupled with research, allows Quilter Investors to devise solutions that are specifically designed to meet the needs of their customers. A practical example of this was the activity to develop the Generation range following Pension Freedom legislation in 2015, where a decumulation product was developed to meet the needs of customers of Quilter Financial Planning and Quilter Wealth Solutions. In the future, the Group expects to develop additional products to directly meet the needs of customers, including further attractive solutions in decumulation, income and absolute return products.

3.4 Implement the UK Platform Transformation Programme and increase the strength of independent adviser relationships accessing the Group's platform

The Group is currently implementing the UK Platform Transformation Programme in its Quilter Wealth Solutions business. The new platform is intended to enhance the Group's service levels, support the Group's advisers and customers and enrich the Group's proposition. The new platform will offer a wider product and investment range to customers including SIPP functionality, cash accounts, adding a Junior ISA, ETFs and investment trusts, and thereby providing greater accessibility and functionality. The implementation of the UK Platform Transformation Programme is expected to provide enhanced DFM functionality and this could provide the opportunity for the UK platform to expand its offering to include more sophisticated MPS propositions.

These new capabilities align Quilter Wealth Solutions with the Group's market offering and provide access to a broader proposition, which the Directors believe will strengthen the Group's position with existing advisers and appeal to new advisers; leading to greater new business from the Group's existing adviser base and bringing in NCCF from new advisers and customers. The Group will retain key customer experience differentiators for its customers and advisers, such as its easy to use online portal and rebate mechanism, which allows the Group to offer funds at competitive prices and is critical to ensuring the Group retains its strong market position. The investment in the UK Platform Transformation Programme is also expected to provide enhanced functionality, integrated systems, increased straight through processing and scalability for the years ahead, providing greater efficiency benefit opportunities.

3.5 Improve operational leverage through enhanced scale, increasing efficiency and supporting profitability of acquired distribution

The historical and ongoing investments made into the Group's distribution platforms, technology operations and strengthening of capabilities ahead of separation have, in recent years, resulted in costs increasing and pressures on the operating margin. Whilst the Group expects to continue to invest for growth, the Directors believe that the Group's operations are capable of supporting higher levels of AuMA at relatively lower levels of incremental cost.

The Directors currently expect the Group should achieve an operating margin, before interest costs, of 30% for the year ending 31 December 2020 after the full impact of the additional expenses expected in 2018, but before it implements (and benefits from) any future optimisation initiatives that the Group intends to consider from the review which will be conducted following Quilter Separation.

The Directors' current expectations with regard to the Group's operating margin takes into account the following considerations on near term cost trends:

• Over the last two years, the Group has invested significantly in new initiatives to grow the business, most notably in the build out of Quilter Financial Planning and PCA. These incremental investment initiatives increased the Group's operating expenses by £25 million in the year ended 31 December 2016 and by a further £12 million in 2017. The Directors expect to continue to target selective investments in advice distribution. The timing and quantum of potential investments is difficult to predict. However, the Directors currently expect investment in distribution to have an incremental impact on the annual expense base of approximately £20 to 30 million in aggregate over the next three years.
• The Group expects to incur up to £30 million per annum of additional recurring fixed costs above 2016 operating expense levels as a consequence of Managed Separation. Of the additional expenses, approximately £16 million on an annual basis were reflected in 2017 year-end reported results, and the Directors expect incremental costs of up to approximately £14 million will be incurred during 2018.
• Long term incentive plan ("LTIP") awards under the new Quilter Performance Share Plan will result in additional staff costs in 2018 and later years. The Directors expect the LTIP costs will increase steadily on a phased basis to approximately £15 million per annum by 2020. Adviser incentive costs are unaffected.

On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, the New Term Loan. The New Term Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction. On 28 February 2018, Group issued the Notes. In addition, the Group entered into the New Revolving Facility for £125 million. The New Revolving Facility is currently undrawn and is expected to remain undrawn during 2018. The issuance of the New Term Loan and the Notes will increase operating expenses in the Group's Head Office. Whilst the interest cost on such facility will be

charged against operating profit, the Group has excluded such interest from the 2020 operating margin target.

At 31 December 2017, the Group had total gross intercompany indebtedness to other companies within the Old Mutual plc group totalling £782 million, offset by a £16 million receivable. Subsequent to the year end, and as part of a series of internal transactions, £566 million of intercompany indebtedness to other companies within the Old Mutual plc group has been effectively equitised, with the indebtedness to other companies within the Old Mutual plc group being replaced with equity in the form of share capital and a merger reserve. The overall indebtedness also reduced by £16 million from ordinary course transactions. The remaining £200 million intercompany indebtedness was repaid in full from the new facilities referred to above and from existing cash resources on 28 February 2018. On the same date, the £70 million revolving credit facility with Old Mutual plc was cancelled.

Following Quilter Separation, management expects to review the standalone cost base and operating model of the Group to identify long term optimisation initiatives to improve expense efficiency. However, at this stage, the initiatives, potential efficiency savings and restructuring costs to achieve this optimisation have not yet been scoped. The Directors expect that this review will be conducted commencing in the second half of 2018, and that an update will be provided at the time of the publication of the results for the financial year ending 31 December 2018.

The Directors expect the ongoing corporate tax rate for the Group to remain below the UK marginal rate going forward, reflecting the mix of profit in the business and the lower corporate tax rate on profits in Quilter International.

The Directors believe that given the currently expected higher levels of NCCF growth and the scalability of Quilter Investors' cost base and reflecting the expected run-off of the Quilter Life Assurance business, there is a greater opportunity to deliver operating margin improvement in the Advice & Wealth Management segment (compared to the Wealth Platforms segment which includes the Quilter Life Assurance business which is in run-off) as the business grows and delivers higher levels of Integrated NCCF.

4. History and Development

Old Mutual acquired the Skandia Group in 2006. Skandia was a life assurance group headquartered in Sweden, which originally launched in the UK in 1979 and operated in the Isle of Man as Royal Skandia. Skandia pioneered the concept of open architecture fund platforms which have since become the industry norm. In September 2014, the Group merged all of the Skandia businesses, including its platform, into a single business under the "Old Mutual Wealth" brand. The Group announced in November 2017 that it will list under its new, unifying brand of "Quilter".

In March 2016, the board of Old Mutual plc announced that the long-term interests of Old Mutual plc shareholders and other stakeholders would be better served by separating the four businesses then owned by the Old Mutual plc group from each other so that they could operate as fully independent businesses. This was described as a "Managed Separation". On 15 March 2018, Old Mutual plc confirmed that it remained on track to deliver the Managed Separation as planned and for it to be materially complete by the end of 2018. For further information on the Managed Separation, see "Managed Separation" and "Risk Factors-4. Risks relating to the Quilter Separation".

The Group began transforming its business in 2012, from a traditional UK and European life assurer to a full service, UK-focused wealth manager. The Group's strategic decisions principally comprised:

• first, the Group decided to focus on the large and growing affluent UK market, where it believed the market and various structural shifts offered the Group the most significant growth opportunity;
• second, the Group chose to focus on being an advice-led (rather than execution only) business, as it believed there was a significant financial advice gap in the UK. The Group set out to build a wealth manager for people seeking sound and insightful financial advice and investment solutions;
• third, the Group believed it was more important to deliver investment solutions to customers in simple, straightforward retirement and investment wrappers rather than continuing to follow the traditional life company model of being product centric with structured and annuitised products;
• fourth, the Group focussed on building a wealth management business rather than being just a funds "supermarket", as the Group believed a wealth management proposition utilising a platform was the better way forward to deliver better customer outcomes; and
• fifth, the Group chose to focus on building a multi-channel offering designed to generate better customer outcomes, providing choice and flexibility to customers seeking to access the Group, rather than determining one method through which they should access the Group.

Based on these strategic decisions, the Group began transforming its business over the following five years from a traditional UK and European life assurer, which was dependent upon legacy business, to a full service, UK-focused wealth manager with the majority of profits coming from advice-driven wealth management. The Group has undertaken this transformation through disposals, acquisitions and a number of other strategic steps and operational investments. In particular:

• the Group divested its European life assurance businesses (including Skandia Life Finland in 2012, Skandia Germany and Skandia Austria in March 2014, Skandia Poland in May 2014, Skandia Lichtenstein in November 2014, Skandia France and Skandia Luxembourg in February 2015, Skandia Switzerland in September 2015, and Old Mutual Wealth Italy in January 2017) to streamline and de-risk the business and support the financing of its acquisitions, allowing the Group to focus on its core UK and re-focused international business;
• the Group exited its capital intensive UK with profits fund in November 2013;

• the Group made the strategic decision to focus on fewer core worldwide regions, which has resulted in the Group ceasing to write new business in a large number of countries;

• the Group announced in November 2017 that it would exit the institutional platform business, which is expected to increase operating margin slightly and reduce operational risk;

• the Group entered into an agreement in December 2017 to sell OMGI (excluding the Multi-Asset Business), which operates the Single Strategy Business through certain subsidiaries including OMGIUK, to Bidco (a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of OMGIUK's management) for an expected total consideration of approximately £600 million, comprising cash consideration of approximately £570 million payable on completion and approximately £30 million anticipated to be payable thereafter. These values are subject to a number of potential price adjustments, depending on the net asset value of the business and other factors at the disposal date. With this divestment, the Group fully focussed its business on the advice-led wealth management market, where it sees the greatest long-term shareholder value creation opportunities. For a further discussion of the OMGI disposal, see "-5. Business Overview-5.3 Business held for disposal - OMGI and the Single Strategy Business" below and "Additional Information-3.5.1 OMGI Transaction";
• the Group launched WealthSelect, its Global Partner managed portfolio service ("MPS"), in February 2014;
• the Group acquired Intrinsic Financial Services ("Intrinsic") in July 2014, which will be rebranded as Quilter Financial Planning. Intrinsic increased the Group's distribution capabilities by approximately 3,000 advisers and has grown to become the second largest restricted financial advice business in the UK. Intrinsic also owned 50% of the Cirilium fund range;
• the Group acquired the remaining 50% stake in the Cirilium fund range that it did not already own from Henderson Global Investors ("Henderson") in December 2014, providing continuity of ownership to financial advisers and their customers and further strengthening the resources available to the Group's multi-asset funds;
• the Group acquired Quilter Cheviot, one of the UK's leading discretionary wealth managers, in February 2015, representing a significant milestone in the Group's transition from primarily a platform business to a multi-channel wealth management business that delivers increased value to customers and advisers;
• the Group entered into an agreement with Friends Life, naming the Group as the "Preferred Partner" of Sesame Bankhall ("Sesame") in August 2015 following the closure of Sesame's independent adviser network, which resulted in an additional 245 advisers joining Intrinsic;
• the Group launched PCA in October 2015 as a Group-branded advice proposition serving affluent and high net worth customers through an employed adviser model and, since its launch, PCA has grown its customer base, assets under advice and geographic footprint through acquisitions, including the purchase of DQS Financial Management, Beaumont Robinson, Premier Planning, Premier Wealth, Infiniti Financial Planning and Coleman Clough;

• the Group acquired the FAS from Sesame in February 2016, supporting the growth and development of the adviser community;

• the Group acquired AAM Advisory, a leading expatriate adviser business in Singapore, in March 2016, demonstrating the Group's long-term commitment to this core region and to the financial advice market;

• the Group acquired Caerus Capital Group ("Caerus") in June 2017, building on the Group's controlled distribution strategy in the UK by adding 300 advisers to the Group's network (of which 130 were RFPs);
• the Group completed the transfer of GET, an IT company which had previously been part of the wider Old Mutual plc group, in November 2017. GET provides key application services for Quilter Wealth Solutions and Quilter Life Assurance and is key to the operation of certain of the Group's IT activities; and
• the Group began investing in platform transformation to grow its UK and international platforms, including through its ongoing UK Platform Transformation Programme, which aims to broaden the Group's product range and modernise and improve the Group's offering to new and existing customers and advisers.

The Group has also made several leadership appointments over this period. Paul Feeney joined as Chief Executive of the Group in August 2012; Glyn Jones was appointed as the independent non-executive Chairman of the Board in September 2016; and Tim Tookey, who joined in February 2017 as a non-executive director of the Group, took up the role of Chief Financial Officer in August 2017, with Mark Satchel appointed as Corporate Finance Director. The Group also appointed Rosie Harris, Moira Kilcoyne, Jon Little, George Reid and Cathy Turner as independent non-executive directors over the course of 2016 and 2017. See "Directors, Senior Management and Corporate Governance" for more information.

The Group is focused on continuing to service its customers by delivering strong long-term investment performance and a broad range of investment solutions which underpins its business model, further integrating its businesses to work more closely together to improve the customer experience and drive profitability, and delivering on its UK Platform Transformation Programme to broaden its capabilities and enable it to operate more efficiently.

Other than as outlined in this Prospectus, there have been no material changes to the business of the Company during the past five years.

5. Business Overview

The Group's operations are divided into two main operating segments. The Advice & Wealth Management segment is comprised of Quilter Financial Planning, Quilter Cheviot and Quilter Investors, with £41.7 billion of AuM as at 31 December 2017. The Wealth Platforms segment is comprised of Quilter Wealth Solutions, Quilter International and Quilter Life Assurance, with £84.6 billion of AuA as at 31 December 2017.

The Group has adopted a multi-channel access model, using both its own advised and open market approaches, to deliver financial advice, investment solutions and wrappers, which are provided on platforms. The advised channel can be accessed through Quilter Financial Planning (including RFPs, IFAs and Mortgage & Protection Advisers) and the open market channel can be accessed through a third party adviser. As at 31 December 2017, the Group's advised channel included approximately 200,000 advised customers paying ongoing advice fees, 1,561 RFPs (who advise on a range of investment solutions offered by the Group and from third parties that have been pre-researched by the Group) and 422 IFAs on the Quilter Financial Planning network (who advise on an unrestricted whole of market basis). The Group's open market channel included approximately 700,000 customers (of which approximately 400,000 are customers of Quilter Wealth Solutions) who are primarily serviced by over 4,000 active third party UK advice firms using the Group's platforms and investment solutions. The Directors believe that the Group's multi-channel wealth management proposition provides greater market breadth and customer and adviser choice, which support long-term customer relationships. The Group's multi-channel wealth management proposition has also contributed to growth in the Group's Integrated NCCF (excluding Quilter Life Assurance), which has increased from £1.6 billion in the year ended 31 December 2015 to £5.2 billion in the year ended 31 December 2017. The Group's open market NCCF (excluding Quilter Life Assurance) has decreased from £2.7 billion in the year ended 31 December 2015 to £2.4 billion in the year ended 31 December 2017.

5.1 Advice & Wealth Management

5.1.1 Quilter Financial Planning

Quilter Financial Planning was established in 2006, became part of the Group in 2014 and is based on the belief that one of the best ways for customers to achieve good outcomes is through face-to-face advice with a professional. Quilter Financial Planning provides expert face-to-face financial advice to affluent and high net worth customers in the UK to meet their financial planning, mortgage and protection needs. Quilter Financial Planning does this through its network of 3,567 advisers located across the UK (of which 1,561 were RFPs, 422 were IFAs and 1,584 were Mortgage & Protection Advisers as at 31 December 2017). Quilter Financial Planning is the second largest advice business in the UK as at 31 December 2017, as measured by the number of CF30 Advisers, meaning advisers who are approved by the FCA to carry out a customer function and may provide investment advice. Advisers and AR firms operate as appointed representatives under the regulatory permissions of the Quilter Financial Planning network, sharing revenue in return for a range of support services provided by Quilter Financial Planning.

The Directors believe that advisers and AR firms choose the Quilter Financial Planning network because of the strength, stability and scale of the Group, which provide a secure environment in which advisers and AR firms can operate, with a robust and effective oversight framework that is designed to keep their customers and businesses safe. This framework enables advisers and AR firms to trade with confidence and plan for the longer-term. In addition, Quilter Financial Planning offers advisers a strong customer proposition, where the Group carries out due diligence on the products and providers and where solutions are designed and built with the end customers in mind. Quilter Financial Planning's knowledge of the advice business allows it to serve advisers and AR firms effectively, and the Group's investment in technology benefits advisers and AR firms who would otherwise face significant costs and disruption sourcing IT solutions in the open market. Quilter Financial Planning has successfully grown its adviser numbers and also supports advisers in growing their own business, including through its field management team.

Quilter Financial Planning is closely aligned to the Group's other business units, delivering £3.9 billion of NCCF to the Group in the year ended 31 December 2017. The Directors believe that there are further opportunities for Quilter Financial Planning to deliver growth and increased Integrated NCCF within the Group, driven by increasing the number of RFPs, improving adviser productivity and continued focus on delivering good customer outcomes. Following the implementation of the RDR in 2012 and the Pension Freedom legislation in 2015, there has been increased customer demand for financial planning throughout retirement and a limited supply of advisers to meet the demand. The Group has sought to meet this demand by growing its number of RFPs through acquisitions and organic recruitment. RFPs numbers have grown by 930 since the beginning of 2014 to 1,561 as at 31 December 2017. This increase in RFPs is 28% due to organic growth, 31% due to transition of IFAs to RFPs, and 41% due to acquisitions. Quilter Financial Planning's significant acquisitions include Positive Solutions in 2013 (adding over 740 advisers) and, since the acquisition of Quilter Financial Planning by the Group in 2014 (adding over 3,000 advisers), Caerus (adding 300 advisers in 2017, of which 130 were RFPs). In addition, following the closure of Sesame's IFA network, Intrinsic (as Quilter Financial Planning was then known) was named as Sesame's "Preferred Partner" (adding 245 advisers in 2015). Quilter Financial Planning also acquired the FAS from Sesame in 2016 to further support the Group's growth strategy and to encourage the development of the adviser community.

Nearly two-thirds of the RFPs have been with the Group for fewer than five years as a result of recent adviser acquisitions. Accordingly, the Directors believe that there are opportunities for growth as this model matures and as RFPs and their customers become more established with the Group's proposition. The Group also aims to build out PCA, driven by further acquisitions of client banks that fit the Group's customer profile, and increase Integrated NCCF, in particular through PCA's alignment with Quilter Cheviot.

Quilter Financial Planning has driven growth across the Group's business. NCCF from Quilter Financial Planning to Quilter Investors has increased from £1.0 billion in the year ended 31 December 2015 to £2.5 billion in the year ended 31 December 2017. NCCF into Quilter Cheviot, primarily driven by the PCA business, has increased from nil in the year ended 31 December 2015 to £238 million in the year ended 31 December 2017. NCCF from Quilter Financial Planning to Quilter Wealth Solutions has increased from £0.7 billion in the year ended 31 December 2015 to £1.2 billion in the year ended 31 December 2017.

Quilter Financial Planning currently operates under the "Intrinsic" brand and will continue to do so until the rebranding described in "-6. Brand" occurs.

(a) Products and Services

Quilter Financial Planning offers regulated face-to-face advice to individuals and businesses in financial planning, mortgages and protection through qualified financial advisers and mortgage and protection advisers.

Quilter Financial Planning offers three different advice models, each focused on meeting the differing needs of the target customers: PCA, Financial Advisers and Mortgage & Protection Advisers. Of the three advice models, PCA is provided on a restricted basis, while Financial Advisers and Mortgage & Protection Advisers are provided on either a restricted or an independent basis. Where advice is provided on a restricted basis, Quilter Financial Planning defines the range of products and investment solutions available through the proposition. Where advice is provided on an independent basis, the adviser provides advice based on a comprehensive analysis of the whole of market, free from any restrictions.

AR firms choose one of the advice models depending on the majority needs of their target customer base. For example, if the preponderance of an AR firm's customers require mortgage advice, then the AR firm would be categorised within the Mortgage & Protection Advisers advice model, although the AR firm may also contain RFPs. The Group's ability to recruit and develop its three advice models has allowed Quilter Financial Planning to build a strong national footprint.

Quilter Financial Planning earns revenue through a share of the advice charges, commissions and procuration fees that are charged. Advice charges are paid by retail customers, typically on an initial basis (at the implementation stage) and an ongoing basis (at the review stage). Commissions and procuration fees for insurance and mortgage services are paid by insurance companies and lenders, typically on an initial basis only.

Quilter Private Client Advisers

The Group launched PCA in 2015, in part to align with the Quilter Cheviot customer base, focused on delivering financial planning advice to upper affluent and high net worth customers. PCA employs its own RFPs who operate under the Group's brand. Therefore, the Group controls the RFP's relationship with the customer, and PCA is responsible for delivering the service and overall customer experience. PCA's national adviser network has coverage across the UK, with six offices in London, Chester, Devon, Yorkshire, Birmingham and Cumbria. As at 31 December 2017, PCA had 62 RFPs and 5,177 retail customers with £2.1 billion of total assets under advice.

PCA is growing its customer coverage and assets under advice through targeted acquisitions of advice businesses and client banks which have the same target customer profile, geographic alignment and approach as PCA. As at 31 December 2017, PCA had made 15 acquisitions since its launch on 1 October 2015. These acquisitions have been integrated into one of the six offices under PCA's management, with customers advised by an employed PCA adviser.

PCA offers its customers a centrally-defined restricted advice proposition, which includes a centralised investment proposition consisting of solutions from Quilter Cheviot and Quilter Investors, which PCA believes meets the needs of the majority of its target customer base.

Within the PCA advice model, PCA holds the advice revenues from advice charges, commissions and procuration fees. PCA's revenue model is an ongoing advice fee and an initial advice fee, less adviser costs.

Financial Advisers

The Financial Advisers model comprises AR firms and advisers operating under their own brand but under the oversight, controls and processes of the network. These AR firms hold financial advisers, either RFPs or IFAs, with a number also holding Mortgage & Protection Advisers where required to meet the needs of their customers. The AR firm controls the financial planning relationships with its own customers. Therefore, if the AR firm leaves the network, the customer may leave too. Quilter Financial Planning aims to retain and motivate its top AR firms through, among other things, profit share arrangements, paid in the form of rebates on Quilter Financial Planning charges to these firms.

As at 31 December 2017, the Financial Advisers model contained 1,442 RFPs. RFPs operate under Quilter Financial Planning's controlled advice process, using a centrally determined proposition, where Quilter Financial Planning uses its scale and research capability to construct a "panel" of products and providers designed to meet the needs of the majority of the customer base. RFPs can recommend products from the panel of pre-approved products selected by Quilter Financial Planning. RFPs and customers can also choose from a wider solution base if the restricted suite of solutions does not meet a particular customer's needs. The average RFP delivered £1.8 million of Integrated NCCF in the year ended 31 December 2017.

As at 31 December 2017, the Financial Advisers model also contained 416 IFAs, who are subject to Quilter Financial Planning's controlled advice process, but advise their customers on an unrestricted whole of market basis. IFAs consider and recommend all types of retail investment products from all firms across the market. Quilter Financial Planning facilitates this whole of market analysis through IT solutions to independent advisers. Since 2014, 376 IFAs have also transitioned to become RFPs, primarily because they believe the centrally defined restricted advice proposition is more appropriate for their customer base. The Directors believe this is because RFPs benefit from robust initial assessment and ongoing monitoring, developed upon Quilter Financial Planning's skills and overseen by independent and non-executive governance. The Directors also believe this transition can deliver operational and commercial benefits to AR firms and their advisers.

Within the Financial Advisers model, advice revenues from advice charges, commissions and procuration fees are split between Quilter Financial Planning and the AR firm (with 80-85% going to the AR firm, given they incur the cost of the advisers, local office costs, marketing, and fixed charges for FSCS levies, insurance and technology, among others).

Mortgage & Protection Advisers

Quilter Financial Planning's Mortgage & Protection Advisers model was established in 2006 and contains AR firms operating under their own brand but under the oversight, controls and processes of the network. These AR firms hold Mortgage & Protection Advisers, as well as some RFPs and IFAs. Control of the financial planning relationship with the customer sits with the AR firm, so if the firm leaves the network, the customer may leave too.

Mortgage & Protection Advisers typically operate under Quilter Financial Planning's controlled advice process, using a centrally determined proposition, where Quilter Financial Planning uses its scale and research capability to construct a "panel" of products, lenders and providers designed to meet the needs of the Group's customer base.

As at 31 December 2017, the Quilter Financial Planning network contained 1,584 Mortgage & Protection Advisers. Including both Mortgage & Protection Advisers and Financial Advisers, the Group advised on a total mortgage lending volume of £16.8 billion in the year ended 31 December 2017.

The Group's Mortgage & Protection Advisers model is an "entry point" to the Group for both customers and financial advisers. According to FCA data, in general, customers first seek mortgage and protection advice in their early 30s, which may provide the Group an opportunity to build long-term relationships with them before they become net savers. In terms of advisers, due to the lower qualifications required to advise in this market, individuals can commence their career as a Mortgage & Protection Adviser and progress through to full financial advice over time. Since the beginning of 2014, the Group has had more than 100 Mortgage & Protection Advisers change roles in this way.

Within the Mortgage & Protection Advisers model, advice revenues from advice charges, commissions and procuration fees are split between Quilter Financial Planning and the AR firm with the majority going to the AR firm, as they incur the cost of the advisers, local office costs and marketing, among others.

(b) Customers

Quilter Financial Planning helps customers at all stages of their lifecycle to build, protect, maximise and transfer their wealth.

The Mortgage & Protection Advisers model focuses on mass market customers with less than £100,000 investable assets. In the year ended 31 December 2017, Mortgage & Protection helped nearly 62,000 customers secure their home, delivering £12.8 billion of lending.

The Financial Advisers model has a broad distribution of customers, but over twothirds of its customers are in the mass affluent space (wherein customers have £100,000 to £250,000 in invested assets). Because of Financial Adviser's focus on the mass affluent market, it is closely aligned with Quilter Investors. From time to time, Financial Advisers has commissioned Quilter Investors to develop solutions which meet the needs of their target customers. As at 31 December 2017, Financial Advisers has over 200,000 customers contracted for ongoing service and realising the benefits of an ongoing relationship with an adviser.

The PCA model targets upper affluent and high net worth customers with more than £250,000 investable assets, and is closely aligned with Quilter Cheviot. As at 31 December 2017, over 38% of PCA assets were held by households who have entrusted over £1 million of their wealth to the Group.

The Group seeks to protect customers and deliver positive customer outcomes by managing advice risk, through its adviser on-boarding and training process, ongoing skills assessment, conflict of interest procedures and independent oversight. The Group carefully manages its advice risk and potential conflicts of interest through its enterprise-wide risk management ("ERM") approach. For more information on the Group's risk management processes, see "-9. Risk Management and Internal Control". Critical to managing advice risk is the rigorous checking of advice cases, to ensure the Group is delivering demonstrably suitable advice for customers. Quilter Financial Planning checked over 38,000 advice cases in the year ended 31 December 2017, the majority as a pre-approval process to prevent any unsuitable advice in higher risk areas. Quilter Financial Planning's prudent approach means that the customer complaints Quilter Financial Planning deals with are low, with 597 in 2017 and 93 referred for the FOS out of more than 1.2 million in-force advice cases. Where complaints were referred to the Ombudsman, the ratio of complaints upheld for Quilter Financial Planning over the six months ended 30 June 2017 was 21%, which is lower than the industry average of 36% (Source: FOS).

(c) Sales & Marketing

Quilter Financial Planning has grown the number of RFPs from 930 as at 31 December 2014 to 1,561 as at 31 December 2017, and the Group aims to further increase this number through acquisitions and organic recruitment. The fragmented marketplace provides acquisition opportunities into both Financial Advisers and PCA. In addition, Quilter Financial Planning has a team of 10 regional directors who have delivered net organic recruitment of RFPs at an average of 8% per annum since the beginning of 2014.

To further support its growth strategy, Quilter Financial Planning also acquired the FAS from Sesame in 2016 to encourage new entrants into the market. The FAS aligns with the Group's purpose and commitment to the future of face-to-face advice, supporting the growth of AR firms and promoting professionalism and confidence in the industry. As at 31 December 2017, 42 students had graduated and found employment with advice firms (including on the Quilter Financial Planning network) and a further 83 were enrolled.

Adviser retention is important to the Group's strategy in Quilter Financial Planning. Quilter Financial Planning established a Practice Buyout Scheme in 2015 to provide an exit for retiring advisers and a safe transition for customers, retaining customers within the Group and providing continuity of service. Under the Practice Buyout Scheme, the Group offers loans to advisers to acquire the client relationships and the recurring income of exiting AR firms. Quilter Financial Planning typically mitigates the risk of default on these loans by lending to trusted partners who have worked with the Group for a minimum of three years and have a profitable and cash generative business (against which the loan is secured), taking loan payments from the borrower's trail commission which are directly received by Quilter Financial Planning, and performing financial analysis of the borrower's business and its ability to repay the loan from existing business. As at 31 December 2017, Quilter Financial Planning had facilitated 41 Practice Buyouts since the Practice Buyout Scheme was established.

(d) Operations

Quilter Financial Planning provides a range of business-to-business services to AR firms, including regulatory and compliance support, research and advice on products and providers, IT services and training to support continued professional development. Quilter Financial Planning provides all AR firms with XPLAN, a bespoke point-of-sale and back office platform, along with other IT solutions to help AR firms manage their businesses effectively. In addition, PCA provides a full range of operational services required for a customer-facing advice business, including administration and paraplanning support for RFPs in the PCA advice model.

As at 31 December 2017, Quilter Financial Planning had 38 employees on its field management team who support business development, in addition to telephonebased support desks to answer questions about products, processes and technology. Quilter Financial Planning also runs a comprehensive programme of academies and master classes to help RFPs, IFAs and Mortgage & Protection Advisers develop skills and knowledge in specific markets.

5.1.2 Quilter Investors

Originating from the merger of Old Mutual Asset Management and Skandia Investment Group and following the separation of the single strategy business, Quilter Investors is one of the largest providers of retail market investment solutions in the UK multi-asset market. Quilter Investors has grown its AuM from £9.8 billion as at 31 December 2015 to £16.9 billion as at 31 December 2017, an increase of 72%. According to the Pridham Report, Quilter Investors had the highest net new inflows in the UK multi-asset space in each quarter in 2017.

Quilter Investors' mission is to deliver institutional quality multi-asset management to the retail market and to provide excellent outcomes to the Group's customers. Being an integral part of the Group provides distinct advantages and allows for close collaboration between the Group's entities. Solutions are often designed together with Quilter Financial Planning and satisfy a clear customer need.

The market dynamics in which the business operates are becoming more challenging. Asset returns are likely to remain lower for longer, passive solutions will continue to put pressure on margins, and regulation and politics will provide a degree of uncertainty going forward. Customer tastes and investment habits are also changing, with a greater acceptance of alternative solutions and an increased need for retirement income being two recent examples.

To ensure that Quilter Investors remains a modern, scalable and successful business able to take advantage of these shifting trends, the Group began an upgrade programme two years ago. Through a series of management actions, acquisitions and product/process evolution, such as the acquisition of the Cirilium range from Henderson and the development of the WealthSelect and Generation ranges, Quilter Investors has become a peer-leading business.

Quilter Investors currently operates as part of the "Old Mutual Global Investors" brand and will continue to do so until the rebranding described in "-6. Brand" occurs.

(a) Products and Services

Supported by an experienced team of professionals and using a range of proprietary processes and tools, Quilter Investors provides an extensive range of attractive multiasset solutions which are categorised by style of investment, including whole of market ranges, Global Partner ranges, a fettered range and passive ranges. These solutions have been designed to meet the needs of Quilter Financial Planning and Quilter Wealth Solutions' target customers, in particular.

Whole of market ranges: Solutions in this category seek the potential for higher levels of active returns from a wide investment universe and investment toolkit. Investments are made across all asset classes through a diverse range of instruments, including open and closed ended funds, direct equity and fixed interest securities and derivatives.

Cirilium - Launched in 2008 as a joint venture between Intrinsic and Henderson and acquired by the Group in 2014, the Cirilium Portfolios are the Group's flagship accumulation products for the UK market. Cirilium is a range

of risk targeted multi-asset funds which have been designed for customers who desire the potential for higher levels of returns using investment strategies and managers from a wide investment universe and toolkit. The Cirilium active portfolios provide the flexibility to make asset allocation decisions, at asset class, sector and geographic level, whilst remaining aligned to associated risk tolerances. The Cirilium portfolios have a broad investment proposition and wide asset class remit, including access to liquid and illiquid alternatives. As at 31 December 2017, the Cirilium range had £7.5 billion of AuM.

• Generation Quilter Investors' flagship decumulation proposition, the Generation Portfolios are designed to meet the needs of people who seek to draw an income from pension savings while remaining invested in markets, via a range of multi-asset portfolios. The portfolios aim to beat inflation and offer the potential for capital growth. At the same time, they seek to dampen the impact of market falls through a focus on short-term risk management. The Generation range was launched in October 2015. As at 31 December 2017, the Generation range had £0.4 billion of AuM.
• Compass Designed for Quilter Investors' offshore customers, the Compass Portfolios are available across a number of jurisdictions, including Singapore, the Middle East and Europe, and in a number of currencies. The four portfolios are risk targeted with five different risk levels to give customers flexibility in choosing the investment solution that best meets their needs, with the aim of generating a long-term total return through investing in a diversified range of asset classes. The Compass range was launched in April 2016. As at 31 December 2017, the Compass range had £0.5 billion of AuM.

Global Partner ranges: Solutions in this category are invested in a defined range of funds (the "Global Partner fund range") managed by some of the industry's leading fund managers from 17 of the best-known asset management brands. These products are designed for customers that want cost effective access to fully active fund management and are willing to give up some of the potential diversification benefits received through a whole of market solution.

• Creation The Creation Portfolios are an actively managed, risk targeted, range of multi-asset funds. It is comprised of five risk-rated portfolios to give customers working with their advisers the flexibility to choose the investment solution that best meets their needs. In addition to holding funds managed by the 17 global partner fund groups, Creation also invests directly in company shares and bonds to allow the portfolio managers to target investments in specific markets or sectors with more precision amid a broader focus on generating efficiency for investors. As at 31 December 2017, the Creation range had £1.4 billion of AuM.
• WealthSelect WealthSelect is an MPS, meaning that customers have an individual portfolio of securities as opposed to holding units in a multi-asset fund. The WealthSelect MPS is exclusively available via the Old Mutual platform and only invests into the Global Partner fund range. The portfolios are risk targeted, with eight levels of risk offered, and each offers a choice of four tax-optimised versions (ISA, Collective Retirement Accounts ("CRAs"),

Collective Investment Bond ("CIB") and Collective Investment Account ("CIA")). As at 31 December 2017, the WealthSelect range (including Blackrock and Henderson) had £4.8 billion of AuM.

Fettered range: Funds in this category are limited to investing into products from one fund group, OMGI. This range is designed for customers who seek low cost access to fully active management recognising the reduction in diversification from limiting choice to just one fund group.

Foundation - The Foundation Portfolios are an actively managed range, investing exclusively in funds managed by OMGI as part of its Single Strategy Business. The range consists of three portfolios, designed for investors who are seeking growth. The portfolios aim to deliver annual returns of 3, 4 or 5% above inflation over a five, seven or ten year rolling period. As at 31 December 2017, the Foundation range had £0.5 billion of AuM.

Passive ranges: Solutions in this category are predominantly invested in securities that track specific market indices or asset classes and are designed for investors for whom reducing the cost of investment is more important than seeking potential outperformance.

Cirilium Passive - The Cirilium Passive portfolio range consists of five risk targeted solutions with their asset allocations optimised to deliver the greatest return for each target level of risk. Comprised mainly from ETFs, index funds and other collective investment schemes, the portfolios are managed by the same team that looks after the active ranges and benefits from quarterly rebalancing. As at 31 December 2017, the Cirilium Passive range had £0.5 billion of AuM.

Product pricing

In order to provide the broadest possible range of investment solutions at attractive prices, Quilter Investors uses different instruments to achieve its outcomes across the ranges. For example, the Cirilium range is a premium product which is unconstrained in its investment universe and which can access unique and hard-to-find strategies. This is reflected both in its premium pricing and in its performance.

The Creation range uses a narrower range of fund managers (the Global Partners), where Quilter Investors has used its negotiating power to reduce underlying costs. Up to 50% of the portfolio may be held in direct investments, thereby reducing fund manager fees and sharing the benefits with customers in the form of reduced overall charges.

The focus of Quilter Investors on delivering value to customers is reflected in the pricing policy for the solutions on offer. The product pricing is driven by a number of factors, including:

Level of sophistication - The categories of investment solutions offered by Quilter Investors provide differing levels of sophistication and diversification for customers, ranging from the highest levels for whole of market solutions, to much simpler passive solutions. There is an inherent increase in costs of the underlying securities within portfolios as the sophistication and diversification increases, which is reflected in the prices of the ranges.

• Revenue requirement On the establishment of each solution, a required revenue level is agreed which is reflective of the level of work required in the management of the solution. The greater the level of sophistication and diversification, the more effort that is required by the portfolio management team and therefore the greater the level of revenue that is required.
• Peer review When considering the appropriate pricing for the solutions offered, Quilter Investors undertakes a comparison to equivalent products to ensure that pricing is competitive and reflective of the sophistication of each solution.

Investment Performance

During the period under review, Quilter Investors has delivered a strong outperformance across its range of products. Over a three year period, 84% of funds measured against peers (including all funds which are measured against a peer group and have a three year track record) have performed above the peer median, and the Cirilium range has consistently been first quartile over the period.

Notably, two Generation products had a period of under-performance before Quilter Investors modernised its investment process, and the under-performance has since been remedied through the modernisation programme. While WealthSelect cannot be benchmarked against an index, it has also performed above the Group's targets.

In calculating investment performance, Quilter Investors includes all funds with a three year track record, except those sub-advised to external investment managers. The Directors believe this better reflects the active investment performance of Quilter Investors' own fund managers. All fund returns are on a net fee basis (after all fees and expenses), with the exception of segregated mandates, which represent approximately 5% of Quilter Investors' AuM. Segregated mandates, which are largely with institutional clients, are stated gross of management fees, in-line with the Global Investment Performance Standards. The combined fund performance is calculated by aggregating the fund return on an AuM weighted basis. To determine outperformance or underperformance at an individual fund level, each fund is compared against a relevant peer group, index or target as specified in publically available documentation or by agreement with the relevant investment committee. The published performance metrics for Quilter Investors are consistent with those presented internally to investment committees and relevant Boards.

The following table presents the performance of the Group's key funds as at 31 December 2017:

	AuM	Performance quartile
	(£ millions)	1Y	3Y	5Y
Sector-based
performance
Cirilium Balanced	2,441	1	1	1
Cirilium Moderate	2,283	2	1	1
Cirilium Dynamic	1,666	2	1	1
Cirilium Conservative	596	2	1	1

The following table presents the investment performance of Quilter Investors' funds ahead of the peer median, market index benchmark and target, as at 31 December 2017.

	Performance quartile
	1Y	3Y	5Y
		(%)
All funds(1) as a% of AuM ahead of:
Peer median	79	84	89
Market index benchmark	50	45	53
All	68	70	80

(1) All funds investment performance is assessed either by assessing performance relative to the median fund in each peer group or, in the case of those funds without a peer group, the performance above the published target (on a funds under management weighted basis).

Overall, the performance of the ranges continues to deliver the performance and outcomes customers and their advisers desire, which is reflected in the sales numbers (Cirilium Balanced was the top selling Multi-Asset fund in the UK in 2017, according to Pridham). In addition, a significant proportion of net inflows come via Group companies.

The business has invested significantly in an experienced team, processes and intellectual property to ensure that it remains a modern and institutional-class investment management firm.

Investment team and process

Quilter Investors' asset management capability has four key components which combine within the wider investment team:

• a fundamental research team, which focuses on primary fund research, selection and monitoring;
• a relative value team, which ensures genuine diversification in portfolios and focuses on downside risk;
• a direct investment team which has capabilities in both equities and fixed income; and
• a quant team, which manages and evolves the models and tools used at every stage of the investment process.

The investment process central to Quilter Investors is the product of over 20 years of experience and innovation and uses technology and proprietary quantitative techniques extensively. It is scalable, repeatable and is designed with the objective of enhancing investment returns within a risk-governed framework.

There are five key steps to the investment process:

1. Strategic Asset Allocation - Quilter Investors determines a robust allocation using Monte Carlo modelling, stochastic optimisation and focusing on customer outcomes. The team uses proprietary tools and processes to design products to meet bespoke outcomes depending on customer needs (i.e. accumulation/decumulation, active/passive and unitised/portfolio).

2. 1. Bottom-up manager, fund and security section Quilter Investors' fund research capabilities focus on identifying return-generating managers with a sustainable edge. Where using a manager or wrapper is inappropriate or when a purer sector exposure is sought, the team can and does invest a proportion of portfolios directly into stocks and bonds.
3. 1. Tactical asset allocation Using the broadest toolkit available (including derivatives), the team will conservatively size positions and ensure that capital is efficiently protected where appropriate.
4. 1. Risk management Quilter Investors uses a range of proprietary tools to manage risks across products and the desk as a whole. To provide additional oversight, an independent risk team ensures that risks taken are aligned with customer expectations and outcomes.
5. 1. Execution Through a combination of academic insight and market experience, Quilter Investors has developed a proprietary execution model which has a track record of generating active returns and ensures an efficient deployment of investment views.

(b) Customers

Quilter Investors currently has a predominantly retail customer business originated through intermediary channels across the UK and international markets. Since its origins as one of the UK's first multi-manager enterprises in the 1980s, Quilter Investors has had an established presence in the financial adviser channel and has been recognised for its innovative approach, such as launching the first risk targeted fund range in the UK (Creation) or the diverse use of alternative solutions (Cirilium).

Quilter Investors aims to further develop its customer base following demographic and market trends. Due to the Group's presence in advice, from mass affluent in Quilter Financial Planning to high net worth in Quilter Cheviot, Quilter Investors is able to leverage this collective insight to understand customer needs. For example, following UK pension reforms in 2015, Quilter Investors teamed up with Quilter Financial Planning and panels of key advisers to launch its Generation range which, as a decumulation product, is particularly suited for increasing flows of pension assets. In the future, Quilter Investors expects to develop additional products jointly with Group entities.

(c) Sales & Marketing

As part of the Group's strategy to operate a multi-channel model, Quilter Investors provides solutions both for the Group and third party advisers via internal and external platforms. In the year ended 31 December 2017, Group companies provided the majority of AuM and NCCF, with Quilter Financial Planning accounting for approximately 46% of AuM. Furthermore, out of the £3.3 billion NCCF as at 31 December 2017, 100% of NCCF came via the Group's businesses, predominantly from Quilter Financial Planning, but also from Quilter Wealth Solutions and, increasingly, Quilter International. NCCF from Quilter Financial Planning to Quilter

Investors has increased from £1.0 billion in the year ended 31 December 2015 to £2.5 billion in the year ended 31 December 2017.

(d) Operations

Quilter Investors' philosophy is that for customer interests to be best served the operating functions must be an integral part of all investment and customer facing activity, providing the third pillar to the customer offering.

The core principles of the model are centered on delivering efficiency, extensive capability and scalability within a culture of strong governance and risk management. This has led to the development of an outsourced model based on relationships with a limited number of providers across customer and investment facing operations, under-pinned by strong internal oversight.

This approach gives Quilter Investors access to a global network of specialists, high levels of automation and straight-through-processing and extensive instrument and market access. Having a few meaningful outsource partners means Quilter Investors can influence at a senior level and ensure robust outsourcer oversight through joint operations executives and risk committees, all overseen by an experienced internal team.

5.1.3 Quilter Cheviot

The Group offers bespoke investment management through Quilter Cheviot, a UK-based wealth manager providing discretionary and advisory wealth management services to over 36,000 private clients, corporates, pension funds, trusts and charities.

Quilter Cheviot's core focus is on discretionary wealth management for clients with a minimum portfolio size of £200,000, and it offers a MPS for clients with less than £200,000 to invest. In the year ended 31 December 2017, approximately 72% of Quilter Cheviot's clients were discretionary wealth management clients. Quilter Cheviot also offers its clients nondiscretionary advisory services, advice and dealing services and transaction execution services. As at 31 December 2017, Quilter Cheviot had total AuM of £23.6 billion, an increase of 33% since 31 December 2015.

Quilter Cheviot can trace its origins back to 1771, when William Morris and Sons was formed. Following mergers with a number of smaller organisations, Quilter Goodison & Co. was established in 1981. After a number of acquisitions and expansions, including the acquisition of Cheviot in January 2013, Quilter Cheviot was acquired by the Group in February 2015.

Quilter Cheviot's head office is located in London and is complemented by a further nine regional offices across the UK and two international offices in Dublin and Jersey. Quilter Cheviot also has a sales presence in Dubai, and almost 400 new customers have joined the business since the Dubai office opened in 2016. The sales teams are organised by region and are focused on financial advisers. Quilter Cheviot has a strong regional footprint, with 52% of its AuM in London, 10% in Birmingham, 9% in Jersey, 6% in Bristol, 5% in Liverpool, 3% in Glasgow, 3% in Dublin and 11% in all other UK locations (including Belfast, Edinburgh, Leicester, Manchester and Salisbury), each as at 31 December 2017.

The Directors expect that flows into Quilter Cheviot should grow with increasing integration with the broader Group business, which has been part of the strategy since its acquisition in 2015. Quilter Cheviot benefits from being part of the Group, as its extensive experience with financial advisers gives it significant traction evidenced by inflows from PCA and the overall Quilter Financial Planning network. The total AuM managed by Quilter Cheviot for PCA was £0.4 billion in the year ended 31 December 2017, as compared to £0.1 billion in the year ended 31 December 2016. The total AuM managed by Quilter Cheviot for the Quilter Financial Planning network was £0.5 billion in the year ended 31 December 2017, compared to £0.2 billion in the year ended 31 December 2016. Quilter Cheviot managed a further £0.4 billion for clients of Quilter International in the year ended 31 December 2017, as compared to £0.2 billion in the year ended 31 December 2016.

(a) Products and Services

Quilter Cheviot offers a structured investment proposition defined by a firm-wide investment framework, targeting consistent and replicable returns for clients. The framework allows development of bespoke and client-centric investment solutions. Quilter Cheviot offers personalised wealth management services based on a broad range of investments. A typical diversified portfolio may include equities, fixed income securities and alternative investments, all of which can be accessed either directly or through third-party collective investment funds. It offers a long-term approach to investment with emphasis on diversification and growth. Quilter Cheviot's approach to its client relationships is driven by its 164 investment managers as of 31 December 2017, who are responsible for developing and maintaining Quilter Cheviot's client relationships as well as managing each client's portfolio.

Quilter Cheviot's core services are:

• the Discretionary Portfolio Service ("DPS"), where a client's assets are managed at the investment manager's discretion according to the client's specific needs; and
• the Managed Portfolio Service ("MPS"), wherein a range of standardised investment strategies are available according to a client's objectives and risk profile. The MPS is available both under Quilter Cheviot's in-house custody and under certain third-party platforms.

Quilter Cheviot's approach to portfolio management is underpinned by its robust investment process, which includes a dedicated investment oversight function and Quilter Cheviot's in-house research capabilities, including a team comprised of equity and fund research analysts who cover a large security universe across direct equities, collective funds and fixed income. A team of 21 in-house analysts provide sectorspecific recommendations, based upon external and proprietary research.

The DPS has produced strong and consistent performance versus peers and benchmarks, attracting clients and advisers to Quilter Cheviot. According to the ARC Private Client Index, Quilter Cheviot's core "Balanced Strategy" portfolio (category defined as relative risk of 40 to 60% of world markets) has outperformed the peer group in nearly all risk categories across all time periods (up to 10 years) since inception, as has its "Steady Growth" portfolio (category defined as relative risk of 60 to 80% of world markets). The ARC Private Client Index is comprised of actual client returns submitted by more than 50 discretionary investment management firms.

The following table shows Quilter Cheviot's quartile rankings in the ARC Private Client Index as at 31 December 2017:

	AuM	Performance quartile
	(£ millions)	1Y	3Y	5Y	10Y
ARC PCI Balanced
Strategy	2,037	2	2	1	1
ARC PCI Steady Growth	6,714	2	1	1	1
ARC PCI Equity Risk	2,649	2	2	1	2

In addition to its core offering, Quilter Cheviot offers the following non-discretionary wealth management services:

• the advisory managed service and the advice & dealing service, where the investment manager provides advice but client authorisation is needed to conduct any portfolio changes; and
• execution only, where clients bear the sole responsibility for selection and ongoing management of their investments.

Of Quilter Cheviot's total £23.6 billion AuM in the year ended 31 December 2017, 93% were DPS and MPS clients and 7% were advisory managed clients. Advice and dealing and execution only clients are not included in reported AuM.

For DPS, MPS and the advisory managed service, Quilter Cheviot charges clients either a clean fee (as a fixed percentage or a tiered fee structure based on value of portfolio at each month end averaged over the charging period) or a fee plus commission (a fee structure which is generally lower than the clean fee plus a commission based on the value of the transactions). For the advice & dealing service and execution only, Quilter Cheviot charges commission only, and the tiered commission structure is based on the value of the trade.

(b) Clients

Quilter Cheviot has a diverse range of clients, with approximately 21,500 private clients, 7,300 SIPP clients, 2,600 trust clients, 2,400 bonds clients, 900 pension clients, 700 corporate clients, and 600 charity clients, each as at 31 December 2017. As at 31 December 2017, the average customer's portfolio was over £649,000. Quilter Cheviot's distribution channel model was roughly balanced, with approximately 46% of its total AuM sourced from a financial adviser and approximately 54% coming from non-financial adviser channels (direct clients, charities and professional connections) as at 31 December 2017. However, the majority of new business is sourced from financial adviser introductions and an average of 89% of NCCF have come from financial advisers over the past two years.

Quilter Cheviot's established presence in the financial adviser channel remains one of its key competitive strengths. Quilter Cheviot had a dedicated team of 20 business development managers to service the adviser market as at 31 December 2017. Quilter Cheviot's client base is served by over 2,600 financial advisers, and approximately 38% of these advisers have had a relationship with Quilter Cheviot for more than ten years. Quilter Cheviot's client base has also remained consistent, with client asset retention rates at 92%, 91% and 92% in the years ended 31 December 2015, 2016 and 2017, respectively. The Group expects increased regulation to continue to be a driver for financial advisers to outsource investment management.

In connection with the UK Platform Transformation Programme described under "-5.2 Wealth Platforms-5.2.1 Quilter Wealth Solutions-(a) Products and Services", the DPS is planned to become part of the core platform offering, which will be a further step in the development of the Quilter Cheviot proposition and is expected to enable wider access to its core offering.

In addition, Quilter Cheviot does not offer itself financial advisory services such as tax or financial planning as these may pose a potential conflict of interest with financial advisers who refer a significant amount of new business to Quilter Cheviot.

(c) Sales & Marketing

Quilter Cheviot's investment managers are at the core of its client relationships. Quilter Cheviot does not split the role of investment manager and relationship manager, enabling its investment managers to develop closer relationships with their clients and provide tailored investment portfolios based on their clients' investment needs. The Directors believe that Quilter Cheviot's strong tradition of personalised service, together with its consistent investment performance, has resulted in client loyalty, which contributes to AuM growth. As a result of these efforts, Quilter Cheviot has developed long-standing relationships with its clients. Approximately 24% of Quilter Cheviot's clients have been clients for over 10 years as at 31 December 2017. In addition, with the Group's announced intention to rebrand as "Quilter" and the Company to be listed under the name "Quilter plc", Quilter Cheviot expects to benefit from greater brand spread and awareness.

In addition to developing current client relationships, Quilter Cheviot focuses on generating new business and growing its AuM through various distribution channels, namely:

• Financial advisers: Driven by its dedicated, local sales team, Quilter Cheviot uses national financial adviser roadshows, specialist advertising, events programmes and digital engagement. As at 31 December 2017, 20 members of the business development team were dedicated to maintaining and building Quilter Cheviot's relationships with financial advisers, and Quilter Cheviot has relationships with over 2,600 financial advisers.
• Direct clients: Quilter Cheviot relies on referrals from existing clients, advertising, direct mail and digital channels such as "Find a Wealth Manager" and other social sales' platforms. In addition, Quilter Cheviot undertakes brand building initiatives, such as headline sponsorship of Countryfile Live (with footfall of more than 130,000 individuals in August 2017), events with the Spectator, country show exhibitions and a host of local activities, including classic car rallies and sponsorship of the National Scottish Orchestra. Quilter Cheviot manages the number of clients per investment manager to ensure quality of advice and risk management. Quilter Cheviot operates in teams to teach investment managers to manage risk.
• Charities: Driven by a dedicated sales resource and a network of charity champions across Quilter Cheviot's investment managers, Quilter Cheviot

uses national events programmes, specialist press advertising, regular speaker engagements and a digital acquisition strategy, including innovations such as "TrustEnews" (a monthly aggregation of the best news content for trustees).

Professional connections: Quilter Cheviot is also focused on solicitors, accountants and trustees for new business. In addition, Quilter Cheviot undertakes considerable local activity to encourage referrals through professional connections.

As at 31 December 2017, financial advisers accounted for £10.7 billion in AuM and over 22,000 client mandates, with direct business accounting for £12.9 billion in AuM and over 13,000 client mandates. For Quilter Cheviot's DPS, as at 31 December 2017, approximately 46% of AuM was attributable to financial advisers, with direct business accounting for the remaining 54%. As at the same date, approximately 85% of Quilter Cheviot's MPS was attributable to financial advisers, with the remaining 15% attributable to direct business.

Quilter Cheviot works closely with a number of the Group's businesses and shares clients with Quilter Financial Planning (particularly PCA) and Quilter International. For example, NCCF from Quilter Financial Planning into Quilter Cheviot, primarily driven by the PCA business, has increased from nil in the year ended 31 December 2015 to £238 million in the year ended 31 December 2017. Quilter Cheviot and PCA are working together to identify opportunities to grow businesses across the Group, including through the potential acquisition of new client banks. In addition, Quilter Cheviot and Quilter International have positive Integrated NCCF from the Dubai office, and they are considering further leveraging shared distribution capabilities internationally.

(d) Operations

Quilter Cheviot is committed to providing a premium administration service both to its clients and to advisers. It derives substantial benefit from the insourcing of all settlement functions, which leads to higher quality service levels, greater control and faster response times. In particular, Quilter Cheviot is conscious not only of the need to provide a quality service on a day-to-day basis, but also of the necessity of adapting and delivering additional enhanced or bespoke services to its clients in a secure and timely manner. In an effort to meet client needs, Quilter Cheviot provides its clients with several options for income distribution, including monthly, quarterly or semi-annually. Clients are also provided with an annual consolidated tax certificate showing all income received during the last fiscal year, or calendar year for offshore clients.

All settlement functions related to Quilter Cheviot's business are dealt with centrally, within the London office. As such, there are no settlement or custody functions in the regional offices. The Directors believe that this is a key feature enabling Quilter Cheviot to control the settlement and custody process.

Quilter Cheviot's operations utilise the JHC-owned Figaro settlement and portfolio management system across all operations, which is used by many industry leading investment managers. The scope of Figaro's service capabilities includes portfolio management; order management and routing; automated dealing via direct interfaces

with the market and Cofunds; capital gains tax calculations for the United Kingdom and Ireland; daily performance measurement; fee processing; client reporting; CFA accounting and cash management; and administrative functions, such as ISA subscriptions and corporate action elections.

5.2 Wealth Platforms

Wealth Platforms comprises Quilter Wealth Solutions, Quilter International and Quilter Life Assurance. It provides wealth products and solutions, tools, technology and service for customers and financial advisers.

5.2.1 Quilter Wealth Solutions

Quilter Wealth Solutions was formed through the integration of Skandia Multifunds and Selestia, following Old Mutual's acquisition of Skandia's global operations in February 2006. The business rebranded to "Old Mutual Wealth" in 2014 and is in the process of rebranding to "Quilter Wealth Solutions". In the last five years, the Group's strategy has been shifting from a traditional life company to an advice-led wealth management business with customers at its centre. Quilter Wealth Solutions is an integral element of that strategy.

Quilter Wealth Solutions allows customers to use flexible, tax-efficient wrappers to grow and manage their wealth, including pensions, ISAs, bonds and CIAs. It provides a way to easily manage and monitor investments in one convenient central hub, thereby playing an important role in customer wealth management within the Group. Quilter Wealth Solutions provides access to a wide fund choice from a range of third party investment managers, including Quilter Investors, as well as tax and financial planning tools to maximise efficiency. Quilter Wealth Solutions' platform also delivers back office functionality, including custody, settlement and reporting services.

Quilter Wealth Solutions is a top-three provider (with AuA of £50.2 billion and NCCF of £4.5 billion for the year ended 31 December 2017) of advice-based wealth management products and services in the UK. It serves a largely affluent customer base through advised multichannel distribution, supporting both third party advisers and RFPs to make appropriate recommendations for customers. Platforms are currently capturing the majority of UK retail savings flows. The Group has a leading position in the UK platform market and, for the reasons outlined below, the Directors believe it is well placed to continue to grow.

Quilter Wealth Solutions currently operates under the "Old Mutual" brand and will continue to do so until the rebranding described in "-6. Brand" occurs.

(a) Products and Services

Given the complexity of financial planning, Quilter Wealth Solutions promotes its products and services through financial advisers. The interactions between different tax wrappers and investments can be more easily optimised and managed as customers' needs evolve over time by bringing them together on a single platform.

Quilter Wealth Solutions offers a range of product wrappers with a consistentlyperforming fund range and one simple tiered charge. Through these wrappers, customers have access to two investment ranges: SelfSelect and WealthSelect. SelfSelect allows the customer to build their own portfolio from a wide range of 1,500 funds. WealthSelect is a managed portfolio service, which gives the customer a choice of investment approaches.

Pensions represent the largest share of net sales in the platform market, impacted by the Pension Freedom legislative change in April 2015. Pension Freedom represented a fundamental change to the structure of the UK pensions market, removing the legal requirement to buy an annuity with pension savings at retirement and allowing for a range of flexible, alternative solutions. The Group offers the full range of flexi-access drawdown facilities via a platform pension account, the Group's CRA.

Pensions currently represent the largest part of Quilter Wealth Solutions' NCCF. Of Quilter Wealth Solutions' total £50.2 billion AuA as at 31 December 2017, £21.7 billion were personal pensions, £15.0 billion were ISAs, £9.8 billion were general investment accounts (including £0.5 billion of shareholder assets) and £3.7 billion were onshore bonds. The impact of Pension Freedom on Quilter Wealth Solutions has been significant, and, as a result, sales in the pension propositions have accounted for 48%, 56% and 61% of Quilter Wealth Solutions' gross sales in the years ended 31 December 2015, 2016 and 2017, respectively. The shift by employers from old-style DB to new-style DC pension schemes has also contributed to the growth in flows onto platforms.

The Group's stocks and shares ISA is a tax-efficient investment account that allows customers to put money into a range of different funds. Demand for this product has benefited from the recent increase in ISA limit to £20,000.

The CIB is a flexible way for customers to invest money over the medium to long term. It allows customers to put money into a range of different investment funds. It is designed to allow customers' investments to grow while they make regular, taxefficient withdrawals, as needed. It can also be useful for inheritance tax planning.

Quilter Wealth Solution's general investment account, the CIA, allows customers to hold a wide range of collective investments outside of a tax wrapper in one place. The CIA is a flexible way for customers to invest money over the medium to long term, with no limits on the amount they can invest. As such, while the CIA is not a tax wrapper, it allows customers to make full use of their tax allowances by utilising their annual capital gains tax exemption.

(b) Customers

Through third-party financial advisers, Quilter Wealth Solutions serves customers who are in the affluent customer segment and who often have complex financial planning needs. Customers may want to save for retirement, invest for a specific goal or intend to manage their wealth for intergenerational wealth transfer. Given the many factors that impact customers' financial planning needs and decisions, Quilter Wealth Solutions customers value face-to-face financial advice from their third-party financial advisers.

As such, the relationship with the adviser is critical to the customer, as is the reputation of the platform recommended by the adviser. The Directors believe customers take comfort in the strength and reputation of Quilter Wealth Solutions.

As at 31 December 2017, Quilter Wealth Solutions served approximately 400,000 affluent customers, of which approximately 75% were over the age of 50 and who had invested an average of approximately £120,000.

Quilter Wealth Solutions provides advisers and customers with an easy-to-use platform which allows them to access information and transact online when they need to, with most elements of their financial plan in one place.

Quilter Wealth Solutions has constructed its platform to support customers in their financial goals, including:

• Simple sliding scale tariff which reduces the charge in basis points as customer assets increase;
• Simple, transparent pricing with no additional charges for wrappers, transactions or fund trading;
• Client linking, which enables spouses and family members to benefit from lower charges; and
• Cheaper fund costs for customers negotiated though Quilter Wealth Solutions' scale.

In addition, customers and advisers value the expertise of the Group's staff, and Quilter Wealth Solutions has regularly won awards for the quality of its service provision.

While Quilter Wealth Solutions recommends customers seek financial advice, the business is also able to offer a high quality service to customers who choose not to retain the services of an adviser. These customers can contact the business directly through the contact centre or use the online customer portal. This is a small part of Quilter Wealth Solutions' business.

Large account firms contribute the majority of Quilter Wealth Solutions' AuA and NCCF. Of the advisers that utilise Quilter Wealth Solutions as at 31 December 2017, approximately 1,650 advice firms, or 22% of the 7,400 total independent advisory firms on the platform, are large account firms which account for approximately 81% of the total AuA and approximately 98% of NCCF. Approximately 2,500 advice firms, or 34% of the total, are mid-tier firms which account for approximately 14% of AuA and approximately 9% of NCCF. The remaining approximately 3,250 advice firms, or 44% of the total, are low activity firms which account for approximately 5% of AuA and an outflow of NCCF.

(c) Sales & Marketing

Quilter Wealth Solutions' sales force comprises field consultants, telephone-based consultants and product specialists. The field consultants have a face-to-face relationship with adviser firms, built up over many years. The telephone-based team manages a further tranche of adviser firms through proactive marketing campaigns, as well as email and telephone contact. This model enables the business to provide appropriate and efficient levels of interaction with the various adviser business models.

As a result of this distribution reach, Quilter Wealth Solutions is the platform of choice for more advisers than any other platform in the UK market. As at 31 December 2017, Quilter Wealth Solutions had transacted business with over 4,000 active third party UK advice firms and it was the number one platform of choice for primary adviser relationships (Source: UK Adviser Technology & Business Report Investment Trends 2017).

RFPs on the Group's Quilter Financial Planning network may also use Quilter Wealth Solutions. Quilter Financial Planning contributed 27% of Quilter Wealth Solutions' NCCF for the year 31 December 2017, and AuA from Quilter Financial Planning comprised £4.6 billion (or 9%) of the Quilter Wealth Solutions' AuA. NCCF from Quilter Financial Planning to Quilter Wealth Solutions has increased from £0.7 billion in the year ended 31 December 2015 to £1.2 billion in the year ended 31 December 2017.

In addition, through third party advisers and RFPs, 42% of Quilter Wealth Solutions' NCCF flowed into the Group's investment solutions in the year ended 31 December 2017, including WealthSelect, Cirilium, Creation and Generation. In the year ended 31 December 2017, over 16% of Quilter Wealth Solutions' assets were invested in the Group's investment solutions.

Advisers use Quilter Wealth Solutions because it provides tools, support and technology to help advisers create the required financial plans for their customers and to drive efficiencies into their businesses. In addition, the Group has a strong team of technical specialists helping advisers across the country. The Group also has robust, secure and dependable trading functionality, and flexible products, trusts and investment solutions. Advisers also take comfort in the scale and financial strength of the Group's business, as well as the Defaqto "Gold" rated service (an award which is voted for by advisers).

Quilter Wealth Solutions benefits from the Group's multi-channel distribution model, with 27% of NCCF coming through the advised channel and 73% of NCCF coming through the open market channel in the year ended 31 December 2017.

As at 31 December 2017, Quilter Wealth Solutions had £4.6 billion of integrated advice AuMA and £45.6 billion of open market AuA. Its top 100 firms only accounted for 31% of Quilter Wealth Solutions' AuMA as at 31 December 2017. With more than 20 platforms currently in the UK market, Quilter Wealth Solutions' offering has differentiated its proposition over the years by a focus on user experience and a number of innovations, including award-winning investment analysis tools like UScan for advisers.

(d) Operations

Operations, called "Client Services" within Quilter Wealth Solutions, is integral to the business. It is the part of the business where there is direct interaction with customers and provides the opportunity to build and retain customer relationships.

Quilter Wealth Solutions has an award-winning customer and adviser service centre in Southampton, where multi-skilled teams provide a flexible professional service to approximately 400,000 Quilter Wealth Solutions customers. The provision of services in Southampton includes a dedicated key accounts team, which provides adviser firms with a large number of customers on the platform with dedicated support.

The Quilter Wealth Solutions Client Services team has won a number of industry awards over the period under review and achieved Gold Standard Defaqto status across all of its products in 2017.

UK Platform Transformation Programme

The Group is investing in the UK Platform Transformation Programme to modernise its technology and improve its offering to existing customers and advisers and attract new ones. The Group's existing platform was built over 20 years ago and developed incrementally to meet various proposition and regulatory requirements. The Group's current UK Platform Transformation Programme is the replacement for its prior replatforming project, which ended in May 2017 due to significant budget overruns and delays to the timetable. The Group has undertaken an extensive review of the prior re-platforming project, including internal audit and external assurance, to ensure the programme governance structure and oversight has improved and the lessons learnt are reflected in the UK Platform Transformation Programme.

The Group has contracted with FNZ to deliver the UK Platform Transformation Programme. Under the UK Platform Transformation Programme, FNZ will supply the Group with a new platform that will provide an increased range of products and functionality, integrated systems, increased straight-through processing and scalability. The new platform is expected to enable the business to further improve on its customer and adviser experience, and strengthen the future platform resilience. The new platform will offer a wider product and investment range to customers, including SIPP functionality, cash account, extended ISA range with a Junior ISA and wider market assets, such as investment trusts and exchange traded funds. These new capabilities align Quilter Wealth Solutions with the Group's market offering and provide access to a broader proposition, which the Directors believe will strengthen the Group's position with existing advisers and appeal to new advisers. The Group will retain key customer experience differentiators for its customers and advisers, such as its easy to use online portal and rebate mechanism, which allows the Group to offer funds at competitive prices and is critical to ensuring the Group retains its strong market position.

The UK Platform Transformation Programme is currently in the development and testing phase. The configuration of the core solution is complete, and the Group has finalised its requirements with FNZ. The UK Platform Transformation Programme is scheduled to soft launch in late 2018 or early 2019, with migration of existing clients and advisers to follow thereafter. The Group's preliminary cost estimates for the operational delivery of the new platform are approximately £120 million to £160 million from the restart of the programme in May 2017, of which £21 million had been incurred as at 31 December 2017. The Group expects to incur £75 million in 2018, with the balance in 2019. The UK Platform Transformation Programme remains on time and within budget and excellent progress has been made with all key deliverables to date being within the Group's planned timelines.

5.2.2 Quilter Life Assurance

Quilter Life Assurance was founded in 1979 to provide innovative retirement, investment and protection products. As part of the Group's planning for RDR, a decision was taken to close a number of products in Quilter Life Assurance to new business in 2012. Consequently, Quilter Life Assurance is predominantly closed books of life insurance, insurance bonds and pension business made up of products sold over the last 30 to 40 years. These products have generally been closed to new business over the last decade and are in steady, managed runoff. Quilter Life Assurance also includes the open protection (life and critical illness cover) book of business. Finally, Quilter Life Assurance also includes the institutional life business, which is part of the platform that is used by employee benefit consultants who advise on large trustee pension schemes. On 15 November 2017, the Group announced that it would cease to take on new institutional clients as the institutional life business was not regarded as core to the Group's strategy. The Directors expect that the majority of the institutional life business will run off over the next one to two years.

Quilter Life Assurance served approximately 222,500 customers as at 31 December 2017, with AuA running off at approximately 15% per year (excluding institutional and transfers to Quilter Wealth Solutions). As at 31 December 2017, the closed book contained onshore bonds, which represented approximately 47,400 plans and £3.5 billion in AuA; pensions, which represented approximately 92,000 plans and £5.4 billion in AuA; and protection, which represented approximately 44,300 plans and £0.3 billion in AuA. The institutional life business contained approximately 114 plans and £4.9 billion in AuA as at 31 December 2017, but had a low revenue margin of approximately 4 basis points. The open protection business had approximately 27,900 plans as at 31 December 2017. The savings products business contained approximately 7,600 plans and £0.4 billion of AuA as at 31 December 2017.

Quilter Life Assurance is a source of free cash flow, and as such is an important source of funding to the capital investment in the rest of the Group. The scale of Quilter Life Assurance and its closed book nature means it delivered 32% of the Group's operating profit from continuing operations in the year ended 31 December 2017 but only 13% of AuM in the year ended 31 December 2017. Quilter Life Assurance has historically been a strong contributor of the Group's capital and dividends.

Delivering fair outcomes for closed book customers has been a key theme of regulatory scrutiny in recent years. On 3 March 2016, the FCA issued a report detailing the findings of its industry-wide Thematic Review into the treatment of long-standing customers invested in closed-book products sold by the life insurance sector, with a focus on four areas or "outcomes": strategy and governance, communications, fund performance and charges (in particular exit charges and paid-up charges). At the same time, the FCA announced that its enforcement division was initiating investigations into six firms (although the investigation into one of those firms was subsequently discontinued on 7 September 2017). One of the firms being investigated is OMWLA, a subsidiary of the Group and the trading name of Quilter Life Assurance prior to the rebranding. The Investigation covers the four outcomes/areas of focus identified in the Thematic Review.

In particular, the FCA is investigating OMWLA in relation to: (i) its behaviour in respect of the disclosure of exit and paid up charges after December 2008 (Outcomes 2 and 4 in the Thematic Review; and (ii) whether OMWLA contravened regulatory requirements across a number of other areas assessed in the Thematic Review. In relation to point (ii), these other areas are aspects of OMWLA's strategy and governance in relation to its closed-book customers (Outcome 1 in the Thematic Review) and aspects of fund performance, again in relation to OMWLA's closed-book customers (Outcome 3 in the Thematic Review).

OMWLA is working with the FCA and is cooperating with the Investigation. To date, the FCA has issued, and OMWLA has given responses in respect of, a number of information requirements. For more information, see "Regulatory Overview -5. Recent and Future Regulatory Developments-5.1 United Kingdom and European Union-5.1.2 FCA Thematic Reviews".

Quilter Life Assurance currently operates under the "OMWLA" brand and will continue to do so until the rebranding described in "-6. Brand" occurs.

(a) Products and Services

Quilter Life Assurance comprises closed books and open protection products.

Quilter Life Assurance managed 77 different products as at 31 December 2017, 42 of which were closed retail pensions products, 15 of which were closed investment and saving products, 13 of which were closed Swedish and Norwegian investment and pension products, one is a closed German critical illness product and one of which was a recently closed institutional pension product. The open products comprise two retail pensions products and three protection products.

Although the Quilter Life Assurance investment products are closed to new business, the Group leverages the Quilter Wealth Solutions' distribution team to continue to manage relationships with advisers and promote the suite of personal protection products (including Guaranteed Whole of Life, Fixed Term and Rolling Term products).

In line with FCA requirements, an independent governance committee has been established to oversee Quilter Life Assurance's contract based workplace pension schemes.

(b) Customers

Quilter Life Assurance had approximately 222,500 customers as at 31 December 2017. Within its pension and investment business, the average age of customers is increasing and, as a result, every year a tranche of customers is expected to redeem their investment to fund their retirement needs.

A number of Quilter Life Assurance's customers acquired their products many years ago when different regulatory requirements applied. In recent years, Quilter Life Assurance has invested in improved frequency and enhanced communications with their customers to help customers make decisions about their investments.

Quilter Life Assurance customers can elect to transfer into the flexible drawdown products offered by Quilter Wealth Solutions to take advantage of the Pension Freedom legislation when it is in the customers' best interest.

Quilter Life Assurance's suite of personal protection products has been targeted to an affluent customer base, aligned with the overall target customer of the business. Protection is an important element of the overall ethos of holistic financial planning for Quilter Life Assurance's target customers. Quilter Life Assurance encourages customers to save, but also to protect their financial future in the event of an unexpected setback. Quilter Life Assurance encourages customers to do this through financial advisers.

Obtaining protection products can be a lengthy process due to underwriting requirements, need for medical checks and the lengthy health questionnaires. Quilter Life Assurance has invested in online systems that provide straight through underwriting capabilities, helping to support efficient new business processes.

(c) Sales & Marketing

Closed Book: Quilter Life Assurance benefits from the sales and marketing team supporting Quilter Wealth Solutions, who also manage the adviser relationship for Quilter Life Assurance.

In an effort to ensure good outcomes for closed book customers, Quilter Life Assurance provides clear, regular information on the value of investments, regulatory changes, and any developments that might have a material impact on the investment. Quilter Life Assurance also recognises the need to encourage closed book customers to seek advice before making any changes to long-standing investments, for example to move the investment into a different vehicle.

Protection: Product development, sales and marketing for the open protection book are delivered through a dedicated specialist team. The protection specialist team supports advisers in understanding products and opportunities through face-to-face support, seminars, educational materials and webinars.

(d) Operations

In terms of operations, the UK operations are integrated with Quilter Wealth Solutions to manage efficiency. The policy administration system is shared with part of Quilter International and supporting technology is shared with Quilter Wealth Solutions and Quilter International. Therefore, closed book customers benefit from the same knowledge and experience within the Client Services team as the Quilter Wealth Solutions customers, which is discussed above in "-5.2.1 Quilter Wealth Solutions-(d) Operations". Quilter Life Assurance is not within the scope of the UK Platform Transformation Programme.

5.2.3 Quilter International

Quilter International is a leader in cross-border investment solutions aimed primarily at affluent and high net worth UK residents seeking investment solutions outside of the UK, as well as British expatriates and international investors around the world. With nearly 700 staff globally, it has significant experience in the offshore insurance and wealth management markets developed over its 25 year history. Quilter International has evolved over the years in sync with the locations of British expatriates. Quilter International is headquartered in the Isle of Man and has branch offices in Hong Kong, Singapore and the United Arab Emirates. Quilter International also has an office in Dublin, which provides the Group access to the European market under freedom of services legislation. Quilter International is also currently establishing a branch in Uruguay.

Quilter International primarily focuses on high net worth and affluent local customers and British expatriates in Asia, the Middle East, Europe and Latin America, offering customers diversification, portability, security, tax and estate planning. Quilter International's products and solutions are underpinned by a wide choice of investment options and ways to monitor and manage them online, with the help of customers' financial advisers. The Group has successfully transitioned Quilter International from a traditional life assurance company to a modern life-wrapped platform, which attracts, consolidates and provides investment flows to the Group's Advice & Wealth Management business. The Directors believe the markets in which Quilter International operates have an appetite for modern, multi-channel wealth management solutions, and there has been an increasing global regulatory emphasis on good customer outcomes.

Quilter International currently operates under the "Old Mutual International" brand and will continue to do so until the rebranding described in "-6. Brand" occurs.

(a) Products and Services

Quilter International predominantly offers single premium portfolio bonds, as well as unit-linked life assurance policies that are generally smaller in value than the single premium portfolio bonds. The personal portfolio bond is a modern, multi-currency, tax-efficient wrapper which can hold an extensive range of investments. The portfolio bond offers varying attractions to different groups of investors. UK residents who have exhausted their contribution limits for ISAs and pensions can use international portfolio bonds for additional financial planning. The cross-border, multicurrency investment platform also serves working UK and international expatriates who are more likely to travel during their careers. Other UK and international investors, including high net worth investors, are principally attracted to the ability to invest in a politically and economically stable jurisdiction with a wide variety of investment choice.

Within that personal portfolio bond, Quilter International offers its customers investment solutions ranging from multi-asset funds managed by Quilter Investors, discretionary asset management services provided by Quilter Cheviot and third party solutions. This means that customers can invest in a wide range of assets, including mutual funds, shares, bonds and structured products, and can transfer any existing investment portfolios into their bond.

Quilter International had £19.3 billion of AuA and £1.4 billion of NCCF as at 31 December 2017. Quilter International derives its income from a variety of sources, with the majority from a percentage charge calculated on either (i) the premium invested, (ii) the policy value or (iii) the higher of premium invested and policy value. Although Quilter International's products are primarily sold on a premium charging basis (rather than on a market value charging basis, as is the case in the Group's other businesses), Quilter International uses a variety of charging structures, allowing advisers to tailor the fees to meet the needs of the customer. For example, advisers can take a commission recouped via an annual management charge levied by Quilter International or a fee payable by the customer. The premium charging structure provides the Group with a stable and resilient revenue source. In the year ended 31 December 2017, 46% of Quilter International's total revenue contribution was based on market value charging as compared to premium and administrative fees, this proportion having increased over two years as investment markets have risen. The closure of new regular premium contractual savings business at the end of 2016 has reduced the volume of new business where income is heavily linked to market value, however charging structure changes on the portfolio bond business will help to increase the proportion of income linked to market value.

Quilter International also derives income from fixed monetary administration charges, rebates from fund managers and dealing fees.

(b) Customers

Customers in the UK and internationally purchase a portfolio bond from Quilter International for a variety of reasons including: tax efficiency (which comes from the legal construct of a wrapper), portability (which comes from the multi-currency and multi-jurisdictional reach of the platform) and security (including the economic and political stability of the Isle of Man and the integrity of Quilter International's wealth management solutions). As at 31 December 2017, Quilter International had approximately 109,000 policies in force, 95% of which had an adviser. Quilter International predominantly serves UK customers, including resident investors, high net worth investors and expatriates, which collectively accounted for 60% of the business' AuA as at 31 December 2017. The remaining 40% of Quilter International's customers are non-UK customers, whether expatriates of other nationalities, international high net worth investors or other investors whose needs require crossborder investment solutions. Quilter International complements Quilter Wealth Solutions by providing international tax efficient wealth management solutions to UK customers, and it offers modern wealth management solutions in other international centres serving customers with similar needs. As at 31 December 2017, the customer breakdown of Quilter International's AuA was as follows: 28% UK resident; 23% UK expatriate; 17% international high net worth; 14% cross-border; 10% international expatriate; and 9% UK high net worth.

Over the last few years, the Group has made the strategic decision to focus on fewer core worldwide regions, which has resulted in the Group ceasing to write new business in a large number of countries. Whilst a "back book" of business continues to be maintained in such "closed" countries, the number of countries of client residency that Quilter International considers accepting new business from has decreased significantly. Going forward, Quilter International intends to continue to focus its resources on developing deeper roots in fewer core regulated markets. The Directors believe this strategy should enable Quilter International to drive growth while retaining control of quality, including with regard to customer service and risk management. The Group's share of the UK resident offshore market has grown from 11% in the year ended 31 December 2015 to 18% as at 30 September 2017, despite a declining overall market (Source: ABI Q3 2017). Total sales for the UK resident offshore market increased from £2.5 billion in the year ended 30 September 2015 to £2.7 billion in the year ended 30 September 2017. In the international markets, the Group maintains a leading position in Singapore, where, having acquired AAM Advisory (a Singapore financial advisory business), it is the leader in the Defined Market Segment of the Single Premium individual unit linked market with a 46% market share as at 31 December 2017. In Hong Kong, it is in the top four providers in the Single Premium individual unit linked class C market with a 5% market share as at 31 December 2017. Outside the UK, each region faces competition from rival insurers and discretionary fund managers. In Europe, the principal markets are Sweden and the offshore pensions market via Malta and Gibraltar. In Latin America, the Group is focused on the lump sum market via Aiva, with which the Group has a long-term distribution agreement.

(c) Sales & Marketing

Quilter International offers life assurance policies and investment solutions around the world to UK residents seeking investment solutions outside of the UK, as well as expatriates and local investors in selected offshore markets. Quilter International's products and services are available through financial advisers, and Quilter International positions itself as able to help manage and grow customers' investments for their future and for their families future. Quilter International is one of the few providers to operate in multiple international markets. As well as its life companies based in the Isle of Man and Ireland, Quilter International has fully equipped offices (including local language speakers) in major markets including the UK, Hong Kong, Singapore and the United Arab Emirates. Quilter International understands local cultures and regulations, which enables it to develop suitable wealth management solutions and have strong relationships with its distributors in these markets. In 2016, Quilter International acquired AAM Advisory in Singapore, which was a network of 34 RFPs as at 31 December 2017. Quilter International also has a long-term distribution agreement with Aiva for distribution in Latin America.

Quilter International aims to provide good service to financial advisers and their customers by providing advisers with comprehensive support for their business. Quilter International has a strong team of sales and technical specialists supporting advisers on sales, investments, marketing and technical matters from experts on hand to help advisers navigate complex tax, trust and regulatory issues. In the local branch offices, Quilter International is able to fast-track administration and respond quickly to enquiries. In line with Quilter International's strategy to develop its investment proposition, Quilter International has recently celebrated the anniversaries of its multi-asset portfolios run by Quilter Investors and Quilter Cheviot opening in Dubai, which have both had successful first years. Quilter International has had to adapt to a number of new regulations across the globe and has developed a modular programme, "Future Fit", to support firms and advisers through this change. In 2017, Quilter International added an additional focus on its high net worth proposition, enhancing its offering with high death-benefit life insurance solutions and expanding the distribution footprint with private client divisions of banks and specialist high net worth brokers. For the year ended 31 December 2017, gross sales into each region outside the UK were 36% into Latin America, 25% into the Middle East, 17% into Europe (excluding Sweden), 8% into Hong Kong, 8% into Sweden and 7% into Singapore.

Flows into Quilter Investors have been modest to date, however these only started in late 2016, and the Directors believe there is a growing opportunity to grow the Integrated NCCF here. Quilter Cheviot and Quilter Investors have done well in the international market - IFA firms have turned to Quilter Cheviot and Quilter Investors as the IFA firms de-risk their business models in the face of growing regulatory change. Quilter International has had particular success in Dubai driving NCCF to Quilter Cheviot. Quilter International is in discussions with Quilter Cheviot about opening an office in Singapore, where Quilter International already has a regulated presence and distribution capabilities.

(d) Operations

Quilter International focuses on customer service, and has embedded a strong risk management and control framework. Its operations support a regional office network, providing services to customers and advisers in their local time zones, which is reinforced by bilingual customer service agents who understand the culture and environment. The Group is currently transitioning its back-office customer operations into regional servicing teams in order to further enhance this customer focused delivery. Quilter International continues to develop its online proposition to provide customer and adviser self-service and is now launching specific online-only products, such as the recent UK Select Bond, to deliver operational leverage.

Quilter International employs processes and controls to mitigate against the risk of financial crime, and utilises an enhanced due diligence process for higher value cases. Senior managers identify and own key risks, and monitor the effectiveness of the Group's controls through quarterly assessment and attestation. In addition, all new customers are assessed at policy inception and regular screening of the existing customer book takes place on a daily basis in order to safeguard and mitigate financial crime risk. Quilter International also has a team of professionals in its Risk & Regulation unit who review the financial crime ratings of the countries in which it operates, who maintain transparent relationships with the Group's regulators. For further information about the Group's risk and control management, see "-9. Risk Management and Internal Control".

Operational processes are supported by two main platforms, Wealth Interactive, with TCS BaNCS systems at its core, and Quilter International's unit-linked life assurance platform. Both platforms continue to be maintained in line with regulatory change in Quilter International's chosen markets, and Wealth Interactive is being further developed to support the international business strategy for growth and effectiveness. Both Wealth Interactive and Quilter International's unit-linked life assurance platform provide an element of self-service to advisers and customers who wish to view their policies and transact online. Quilter International's investment in its platform enables customers and advisers to go online and check the value of their portfolios and trade underlying investments, such as funds and shares.

5.3 Business held for disposal - OMGI and the Single Strategy Business

In December 2017, the Group entered into an agreement to sell OMGI, which operates the Single Strategy Business through certain subsidiaries including OMGIUK, to Bidco (a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of OMGIUK's management), subject to certain conditions, including in relation to mandatory regulatory change of controller approvals and a re-organisation pursuant to which all the shares in OMIML and the Multi-Asset Business will be separated and retained by the Group. The parties currently expect the sale to complete in the second half of 2018. The material terms of the OMGI Transaction are summarised in "Additional Information-3.5.1 OMGI Transaction".

The consideration payable under the OMGI SPA is subject to a number of adjustments and the expected total consideration payable to the Company is approximately £600 million, comprising cash consideration of approximately £570 million payable on completion, with approximately £30 million anticipated to be payable thereafter, anticipated to be paid primarily in 2019 to 2021 as surplus capital of the Single Strategy Business associated with the separation from the Group is released. These values are subject to a number of potential price adjustments, depending on the net asset value of the business and other factors at the disposal date. The deferred consideration is not subject to performance conditions. At completion, economic ownership of the Single Strategy Business will pass to Bidco effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of the Company. Proceeds from a completed transaction will be used to repay the New Term Loan in full and for general corporate purposes.

Bi-lateral transitional services are required for the duration of the transition period to ensure a smooth separation of OMGI and the Single Strategy Business from the Group and the Multi-Asset Business from OMGI. The period of services will vary on a service by service basis but can be up to 36 months. Under the OMGI Reverse TSA, OMGIUK will continue to provide certain IT, operational and other services to OMIML in order to assist OMIML in continuing the Multi-Asset Business following the completion of the OMGI Transaction. Under the OMGI TSA, Old Mutual Wealth Business Services Limited will continue to provide certain IT, human resources, finance and facilities management services to OMGI in order to assist OMGI in continuing to operate the Single Strategy Business following completion of the OMGI Transaction. See "Risk Factors-2. Risks relating to the Group's business-2.6 The Group faces risks relating to the disposal of OMGI".

6. Brand

On 15 November 2017, the Group announced its plans to re-brand the Company to "Quilter", which will ultimately be a single brand across the Group's businesses. The Quilter brand builds on part of the Group's heritage, with its origins tracing back to the City of London in 1771. The Directors believe that the Quilter brand stands for quality, personalised service and dependability - values which remain central to the Group's business today. The Group plans to phase in the new branding for its business units over a period of approximately two years from Quilter Separation, and none of the business units have been rebranded as at the date of this Prospectus.

Prior to the rebranding, the Group marketed a significant portion of its products and services using the "Old Mutual Wealth" brand name and logo. In connection with the Quilter Separation, the Group has entered into a licence to continue to use certain "Old Mutual" trade marks for a transitional period. For a summary of the proposed transitional trade mark licence agreement, see "Additional Information-3.4 Transitional Trade Mark Licence Agreement".

7. Social Responsibility

The Group is committed to operating in a responsible manner and is focused on its core purpose of helping to create prosperity for the generations of today and tomorrow. This is underpinned by the Group's culture defined by three shared values of 'pioneering', 'dependable' and 'stronger together'. The Group recognises the value of diversity and aims to create an inclusive, diverse and rewarding workplace. As a responsible business, the Group seeks to build financial capability, enable secure financial futures and promote responsible investment markets, all with the aim of creating long-term sustainable value for the business, its stakeholders and society more broadly.

8. Technology

The Group maintains a technical environment tailored to its own needs, as well as industry standard settlement and portfolio management systems which allow the business to operate efficiently.

The Group's IT systems are designed to support its business with a focus on delivering customer value and to serve the business in an effective and efficient manner. As a result of significant corporate acquisitions and limited operational integration, the business units have limited IT and operational overlaps. Quilter Wealth Solutions, Quilter Life Assurance and Quilter International share functionality, with approximately half of the applications shared between these business units. The business units within the Wealth Platforms segment, as well as the Group's central head office functions, have largely outsourced their IT services and share a common set of third party suppliers. The business units within the Advice & Wealth Management segment generally use separate operational third party suppliers. The Group has started aligning activities in the business units for enterprise-wide areas, such as governance and controls, policies and procedures.

The core IT platforms used by each business unit are distinct, reflecting the different nature of the underlying businesses. All business units, except Quilter Life Assurance, have either changed their core platform in the last five years or are in the process of doing so: Quilter Wealth Solutions is in the process of migrating to an FNZ solution as part of the UK Platform Transformation Programme; Quilter Investors is undergoing a transformation to replace Data Hub; Quilter International implemented BaNCS in 2014; Quilter Cheviot completed its migration onto Figaro in 2017; and Quilter Financial Planning completed its implementation of XPLAN in 2017. The core IT platforms of all business units are supported by their respective third party suppliers, except for Quilter Wealth Solutions (largely supported by GET) and Quilter Life Assurance (largely supported by HCL). For a discussion of the business units' technology and operations, see "-5. Business Overview".

The Group has also recognised that the risk of cyber-crime is increasing, and there is an increased expectation of IT resilience on behalf of the Group's regulators and customers. The Group has responded to this by increasing investment in the mitigation of these risks and ensuring that governance of these items is carried out at the highest level, including with a Group-wide Information Security Improvement Programme. Quilter Wealth Solutions is also delivering a strategic UK Platform Transformation Programme to outsource elements of its operations to FNZ and interface such to the retained estate business operations. See "-5. Business Overview-5.2 Wealth Platforms-5.2.1 Quilter Wealth Solutions-(d) Operations" for further information on the UK Platform Transformation Programme.

9. Risk Management and Internal Control

9.1 Board ownership

The Board is responsible for establishing appropriate systems of risk management and internal control within the Group and for reviewing their effectiveness.

To discharge this responsibility, the Board has established a system of governance as well as an enterprise-wide risk management ("ERM") framework using the 'three lines of defence' model, which is designed to establish clear accountabilities and to protect the interests of our customers, shareholders and other stakeholders. In recent years, the Group has strengthened its second and third lines of defence ahead of its transition to become an independent public company.

9.2 Internal control

The UK Corporate Governance Code published in April 2016 by the Financial Reporting Council (the "UK Corporate Governance Code") requires a board to maintain a sound system of internal control to safeguard shareholders' investments and the Group's assets. The Group has established a Group Governance Manual as an integral part of meeting this requirement and the various regulatory regimes under which the Group operates. The Group Governance Manual sets out the Group's approach to governance, sets out the rules and procedures for making decisions on corporate affairs and demonstrates the Group's internal control processes.

The Group's principles of internal control are:

• Clearly defined delegated authorities The Group is managed in accordance with the authorities delegated by the Board.
• Lines of responsibility Each business and function should have clearly defined lines of responsibility and delegated authority.
• Robust recording and reporting Transactions are appropriately recorded to permit the preparation and reporting of reliable financial statements.
• Financial reporting control procedures and systems The internal control system should include control procedures and systems which are regularly reviewed.
• Protection of assets The Group's assets are appropriately safeguarded.
• Financial crime (fraud and money laundering) Financial crime is prevented or detected.

The Group also has appropriate governance processes in place to oversee any conflict of interest challenges across the business and to protect customer interests. The Group and business unit CEOs are responsible for ensuring that all appropriate steps are taken to identify and assess all actual or potential conflicts of interest which may result in damage to the interests of the Group, its businesses or its customers. All potential and actual conflicts identified are recorded on a locally-held Conflicts of Interest Register which is overseen by the CROs and escalated to the appropriate board and committee.

9.3 Risk framework

The Board has developed an ERM framework. The ERM framework has been designed to identify, assess, measure, manage, monitor and report on the principle risks of the Group. Risk management is designed to increase the Group's understanding of the risks inherent in the business, improve decision-making and prevent the Group from failing to achieve its business objective, including delivery of fair customer outcomes. The ERM framework does not, and is not intended to, eliminate all risks or provide absolute assurance against material misstatement or losses.

The ERM framework is codified through risk policies and business standards which set out the management framework for key risk types, including risk appetite, and minimum standards for the Group's operations. To ensure completeness and consistency when

comparing risk information across the Group, a common methodology for categorising risk has been adopted.

Risk appetite is the amount and type of risk that is acceptable to the Group, as determined by the Board, and is a function of the Group's strategic and business objectives and its capital resources. Risk appetite therefore refers to the Group's attitude towards risk taking and whether it is willing and able to tolerate either a high or a low level to specific risks or risk groups. As a result, risk appetite has a central role in informing decision making across the Group and assisting in the maximisation of return on capital invested.

The Board delegates responsibility for day-to-day risk management to the Group's CEO. This includes ensuring that the Group is aware of its key risks, defining an appropriate risk appetite with respect to the risks, and cascading this down into the firm through an appropriate risk management framework to define and embed a risk-aware culture. In turn, this enables management to take risks in a manner that is transparent and in line with the Group's business and risk strategy.

9.4 Regulatory compliance

Within the remit of the risk management function, dedicated Financial Crime, Policy & Advisory, Monitoring and Regulatory Relationship teams are established to oversee the Group's regulatory compliance. These teams define the regulatory risk frameworks under which the businesses operate by setting policy, minimum reporting, escalation and governance requirements, and support the Group's central functions.

Regular written and oral regulatory risk reports are provided to senior management through the Group's governance structure, as defined in the Group Governance Manual. Where significant issues are identified, the regulatory risk function will report these promptly to senior management and the Board, together with any associated remedial actions to mitigate the regulatory risk.

9.5 Customer outcomes

The Group supports delivery of fair customer outcomes through effective risk management. The Group has a system of internal controls with risk and internal audit functions that provide oversight to manage the Group's risk profile. The Group also has appropriate governance processes in place to oversee any conflict of interest challenges across the business to protect customer interests.

9.6 Assessment of effectiveness

To support an assessment of the Group's governance, internal control and risk management requirements, the CEO of each business must certify compliance with the Group-wide policies through a prescribed Letter of Representation semi-annually.

The Letter of Representation process supports the Board in making their annual acknowledgement of compliance with the UK Corporate Governance Code.

9.7 Regulation

For an overview of regulations the Directors believe are material to the Group's business, see "Regulatory Overview".

10. Employees

In the year ended 31 December 2017, the Group employed an average of approximately 4,223 people globally. The following table sets out the average number of employees by operating segment as at 31 December 2015, 2016 and 2017:

	As at 31 December
	2015	2016	2017
Advice & Wealth Management	1,005	1,162	1,360
Wealth Platforms	2,151	2,341	2,514
Head Office	47	51	66
Total continuing operations	3,203	3,554	3,940
Discontinued operations	343	380	283
Total	3,546	3,934	4,223

The Group's contracts with employees vary by employing entity, reflecting the Group's history. For example, acquisitions such as Quilter Cheviot, Intrinsic, AAM Advisory and within PCA mean that there are variations in contractual terms in the business. In addition, there are jurisdictional variations to ensure compliance with local labour requirements.

11. Insurance

In order to protect the Group's business against major financial losses arising from the risks in performing the Group's activities and services, the Group carries insurance policies, which the Directors believe are customary for the industry, to cover certain risks associated with its activities and services. Broadly, these policies are a combination of directors' and officers' liability insurance, trustees' professional indemnity insurance, comprehensive crime and civil liability insurance, property damage, business interruption and terrorism insurance, public liability insurance, employer liability insurance and various other liability and accident insurance policies. As at the date of this Prospectus, the Directors believe the Group has appropriate insurance policies in place.

12. Intellectual Property

Trademarks for the words and images used by the companies within the Group have been registered in the countries in which they are located. The Group has a worldwide trademark, business names and domain watching service in place covering any worldwide trademark applications for certain of the marks. Moreover, the Group is the owner of the main domain names containing "Quilter", and the Group's companies own several domain names for the ".com" and ".co.uk" domains. The Directors believe that the Group's core intellectual property rights are adequately protected.

Regulatory Overview

1. Overview

The Group is one of the UK's leading advice-led, investment and wealth management groups. The Group operates in large and growing markets, including financial advice, life assurance, discretionary wealth, investment solutions, retail asset management and investment administration. As such the Group operates in a highly regulated environment in the UK, as well as in other jurisdictions, through Quilter International and a number of international arrangements within its UK-based businesses. This section of the prospectus is intended to give an overview of the regulatory framework that currently applies to the Group.

2. Regulation in the United Kingdom

2.1 Financial Services Act 2012

Between 1 December 2001 and 31 March 2013, UK regulated firms in the Group were required to be authorised by the Financial Services Authority (the "FSA"). Accordingly, those firms were required to comply with the rules and guidance made by the FSA pursuant to Financial Services and Markets Act 2000 ("FSMA") and set out in the FSA Handbook of rules and guidance.

The Financial Services Act 2012 ("FS Act") (and the secondary legislation made under it) reformed the framework for financial regulation in the UK. In 2013, the FSA was replaced by the FCA, the PRA and the Financial Policy Committee (the "FPC"). Therefore, with effect from 1 April 2013, a majority of UK regulated firms in the Group became authorised and regulated by the FCA. OMWLA and Old Mutual Wealth Life & Pensions Limited are insurance undertakings that are dual regulated, which means that they are authorised, prudentially regulated and supervised by the PRA, and regulated for conduct of business purposes by the FCA. UK regulated entities in the Group must comply with the rules and guidance of the PRA and FCA (as applicable) made under FSMA.

The FPC is a subcommittee of the court of directors at the Bank of England, and has powers and responsibilities in relation to systemic risk within the financial services sector, responding to sectoral issues that could threaten UK economic and financial stability. The FPC has powers to give directions to the PRA and the FCA.

2.2 Financial Conduct Authority

The FCA regulates the conduct of every authorised firm. Its "operational objectives" are to secure an appropriate degree of protection for consumers, protect and enhance the integrity of the UK financial system and promote effective competition in the interests of consumers. The FCA also has a "strategic objective" of ensuring that relevant markets function well.

2.3 Prudential Regulation Authority

The PRA is responsible for the prudential regulation of insurance companies, banks, building societies, credit unions and certain designated investment firms, with three statutory objectives. The PRA's general objective is to promote the safety and soundness of PRAauthorised persons. It also has a specific "insurance objective" of contributing to the securing of an appropriate degree of protection for those who are or may become policyholders of PRA-authorised insurers, as well as a secondary objective to facilitate effective competition.

2.4 Financial Services and Markets Act 2000

2.4.1 FCA/PRA rule making powers

The FCA and the PRA have powers under FSMA to make rules, which are set out in the PRA's Rulebook of rules and guidance (the "PRA Rulebook") and the FCA Handbook, respectively. These rules are legally binding. FSMA contains checks and balances in relation to the exercise of these powers, including the procedures that the regulators must follow in the exercise of their rule-making powers. The FCA has the statutory power to make general rules, applying to firms for which it is the sole regulator and rules applying to PRA-authorised firms, although only in pursuance of its objectives. The PRA has the statutory power to make general rules that apply to PRA-authorised firms, although, in line with the power designated to the FCA, only to advance its objectives. The PRA and the FCA are required to consult with one another before making any rules.

2.4.2 Permission to carry out regulated activities in the UK

In order to authorise a person to carry on regulated activities in the UK, the PRA and/or the FCA must determine that the applicant meets regulatory requirements, including certain "threshold conditions". The threshold conditions are the minimum conditions which must be satisfied (both at the time of authorisation, and on an ongoing basis) in order for a firm to gain and continue to have permission to carry on the relevant regulated activities under FSMA. Dual-regulated firms must meet both the PRA and the FCA threshold conditions. These relate to matters including the applicant's legal form, whether the applicant has adequate resources (both financial and non-financial) to carry on its business and whether, having regard to all the circumstances (including whether the applicant's affairs are conducted soundly and prudently), and the applicant is a fit and proper person to conduct the relevant regulated activities.

Once authorised, in addition to continuing to meet the threshold conditions, firms must comply with the provisions of FSMA, related secondary legislation and the rules made by the PRA and the FCA under FSMA.

2.4.3 Supervision and enforcement

The nature and extent of the PRA and FCA's supervisory relationship with a firm depends on, among other considerations, how much of a risk the PRA and FCA consider that firm could pose to the achievement of their statutory objectives.

The PRA and the FCA have powers to take a range of enforcement actions, including the ability to sanction UK authorised firms. In particular, enforcement action may include restrictions on undertaking new business, public censure, restitution, fines and, ultimately, revocation of permission to carry on regulated activities. The FCA may also take enforcement action against individuals performing certain controlled functions in relation to authorised persons, while the PRA and/or FCA may take direct enforcement action against senior insurance management function holders, significant influence holders and key function holders under the Senior Insurance Managers Regime.

The PRA and the FCA have further powers to obtain injunctions against UK authorised firms where a UK authorised firm has breached relevant requirements, including requirements imposed by or under FSMA or under certain EU legislation, and to impose or seek restitution orders where clients or other affected parties have suffered loss, or the firm has obtained a profit as a result of a breach of a relevant requirement. In certain circumstances, the PRA and the FCA also have the power to take action against unauthorised parent undertakings of UK authorised persons (such as Old Mutual Wealth Management Limited or the Company), including by issuing directions to do or refrain from doing a particular activity.

2.5 Principles for Businesses and Fundamental Rules

The FCA's Principles for Businesses (the "Principles") set out high-level principles that apply to all authorised persons in the UK. Amongst other things, the Principles require firms to treat customers fairly, maintain adequate financial resources and communicate with customers in a way that is clear, fair and not misleading.

The FCA has also established six key outcomes it expects firms to focus on in order to ensure that they are treating customers fairly in accordance with the Principles. These include ensuring that consumers can be confident they are dealing with firms where the fair treatment of customers is central to the firm's corporate culture, and that products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

In addition to the Principles, PRA-authorised persons are also subject to certain overarching rules issued by the PRA, known as the "Fundamental Rules". These rules are core to the PRA's supervisory approach and underpin the PRA Rulebook. The Fundamental Rules require firms to conduct their business with integrity, maintain adequate capital resources and organise and control their affairs responsibly and effectively, amongst other things. The emphasis and reliance on these overarching rules and principles by the PRA and the FCA has marked a move to more judgment based regulation in recent years, focusing on the achievement of good outcomes.

2.6 Senior Management, Systems and Controls

Within the FCA Handbook, the Senior Management, Systems and Controls ("SYSC") Sourcebook contains general organisational requirements that apply to a number of different types of UK authorised firms, including UK authorised asset management and investment firms. These requirements elaborate on Principle 3 of the FCA Principles for Businesses, which requires firms to take reasonable care to organise and control their affairs responsibly and effectively, with adequate risk management systems.

Among other things, in broad terms, the SYSC Sourcebook contains rules relating to the persons who effectively direct the business of a Markets in Financial Instruments Directive ("MiFID") investment firm, UCITS management company or AIFM. It requires firms to employ personnel with the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to them, requires firms to implement systems and controls relating to compliance and risk controls and contains requirements relating to outsourcing and conflicts of interest, amongst other things.

2.7 Remuneration

While the PRA expects all UK insurers within the scope of Solvency II to comply with the remuneration requirements set out in Solvency II, its attention in this area is focused on "significant" insurers (i.e. those firms whose size and type of business means that there is a significant or very significant capacity to cause disruption to a substantial number of policyholders). Such firms, including certain firms within the Group, are required to report to the PRA on their compliance with the requirements set out in Solvency II, either in the form of the Remuneration Policy Statement reporting template provided by the PRA or by means of an alternative format if preferred.

2.8 Approved Persons Regime

Non-significant MiFID investment firms, UCITS management companies, AIFMs and insurance companies are required to take reasonable care to ensure that individuals performing certain "controlled functions" in relation to their regulated activities have the prior approval of the FCA. Individuals who perform controlled functions fall broadly into two categories: those who exercise significant influence over a firm's affairs and those who deal with its customers. The FCA will only approve an individual to carry out a controlled function if it is satisfied that he or she is a "fit and proper" person to carry out the relevant function. Individuals approved by the FCA to carry out controlled functions are subject to other requirements imposed by the FCA. Where an individual breaches these rules, the FCA may impose sanctions on the individual concerned.

As set out in more detail below, the scope of the SMCR (which currently only applies to certain firms) is expected to be extended in 2019 to cover more authorised firms, including the UCITS management companies, AIFMs and MiFID investment firms in the Group.

2.9 Conduct of Business Requirements

The FCA regulates, through the Conduct of Business Sourcebook ("COBS"), the Mortgage and Home Finance: Conduct of Business Sourcebook ("MCOB") and the Insurance Conduct of Business Sourcebook ("ICOBS"), the distribution and sale of certain investment products. COBS applies to various firms in the Group (including as regards the distribution of funds and where such insurance products have an investment element), MCOB applies to firms and appointed representatives in the Group carrying out home finance activities and ICOBS applies to non-investment insurance products issued by the Group.

The scope and range of the obligations imposed on an authorised firm under COBS, MCOB and ICOBS vary according to the scope of the firm's business and the nature of its clients. By way of example, the rules in COBS, MCOB and ICOBS require firms to provide clients with information about the firm, meet certain standards of product disclosure, assess suitability when advising on certain products, report appropriately to clients and provide certain disclosures, including in relation to client assets held in custody.

2.10 Retail Distribution Review

In June 2006, the FSA launched the RDR, which was a key retail priority for the FSA at that time, and more recently for the FCA, and complements its long-term work to ensure that firms treat their customers fairly.

The key initiatives are:

• a ban on commission for advised sales of investment products. The cost of advice must be agreed between the customer and the adviser;
• an increase in the professional qualifications needed by advisers; and
• clearer descriptions on the nature of the advice being provided. Where an adviser offers advice on a restricted product range or from a restricted range of product providers, this will need to be made clear.

The new rules were implemented from 31 December 2012. They have had a significant impact on the investment advisory industry, as well as on the charging models of relevant product providers and distributors. With limited exceptions, adviser firms and platforms are no longer able to receive commission or trail (i.e., the fee which was historically paid to financial advisers by their customers on an annual basis for the lifetime of the product), but have to operate their own fee-based charging tariffs for advising clients and/or providing platform services.

2.11 Client Assets

Principle 10 of the FCA's Principles for Businesses requires firms to arrange adequate protection for assets when the firm is responsible for them. CASS elaborates on this requirement, setting out the rules that apply to firms that are permitted to hold client money and assets. This includes certain firms in the Group.

The requirements set out in CASS aim to protect money and assets belonging to a firm's clients from the insolvency of that firm and to ensure that, if a firm is subject to insolvency proceedings, client money and assets can be promptly returned to the client. The rules seek to achieve this by requiring firms to keep client money and assets separate from their own, by preventing firms from using client money and assets for their own purposes and by requiring firms to keep records of the client money and assets that they do hold.

2.12 Prudential Requirements

Regulatory capital requirements form an integral part of the FCA and the PRA's prudential supervision of the Group's solo regulated UK authorised firms. The FCA and the PRA have detailed rules relating to the maintenance of minimum levels of regulatory capital for authorised firms, which amplify the general principle under which a firm must maintain adequate financial resources in order to be able to meet its liabilities as they fall due. The adequacy of a firm's financial resources is assessed in relation to the particular risks to which the firm may be exposed, given its business activities. The FCA and the PRA also expect firms to take a proactive approach to monitoring and managing risks.

Regulatory capital requirements exist on two levels. The first is a solo requirement aimed at individual authorised entities (with the relevant firm being required to submit periodic returns to demonstrate compliance with the relevant requirement). The second is a consolidated (or group) requirement and relates to a part of or the entire group of which an authorised firm or firms form part. Generally, the FCA and the PRA exercise consolidated supervision up to the

level of the highest EEA entity in the group, although they have the discretion to extend this to non-EEA entities in certain circumstances.

The solo prudential requirements that apply to the FCA and PRA-authorised firms in the Group depend on the FCA and the PRA's prudential classification of individual firms. This in turn depends on the level of risk involved in performing the activities the relevant entity is authorised to perform.

The Capital Requirements Directive IV ("CRD IV") applies to all full scope investment firms. Investment firms falling within the scope of the requirements of CRD IV are subject to the regulatory capital requirements of the Prudential sourcebook for Investment Firms ("IFPRU") and GENPRU in the FCA Handbook. Other firms that are not subject to additional rules in CRD IV are instead subject to less stringent rules set out in the FCA Handbook in the Prudential sourcebook for Banks, Building Societies and Investment Firms ("BIPRU") and GENPRU, or in the Interim Prudential sourcebook for Investment Businesses ("IPRU-INV"), depending on their prudential categorisation.

The prudential classification of UCITS management companies and AIFMs depends on whether the firms in question are also authorised to carry on MiFID activities such as portfolio management, investment advice and the safekeeping and administration of assets. Where this is the case, UCITS management companies and AIFMs are required to comply with the prudential requirements of GENPRU and either IFPRU or BIPRU, depending on whether they fall within scope of additional rules in CRD IV. All UCITS management companies and AIFMs (regardless of whether they carry on any MiFID activities) are required to comply with certain base own funds requirements in IPRU-INV.

Additionally, a firm is subject to consolidated supervision under CRD IV and may also be subject to additional requirements relating to prudential supervision under the Financial Conglomerates Directive, as implemented in the UK, pending an application made by the Group to the FCA in December 2017, as set out in further detail in "Risk Factors-3.12 The Group is subject to the risk of having insufficient capital resources to meet the minimum required by regulators".

2.13 Data Protection Act and the Information Commissioner's Office

The 1998 Data Protection Act ("DPA"), which came into force in March 2000 and gives effect to an EU Directive, regulates in the United Kingdom the obtaining and use of personal data relating to living individuals. Personal data includes any data about an individual by which he or she can be identified (including, for example, a name, address, age, bank or credit card details).

The data need not in any sense be private. The DPA applies to both computerised data and to certain sets of manual data such as address books and filing systems. It lays down certain principles, which, in general, must be followed by those who hold personal data. The Group and everyone working at its businesses must comply with local jurisdiction data protection and privacy requirements.

Breach of the DPA may give rise to criminal or civil liability and other enforcement action can be taken.

The Information Commissioner's Office (the "ICO") upholds information rights in the public interest, promoting openness by public bodies and data privacy for individuals.

UK data protection law is likely to be subject to material change in the medium term, following the introduction of GDPR in May 2018. For a further discussion of GDPR, see "-5. Recent and Future Regulatory Developments-5.1 United Kingdom and European Union-5.1.6 EU General Data Protection Legislation".

2.14 Consumer Complaints and Compensation

2.14.1 Financial Ombudsman Service

UK authorised firms fall under the compulsory jurisdiction of the FOS, which is a body established under FSMA. Authorised firms are required to have adequate complaints handling procedures in place but, where these are exhausted and the complaint or dispute has not been resolved, the FOS provides for dispute resolution in respect of certain categories of customer complaints brought by individuals and small business customers. Firms covered by the FOS are required to pay levies and case fees, which provides the funding for the FOS.

2.14.2 Financial Services Compensation Scheme

The FSCS, established under FSMA, seeks to protect customers of UK authorised firms that are unable or unlikely to be able to meet their financial obligations to customers. The FSCS provides compensation to certain categories of customer who suffer loss as a consequence of the failure by a regulated firm to meet its liabilities arising from claims made in connection with regulated activities. The FSCS is funded by way of levies imposed on all of its participating financial services firms, including certain authorised firms within the Group.

2.14.3 Pensions

The Pensions Ombudsman investigates and decides complaints and disputes over the manner in which pension schemes are run, and works closely with the FOS in cases where their remit overlaps.

2.15 Fair Treatment of Long-Standing Customers in the Life Insurance Sector

On 3 March 2016, the FCA published a thematic report setting out the findings from its thematic review of the fair treatment of long-standing customers in the life insurance sector. The FCA found a mixed picture with most firms demonstrating good practice in one or more areas and poor practice in other areas. In December 2016, the FCA published non-Handbook guidance to improve firms' behaviour in order to drive better outcomes for customers, which applies to life insurers who have closed-books. The guidance was also intended to help firms better understand the FCA's expectations. The FCA requested firms to review their business practices within three months of the date of its finalised guidance (9 December 2016) and then make changes, where necessary, in light of the guidance. See "—5. Recent and Future Regulatory Developments—5.1.2 FCA Thematic Reviews" and "Risk Factors—3.2 A Group company is under regulatory investigation by the FCA, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects".

2.16 Codes of Practice

Insurance firms within the Group also comply with certain binding and non-binding codes of practice and other guidance issued by various trade associations, including the Association of British Insurers.

3. Regulation in the European Union

3.1 Markets in Financial Instruments Directive & Markets in Financial Instruments Directive II

MiFID sets out the framework for the regulation of firms in the EEA that engage in certain investment activities, such as (in certain circumstances) investment advice and portfolio management. MiFID sets out detailed and specific requirements relating to investment firms within its scope, including provisions relating to systems and controls, outsourcing, customer classification, conflicts of interest, best execution, client order handling, suitability and appropriateness, transparency and transaction reporting. MiFID also confers passporting rights on investment firms authorised in accordance with its provisions, enabling them to carry on certain investment activities in other EEA States without needing to obtain separate authorisations there.

MiFID II and local implementing rules have applied from 3 January 2018 and introduced changes to MiFID that are intended to make financial markets more efficient and resilient, increase transparency of both equity and non-equity markets, reinforce supervisory powers, and strengthen investor protection. These include requirements relating to transaction reporting, costs and charges disclosure, product governance and conduct of business requirements that will affect the Group's operations. The Group has identified the impacts of MiFID II and is currently implementing changes to systems and business practices. In the UK, aspects of MiFID II were also extended to firms not otherwise governed by MiFID, such as AIFMs and UCITS managers. This includes the new ban on soft commission and detailed telephone taping requirements.

3.2 Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive ("AIFMD") sets out the framework for the regulation of the management of certain non-UCITS collective investment undertakings in the EU. AIFMD applies to AIFMs, that is, to legal persons whose regular business it is to manage an alternative investment fund ("AIF") within the meaning of AIFMD. In broad terms, an AIF is a non-UCITS collective investment undertaking that raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors.

AIFMD covers matters such as authorisation, capital requirements, conduct of business standards, remuneration, the valuation of assets, delegation, depositaries, transparency, and marketing. It also provides for passporting rights that allow AIFMs to manage and market EU AIFs to professional investors throughout the EU. Certain parts of AIFMD are yet to apply; when fully applicable, these passporting rights will also apply to the management and marketing of AIFs by non-EU AIFMs and to the marketing of non-EU AIFs by EU AIFMs.

3.3 PRIIPs Regulation

The PRIIPs Regulation has applied in EU member states from 1 January 2018. The Regulation requires manufacturers of PRIIPs to provide a key information document ("KID") containing certain pre-contract product disclosures to retail consumers when they are considering buying a PRIIP. The KID must provide a comprehensible explanation of the PRIIP, as well as enable retail investors to compare the KID with other similar investment product KIDs and is intended to enable investors to make more informed investment choices. This includes, for example, details of future performance scenarios and the assumptions made to produce them, but does not include details of past performance.

PRIIPs include both packaged retail investment products (that is, investment products in relation to which the amount repayable to the retail investor fluctuates because of exposure to reference values or to the performance of one or more assets that are not directly purchased by the retail investor) and insurance based investment products (that is, insurance products that offer a maturity or surrender value that is directly or indirectly exposed to market fluctuations). Subject to limited transitional provisions, this includes products such as units in an investment fund, life insurance policies with an investment element and structured deposits. As such, the Group is required to comply with KID requirements when manufacturing or distributing such products.

3.4 Solvency II Directive

Solvency II sets out the framework for the solvency and supervisory regime for EU insurance firms and has been fully implemented in the UK since 1 January 2016. The aims of the prudential framework under Solvency II are to ensure the financial stability of the insurance industry across the EU and protect policyholders through establishing solvency requirements better matched to the true risks of the business. Solvency II requires insurers to establish and maintain remuneration policies and procedures that promote sound and effective risk management, so as not to encourage excessive risk taking. Specific requirements apply to "material risk takers" (in very broad terms, executive directors, senior executives and heads of certain support and control functions), including in relation to the proportion of variable to fixed remuneration.

Solvency II firms within the Group must comply with the rules set out in those parts of the PRA Rulebook that apply to Solvency II firms. The FCA Handbook also contains rules and guidance that apply to dual-regulated firms, including insurance firms.

3.5 Capital Requirements Directive IV and Regulation

The CRD IV package sets out the EU framework for the regulation of credit institutions and certain investment firms, applicable in the main since January 2014, in particular in respect of capital adequacy. Certain MiFID investment firms and, in particular, those with permissions relating to the safeguarding of client assets or handling of client money, are subject to the provisions of CRD IV as regards prudential and capital standards. This includes certain firms within the Group.

3.6 Capital Requirements Directive III

Capital Requirements Directive III ("CRD III") set out the capital requirements applicable to credit institutions and investment firms in the EU prior to 1 January 2014. CRD III was repealed by the CRD IV package with effect from that date, but continues to be relevant to certain UK investment firms, including certain firms in the Group that are permitted not to apply the more stringent requirements of CRD IV. Such firms are permitted to apply the UK rules implementing CRD III, rather than applying CRD IV, as applicable or implemented in the UK.

3.7 Fourth Money Laundering Directive

The Fourth Money Laundering Directive ("MLD4") entered into force on 25 June 2015 and was required to be transposed into UK law by 26 June 2017. Key changes introduced by MLD4 include changes to the scope of the anti-money laundering regime, measures designed to provide enhanced clarity and accessibility with regard to beneficial owner information, and a tightening of the rules on when simplified due diligence can be used. MLD4 applies to all of the regulated entities in the Group.

3.8 Market Abuse Regulation

The FCA has the power to impose fines and other civil sanctions on individuals and firms that commit market abuse. The definition of market abuse is set out in the Market Abuse Regulation ("MAR"), which repealed and replaced the Market Abuse Directive and its implementing legislation with effect from 3 July 2016. MAR refers to three abusive behaviours which, when committed in relation to publicly traded financial instruments, commodity derivatives or emission allowances, constitute market abuse. The relevant behaviours are: insider dealing; the unlawful disclosure of inside information; and market manipulation.

The FCA may impose an unlimited fine on any person that engages in market abuse, or that has encouraged or required another person to do so. As an alternative to imposing a fine, the FCA may publish a statement of public censure or apply to the court under FSMA for an injunction or restitution order. The FCA also has the power to impose other administrative sanctions, including the power to enter premises under a warrant and the power to cancel or suspend trading in financial instruments.

In addition to the civil regime under FSMA and MAR, the FCA has the power to prosecute the criminal offences of insider dealing under the Criminal Justice Act 1993 and the criminal offences of making false or misleading statements, creating false or misleading impressions and making false or misleading statements or creating a false or misleading impression in relation to specified benchmarks under the FS Act.

3.9 Insurance Distribution Directive

The Insurance Mediation Directive required EU member states to establish a framework to:

ensure that insurance and reinsurance intermediaries have been registered on the basis of a minimum set of professional and financial requirements;

• ensure that registered intermediaries will be able to operate in other member states by availing themselves of the freedom to provide services or by establishing a branch; and
• impose requirements on insurance intermediaries to provide specified minimum information to potential customers.

IDD came into force on 22 February 2016 and was required to be implemented by 23 February 2018. IDD has amended and replaced the Insurance Mediation Directive. The IDD significantly raises the minimum standards set out in the Insurance Mediation Directive and is intended to strengthen policyholder protection and make it easier for firms to provide services cross-border.

3.10 Undertakings for Collective Investment in Transferable Securities Directive

The UCITS Directive sets out the framework for the regulation of UCITS and UCITS management companies in the EU. The UCITS Directive includes rules on authorisation, the operation of management companies, depositaries, mergers and investment policies, and on the information that must be provided to investors. It also requires UCITS management companies to establish and apply remuneration policies and practices consistent with sound and effective risk management.

The UCITS Directive provides that a UCITS fund or management company authorised in accordance with the UCITS Directive in one EEA member state (the "home state") may carry on certain activities in another EEA member state without being separately authorised there (so-called "passporting rights"). Funds authorised in accordance with the UCITS Directive may therefore be marketed and sold to retail investors throughout the EEA, while management companies authorised in one EEA member state in accordance with the UCITS Directive may exercise passporting rights to operate a fund established in another EEA member state.

3.11 European Market Infrastructure Regulation

European Market Infrastructure Regulation ("EMIR") introduced a number of requirements for counterparties to derivative transactions, including (i) the mandatory obligation to clear certain classes of over-the-counter ("OTC") derivative contracts via a central counterparty ("CCP"); (ii) risk mitigation requirements relating to uncleared OTC derivative contracts including collateral exchange and daily valuation; and (iii) reporting and recordkeeping obligations for all derivatives contracts. The application of EMIR requirements to a derivatives counterparty pairing will depend on the classification of the counterparties to such derivative transactions. EMIR came into force on 16 August 2012 but some key requirements relating to clearing and collateral do not yet apply in respect of all in-scope counterparties. Generally speaking, from 14 February 2014, the reporting obligation has applied in relation to all new derivative contracts (and certain amendments will be made to the format and content of reports (amongst other things) with effect from 1 November 2017). Variation margin requirements for all in-scope counterparties are in force, while initial margin requirements are still being phased in. The initial margin compliance date for the most systemically-important counterparties was 4 February 2017 with the compliance date for other in-scope counterparties being phased in from 1 September 2017 to 1 September 2020. The time frames for the phase-in of clearing requirements for certain interest rate swaps and index credit default swaps have been

confirmed and phase-in is underway with the timing dependent on counterparty type and transaction type.

The European Commission published a proposal on 4 May 2017 to amend certain aspects of EMIR, including reclassifying certain counterparties, which is not expected to be finalised until the end of 2018.

3.12 Securities Financing Transactions Regulation

The Securities Financing Transactions Regulation ("SFTR"), which entered into force on 12 January 2016, imposes a number of requirements on the parties to securities financing transactions ("SFTs") and other market participants including (i) reporting and record keeping requirements for certain counterparties to SFTs; (ii) limitations on the reuse of collateral (not only in the securities financing markets but also in the wider collateral markets); and (iii) new investor disclosure rules for management companies of UCITS, UCITS investment companies and AIFMs.

In broad terms, the SFTR requires the conclusion, modification or termination of an SFT to be reported to a trade repository which is registered or recognised in accordance with the SFTR. Counterparties are also required to keep a record of any SFT that they have concluded, modified or terminated for at least five years following the termination of a relevant transaction. An SFT is defined as (i) a repurchase transaction; (ii) securities or commodities lending and securities or commodities borrowing; (iii) a buy-sell back transaction or sell-buy back transaction; and (iv) a margin lending transaction, each as further defined in the SFTR. Recordkeeping requirements were effective from 12 January 2016 but the reporting requirements will be phased-in depending on counterparty type (and this is currently not expected to occur before July 2019).

A right of reuse of financial instruments received as collateral is subject to at least both of the following conditions: (i) risks and consequences have been communicated in writing; and (ii) prior express consent of the providing counterparty has been granted. In addition, the exercise of a right of reuse is subject to at least both of the following conditions: (i) reuse is undertaken in accordance with the terms specified in the relevant collateral arrangement; and (ii) financial instruments are transferred from the account of the providing counterparty. Reuse of collateral requirements applied to new and existing arrangements from 13 July 2016.

SFTR imposes new investor disclosure rules for management companies of UCITS, UCITS investment companies and AIFMs in respect of the use they make of SFTs and total return swaps in periodical reports and in pre-contractual documents. In respect of periodic reports, the requirements applied from 13 January 2017 (for new periodic reports going forward). In respect of pre-contractual documents, the requirements applied from 12 January 2016 or 13 July 2017 in the case of collective investment undertakings subject to the UCITS Directive or AIFMD that were constituted before 12 January 2016.

4. Regulation in Other Jurisdictions

The Group includes regulated entities that are active in a number of non-UK jurisdictions.

4.1 Isle of Man

The Group's international operations are principally conducted through Quilter International and regulated by the Isle of Man FSA. The Isle of Man FSA was established by the Transfer of Functions (Isle of Man Financial Services Authority) Order 2015, which was approved by Tynwald (the parliament of the Isle of Man) in March 2015, with the main provisions of the order coming into force on 1 November 2015. As well as establishing the Isle of Man FSA, the order transferred the functions of the Financial Supervision Commission and the Insurance and Pensions Authority to the Isle of Man FSA. The regulatory objectives of the Isle of Man FSA are (i) to secure an appropriate degree of protection for policyholders, members of retirement benefits schemes and the customers of persons carrying on a regulated activity; (ii) the reduction of financial crime; and (iii) the maintenance of confidence in the Isle of Man's financial services, insurance and pensions industries through effective regulation, thereby supporting the Isle of Man's economy and its development as an international financial centre.

4.2 Europe, the Middle East and Africa

The Group contains operating subsidiaries regulated in Ireland by the CBI and on a crossborder basis within the EEA, in Jersey by the JFSC and in Guernsey by the Guernsey Financial Services Commission. The Group also contains an operating subsidiary in Dubai that is regulated by the DFSA.

4.3 Asia

The Group contains operating subsidiaries in Asia, which are regulated in Singapore by the MAS and in Hong Kong by the Hong Kong SFC and the Insurance Authority, an independent regulatory body which replaced the Office of the Commissioner of Insurance in June 2017.

4.4 Americas

The Group distributes in the United States through Aiva under an insurance license exemption with the Florida Office of Insurance Regulation. Quilter Cheviot relies on a foreign private client adviser exemption for its US clients. The Group contains an operating subsidiary in Trinidad and Tobago, which is regulated by the Securities and Exchange Commission of Trinidad and Tobago. The Group has also recently established a branch of the Group's service company in Uruguay, which is regulated by the Central Bank of Uruguay.

5. Recent and Future Regulatory Developments

5.1 United Kingdom and European Union

5.1.1 Brexit

On 23 June 2016, the United Kingdom voted to leave the EU and on 29 March 2017 Prime Minister Theresa May notified the European Council in accordance with Article 50(2) of the Treaty on European Union of the UK's intention to withdraw from the European Union. The terms of the UK's departure from the EU remain unclear, as does its impact on the UK regulatory framework. As set out above, much of the regulatory framework that applies to UK insurers, insurance intermediaries, asset and fund management and investment firms is derived from EU legislation. While the UK is currently required to implement and apply such legislation, this may no longer be the case following Brexit. As such, Brexit may have a significant impact on UK financial services legislation and the regulatory environment in which the Group operates, including in relation to the impact of the EU initiatives described in this section.

It is also not yet clear how Brexit will affect UK financial institutions with assets or operations (including branches) in the EU (and vice versa). At present, and as set out above, EU legislation grants passporting rights to certain categories of financial institution, including insurers, investment firms, UCITS management companies and AIFMs as well as facilitating mutual rights of access to market infrastructure such as payment and settlement systems. Once the UK ceases to be a Member State of the EU, the current passporting arrangements may cease to be effective, as may the current mutual rights of access to market infrastructure.

The ability of regulated entities within the Group to continue to do business with customers or investors in the remaining EEA Member States after Brexit may be subject to separate arrangements between the UK and the remaining EEA Member States, in respect of which negotiations are ongoing. There can be no assurance that any such arrangements will be concluded and, if they are concluded, on what terms.

5.1.2 FCA Thematic Reviews

Thematic reviews are part of the FCA's approach to supervising the firms it regulates. The FCA publishes thematic reviews to assess a current or emerging risk regarding an issue or product across a number of firms in a sector or market. From time to time regulated firms in the Group are asked to participate in thematic reviews.

The Group monitors thematic reviews to identify FCA findings that may be relevant to its businesses. Recent FCA thematic reviews that are relevant to the Group's businesses include, for example: TR16/3: "Meeting investors' expectations", which is relevant to the fund management industry; TR15/12: "Wealth management firms and private banks: suitability of investment portfolios", which relates to suitability of customer investment portfolios; and TR16/6 "Principals and their appointed representatives in the general insurance sector", where the FCA noted that their findings about shortcomings in relation to principal firms' understanding of their regulatory obligations for their appointed representatives in the general insurance sector, and their control and oversight of their appointed representatives' activities, may be more widely applicable to the UK financial services industry.

There has also been a further thematic review relevant to the Group relating to legacy issues in the insurance sector. In March 2016, the FCA published TR16/2: "Fair treatment of longstanding customers in the life insurance sector". The FCA's review analysed information relating to investment-based life insurance products sold before 2000 from a sample of 11 firms, including OMWLA, which is a dual regulated firm in the Group. The FCA looked at approximately £153 billion held in closed-book individual personal pensions, whole-of-life, endowment and investment bond products, across approximately 9.4 million customers. The term "closed-book" refers to products that are closed to new business, where the only new monies that may be invested are additional investments from existing customers. The FCA carried out this thematic review because they had identified some risks which could lead to long-standing customers being treated unfairly, such as firms benefitting from customer inertia by keeping them in high-charging, poorly performing products or by cutting costs in a way that

was detrimental to customers. The FCA assessed firms in its sample against four high-level outcomes: (i) the firm's strategy and governance framework results in the fair treatment of closed-book customers; (ii) the firm's closed-book customers receive clear and timely communications about policy features at regular intervals and at key points in the product lifecycle that enable them to make informed decisions; (iii) the firm gives adequate consideration to and takes proper account of fund performance and policy values in a way that ensures it treats its closed-book customers fairly and proportionately; and (iv) the firm's closed-book customers are able to move from products that are no longer meeting their needs in a fair and reasonable manner. The FCA found that most firms were demonstrating good practice in one or more areas and poor practice in other areas, while a small number of firms in the sample were delivering poor customer outcomes across a majority of areas assessed. For further information, see "Risk Factors-3. Risks relating to regulation and legislation-3.2 A Group company is under regulatory investigation by the FCA, which could have a material adverse effect on the Group's business, financial condition, results of operations and prospects.".

5.1.3 FCA Asset Management Market Study

The FCA launched a market study into the asset management sector in November 2015, publishing interim findings in November 2016 and a final report in June 2017. The final report identified a number of concerns in relation to the UK asset management industry, including concerns of weak competition in a number of areas in the market, that on average the funds reviewed in the study did not outperform their own benchmarks after fees, that there is little evidence of persistent outperformance, and that a number of funds in the UK market are priced in line with active rather than passive management but closely mirror the market. The FCA also expressed concerns as to how asset managers communicate their objectives to clients and in the final report concluded that investors' awareness and focus on charges is often poor, finding that sustained, high profits have been generated by firms in this market over a number of years.

The FCA has proposed remedies to address some of these concerns and on 5 April 2018 published a policy statement regarding the implementation of final rules and guidance. The remedies include measures to strengthen the rules on authorised fund managers to act in their investors' best interests, governance reforms to hold asset managers to greater account, a requirement for more independent directors on fund management boards, and more express regulatory requirements on fund managers to consider value for money. From April 2019, managers of dual-priced authorised funds that make risk-free profits when dealing as principal in the units of their funds will be required to repay such profits to the funds or individual investors rather than retaining them.

The FCA has also consulted on measures to introduce an end to the payment of trail commission payment, which has been a controversial and long standing issue in the industry. The FCA has recently stated that it has no immediate plans to bring forward proposals for policy change at this time.

The FCA has also foreshadowed that further reforms may be introduced as part of a wider package of remedies, including among other things how fund objectives are articulated, the way benchmarks are used and how performance fees are calculated and disclosed to investors.

5.1.4 FCA Financial Advice Market Review

The Financial Advice Market Review was launched in August 2015 by HM Treasury and the FCA to explore ways in which government, industry and regulators can take individual and collective steps to stimulate the development of a market to deliver affordable and accessible financial advice and guidance to everyone.

5.1.5 FCA Investment Platforms Market Study

In July 2017, the FCA published the Terms of Reference for the Investment Platforms Market Study, setting out the scope and topics that will be covered. Key aims are to explore the impact that platforms have on the charges investors pay for relevant investment products, whether they use their bargaining power to negotiate good deals for investors, and whether in turn, they compete on their own costs. The FCA has also noted that a number of platforms operate within a "vertically integrated" business model (which is the case with the Group), and is seeking to explore whether this has the potential to distort competition and give rise to conflicts of interest, to the potential detriment of customers. Another key aim of the study is to assess the impact these relationships are having on competition and whether they are working in the interests of investors.

In the study, the FCA will (i) explore whether platforms help investors make good investment decisions, and if their solutions offer investors value for money, (ii) look at how platforms compete in practice and whether they use their bargaining power to get investors a good deal and (iii) assess whether relationships between investment platforms and other platforms, advisers, asset managers, and fund ratings providers, work in the interests of investors. The FCA's investment platforms market study will include in its scope (i) platforms and other firms that offer access to retail investment products through an online portal, (ii) retail investors who access retail investment products through an online portal, (iii) intermediaries, including financial advisers and wealth managers who use intermediated platforms to access different retail investment providers on behalf of their clients, (iii) product and wrapper providers who use platforms to distribute their products, (iv) technology providers to whom platforms outsource services and (v) fund ratings and data providers whose information platforms use and distribute.

This market study follows on from the FCA Asset Management market study final report noted above, which highlighted a number of potential competition issues in the platforms sector. The FCA aims to publish an interim report by summer 2018, setting out its analysis and preliminary conclusions including, where appropriate, possible remedies to address any concerns identified. This will be followed subsequently by the FCA's final report.

5.1.6 EU General Data Protection Legislation

The GDPR was published in the Official Journal of the EU on 4 May 2016 and will apply from 25 May 2018. The GDPR will repeal the Data Protection Directive. The GDPR will increase the territorial scope of the existing EU data protection framework and impose stronger sanctions on those who breach it, amongst other things. It will also change the ways in which personal data is collected and used, requiring data subjects to give unambiguous or explicit consent in some cases and introduce increased enforcement powers, empowering national data protection authorities to impose fines of up to 4% of annual turnover, or €20 million, whichever is greater.

5.1.7 Senior Managers and Certification Regime

The SMCR came into force in the UK in March 2016. The SMCR requires UK banks, building societies and significant investment firms to allocate responsibility for certain senior management functions to individuals pre-approved by the FCA and PRA ("Senior Managers"). The SMCR also introduced a certification regime for staff employed in positions where they could pose a significant risk of harm to their firm or its customers. A new set of Conduct Rules were also introduced that apply to Senior Managers, certified employees and almost all other individuals working for firms that are subject to the SMCR. Additional Conduct Rules apply to Senior Managers.

At present, no entities in the Group are subject to the SMCR. The Bank of England and Financial Services Act 2016 has, however, given the FCA the power to extend the SMCR to all UK authorised firms. This is expected to take place in 2019. While it is anticipated that the rules that will apply to other UK authorised firms will for the most part follow those that apply to firms currently within scope of the SMCR, the final rules remain subject to consultation, which is currently ongoing. The feedback from this consultation process is not expected until early 2018 at the earliest. Once implemented, FCA authorised firms in the Group will be subject to the SMCR.

Other jurisdictions in which the Group operates have adopted similar senior managers regimes, such as Hong Kong.

5.1.8 EU Benchmarks Regulation

With the exception of certain provisions relating to critical benchmarks which were already in force, and subject to certain transitional provisions, the EU Benchmarks Regulation was implemented on 1 January 2018. The Regulation places requirements on administrators of, contributors to and users of financial benchmarks, principally aimed at improving governance processes, transparency and documentation. Supervised entities within the EU are not permitted to "use" a benchmark unless it is compliant with the Regulation and it, or its administrator (as applicable), is registered in the relevant ESMA register.

The scope of the Regulation is broad, covering a number of measures which may not typically be considered to be "benchmarks" (including basket levels, customised/proprietary index levels and portfolio levels). It also covers both benchmarks published by entities within the EU and those based in third countries (e.g. if that benchmark is "used" in relevant financial products, contracts or funds by an EU supervised entity). Complying with the EU Benchmarks Regulation requires affected firms (including potentially certain firms in the Group) to make changes to their procedures and practices where they act as a user of benchmarks or (more onerous and if applicable) where they act as an administrator or contributor in relation to inscope benchmarks.

5.1.9 Retirement Income Market Study

In March 2015, the FCA published the final findings of its retirement income market study and its proposed remedies. The final findings set out the FCA's conclusions on the effectiveness of competition in the retirement income market and its remedies on how it intended to intervene in the market to make competition work better for consumers. The FCA examined products purchased by UK consumers with their DC pension pots that provide an income in retirement - specifically, annuities and income drawdown.

The FCA has found that competition in this market is not working well for consumers as final, stating in particular that (i) many consumers are missing out by not shopping around for an annuity and switching providers, and some do not purchase the best annuity for their circumstances, (ii) consumers are deterred from engaging with their options by the length and complexity of wake-up packs, or because they do not believe the sums involved make shopping around worthwhile, (iii) consumers' tendency to buy products from their existing provider weakens competitive discipline on incumbent firms and makes it harder for challenger firms to attract a critical mass of customers and (iv) consumers are highly sensitive to how options are presented to them - savers reaching retirement will face a landscape that is more complex and will need support in making the right choices.

The FCA's remedies were designed to support consumer choice in this market, in light of the latest pensions reforms as follows:

• Requiring firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal by shopping around;
• Redesigning and behaviourally trialling the information that consumers receive from their providers, such as wake-up packs, in the run up to their retirement; and
• In the longer term, the creation of a pensions dashboard which will allow consumers to see all their pension pots in one place.

In addition, the FCA wants to see firms framing the options available to help consumers make good decisions, rather than to drive sales of certain products. The FCA will also monitor the market and track consumer outcomes, as well as the take-up of the Pension Wise service, a government service set up to help people understand the pension options available to them.

5.2 Isle of Man

5.2.1 Conduct of Business Regime

The Isle of Man FSA is currently focused on the modernisation of its regulatory framework to align with international standards under the banner of the Isle of Man FSA Roadmap (the "Roadmap"). The Roadmap covers a number of areas including enhanced regulatory powers, changes to primary legislation, supervision and policyholder protection. However, the two primary areas of impact are the implementation of a new risk-based capital regime similar to Solvency II and new Conduct of Business rules.

5.3 United Arab Emirates

5.3.1 ESCA regulations

The ESCA has recently implemented new licence and product registration requirements. A transition period is expected for both product providers and brokers. In most instances, brokers will required to upgrade their licence from a consulting licence to a promotions licence, which is considered straightforward with minimal additional capital requirements.

Directors, Senior Management and Corporate Governance

1. Directors

The following table sets out certain information with respect to the members of the Board as at the date of this Prospectus. The business address for each of the Directors is Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ.

Name	Position	Nationality	Date of birth	Date appointed
	Independent Non Executive
Glyn Jones	Chairman Chief Executive	British	17 March 1952 11 November	1 November 2016
Paul Feeney	Officer Chief Financial	British	1963	1 August 2012
Timothy (Tim) Tookey Rosemary (Rosie)	Officer Independent Non	British	17 July 1962	10 February 2017
Harris	Executive Director Non-Executive	British	28 January 1958	3 April 2017 13 November
Bruce Hemphill	Director Non-Executive	South African	11 June 1963	2015
Ingrid Johnson	Director Independent Non	South African	4 July 1966 15 December	23 July 2014 31 December
Moira Kilcoyne	Executive Director Independent Non	American	1961 20 December	2016
Jonathan (Jon) Little	Executive Director Independent Non	British	1964	24 April 2017
George Reid	Executive Director Corporate Finance	British British and South	16 April 1965	8 February 2017
Mark Satchel Catherine (Cathy)	Director Independent Non	African	14 August 1969	22 July 2010 31 December
Turner	Executive Director	British	3 June 1963	2016

The management experience and expertise of each of the Directors is set out below.

Glyn Jones

Glyn Jones was appointed as independent non-executive chairman effective from November 2016 and is a member of the Remuneration Committee and chair of the Corporate Governance and Nominations Committee. Mr Jones is also the chairman of Aspen Insurance Holdings, a New York Stock Exchange listed business. Prior to this, Mr Jones was the senior independent director at Direct Line Insurance Group, a board he joined ahead of its listing on the London Stock Exchange as a FTSE 100 company. Other past chairmanships include: Aldermore Group plc, Hermes Fund Managers, BT Pension Scheme Management and Towry, a financial planning and wealth advice business.

From 1981 to 1990, Mr Jones was a senior partner in the consulting practice specialising in financial services within Deloitte, Haskins & Sells, a predecessor firm to PwC. In 1991, he joined Standard Chartered Bank where he ran their international private banking business which was headquartered in Hong Kong. On his return to the UK in 1997, he joined NatWest Bank and was appointed chief executive officer of the Coutts Group, the domestic and international private banking business, as well as having responsibility for NatWest Investments and NatWest Stockbrokers. In 2001, Mr Jones joined Gartmore Investment

Management as chief executive officer until 2004. Mr Jones holds a MA in Economics, Social and Political Sciences from the University of Cambridge and is a fellow of the Institute of Chartered Accountants in England and Wales.

Paul Feeney

Paul Feeney was appointed as Chief Executive Officer in August 2012 and was responsible for creating and developing the vision and strategy for the Group. Prior to this, Mr Feeney was chief executive officer of Asset Management, Long Term Savings after joining Old Mutual in January 2012.

From 2008 to 2011, Mr Feeney was the Global Head of Distribution at BNY Mellon Asset Management International. Prior to that, Mr Feeney was Group Managing Director and Head of Distribution for Gartmore Investment Management, responsible for all sales, marketing, product development and multi-manager divisions of Gartmore globally. Mr Feeney's extensive background in both asset management and wealth management includes positions as Chief Executive of NatWest Private Bank and of NatWest Investments USA, as well as three years at Coutts. Mr Feeney holds a PhD in Financial Economics and a BA Hons degree in Banking, Insurance and Finance from the University of Wales, Bangor.

Tim Tookey

Tim Tookey was appointed as an independent non-executive director in February 2017 and subsequently as chief financial officer in August 2017. Prior to this, Mr Tookey worked at board level in financial services for over 20 years and has been responsible for managing a large number of significant business transformation and strategic projects, mergers and acquisitions.

From 1985 to 1996 Mr Tookey worked at KPMG, specialising in corporate finance advisory work and audit, moving to Heath Lambert in 1996, where he lead the management buy-out of CE Heath plc in 1997 and the public takeover of Lambert Fenchurch plc in 1999. From 2002 to 2006, Mr Tookey worked for Prudential plc, where he held the position of finance director (UK and Europe). In 2006, Mr Tookey moved to Lloyds TSB Group plc (now Lloyds Banking Group plc), where he held various roles including group finance director and, from 2012 to 2015, Mr Tookey was chief financial officer of Friends Life Group.

Mr Tookey is currently a non-executive director of Nationwide Building Society, where he chairs the Board Risk Committee, and is a member of certain other Board committees including the Audit Committee. Mr Tookey holds a BSc Hons degree from the University of Bath in Building Engineering and is a member of the Institute of Chartered Accountants in England and Wales.

Rosie Harris

Rosie Harris was appointed to the Board as an independent non-executive director in April 2017 and is a member of the IT Committee and Audit Committee, as well as the chair of the Risk Committee. Ms Harris also sits on the board of Quilter Cheviot Limited.

Ms Harris has extensive financial services industry executive experience. During her 30 year career, she has undertaken a broad range of general management and chief risk officer roles. From 1985 to 2007 Ms Harris worked at Prudential plc, where she undertook various senior roles before becoming UK chief operating officer. In 2007 she was appointed group risk director at Old Mutual plc, before moving to Lloyds Banking Group plc in 2009, where she undertook chief risk officer and managing director roles. From 2012 to 2015, Ms Harris was the group chief risk officer at Friends Life plc and, following Aviva's acquisition of Friends Life plc, was appointed chief risk officer for UK Life at Aviva plc, a position which she retired from at the end of June 2017. Ms Harris is currently a non-executive director of Tokio Marine Kiln's Insurance and Syndicates businesses and chair of its Risk Committee. Ms Harris holds a BA Hons from the University of Birmingham and is a member of the Institute of Chartered Accountants in England and Wales.

Bruce Hemphill

Bruce Hemphill has been Group Chief Executive of Old Mutual plc since November 2015. He was previously Chief Executive of Wealth, Insurance and Non-Bank Financial Services at Standard Bank Group. From June 2006 to February 2014, he was Chief Executive of Liberty Holdings Ltd, having previously served as Chief Executive Officer of STANLIB. He also served in Corporate & Merchant and Investment Banking at Standard Bank.

Ingrid Johnson

Ingrid Johnson has been the Group Finance Director of Old Mutual plc since July 2014. She was previously the Group Managing Executive: Retail and Business Banking for Nedbank.

Ms Johnson has more than 20 years' broad-based financial services experience with the Nedbank Group in a variety of roles. She was appointed to the Nedbank Group Executive Committee in 2008 and is a Prescribed Officer of the Nedbank Group. Ms Johnson is a qualified chartered accountant and served her articles with Price Waterhouse and completed the Advanced Management Programme at Harvard Business School.

Moira Kilcoyne

Moira Kilcoyne was appointed to the Board as an independent non-executive director in December 2016 and is a member of the Risk Committee and chair of the IT Committee. Ms Kilcoyne brings over 25 years of technology and cyber security leadership and has spent much of her career working in senior technology roles in both London and New York, predominantly with Morgan Stanley and Merrill Lynch. Ms Kilcoyne recently retired from Morgan Stanley having held the role of managing director and co-chief information officer for Global Technology and Data at Morgan Stanley since 2013. Ms Kilcoyne has a BSc in Mathematics from Manhattan College.

Jon Little

Jon Little was appointed to the Board as an independent non-executive director in April 2017 and is a member of the Remuneration Committee. Mr Little also sits on the board of Old Mutual Investment Management Limited.

From 1990 to 1997, Mr Little worked at Fidelity Investments, holding various roles including business development director, before moving to JP Morgan Investment Management where he was vice president, head of International Funds & European Sub-advisory. In 2000, Mr Little moved to Mellon (later BNY Mellon) and held various roles including vice chairman of BNY Mellon Asset Management, member of The Bank of New York Mellon's Global Executive Committee and head of BNY Mellon's International Asset Management Business, responsible for all non-US asset management businesses. From 2007 to 2008, Mr Little was also chairman of The Dreyfus Corporation in New York and chairman of Insight Investment Management from its acquisition in 2009. Mr Little was also a member of various asset management boards, including Newton, Walter Scott, Pareto and Alcentra. From 2011 to 2016, Mr Little was a non-executive director of Jupiter Fund Management plc. Mr Little is currently a partner at Northill Capital, a company he founded in November 2010. Mr Little is also the Chairman of the Oxford Brookes Endowment Investment Committee.

Mr Little holds a BTEC from Oxford Brookes in Business and Finance. He also holds the CFA Society of the UK - Investment Management Certificate and the Chartered Insurance Institute Financial Planning Certificate qualifications.

George Reid

George Reid was appointed to the Board as an independent non-executive director in February 2017 and is the chair of the Audit Committee and a member of the IT and Risk Committees. Mr Reid also chairs the board of Old Mutual Wealth Management Limited, OMWLA and Old Mutual Wealth Life & Pensions Limited.

From 1987 to 1999, Mr Reid worked at Price Waterhouse and PricewaterhouseCoopers (now PwC), undertaking various roles and overseas secondments. In 1999, he joined Standard Life where he spent seven years in various senior executive roles, including group chief accountant and financial reporting director for UK Life and Pensions. He returned to the accounting profession in 2006 and spent the next 10 years with Ernst & Young UK LLP. Initially a partner within the Financial Services Audit Practice, in 2015 he was appointed managing partner and EY's head of financial services for Scotland and UK regions, and made a member of the UK Firm's Financial Services Board. In addition, Mr Reid has been a director of the Children's Hospice Association Scotland since 2009. Mr Reid has a B.Sc Hons degree from the University of St Andrews in Statistics and is a member of the Institute of Chartered Accountants in England and Wales.

Mark Satchel

Mark Satchel was appointed as Corporate Finance Director in August 2017 following Tim Tookey's appointment as Chief Financial Officer of the Company in preparation for the Quilter Separation. Mr Satchel joined Old Mutual in the UK in January 2000 and has held numerous leadership positions within the finance function at Old Mutual plc and in the operating business units. He joined the Board in 2010 on his appointment as Chief Financial Officer to the business (then branded Skandia). Mr Satchel has been responsible for the disposal of nine businesses in Continental Europe, and played a lead role in the acquisitions of Intrinsic and Quilter Cheviot. He was instrumental in implementing the Group's successful business model and helped scope the footprint of the business which has led to the development of a business that is now fit for the Quilter Separation.

Prior to his current role, Mr Satchel was Chief Financial Officer for Skandia's Europe & Latin America Division, and before that he spent a year in Sweden on the integration of Skandia into Old Mutual. Mr Satchel qualified as a Chartered Accountant in South Africa, and worked for KPMG in both South Africa and Canada prior to moving to the UK.

Cathy Turner

Cathy Turner was appointed to the Board as an independent non-executive director in December 2016 and is also a member of the Corporate Governance and Nominations Committee and chair of the Remuneration Committee. Ms Turner is an experienced nonexecutive director who has spent over 30 years working in senior leadership roles at global organisations. After an initial career in consulting, Ms Turner moved into financial services in 1997 with Barclays plc, where she rose to the position of group HR director and was a member of the group executive committee. At various times, her responsibilities also included group strategy and investor relations. Her most recent executive role was as chief administration officer at Lloyds Banking Group plc where she was responsible for a number of corporate functions.

Ms Turner's current board roles include being non-executive director and chair of the Remuneration Committee at Countrywide plc and non-executive director and chair of the Remuneration Committee at Aldermore Group plc, part of FirstRand Group. She is also a part-time partner at the senior advisory organisation Manchester Square Partners. Ms Turner holds a BA (Hons) degree from Lancaster University in Economics.

2. Senior Managers

The following table sets out certain information with respect to Senior Managers as at the date of this Prospectus. The business address for each of the Senior Managers is Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ.

Name	Position	Date of birth	Date appointed
Paul Feeney	Chief Executive Officer	11 November 1963	1 August 2012
Tim Tookey	Chief Financial Officer	17 July 1962	9 August 2017
Mark Satchel	Corporate Finance Director	14 August 1969	1 May 2010
Martin Baines	Chief Executive Officer - Quilter Cheviot	28 May 1964	1 May 2017
Steven Braudo	Chief Operating Officer	3 November 1971	1 June 2016
Matthew (Matt) Burton	Chief Internal Auditor	22 December 1968	1 April 2016
Paul Hucknall	Human Resources Director	31 October 1971	1 January 2018
Steven Levin	Chief Executive Officer - Quilter Wealth Solutions	29 January 1975	29 October 2015
Paul Simpson	Chief Executive Officer - Quilter Investors	30 September 1958	1 January 2018
Andrew (Andy) Thompson	Chief Executive Officer - Quilter Financial Planning	11 November 1968	1 December 2015

Iain Wright Chief Risk Officer 29 September 1965 29 February 2016

The management experience and expertise of each of the Senior Managers is set out below.

Paul Feeney

See "-1. Directors" above for Paul Feeney's biography.

Tim Tookey

See "-1. Directors" above for Tim Tookey's biography.

Mark Satchel

See "-1. Directors" above for Mark Satchel's biography.

Martin Baines

Martin Baines served as Chief Executive Officer of Quilter Cheviot from 2003 to August 2015, and from May 2017 until present. He became a Director of Quilter in 1998 and joined the management group in 1999. Mr Baines has previously served as Head of Onshore Branches, with specific responsibility to build the UK branch network. Following the purchase of Quilter by Morgan Stanley in 2001, Mr Baines was appointed as a Managing Director of Morgan Stanley in 2002 and Chief Executive Officer of Quilter in 2003. In 2011 and 2012, Mr Baines led the Bridgepoint backed buyout of Quilter from Morgan Stanley. The Quilter business then merged with Cheviot, a leading London based investment management company. Post integration of the two companies, Mr Baines led the subsequent deal process which resulted in Quilter Cheviot becoming part of the Group.

Mr Baines trained with KPMG before beginning a career in stockbroking and investment management. Mr Baines is a fellow of the Chartered Institute for Securities & Investment.

Steven Braudo

Steven Braudo joined Old Mutual Wealth as Chief Operating Officer in June 2016. Prior to this, Mr Braudo was Chief Executive Officer of Standard Bank Wealth, where he led the wealth businesses globally which included asset management and distribution, short and long term insurance and financial planning across all client segments. Before this, Mr Braudo held various senior roles within Liberty Holdings in their Corporate and Retail Divisions. His career at Liberty Holdings culminated when he was promoted to Group Deputy Chief Executive Officer and Director on the Liberty Holdings Board. Before joining Liberty, Mr Braudo held the Operations Director role of a start-up multi-manager firm and went on to become Managing Director of the South African and UK businesses.

An Actuary by training, Mr Braudo started his career as an Actuarial Manager in the Corporate Life department of Commercial Union Life (subsequently part of the Aviva Group).

Matt Burton

Matt Burton joined Old Mutual Wealth as Chief Internal Auditor in April 2016. Prior to this, Mr Burton was a partner in PricewaterhouseCoopers' (now PwC) Financial Services Practice, where he was responsible for the leading their Internal Audit offering within the Insurance and Investment Management sector. Mr Burton has over twenty five years' of internal audit experience across financial services having held senior roles in Credit Suisse, where he was Chief Auditor for EMEA, and Deutsche Bank. Mr Burton began his career as a Chartered Accountant with Deloitte.

Mr Burton has a BSc(Hons) in Economics from Loughborough University and is a member of the Institute of Chartered Accountants in England and Wales and a member of the Chartered Institute of Internal Auditors.

Paul Hucknall

Paul Hucknall joined Old Mutual Wealth as Human Resources Director in January 2018. Prior to this, Mr Hucknall was People Director, Centres of Excellence at Lloyds Banking Group, where he was responsible for the design and delivery of the Group's overall HR strategy. Mr Hucknall led the teams focused on developing and delivering key policies around remuneration, governance, talent and development, recruitment and employee relations for an organisation of around 75,000 people.

Mr Hucknall has over 20 years of experience and has held various senior roles working at board level in publicly listed financial services companies such as Bank of America and ING.

Steven Levin

Steven Levin has been Chief Executive Officer of Quilter Wealth Solutions (previously Investment Platforms) since October 2015 and was Global Head of Distribution from July 2014. Prior to this, he was Managing Director of Skandia International (now Quilter International). Mr Levin has extensive experience in developing and distributing financial service products as well as in asset management and investments, and he was previously Product & Proposition Director for Old Mutual in South Africa and then globally for Old Mutual plc. He has also been an equity analyst and fund manager in Old Mutual's asset management business.

Mr Levin is an Actuary by training and a Chartered Financial Analyst.

Paul Simpson

Paul Simpson was appointed Chief Executive Officer of Quilter Investors in January 2018. Mr Simpson began his capital markets career in risk management, gaining experience in major houses such as Deutsche Bank and UBS, trading a wide range of equity market neutral and arbitrage strategies. Switching to investment management he was portfolio manager on a successful merger arbitrage fund at De Putron Fund Management Ltd, later concentrating on statistical arbitrage, with two years as a portfolio manager at Millennium Partners. Mr Simpson joined Old Mutual in 2006. At Old Mutual, he initiated and was co-manager on the European Statistical Arbitrage fund (launched 2006) and Global Statistical Arbitrage fund (launched 2007). He was appointed Head of Alternatives at OMGI in 2009, having managerial

responsibility for quantitative multi-factor investment processes spanning hedge funds, alternative and long only UCITS funds. He was appointed Investment Director in January 2015.

Mr Simpson is Chair of OMGI's Investment Director's Committee and sits on the Boards of the Old Mutual UK, Irish and Cayman investment funds. He is also a member of OMGI's Executive Committee. Mr Simpson has a BA in Economics from Cambridge University (1980) and an MBA from the University of Bradford Management Centre (1986).

Andy Thompson

Andy Thompson was appointed Chief Executive Officer of Quilter Financial Planning (previously Intrinsic) in December 2015, subsequently leading the acquisition of the Caerus business. Prior to that he was Distribution Director, leading the Distribution team to provide first-class products and solutions for customers and to recruitment and support of advisers including the acquisitions of Positive Solutions (approximately 700 advisers) and 250 advisers from Sesame Bankhall Group. Mr Thompson joined Intrinsic in early 2012, when Intrinsic acquired his businesses, Blueprint Financial Services and Blueprint Distribution. As a start-up in 2003, Mr Thompson proved his entrepreneurial flair by growing Blueprint to 180 advisers before its sale.

Mr Thompson was a financial adviser before being appointed to become a Regional Director for the Zurich Advice Network, managing and leading the London region for over five years. Mr Thompson has an executive MBA from London Business School, having graduated in 1999.

Iain Wright

Iain Wright became Chief Risk Officer in February 2016. Prior to this, he worked for Sun Life Financial as Chief Risk Officer of the UK business in 2011 and transferred to the Head Office as Senior Vice President, Enterprise and Operational Risk in 2013. Mr Wright began his career as a chartered accountant with Deloitte, and later moved to the London Stock Exchange where he carried out a number of roles, completing his career there as Head of Equity and Debt Markets. When the FSA was formed in 2000, Mr Wright formed part of the leadership team, heading up the supervision of major insurance groups. Moving to Prudential as Chief Risk Officer of the UK and Europe business, Mr Wright remained in the role for three years before leaving to establish an insurance and regulatory consultancy in 2009.

Mr Wright has a BA (Hons) in Accounting and Financial Management from the University of Sheffield and is a fellow of the Institute of Chartered Accountants in England and Wales. Mr Wright is a member of the Board and Chair of the Audit & Risk Committee of the Institute of Risk Management.

3. Conflicts of interest

There are no potential or actual conflicts of interest between any duties of the members of the Board or the Senior Managers towards the Company and their private interests and/or other duties.

4. Corporate Governance

UK Corporate Governance Code

The Board is committed to the highest standards of corporate governance. Following the Proposed Listing, the Board intends to comply with the requirements of the UK Corporate Governance Code on an ongoing basis. The Company will report to its shareholders on its compliance with the UK Corporate Governance Code in accordance with the Listing Rules.

As envisaged by the UK Corporate Governance Code, the Board has established four committees: an Audit Committee, a Risk Committee, a Corporate Governance and Nominations Committee and a Remuneration Committee. In addition, the Board has also established an IT Committee. If the need should arise, the Board may set up additional committees as appropriate.

The UK Corporate Governance Code 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 of directors 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. As at the date of this Prospectus, the Board consists of the non-executive chairman and five further independent non-executive Directors (the "Independent Non-Executive Directors"), three executive Directors and two Non-Executive Directors appointed by Old Mutual plc who will step down from the Board ahead of the Proposed Listing. The Company regards all of the Independent Non-Executive Directors as being independent within the meaning of the UK Corporate Governance Code and free from any business or other relationship that could materially interfere with the exercise of their independent judgement.

The UK Corporate Governance Code recommends that the board of directors of a company with a premium listing on the Official List of the FCA should appoint one of the Non-Executive Directors to be the Senior Independent Director to provide a sounding board for the chairman and to serve as an intermediary for the other directors when necessary. The Senior Independent Director should be available to shareholders if they have concerns which contact through the normal channels of the chief executive officer has failed to resolve or for which such contact is inappropriate. As at the date of this Prospectus, the Board has identified a candidate to be appointed as a Non-Executive Director and the Senior Independent Director and expects, subject to regulatory approvals and the timetable for those approvals, that individual to have joined the Board as the Senior Independent Director before the Proposed Listing. Until the appointment is confirmed, the Group will not comply with the UK Corporate Governance Code with regard to having a Senior Independent Director. The Senior Independent Director is expected to be a member of both the Audit Committee and Remuneration Committee. The appointment of the Senior Independent Director to these committees together with the resignations of the Non-Executive Directors appointed by Old Mutual plc will mean that each committee's membership complies with the UK Corporate Governance Code.

The UK Corporate Governance Code further recommends that directors should be subject to annual re-election. The Company intends to comply with these recommendations.

In September 2017, the Board undertook a review of its effectiveness which was independently facilitated by Egon Zehnder. The outcome of the review confirmed that the Board had been operating effectively, despite undergoing a significant period of transition. The Board has agreed an action plan to address points raised as part of the review, and will be reporting progress against those actions in its 2018 Annual Report.

Audit Committee

Subject to the appointment of the Senior Independent Director and following the resignation of Ingrid Johnson (as described above), in compliance with the requirements of the UK Corporate Governance Code, the Audit Committee will be made up of a minimum of three members who are all independent non-executive directors and includes one member with recent and relevant financial experience. The Audit Committee is chaired by George Reid and its current membership is as follows:

Name	Committee Position
George Reid	Chair of the Audit Committee
Rosie Harris	Independent Non-Executive Director
Ingrid Johnson*	Non-Executive Director

^* Ingrid Johnson will step down from the Audit Committee ahead of the Proposed Listing.

The Senior Independent Director is expected to be appointed to the Audit Committee ahead of the Proposed Listing.

The Audit Committee will meet at least four times a year and otherwise as the Chair of the Audit Committee, Audit Committee members, Chief Executive Officer or Chief Internal Auditor shall require and as requested by the external Audit Lead Partner auditor. The Audit Committee has responsibility for, amongst other things, monitoring and reviewing the financial reporting process of the Group and the involvement of the auditors in that process.

The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing the Group's annual and half-yearly financial statements, making recommendations on the appointment, reappointment and removal of the external auditors, monitoring the independence of the external auditor, reviewing the objectivity and effectiveness of the audit process and reviewing the scope of the audit and non-audit work undertaken by the external auditors.

The terms of reference of the Audit Committee covers such issues as membership and the frequency of meetings, as mentioned above, together with requirements for the quorum for and the right to attend meetings, reporting responsibilities and the authority of the Audit Committee to carry out its duties.

Risk Committee

In compliance with the requirements of the UK Corporate Governance Code, the Risk Committee is made up of a minimum of three members who are all independent nonexecutive directors and includes one member with recent and relevant financial experience and one member with recent and relevant experience with regard to risk management issues and practices. The Risk Committee is chaired by Rosie Harris and its membership is as follows:

Name	Committee Position
Rosie Harris	Chair of the Risk Committee
Moira Kilcoyne	Independent Non-Executive Director
George Reid	Independent Non-Executive Director

The Risk Committee will meet at least four times a year and otherwise as the Chair of the Risk Committee, the Risk Committee members, the Chief Executive Officer or the Chief Risk Officer shall require. The Risk Committee has responsibility for, amongst other things, monitoring and reviewing the effectiveness of the Company's internal control and risk management systems.

The duties of the Risk Committee include providing advice to the Board in relation to the assessment of the principal risks facing the Group, including management and mitigation of those risks and considering the effectiveness of the Group's compliance function, as well as providing oversight and advice to the Board in relation to future risk strategy and promoting a risk awareness culture within the Group.

The terms of reference of the Risk Committee covers such issues as membership and the frequency of meetings, as mentioned above, together with requirements for the quorum for and the right to attend meetings, reporting responsibilities and the authority of the Risk Committee to carry out its duties.

Corporate Governance and Nominations Committee

Subject to the appointment of the Senior Independent Director and following the resignation of Bruce Hemphill (as described above), in compliance with the UK Corporate Governance Code, the Corporate Governance and Nominations Committee will be made up of a minimum of three members, a majority of whom are independent non-executive directors. The Corporate Governance and Nominations Committee is chaired by Glyn Jones and its current membership is as follows:

Name Committee Position
Glyn Jones	Chair of the Corporate Governance and Nominations Committee
Bruce Hemphill*	Non-Executive Director
Cathy Turner	Independent Non-Executive Director

^* Bruce Hemphill will step down from the Corporate Governance and Nominations Committee ahead of the Proposed Listing.

The Senior Independent Director is expected to be appointed to the Corporate Governance and Nominations Committee ahead of the Proposed Listing.

The Corporate Governance and Nominations Committee will meet at least twice per year and otherwise as the Chair of the Corporate Governance and Nominations Committee or the Chief Executive Officer shall require. The Corporate Governance and Nominations Committee assists the Board in reviewing the structure, composition and make-up of the Board, any committees of the Board and the composition of significant subsidiary boards within the Group, succession planning, evaluating the balance of skills, experience, independence and knowledge on the Board and leading the process for board appointments and making recommendations to the Board on such matters. The Corporate Governance and Nominations Committee has agreed it is also responsible for assisting with any evaluation process to assess the overall and individual performance of the Board and its committees and reviewing the policies on diversity and progress on achieving objectives under the policy. In January 2018, the Committee agreed to set a minimum gender diversity target of 33% in line with the Hampton-Alexander Review recommendations.

The Corporate Governance and Nominations Committee is responsible for corporate governance matters such as approving material changes to, and monitoring compliance with, the Group Governance Manual. It also monitors developing trends or proposals in relation to Board governance issues and best corporate governance practice in order to determine the extent to which these initiatives impact the Group.

The Corporate Governance and Nominations Committee has recently also acquired responsibility for Board oversight of responsible business. Going forward, it will provide oversight of, and support for, the Group's aspirations and strategy with respect to responsible business.

The terms of reference of the Corporate Governance and Nominations Committee also covers issues such as membership and frequency of meetings, as mentioned above, together with the requirements for the quorum for and the right to attend meetings, reporting responsibilities and the authority of the Corporate Governance and Nominations Committee to carry out its duties.

Remuneration Committee

Subject to the appointment of the Senior Independent Director and following the resignation of Ingrid Johnson (as described above), in compliance with the UK Corporate Governance Code, the Remuneration Committee will be made up of a minimum of three members who are independent non-executive directors (other than the Chairman who was independent on appointment). The Remuneration Committee is chaired by Cathy Turner and its current membership is as follows:

Name	Committee Position
Cathy Turner	Chair of the Remuneration Committee
Ingrid Johnson*	Non-Executive Director
Glyn Jones	Independent Non-Executive Director

Jon Little Independent Non-Executive Director

* Ingrid Johnson will step down from the Remuneration Committee ahead of the Proposed Listing.

The Senior Independent Director is expected to be appointed to the Remuneration Committee ahead of the Proposed Listing.

The Remuneration Committee will meet not less than four times a year and otherwise as the Chair of the Remuneration Committee or the Chief Executive Officer shall require. The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Group's policy on executive remuneration, determining the individual remuneration packages, including pension rights and any compensation payments of each of the Company's executive directors, members of the Executive Committee, senior executives in control functions, material risk takers and other Group employees whose total annual compensation is expected to equal or exceed £1 million.

The Remuneration Committee is also responsible for considering and making recommendations to the Board with regard to the design and targets for the Group-wide annual bonus scheme and operation of long-term incentive schemes in which executive directors and senior management participate, and reviewing the ongoing appropriateness and relevance of the remuneration policies of the Group.

The terms of reference of the Remuneration Committee cover such issues as membership and frequency of meetings, together with the requirements for the quorum for and the right to attend meetings, reporting responsibilities and the authority of the Remuneration Committee to carry out its duties.

IT Committee

The IT Committee has been established to oversee the Group IT estate and to identify any IT matters which pose a significant risk to, or have material impact on, the Group. It shall consist of at least three members, all of whom are independent non-executive directors. The IT Committee is chaired by Moira Kilcoyne and its membership is as follows:

Name	Committee Position
Moira Kilcoyne	Chair of the IT Committee
Rosie Harris	Independent Non-Executive Director
George Reid	Independent Non-Executive Director

The IT Committee will meet not less than six times a year and otherwise as the Chair of the IT Committee or the Chief Executive Officer may require. The terms of reference of the IT Committee cover such issues as membership and frequency of meetings, as mentioned above, together with the requirements for the quorum for and the right to attend meetings, reporting responsibilities and the authority of the IT Committee to carry out its duties.

Selected Financial Information

The following review of the Group's financial condition and operating results sets out selected consolidated audited financial information for the Group as at and for each of the years ended 31 December 2015, 2016 and 2017, in each case prepared in accordance with IFRS. The information has been extracted without material adjustment from the financial information in "Historical Financial Information" in this Prospectus and is presented on a continuing operations basis, which therefore excludes discontinued operations. The following section also includes certain non-IFRS financial information for the periods indicated, which has not been extracted from the financial information in "Historical Financial Information" and has not been prepared in accordance with IFRS.

The selected financial information should be read in conjunction with the information referred to above and in "Operating and Financial Review". Investors are advised to read the whole of this Prospectus and not rely on the information summarised in this "Selected Financial Information".

Consolidated Income Statement

	Year Ended 31 December
	2015	2016	2017
Revenue		(£ millions)
Gross earned premiums	135	141	148
	(81)	(84)	(88)
Premiums ceded to reinsurers
Net earned premiums	54	57	60
Fee and commission income, and income from service activities	816	803	895
Net investment income	1,166	6,310	5,195
Other income	2	17	13
Total revenue	2,038	7,187	6,163
Expenses
Claims and benefits paid	(77)	(72)	(76)
Reinsurance recoveries	56	51	54
Net insurance claims and benefits incurred	(21)	(21)	(22)
Change in reinsurance assets and liabilities	40	119	85
Change in insurance contract liabilities	(32)	(125)	(78)
Change in investment contract liabilities	(949)	(5,522)	(4,308)
Fee and commission expenses, and other acquisition
costs	(362)	(299)	(320)
Change in third-party interest in consolidated funds	(76)	(575)	(673)
Other operating and administrative expenses	(565)	(654)	(816)
Finance costs	(32)	(43)	(39)
Total expenses	(1,997)	(7,120)	(6,171)
Profit on the acquisition and re-measurement of subsidiaries	-	-	3
Profit/(loss) before tax	41	67	(5)
Tax expense attributable to policyholders' funds	7	(102)	(49)
Profit/(loss) before tax attributable to shareholders' profits	48	(35)	(54)
Income tax expense	16	(94)	(41)
Less: tax attributable to policyholders' funds	(7)	102	49
Tax attributable to shareholders' funds	9	8	8

57	(27)	(46)
28	62	203
85	35	157
85	35	157
43.9	(20.8)	(35.4)
21.5	47.7	156.2
65.4	26.9	120.8
43.9	(20.8)	(35.4)
21.5	47.7	156.2
65.4	26.9	120.8

Consolidated Statement of Comprehensive Income

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Profit for the year after tax	85	35	157
Other comprehensive income:
Items that may be reclassified subsequently to income statement
Exchange gains/(losses) on translation of foreign
operations	(8)	23	-
Other comprehensive income/(expenses) for the year	-	(2)	3
	(8)	21	3
Items that will not be reclassified subsequently to income statement
Measurement movements on DB plans	(1)	(1)	-
	(1)	(1)	-
Total other comprehensive income, net of tax	(9)	20	3
Total comprehensive income for the year	76	55	160
Attributable to:
Equity holders of the Parent Company	76	55	160

Consolidated Statement of Financial Position

	As at 31 December
	2015	2016	2017
		(£ millions)
Assets
Goodwill and other intangible assets	670	654	574
Property, plant and equipment	19	18	18
Investments in associated undertakings	1	1	3
Loans and advances	190	220	199
Financial investments	49,294	52,235	64,248
Reinsurers' share of policyholder liabilities	2,507	2,863	2,908
Deferred tax assets	8	8	22
Current tax receivable	27	20	-
Trade, other receivables and other assets	716	794	497
Deferred acquisition costs	768	655	611
Derivative assets	971	26	87
Cash and cash equivalents	1,601	1,595	2,360
Assets of operations classified as held for sale	-	6,396	446
Total assets	56,772	65,485	71,973
Equity and liabilities Equity
Ordinary share capital	130	130	130
Ordinary share premium reserve	-	-	58
Other reserves	60	80	39
Retained earnings	723	782	872
Total equity	913	992	1,099
Liabilities
Long-term business insurance policyholder liabilities	293	417	489
Investment contract liabilities	49,041	51,265	59,139
Third-party interests in consolidated funds	3,311	4,140	7,905
Provisions and accruals	35	29	104
Deferred tax liabilities	152	179	190
Current tax payable	13	20	38
Borrowings	786	839	782
Trade, other payables and other liabilities	938	1,024	1,331
Deferred revenue	312	261	244
Derivative liabilities	978	56	433
Liabilities of operations classified as held for sale	-	6,263	219
Total liabilities	55,859	64,493	70,874
Total equity and liabilities	56,772	65,485	71,973

Consolidated Statement of Cash Flows (1)

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Cash flows from operating activities
Profit before tax	84	149	227
Non-cash movements in profit before tax	2,878	2,552	4,061
Net changes in working capital	(190)	229	1,134
Taxation paid	(40)	(59)	(9)
Total net cash flows from operating activities	2,732	2,871	5,413
Cash flows from investing activities
Net acquisitions of financial investments	(2,430)	(2,810)	(4,760)
Acquisition of property, plant and equipment	(5)	(4)	(8)
Acquisition of intangible assets	(14)	(9)	(9)
Acquisition of interests in subsidiaries and associated
undertakings joint ventures	(567)	(16)	(33)
Proceeds from the disposal of interests in subsidiaries	(4)	-	208
Total net cash used in investing activities	(3,020)	(2,839)	(4,602)
Cash flows from financing activities
Dividends paid to ordinary equity holders of the Company
	(24)	-	(210)
Interest paid	(32)	(43)	(39)
Proceeds from issue of ordinary shares	-	-	258
Loan to Employee Benefit Trust	(54)	(43)	-
Proceeds from issue of subordinated and other debt	614	53	-
Subordinated and other debt repaid	-	-	(57)
Total net cash from/(used in) financing activities	504	(33)	(48)
Net increase/(decrease)in cash and cash equivalents	216	(1)	763
Cash and cash equivalents at beginning of the year	1,386	1,601	1,595
Effects of exchange rate changes on cash and cash
equivalents	(1)	(5)	2
Cash and cash equivalents at end of the year	1,601	1,595	2,360

⁽¹⁾ Cash flows include both continuing and discontinued operations.

Non-IFRS Financial Information

__________________

The tables below present certain non-IFRS financial measures as at and for the years ended 31 December 2015, 2016 and 2017. The Directors believe that these measures provide useful information with respect to the performance of its business and operations. These non-IFRS financial measures are not audited. They are not meant to be considered in isolation or as a substitute for metrics of financial performance reported in accordance with IFRS. Moreover, these measures may be defined or calculated differently by other companies and, as a result, they may not be comparable to similar measures calculated by the Group's peers. See "Presentation of Financial and Other Information—2. Non-IFRS Financial Measures".

The following table sets forth the reconciliation of profit after tax to operating profit from continuing operations:

	Year Ended 31 December
	2015	2016	2017
Profit for the year after tax Adjustments:	85	35	157
Profit after tax from discontinued operations	(28)	(62)	(203)
Profit/(loss) after tax from continuing operations	57	(27)	(46)
Income tax on continuing business	(16)	94	41
Profit/(loss) before tax	41	67	(5)
Income tax attributable to policyholder returns	7	(102)	(49)
Profit/(loss) before tax attributable to shareholders'
profits	48	(35)	(54)
Goodwill and amortisation of purchased intangibles (1)	57	52	54
Business transformation costs (2)	96	102	89
Finance costs (3)	32	43	39
Quilter Separation one-off costs (4)	-	7	32
Profit on acquisition and re-measurement of subsidiaries (5)	-	-	(3)
Policyholder tax adjustments (6)	(12)	8	(17)
Voluntary customer remediation costs (7)	-	-	69
Total non-operating adjusting items before tax	173	212	263

operations 221 177 209

Operating profit before tax from continuing

__________________

⁽¹⁾ Represents acquisition costs and the amortisation of intangible assets acquired by the Group, in relation to policies sold by acquired businesses pre-acquisition. When applying acquisition accounting, deferred acquisition costs and deferred revenue existing at the point of acquisition are not recognised under IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill and other intangible assets. In determining operating profit, the Group recognises deferred revenue, acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation and impairment of acquired other intangible assets as well as the movements in certain acquisition date provisions. If the intangible assets recognised as a result of a business combination are subsequently impaired, this is excluded from operating profit. Costs incurred on completed acquisitions are also excluded from operating profit.

⁽²⁾ Represents the costs the Group has incurred in connection with its UK Platform Transformation Programme and the transformation costs in relation to the South African branches. This programme is on-going and involves replacing many aspects of the existing UK platform and migration of services to third party service providers. The cost of developing the new technology typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services are excluded from operating profit from continuing operations. Only costs that are directly attributable to the programme are excluded from operating profit from continuing operations. The contracts with IFDS came to an end by mutual agreement effective as of 2 May 2017, at which point the costs for the year ended 31 December 2017 totalled £53 million (2016: £102 million), (2015: £96 million). The Group subsequently entered into a new contract with FNZ, under which additional costs of £21 million were incurred for the year ended 31 December 2017. The transformation costs for the South African branches include charges of £15 million for the year ended 31 December 2017 related to historical arrangements with the wider Old Mutual plc group's South African businesses. As a consequence of Managed Separation, these arrangements were severed and, as a

• result, deferred acquisition cost balances were written off, together with a loss incurred on the cancellation of reinsurance arrangements.
• (3) Represents the cost of interest and finance charges on the Group's borrowings from Old Mutual plc, borrowed to primarily fund acquisitions, including Quilter Cheviot in 2015.
• (4) Represents the one-off transition costs to separate the Group from Old Mutual plc to become standalone and any additional one-off costs associated with the Proposed Listing.
• (5) Relates to the Group acquiring 100% of the whole of the issued share capital of GET, a company incorporated in South Africa, from OMGUK (part of the Old Mutual plc group) for around £1 million. Along with recording the book values of the assets acquired and liabilities assumed of £4 million, the Group recognised a gain of £3 million. The excess of the book value over consideration paid was attributable to potential future integration costs which, if incurred, would be expensed in future periods. As potential future integration activities do not qualify as a liability under the acquisition method of accounting, none was recorded, resulting in a gain.
• (6) Relates to the removal of distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. In addition, adjustments are made to remove distortions to policyholder tax arising from the utilisation of tax allowances from elsewhere in the Group (e.g. capital losses) which are regarded economically as impacting shareholder tax, and from distortions arising from other non-operating adjusting items.
• (7) Represents the costs the Group expects to incur in relation to the decision to commence voluntary remediation to customers in certain legacy products within Quilter Life Assurance.

The following table sets forth a breakdown of the Group's reported and normalised operating profit from continuing operations, as well as other selected key metrics on a normalised basis for the periods indicated. See "Presentation of Financial and Other Information—2. Non-IFRS Financial Measures" for a further discussion of the normalisation adjustments.

	Year Ended 31 December
	2015	2016	2017
		(£ millions, unless otherwise indicated)
Reported basis
Net management fee (1)	505	495	591
Other revenue (2)	81	121	137
Total revenue	586	616	728
Total expenses	(365)	(439)	(519)
Operating profit from continuing operations	221	177	209
Adjustments to reported basis Quilter Life Assurance fee restructure (3)
Net management fee	-	24	-
Other revenue	-	(1)	-
Total expenses	-	4	-
Total Quilter Life Assurance fee restructure adjustment	-	27	-
Other normalisation adjustments (4)
Net management fee	(2)	5	-
Other revenue	3	2	-
Total expenses	(9)	(3)	-
Total other normalisation adjustments	(8)	4	-
Total adjustments	(8)	31	-

Normalised basis

__________________

Normalised net management fee (5)	503	524	591
Normalised other revenue (5)	84	122	137
Total normalised revenue (5)	587	646	728
Total normalised expenses (5)	(374)	(438)	(519)
Normalised operating profit from continuing operations (5)	213	208	209
Key performance indicators
Revenue margin (bps) (6)	64	59	56
Operating margin (%) (7)	36	32	29
Closing AuMA (£bn) (8)	85.3	98.2	114.4
Average AuMA (£bn) (9)	82.5	89.2	105.1
NCCF (£bn) (10)	3.9	3.3	6.3
NCCF (excl. Quilter Life Assurance) (£bn)	4.3	4.2	7.6
NCCF / Opening AuMA (%) (11)	6	6	9

• (1) Net management fee consists of revenue generated from AuMA, fixed fee revenues and policyholder tax contributions, netted off by trail commissions payable.
• (2) Other revenue represents revenue not directly linked to AuMA (e.g. early encashment charges, risk result, adviser initial fees and adviser fees linked to AuMA in Quilter Financial Planning (recurring fees)).
• (3) The Quilter Life Assurance fee restructure adjustment relates to the removal of a fee restructure exercise conducted on Quilter Life Assurance's pension products in the year ended 31 December 2016 following the FCA Thematic Review. This adjustment impacts the Wealth Platforms segment and includes the one-off revenue impact, expenses incurred in relation to the Thematic Review and compensation paid to policyholders for the understatement of fund rebates.
• (4) Other normalisation adjustments relate to certain one-time adjustments and rebates. The rebate adjustments impacts the Advice & Wealth Management segment (a decrease in revenue on a normalised basis by £2 million in the year ended 31 December 2015 and an increase in revenue on a normalised basis by £5 million in the year ended 31 December 2016). The remaining normalisation adjustments impact the Wealth Platforms segment.
• (5) Adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments (each as described above).
• (6) Revenue margin represents net management fee, including policyholder tax, divided by average AuMA.
• (7) Operating margin represents reported operating profit from continuing operations divided by total revenue, including policyholder tax and adviser fees. Operating margin excludes financing costs.
• (8) Closing AuMA represents the total market value of all financial assets managed and administered on behalf of customers as at 31 December of the financial year, after intra-group eliminations.
• (9) Average AuMA represents the average total assets managed and administered on behalf of customers during the financial year ended 31 December, after intra-group eliminations. Average AuMA is calculated using a 13-point average of monthly closing AuMA.
• (10) NCCF measures the difference between money received from and the money returned to customers during the relevant period for the Group or for the business indicated.
• (11) Excludes Quilter Life Assurance.

Operating and Financial Review

This "Operating and Financial Review" should be read in conjunction with "Presentation of Financial and Other Information", "Industry Overview", "Business Description" and "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 "Operating and Financial Review" is extracted from the financial information set out in "Historical Financial Information".

The following discussion of the Group's results of operations and financial condition contains forwardlooking statements. The Group'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 "Risk Factors" and "Presentation of Financial and Other Information—10. Forward-looking statements". In addition, certain industry issues also affect the Group's results of operations and are described in "Industry Overview".

This discussion and analysis contains forward-looking statements that are subject to known and unknown risks and uncertainties. Quilter's actual results and the timing of events could differ materially from those expressed or implied by such forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Prospectus. Quilter does not undertake any obligation to revise or publicly release the results of any revision to these forwardlooking statements.

1. Overview

The Group is a leader in the UK and in selected offshore markets in wealth management, providing advice-led investment solutions and investment platforms to over 900,000 customers, principally in the affluent market segment. At the core of the Group are a multichannel wealth management proposition and a strong investment performance track record, driving Integrated NCCF and long term customer relationships. As at 31 December 2017, the Group had £114.4 billion of AuMA following the elimination of intra-Group assets.

The Group operates through two segments, Advice & Wealth Management and Wealth Platforms.

The Group's Advice & Wealth Management segment, with £41.7 billion of AuM as at 31 December 2017, comprises:

• Quilter Financial Planning, which is a network of over 3,500 financial advisers, including approximately 2,000 CF30 Advisers, of which 1,561 are RFPs, who deliver face-to-face financial advice tailored to meet the specific needs of the customer. Quilter Financial Planning is the second largest restricted advice network in the UK, as measured by the number of CF30 Advisers as at 31 December 2017 (Source: Financial Times);
• Quilter Investors, which is a leading provider of multi-asset investment solutions in the UK, offering a broad range of solutions for its customers' accumulation and decumulation needs; and

Quilter Cheviot, which is a leading UK-based private-client wealth manager providing discretionary and advisory wealth management services to private clients, corporates, pension funds, trusts and charities.

The Group's Wealth Platforms segment, with £84.6 billion of AuA as at 31 December 2017, comprises:

• Quilter Wealth Solutions, which is a leading investment platform provider of advicebased wealth management products and services in the UK. Quilter Wealth Solutions serves a largely affluent customer base through both Quilter Financial Planning and third party advisers. The UK Platform Transformation Programme, a major enhancement of Quilter Wealth Solutions' range of products and capabilities, is designed to improve clients' and advisers' experience and expand the proposition;
• Quilter Life Assurance, the Group's book of legacy UK life insurance, insurance bonds and pension business, as well as the Group's open protection book of business. It also includes the Group's institutional life business, which is closed to new business and the majority of which the Group expects will run off over the next one to two years. Quilter Life Assurance's retail book is also in a steady managed run-off expected to be at around 15% per annum; and
• Quilter International, which is a leading investment platform provider of cross-border investment solutions (portfolio bonds and unit-linked products) aimed primarily at affluent and high net worth UK residents seeking investment solutions outside of the UK, as well as expatriates and international investors in selected offshore markets.

The Group has adopted a multi-channel access model, using both advised and open market approaches, designed for better customer outcomes by giving customers greater accessibility and choice. As at 31 December 2017, the Group's advised channel included approximately 200,000 advised customers paying ongoing advice fees, 1,561 RFPs (who advise on a range of investment solutions offered by the Group and from third parties that have been preresearched by the Group) and 422 IFAs on the Quilter Financial Planning network (who advise on an unrestricted whole of market basis). The Group's open market channel included approximately 700,000 customers (of which approximately 400,000 are customers of Quilter Wealth Solutions) who are primarily serviced by over 4,000 active third party UK advice firms using the Group's platforms and investment solutions. The Directors believe that the Group's multi-channel wealth management proposition provides greater market breadth and customer and adviser choice which support long-term customer relationships. The Group's multichannel wealth management proposition has also contributed to growth in the Group's Integrated NCCF (excluding Quilter Life Assurance), which has increased from £1.6 billion in the year ended 31 December 2015 to £5.2 billion in the year ended 31 December 2017. The Group's open market NCCF (excluding Quilter Life Assurance) has decreased from £2.7 billion in the year ended 31 December 2015 to £2.4 billion in the year ended 31 December 2017. Growth in Integrated NCCF has also been supported by the increase in the Group's RFPs from 930 as at 31 December 2014 to 1,561 as at 31 December 2017, an increase of 68% as a result of acquisitions, organic growth and transition of advisers from IFAs to RFPs.

2. Current Trading and Prospects

The Group has continued to trade in line with the Directors' expectations since the year ended 31 December 2017. Overall the Directors continue to remain confident in the Group's prospects. The Directors believe that the outlook for the Group is attractive due to the strong growth prospects of the sectors within which the Group operates.

The Group's vision is to be the leading UK wealth manager, as a purpose-built, full service wealth manager delivering good customer outcomes. The Group has leading positions in one of the world's largest wealth markets, and its multi-channel wealth management proposition and investment performance are driving integrated flows and long term customer relationships. Together this has delivered attractive top-line growth and there is the opportunity for operating leverage following the Proposed Listing.

In 2017, alongside strong investment performance, the Group attracted very high levels of net flows, and the integrated business model is proving a success in providing what customers want. This has enabled the Group to maintain profitability while still investing in the business ahead of the Proposed Listing, and achieving a 29% operating margin for 2017 for the goforward business. The Group has further grown its distribution capabilities through the acquisition of Caerus, and remains on track and on budget with the UK Platform Transformation Programme. The Group has a strong balance sheet, strong capital and liquidity positions and is independently funded.

The strong levels of Integrated NCCF in recent periods have helped the Group exceed its target of delivering NCCF (excluding Quilter Life Assurance) of 5% of opening AuMA per annum over the medium term and, should market conditions remain supportive, the Directors expect to exceed this target in 2018.

The Company expects to publish the Q1 Results Supplement on or about 30 April 2018.

3. Segmental Reporting

The Group's operations are divided into two principal reporting segments: Advice & Wealth Management and Wealth Platforms, which accounted for 43% and 56% of the Group's revenue and 39% and 76% of the Group's operating profit from continuing operations, respectively, for the year ended 31 December 2017 (in each case, excluding Head Office). The Group's Advice & Wealth Management segment comprises the Quilter Financial Planning, Quilter Cheviot (since its acquisition in February 2015) and Quilter Investors businesses. The Group's Wealth Platforms segment comprises the Quilter Wealth Solutions, Quilter International and Quilter Life Assurance businesses. The Group's Head Office function comprises aggregate head office and other central costs, Quilter Separation and related standalone costs, as well as financing costs. In addition, the Group contains a number of businesses which constitute "Discontinued Operations" and have been, or are planned to be, divested. The Group's Discontinued Operations include the Single Strategy Business, Old Mutual Wealth Italy S.p.A (up to the date of its sale completed on 9 January 2017) and Skandia Life S.A. (Skandia Luxembourg and Skandia France) (up to the date of its sale completed on 2 February 2015). The following discussion and analysis presents the Group's historical financial information on a continuing operations basis, which therefore excludes discontinued operations from the discussion.

The business area segmentation that is presented has changed over the historical period under review. In order to facilitate the comparability of results between the periods presented, the Group has prepared the historical financial information to reflect the current segmentation of the business. For a description of the Group's current business areas, see "Business Description".

4. Key Factors Affecting the Group's Results of Operations and Financial Condition

The Group's results of operations and financial condition are affected by a variety of factors, a number of which are outside the control of the Group. Set out below is a discussion of the most significant factors that have affected the Group's financial results during the periods under review and which the Group currently expects to affect its financial results in the future. Factors other than those presented below could also have a significant impact on the Group's results of operations and financial condition in the future.

4.1 Economic and market conditions in the UK and internationally

The Group's results are affected by conditions in global capital markets, the economy generally and the UK economy in particular. Such conditions impact the value of customer investment portfolios, which in turn impacts the Group's results because a significant portion of the Group's income is derived from fees which are calculated as a percentage of AuM or AuA. Factors such as consumer spending, business investment, the volatility and strength of both debt and equity markets, exchange rates and inflation all affect the economic environment, investor confidence and, ultimately, the volume and profitability of the Group's business. In an economic downturn characterised by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for savings products could be adversely affected. Further, customer sentiment regarding the future prospects of investment markets, and of the economy more generally, could impact customer behaviour and reduce demand for the Group's products and services.

The Group's results of operations may be impacted by Brexit. Due to the size and importance of the UK economy, particularly with respect to the financial services market, as well as the uncertainty and unpredictability concerning the UK's legal, political and economic relationship with Europe after Brexit, there may continue to be instability in the national and international markets, significant currency fluctuations and otherwise adverse effects on consumer confidence for the foreseeable future, including beyond the date of the UK's withdrawal from the EU, which could reduce the demand for or value of investment assets.

Despite recent fluctuations and market changes, the Directors believe that the historical strength of the UK equity markets, combined with demographic factors and government efforts to increase individual savings and self-provision for retirement, has resulted in increased consumer focus on savings and investment products. In addition, the Group has continued to perform against a challenging background of difficult capital markets, volatile equity markets and widespread economic uncertainty which has led to consumers looking for greater certainty and security through trusted and financially strong brands.

4.2 Government policy, legislation and regulation

The Group is subject to detailed and comprehensive regulation in each of the jurisdictions in which it conducts business. Changes in government policy, legislation or regulation applying to companies in the financial services industry in any of the jurisdictions in which the Group operates, particularly in the United Kingdom, has historically impacted and may continue to impact the Group's results of operations. For example, changes in taxation legislation applicable to the Group's products have impacted the Group's results of operations in the past and further changes in taxation legislation could impact the Group's results of operations in the future.

Following the implementation of the RDR in 2012 and the Pension Freedom legislation in 2015, there has been increased customer demand for financial planning throughout retirement and a limited supply of advisers to meet the demand. The Pension Freedom legislation has given retirees greater flexibility in how to access and invest DC pensions at retirement, including through platforms like Quilter Wealth Solutions. Under Pension Freedom, consumers approaching retirement have the option to take their whole pension pot as cash (the first 25% tax free, with the balance taxed at the individual's marginal rate). Consumers who do not draw down their pensions immediately have significantly more control and flexibility with respect to how their pensions are invested as a consequence of the Pension Freedom legislation. As a result, the Group has experienced an increase in demand for pension products, potentially as an alternative to annuities products. The impact of Pension Freedom on Quilter Wealth Solutions has been significant, and, as a result, sales in the pension propositions have accounted for 48%, 56% and 61% of Quilter Wealth Solutions' gross sales in the years ended 31 December 2015, 2016 and 2017, respectively. However, there can be no assurance that the Group will continue to capture new business in this manner, or that the trends seen in the aftermath of Pension Freedom will not reverse, as there is still uncertainty over the longer-term impact of the Pension Freedom on the sales of individual annuities and alternative savings products.

As part of RDR, the FCA announced that IFAs and wealth managers had to move to a more transparent and fair charging system, in which the services received are clear to the client. As a result of RDR and the shift towards clean, fee based charging for financial advice, revenue margins were suppressed as commission based charging mechanisms are no longer in place. Furthermore, in 2012 the FCA announced that platform businesses had to move to adviser charging for new business. Adviser charges are an explicit agreement between the adviser and customer to pay for a service which the adviser is providing the customer. Prior to RDR, the advisers were remunerated through a commission mechanism paid by the platforms. A Sunset Clause came into effect in April 2016 for existing business which meant that all rebates needed to be passed onto customers for ISA and CIA accounts. As a result, a number of charging structures within the Wealth Platforms segment were changed in early 2016. Most notably, UK Platform moved ISA and CIA accounts that were still on an old charging structure (SIS1 and SIS2) to the SIS3 charging structure in early 2016. CRA and CIB were not moved to the new structure as they were not impacted by the Sunset Clause, but they were naturally migrating over time.

The Group's efforts to comply with changes in regulations have historically, and may in the future, lead to increased operating and administrative expenses. Recent and ongoing regulatory reform initiatives include MiFID II, the PRIIPs regulation, Solvency II, GDPR and the IDD. These regulations could make it more expensive for the Group to conduct its business, require that the Group make changes to its business model, require that the Group satisfy increased capital requirements, necessitate time-consuming and costly implementation measures, or subject the Group to greater regulatory scrutiny.

The Group is also subject to regulatory review, whether as part of an industry-wide review, a firm-specific assessment or otherwise. The outcome of such reviews, though difficult to

predict, could have an impact on the Group's results of operations. For example, possible outcomes include a requirement to compensate customers for losses or certain costs they have incurred as a result of the products they were sold or services they received or the initiation of regulatory enforcement action against the Group, potentially including the imposition of a fine. Further, even if the Group is not named specifically, these reviews could negatively impact the Group's reputation or demand for the Group's products.

On 3 March 2016, the FCA issued a report detailing the findings of its industry-wide Thematic Review into the treatment of long-standing customers invested in closed-book products sold by the life insurance sector, with a focus on four areas or "outcomes": strategy and governance, communications, fund performance and charges (in particular exit charges and paid-up charges). At the same time, the FCA announced that its enforcement division was initiating investigations into six firms in connection with the findings of the Thematic Review (although the investigation into one of those firms was subsequently discontinued on 7 September 2017).

OMWLA, a subsidiary of the Group which will be rebranded, and is referred to elsewhere in this Prospectus, as Quilter Life Assurance, is one of the firms under investigation by the FCA. The Investigation covers the four outcomes/areas of focus identified in the Thematic Review and in particular: (i) OMWLA's behaviour in respect of the disclosure of exit charges and paid up charges after December 2008 (Outcomes 2 and 4 in the Thematic Review); and (ii) whether OMWLA contravened regulatory requirements across a number of other areas assessed in the Thematic Review. In relation to point (ii), these other areas are aspects of OMWLA's strategy and governance in relation to its closed-book customers (outcome 1 in the Thematic Review) and aspects of fund performance, again in relation to OMWLA's closedbook customers (Outcome 3 in the Thematic Review).

OMWLA is working with the FCA and is cooperating with its Investigation. To date, the FCA has issued, and OMWLA has given responses in respect of, a number of information requirements. For further information, see "Regulatory Overview —5. Recent and Future Regulatory Developments—5.1 United Kingdom and European Union—5.1.2 FCA Thematic Reviews".

There are a number of studies and thematic reviews currently being initiated or undertaken by the UK regulators. These include the FCA's Asset Management Review, the findings of which were published on 28 June 2017, and the Investment Platforms Market Study, the terms of reference for which were announced on 17 July 2017. The Group fully supports these studies, which it believes will increase the confidence and credibility of the wealth management industry in the UK and ensure that it provides fair outcomes for customers.

The Group may also be affected by future changes in government in the UK, which may lead to changes in government policy, legislation or regulatory interpretation applying to the Group and may ultimately influence investor decisions in particular markets in which the Group operates, change the structure of those markets and the products offered, or increase the costs of doing business in those markets. Changes in government could also introduce a range of anti-wealth policies. See "—4.3 Taxation" below.

4.3 Taxation

The Group currently benefits from customer demand supported by government policies aimed at encouraging personal savings through the application of tax relief to certain types of investment. The Group also benefits from tax policies which offer customers cross-border tax benefits, in particular with regard to Quilter International's single premium portfolio bonds. Changes in taxation legislation and policy, either as a result of a change in government or otherwise, have historically affected, and may in the future affect, investor sentiment, making investment generally, and specific types of investment products or solutions in particular, either more or less appealing. Quilter International (and particularly the business located in the Isle of Man) may be particularly vulnerable to the impact of changes in taxation legislation, or to the impact of public perception of offshore accounts in low tax jurisdictions. As a result of the negative press surrounding these events, the Group may experience decreased demand for certain of its products and services due to social and political pressure concerning offshore investing.

Under UK legislation enacted in 2016, the Group will be required, post-Quilter Separation to publish its UK tax strategy (the "Quilter UK Tax Strategy"), setting out the Group's approach to the management of tax affairs in the context of the Group's wider strategy. The Group aims to fulfill its strategic objectives within a stated risk framework, encompassing tax risk management and governance processes within a formal tax risk policy which is approved by the Board Risk Committee. In operating tax risk management and governance processes, the Group has a low appetite towards tax risk. The Group does not promote tax avoidance or aggressive tax planning arrangements to customers or to other parties. The Group maintains an open and co-operative relationship with HMRC, holding regular meetings to ensure that HMRC understands the business and to provide the opportunity to discuss tax implications of strategy and business developments in real time. The full Quilter UK Tax Strategy will be published on the company website post-Quilter Separation and in line with regulatory requirements.

4.4 Impact of acquisitions, disposals and exited businesses

Throughout the period under review, the Group has focused on transforming its business from a traditional UK and European life assurer, which was dependent upon legacy business, to a modern, multi-channel UK-focused wealth manager with the majority of profits resulting from its advice-driven wealth model. The Group has undertaken this transformation, in particular, through the acquisitions of UK advice and wealth management businesses, the closing to new business of its legacy life insurance businesses in the UK and the disposal of its European life assurance businesses. In respect of acquisitions completed during the periods under review, the Group's consolidated historical financial information only includes the results of acquired entities as from the date of acquisition.

In February 2015, the Group acquired Quilter Cheviot, one of the UK's leading discretionary wealth managers with closing AuM of £17.4 billion in the month of the acquisition, for £585 million. This transaction represented a significant milestone in the Group's transition from primarily a platform business to a multi-channel wealth management business that delivers increased value to advisers and customers. Quilter Cheviot accounted for 20%, 22% and 22% of the Group's total revenue in the years ended 31 December 2015, 2016 and 2017, respectively.

The Group has also focused on delivering growth and increasing Integrated NCCF within the Group, primarily by increasing the number of RFPs through acquisitions and organic recruitment. RFPs numbers have grown by 930 since the beginning of 2014 to 1,561 as at 31 December 2017. This increase in RFPs is 28% due to organic growth, 31% due to transition of IFAs to RFPs, and 41% due to acquisitions. Quilter Financial Planning's significant acquisitions include Positive Solutions in 2013 (adding over 740 advisers) and Caerus in 2017 (adding 296 advisers, of which 130 were RFPs). In addition, following the closure of Sesame's IFA network, Intrinsic was named as Sesame's "Preferred Partner" (adding 245 advisers in 2015). To further increase Integrated NCCF, the Group has also focused on improving adviser productivity through the services and support that the Group provides to its advisers and investment managers. Productivity, defined as average NCCF per adviser into the advised proposition (consisting of Quilter Investors or Quilter Cheviot), has increased from £0.9 million in the year ended 31 December 2015 to £1.8 million in the year ended 31 December 2017.

The Group has divested its European life assurance businesses to streamline and de-risk the business and support the financing of its acquisitions, allowing the Group to focus on its core UK and re-focused international business. During the period under review, these disposals include Skandia France and Skandia Luxembourg in February 2015 and Old Mutual Wealth Italy in January 2017. Revenue from these disposed businesses was £51 million, £41 million and £nil for the years ended 31 December 2015, 2016 and 2017.

In November 2017, the Group completed the transfer in of GET, an IT company which had previously been part of the wider Old Mutual plc group. This transfer ensures that the Group will continue to provide direct IT support to Quilter Wealth Solutions and help deliver IT activities required to support completion of the Quilter Separation and the UK Platform Transformation Programme.

In December 2017, the Group entered into an agreement to sell OMGI, which operates the Single Strategy Business through certain subsidiaries including OMGIUK, to Bidco (a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of OMGIUK's management), subject to certain conditions, including in relation to mandatory regulatory change of controller approvals and a re-organisation pursuant to which all the shares in OMIML and the Multi-Asset Business will be separated and retained by the Group. The parties currently expect the sale to complete in the second half of 2018. The Single Strategy Business is classified within discontinued operations and had a total profit before tax of £48 million, £60 million and £152 million for the years ended 31 December 2015, 2016 and 2017, respectively. While the Single Strategy Business has contributed to the Group's performance historically, the Directors believe a single strategy, active investment solution, which is primarily reliant on wholesale and institutional market distributions, is less closely aligned to the Group's goal of becoming the leading UK wealth manager. Accordingly, it was decided to affect a disposal of the Single Strategy Business via the sale of OMGI, coupled with the separation and retention of the Multi-Asset Business. The consideration payable under the OMGI SPA is subject to a number of adjustments and the expected total consideration payable to the Group is approximately £600 million, comprising cash consideration of approximately £570 million payable on completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as surplus capital of the Single Strategy Business associated with the separation from the Group is released. These values are subject to a number of potential price adjustments, depending on the net

asset value of the business and other factors at the disposal date. The deferred consideration is not subject to performance conditions. At completion, economic ownership of the Single Strategy Business will pass to Bidco effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of the Group. Proceeds from a completed transaction will be used to repay the New Term Loan in full and for general corporate purposes. In connection with the OMGI Transaction, bi-lateral transitional services are required for the duration of the transition period to ensure a smooth separation of OMGI and the Single Strategy Business from the Group and the Multi-Asset Business from OMGI. The period of services will vary on a service by service basis but can be up to 36 months. The Group's contracted costs under the OMGI TSA are expected to be approximately £10 million per annum. For a further discussion of the OMGI Transaction, see "Risk Factors—2. Risks relating to the Group's business—2.6 The Group faces risks relating to the disposal of OMGI.", "Business Description—5. Business Overview—5.3 Business held for disposal - OMGI and the Single Strategy Business" and "Additional Information—3.5.1 OMGI Transaction".

The Group has also closed certain product lines during the period under review. For example, Quilter Life Assurance's products (including life insurance, insurance bonds and pension business) have generally been closed to new business over the last decade and are in steady, managed run-off. Most recently, Quilter Life Assurance announced on 15 November 2017 that it would cease to take on new institutional clients for its low margin institutional life business. As at 31 December 2017, the institutional life business represented approximately £4.9 billion of AuA. The Directors expect that the majority of the institutional life business will run off over the next one to two years. Quilter Life Assurance delivered 32% of the Group's profit in the year ended 31 December 2017 and an operating margin of 55% in the year ended 31 December 2017. Quilter Life Assurance has historically been a strong contributor of the Group's cash generation and source of dividends.

4.5 The Group's multi-channel wealth management proposition

The Group's multi-channel wealth management proposition provides market breadth and customer and adviser choice which support long-term customer relationships. The Group's multi-channel wealth management proposition has also contributed to growth in the Group's Integrated NCCF excluding Quilter Life Assurance, which has increased from £1.6 billion, or 37% of total NCCF, in the year ended 31 December 2015 to £5.2 billion, or 68% of total NCCF, in the year ended 31 December 2017. Growth in Integrated NCCF has been supported by the increase in the Group's RFPs from 930 as at 31 December 2014 to 1,561 as at 31 December 2017. This is a net increase of approximately 68%, with 355 RFPs joining the network via acquisitions and a further 276 new RFPs being generated via recruitment and internal transfers over the same period. Since the end of 2015, 142 IFAs have transferred to become RFPs and a further 55 RFPs have transferred from a Mortgage & Protection adviser role. The Group aims to further increase the number of RFPs through acquisitions and organic recruitment. See "—4.4 Impact of acquisitions, disposals and exited businesses" for a discussion of the Group's RFP acquisitions during the period under review. To further support the growth of RFPs, Quilter Financial Planning also acquired the FAS to encourage new entrants into the market and to support the growth and development of the adviser community.

In addition to driving Integrated NCCF, the Group's multi-channel wealth management proposition is expected to enable the Group to benefit from scale and improved operating efficiency. For example, the Group's scale and the margin earned in its multi-channel model have reduced the impact of industry pricing pressure. Going forward, the Group will have further opportunities to deliver scale benefits through distribution and through its multi-asset and discretionary portfolio management capabilities. The Group also believes that it will have opportunities to improve its operating margins in the medium term. Expense margins (in basis point terms) have been stable while the Group has been investing in its business, because the additional costs have come at a time when the Group has experienced market and asset growth.

Finally, the Directors believe that the Group's multi-channel model helps to mitigate against business-specific headwinds, including both Group-specific and industry-wide trends. This can be seen as the Group has continued to grow its absolute level of revenues, despite the decrease in revenue margin the Group has experienced during the period under review.

4.6 Competition in the Group's markets

The markets for financial services in the UK and the Group's other geographic markets are competitive. The Group's financial performance and its ability to maintain and grow its market share and generate an appropriate return depends upon its capacity to anticipate and respond appropriately to these competitive pressures and trends. The Group currently has leading positions in attractive markets and across its businesses.

Within the Advice & Wealth Management segment, Quilter Financial Planning is the second largest restricted advice network in the UK, with the Group's network of CF30 Advisers representing approximately 9% of the total CF30 Adviser market (Source: APFA). Quilter Cheviot is one of the UK's leading discretionary investment management firms, and it has outperformed its peer group in nearly all investment risk categories in the period under review. Quilter Investors held a leading market position in the UK multi-manager ratings by net flows as at 30 June 2017, according to the Pridham report. The Group also faces competition from direct-to-consumer advice models, including emerging financial technology competitors. For example, PwC forecasts that passives will gain significant market share, rising from 17% of total industry AuM in 2016 to 25% by 2025. Furthermore, transparent, flexible, cheap, passive exchange-traded funds are expected to continue to grow, primarily led by demand from younger, high net worth investors, but also as a result of the rising popularity of "robo-advisors" and other forms of digital advice, which will further increase the take up of these inexpensive funds globally (Source: Asset & Wealth Management Revolution: Embracing Exponential Change, PwC).

Within the Wealth Platforms segment, Quilter Wealth Solutions is a top-three provider of advice-based wealth management products and services in the UK, with a leading market share of assets and net flows. Quilter International is a leader in cross-border investment solutions, and its share of the UK resident offshore market has been growing.

The ability of the Group to keep pace with software and infrastructure investment requirements and innovation may also have an impact on its ability to remain competitive within the relevant markets, which the UK Platform Transformation Programme and other IT initiatives are designed to mitigate.

4.7 Investment performance

Investment performance can impact inflows and outflows of AuM, because customers and intermediaries generally are attracted to asset management products with a consistent, strong record of investment outperformance. The Group's strong investment performance has supported consistent positive net sales of AuM over the period under review. The Group's net sales directly impact revenues and results of operations where fees are charged as a percentage of AuM. For example, Cirilium Balanced was the top selling multi-asset fund in the UK in 2017, according to Pridham, and was continually a first quartile performer over the period under review.

The Group's investment performance track record is strong for the majority of its portfolios and products during the period under review. This strong relative investment performance can contribute to enhanced appreciation in AuM or, in falling equity markets, can mitigate the impact of depreciation on AuM. Conversely, in the case of weak relative investment performance, the opposite can be the case.

Quilter Investors accounted for 11%, 12% and 15% of the Group's total AuM (excluding discontinued operations) as at 31 December 2015, 2016 and 2017, respectively. In the last three years, Quilter Investors has delivered strong performance across its range of products, in particular the Cirilium range has been consistently first quartile over the period. All funds investment performance is assessed either by assessing performance relative to the median fund in each peer group or, in the case of those funds without a peer group, the performance above the published target (on an AuM weighted basis). 84% of the funds that were measured against peers performed above the peer median over a three year period. Notably, two Generation products had a period of under-performance before the modernisation programme was commenced and which has since been remedied through management action. While WealthSelect cannot be benchmarked against an index, it shows MPS actual fund performance versus the ex-ante returns forecast from risk profiles over one year and three year performance. For a further discussion of the performance of the Group's key products, see "Business Description—5. Business Overview—5.1 Advice & Wealth Management—5.1.2 Quilter Investors—(a) Products and Services".

Quilter Cheviot accounted for 21% of the Group's total AuM as at 31 December 2015, 2016 and 2017. During the period under review, Quilter Cheviot has delivered a strong outperformance versus its peers. In Quilter Cheviot's Balanced Strategy, the Group has outperformed the peer group in all risk categories over all time periods since inception in March 2007. For a further discussion of the performance of the Group's key portfolios, see "Business Description—5. Business Overview—5.1 Advice & Wealth Management—5.1.3 Quilter Cheviot—(a) Products and Services".

4.8 Quilter Separation and becoming a public company

The Group has taken a number of actions as part of the Quilter Separation to create the corporate infrastructure necessary to operate as an independent public company. These actions include the establishment of independent corporate functions and governance following the completion of a number of separation initiatives, including a fully independent Board, building capability within head office functions to support a publicly listed group, rebranding and the transfer of certain information technology systems.

The Group expects to incur up to £30 million per annum of additional recurring fixed costs above 2016 operating expense levels as a consequence of the Managed Separation. Of the additional expenses, approximately £16 million on an annual basis were reflected in 2017 year-end reported results, and the Directors expect incremental costs of up to approximately £14 million will be incurred during 2018.

The primary recurring costs being incurred by the Group in connection with the Quilter Separation include:

• Operational costs: The Group's recurring costs include those incurred in the running of the Group's stand-alone arrangements in a wide range of areas including finance, investor relations, risk and governance functions, which it either did not previously require, or where it previously relied on support and services from Old Mutual plc. In addition, the Group will experience increased ongoing costs in connection with being an independent public company, including potentially as a result of the need for further investment in these new services and functions.
• Transitional services arrangements: In anticipation of the Quilter Separation, in 2016 the Group commenced a project to achieve operational independence from Old Mutual plc by replicating and transferring the functions, systems and infrastructure it had obtained from Old Mutual plc in the past as a member of Old Mutual plc. Pursuant to certain TSAs, the Group will continue to perform or support certain services for Old Mutual plc and Old Mutual plc will continue to perform or support certain services for the Group. These TSAs are not indefinite and the services will continue to be provided by the Group and Old Mutual plc under the TSAs until a date specified in the TSAs. The Group's contracted costs with Old Mutual plc under the TSAs are initially expected to be approximately £1 million in the year ending 31 December 2018, and those costs will reduce as services gradually migrate to the Group. However, the actual amount and timing of these costs may be different to those expected. In the event that migration extends beyond the date specified in the TSAs, the Group and Old Mutual plc are obliged to extend the service terms until completion of migration, subject to the payment of additional charges. See "Additional Information".

In addition, the Group currently expects total one-off costs of approximately £75 million in respect of the completion of the Quilter Separation, which will be charged outside of operating profit to reflect their one-off nature. Of these, £32 million and £7 million were incurred in 2017 and 2016 respectively, with approximately £36 million in further one-off costs expected to be incurred in due course, including costs incurred in connection with the Proposed Listing. These comprise a mixture of standalone, advisor and other transaction costs, and will be charged outside of operating profit to reflect their one-off nature. Of these, approximately £12 million is expected to be incurred in respect of the rebrand of the business from Old Mutual Wealth to Quilter.

The primary one-off costs being incurred by the Group in connection with the Quilter Separation include:

Standalone costs: The Group's standalone costs include those incurred in the establishment of the Group's stand-alone arrangements in a wide range of areas including finance, investor relations, risk and governance functions, which it either did not previously require, or where it previously relied on support and services from Old Mutual plc.

Migration costs: In connection with the migration of services to the Group during and at the end of the TSA period, the Group may be required to make an investment in its own infrastructure to prepare for and execute that migration. The actual cost of the migration of services may, however, cost more than the Group expects. See "Risk Factors—4. Risks relating to the Quilter Separation".

In the second half of 2018, management expects to review the Group's standalone cost base and operating model to identify long term optimisation initiatives to improve overall business efficiency. However, at this stage, the initiatives, potential efficiency savings and restructuring costs to achieve this optimisation have not yet been scoped.

4.9 Other one-off costs and other impacts associated with implementing the Group's significant change initiatives

The Group is currently in the process of planning and executing significant change across all business units, including in response to regulatory initiatives. The non-operational costs, which do not form part of operating profit from continuing operations, include the Quilter Separation (which includes both the separation and activities related to the Proposed Listing) as explained above in "—4.8 Quilter Separation and becoming a public company", the UK Platform Transformation Programme, the disposal of the Single Strategy Business and the transfer of the South African branches.

The Group is currently undergoing a material change in Quilter Wealth Solutions, with the UK Platform Transformation Programme and transition of technology and services to those provided by FNZ. The UK Platform Transformation Programme is currently in the implementation and test phase with total forecast costs of £120 to 160 million, of which £21 million had been incurred as at 31 December 2017. The Group expects to incur £75 million in 2018, with the balance in 2019. The UK Platform Transformation Programme is scheduled to soft launch in late 2018 or early 2019, with migration of existing clients and advisers to follow thereafter. The UK Platform Transformation Programme will broaden the range of products offered and is expected to facilitate NCCF growth and continued service enhancements.

The Group's previous re-platforming programme with IFDS came to an end by mutual agreement effective 2 May 2017, with total costs of £333 million at the end date. The Group conducted a comprehensive review of the options available and entered into a new contract with FNZ, having concluded that FNZ's scale, market-proven and functionally rich offering was the most suitable to meet the current and anticipated needs of the business. In partnership with FNZ, the Group expects to deliver all the existing functionality of the platform with increased levels of straight-through processing and enhanced functionality by late 2018 or early 2019, with migration of the existing clients and advisers to follow thereafter.

The Group is in the process of separating the Multi-Asset Business from OMGI following the sale of the Single Strategy Business to Bidco. The Group expects to record a restructuring charge of approximately £20 million in respect of the establishment of the standalone Multi-Asset Business. See "Risk Factors—2. Risks relating to the Group's business—2.6 The Group faces risks relating to the disposal of OMGI—2.6.3 Separation and establishment of the Multi-Asset Business".

The Group's operational costs in the year ended 31 December 2017 were affected by regulatory change, including MiFID II and GDPR, as well as spend on Quilter Wealth Solutions to maintain its existing IT and operational capabilities. In addition, costs have been incurred to enhance information security, cyber security and business resilience across the Group. Costs have also continued to be incurred on the Wealth Interactive enhancement programme, which underpins the platform for Quilter International.

4.10 The composition and volume of the Group's AuMA

Given that fees are largely earned on the amount of AuMA, factors that affect the levels and relative composition of the Group's AuMA have a direct impact on the Group's results of operations. While a portion of the Group's costs are variable and indirectly linked to levels of AuMA, the majority of costs are fixed despite the level of the Group's AuMA and, therefore, factors affecting AuMA will have a magnified effect on profitability.

	Year ended 31 December
	2015	2016	2017
AuMA		(£ billions)
Advice & Wealth Management
Quilter Financial Planning	-	-	1.2
Quilter Investors	9.8	12.1	16.9
Quilter Cheviot	17.8	20.7	23.6
Wealth Platforms
Quilter Wealth Solutions (1)	34.5	41.4	50.2
Quilter International	14.5	16.9	19.3
Quilter Life Assurance	14.7	15.3	15.1
Head Office	0.2	0.1	0.2
Elimination of intra-Group assets	(6.3)	(8.3)	(12.1)
Total	85.3	98.2	114.4

⁽¹⁾ Includes shareholder assets.

_______________

The Group's AuMA has increased by 34%, from £85.3 billion in the year ended 31 December 2015 to £114.4 billion in the year ended 31 December 2017. The Group's AuMA is predominantly made up of equities, bonds, and cash and cash equivalents. Although the Group does not actively diversify its AuMA, it provides access to different products and in various markets, which may be impacted by different factors, and thus benefits to a certain degree from natural diversification.

Key factors influencing the size and composition of the Group's AuMA include the performance of the markets in which the Group's AuMA are invested, the choice of customers to transfer more of their wealth to existing Group accounts, the addition of new customer accounts, the withdrawal of funds, the Group's ability to attract and retain advisers and consumer preferences (such as the attractiveness of the Group's advice-led proposition and preference for the Group's wealth management offering over traditional pension or other alternatives).

5. Results of Operations

In "—5.1 IFRS Financial Statements" below, the Group presents its results of operations on an IFRS basis, which have been extracted from the Group's historical financial information set out in "Historical Financial Information". In "—5.2 Operating Basis" below, the Group presents certain non-IFRS financial measures, including operating profit from continuing operations and certain key measures on a management view basis and on a normalised basis. The Group presents these metrics because they are less affected than IFRS measures of performance by one-time impacts, and thus in the Group's view provide a better basis for assessing trends in the operational performance of the Group over time. The Directors believe that operating profit from continuing operations is a more accurate reflection of the normal operating performance of the Group and believe that this measure provides additional useful information for prospective investors on the Group's performance and is consistent with how business performance is measured internally. Operating profit from continuing operations, the normalised metrics and the management view basis metrics presented below should not be considered in isolation as an alternative to profit before tax or other data presented in the Group's financial statements as indicators of financial performance. Because they are not determined in accordance with IFRS, operating profit from continuing operations, the normalised metrics and the management view basis metrics presented below as presented by the Group may not be comparable to other similarly titled measures of performance of other companies. See "Presentation of Financial and Other Information—2. Non-IFRS Financial Measures".

5.1 IFRS Financial Statements

5.1.1 Description of Certain Line Items

As presented in the consolidated audited financial statements, the Group's revenue is comprised of:

• Net earned premiums, which are premiums earned in respect of the Group's insurance business (or gross premiums) less the cost of premiums ceded to reinsurers. Net earned premiums exclude the investment contract business that forms the majority of the Group's business.
• Fee and commission income, and income from service activities, which are predominantly fees charged to clients for plan and policy administration, investment management, surrenders and other contract services in relation to the Group's unit linked business. The fees may be for fixed amounts or vary with the amounts being managed, and will generally be charged as an adjustment to the policyholder's balance. In addition, this also includes advice income from Quilter Financial Planning.
• Net investment income, which is the income derived from market growth (including foreign exchange gains and losses), which belongs to policyholders that are clients of Quilter Wealth Solutions, Quilter Life Assurance and Quilter International, rather than shareholders and so is broadly matched by movement in the line item 'change in investment contract liabilities'.
• Other income, which includes gross income from the Group's notional investments and seed capital placed in funds in connection with new product development by the Group's wealth management businesses. This is required to be consolidated under IFRS.

The Group's expenses are comprised of:

• Net claims and benefits paid, which include payments for maturities, annuities, surrender, death and disability claims, net of reinsurance recoveries, as well as claims handling costs, incurred in connection with the negotiation and settlement of claims.
• Change in insurance liabilities, net of reinsurance, which reflect the movement in the reporting period of insurance liabilities, net of reinsurance, as calculated in accordance with actuarial principles and assumptions.
• Change in investment contract liabilities, which is the offsetting impact of "net investment income" described above, attributing the majority of the related revenue to policyholders.
• Fee and commission expenses, and other acquisition costs, which are incremental costs directly attributable to securing an insurance or investment contract.
• Change in third-party interest in consolidated funds relates to the change in the amounts due to third party interests in investment funds that have met the criteria for consolidation.
• Other operating and administrative expenses, which are the expenses incurred in running the business. These expenses include staff costs, property costs, depreciation, business transformation costs for the UK Platform Transformation Programme, separation one-off costs and other administrative expenses including information technology. In 2017, other operating and administrative expenses also included voluntary customer remediation costs for the Quilter Life Assurance business, as explained further in "—5.2.2 Reconciliation of profit after tax to operating profit from continuing operations" below.
• Finance costs (including interest and similar expenses), which include interest payable, financing fees and similar financing charges, principally to Old Mutual plc.
• Income tax expense, which is the total of the corporation tax accounted for during the relevant period, covering both shareholder and policyholder tax.

Discontinued operations relate to the discontinued operations of Skandia Life S.A. (Skandia Luxembourg and Skandia France), which was sold in 2015; Old Mutual Wealth Italy, which was sold in January 2017; and OMGI, the sale of which is expected to complete in the second half of 2018.

5.1.2 Comparison of Financial Years Ended 31 December 2015, 2016 and 2017

(a) Consolidated revenue

The following table sets forth a breakdown of the Group's consolidated revenue for the periods indicated:

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Revenue
Gross earned premiums	135	141	148
Outward reinsurance	(81)	(84)	(88)
Net earned premiums	54	57	60
Fee and commission income, and income
from service activities	816	803	895
Net investment income	1,166	6,310	5,195
Other income	2	17	13
Total revenues	2,038	7,187	6,163

(i) Net earned premiums

For the year ended 31 December 2016, net earned premiums were £57 million, representing an increase of 6% from £54 million in the year ended 31 December 2015. For the same period, gross earned premiums were £141 million, representing an increase of 4% from £135 million in the year ended 31 December 2015, and outward reinsurance was £84 million, representing an increase of 4% from £81 million in the year ended 31 December 2015. The increase in net earned premiums was primarily due to an increase in protection contract sales in Quilter Life Assurance.

For the year ended 31 December 2017, net earned premiums were £60 million, representing an increase of 5% from £57 million in the year ended 31 December 2016. For the same period, gross earned premiums were £148 million, representing an increase of 5% from £141 million in the year ended 31 December 2016; and outward reinsurance was £88 million, representing an increase of 5% from £84 million. The increase in net earned premiums was principally due to higher sales in Quilter Life Assurance for guaranteed whole of life and life rolling term products within the protection book of business.

(ii) Fee and commission income, and income from service activities

For the year ended 31 December 2016, fee and commission income, and income from service activities was £803 million, representing a decrease of 2% from £816 million in the year ended 31 December 2015. This decrease was primarily due to the reduction in early encashment charges to 1% for pension customers over the age of 55, policyholder rebate corrections and a decrease in AuM resulting in lower AMCs in the Quilter Life Assurance business, as well as the continued impact of charging structure changes post RDR in the Quilter Wealth Solutions business. This decrease was partly offset by growth of the business and higher adviser fees in Quilter Financial Planning, and higher AuM driving growth of fee income in Quilter Investors. The year ended 31 December 2016 also represents the first year during which 12 months of income from the acquisition of Quilter Cheviot is reflected in the Group's consolidated results of operations, as compared to 10 months in the year ended 31 December 2015.

For the year ended 31 December 2017, fee and commission income, and income from service activities was £895 million, representing an increase of 11% from £803 million in the year ended 31 December 2016. This increase was primarily due to higher AuM driving growth of fee income in Quilter Investors and Quilter Cheviot, and higher adviser fees in Quilter Financial Planning. Quilter Wealth Solutions also experienced a continued increase in fee and commission income in the year ended 31 December 2017 as a result of the one-off structure changes arising from RDR, which decreased income in the year ended 31 December 2016.

(iii) Net investment income

For the year ended 31 December 2016, net investment income was £6,310 million, as compared to £1,166 million in the year ended 31 December 2015. This increase was due to positive movement in markets and foreign exchange gains on policies held by policyholders compared to the year ended 31 December 2015.

For the year ended 31 December 2017, net investment income was £5,195 million, as compared to £6,310 million in the year ended 31 December 2016. This decrease primarily related to a reduction in investment return for Quilter International due to adverse foreign exchange movements in policies held by policyholders compared to the year ended 31 December 2016.

As these movements are broadly offset by equivalent reductions in investment contract liabilities, the overall effect on the Group's financial performance is broadly neutral.

(iv) Other income

For the year ended 31 December 2016, other income was £17 million, an increase of £15 million as compared to £2 million in the year ended 31 December 2015. The increase was principally due to higher gross income from the Group's interest in its consolidated funds for the year ended 31 December 2016.

For the year ended 31 December 2017, other income was £13 million, representing a decrease of 24% from £17 million in the year ended 31 December 2016. This decrease was primarily due to losses on the termination of a reinsurance agreement and the accelerated recognition of deferred acquisition costs on the transfer of the South African branch business in Quilter International.

(b) Consolidated expenses

The following table sets forth a breakdown of the Group's consolidated expenses for the periods indicated:

	Year Ended 31 December
	2015	2016	2017
Expenses		(£ millions)
Net claims and benefits incurred	(21)	(21)	(22)
Change in reinsurance assets and liabilities	40	119	85
Change in insurance contract liabilities	(32)	(125)	(78)
Change in insurance liabilities, net of
reinsurance	(13)	(27)	(15)
Change in investment contract liabilities Fee and commission expenses, and other	(949)	(5,522)	(4,308)
acquisition costs Change in third-party interest in consolidated funds	(362)	(299)	(320)
	(76)	(575)	(673)
Other operating and administrative expenses	(565)	(654)	(816)
Finance costs	(32)	(43)	(39)
Total expenses	(1,997)	(7,120)	(6,171)

(i) Change in insurance liabilities, net of reinsurance

For the year ended 31 December 2016, change in insurance liabilities, net of reinsurance was £27 million, as compared to £13 million in the year ended 31 December 2015. The increase was primarily due to higher sales of protection policies in 2016, which are reassured by the Group, marginally offset by a favourable movement in assumptions.

For the year ended 31 December 2017, change in insurance liabilities, net of reinsurance was £15 million, as compared to £27 million in the year ended 31 December 2016. The decrease in change in insurance liabilities, net of reinsurance was primarily due to a reduction in reserves for Quilter Life Assurance, primarily driven by a change in assumptions during the year.

(ii) Change in investment contract liabilities

For the year ended 31 December 2016, change in investment contract liabilities was £5,522 million, as compared to £949 million in the year ended 31 December 2015. This increase was primarily due to the movement in underlying stock markets in which the linked policyholders are invested and broadly represents the offsetting impact of the investment return revenue described above, attributing the majority of the revenue to policyholders.

For the year ended 31 December 2017, change in investment contract liabilities was £4,308 million, representing a decrease of 22% from £5,522 million in the year ended 31 December 2016. This decrease was primarily due to the movement in underlying stock markets in which the linked policyholders are invested, and broadly represents the offsetting impact of the investment return revenue described above, attributing the majority of the revenue to policyholders.

(iii) Fee and commission expenses, and other acquisition costs

For the year ended 31 December 2016, fee and commission expenses, and other acquisition costs were £299 million, representing a decrease of 17% from £362 million in the year ended 31 December 2015. This decrease was primarily due to a reduction in the Quilter Wealth Solutions business as a result of the continuing impacts of the RDR on changes in fee structures, where no trail commission is paid on new business, as well as a reduction in rebates on fees paid by Quilter Wealth Solutions to other third party fund managers. This decrease was partially offset by an increase of £8 million in Quilter International, due predominantly to the acquisition of AAM Advisory during the year and the inclusion of its financials for the first time.

For the year ended 31 December 2017, fee and commission expenses, and other acquisition costs were £320 million, representing an increase of 7% from £299 million in the year ended 31 December 2016. This increase was principally driven by an increase in fee and commission expenses in respect of consolidated funds. The impact of the RDR changes in fee structures in Quilter Wealth Solutions continued, as described above.

(iv) Change in third-party interest in consolidated funds

For the year ended 31 December 2016, change in third-party interest in consolidated funds was £575 million, as compared to £76 million in the year ended 31 December 2015. The increase was primarily due to the impact of market movements on the underlying funds, which resulted in an increase in amounts in relation to the interest due to third parties.

For the year ended 31 December 2017, change in third-party interest in consolidated funds was £673 million, as compared to £575 million in the year ended 31 December 2016. The increase was primarily due to new funds launched during 2017, which had interests held by third parties.

(v) Other operating and administrative expenses

For the year ended 31 December 2016, other operating and administrative expenses were £654 million, representing an increase of 16% from £565 million in the year ended 31 December 2015. This increase was primarily due to 2016 being the first full year that reflects twelve months of Quilter Cheviot subsequent to its acquisition in February 2015; increased variable compensation at Quilter Investors as a result of higher AuM; additional staff costs due to increased headcount; AAM Advisory costs in Quilter International; continued investment in IT and infrastructure development leading to higher operational costs.

For the year ended 31 December 2017, other operating and administrative expenses were £816 million, representing an increase of 25% from £654 million in the year ended 31 December 2016. This increase was primarily due to the recognition of a provision for £69 million in relation to the voluntary customer remediation for Quilter Life Assurance; higher administration costs as a result of increased technology spend, regulatory change spend, and other organic and inflationary costs; and higher costs in preparation for becoming a standalone business.

(vi) Finance costs

For the year ended 31 December 2016, finance costs were £43 million, representing an increase of 34% from £32 million in the year ended 31 December 2015. This increase was primarily due to an increase in interest paid to Old Mutual plc as a result of the loan funding to acquire Quilter Cheviot, and the market value adjustment in respect of the derivative taken out by Old Mutual plc for hedging the proceeds of the sale of Old Mutual Wealth Italy. Quilter Cheviot was purchased at the end of February 2015, with interest costs for ten months in 2015, whereas a full year of interest costs were incurred in the year ended 31 December 2016.

For the year ended 31 December 2017, finance costs were £39 million, representing a decrease of 9% from £43 million in the year ended 31 December 2016. This decrease was primarily due to a reduction in the Group's liabilities payable to Old Mutual plc during the year. This relates to the one-off 2016 market value adjustment to the derivative taken out by Old Mutual plc for hedging the proceeds of the sale of Old Mutual Wealth Italy.

(c) Income tax expense

For the year ended 31 December 2016, income tax expense was £94 million as compared to a gain of £16 million in the year ended 31 December 2015. This increase was primarily due to high income tax attributable to policyholder returns of £102 million, driven by market movements during year ended 31 December 2016 and the impact of temporary timing differences during year ended 31 December 2015.

For the year ended 31 December 2017, income tax expense was £41 million, representing a decrease of 56% from £94 million in the year ended 31 December 2016. This decrease was primarily due to lower profit for the year and lower tax attributable to policyholder returns due to changes in market movements.

The Group's income tax expense can vary significantly year on year, even in years of consistent profit before tax, due to the impact of changes in the income tax attributable to policyholder returns. In turn, income tax attributable to policyholder returns can vary significantly year on year as a result of changes in market movements and the associated gains or losses from policyholder investments.

(d) Post-tax profit/(loss)

The Group's post-tax profit was £35 million in the year ended 31 December 2016, compared to a post-tax profit of £85 million in the year ended 31 December 2015. This was due to a reduction in profit after tax from continuing operations of £84 million, principally due to increased operational expenses; one-off Quilter Separation costs of £7 million; increased finance costs of £11 million, incorporating interest paid to Old Mutual plc principally as a result of the loan funding the acquisition of Quilter Cheviot, partially offset by a £34 million increase in profit after tax from discontinued operations.

For the year ended 31 December 2017, post-tax profit was £157 million, representing an increase of 349% from £35 million in the year ended 31 December 2016. This increase was primarily due to higher profit after tax from discontinued operations from £62 million in 2016 to £203 million in 2017, which was mainly as a result of increased net performance fees in 2017 for the Single Strategy Business. The higher profit after tax for discontinued operations was partially offset by an increased loss after tax from continuing operations from £27 million in the year ended 31 December 2016 to £46 million in the year ended 31 December 2017, which was primarily due to higher Quilter separation one-off costs and voluntary customer remediation costs for Quilter Life Assurance in the year ended 31 December 2017.

The following table presents the Group's profit and loss for the years under review.

	Year Ended 31 December
	2015	2016	2017
Profit & Loss		(£ millions)
Revenue	2,038	7,187	6,163
Expenses	(1,997)	(7,120)	(6,171)
Profit on acquisition and re-measurement
of subsidiaries	-	-	3
Profit/(loss) before tax	41	67	(5)
Tax expense attributable to policyholders
funds	7	(102)	(49)
Profit/(loss) attributable to shareholder
profits	48	(35)	(54)
Income tax expense	16	(94)	(41)
Tax attributable to policyholder funds	(7)	102	49
Profit/(loss) from continuing
operations	57	(27)	(46)
Profit after tax from discontinued
operations	28	62	203
Profit after tax	85	35	157

5.2 Operating Basis

5.2.1 Reconciliation of IFRS results of operations to management view results of operations

The following tables present the reconciliation of certain of the Group's IFRS results of operations to the management view, reflecting a number of adjustments and reclassifications. The Group presents these non-IFRS results of operations on a management view basis because they are less affected than IFRS measures of performance by one-time impacts, and the Directors believe that these measures are a more accurate reflection of the normal operating performance of the Group. These measures are consistent with how performance is measured internally. The use of these non-IFRS measures are explained in more detail in the introductory paragraph to "—5.Results of Operations" above.

			Year Ended 31 December 2015
	IFRS	Adjustments (1)	Reclassifications (2) Management	view
			(£ millions)
Net management fee	-	-	-	505
Other revenue	-	-	-	81
Total revenue	2,038	-	(1,452)	586
Total expenses	(1,997)	180	1,452	(365)
Profit before tax	41	180	-	221

⁽¹⁾ The key adjustments to IFRS profit before tax are shown in the reconciliation table in "—5.2.2 Reconciliation of profit after tax to operating profit from continuing operations" below.

⁽²⁾ The reclassification adjustments between revenue and expenses primarily relate to the reclassification of "Change in investment contract liabilities" and "Fee and commission expenses, and other acquisition costs", coupled with other revenue related costs, as shown in the expenses table in "—5.1.2 Comparison of Financial Years Ended 31 December 2015, 2016 and 2017—(b) Consolidated expenses" above.

Year Ended 31 December 2016

	IFRS	Adjustments (1)	Reclassifications (2) (£ millions)	Management view
Net management fee	-	-	-	495
Other revenue	-	-	-	121
Total revenue	7,187	-	(6,571)	616
Total expenses	(7,120)	110	6,571	(439)
Profit before tax	67	110	-	177

⁽¹⁾ The key adjustments to IFRS profit before tax are shown in the reconciliation table in "—5.2.2 Reconciliation of profit after tax to operating profit from continuing operations" below.

(2) The reclassification adjustments between revenue and expenses primarily relate to the reclassification of "Change in investment contract liabilities" and "Fee and commission expenses, and other acquisition costs", coupled with other revenue related costs, as shown in the expenses table in "—5.1.2 Comparison of Financial Years Ended 31 December 2015, 2016 and 2017—(b) Consolidated expenses" above.

Year Ended 31 December 2017

	IFRS	Adjustments (1)	Reclassifications (2)	Management view
			(£ millions)
Net management fee	-	-	-	591
Other revenue	-	-	-	137
Total revenue	6,163	-	(5,435)	728
Total expenses	(6,171)	217	5,435	(519)
Profit on the acquisition and re
measurement of subsidiaries	3	(3)	-	-
(Loss)/profit before tax	(5)	214	-	209

⁽¹⁾ The key adjustments to IFRS profit before tax are shown in the reconciliation table in "—5.2.2 Reconciliation of profit after tax to operating profit from continuing operations" below.

5.2.2 Reconciliation of profit after tax to operating profit from continuing operations

Operating profit from continuing operations represents operating profit before tax attributable to shareholders' profits and is management's main measure of underlying profitability, as set forth in the reconciliation below:

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Profit for the year after tax	85	35	157
Adjustments:
Profit after tax from discontinued operations	(28)	(62)	(203)
Profit/(loss) after tax from continuing operations	57	(27)	(46)
Income tax on continuing business	(16)	94	41
Profit/(loss) before tax	41	67	(5)

_____________

_____________

⁽²⁾ The reclassification adjustments between revenue and expenses primarily relate to the reclassification of "Change in investment contract liabilities" and "Fee and commission expenses, and other acquisition costs", coupled with other revenue related costs, as shown in the expenses table in "—5.1.2 Comparison of Financial Years Ended 31 December 2015, 2016 and 2017—(b) Consolidated expenses" above.

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Income tax attributable to policyholder returns	7	(102)	(49)
Profit/(loss) before tax attributable to
shareholders' profits	48	(35)	(54)
Goodwill and amortisation of purchased intangibles .	57	52	54
Business transformation costs	96	102	89
Finance costs	32	43	39
Quilter Separation one-off costs	-	7	32
Profit on acquisition and re-measurement of
subsidiaries	-	-	(3)
Policyholder tax adjustments	(12)	8	(17)
Voluntary customer remediation costs	-	-	69
Total non-operating adjusting items before tax	173	212	263
Operating profit before tax from continuing
operations	221	177	209

The key adjustments in the reconciliation above are as follows:

• Goodwill and amortisation of purchased intangibles, reflects acquisition costs and the amortisation of intangible assets acquired by the Group, in relation to policies sold by acquired businesses pre-acquisition. When applying acquisition accounting, deferred acquisition costs and deferred revenue existing at the point of acquisition are not recognised under IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill and other intangible assets. In determining operating profit, the Group recognises deferred revenue, acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation and impairment of acquired other intangible assets as well as the movements in certain acquisition date provisions. If the intangible assets recognised as a result of a business combination are subsequently impaired, this is excluded from operating profit. Costs incurred on completed acquisitions are also excluded from operating profit.
• Business transformation costs, which represent the costs the Group has incurred in connection with its UK Platform Transformation Programme and the transformation costs in relation to the South African branches. The UK Platform Transformation Programme is on-going and involves replacing many aspects of the existing UK platform and migration of services to third party service providers. The cost of developing the new technology typically cannot be capitalised, hence these costs and the costs of decommissioning existing technology and migrating of services are excluded from operating profit from continuing operations. Only costs that are directly attributable to the programme are excluded from operating profit from continuing operations. The contracts with IFDS came to an end by mutual agreement effective as of 2 May 2017, at which point the costs for the year ended 31 December 2017 totalled £53 million (2016: £102 million), (2015: £96 million). The Group subsequently entered into a new contract with FNZ, under which additional costs of £21 million were incurred for the year ended 31 December 2017. The transformation costs for the South African branches include charges of £15 million for the year ended 31 December 2017 related to historical arrangements with the wider Old Mutual plc group's South African businesses. As a consequence of Managed Separation, these arrangements were severed and, as a result, deferred acquisition cost balances were

written off, together with a loss incurred on the cancellation of reinsurance arrangements.

• Finance costs, which represent the cost of interest and finance charges on the Group's borrowings from Old Mutual plc, borrowed to primarily fund acquisitions, including Quilter Cheviot in 2015;
• Quilter Separation one-off costs, which represent the one-off transition costs to separate the Group from Old Mutual plc to become standalone and any additional one-off costs associated with the Proposed Listing.
• Profit on acquisition and re-measurement of subsidiaries relates to the Group acquiring 100% of the whole of the issued share capital of GET, a company incorporated in South Africa, from OMGUK (part of the Old Mutual plc group) for around £1 million. Along with recording the book values of the assets acquired and liabilities assumed of £4 million, the Group recognised a gain of £3 million. The excess of the book value over consideration paid was attributable to potential future integration costs which, if incurred, would be expensed in future periods. As potential future integration activities do not qualify as a liability under the acquisition method of accounting, none was recorded, resulting in a gain.
• Policyholder tax adjustments relate to the removal of distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. In addition, adjustments are made to remove distortions to policyholder tax arising from the utilisation of tax allowances from elsewhere in the Group (e.g. capital losses) which are regarded economically as impacting shareholder tax, and from distortions arising from other non-operating adjusting items.
• Voluntary customer remediation costs, which represent the costs the Group expects to incur in relation to the decision to commence voluntary remediation to customers in certain legacy products within Quilter Life Assurance.

In addition to the adjustments detailed above, there may be other one-off costs arising in the future which require adjustment in order for operating profit from continuing operations to continue to reflect the Directors' view of the underlying long-term performance of the Group.

5.2.3 Reconciliation of operating profit from continuing operations to normalised operating profit from continuing operations

The following table sets forth a breakdown of the Group's reported and normalised operating profit from continuing operations, as well as other selected key metrics on a normalised basis for the periods indicated. See "Presentation of Financial and Other Information—2. Non-IFRS Financial Measures" for a further discussion of the normalisation adjustments.

	Year Ended 31 December
	2015	2016	2017
	(£ millions,	unless otherwise	indicated)
Reported basis
Net management fee (1)	505	495	591
Other revenue (2)	81	121	137
Total revenue	586	616	728
Total expenses	(365)	(439)	(519)
Operating profit from continuing operations	221	177	209
· · · · · · · · · · · · · · · · · · ·

	Year Ended 31 December
-	2015	2016	2017
-	(£ millions,	unless otherwise in	ndicated)
Adjustments to reported basis	,		,
Quilter Life Assurance fee restructure (3)
Net management fee	-	24	-
Other revenue	-	(1)	-
Total expenses	-	4	-
Total Quilter Life Assurance fee restructure
adjustment	-	27	-
adjustment
Net management fee	(2)	5	-
Other revenue	3	2	-
Total expenses	(9)	(3)	-
Total other normalisation adjustments	(8)	4	-
Total adjustments	(8)	31	-
Normalised basis
Normalised net management fee (5)	503	524	591
Normalised other revenue (5)	84	122	137
Total normalised revenue (5)	587	646	728
Total normalised expenses (5)	(374)	(438)	(519)
Normalised operating profit from continuing	(- )		( /
operations (5)	213	208	209
Key performance indicators
Revenue margin (hps) (6)	64	59	56
Operating margin (%) (7)	36	32	29
Operating margin (%) (7) (Closing AuMA (£bn) (8) (S) (Average AuMA (£bn) (9) (S) (S) (S) (S) (S) (S) (S) (S) (S) (S	85.3	98.2	114.4
Average AuMA (£bn) (9)	82.5	89.2	105.1
NCCF (£bn) (10) (10)	3.9	3.3	6.3
NCCF (excl. Quilter Life Assurance)	4.3	4.2	7.6
NCCF / Opening AuMA (%) (11)	6	6	9

• (1) Net management fee consists of revenue generated from AuMA, fixed fee revenues and policyholder tax contributions, netted off by trail commissions payable.
• Other revenue represents revenue not directly linked to AuMA (e.g. early encashment charges, risk result, adviser initial fees and adviser fees linked to AuMA in Quilter Financial Planning (recurring fees)).
• (3) The Quilter Life Assurance fee restructure adjustment relates to the removal of a fee restructure exercise conducted on Quilter Life Assurance's pension products in the year ended 31 December 2016 following the FCA Thematic Review. This adjustment impacts the Wealth Platforms segment and includes the one-off revenue impact, expenses incurred in relation to the Thematic Review and compensation paid to policyholders for the understatement of fund rebates.
• Other normalisation adjustments relate to certain one-time adjustments and rebates. The rebate adjustments impacts the Advice & Wealth Management segment (a decrease in revenue on a normalised basis by £2 million in the year ended 31 December 2015 and an increase in revenue on a normalised basis by £5 million in the year ended 31 December 2016). The remaining normalisation adjustments impact the Wealth Platforms segment.
• (5) Adjusted for the Quilter Life Assurance fee restructure and other normalisation adjustments (each as described above).
• (6) Revenue margin represents net management fee, including policyholder tax, divided by average AuMA.

• (7) Operating margin represents reported operating profit from continuing operations divided by total revenue, including policyholder tax and adviser fees. Operating margin excludes financing costs.

• (8) Closing AuMA represents the total market value of all financial assets managed and administered on behalf of customers as at 31 December of the financial year, after intra-group eliminations.

• (9) Average AuMA represents the average total assets managed and administered on behalf of customers during the financial year ended 31 December, after intra-group eliminations. Average AuMA is calculated using a 13-point average of monthly closing AuMA.
• (10) NCCF measures the difference between money received from and the money returned to customers during the relevant period for the Group or for the business indicated.
• (11) Excludes Quilter Life Assurance.

(a) Normalised revenue

Total revenue increased by £59 million to £646 million in the year ended 31 December 2016, as compared to £587 million in the year ended 31 December 2015. The growth is due to an increase of £21 million in net management fees, predominantly related to the acquisition of Quilter Cheviot in February 2015 and an increase in other revenues such as advice fees, the benefits of an assumption change and higher protection income within Quilter Life Assurance, together totalling £38 million. Average assets during the year ended 31 December 2016 were 8% higher than during the prior year, contributing to increased net management fees of £524 million in the year ended 31 December 2016 due to the full-year impact of the Quilter Cheviot acquisition, as compared to £503 million in the year ended 31 December 2015. Overall, the Group reported a decline in the blended revenue margin from 64 basis points in the year ended 31 December 2015 to 59 basis points in the year ended 31 December 2016, with the Wealth Platforms segment contributing to that decline to a greater extent than the Advice & Wealth Management segment.

Other revenue increased by £38 million to £122 million in the year ended 31 December 2016, as compared to £84 million in the year ended 31 December 2015. This increase is primarily due to an increase in RFPs from 1,230 to 1,423 in 2016, leading to an increase in advice income, as well as an assumption change for Quilter Life Assurance, and higher early encashment charges for Quilter International.

Total revenue increased by £82 million to £728 million in the year ended 31 December 2017, as compared to £646 million in the year ended 31 December 2016. This increase was primarily due to strong growth in net management fees, which accounted for 81% of total revenue. Charging structure changes introduced in response to RDR also resulted in lower net management fee growth in the year ended 31 December 2016. Overall, the Group reported a decrease in the blended revenue margin from 59 basis points in the year ended 31 December 2016 to 56 basis points in the year ended 31 December 2017.

Other revenue increased by £15 million in the year ended 31 December 2017, primarily due to growth in PCA revenues and the acquisitions of Sesame Bankhall, Caerus and Attivo Investment Management Limited ("Attivo"), which was acquired by Quilter Cheviot in the first quarter of 2017.

The Group's revenue margins reduced from 64 basis points in the year ended 31 December 2015 to 59 basis points in the year ended 31 December 2016, then by a further 3 basis points to 56 basis points in the year ended 31 December 2017, as a result of changing fee structure mix, reduced trading commission income in Quilter Cheviot, changes in business mix and competitive pressures. However, the Group's multi-channel business model has allowed it to mitigate some of this impact as an increasing proportion of revenue is earned by providing solutions to customers across the value chain.

(b) Normalised expenses

Total expenses increased by £64 million, or 17%, to £438 million in the year ended 31 December 2016, from £374 million in the year ended 31 December 2015. This reflected incremental business investment of £25 million mainly in building out the financial advice capacity as a part of the overall strategy of the Group, including £6 million of expenses incurred to develop PCA. In addition, expenses driven by growth in the business, business volumes and inflation contributed to a £20 million increase in costs, of which £15 million of the increase reflected the impact of the full year run rate of the expense base of Quilter Cheviot. Variable incentives reflected a further £14 million increase in line with performance. Further expense increases reflected the strengthening of the central functions in the lead up to being a standalone listed group, coupled with additional spend to strengthen the Group's IT infrastructure.

Total expenses increased by £81 million, or 18%, to £519 million in the year ended 31 December 2017, from £438 million in the year ended 31 December 2016. This increase was primarily due to (i) the increase in underlying administration expenses of £39 million, reflecting increased technology spend, regulatory change spend (including spend associated with MiFID II, GDPR and PRIIPs), and other organic and inflationary costs, (ii) an increase in variable incentives of £14 million due to higher levels of AuM and higher senior headcount, (iii) incremental investment in new business initiatives of £12 million, and (iv) additional recurring managed separation and standalone costs of £16 million. Of the Group's total £519 million of expenses in the year ended 31 December 2017, £237 million were non-staff expenses, £203 million were staff expenses and £78 million were variable expenses.

(c) Normalised operating profit from continuing operations

Normalised operating profit from continuing operations was £208 million for the year ended 31 December 2016, representing a decrease of £5 million, or 2%, from £213 million in the year ended 31 December 2015. The decrease was due to increasing investment in the Group's distribution capabilities, investment to become a standalone business and an increase in variable incentives paid to staff. This was partly offset by revenue growth due to increased net management fees due to the fullyear impact of the Quilter Cheviot acquisition and increased AuMA leading to higher fees and commissions. Normalised operating profit margin from continuing operations decreased by 4 percentage points to 32% in the year ended 31 December 2016, reflecting the Group-wide revenue margin decline and higher expenses, which primarily related to the increased investment spend being greater than the increase in revenues during the period.

Normalised operating profit from continuing operations was £209 million for the year ended 31 December 2017, representing an increase of £1 million, from £208 million for the year ended 31 December 2016. The increase was primarily due to market performance, the benefits of integrated NCCF and growth in RFPs on net management fees partially offset by the cost of investment in future growth and the impact of revenue margin decline in several business areas. Normalised operating profit margin from continuing operations decreased to 29% in the year ended 31 December 2017, from 32% in the year ended 31 December 2016, driven by material expense increases, including the impact of £16 million of additional costs in relation to the Quilter Separation and the Group becoming capable of operating on a standalone basis, and higher development spend, including the build out of PCA and Caerus.

(d) Key performance indicators

	Year Ended 31 December
	2016	2017
	(£ billions, except wl	here indicated)
Opening AuMA	85.3	98.2
Quilter Life Assurance assets	14.7	15.3
Market movement	9.6	8.6
Acquired AuM (1)	-	1.3
NCCF (2)	4.9	10.3
Quilter Life Assurance outflows	(1.1)	(1.6)
Eliminations	(0.5)	(2.4)
Closing AuMA	98.2	114.4
Quilter Life Assurance assets	15.3	15.1
NCCF / Opening AuMA (%) (2)	6	9

• (1) Acquired AuM of £1.3 billion, of which £1.0 for Caerus and £0.3 billion for Attivo.
• (2) Excludes Quilter Life Assurance.

(i) Net client cash flow

NCCF was £3.3 billion in the year ended 31 December 2016, a decrease of 15% from £3.9 billion in the year ended 31 December 2015. The decrease is believed to have been due to market uncertainty in the lead up to, and following, the Brexit referendum and the US presidential election result in the second half of 2016. Nevertheless, supported by the Group's investment in distribution during the year, NCCF remained positive for the period despite lower investor confidence. Integrated NCCF in the year ended 31 December 2016 was £1.8 billion, an increase of 50% compared to £1.2 billion in the year ended 31 December 2015, driven principally by NCCF into Cirilium.

NCCF was £6.3 billion in the year ended 31 December 2017, an increase of 91% from £3.3 billion in the year ended 31 December 2016, primarily due to growth of £2.8 billion in Advice & Wealth Management driven by flows for Quilter Investors into the Cirilium range, strong flows for Wealth Platforms into pension propositions as customers continue to consolidate existing pensions, and strong net flows for Quilter International from Latin America, the Middle East and UK. Integrated NCCF in the year ended 31 December 2017 was £4.8 billion, an increase of 167% compared to £1.8 billion in the year ended 31 December 2016, driven principally by increased productivity in Quilter Financial Planning, which generated £3.9 billion, of which 63% was recognised in Quilter Investors, 6% in Quilter Cheviot and 31% in Quilter Wealth Solutions.

(ii) Assets under management and administration

Total closing AuMA were £98.2 billion as at 31 December 2016, up £12.9 billion or 15%, from £85.3 billion as at 31 December 2015. The Group reported a positive market performance in the years ended 31 December 2015 and 2016, reflecting the year-on-year increase in equity markets and a

favourable mix of assets. AuMA growth due to market movement in 2016 was £9.7 billion or 11%. This includes the impact of equity markets such as the FTSE 100, which rose by 17%, and other markets as well as the impact of the depreciation of the pound sterling by approximately 15% during the period. Additionally, the increase in the overall AuMA was impacted by acquisitions, principally of Quilter Cheviot, which was acquired by the Group on 25 February 2015. The closing AuM of Quilter Cheviot was £17.4 billion as at the month of the acquisition and £20.7 billion as at 31 December 2016.

Total closing AuMA were £114.4 billion as at 31 December 2017, an increase of £16.2 billion or 16%, from £98.2 billion as at 31 December 2016. This increase was due to positive market performance of £8.5 billion, positive net flows of £6.3 billion and acquisitions of £1.3 billion (Caerus and Attivo). The FTSE 100 increased 8% over the year ended 31 December 2017, impacting market growth.

(e) Segmental overview

The following tables present certain key performance indicators utilised by management with respect to the Group's operating segments (Advice & Wealth Management and Wealth Platforms), the Group's Head Office function and the consolidated Group, for the periods indicated.

	Year Ended 31 December 2015
	Advice & Wealth Management	Wealth Platforms	Head Office / Eliminations	Group
	(£ n	nillions, except	where indicated)
Normalised basis
Revenue	209	378	-	587
Expenses	(157)	(202)	(14)	(374)
Normalised operating profit from continuing operations	51	176	(14)	213
Revenue margin (bps)	68	56	-	64
Operating margin (%)	25	47	-	36
AuMA (£bn) (1)	27.6	63.8	(6.1)	85.3
NCCF (£bn) (2)	1.7	2.4	(0.2)	3.9
NCCF (excluding Quilter Life
Assurance) (£bn) (2)	1.7	3.2	(0.6)	4.3
NCCF/Op. ÂuM (%) (3)	7	7	-	6

⁽¹⁾ Gross closing AuMA.

⁽²⁾ NCCF measures the difference between money received from and returned to customers during the relevant period for the Group or for the business indicated.

⁽³⁾ Excludes Quilter Life Assurance.

Year Ended 31 December 2016

	Advice & Wealth Management	Wealth Platforms	Head Office/ Eliminations	Group
	(£ n	nillions, except	where indicated)
Normalised basis
Revenue	253	392	1	646
Expenses	(194)	(226)	(18)	(438)
Normalised operating profit from continuing operations	59	166	(17)	208
Revenue margin (bps)	66	49	-	59
Operating margin (%)	23	42	-	32
AuMA (£bn) (1)	32.8	73.7	(8.3)	98.2
NCCF (£bn) (2)	1.6	2.2	(0.5)	3.3
Assurance) (£bn) (2)	1.6	3.3	(0.7)	4.2
NCCF/Op. AuM (%) (3)	6	7	· -	6

⁽¹⁾ Gross closing AuMA.

Year Ended 31 December 2017

	Advice & Wealth Management	Wealth Platforms	Head Office/ Eliminations	Group
	(£ m	illions, except	where indicated)
Normalised basis
Revenue	316	411	1	728
Expenses	(234)	(253)	(32)	(519)
Normalised operating profit from continuing operations	82	158	(31)	209
Revenue margin (bps)	63	46	-	56
Operating margin (%)	26	38	-	29
AuMA (£bn) (1)	41.7	84.6	(11.9)	114.4
NCCF (£bn) (2)	4.4	4.3	(2.4)	6.3
NCCF (excluding Quilter Life
Assurance) (£bn) (2)	4.4	5.9	(2.7)	7.6
NCCF/Op. AuM (%) (3)	13	10	-	9

⁽¹⁾ Gross closing AuMA.

(i) Advice & Wealth Management

The following table sets forth certain key performance indicators utilised by management with respect to the business units of the Advice & Wealth Management segment, for the periods indicated.

⁽²⁾ NCCF measures the difference between money received from and returned to customers during the relevant period for the Group or for the business indicated.

⁽³⁾ Excludes Quilter Life Assurance.

⁽²⁾ NCCF measures the difference between money received from and returned to customers during the relevant period for the Group or for the business indicated.

⁽³⁾ Excludes Quilter Life Assurance.

	2015	2016	2017
		(£ millions, except where indicated)
Advice & Wealth Management
Quilter Financial Planning
Net management fee	-	-	1
Other revenue	48	59	77
Total revenue	48	59	78
RFPs + PCA (1) (#)1,230		1,423	1,561
Productivity (2)	0.9	0.9	1.8
Integrated AuM per RFP	2.4	3.0	4.6
Quilter Investors
Net management fee	43	48	73
Other revenue	1	1	2
Total revenue	44	49	75
NCCF (£bn)	0.7	0.8	3.3
Closing AuM (£bn)	9.8	12.1	16.9
Average AuM (£bn)	9.4	10.6	14.2
Revenue margin (bps)	46	45	51
Quilter Cheviot
Net management fee	117	146	160
Other revenue	-	(1)	3
Total revenue	117	145	163
NCCF (£bn)	1.0	0.8	1.1
Closing AuM (£bn)	17.8	20.7	23.6
Average AuM (£bn)	17.3	19.0	22.2
Revenue margin (bps) (3)	80	77	72
Asset retention (%) (4)	92	91	92
Investment managers (#)	161	158	164
Productivity (5)	6.2	5.0	6.7
Average AuM per investment manager107.5		120.1	135.4

Year Ended 31 December

NCCF for the Advice & Wealth Management segment decreased to £1.6 billion in the year ended 31 December 2016 from £1.7 billion in the year ended 31 December 2015. The reduction was believed to reflect investor uncertainty around "Brexit" and the US presidential election result in the second half of 2016, impacting NCCF in Quilter Cheviot. NCCF (excluding

⁽¹⁾ The overall number of restricted financial planners and advisers in PCA delivering the Group's solutions.

⁽²⁾ Average NCCF per adviser for the advised proposition including Quilter Investors and Quilter Cheviot.

⁽³⁾ Quilter Cheviot acquired in February 2015. Figures on an annualised basis (closing AuM of £17.4 billion at February 2015).

⁽⁴⁾ Calculated as 1 – (gross outflows / opening AuM). In 2015, Quilter Cheviot outflows were annualised.

⁽⁵⁾ Average NCCF per investment manager.

intragroup flows) for the Advice & Wealth Management segment increased to £4.4 billion in the year ended 31 December 2017 from £1.6 billion in the year ended 31 December 2016. This increase was primarily due to higher net inflows for Quilter Investors, principally Quilter Financial Planning into the Cirilium fund range and Quilter Wealth Solutions via the WealthSelect fund range.

The Cirilium fund range managed by Quilter Investors, which is predominantly sold via Quilter Financial Planning's restricted channel, contributed £1.0 billion NCCF in the year ended 31 December 2016 and £2.3 billion NCCF in the year ended 31 December 2017. Growth in the Cirilium fund range is attributable to the fund range's strong historical investment performance and increases in RFPs in Quilter Financial Planning from 1,423 as at 31 December 2016 to 1,561 as at 31 December 2017.

Productivity for Quilter Financial Planning increased from the year ended 31 December 2015 to the year ended 31 December 2017 as a result of longer adviser tenure leading to growth in the number of customers, advisers having a stronger offering of performing funds such as Cirilium, and an increase in clients' income over time.

Asset retention for Quilter Cheviot has remained broadly consistent year on year from the year ended 31 December 2015 to the year ended 31 December 2017 as a result of a proven track record and performance, a comprehensive product offering, and strong client retention through focus on good customer outcomes.

AuM for the Advice & Wealth Management segment increased by £5.2 billion to £32.8 billion at 31 December 2016 from £27.6 billion at 31 December 2015, principally reflecting strong growth in markets. AuM for the Advice & Wealth Management segment increased by £8.9 billion to £41.7 billion at 31 December 2017 from £32.8 billion at 31 December 2016, principally reflecting strong flows into the Cirilium fund range, which was first quartile over three year period to 31 December 2017, and strong market performance.

Total revenue for the Advice & Wealth Management segment increased to £253 million in the year ended 31 December 2016 from £209 million in the year ended 31 December 2015. Quilter Cheviot revenue increased by £28 million as a result of the full year run rate following the acquisition of Quilter Cheviot in 2015 and a growth in average AuM of 10%. Quilter Investors net management fees increased by 12% in the year ended 31 December 2016, due to growth in average AuM of 13%, which was partially offset by a decrease of 1 basis point in revenue margin. The increase in other revenue principally reflects Quilter Financial Planning advice revenue which increased by £11 million in the year ended 31 December 2016, due to the increase of 193 RFPs.

Total revenue for the Advice & Wealth Management segment increased to £316 million in the year ended 31 December 2017 from £253 million in the year ended 31 December 2016. This increase was due to higher net management fee revenue for both Quilter Cheviot and Quilter Investors as a result of higher AuM. Other revenue increased by £23 million to £82 million in the year ended 31 December 2017, due to higher advice income for Quilter Financial Planning reflecting the increase in the number of RFPs, as described in the discussion of NCCF above.

Revenue margin for the Advice & Wealth Management segment declined by 2 basis points from the year ended 31 December 2015 to the year ended 31 December 2016. Revenue margin for the Advice & Wealth Management segment further declined by 3 basis points from the year ended 31 December 2016 to the year ended 31 December 2017. This reflected the decline in revenue margin within Quilter Cheviot from a change in business mix, lower trading commission income, the effect of tiered fee structures, and ongoing competitive margin pressures. This was partially offset by the benefit of a higher contribution to the blended revenue margin from Quilter Investors due to customers investing in higher margin products offered by the Group, particularly Cirilium.

Total expenses for the Advice & Wealth Management segment increased to £194 million in the year ended 31 December 2016 from £157 million in the year ended 31 December 2015. The material drivers of the higher expense base were investment in the Group's businesses, including building out the advice capabilities to support revenue growth, and increased performancerelated incentives. Total expenses for the Advice & Wealth Management segment increased £40 million to £234 million in the year ended 31 December 2017 from £194 million in the year ended 31 December 2016. The increase relates to further investment in the business reflecting the costs of expanding PCA in Quilter Financial Planning, the inclusion of costs for Caerus, which was acquired in 2017, FSCS costs in Quilter Financial Planning, investment in IT and regulatory change and costs associated with becoming a standalone business.

Normalised operating profit from continuing operations for the Advice & Wealth Management segment increased by 16% to £59 million in the year ended 31 December 2016 from £51 million in the year ended 31 December 2015, driven by a combination of profit growth in Quilter Cheviot, due to its inclusion for the full 2016 year after its acquisition in early 2015, and Quilter Investors, partially offset by increased losses for Quilter Financial Planning, which is targeted to become a breakeven business over the medium term. Quilter Cheviot and Quilter Investors benefited from growth in AuM. Quilter Financial Planning incurred the first year of the Adviser incentive plan costs and continued to invest in adviser headcount growth. Normalised operating profit from continuing operations for the Advice & Wealth Management segment increased by 39% to £82 million in the year ended 31 December 2017 from £59 million in the year ended 31 December 2016, driven by an increase in the contribution from Quilter Investors as a result of 34% growth in average AuM.

Operating margin for the Advice & Wealth Management segment declined by 2 percentage points between 2015 and 2016. This reflects the ongoing investment in developing the Group's advice and investment management capabilities in line with its core strategy. Operating margin for the Advice & Wealth Management segment grew by 3 percentage points between 2016

and 2017, reflecting the increased contribution from Quilter Investors including scale benefits from the integrated business model.

(ii) Wealth Platforms

The following table sets forth certain key performance indicators utilised by management with respect to the business units of the Wealth Platforms segment, for the periods indicated.

	Year Ended 31 December
	2015	2016	2017
	(£ millions,	except where	indicated)
Wealth Platforms
Quilter Wealth Solutions
Net management fee	134	138	156
Other revenue	1	4	5
Total revenue	135	142	161
NCCF (£bn)	2.7	2.8	4.5
Closing AuA (£bn) (1)	34.5	41.4	50.2
Average AuA (£bn) (2)	32.7	37.1	45.5
Revenue margin (bps) (3)	39	36	33
NCCF (£bn)	88	89	90
Quilter International
Net management fee	110	105	112
Other revenue	5	18	17
Total revenue	115	123	129
NCCF (£bn)	0.5	0.5	1.4
Closing AuÁ (£bn)	14.5	16.9	19.3
Average AuA (£bn)	14.5	15.4	17.7
Revenue margin (bps)	76	68	63
% premium-based charging (%)	56	57	54
Asset retention (%) (4)	91	90	91
Quilter Life Assurance
Net management fee	99	87	89
Other revenue	28	39	32
Total revenue	127	126	121
NCCF (£bn)	(0.8)	(1.1)	(1.6)
Closing AuA (£bn) (1)	14.7	15.3	15.1
Average AuA (£bn) (2)	14.6	14.5	14.8
Revenue margin (bps) (3)	68	60	60
Asset retention (%) (4)	86	86	82
MCEV (**	538	497	498
Normalised operating profit from	82	80	66
continuing operations (6)

⁽¹⁾ Includes shareholder assets.

⁽²⁾ Excludes shareholder assets.

⁽³⁾ Revenue margin is calculated as net management fee over average AuA excluding shareholder assets and including International assets on the Quilter Wealth Solutions platform.

⁽⁴⁾ Calculated as 1 – (gross outflows / opening AuA).

⁽⁵⁾ Market Consistent Embedded Value ("MCEV") is a measure of the consolidated value of shareholders' interests in the covered business, including the impact of the Quilter Life Assurance product review. MCEV is a reporting standard for life insurance companies that provide a common set of principles and guidelines for use in

calculating embedded value. MCEV measures the value of business in-force based on a set of best estimate assumptions, allowing for the impact of uncertainty in future investment returns.

(6) Does not include impact of Quilter Life Assurance product review due to charge outside of operating profit from continuing operations.

NCCF for the Wealth Platforms segment decreased to £2.2 billion in the year ended 31 December 2016 from £2.4 billion in the year ended 31 December 2015. NCCF net inflows in Quilter Wealth Solutions improved, mainly driven by strong sales in personal pension product (driven mainly by the impact of pension reform) which was offset by higher surrenders across other products. NCCF net outflows in Quilter Life Assurance increased to £1.1 billion in the year ended 31 December 2016 from £0.8 billion in the year ended 31 December 2015. The increase in net outflows was driven by lower levels of new business generated through the institutional life business as the business started withdrawing from entering new institutional mandates. Quilter International NCCF remained stable between 2015 and 2016, across both portfolio bonds and unit-linked products.

NCCF for the Wealth Platforms segment increased to £4.3 billion in the year ended 31 December 2017 from £2.2 billion in the year ended 31 December 2016. Quilter Wealth Solutions net flows were £4.5 billion, up 61% due to strong flows into pension propositions as customers continue to consolidate existing pensions. Sales into the pension propositions accounted for 61% of total Quilter Wealth Solutions sales in 2017. Transfers by customers from their DB pensions into DC schemes accounted for gross sales of £1.8 billion in 2017, representing 33% of gross pension sales and 20% of total gross sales for Quilter Wealth Solutions. Quilter Life Assurance had net outflows of £1.6 billion in the year ended 31 December 2017, up 45% from £1.1 billion in the year ended 31 December 2016, primarily due to expected institutional life business outflows, which is expected to run-off over one to two years. Quilter International's net flows increased 180% to £1.4 billion in the year ended 31 December 2017 with strong net flows of £0.5 billion from Latin America, the Middle East, UK and Europe. Unit-linked products experienced modest outflows as these products are largely in run-off.

Asset retention for Quilter Wealth Solutions has increased year on year from 2015 to 2017 as a result of a comprehensive product offering and strong client retention through focus on good customer outcomes. Asset retention for Quilter Life Assurance has decreased year on year from the year ended 31 December 2015 to the year ended 31 December 2017 as a result of this book of business being in a steady, managed run-off of approximately 15% per annum (excluding Institutional).

AuA for the Wealth Platforms segment increased by £9.9 billion to £73.7 billion at 31 December 2016 from £63.8 billion at 31 December 2015. AuA grew across all Wealth Platforms business units, but was mainly driven by Quilter Wealth Solutions (£6.9 billion) and Quilter International (£2.4 billion). Quilter Life Assurance closing AuA increased to £15.3 billion at 31 December 2016 from £14.7 billion at 31 December 2015, due to positive market performance, partially offset by net outflows. AuA for the Wealth Platforms segment increased by £10.9 billion to £84.6 billion at 31 December 2017 from

£73.7 billion at 31 December 2016. AuA grew in Quilter Wealth Solutions and Quilter International due to strong NCCF and positive market movements.

Total revenue for the Wealth Platforms segment increased to £392 million in the year ended 31 December 2016 from £378 million in the year ended 31 December 2015. Quilter Wealth Solutions revenue increased during the period, following increased AuA due to strong net flows and market performance. This was partially offset by charging structure changes post RDR, which led to a decrease in fee income. Quilter Life Assurance net management fees decreased by 12% in the year ended 31 December 2016 as a result of a decline in revenue margin due to a change in business mix. Other revenue increased in 2016 due to an increase in early encashment charges in Quilter International and a one-off benefit from an assumption change in Quilter Life Assurance. Total revenue for the Wealth Platforms segment increased to £411 million in the year ended 31 December 2017 from £392 million in the year ended 31 December 2016, reflecting higher net management fee revenue from increased AuA, partially offset by lower revenue for Quilter Life Assurance due to the impact of the one-off assumption change in the year ended 31 December 2016, which did not reoccur in the year ended 31 December 2017.

Revenue margin for the Wealth Platforms segment declined by 7 basis points from the year ended 31 December 2015 to the year ended 31 December 2016. A further decline of 3 basis points from the year ended 31 December 2016 to the year ended 31 December 2017 reflected the competitive pressures, larger case sizes from pension transfers and the impact of the tiered charging structure in a strong market environment and changes to premium based fees in Quilter International.

Total expenses for the Wealth Platforms segment increased to £226 million in the year ended 31 December 2016 from £202 million in the year ended 31 December 2015. This was driven by investment in the IT infrastructure to build capabilities in line with best practice, including strengthening the second and third lines of defense teams, ahead of the transition to becoming standalone, and costs related to ensuring compliance with changes in regulation. Total expenses for the Wealth Platforms segment increased to £253 million in the year ended 31 December 2017 from £226 million in the year ended 31 December 2016. This was driven by continued investment in technology spend linked to improving resiliency of IT, infrastructure, changes to regulation, compliance with GDPR and MIFID II requirements, FSCS costs and costs associated with becoming a standalone business. Variable incentive costs also increased due to increased AuA and revenue.

Normalised operating profit from continuing operations for Wealth Platforms declined by 6% to £166 million in the year ended 31 December 2016 from £176 million in the year ended 31 December 2015. This was mainly due to a decline in revenue margin to 49 basis points in the year ended 31 December 2016 from 56 basis points in the year ended 31 December 2015 for the overall segment, due to margin pressure across its business units. The Quilter Life Assurance result benefitted from £10 million uplift from assumption changes over the two year period of the years ended 31 December 2016 and 2017. Normalised operating profit from continuing operations for Wealth Platforms decreased by 5% to £158 million in the year ended 31 December 2017 from £166 million in the year ended 31 December 2016. This was mainly due to expenses increasing more than revenues during the year as a result of continued investment in technology, as well as regulatory change costs, as explained in the expenses section above.

Operating margin for the Wealth Platforms segment has declined by 9 percentage points from the year ended 31 December 2015 to the year ended 31 December 2017, driven by the continued trend of increased costs in relation to improving the IT infrastructure and a decline in revenue due to the ongoing run-off of the Quilter Life Assurance business.

MCEV for Quilter Life Assurance decreased to £497 million at 31 December 2016 from £538 million at 31 December 2015. This reflected the impact of the fee restructure changes following the FCA Thematic Review, coupled with changes in expense assumptions.

The MCEV for Quilter Life Assurance was broadly unchanged at £498 million at 31 December 2017. Movements in the year, which had no overall impact, included benefits from positive investment return and policyholder tax experience variances, positive assumption changes with respect to pension maturities and a capital injection of £38 million. This was offset by the impact of the provision for the voluntary client remediation.

(iii) Head Office

The costs for Head Office increased by £4 million, or 29%, to £18 million in the year ended 31 December 2016, as compared to £14 million in the year ended 31 December 2015. This reflects the initial expenses incurred as a part of the build-up to become a standalone listed Group and include strengthening capability in the Group's Board and in central functions such as Risk, Finance and Company Secretariat. Revenue of £1 million was earned in the year ended 31 December 2016 as a result of other shareholder assets.

The costs for Head Office increased by £14 million, or 78%, to £32 million in the year ended 31 December 2017, as compared to £18 million in the year ended 31 December 2016. This reflects further additional expenses incurred to become a standalone Group, and higher variable incentive costs due to additional senior headcount. Revenue of £1 million was recognised in the year ended 31 December 2017 as a result of returns on shareholder assets.

6. Liquidity and Capital Resources

The Group manages its capital with a focus on capital efficiency and effective risk management. The capital objectives are to maintain the Group's ability to continue as a going concern while supporting the optimisation of return relative to the risks. The Group ensures that it can meet its expected capital and financing needs at all times having regard to the Group's business plans, forecasts and strategic initiatives and regulatory requirements in all businesses in the Group. The Group's overall capital risk appetite is set with reference to the requirements of the relevant stakeholders and seeks to:

• Maintain sufficient, but not excessive, financial strength to support stakeholder requirements;
• Optimise the debt to equity structure to enhance shareholder returns; and
• Retain financial flexibility by maintaining liquidity, including unutilised committed credit lines.

The primary sources of capital used by the Group are equity shareholders' funds, subordinated debt and the value of in force insurance business. Liquidity is sourced from shareholder cash resources, borrowings and a revolving credit facility. Alternative resources are utilised where appropriate. Targets are established in relation to regulatory solvency, credit ratings, liquidity and dividend capacity and are a key tool in managing capital in accordance with the Group's risk appetite and the requirements of the Group's various stakeholders.

6.1 Consolidated Cash Flow

The following table sets forth the Group's consolidated cash flows, which includes policyholder and shareholder cash, for the periods indicated and has been extracted without material adjustment from the consolidated historical financial information set out in "Historical Financial Information".

	Year Ended 31 December
	2015	2016	2017
		(£ millions)
Net cash flows from operating activities (1)	2,732	2,871	5,413
Net cash flows used in investing activities . Net cash flows from/(used in) financing	(3,020)	(2,839)	(4,602)
activities	504	(33)	(48)
Net increase/(decrease) in cash and cash equivalents	216	(1)	763

⁽¹⁾ Cash flows include continuing and discontinued operating activities.

The required IFRS format for cash flow statements of life insurance businesses includes a commingling of cash flows related to policyholders and those related to shareholders. This results in, for example, market value movements within investment contract liabilities matching the "linked" funds investments being shown within operating activities, where the acquisition of the related linked financial investments is shown within investing activities. From a management perspective, these policyholder flows would be netted off. This makes it difficult to draw conclusions from the relative quantum of these operating and investing activities specifically impacting the shareholder.

6.1.1 Net cash flows from operating activities

Net cash flows from operating activities were £2,871 million for the year ended 31 December 2016, as compared to £2,732 million for the year ended 31 December 2015. The increase in net cash flows from operating activities was due to an increase in profit before tax from discontinued operations, as well as cash inflows from changes in working capital, primarily driven by a movement in reinsurers' share of policyholder liabilities.

Net cash flows from operating activities were £5,413 million for the year ended 31 December 2017, as compared to £2,871 million for the year ended 31 December 2016. The increase in net cash inflows from operating activities was primarily driven by growth in NCCF and strong market performance, which led to an increase in the value of insurance and investment contract liabilities. There was also a reduction in net cash outflows associated with the sale of financial assets as part of regular trading activity, as well as net cash inflows from working capital requirements.

6.1.2 Net cash flows used in investing activities

Net cash flows used in investing activities were £2,839 million for the year ended 31 December 2016, as compared to £3,020 million for the year ended 31 December 2015. The decrease in net cash used in investing activities was primarily due to a decrease in the outflows for acquisition of investments in subsidiaries and associated undertakings, which was £16 million for the year ended 31 December 2016 in relation to the AAM Advisory and PCA acquisitions, compared to £567 million for the year ended 31 December 2015 in relation to the acquisition of Quilter Cheviot. This was partially offset by an increase in the net cash used for the acquisition of financial investments, primarily for the benefit of policyholders, which was an outflow of £2,810 million for the year ended 31 December 2016, as compared to £2,430 million for the year ended 31 December 2015.

Net cash flows used in investing activities were £4,602 million for the year ended 31 December 2017, as compared to £2,839 million for the year ended 31 December 2016. The increase in the net cash used in investing activities was primarily due to increased trading and the acquisition of financial investments, primarily for the benefit of policyholders, which led to an outflow of £4,760 million for the year ended 31 December 2017, as compared to an outflow of £2,810 million for the year ended 31 December 2016. Cash outflows relating to the acquisition of subsidiaries increased from £16 million for the year ended 31 December 2016 to £33 million for the year ended 31 December 2017, which was more than offset by the cash inflows from the disposal of the Italy business of £208 million in the year ended 31 December 2017.

6.1.3 Net cash flows from/(used in) financing activities

Net cash flows used in financing activities were £33 million for the year ended 31 December 2016, as compared to net cash from investing activities of £504 million for the year ended 31 December 2015. The decrease in net cash flows from financing activities was due to the proceeds received from the issue of subordinated and other debt of £614 million in the year ended 31 December 2015, compared with £53 million in the year ended 31 December 2016. In addition, dividends paid to Old Mutual plc were £24 million, compared to nil in the year ended 31 December 2016.

Net cash flows used in financing activities was £48 million for the year ended 31 December 2017, as compared to £33 million for the year ended 31 December 2016. The increase in net cash used in financing activities was due to the proceeds from the issue of debt of £53 million in the year ended 31 December 2016, which was partially offset by a loan to the Employee Benefit Trust of £43 million. The dividends paid to Old Mutual plc of £210 million, and the debt repayments of £57 million, were separate from the proceeds from the issue of ordinary shares of £258 million in the year ended 31 December 2017.

6.1.4 Closing cash position

The closing cash positions for the period under review includes cash held with consolidated investment funds and was £1,601 million, £1,595 million and £2,360 million as at 31 December 2015, 2016 and 2017, respectively. This is an IFRS requirement but does not form part of the Group's operating cash as it is held within legally segregated collective fund vehicles. Excluding these amounts, the closing cash positions of the Group was £892 million, £1,076 million and £1,595 million as at 31 December 2015, 2016 and 2017, respectively.

These positions exclude cash held within entities shown as held for sale within the statement of financial position, which was £147 million as at 31 December 2017 and £14 million as at 31 December 2016.

6.2 Capital Resources

As at 31 December 2017, the Group had £2,360 million in cash and cash equivalents, and £782 million of outstanding indebtedness. The Group's interest expense for the year ended 31 December 2017 was £39 million, compared to £43 million for the year ended 31 December 2016 and £32 million for the year ended 31 December 2015.

During the years ended 31 December 2016 and 2015, the Group had an implicit borrowing arrangement with its parent Old Mutual plc under which it could receive funding for liquidity strains in stress scenarios should the need arise. No drawdown on this arrangement was made over the period. In January 2017, the Group established a new internal £200 million revolving credit facility with Old Mutual plc for a two year duration which was subsequently amended in May 2017 to £70 million over the same term.

On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, the New Term Loan, a £300 million senior unsecured term loan with five relationship banks all participating in an equal share with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating. The New Term Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction. On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478%. Including the impact of amortisation of bond set-up costs, the issuance of the Notes will increase operating expenses in the Group's Head Office function by approximately £11 million on an annual basis. The Notes have a Fitch instrument rating of BBB-. In addition, the Group entered into the New Revolving Facility for £125 million. The New Revolving Facility is currently undrawn and is expected to remain undrawn during 2018.

At 31 December 2017, the Group had total gross intercompany indebtedness to other companies within the Old Mutual plc group totalling £782 million, offset by a £16 million receivable. Subsequent to the year end, and as part of a series of internal transactions, £566 million of intercompany indebtedness to other companies within the Old Mutual plc group has been effectively equitised, with the indebtedness to other companies within the Old Mutual plc group being replaced with equity in the form of share capital and a merger reserve. The overall indebtedness also reduced by £16 million from ordinary course transactions. The remaining £200 million intercompany indebtedness was repaid in full from the new facilities referred to above and from existing cash resources on 28 February 2018. On the same date, the £70 million revolving credit facility with Old Mutual plc was cancelled.

For a description of the Group's financing arrangements, see Note 34 of the Group's historical financial information in "Historical Financial Information".

Save as outlined herein, there have been no other material loans made by third parties to the Group and its Major Subsidiaries, or any subsidiary where such loans are material to the Company. Details of all outstanding loan capital are listed as material borrowings of the Company, its Major Subsidiaries or any subsidiary where such loans are material to the Company as at the Last Practicable Date. There are no material loans receivable outstanding made by the Group, its Major Subsidiaries or any subsidiary where such loans are material to the Company, to third parties.

6.3 Capital Expenditures

Apart from consideration paid in respect of its acquisitions the Group, given the nature of its operations, has no significant capital expenditures other than certain leaseholds and office improvements made in the normal course of business.

6.4 Capital Management

Following the Quilter Separation, the Group will be subject to Solvency II group supervision. However, three life assurance companies based within the EEA (Old Mutual Wealth Life & Pensions Limited, Old Mutual Wealth Life Assurance Limited and Old Mutual International Ireland dac) are already subject to Solvency II supervision at an entity level. Solvency II will also, following the Quilter Separation, be the umbrella regime for the Group's consolidated balance sheet; the headline capital ratio reported by the Group will be its Solvency II ratio (in which the entities subject to ICAAP are included).

The ICAAP regime principally applies to the entities within the Group's Advice & Wealth Management segment, as well as to OMWL, the part of the Quilter Wealth Solutions business that is not under the Solvency II regime. The ICAAP is used to assess the level of capital which should be retained by the entities to which it applies and is a consolidated assessment of capital requirements for the investment and advice businesses within the Group. The ICAAP considers all of the risks faced by the relevant entities and the degree to which risks have similar or related causes and so could occur together. Capital resources are then allocated appropriately within the entities forming the ICAAP group taking into account the risks faced by each business.

Capital is managed to ensure continued compliance with entity level and group level capital requirements within the above frameworks.

6.4.1 Regulatory capital in accordance with Solvency II rules

From 1 January 2016, the regulated insurance entities within the Group operating in the EU have been required to measure and monitor their capital resources under the Solvency II regulatory regime. Following the Quilter Separation, the consolidated Group will also be subject to Solvency II reporting on a group basis.

The Group's capital position under Solvency II will, following the Quilter Separation, be determined by aggregating the assets and liabilities of the Group recognised and measured on a Solvency II basis with the excess of the former over the latter (if any) being "own funds" (reduced by the amount of own shares held). The result of this calculation is compared with the Group's Solvency II solvency capital requirement to determine surplus capital.

While the Group was not required to report on a Solvency II basis as at 31 December 2017, the Group's Solvency II surplus as at 31 December 2017 was £653 million, as compared to £800 million as at 31 December 2016, representing a Solvency II ratio of 155% as at 31 December 2017, compared to 175% as at 31 December 2016, calculated under the standard formula. Surplus capital at individual entity level is assessed for availability to the Group and therefore may be restricted when determining Group own funds.

For the period under review, the estimated solvency capital requirement and corresponding eligible own funds were as follows:

	As at 31 December
	2015	2016	2017
		(£ millions, except where indicated)
Eligible Own Funds (1)	1,768	1,872	1,849
Solvency capital requirements	974	1,072	1,196
Solvency II surplus	794	800	653
Coverage (%)	182	175	155

⁽¹⁾ Includes a £566 million subordinated loan from Old Mutual plc and, as such, represents how the capital position of the Group was presented within the broader Old Mutual plc group. This subordinated loan has been effectively converted to equity after the year-end following the acquisition of Skandia UK. See "— 6.4.3 Illustrative regulatory capital position as at 31 December 2017".

6.4.2 EIOPA Solvency II Capital Guidance

_____________

The EIOPA has recently published updated guidance regarding the treatment of the Individual Capital Guidance ("ICG") requirements in investment firms subject to the ICAAP regime. This guidance, which is non-mandatory, applies when calculating the Solvency II capital ratio on a consolidated basis for groups comprising both ICAAP and Solvency II regulated entities. The Group has adopted this treatment for all periods as shown above.

According to the EIOPA guidance, the solvency capital requirement under Solvency II for ICAAP regulated entities should include both the capital requirement from the ICAAP and any requirement imposed by the regulator. The previous methodology used by the Group included the Pillar 1 capital requirement for the ICAAP regulated entities within the Solvency II capital requirement, with the balance between this and the total capital requirement being excluded from both the Solvency II Own Funds and the solvency capital requirement. On a pro forma basis, the change in treatment would have increased both Own Funds and the solvency capital requirement by £0.2 billion as at 30 June 2017. As a result, the consolidated Solvency II ratio for the Group of 177% reported as at 30 June 2017 would have been 163% on a pro forma consolidated basis. The change in treatment is economically neutral and has no impact on the Solvency II surplus.

6.4.3 Illustrative regulatory capital position as at 31 December 2017

The following illustrative regulatory capital position for Quilter plc as at 31 December 2017 has been prepared to illustrate the impact of the Skandia UK acquisition, the Notes, the New Term Loan and the repayment of the Old Mutual plc loan. For further information on the pro forma adjustments, see "Unaudited Pro Forma Financial Information".

	Quilter plc as at 31 December 2017	Acquisition of Skandia UK	Notes	New Term Loan	Repayment of Old Mutual plc loan	Pro forma
	Note 1	Note 2	Note 3	Note 4	Note 5
				(£ millions)
Eligible Own Funds Solvency capital	1,849	11	200	-	-	2,060
requirements	1,196	2	5	7	(5)	1,205
Solvency II surplus	653	9	195	(7)	5	855
Coverage (%)	155					171

• (1) The financial information as at 31 December 2017 has been extracted without adjustment from the historical financial information set out in Section B of "Historical Financial Information" of this Prospectus
• (2) Acquisition of Skandia UK from Old Mutual plc: The Skandia UK Limited group of entities was acquired from Old Mutual plc on 31 January 2018 and comprises seven Old Mutual plc group entities with a net asset value of £591 million. The transfer was financed by the issue of one share, with the balance represented by a merger reserve; no debt was taken on as a result of this transaction. The most significant asset within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial position. Subsequent to the year end, a series of transactions were carried out the net effect of which was to replace £566 million of intercompany indebtedness to Old Mutual plc with equity in the form of share capital and a merger reserve.
• (3) Issue of Notes: On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478%. Including the impact of amortisation of bond set-up costs, the issuance of the Notes will increase operating expenses, which will be reported as part of Head Office, by £11 million on an annual basis. The Notes have a Fitch instrument rating of BBB-.
• (4) New Term Loan: On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, the New Term Loan, a £300 million senior unsecured term loan with a number of lenders with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Company's credit rating.
• (5) Repayment of Old Mutual plc loan of £200 million: As at 31 December 2017, the Group had net payables due to Old Mutual plc of £766 million (representing a gross payable of £782 million offset by a £16 million receivable). The acquisition of Skandia UK Limited (see Note 2 above) in January 2018 reduced this payable by £566 million to £200 million; the remaining £200 million net liability to Old Mutual plc was settled from the new financing arrangements obtained in February 2018 and from existing cash resources.

The Company also expects to receive a further approximately £570 million of additional funds on completion of the disposal of the Single Strategy Business. The New Term Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction. The Company will consider the use of any surplus proceeds later in 2018, taking into account the costs associated with the sale of the Single Strategy Business, the costs associated with the establishment of the Multi-Asset Business and ongoing business requirements and its dividend policy as described in "Business Description".

6.4.4 Own Risk and Solvency Assessment

The Solvency II directive introduced a requirement for undertakings to conduct an ORSA. The Group defines its ORSA as a series of inter-related activities by which it establishes the quantity and quality of the risks which it seeks to assume; the level and quality of capital required to support those risks; and the actions it will take to achieve and maintain the desired levels of risk and capital.

The assessment considers both the current position and the positions that may arise during the planning horizon of the Group (typically the next three years). It looks at both the expected outcome and the outcome arising when the plan assumptions do not materialise as expected.

The assessments of how much risk to assume and how much capital to hold are inextricably linked. In some situations, it may be desirable to increase the amount of risk assumed or retained in order to make the most efficient use of capital available or else to return excess capital to capital providers. In other situations, where the risks assumed give rise to a capital requirement that is greater than the capital immediately available to support those risks, it will be necessary either to reduce the risk assumed or to obtain additional capital.

The assessment of risk and solvency needs is in principle carried out continuously. In practice, the assessment consists of a range of specific activities and decisions carried out at different times of the year as part of an annual cycle, supplemented as necessary by ad hoc assessments of the impact of external events and developments and of internal business proposals.

Papers are presented to the Board throughout the year dealing with individual elements that make up the ORSA. The information contained in those papers and the associated decisions taken are summarised in an annual ORSA report, which is submitted to the Group's regulators as part of the normal supervisory process. Given its current regulatory permissions and waivers position, the Group currently produces individual ORSAs and capital calculations for each entity in the Group which is required to do so. In December 2017, the Group produced and submitted a Group-level ORSA report for OMWML, which incorporated the ORSA entities and the ICAAP group. The Group will produce a Group-level ORSA in the second half of 2018.

7. Contractual Obligations and Commitments

The principal contractual obligations that the Group incurs in the ordinary course of business, are in relation to investment contract liabilities and expected claim dates for insurance contracts. Investment contract policyholders have the option to terminate or transfer their contracts at any time and to receive the surrender or transfer value of their policies. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due in less than three months and more than three months and less than one year, the Group does not expect all these amounts to be paid out within one year of the reporting date.

The following table is a maturity analysis of liability cash flows based on contractual maturity dates for investment contract liabilities and expected claim dates for insurance contracts. The undiscounted cash flows of discretionary participating investment contracts only include amount vested or to be vested, while their carrying amount include reserves that are payable at the discretion of the Group.

	As at 31 December 2017
				Undiscounted cash flows
		Up to	Three	Between
	Carrying	three	months to	one and	More than
	amount	months	one year	five years	five years	Total
				(£ millions)
Life assurance
policyholder liabilities
Insurance contracts	489	15	8	34	855	912
Life assurance policyholder
liabilities	480	6	8	34	855	903
Outstanding claims	9	9	-	-	-	9
Investment contracts
Unit-linked investment
contracts and similar
contracts	59,139	59,139	-	-	-	59,139
Total policyholder
liabilities	59,628	59,154	8	34	855	60,051

8. Contingent Liabilities

For a discussion of the Group's contingent liabilities, see Note 39 of the Group's historical financial information included in "Historical Financial Information".

9. Market Risk Disclosure

Market risk is the risk of a financial impact arising from the changes in values of financial assets or financial liabilities from changes in equity, bond and property prices, interest rates and foreign exchange rates. Market risk arises differently across the Group's businesses depending on the types of financial assets and liabilities held.

The Group has developed market risk policies which set out the market risk management governance framework, permitted and prohibited market risk exposures, maximum limits on market risk exposures, management information and stress testing requirements which are used to monitor and manage market risk. These policies are cascaded to business units across the Group. Each of the Group's business units has their own established set of policies, principles and governance processes to monitor and manage market risk within their individual businesses and in accordance with their local regulatory requirements. Group-level governance and monitoring processes provide oversight of these individual approaches to the management of market risk.

The financial impact of extensive movements in market risk other than those that could be reasonably expected is examined through scenario testing. The sensitivity of future earnings to the level and performance of investment markets is monitored through sensitivity analyses performed for business planning. The sensitivity of the Group's earnings, capital position and embedded value to market risk is monitored through the Group's embedded value and risk appetite reporting processes.

Market risk arises from exposure to movements in interest rates, equity and property values and foreign exchange rates.

9.1 Insurance operations

For the Group's insurance operations, equity, property, volatility and interest rate risk exposure to capital and to earnings are quantified in accordance with the Group's risk appetite framework.

For the Group's unit-linked assurance operations, policyholders carry the full market risk, with the only risk to the Group being asset-based fee risk from charges on policyholder funds. In respect of the Group's shareholders' funds, market risk is addressed in the Group's investment policy, which provides for very limited opportunity for entities to invest their shareholder capital in equities and other volatile assets.

9.2 Equity and property price risk

In accordance with the market risk policy, the Group does not invest shareholder assets in equity or property, or related collective investments, except where the exposure arises due to:

• Mismatches between unitised fund assets and liabilities. These mismatches are permitted, subject to maximum limits, to avoid excessive dealing costs;
• Seed capital investments. Seed capital is invested within new unit-linked funds at the time when these funds are launched. The seed capital is then withdrawn from the funds as policyholders invest in the funds.

The above exposures are not material. Due to the nature of the investments held there is no material exposure to equity and property price risk on non-linked term assurance policyholder assets.

The Group derives fees (e.g. annual management charges) and incurs costs (e.g. adviser fund based renewal commissions) which are linked to the performance of the underlying assets. Therefore future earnings will be affected by equity and property market performance.

		As at 31 December
	2015	2016	2017
		(£ millions)
Impact on profit after tax
Impact of 10% increase in equity and property prices	29	30	32
Impact of 10% decrease in equity and property prices	(29)	(31)	(31)

9.3 Interest rate risk

Interest rate risk arises primarily from investment in fixed interest government securities, which are exposed to fluctuations in interest rates and bank balances held with financial institutions.

Fixed interest government securities are held to match liabilities for non-linked protection business determined on an IFRS basis. Therefore, on an IFRS basis there is no material exposure to interest rate movements.

A rise in interest rates would also cause an immediate fall in the value of investments in fixed income securities within unit-linked funds, resulting in a short term fall in fund based fees.

Exposure of the IFRS income statement and statement of financial position equity to interest rates are summarised in sensitivities later within this section.

9.3.1 Interest rate sensitivity testing

The impact of an increase or decrease in market interest rates of 1% is tested (e.g. if the current interest rate is 5%, the test allows for the effects of an instantaneous change to 4% and 6% from the start of the year). The test allows consistently for similar changes in investment returns and movements in the market value of assets backing non-linked liabilities. The sensitivity of profit to interest rates is presented below.

A 1% rise in interest rates would impact the value of linked funds and therefore impact the fee income that is based on the market value of the investments held for the policyholders. Linked funds would move in value by around 2% as a shift of 1% in gilt yields moves gilt market values by 10%, but only 20% of linked assets are gilts. In previous years, gilts backing free capital and sterling reserves were held for regulatory purposes (£76 million in the year ended 31 December 2015) and these were subject to market movements, although the sterling reserves themselves were not included in the IFRS financial statements. These gilts are no longer required due to regulatory changes effective from 2016.

Perfect matching has been assumed for insurance contracts so that any movement in asset values is balanced by a movement in the insurance provision.

		As at 31 December
	2015	2016	2017
		(£ millions)
Impact on profit after tax
Impact of 1% increase in interest rates	12	16	20
Impact of 1% decrease in interest rates	(13)	(12)	(10)

9.4 Currency translation risk

The Group is exposed to movements in exchange rates from changes in the Sterling value of surplus assets and earnings on underlying invested funds denominated in foreign currencies. From a capital perspective, the Group's capital is held where its risks are located and currency translation risk would only be realised if the Group were to require a transfer of surplus capital between regions during a period of stress. The functional currencies of the Group's principal overseas operations are euros and Hong Kong dollars.

Certain of the Groups' business operations may undertake activities that are not in their functional currencies. These activities are economically hedged by numerous activities such as the use of currency swaps, currency borrowings and forward foreign exchange contracts.

The foreign currency translation table below has been prepared on the basis that the values of the economic hedging instruments are reflected at their carrying value as opposed to their notional amounts. The tables are therefore a reflection of the foreign currency exposures in their respective currencies. Each currency is actively managed and compared with appropriate limits. The Group does not have significant concentrations of foreign currency risk exposure.

At the dates indicated below, the Group's total shareholders' equity deployed by currency was:

		As at 31 December 2016
		(£ millions)
	GBP	EUR	USD	SEK	Other	Total
Shareholders' equity at 31 December 2017	891	7	173	21	7	1,099
Shareholders' equity at 31 December 2016	779	179	12	19	3	992
Shareholders' equity at 31 December 2015	764	148	(15)	10	6	913

9.5 Liquidity risk

Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Ultimate responsibility for liquidity risk management rests with the Board, which has built an appropriate liquidity risk management framework for the management of the Group's short-, medium- and long-term funding and liquidity requirements. The Group manages liquidity by maintaining adequate reserves and banking facilities, continuously monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities. Individual businesses separately maintain and manage their local liquidity requirements according to their business needs, within the overall liquidity framework established by the Group.

The Group continues to meet Group and individual entity capital requirements, and day-today liquidity needs through the Group's available cash resources and, if necessary, available credit facilities. The Group's liquid resources are held in large portfolios of highly marketable securities, for example listed bonds, actively traded pooled investments and cash and cash equivalents. Whilst most of the Group's policyholder liabilities are generally repayable on demand, the Group's expectation is that policyholders will only require funds on an ongoing basis. However, cash resources and other liquid assets are maintained in the event of a need for additional liquidity. Information on the nature of the investments and securities held is given in Note 22 of the Group's historical financial information in "Historical Financial Information".

During the years ended 31 December 2016 and 2015, the Group had an implicit borrowing arrangement with its parent Old Mutual plc where it could receive funding for liquidity strains in stress scenarios should the need arise. No drawdown on this arrangement was made over the period. In January 2017, the Group established a new internal £200 million revolving credit facility with Old Mutual plc for a two year duration which was subsequently amended in May 2017 to £70 million over the same term. Further details, together with information on the Group's borrowed funds, are given in Note 34 of the Group's historical financial information in "Historical Financial Information".

The key information reviewed by the Group's Executive Directors and Executive Committee, together with the Group's Capital Management Forum, is a detailed management report on the Group's and holding company's current and planned capital and liquidity position, together with summary information on the current and planned liquidity positions of the Group's operating segments. Forecasts are updated regularly based on new information received and also as part of the Group's annual business planning cycle. The Group and holding company's liquidity and capital position and forecast are presented to the Group's Board of Directors on a regular basis. Additionally the Group conducts regular stress testing around liquidity requirements.

Group operating segments are required, both in terms of their local requirements and in accordance with direction from the holding company, to establish their own processes for managing their liquidity and capital needs and these are subject to review by their local oversight functions, with representation from the Group.

The Group does not have material liquidity exposure to special purpose entities or investment funds. The contractual maturities of the Group's financial liabilities are set out above in the section entitled "—7. Contractual Obligations and Commitments".

9.6 Operational risk

Operational risk is the risk that failure of people, processes, systems or external events results in financial loss, damage to brand/reputation or adverse regulatory intervention or government or regulatory fine.

Operational risk includes all risks resulting from operational activities, excluding risks already described above and excluding strategic risks and risks resulting from being part of a wider group of companies.

Operational risk includes the effects of failure of the administration processes, IT maintenance and development processes, investment processes (including settlements with fund managers, fund pricing and matching & dealing), product development and management processes, legal risks (e.g. risk of inadequate legal contract with third parties), risks relating to the relationship with third party suppliers, and the consequences of financial crime and business interruption events.

The management have primary responsibility for the identification, management and monitoring of risks, and escalation and reporting on issues to executive management and group management.

The company executive management have responsibility for implementing the Group risk management methodologies and framework and for development and implementation of action plans to manage risk levels within acceptable tolerances and resolve issues.

9.7 Investment contract risk

Investment contract risk arises through the exposure to unfavourable operating experience in respect of factors such as persistency levels and management expenses relative to the Group's expectations when pricing contracts, which may prevent the Group from achieving its profit objectives.

The financial impact of persistency and expense risks is examined through stress tests carried out within the ICAAP.

10. Critical Accounting Policies, Judgements and Key Sources of Estimation Uncertainty

The preparation of financial statements requires management to exercise judgement in applying accounting policies and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. Critical accounting estimates and judgements are those that involve the most complex or subjective assessments and assumptions. Management uses its knowledge of current facts and circumstances and applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance to make predictions about future actions and events. Actual results may differ significantly from those estimates.

The Group Audit Committee reviews the reasonableness of judgements and assumptions applied and the appropriateness of significant accounting policies adopted in the preparation of these financial statements.

The significant accounting policies used in the preparation of the Group's consolidated financial statements are set out and described in Note 4 of the Group's historical financial information and have been applied consistently to the periods under review, unless otherwise stated. The Group has not made any significant changes to its accounting policies in the year ended 31 December 2017.

The areas where judgements, estimates and assumptions have the most significant effect on the amounts recognised in the consolidated financial statements are summarised below.

10.1 Consolidation

Assessment of whether the Group controls underlying entities (invested) including investment funds, based on whether the Group has power over the investee; exposure or rights to variable returns from its involvement with the investee; and, the ability to affect those returns through the power over the investee. For additional information on the Group's related accounting policies, see Note 4.1 to the Group's historical financial information in "Historical Financial Information".

10.2 Insurance contracts – recognition and measurement

The recognition and measurement of insurance contracts requires an assessment of the significance of insurance risk transferred to the Group in determining whether a contract should be classified (and accounted for) as an insurance or investment contract. Measurement involves significant use of assumptions including mortality, morbidity, persistency, expense valuation and interest rates. For additional information on the Group's related accounting policies, see Notes 4.3 and 4.9 to the Group's historical financial information in "Historical Financial Information".

10.3 Provisions and contingent liabilities

In assessing whether a provision should be recognised or a contingent liability disclosed, the Group evaluates the likelihood of a constructive or legal obligation to settle an event that took place in the past and whether a reliable estimate can be made. The amount of provision is calculated, based on the Group's estimation of the expenditure required to settle the obligation at the statement of financial position date. For additional information on the Group's related accounting policies, see Note 4.17 to the Group's historical financial information in "Historical Financial Information".

10.4 Tax

The calculation and recognition of temporary differences resulting in deferred tax balances includes judgement to the extent to which future taxable profits are available against which temporary differences can be utilised. The estimation of future taxable profits is performed as part of the annual business planning process, and is based on estimated levels of assets under management, which are subject to a large number of factors including worldwide stock market movements, related movements in foreign exchange rates and net client cash flow, together with estimates of expenses and other charges. For additional information on the Group's related accounting policies, see Note 4.14 to the Group's historical financial information in "Historical Financial Information".

10.5 Goodwill and other intangible assets

The valuation of intangible assets that are recognised as the result of a business combination involves the use of valuation models. In relation to goodwill impairment, the determination of a cash generating unit's recoverable value is based on the discounted value of the expected future profits of each business. Significant estimates include forecast cash flows, new business growth and discount rates. Other intangible assets are tested for impairment using an income approach method using estimates such as forecast cash flows and discount rate. For additional information on the Group's related accounting policies, see Note 4.15 to the Group's historical financial information in "Historical Financial Information".

11. Recent and Prospective Changes in Accounting Policies

Recent and prospective changes in accounting policies are also explained in Note 3 to the Group's historical financial information in "Historical Financial Information".

11.1 IFRS 9 (Financial Instruments)

IFRS 9: Financial Instruments was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition and Measurement. The standard is effective and will be implemented by the Group from 1 January 2018. The final version of this standard incorporates amendments to classification and measurement, hedge accounting guidance, as well as the accounting requirements for the impairment of financial assets measured at amortised cost and fair value through other comprehensive income (FVOCI). IFRS 9's enhanced disclosure requirements will result in improved credit risk disclosures and increased transparency with respect to impairment judgements and estimates.

As permitted by the transitional provisions of IFRS 9, the Group has elected not to restate comparative figures. Any adjustments to the carrying amount of financial assets and financial liabilities at the date of transition will be recognised in the opening retained earnings and other reserves at 1 January 2018. The Group has elected to continue to apply the hedge accounting requirements of IAS 39 on adoption of IFRS 9.

11.1.1 Classification and measurement of financial assets and liabilities

Financial assets are classified based on (i) the business model within which the financial assets are held and managed and (ii) the contractual cash flow characteristics of the financial assets, whether the cash flows represent 'solely payments of principal and interest'.

Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold those assets for the purpose of collecting contractual cash flows and those cash flows comprise solely payments of principal and interest ('hold to collect' business model).

Financial assets are measured at fair value through other comprehensive income ("FVOCI") if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and those contractual cash flows comprise solely payments of principal and interest ('hold to collect and sell' business model). Movements in the carrying amount of these financial assets should be taken through other comprehensive income ("OCI"), except for impairment gains or losses, interest revenue and foreign exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

The remaining financial assets are measured at fair value through profit or loss ("FVTPL"). All derivative instruments that are either financial assets or financial liabilities are held for trading and as such will continue to be measured at fair value through profit and loss.

The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the fair value of these financial liabilities that are attributable to the Group's own credit risk are recognised in OCI. Where the financial liability is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity.

For equity investments that are neither held for trading nor contingent consideration, the Group may irrevocably elect to present subsequent changes in fair value of these equity investments in OCI. Where the equity investment is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity. Alternatively where the Group does not make the aforementioned election, fair value changes are recognised in profit or loss. This election is made on an investment by investment basis.

Based on the assessment of financial assets at 31 December 2017, the Group does not expect the impact of the changes to classification and measurement of financial assets to be significant to the Group's statement of financial position and performance.

11.1.2 Impairment of financial assets

Under IFRS 9 impairment is determined based on an expected credit loss ("ECL") model rather than the current incurred loss model required by IAS 39. The Group will be required to recognise an allowance for either 12-month or lifetime ECLs, depending on whether there has been a significant increase in credit risk since initial recognition.

The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity's best available forward-looking information. The aforementioned probabilityweighted outcome must consider the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of a credit loss occurring is low.

The ECL model applies to financial assets measured at amortised cost and FVOCI, lease receivables and certain loan commitments as well as financial guarantee contracts.

The IFRS 9 Impairment Implementation continued to progress during 2017. The following were the main areas of focus for 2017:

• Development, build and testing of impairment models with respect to financial assets held at amortised cost or FVOCI;
• Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and
• Documentation and implementation of the relevant control environment and related governance processes.

Significant development in the above areas facilitated the performance of a parallel run for the majority of the Group's significant holdings of financial assets held at amortised cost or FVOCI during the latter part of 2017.

Key assumptions and judgements applied in relation to the new impairment model are summarised below:

• Cash at bank no ECL allowance is recognised, as deposits are held with banks with medium to high quality credit ratings and credit risk is considered to be minimal.
• Inter-company loans no ECL allowance is recognised as these balances are internal to the Group and credit risk is considered to be low.
• Loans and advances methodology is based on approach, whereby historical data is extrapolated forward to derive a 12 month ECL allowance and then monitored for increases in credit risk which may trigger the recognition of a Lifetime ECL.
• Other assets (trade receivables) simplified approach is adopted, whereby a Lifetime ECL is recognised immediately and there is no need to track for any increases in credit risk.

The Group has estimated that the impact of adopting IFRS 9's ECL model has an immaterial transitional impact on the Group's opening retained earnings at 1 January 2018. These estimates are based on accounting policies, assumptions, judgements and estimation techniques which will be regularly reviewed and assessed during the year in preparation for the financial statements for the year ending 31 December 2018.

11.2 IFRS 15 (Revenue from Contracts with Customers) (endorsed by the European Union)

IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with clients, unless the contracts are in the scope of the standards on leases, insurance contracts and financial instruments. The core principle of the standard is that revenue recognised reflects the consideration to which the Group expects to be entitled in exchange for the transfer of promised goods or services to the client. The standard incorporates a five-step analysis to determine the amount and timing of revenue recognition.

The standard is effective for the Group for the financial year commencing 1 January 2018. The Group intends to adopt the standard using the modified retrospective approach which means that the cumulative impact of adoption will be recognised in retained earnings as of 1 January 2018.

The Group performed an assessment to determine the potential impact of the new standard on the Group's statement of financial position and performance. The Group considered the five-step analysis prescribed by the standard. It also took into account the different types of contracts it has with its customers, the corresponding types of services provided to customers and when these service obligations are satisfied. In addition, the Group considered the types of fee income generated across all products from the contracts with its customers and when the fee income is recognised. This impact assessment concluded that IFRS 15 will have minimal effect on the Group.

An increased level of disclosure is required by IFRS 15 which will include qualitative and quantitative information about the Group's contracts with customers, significant judgements made and changes in those judgements. IFRS 15 also introduces standard definitions and will require additional information about contact costs (previously known as Deferred Acquisition Costs from non-insurance contracts), contract assets (previously known as Accrued Income from contracts with customers), and contract liabilities (previously known as Deferred Fee Income from contracts with customers).

11.3 IFRS 16 (Leases) (endorsed by the European Union)

IFRS 16 was issued in January 2016 and replaces IAS 17 Leases and its related interpretations for reporting periods beginning on or after 1 January 2019.

The Group as lessee: IFRS 16 introduces a 'right of use' model whereby the lessee recognises a right-of-use asset and an associated financial obligation to make lease payments for all leases with a term of more than 12 months. The asset will be amortised over the lease term and the financial liability measured at amortised cost with interest recognised in profit and loss using the effective interest rate method.

The Group as lessor: IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify and account for its leases as operating leases or finance leases.

The Group is in the process of assessing the impact of IFRS 16 and which transitional approach will be used. The Group's operating lease commitment note (Note 41) provides an indication of the impact on an undiscounted basis where the Group is the lessee.

11.4 IFRS 17 (Insurance contracts) (yet to be endorsed by the European Union)

The IASB issued IFRS 17 in May 2017 as a replacement for IFRS 4 Insurance Contracts.

The new IFRS 17 standard is effective for reporting periods beginning on or after 1 January 2021. The new rules will affect the financial statements and key performance indicators of companies that issue insurance contracts or investment contracts with discretionary participation features.

The Group will commence assessing the impact of IFRS 17 in 2018.

There are no other new standards, interpretations and amendments to existing standards that have been published and are expected to have a significant impact on the consolidated financial statements of the Group.

Historical Financial Information

SECTION A – ACCOUNTANTS' REPORT ON THE GROUP'S HISTORICAL FINANCIAL INFORMATION

KPMG LLP 15 Canada Square London E14 5GL United Kingdom Tel +44 (0) 20 7311 1000 Fax +44 (0) 20 7311 3311

The Directors
Quilter plc
Millennium Bridge House
2 Lambeth Hill
London
EC4V 4AJ

9 April 2018

Ladies and Gentlemen

Quilter plc

We report on the financial information set out on pages 247 to 335 for the years ended 31 December 2015, 31 December 2016 and 31 December 2017. This financial information has been prepared for inclusion in the prospectus dated 9 April 2018 of Quilter plc on the basis of the accounting policies set out in Note 4. This report is required by paragraph 11.1 of Annex IX of the Prospectus Directive Regulation and is given for the purpose of complying with that paragraph and for no other purpose.

Responsibilities

The Directors of Quilter plc are responsible for preparing the financial information on the basis of preparation set out in Note 1 to the financial information and in accordance with International Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the financial information and to report our opinion to you.

Save for any responsibility arising under Prospectus Rule 5.5.4R (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 paragraph 13.1 of Annex IX of the Prospectus Directive Regulation, consenting to its inclusion in the prospectus.

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

KPMG LLP Quilter plc April 2018

assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of the significant estimates and judgments made by those responsible for the preparation of the 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 financial information is free from material misstatement whether caused by fraud or other irregularity or error.

Opinion on financial information

In our opinion, the financial information gives, for the purposes of the prospectus dated 9 April 2018, a true and fair view of the state of affairs of Quilter plc as at 31 December 2015, 31 December 2016 and 31 December 2017 and of its profits, cash flows, recognised gains and losses and changes in equity for the years ended 31 December 2015, 31 December 2016 and 31 December 2017 in accordance with the basis of preparation set out in Note 1 and in accordance with International Financial Reporting Standards as adopted by the European Union as described in Note 1 and Note 4.

Declaration

For the purposes of Prospectus Rule 5.5.4R (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 IX of the Prospectus Directive Regulation.

Yours faithfully

KPMG LLP

KPMG II P

SECTION B – THE GROUP'S HISTORICAL FINANCIAL INFORMATION

CONSOLIDATED HISTORICAL FINANCIAL INFORMATION AS AT AND FOR THE THREE YEARS ENDED 31 DECEMBER 2015, 2016 AND 2017

Consolidated income statement

For the year ended 31 December 2017

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Revenue
Gross earned premiums		148	141	135
Premiums ceded to reinsurers		(88)	(84)	(81)
Net earned premiums		60	57	54
Fee and commission income, and income from service activities	8(a)	895	803	816
Net investment income	8(b)	5,195	6,310	1,166
Other income		13	17	2
Total revenue		6,163	7,187	2,038
Expenses
Claims and benefits paid		(76)	(72)	(77)
Reinsurance recoveries		54	51	56
Net insurance claims and benefits incurred		(22)	(21)	(21)
Change in reinsurance assets and liabilities	25(c)	85	119	40
Change in insurance contract liabilities		(78)	(125)	(32)
Change in investment contract liabilities		(4,308)	(5,522)	(949)
Fee and commission expenses, and other acquisition costs	9(a)	(320)	(299)	(362)
Change in third party interest in consolidated funds		(673)	(575)	(76)
Other operating and administrative expenses	9(b)	(816)	(654)	(565)
Finance costs	10	(39)	(43)	(32)
Total expenses		(6,171)	(7,120)	(1,997)
Profit on the acquisition and re-measurement of subsidiaries	7(c)	3	-	-
(Loss)/Profit before tax		(5)	67	41
Tax expense attributable to policyholders' funds		(49)	(102)	7
(Loss)/Profit before tax attributable to shareholders' profits		(54)	(35)	48
Income tax expense	13(a)	(41)	(94)	16
Less: tax attributable to policyholders' funds		49	102	(7)
Tax attributable to shareholders' funds		8	8	9
(Loss)/Profit after tax from continuing operations		(46)	(27)	57
Profit after tax from discontinued operations	5(d)	203	62	28
Profit for the year after tax		157	35	85
Attributable to:
Equity holders of the Parent Company		157	35	85
Earnings per ordinary share on profit attributable to ordinary shareholders of the Parent Company
Basic
From continuing operations (pence)		(35.4)	(20.8)	43.9
From discontinued operations (pence)	5(d)	156.2	47.7	21.5
	14(a)	120.8	26.9	65.4
Diluted
From continuing operations (pence)		(35.4)	(20.8)	43.9
From discontinued operations (pence)	5(d)	156.2	47.7	21.5
	14(b)	120.8	26.9	65.4

Consolidated statement of comprehensive income

For the year ended 31 December 2017

				£m
	Note	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Profit for the year		157	35	85
Other comprehensive income:
Items that may be reclassified subsequently to income statement
Exchange gains/(losses) on translation of foreign operations		-	23	(8)
Other comprehensive income/(expenses) for the year		3	(2)	-
		3	21	(8)
Items that will not be reclassified subsequently to income statement
Measurement movements on defined benefit plans		-	(1)	(1)
		-	(1)	(1)
Total other comprehensive income, net of tax	16	3	20	(9)
Total comprehensive income for the year		160	55	76
Attributable to:
Equity holders of the Parent Company		160	55	76

Reconciliation of Group operating profit to profit after tax

For the year ended 31 December 2017

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Operating profit before tax attributable to shareholders' profits
Advice and Wealth Management		82	55	54
Wealth Platforms		158	140	181
Head Office		(31)	(18)	(14)
Operating profit before tax attributable to shareholders' profits	6(b)	209	177	221
Reconciliation of Group operating profit to profit after tax
Adjusting for the following:
Impairment of goodwill and impact of acquisition accounting1		(54)	(52)	(57)
Profit on the acquisition and re-measurement of subsidiaries		3	-	-
Business transformation costs		(89)	(102)	(96)
Managed separation costs		(32)	(7)	-
Group debt costs and other interest		(39)	(43)	(32)
Policyholder tax adjustments		17	(8)	12
Voluntary customer remediation provision		(69)	-	-
Total non-operating adjusting items before tax	7(a)	(263)	(212)	(173)
(Loss)/Profit before tax attributable to shareholders' profits		(54)	(35)	48
Income tax attributable to policyholder returns		49	102	(7)
(Loss)/Profit before tax		(5)	67	41
Income tax expense on continuing business	13(b)	(41)	(94)	16
(Loss)/Profit after tax from continuing operations		(46)	(27)	57
Profit after tax from discontinued operations	5(d)	203	62	28
Profit for the year after tax		157	35	85

Operating profit after tax attributable to ordinary equity holders of the Parent Company

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Operating profit before shareholder tax		209	177	221
Shareholder tax on operating profit	13(c)	(14)	(28)	(24)
Operating profit after tax attributable to ordinary equity holders of the Parent Company	14(c)	195	149	197
Adjusted weighted average number of ordinary shares used to calculate operating earnings per share (millions)	14(c)	130	130	130
Operating earnings per share (pence)	14(c)	150.0	114.6	151.5

Impairment of goodwill and impact of acquisition accounting represents acquisition costs less the amortisation of intangible assets acquired by the Group, in relation to policies sold by acquired businesses pre-acquisition.

Basis of preparation of operating profit

Operating profit reflects the directors' view of the underlying performance of the Group and is used for management decision making and internal performance management. It is the profit measure presented in the Group's segmental reporting. Operating profit is a non-GAAP measure which adjusts the IFRS profit for specific agreed items as detailed in note 7(a): Operating profit adjusting items.

Operating profit excludes the impairment of goodwill; amortisation and impairment of other intangibles acquired in business combinations; the profit or loss on disposal and re-measurement of subsidiaries, joint ventures and associates; integration and restructuring costs; costs related to business transformation, in particular the development of our new platform capability and outsourcing of UK business administration; policyholder tax adjustments on non-operating items; and customer remediation provisions.

Execution of the Group's strategy of managed separation from Old Mutual plc is expected to entail a number of significant costs that may be regarded as non-operating, or one-off in nature. These costs are recognised within IFRS profit and excluded from operating profit.

Operating earnings applied in the calculation of operating earnings per share is calculated based on operating profit after tax. The calculation of the adjusted weighted average number of shares includes own shares held in policyholders' funds.

Consolidated statement of changes in equity

For the year ended 31 December 2017

				Share based		Foreign currency		£m Total share
For the year ended 31 December 2017	Notes	Share capital	Share premium	payments reserve	Other reserves	translation reserve	Retained earnings	holders' equity
Balance at 1 January 2017		130	-	75	3	2	782	992
Total comprehensive income
Profit for the year		-	-	-	-	-	157	157
Other comprehensive income/(expense)	16	-	-	-	-	-	3	3
		-	-	-	-	-	160	160
Transactions with the owners of the Company
Dividends	15	-	-	-	-	-	(210)	(210)
Issue of share capital	29	200	58	-	-	-	-	258
Reduction of share capital	29	(200)	-	-	-	-	200	-
Movement in treasury shares 1		-	-	-	-	-	(99)	(99)
Equity share-based payment transactions 2		-	-	(36)	-	-	31	(5)
Total contributions and distributions		-	58	(36)	-	-	(78)	(56)
Changes in shareholders' interests in subsidiaries		-	-	(1)	(2)	(2)	8	3
Total transactions with the owners of the Company		-	58	(37)	(2)	(2)	(70)	(53)
Balance at 31 December 2017		130	58	38	1	-	872	1,099

¹Movement in treasury shares includes £99m of treasury shares within the JSOP Trust that transferred from Old Mutual plc to the Company during 2017. See note 30(e) for further details.

²Equity shares based payment transactions include a £31 million transfer to retained earnings representing share based payment schemes that have fully vested.

For the year ended 31 December 2016	Notes	Share capital	Share premium	Share based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings	Total share holders' equity
Balance at 1 January 2016		130	-	51	10	(1)	723	913
Total comprehensive income
Profit for the year		-	-	-	-	-	35	35
Other comprehensive income/(expense)	16	-	-	-	-	3	17	20
		-	-	-	-	3	52	55
Transactions with the owners of the Company
Equity share-based payment transactions		-	-	24	-	-	-	24
Total contributions and distributions		-	-	24	-	-	-	24
Changes in shareholders' interests in subsidiaries		-	-	-	(7)	-	7	-
Total transactions with the owners of the Company		-	-	24	(7)	-	7	24
Balance at 31 December 2016		130	-	75	3	2	782	992

For the year ended 31 December 2015	Notes	Share capital	Share premium	Share based payments reserve	Other reserves	Foreign currency translation reserve	Retained earnings	Total share holders' equity
Balance at 1 January 2015		130	-	28	10	(1)	713	880
Total comprehensive income
Profit for the year		-	-	-	-	-	85	85
Other comprehensive income/(expense)	16	-	-	-	-	-	(9)	(9)
		-	-	-	-	-	76	76
Transactions with the owners of the Company
Dividends	15	-	-	-	-	-	(24)	(24)
Equity costs associated with the acquisition of Quilter Cheviot Limited		-	-	-	-	-	(42)	(42)
Equity share-based payment transactions		-	-	23	-	-	-	23
Total contributions and distributions		-	-	23	-	-	(66)	(43)
Total transactions with the owners of the Company		-	-	23	-	-	(66)	(43)
Balance at 31 December 2015		130	-	51	10	(1)	723	913

Consolidated statement of financial position

At 31 December 2017

				£m
	Notes	At 31 December 2017	At 31 December 2016	At 31 December 2015
Assets
Goodwill and other intangible assets	17	574	654	670
Property, plant and equipment	18	18	18	19
Investments in associated undertakings		3	1	1
Loans and advances	19	199	220	190
Financial investments	20	64,248	52,235	49,294
Reinsurers' share of policyholder liabilities	25	2,908	2,863	2,507
Deferred tax assets	33	22	8	8
Current tax receivable		-	20	27
Trade, other receivables and other assets	26	497	794	716
Deferred acquisition costs	27	611	655	768
Derivative assets	21	87	26	971
Cash and cash equivalents	28	2,360	1,595	1,601
Assets of operations classified as held for sale	5(g)	446	6,396	-
Total assets		71,973	65,485	56,772
Equity and liabilities
Equity
Ordinary share capital	29	130	130	130
Ordinary share premium reserve	29	58	-	-
Other reserves		39	80	60
Retained earnings		872	782	723
Total equity		1,099	992	913
Liabilities
Long-term business insurance policyholder liabilities	31	489	417	293
Investment contract liabilities	31	59,139	51,265	49,041
Third-party interests in consolidated funds		7,905	4,140	3,311
Provisions and accruals	32	104	29	35
Deferred tax liabilities	33	190	179	152
Current tax payable		38	20	13
Borrowings	34	782	839	786
Trade, other payables and other liabilities	35	1,331	1,024	938
Deferred revenue	36	244	261	312
Derivative liabilities	21	433	56	978
Liabilities of operations classified as held for sale	5(g)	219	6,263	-
Total liabilities		70,874	64,493	55,859
Total equity and liabilities		71,973	65,485	56,772

Consolidated statement of cash flows

For the year ended 31 December 2017

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Cash flows from operating activities	28
Profit before tax		227	149	84
Non-cash movements in profit before tax		4,061	2,552	2,878
Net changes in working capital		1,134	229	(190)
Taxation paid		(9)	(59)	(40)
Total net cash flows from operating activities		5,413	2,871	2,732
Cash flows from investing activities
Net acquisitions of financial investments		(4,760)	(2,810)	(2,430)
Acquisition of property, plant and equipment		(8)	(4)	(5)
Acquisition of intangible assets		(9)	(9)	(14)
Acquisition of interests in subsidiaries and associated undertakings joint ventures		(33)	(16)	(567)
Proceeds from the disposal of interests in subsidiaries		208	-	(4)
Total net cash used in investing activities		(4,602)	(2,839)	(3,020)
Cash flows from financing activities
Dividends paid to ordinary equity holders of the Company		(210)	-	(24)
Interest paid		(39)	(43)	(32)
Proceeds from issue of ordinary shares		258	-	-
Loan to Employee Benefit Trust		-	(43)	(54)
Proceeds from issue of subordinated and other debt		-	53	614
Subordinated and other debt repaid		(57)	-	-
Total net cash (used in)/from financing activities		(48)	(33)	504
Net increase/(decrease) in cash and cash equivalents		763	(1)	216
Cash and cash equivalents at beginning of the year		1,595	1,601	1,386
Effects of exchange rate changes on cash and cash equivalents		2	(5)	(1)
Cash and cash equivalents at end of the year	28	2,360	1,595	1,601

Cash flows include both continuing and discontinued operations.

For the year ended 31 December 2017

General Information

These financial statements are the consolidated financial statements for the Group, consisting of Quilter plc, formerly known as Old Mutual Wealth Management Limited, and its subsidiaries. Quilter plc (the 'Company'), a public limited company incorporated and domiciled in the United Kingdom (UK), together with its subsidiaries (collectively, the 'Group') offers investment and wealth management services, life assurance and long-term savings, and financial advice through its subsidiaries and associates primarily in the UK with a presence in a number of cross-border markets.

The address of the registered office is Old Mutual House, Portland Terrace, Southampton SO14 7EJ, England.

The Company is a wholly owned subsidiary of Old Mutual plc, a FTSE 100 listed group. The Company forms part of the Old Mutual Wealth division of Old Mutual plc, for which it acts as holding company and delivers strategic and governance oversight. The address of the registered office of Old Mutual plc is Millennium Bridge House, 2 Lambeth Hill, London EC4V 4GG.

1: Basis of preparation

The consolidated financial statements have been prepared in accordance with the requirements of the Prospectus Directive regulation and the Listing Rules. These consolidated financial statements for all periods have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as endorsed by the European Union (EU), with interpretations issued by the IFRS Interpretations Committee (IFRICs), and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements do not constitute statutory accounts.

The principal accounting policies adopted in the preparation of these financial statements are set out in note 4. Less material accounting policies are included in Appendix A. These policies have been consistently applied to all years presented, unless otherwise stated. Judgements made by the directors in the application of these accounting policies that have a significant effect on the financial statements, and estimates with a significant risk of material adjustment in the next year, are also discussed in this section.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). These consolidated financial statements are presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates and are rounded to the nearest million (£m).

The consolidated financial statements are prepared under the historical cost convention, except for certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value through profit or loss (FVTPL) at the end of each reporting period and defined benefit assets and liabilities, measured at the fair value of plan assets less the present value of the defined benefit obligation. Assets and disposal groups held for sale are stated at the lower of the previous carrying amount and fair value less costs to sell.

Pursuant to section 435 of the Companies Act, this historical financial information does not constitute the company's statutory accounts for the years ended 31 December 2017, 2016 or 2015. Up until now, the Group has previously taken advantage of section 400 of the Companies Act not to prepare consolidated statutory financial statements as it previously formed part of a larger group, being Old Mutual plc, for which consolidated accounts are prepared. Old Mutual plc is the ultimate parent company of the group, and is incorporated in England and Wales. Non-statutory accounts were prepared by the Group for the year ended 31 December 2016 in accordance with EU-IFRS. The company-only accounts of Old Mutual Wealth Management Limited for years ended 31 December 2017, 2016 and 2015 have been reported on by the company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

On publishing these Group financial statements, the Group has made available to Old Mutual plc, IFRS compliant consolidated financial statements in the preceding year and therefore IFRS 1 First-time Adoption of International Financial Reporting Standards does not apply.

The Group financial statements have been prepared on the going concern basis which the directors believe to be appropriate.

Basis of consolidation

The consolidated financial statements incorporate the assets, liabilities and the results of the Company and its subsidiary undertakings (investees). Subsidiary undertakings are those entities, including structured entities, controlled by the Group. More information on how the Group assesses whether it has control (and as a result consolidates an investee) is provided in accounting policy 4.1. Subsidiaries are consolidated from the date the Group obtains control and are excluded form consolidation from the date the Group loses control.

Where necessary, adjustments are made to financial statements of subsidiaries to bring the accounting policies used in line with Group policies. All intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group companies are eliminated on consolidation.

Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated financial statements.

A list of major subsidiaries is included in note 46.

Liquidity analysis of the statement of financial position

The Group's statement of financial position is in order of liquidity as is permitted by IAS 1 Presentation of Financial Statements. For each asset and liability line item, those amounts, expected to be recovered or settled after more than twelve months after the reporting date are disclosed separately in the notes to the financial statements.

For the year ended 31 December 2017

Critical accounting estimates and judgements

The preparation of financial statements requires management to exercise judgement in applying accounting policies and make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements. Critical accounting estimates and judgements are those that involve the most complex or subjective assessments and assumptions. Management uses its knowledge of current facts and circumstances and applies estimation and assumption setting techniques that are aligned with relevant actuarial and accounting guidance to make predictions about future actions and events. Actual results may differ significantly from those estimates.

The Group Audit Committee reviews the reasonableness of judgements and assumptions applied and the appropriateness of significant accounting policies adopted in the preparation of these financial statements.

The areas where judgements, estimates and assumptions have the most significant effect on the amounts recognised in the consolidated financial statements are summarised below:

Area	Critical accounting judgement or assumption/estimate	Accounting Policy	Note
Consolidation	Assessment of whether the Group controls underlying entities (investees), including investment funds, based on whether the Group has (1) power over the investee, (2) exposure or rights to variable returns from its involvement with the investee and (3) the ability to affect those returns through its power over the investee.	4.1	24 & 46
Insurance contracts – classification and measurement	Assessment of the significance of insurance risk transferred to the Group in determining whether a contract should be classified (and accounted for) as an insurance or investment contract. Measurement involves significant use of assumptions including mortality, morbidity, persistency, expense valuation and interest rates.	4.3 & 4.9	31
Provisions and contingent liabilities	In assessing whether a provision should be recognised or a contingent liability disclosed, the Group evaluates the likelihood of a constructive or legal obligation to settle an event that took place in the past and whether a reliable estimate can be made. The amount of provision is calculated, based on the Group's estimation of the expenditure required to settle the obligation at the statement of financial position date.	4.17	32 & 39
Deferred tax	The calculation and recognition of temporary differences resulting in deferred tax balances includes judgement to the extent to which future taxable profits are available against which temporary differences can be utilised. The estimation of future taxable profits is performed as part of the annual business planning process, and is based on estimated levels of assets under management, which are subject to a large number of factors including worldwide stock market movements, related movements in foreign exchange rates and net client cash flow, together with estimates of expenses and other charges.	4.14	33
Goodwill and intangible assets	The valuation of intangible assets that are recognised as the result of a business combination involves the use of valuation models. In relation to goodwill impairment, the determination of a cash generating unit's (CGU's) recoverable value is based on the discounted value of the expected future profits of each business. Significant estimates include forecast cash flows, new business growth and discount rates. Intangible assets are tested for impairment using an income approach method using estimates such as forecast cash flows and discount rate.	4.15	17

2: New standards, amendments to standards, and interpretations adopted in the 2017 annual financial statements

There are a small number of narrow scope amendments arising from annual improvements to standards that are applicable to the Group for the first time in 2017, none of which have had a significant impact on the consolidated financial statements.

For the year ended 31 December 2017

3: Future standards, amendments to standards, and interpretations not early-adopted in these financial statements

At the date of authorisation of these financial statements the following standards, which are relevant to the Group, have been issued by the International Accounting Standards Board (IASB).

IFRS 9 Financial Instruments

IFRS 9: Financial Instruments was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition and Measurement. The standard is effective and will be implemented by the Group from 1 January 2018. The final version of this standard incorporates amendments to classification and measurement, hedge accounting guidance, as well as the accounting requirements for the impairment of financial assets measured at amortised cost and fair value through other comprehensive income (FVOCI). IFRS 9's enhanced disclosure requirements will result in improved credit risk disclosures and increased transparency with respect to impairment judgements and estimates.

As permitted by the transitional provisions of IFRS 9, the Group has elected not to restate comparative figures. Any adjustments to the carrying amount of financial assets and financial liabilities at the date of transition will be recognised in the opening retained earnings and other reserves at 1 January 2018. The Group has elected to continue to apply the hedge accounting requirements of IAS 39 on adoption of IFRS 9.

Classification and measurement of financial assets and liabilities

Financial assets are classified based on (i) the business model within which the financial assets are held and managed and (ii) the contractual cash flow characteristics of the financial assets, whether the cash flows represent 'solely payments of principal and interest'.

Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold those assets for the purpose of collecting contractual cash flows and those cash flows comprise solely payments of principal and interest ('hold to collect' business model).

Financial assets are measured at fair value through other comprehensive income (FVOCI) if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and those contractual cash flows comprise solely payments of principal and interest ('hold to collect and sell' business model). Movements in the carrying amount of these financial assets should be taken through other comprehensive income (OCI), except for impairment gains or losses, interest revenue and foreign exchange gains or losses, which are recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss.

The remaining financial assets are measured at fair value through profit or loss (FVTPL). All derivative instruments that are either financial assets or financial liabilities are held for trading and as such will continue to be measured at fair value through profit and loss.

The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the fair value of these financial liabilities that are attributable to the Group's own credit risk are recognised in OCI. Where the financial liability is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity.

For equity investments that are neither held for trading nor contingent consideration, the Group may irrevocably elect to present subsequent changes in fair value of these equity investments in other comprehensive income (OCI). Where the equity investment is derecognised, the cumulative gain or loss previously recognised in OCI is not reclassified from equity to profit or loss. However, it may be reclassified within equity. Alternatively where the Group does not make the aforementioned election, fair value changes are recognised in profit or loss. This election is made on an investment by investment basis.

Based on the assessment of financial assets at 31 December 2017, the Group does not expect the impact of the changes to classification and measurement of financial assets to be significant to the Group's statement of financial position and performance.

Impairment of financial assets

Under IFRS 9 impairment is determined based on an expected credit loss (ECL) model rather than the current incurred loss model required by IAS 39. The Group will be required to recognise an allowance for either 12-month or lifetime ECLs, depending on whether there has been a significant increase in credit risk since initial recognition.

The measurement of ECLs reflects a probability-weighted outcome, the time value of money and the entity's best available forward-looking information. The aforementioned probability-weighted outcome must consider the possibility that a credit loss occurs and the possibility that no credit loss occurs, even if the possibility of a credit loss occurring is low.

The ECL model applies to financial assets measured at amortised cost and FVOCI, lease receivables and certain loan commitments as well as financial guarantee contracts.

The IFRS 9 Impairment Implementation continued to progress during 2017. The following were the main areas of focus for 2017:

• Development, build and testing of impairment models with respect to financial assets held at amortised cost or FVOCI;
• Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and
• Documentation and implementation of the relevant control environment and related governance processes.

Significant development in the above areas facilitated the performance of a parallel run for the majority of the Group's significant holdings of financial assets held at amortised cost or FVOCI during the latter part of 2017.

Key assumptions and judgements applied in relation to the new impairment model are summarised below:

• Cash at bank no ECL allowance is recognised, as deposits are held with banks with medium to high quality credit ratings and credit risk is considered to be minimal.
• Inter-company loans no ECL allowance is recognised as these balances are internal to the Group and credit risk is considered to be low.
• Loans and advances methodology is based on approach, whereby historical data is extrapolated forward to derive a 12 month ECL allowance and then monitored for increases in credit risk which may trigger the recognition of a Lifetime ECL.
• Other assets (trade receivables) simplified approach is adopted, whereby a Lifetime ECL is recognised immediately and there is no need to track for any increases in credit risk.

The Group has estimated that the impact of adopting IFRS 9's ECL model has an immaterial transitional impact on the Group's opening retained earnings at 1 January 2018. These estimates are based on accounting policies, assumptions, judgements and estimation techniques

For the year ended 31 December 2017

which will be regularly reviewed and assessed during the year in preparation for the financial statements for the year ending 31 December 2018.

IFRS 15 Revenue from Contracts with Customers (endorsed by the European Union)

IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with clients, unless the contracts are in the scope of the standards on leases, insurance contracts and financial instruments. The core principle of the standard is that revenue recognised reflects the consideration to which the Group expects to be entitled in exchange for the transfer of promised goods or services to the client. The standard incorporates a five-step analysis to determine the amount and timing of revenue recognition.

The standard is effective for the Group for the financial year commencing 1 January 2018. The Group intends to adopt the standard using the modified retrospective approach which means that the cumulative impact of adoption will be recognised in retained earnings as of 1 January 2018.

The Group performed an assessment to determine the potential impact of the new standard on the Group's statement of financial position and performance. The Group considered the five-step analysis prescribed by the standard. It also took into account the different types of contracts it has with its customers, the corresponding types of services provided to customers and when these service obligations are satisfied. In addition, the Group considered the types of fee income generated across all products from the contracts with its customers and when the fee income is recognised. This impact assessment concluded that IFRS 15 will have minimal effect on the Group.

An increased level of disclosure is required by IFRS 15 which will include qualitative and quantitative information about the Group's contracts with customers, significant judgements made and changes in those judgements. IFRS 15 also introduces standard definitions and will require additional information about contact costs (previously known as Deferred Acquisition Costs from non-insurance contracts), contract assets (previously known as Accrued Income from contracts with customers), and contract liabilities (previously known as Deferred Fee Income from contracts with customers).

IFRS 16 Leases (endorsed by the European Union)

IFRS 16 was issued in January 2016 and replaces IAS 17 Leases and its related interpretations for reporting periods beginning on or after 1 January 2019.

The Group as lessee: IFRS 16 introduces a 'right of use' model whereby the lessee recognises a right-of-use asset and an associated financial obligation to make lease payments for all leases with a term of more than 12 months. The asset will be amortised over the lease term and the financial liability measured at amortised cost with interest recognised in profit and loss using the effective interest rate method.

The Group as lessor: IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify and account for its leases as operating leases or finance leases.

The Group is in the process of assessing the impact of IFRS 16 and which transitional approach will be used. The Group's operating lease commitment note (note 41) provides an indication of the impact on an undiscounted basis where the Group is the lessee.

IFRS 17 Insurance contracts (yet to be endorsed by the European Union)

The IASB issued IFRS 17 in May 2017 as a replacement for IFRS 4 Insurance Contracts.

The new IFRS 17 standard is effective for reporting periods beginning on or after 1 January 2021. The new rules will affect the financial statements and key performance indicators of companies that issue insurance contracts or investment contracts with discretionary participation features.

The Group will commence assessing the impact of IFRS 17 in 2018.

There are no other new standards, interpretations and amendments to existing standards that have been published and are expected to have a significant impact on the consolidated financial statements of the Group.

For the year ended 31 December 2017

4: Significant accounting policies

The significant accounting policies used in the preparation of these consolidated financial statements, as set out below, have been applied consistently to all periods presented in these consolidated financial statements, unless otherwise stated. The Group has not made any significant changes to its accounting policies during 2017.

4.1 Group accounting

Subsidiaries

Subsidiary undertakings are those entities (investees) controlled by the Group. The Group controls an investee if, and only if, the Group has all of the following three elements of control:

• power over the investee;
• exposure or rights to variable returns from its involvement with the investee; and
• the ability to affect those returns through its power over the investee.

For operating entities this usually arises with a shareholding in the entity of 50% or more. The Group also consolidates certain of its interests in open-ended investment companies, unit trusts, mutual funds and similar investment vehicles (collectively 'investment funds'). Where, as is often the case with investment funds, voting or similar rights are not the dominant factor in deciding who controls the investee, other factors are considered in the control assessment. These are looked at in more detail below.

The Group continually assesses any changes to facts and circumstances to determine, in the context of the three elements of control listed above, whether it still controls investees and is required to consolidate them.

Investment funds

The Group invests in a wide range of investment funds such as Open-Ended Investment Companies ('OEICs') and unit trusts generally in respect of its unit linked investment contracts where investments are made to match clients' investment choices. For some of these funds it also acts as fund manager. These funds invest predominantly in equities, bonds, cash and cash equivalents. The Group holds interests in these investment funds mainly through the receipt of fund management fees, in the case where the Group acts as fund manager, which provide a variable return based on the value of the funds under management and other criteria, and in the case of third party funds where fund performance has an impact on fundbased fees within unit linked investment contracts and other similar client investment products. Where the Group acts as fund manager it may also hold investments in the underlying funds, through acquiring units or shares. Where these investments are held in unit-linked funds, the Group has a secondary exposure to variable returns through the management fees that it deducts from unit-linked policyholders' account balances. The Group's percentage ownership can fluctuate from day to day according to the Group's participation in them as clients' underlying investment choices change.

When assessing control of investment funds, the Group considers the purpose and design of the fund, scope of its decision making authority, including its ability to direct relevant activities and to govern the operations of a fund so as to obtain variable returns from that fund and its ability to use its power to affect these returns, both from the perspective of an investor and an asset manager. In addition, the Group assesses rights held by other parties including substantive removal ('kick-out' rights) that may affect the Group's ability to direct relevant activities.

On consolidation, the interests of parties other than the Group are assessed to determine whether they should be classified as liabilities or as noncontrolling interests ('NCIs') on the statement of financial position. The amounts are reported as a liability and described as 'Third-party interests in consolidated funds'. Such interests are not recorded as non-controlling interests as they meet the liability classification requirement set out in IAS 32, Financial Instruments: Presentation. These liabilities are regarded as current, as they are repayable on demand, although it is not expected that they will be settled in a short time period.

Business combinations

The Group is required to use the acquisition method of accounting for business combinations. Business combinations are accounted for at the date that control is achieved (the acquisition date). The cost of a business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree.

The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair value at the acquisition date.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts. Where provisional amounts are reported these are adjusted during the measurement period which extends up to a maximum of 12 months from the acquisition date. Additional assets or liabilities may also be recognised during this period, to reflect any new information obtained about the facts and circumstances that existed as of the date of acquisition date that, if known, would have affected the amounts recognised as on that date.

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the identifiable net assets of the acquired entity at the date of acquisition. Acquisition related costs are expensed as incurred.

NCI's in the net assets of consolidated subsidiary undertakings are identified and recorded separately from the Group's equity. The interest of noncontrolling shareholders is initially measured either at fair value or at the NCI's proportionate share of the acquiree's identifiable net assets. The choice of measurement basis for the initial measurement of the NCI is made on an acquisition-by-acquisition basis. Subsequent to acquisition, NCI's comprise the amount attributed to such interests at initial recognition together with the NCI's share of changes in equity since the date of acquisition. Transactions with NCI's that lead to changes in the ownership interests of a subsidiary but do not result in the loss of control are treated as equity transactions.

The difference between the proceeds from the disposal of a subsidiary undertaking and its carrying amount as at the date of disposal, including the cumulative amount of any related exchange differences that are recognised in the foreign currency translation reserve equity, is recognised in the consolidated income statement as the gain or loss on disposal of the subsidiary undertaking.

For the year ended 31 December 2017

4.2: Fair value measurement

The Group uses fair value to measure the majority of its assets and liabilities. Fair value is a market based measure and is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For a financial instrument, the best evidence of fair value at initial recognition is normally the transaction price, which represents the fair value of the consideration given or received.

Where observable market prices in an active market, such as bid or offer (ask) prices are unavailable, fair value is measured using valuation techniques based on the assumptions that market participants would use when pricing the asset or liability. If an asset or a liability measured at fair value has a bid or an offer price, the price within the bid-offer spread that is most representative of fair value is used as the basis of the fair value measurement.

The quality of the fair value measurement for financial instruments is disclosed by way of the fair value hierarchy, whereby level 1 represents a quoted market price for identical financial assets and liabilities, level 2 financial assets and liabilities are valued using inputs other than quoted prices in active markets included in level 1, either directly or indirectly and level 3 whereby financial assets and liabilities are valued using valuation techniques where one or more significant inputs are unobservable.

Classifying financial instruments into the three levels outlined above provides an indication about the reliability of inputs used in determining fair value.

4.3: Product classification

The Group's life assurance contracts are categorised as either insurance contracts or investment contracts, in accordance with the classification criteria set out in the paragraphs below.

Insurance contracts

The Group's insurance contracts include traditional life and health insurance contracts including for the latter stand-alone critical illness and long term care policies, as well as the unbundled insurance component of unit-linked contracts. Life assurance contracts are categorised as insurance contracts at the inception of the contract only if the contract transfers significant insurance risk. Insurance risk is significant if, and only if, an insured event could cause the Group to make significant additional payments in any scenario, excluding scenarios that lack commercial substance. Such contracts remain insurance contracts until all rights and obligations are extinguished or expire. It is possible to reclassify contracts as insurance contracts after inception if insurance risk becomes significant.

IFRS accounting for insurance contracts in UK companies was 'grandfathered' at the date of transition to IFRS and determined in accordance with the Statement of Recommended Practice on Accounting for Insurance Business (issued by the Association of British Insurers and subsequently withdrawn from 1 January 2015), adjusted to remove certain regulatory reserves and margins in assumptions.

Investment contracts

Investment contracts do not meet the definition of an insurance contract as they do not transfer significant insurance risk from the policyholder to the insurer. Unit linked investment contracts are separated into two components being an investment management services component and a financial liability. The financial liability component is designated at FVTPL as it is managed on a fair value basis, and its value is directly linked to the market value of the underlying portfolio of assets. The Group does not share in the explicit returns of the assets held by the policyholder, apart from secondary exposure to future annual management fees that the Group expects to receive over the life of the policy.

'Hybrid' Insurance and investment contracts - unbundling

Generally, life and pensions contracts allow for a single classification at product class level. For those contracts containing both an insurance component and an investment component, the Group has elected to unbundle these contracts and account for each component separately. This approach has been applied to a number of the Group's unit-linked assurance business contract types where a significant component of insurance risk exists.

4.4: Fee and commission income

Fee and commission income represents the fair value of services provided, net of value-added tax and consists predominantly of fees charged to clients for plan and policy administration, investment management, surrenders and other contract services in relation to the Group's unit linked business. The fees may be for fixed amounts or vary with the amounts being managed, and will generally be charged as an adjustment to the policyholder's balance. Fee income and commission income is recognised as revenue as investment management services are provided to policyholders. Where fees, such as initiation and advice fees, are received upfront, either at inception or over an initial period for services not yet provided, the income is deferred and recognised as a deferred fee income ("DFI") liability on the statement of financial position and released to the income statement as services are provided over the lifetime of the contract. In addition, this also includes advice income from Quilter Financial Planning.

Performance-based incentive fees are charged for managing certain investment funds outside of the Group's core unit-linked business. These fees are based on the fund's performance, relative to a benchmark. These services are deemed to be provided (and revenue recognised) only when the performance of the fund for the period is known and has crystallised, usually bi-annually. These fees are borne in our Single Strategy asset management business which is included within Discontinued Operations.

4.5: Investment return

Investment return comprises two elements (a) investment income and (b) realised and unrealised gains and losses on investments held at FVTPL.

Investment income

Investment income includes dividends on equity securities which are recorded as revenue on the ex-dividend date and interest income which is recognised using the effective interest rate method which allocates interest and other finance costs at a constant rate over the expected life of the financial instrument

Realised and unrealised gains and losses

A gain or loss on a financial investment is only realised on disposal or transfer and represents the difference between the proceeds received, net of transaction costs, and its original cost (or amortised cost). Unrealised gains or losses, arising on investments which have not been disposed or transferred, represent the difference between carrying value at the year end and the carrying value at the previous year end or purchase value (if this occurs during the year), less the reversal of previously recognised unrealised gains or losses in respect of disposals made during the year.

Gains and losses resulting from changes in both market value and foreign exchange on investments classified at FVTPL are recognised in the consolidated income statement in the period in which they occur.

For the year ended 31 December 2017

4.6: Premiums

Premiums receivable under insurance contracts are shown in the income statement gross of commission and exclude sales-based taxes and levies. For regular (and recurring) premium contracts, receivables are recognised when payments are due. Premiums in respect of other insurance contracts are recognised in the income statement when receivable, apart from premiums received in respect of unit-linked insurance contracts (see below). Where policies lapse due to non-receipt of premiums, then all the related premium income accrued but not received from the date they are deemed to have lapsed is offset against premiums.

Premiums received in respect of unit-linked insurance contracts are recognised when the corresponding liability to the policyholder is established. For single premium business, this is the date from which the policy is effective.

4.7: Deferred acquisition costs

Investment contracts

Incremental costs, including fee and commission expenses, that are directly attributable to securing either unit linked investment contracts or other asset management services are deferred and recognised as a 'deferred acquisition cost' (DAC) asset if they can be identified separately and measured reliably and it is probable that the costs will be recovered. Because such deferred acquisition costs are linked to the contractual right to benefit from providing investment management services, they are amortised through the income statement as the related revenue is recognised.

After initial recognition, deferred acquisition costs are reviewed by category of business and are impaired to the extent that they are no longer considered to be recoverable. All other costs are recognised as expenses when incurred.

Insurance contracts

Incremental costs directly attributable to securing an insurance contract, such as initial commission and the costs of obtaining and processing such business are deferred and a DAC asset recognised, to the extent that they are expected to be recovered out of future margins.

Long-term business deferred acquisition costs are amortised as an expense on a straight line basis, adjusted for expected persistency, over the expected life of the contract, as the services are provided (equal service provision assumed) and no longer than the period in which such costs are expected to be recoverable out of future margins.

At the end of each reporting period, deferred acquisition costs are reviewed for recoverability, by category of business, against future margins from the related contracts. They are impaired in the income statement where they are no longer considered to be recoverable.

4.8: Investment contracts

Investment contracts are those contracts not classified as insurance contracts because they do not transfer significant insurance risk. The majority of the Group's investment contracts are unit-linked contracts. At inception, investment contract liabilities for unit linked business are designated as financial liabilities and measured at FVTPL. For these contracts, the fair value liability is equal to the total value of units allocated to the policyholders, based on the bid price of the underlying assets in the fund. The FVTPL classification reflects the fact that the matching investment portfolio, that backs the unit-linked liabilities, is managed, and its performance evaluated, on a fair value basis.

Contributions received on investment contracts are treated as policyholder deposits and credited directly to investment contract liabilities on the statement of financial position, as opposed to being reported as revenue in the consolidated income statement. This practise is known as deposit accounting. Withdrawals paid out to policyholders on investment contracts are treated as a reduction to policyholder deposits, reducing the investment contract liabilities on the statement of financial position, as opposed to being recognised as expenses in the consolidated income statement.

4.9: Insurance contract liabilities

Claims

Long-term business claims reflect the cost of all claims arising during the year and include payments for maturities, annuities, surrender, death and disability claims, as well as claims handling costs, incurred in connection with the negotiation and settlement of claims. They are recognised as expenses in the income statement. Maturity and annuity claims are recorded as they fall due for payment. Death and disability claims and surrenders are accounted for when notified. Reinsurance recoveries are accounted for in the same period as the related claim.

Long-term business liabilities

The Group calculates its long term business liabilities separately for each life operation, based on local regulatory requirements and actuarial principles consistent with those applied in each local market. For UK business this is in accordance with UK regulatory requirements (the Modified Statutory Solvency Basis), in place before the introduction of Solvency II, adjusted to remove certain regulatory reserves and margins in assumptions. Liabilities are calculated using the gross premium valuation method, which is based on the amount of contractual premiums receivable and includes explicit assumptions for interest and discount rates, as well as for mortality, morbidity, persistency and future expenses. These assumptions are set on a prudent basis and can vary by contract type and reflect current and expected future experience. The liability for contractual benefits that are expected to be paid in the future is determined as the discounted value of the excess of future expected outgoings over future expected income. Future expected outgoings include claim costs, direct expenses, commissions and reinsurance premiums. Future expected income includes premiums payable by policyholders and recoveries made from reinsurers. For anticipated future claims that have been incurred but not yet paid, the company establishes a provision for outstanding claims.

The method used to determine liabilities for long-term life business makes allowance for the level of risk and uncertainty inherent in the business by the use of margins for caution within the assumptions used to project future income and outgoings. The portion of premiums received that relates to unexpired risks as at the reporting period end is reported within the long term insurance liabilities. The change in insurance contract liabilities, comprising the full movement in the corresponding liabilities during the period, is recognised in the income statement.

Liability adequacy test

At each reporting date, the Group assesses whether the recognised insurance contract liabilities are adequate in light of current estimates of future cash flows. This liability adequacy test is performed by comparing the carrying value of the insurance contract liabilities and the discounted projections of future cash flows. If the carrying value is less than the future expected cash flows, the deficiency is initially recognised by writing down the DAC asset. The recoverability of the DAC asset is tested against present value of in-force (PVIF) business, determined on a best estimate basis, with any deficit written off the DAC asset immediately. Any required write down in excess of the value of the DAC asset is recognised in the income statement with a corresponding additional provision in the statement of financial position.

For the year ended 31 December 2017

4.10: Reinsurance

Long-term insurance business

The Group cedes reinsurance in the normal course of business for the purpose of limiting its claims costs. Ceded reinsurance contracts include arrangements where regular risk premiums are paid by the Group to the reinsurer and an agreed share of claims are paid by the reinsurer to the Group. These arrangements are in respect of underlying policies that are classified as insurance contracts. Accordingly, contracts with reinsurers are assessed to establish whether they contain significant insurance risk to justify such a classification. Only rights under contracts that give rise to a transfer of significant insurance risk are accounted for as long term insurance business reinsurance assets.

Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent with the recognition basis for the premiums on the related insurance contracts. The un-expensed portion of ceded reinsurance premiums is included in reinsurance assets. Reinsurance recoveries are recognised in the income statement in the same period as the related claim.

Reinsurance recoveries due from reinsurers and reinsurance premiums due to reinsurers under reinsurance contracts that are contractually due at the reporting date are separately recognised in other receivables and other payables respectively unless a right of offset exists, in which case the net amount is reported on the consolidated statement of financial position. Assets, liabilities and income and expenses arising from ceded reinsurance contracts are presented separately from the related assets, liabilities, income and expense from the underlying insurance contracts because the reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders.

The value of the benefits that the Group is entitled to under the ceded reinsurance arrangements are reported as "reinsurers' share of policyholder liabilities" in the statement of financial position. This is calculated as the difference between the insurance contract liability assuming no reinsurance arrangement exists (the gross basis) and the liability with explicit allowance for all cash flows relating to the reinsurance arrangement (the net basis). Insurance contract liabilities are calculated quarterly on the gross and net bases taking into account all relevant experience effects. The reinsurers' share of insurance provisions is updated consistently with these calculations. Any resulting movement in the reinsurers' share of insurance provisions is recognised in the income statement.

Reinsurance assets are assessed for impairment at each reporting date. A reinsurance asset is impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due to it under the terms of the contract and that the event has an impact that can be measured reliably on the amounts that the Group will receive from the reinsurer. The reinsurers' share of policyholder liabilities is updated for any impairment. Any resulting movement in the reinsurers' share of policyholder liabilities is recognised in the income statement.

Investment contracts

Policyholder investments recognised by the Group that are fully managed by a third party reinsurer are shown on the statement of financial position within reinsurers' share of investment contract liabilities, with the corresponding liability to the policyholder included within liabilities for linked investment contracts.

4.11: Financial instruments (other than derivatives)

Financial instruments cover a wide range of financial assets, including financial investments, trade receivables and cash and cash equivalents and financial liabilities, including investment contract liabilities, trade payables, and borrowings. Derivatives, which are also financial instruments, are covered by accounting policy 4.12. Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to receive cash flows have expired or been forfeited by the Group. A financial liability is derecognised when, and only when the liability is extinguished.

Management determines the classification of financial investments at initial recognition depending on the purpose for which they were acquired. This classification determines the subsequent measurement basis. Financial investments which are not derivatives and are not designated at FVTPL are classified as loans and receivables. Management also determines the classification of financial liabilities at initial recognition.

Financial investments

The Group's interests in pooled investment funds, equity securities and debt securities are designated at FVTPL, as they are part of groups of financial assets which are managed and whose performance is evaluated on a fair value basis. These investments are recognised at fair value initially and subsequently, with changes in fair value recognised in investment return in the consolidated income statement.

The fair value of quoted financial investments, which represents the vast majority of the Group's investments, are based on the value within the bidask spread that is most representative of fair value. If the market for a financial investment is not active, the Group establishes fair value by using valuation techniques such as recent arm's length transactions, reference to similar listed investments, discounted cash flow or option pricing models.

The Group recognises purchases and sales of financial investments on trade date, which is the date that the Group commits to purchase or sell the assets. The costs associated with investment transactions are included within expenses in the statement of comprehensive income.

Loans and advances

Loans with fixed maturities, including policyholder loans, are recognised when cash is advanced to borrowers or policyholders. Policyholder loans are interest free and are designated at FVTPL since they are taken from the policyholder's account and thereby linked to underlying investments held at FVTPL. Other loans and advances are carried at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are made and recognised in the income statement when there is objective evidence that the asset is impaired.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits that are readily convertible to a known amount of cash. Cash and cash equivalents held within consolidated unit trust funds are classified as FVTPL. All other cash and cash equivalents are classified as loans and receivables which means they are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. The carrying amount of these assets is approximately equal to their fair value.

For the year ended 31 December 2017

Financial liabilities and equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. At inception, investment contract liabilities for unit linked business are designated as financial liabilities and measured at FVTPL. For unit-linked contracts, the fair value liability is equal to the total value of units allocated to the policyholders, based on the bid price of the underlying assets in the fund. The FVTPL classification reflects the fact that the matching investment portfolio, that mirrors the unit-linked liabilities, is managed, and its performance evaluated, on a fair value basis. Other financial liabilities are measured at amortised cost using the effective interest method.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

Trade payables and receivables

Due to the short term nature of trade payables and receivables, their carrying amount is considered to be the same as their fair value.

4.12: Derivatives and hedge accounting

Derivative financial instruments are generally used to reduce the risk from possible movements in foreign exchange rates, equity indices, and interest rates and to reduce credit risk or to achieve efficient portfolio management. Derivative instruments include foreign exchange contracts, interest rate futures, currency and interest rate swaps, currency and interest rate options (both written and purchased). Management determines the classification of derivatives at initial recognition. All derivatives instruments are classified as held for trading except those designated as part of a hedge accounting relationship, which is addressed below. Held for trading derivatives are measured at fair value with changes in fair value recognised in the income statement. All derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

Using derivatives to manage a particular exposure is referred to as hedging. Hedge accounting is a technique that modifies the normal basis for recognising gains and losses (or revenues and expenses) on associated hedging instruments and hedged items so that both are recognised in profit or loss or OCI in the same accounting period. This is a matching concept that eliminates or reduces the volatility in the statement of comprehensive income that otherwise would arise if the hedged item and the hedging instrument were accounted for separately under IFRS. If the hedging relationship meets the IAS 39 criteria for hedge accounting, then the two sides of the relationship are treated as a single transaction within the financial statements. For a derivative to be considered as part of a hedging relationship its purpose must be formally documented up front. In addition, the effectiveness of the hedge must be initially high and be able to be reliably measured regularly. If a derivative ceases to meet the relevant hedging criteria, hedge accounting is discontinued.

Derivatives used to hedge the fair value of a recognised asset or liability, are designated as fair value hedges. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the income statement. The gain or loss on the hedged item is also recognised in the income statement. Derivatives used to hedge the variability in future cash flows are designated as cash flow hedges, while derivatives used to hedge currency risk on investments in foreign operations are designated as net investment hedges. For a derivative that qualifies as a cash flow or net investment hedge, the effective part of any gain or loss resulting from the change in fair value is recognised in OCI and in the cash flow or net investment hedge reserve in equity. Gains and losses accumulated in this reserve are included in the income statement on disposal of the relevant occurrence of cash flow or investment, as appropriate. Any ineffective part is recognised immediately in the income statement.

4.13: Employee benefits

Pension obligations

The Group operates two types of pension plans which have been established for eligible employees of the Group:

• Defined contribution schemes where the Group makes contributions to members' pension plans but has no further payment obligations once the contributions have been paid.
• Defined benefit plans which provide pension payments upon retirement to members as defined by the plan rules. The Group has funded these liabilities by ring-fencing assets in trustee-administered funds.

Defined contribution pension obligation

Under a defined contribution plan, the Group's legal or constructive obligation is limited to the amount it agrees to contribute to a pension fund and there is no obligation to pay further contributions if the fund does not hold sufficient assets to pay benefits. Contributions in respect of defined contribution schemes for current service are expensed in the income statement as staff costs and other employee-related costs when incurred.

Defined benefit pension obligation

A defined benefit pension plan typically defines the amount of pension benefit that an employee will receive on retirement. For these plans, the Group's defined benefit obligation is calculated by independent actuaries using the projected unit credit method, which measures the pension obligation as the present value of estimated future cash outflows. The discount rate used is determined based on the yields for investment grade corporate bonds that have maturity dates approximating to the terms of the Group's obligations. Plan assets are measured at their fair value at the reporting date. The net surplus or deficit of the defined benefit plan is recognised as an asset or liability in the statement of financial position and represents the present value of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets.

The value of any asset recognised is restricted to the sum of any unrecognised past service costs plus the present value of available funds and reductions in future contributions to the plan.

The current service cost and any past service costs together with the expected return on plan assets less the unwinding of the discount on the plan liabilities is charged to 'other expenses' in the income statement.

For the year ended 31 December 2017

Re-measurements which comprise gains and losses as a result of experience adjustments and changes in actuarial assumptions, the actual return on plan assets (excluding interest) and the effect of the asset ceiling are recognised immediately in OCI in the period in which they occur. Remeasurements are not reclassified to the income statement in subsequent periods. Administration costs (other than the costs of managing plan assets) are recognised in the income statement when the service is provided.

When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment, is recognised immediately in the income statement when the plan amendment or curtailment occurs.

Employee share-based payments

The Group operates a number of share incentive plans for its employees. These generally involve an award of shares or options in the Group (equity-settled share based payments), but may also take the form of a cash award based on the share price of the Group (cash-settled share based payments).

The Group's incentive plans have conditions attached before the employee becomes entitled to the award. These can be performance and / or service conditions (vesting conditions) or conditions that are often wholly within the control of the employee, for example where the employee has to provide funding during the vesting period, which is then used to exercise share options (non-vesting condition).

Performance conditions may be market based or non-market based. Market performance conditions are those related to an entity's equity, such as achieving a specified share price or target based on a comparison of the entity's share price with an index of share prices. Non-market performance conditions are those related to an entity's profit or revenue targets, an example of which would be Earnings per Share (EPS). Market based performance conditions and non-vesting conditions are taken into account when estimating the fair value of the share or option awards at the measurement date. The fair value of the share awards or options is not adjusted to take into account non-market performance features. These are taken into consideration by adjusting the number of equity instruments in the share-based payment measurement and this adjustment is made each period until the equity instruments vest.

The fair value of share-based payment awards granted is recognised as an expense in the income statement over the vesting period which accords with the period for which related services are provided by the employee. A corresponding increase in equity is recognised for equity settled plans and a corresponding financial liability for cash settled plans.

For equity-settled plans, the fair value is determined at grant date and not subsequently re-measured. For cash settled plans, the fair value is remeasured at each reporting date and the date of settlement, with any changes in fair value recognised in the statement of comprehensive income for the period and the liability adjusted accordingly

At each period end the Group reassesses the number of equity instruments expected to vest and recognises any difference between the revised and original estimate in the income statement with a corresponding adjustment to the share-based payments reserve in equity.

At the time the equity instruments vest, the amount recognised in the share-based payments reserve in respect of those equity instruments is transferred to retained earnings.

4.14: Tax

Current tax

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to income tax payable in respect of previous years. Current tax is charged or credited to the income statement, except when it relates to items recognised directly in equity or in other comprehensive income.

Deferred tax

Deferred taxes are calculated according to the statement of financial position method, based on temporary differences between the tax base of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised.

Deferred tax is charged or credited to the income statement, except when it relates to items recognised directly in equity or in other comprehensive income. In certain circumstances, as permitted by accounting guidance, deferred tax balances are not recognised. In particular, where the liability relates to the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence affect neither accounting nor taxable profit. Note 33(b) includes further detail of circumstances in which the Group does not recognise temporary differences.

Policyholder tax

Certain products are subject to tax on policyholder's investment returns. This 'policyholder tax' is an element of tax expense. To make the tax expense more meaningful, tax attributable to policyholder returns and tax attributable to shareholder profits is shown separately.

The tax attributable to policyholder returns is the amount payable in the year plus the movement of amounts expected to be payable in future years. The remainder of the tax expense is attributed to shareholders as tax attributable to shareholder profits.

For the year ended 31 December 2017

4.15: Goodwill and intangible assets

The recognition of goodwill arises on the acquisition of a business and represents the premium paid over the fair value of the Group's share of the identifiable asset and liabilities acquired at the date of acquisition. Intangible assets include both purchased intangible assets initially recognised as part of a business combination and internally generated assets, such as software development costs related to amounts recognised for in-house systems development.

Goodwill and goodwill impairment

Goodwill arising on the Group's investments in subsidiaries is shown as a separate asset, while that on associates where it arises is included within the carrying value of those investments. Goodwill is recognised as an asset at cost at the date that control is achieved (the acquisition date) and is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to annual impairment reviews.

Goodwill is allocated to one or more cash-generating units (CGUs) expected to benefit from the synergies of the combination, where the CGU represents the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Goodwill is reviewed for impairment at least once annually, as a matter of course even if there is no indication of impairment, and whenever an event or change in circumstances occurs which indicates a potential impairment. For impairment testing, the carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment loss is recognised immediately in profit or loss and is not subsequently reversed.

On disposal of an operation within a group of CGUs to which goodwill has been allocated, the goodwill associated with that operation is included in the carrying amount of the operation when determining the gain or loss on disposal. It is measured based on the relative values of the operation disposed of and the portion of the CGU retained.

Intangible assets acquired as part of a business combination

Intangible assets acquired as part of a business combination are recognised where they are separable and can be measured reliably. Acquired intangible assets consist primarily of contractual relationships such as customer relationships and distribution channels. Such items are capitalised at their fair value, represented by the estimated net present value of the future cash flows from the relevant relationships acquired at the date of acquisition. Brands and similar items acquired as part of a business combination are capitalised at their fair value based on a 'relief from royalty' valuation methodology.

Subsequent to initial recognition acquired intangible assets are measured at cost less amortisation and any recognised impairment losses. Amortisation is provided at rates calculated to write off the cost or valuation less estimated residual value, using a straight-line method over their estimated useful lives as set out below:

Distribution channels 10 years Customer relationships 10 years Brand 15 – 20 years

The economic lives are determined by considering relevant factors such as usage of the asset, product life cycles, potential obsolescence, competitive position and stability of the industry. The amortisation period is re-evaluated at least at the end of each financial year end.

Internally developed software

There are a number of factors taken into account when considering whether internally developed software meets the recognition criteria in IAS 38 Intangible assets. Where for example a third party provider retains ownership of the software, this will not meet the control criterion in the standard (i.e. the power to obtain benefits from the asset) and the costs will be expensed as incurred.

Where it is capitalised, internally developed software is held at cost less accumulated amortisation and impairment losses. Such software is recognised in the statement of financial position if, and only if, it is probable that the relevant future economic benefits attributable to the software will flow to the Group and its cost can be measured reliably.

Costs incurred in the research phase are expensed, whereas costs incurred in the development phase are capitalised, subject to meeting specific criteria, as set out in the relevant accounting guidance, the main one being that future economic benefits can be identified as a result of the development expenditure. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of the relevant software, which range between three and five years, depending on the nature and use of the software.

Subsequent expenditure

Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Impairment testing for intangible assets

For intangible assets with finite lives, impairment charges are recognised where evidence of impairment is observed. If an indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The recoverable amount is calculated as the higher of fair value less costs to sell and value in use. If the recoverable amount of an intangible asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense in the income statement immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

4.16: Assets and liabilities held for sale and discontinued operations

Assets (and disposal groups) are classified as held for sale if their carrying amount will be recovered through a sales transaction rather than through continuing use. This condition is regarded as having been met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year of the date of classification. Assets and liabilities held for sale are presented separately in the consolidated statement of financial position.

Assets and liabilities (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and their fair value less costs to sell. No depreciation or amortisation is charged on a non-current asset while classified as held for sale or while part of a disposal group once it has been classified as held for sale.

The Group classifies as discontinued operations areas of the business which have been disposed of, or are classified as held for sale at the year end and which either represent a separate major line of business or geographical area, or are part of a plan to dispose of one, or are subsidiaries acquired exclusively with a view to resale.

For the year ended 31 December 2017

When an asset (or disposal group) ceases to be classified as held for sale, the individual assets and liabilities cease to be shown separately in the statement of financial position at the end of the year in which the classification changes. Comparatives are not restated. If the line of business was previously presented as a discontinued operation and subsequently ceases to be classified as held for sale, profit and loss and cash flows of the comparative period are restated to show that line of business as a continuing operation.

Further information can be found in note 5.

4.17: Provisions and contingent liabilities

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more probable than not that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are measured at management's best estimate of the expenditure required to settle the obligation at the reporting date. Where the effect of the time value of money is material, provisions are discounted and represent the present value of the expected expenditure.

The Group recognises specific provisions where they arise for the situations outlined below:

• Onerous contracts when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting the obligations under the contract.
• Corporate restructuring only if the Group has approved a detailed formal plan and raised a valid expectation among those parties directly affected, that the plan will be carried out either by having commenced implementation or by publicly announcing the plan's main features. Such provisions include the direct expenditure arising from the restructuring, such as employee termination payments but not those costs associated with the ongoing activities of the Group.

Provisions are not recognised for future operating costs or losses.

Contingent liabilities are possible obligations of the Group of which the timing and amount are subject to significant uncertainty. Contingent liabilities are not recognised in the consolidated statement of financial position, unless they are assumed by the Group as part of a business combination. They are however disclosed, unless they are considered to be remote. If a contingent liability becomes probable and the amount can be reliably measured it is no longer treated as contingent and recognised as a liability.

Contingent assets which are possible benefits to the Group are only disclosed if it is probable that the Group will receive the benefit. If such a benefit becomes virtually certain, it is no longer considered contingent and is recognised on the consolidated statement of financial position as an asset.

For the year ended 31 December 2017

5: Acquisitions, discontinued operations and disposal groups held for sale

This note provides details of the acquisitions and disposals of subsidiaries the Group has made during the three year period, together with details of businesses held for sale during that same period.

5(a) Business acquisitions completed during the three year period

Business acquisitions completed during 2017

Caerus Capital Group Limited (Caerus)

On 1 June 2017, the Group completed the acquisition of 100% of the share capital of Caerus, a UK based adviser network that operates in a similar manner to Intrinsic and which has approximately £4 billion of funds under advice and 300 advisers.

The total consideration of £24 million includes £15 million cash consideration and up to £3 million that has been deferred for two years and £6 million that has been deferred for three years. The deferred consideration has been included as part of the cost of the acquisition as there is no continuing employment condition applying to the sellers of the business. The deferred consideration payable is dependent on turnover targets post acquisition and is potentially reduced by the amount of any relevant claims arising from in-force business existing prior to the payment dates.

The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition date.

The carrying value of assets and liabilities in Caerus's consolidated statement of financial position on acquisition date approximates the fair value of these items determined by the Group. In addition, the Group recognised identified intangible assets of £10 million relating to customer distribution channels. The value of the intangible assets was determined by applying cash flows to standard industry valuations models. Goodwill of £10 million was recognised on the acquisition and is attributable to the delivery of significant cost and revenue synergies that cannot be linked to identifiable intangible assets.

Transaction costs incurred of £1 million relating to the acquisition have been recognised within other operating expenses in the consolidated income statement, but not included within adjusted operating profit.

Old Mutual Wealth Private Client Advisers (PCA)

During 2017, the Group completed the acquisition of eight adviser businesses as part of the expansion of its PCA business that was launched in October 2015. The aim is to develop a Quilter branded, employed adviser business focused upon servicing upper affluent and high net worth clients, offering a centrally-defined restricted advice proposition focused upon Group's investment solutions and platform.

The purchase price for each acquisition has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the dates of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocations required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition dates.

The estimated consideration payable is £20 million, of which £10 million was cash consideration and up to £10 million in relation to deferred payments. The amount of deferred consideration is dependent upon the meeting certain performance targets, generally relating to the value of funds under management and levels of on-going fee income. The deferred consideration has been included as part of the cost of the acquisition. Total other intangible assets of £10 million in respect of customer relationships were recognised as a result of the acquisitions, together with goodwill of £5 million.

Transaction costs incurred of £1 million relating to the acquisitions have been recognised within other operating expenses in the consolidated income statement, but not included within adjusted operating profit.

Attivo Investment Management Limited (AIM)

On 29 March 2017, the Group completed the acquisition of 100% of the share capital of AIM, a UK based investment management business offering a comprehensive investment management service.

The fair value of the total estimated consideration was £8 million, of which £4 million was cash consideration and £4 million was deferred for two years. The deferred consideration is included within the cost of the acquisition because it is dependent on levels of assets under management being maintained, with no requirement for continuing employment applied to the sellers of the business.

The book value of total assets and total net assets of the acquired business were both less than £1m.

The purchase price has been allocated based on a provisional estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition determined in accordance to IFRS 3 'Business Combinations'. The provisional allocation required significant assumptions and it is possible that the preliminary estimates may change materially as the purchase price allocations are finalised. The accounting must be finalised within 12 months of the acquisition date.

The carrying value of assets and liabilities in AIM's statement of financial position on acquisition date approximates the fair value of these items determined by the Group. Other intangible assets of £7 million, relating to customer relationships, were recognised as a result of the acquisition. No goodwill was recognised on this transaction.

Transaction costs incurred of £0.5m relating to the acquisition have been recognised within other operating expenses in the consolidated income statement, but not included within adjusted operating profit.

Commsale 2000 Limited

On 29 September 2017 the Group acquired Commsale 2000 Limited (Commsale) from Old Mutual plc. Commsale is a UK based service company that runs the lease for the Old Mutual head office building and is responsible for the payment of rent, rates and service charges relating to the building and recharging the costs to all tenants through a service charge.

This represents a business combination involving entities or businesses under common control because the combining businesses are ultimately controlled by the same party or parties before and after the business combination.

The total consideration was for £0.29m. The Net Asset Value (NAV) at the date of acquisition was £0.45m, with a gain on purchase of £0.16m being recognised, representing assets not valued within the agreed consideration.

For the year ended 31 December 2017

5: Acquisitions, discontinued operations and disposal groups held for sale continued

5(a) Business acquisitions completed during the three year period continued

Global Edge Technology Ltd (GET)

On 30 November 2017 the Group acquired 100% of the issued share capital of Global Edge Technology Ltd (GET) from Old Mutual plc. GET is a service company incorporated in South Africa, with a branch in the UK that provides IT support for the Group's Platform business services.

This represents a business combination involving entities or businesses under common control because the combining businesses are ultimately controlled by the same party or parties before and after the business combination.

The total consideration was for £0.8m. The Net Asset Value (NAV) at the date of acquisition was £4.1m, with a gain on purchase of £3.3m being recognised. We determined that the excess of book value over consideration paid was attributable to potential future integration costs which, if incurred, would be expensed in future periods. As potential future integrating activities do not qualify to be recognised as a liability in the application of the acquisition method of accounting, no such liability was recognised, and we recorded the excess as a bargain purchase gain.

Business acquisitions completed during 2016

Acquisition of AAM Advisory Pte Ltd (AAM)

On 16 March 2016, the Group completed the acquisition of 100% of AAM, a Singapore financial advisory business. The cash consideration paid was £7 million (Singapore Dollars 'SGD': 14 million) with additional potential deferred consideration of £13 million (SGD 26 million), which is subject to AAM meeting certain performance targets for the period from 2016 to 2018. Deferred consideration is not included in the cost of acquisition due to the requirement for the sellers to remain within the business. The book value of total net assets of the acquired business was less than £1m.

Goodwill of £4 million and other intangible assets of £3 million were recognised as a result of the transaction.

Old Mutual Wealth Private Client Advisers (OMWPCA)

During the second half of 2016, the Group completed the acquisition of a number of PCA advisory businesses and client books as part of the expansion of the PCA business that was launched in October 2015, with the aim of developing a Quilter branded, employed adviser business focused upon servicing upper affluent and high-net worth clients, offering a centrally-defined restricted advice proposition focused upon the Group's investment solutions and platform. The total cash consideration paid was an initial £8 million with additional potential deferred consideration of £8 million, dependent upon meeting certain performance targets, generally relating to funds under management.

Goodwill of £8 million and other intangible assets of £3 million were recognised as a result of the transaction. The deferred consideration was capitalised in the calculation of goodwill recognised.

Business acquisitions completed during 2015

Acquisition of Quilter Cheviot Limited

On 25 February 2015, the Group completed the acquisition of 100% of Quilter Cheviot Limited, a leading UK-based discretionary investment manager, for a total consideration of £585 million, comprising of £543 million cash and £42 million of deferred consideration to be settled in Old Mutual plc shares. Deferred consideration is not included in the cost of acquisition due to the requirement for the sellers to remain within the business. An additional £23 million was paid to the seller to compensate for the increase in the net asset value of Quilter Cheviot Limited between the date at which the acquisition was agreed and the completion of the transaction. The purchase consideration for the acquisition of Quilter Cheviot was the total cash paid of £566 million.

Goodwill of £292 million and other intangible assets of £288 million (£273 million customer relationships and £15 million brand) were recognised as a result of the transaction.

The table below sets out the consolidated assets and liabilities acquired as a result of the acquisition of Quilter Cheviot Limited:

		£m
	Acquiree's carrying amount	Fair value
Assets
Intangible assets	-	288
Property, plant and equipment	8	8
Deferred tax asset	1	1
Current tax receivable	3	3
Cash and cash equivalents	69	69
Trade, other receivables and other assets	128	128
Total assets	209	497
Liabilities
Deferred tax liabilities	-	(58)
Provisions and accruals	(50)	(53)
Current tax payable	(5)	(5)
Trade, other payables and other liabilities	(107)	(107)
Total liabilities	(162)	(223)
Total net assets acquired	47	274
Fair value of net assets at acquisition date		543
Increase in fair value of net assets to completion date		23
Total cash consideration paid		566
Goodwill recognised		292

For the year ended 31 December 2017

5: Acquisitions, discontinued operations and disposal groups held for sale continued

5(a) Business acquisitions completed during the three year period continued

The table below represents the financial results of Quilter Cheviot Limited for the period from 1 January 2015 to 28 February 2015 (the period before acquisition) and for the period 26 February 2015 to 31 December 2015.

			£m
	1 January 2015 to 25 February 2015	26 February 2015 to 31 December 2015	Combined year ended 31 December 2015
Revenue
Fee and commission income, and income from service activities	21	117	138
Net investment income	1	3	4
Total revenue	22	120	142
Expenses
Other operating and administrative expenses	(25)	(106)	(131)
Total expenses	(25)	(106)	(131)
Profit before tax	(3)	14	11
Income tax expense	(2)	(4)	(6)
Profit for the period after tax	(5)	10	5

The acquired business contributed revenues of £120 million and net profit of £10 million to the Group for the period from 26 February 2015 to 31 December 2015. If the acquisition had occurred on 1 January 2015, the Group consolidated revenue and profit for the year ended 31 December 2015 would have been £2,060 million and £80 million respectively. These amounts have been calculated using the subsidiary's results and adjusting them for: (i) differences in the accounting policies between the group and subsidiary and (ii) the additional amortisation that would have been charged, assuming the fair value adjustments to intangible assets had been applied from 1 January 2015, together with tax effects.

5(b) Disposal of subsidiaries, associated undertakings and strategic investments

Year ended 31 December 2017

In August 2016, the Group announced that it has agreed to sell Old Mutual Wealth Italy S.p.A. to Ergo Previdenza S.p.A. ("Ergo"), a member of the Flavia insurance group). The sale completed on 9 January 2017. The consideration for the transaction was £221 million (€278 million) in cash, plus interest to completion recognising a profit on disposal of £80 million.

Year ended 31 December 2016

There were no disposals of subsidiaries, associated undertakings or strategic investments during the year ended 31 December 2016.

Year ended 31 December 2015

On 2 February 2015, the Group completed the sale of its interest in Luxembourg subsidiary Skandia Life S.A. (Skandia Luxembourg and Skandia France) for a cash consideration of £9 million recognising a loss on disposal of £28 million.

5(c) Discontinued operations

The Group's Discontinued Operations include the Single Strategy Business, Old Mutual Wealth Italy S.p.A (up to the date its sale completed on 9 January 2017) and Skandia Life S.A. (Skandia Luxembourg and Skandia France) (up to the date of its sale completed on 2 February 2015).

In December 2017, the Group announced that it had entered into an agreement to sell its Single Strategy asset management business ('Single Strategy business') to a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of the Single Strategy management team (together 'the Acquirer'), for an expected total consideration of c.£600 million, comprising cash consideration of £570 million payable on or before completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as surplus capital associated with the separation from Quilter is released in the business. These values are subject to a number of potential price adjustments depending on the net asset value of the business and a number of other factors at the disposal date. The deferred consideration is not subject to performance conditions. Once the transaction completes, economic ownership of the Single Strategy business will pass to the Acquirer effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of Quilter.

		£m
	Year ended 31 December 2017	Year ended 31 December 2015
	Old Mutual Wealth Italy S.p.A.	Skandia Life S.A.
Consideration received	221	9
Less: transaction costs	(4)	(11)
Net proceeds from sale	217	(2)
Carrying value of net assets disposed of	(137)	(26)
Profit/(Loss) on sales of operations before tax	80	(28)
Profit/(Loss)on sales of operations after tax	80	(28)

For the year ended 31 December 2017

5: Acquisitions, discontinued operations and disposal groups held for sale continued

5(d) Discontinued income statement

The table below sets out the combined trading results of the Group's discontinued operations and also any profit/(loss) on the sale of discontinued operations during the three year period.

				£m
		Year ended 31 December	Year ended 31 December	Year ended 31 December
	Note	2017	2016	2015
Revenue
Net earned premiums		-	1	13
Fee and commission income, and income from service activities		389	354	301
Net investment income		7	141	164
Other income		3	2	6
Total revenue		399	498	484
Expenses
Net insurance claims and benefits incurred		-	-	(10)
Change in insurance contract liabilities		-	(1)	(51)
Change in investment contract liabilities		-	(133)	(107)
Fee and commission expenses, and other acquisition costs		(62)	(140)	(126)
Other operating and administrative expenses		(185)	(142)	(119)
Total expenses		(247)	(416)	(413)
Profit/(Loss) on disposal of subsidiaries	5(c)	80	-	(28)
Profit before tax from discontinued operations		232	82	43
Tax attributable to shareholders' funds		(29)	(20)	(15)
Profit for the year after tax from discontinued operations		203	62	28
Attributable to:
Equity holders of the Parent Company		203	62	28
		156.2 156.2	47.7 47.7
				21.5 21.5
Earnings per ordinary share on profit attributable to ordinary shareholders of the Parent Company Basic - from discontinued operations (pence) Diluted - from discontinued operations (pence) 5(e) Statement of comprehensive income from Discontinued Operations				£m
		Year ended	Year ended	Year ended
		31 December	31 December	31 December
	Note	2017	2016
Profit for the year		203	62	28
				2015
		4	18
		3	6	-
		7	24
		210	86	20
		Year ended	Year ended
		31 December	31 December
		2017	2016
		(22)	398	596
Other comprehensive income from discontinued operations: Items that may be reclassified subsequently to income statement Exchange gains/(losses) on translation of foreign operations Other comprehensive income/(expenses) for the year Total other comprehensive income from discontinued operations, net of tax Total comprehensive income for the year from discontinued operations 5(f): Net cash flows from discontinued operations Net cash flows from operating activities Net cash outflow from investing activities Total net cash flows from discontinued operations		137 115	(362) 36	(8) (8) £m Year ended 31 December 2015 (558) 38

For the year ended 31 December 2017

5: Acquisitions, discontinued operations and disposal groups held for sale continued

5(g) Assets and liabilities held for sale

Assets and liabilities held for sale during 2017

Assets and liabilities of operations classified as held for sale at 31 December 2017 relate to the Single Strategy asset management business. The operation has been classified as held for sale from December 2017 and the transaction is expected to complete during 2018. The assets and liabilities held for sale are disclosed in the table below.

Assets and liabilities held for sale during 2016

Assets and liabilities of operations classified as held for sale at 31 December 2016 relate to Old Mutual Wealth Italy S.p.A. The operations had been classified as held for sale from August 2016 and the transaction was completed on 9 January 2017. The principal financial assets and liabilities included as held for sale are investments and securities of £6,189 million and investment contract liabilities of £6,155 million, both of which are classified as Level 1 in terms of the fair value hierarchy.

The table below represents assets and liabilities held for sale.

			£m
		At	At
		31 December	31 December
	Note	2017	2016
Assets classified as held for sale
Goodwill and other intangible assets	17(a)	82	-
Financial investments	20	-	6,189
Deferred tax assets	33	9	3
Trade, other receivables and other assets	26	204	127
Deferred acquisition costs	27	4	63
Cash and cash equivalents	28	147	14
Assets of operations classified as held for sale		446	6,396
Liabilities directly associated with assets classified as held for sale
Long-term business insurance policyholder liabilities		-	10
Investment contract liabilities		-	6,155
Provisions and accruals	32	-	3
Deferred tax liabilities	33	-	20
Current tax payable		33	-
Trade, other payables and other liabilities	35	186	70
Deferred revenue	36	-	5
Liabilities of operations classified as held for sale		219	6,263
Net assets of operations classified as held for sale		227	133

For the year ended 31 December 2017

6: Segmental information

6(a) Segmental presentation

There have been no changes to the presentation of segment information for the three year period in the historical financial information. All three years have been segmented based on our agreed segmentation post separation from Old Mutual plc.

The Group's operating segments comprise Advice and Wealth Management and Wealth Platforms. Head Office expenses are also included within our continuing business and this segmentation is consistent with how the Group is managed. For all reporting periods, these businesses have been classified as continuing operations in the IFRS income statement and as core operations in determining the Group's Operating profit. The Head Office function includes certain central costs that are not allocated to a specific business unit.

For the year ended 31 December 2017, 31 December 2016 and 31 December 2015, the Group has classified the European operations and the Single Strategy asset management business as discontinued because they have either been sold or held for sale. Further detail is included in note 5(c).

The Group's segmental results are analysed and reported on a basis with the way that management and the Board of directors of Old Mutual Wealth Management Limited will assess performance of the underlying businesses and allocates resources. Information is presented to the Board on a consolidated basis in pounds sterling (the presentation currency) and in the functional currency of each business.

Operating profit is one of the key measures reported to the Group's management and Board of directors for their consideration in the allocation of resources to, and the review of the performance, of the segments. As appropriate to the business line, the Board reviews additional measures to assess the performance of each of the segments. These typically include sales, net client cash flows, assets under management and advice, and revenue and operating margins.

Consistent with internal reporting, assets, liabilities, revenues and expenses that are not directly attributable to a particular segment are allocated between segments where appropriate and where there is a reasonable basis for doing so. The Group accounts for inter-segment revenues and transfers as if the transactions were with third parties at current market prices.

The revenues generated in each reported segment is provided in the analysis of profits and losses in note 6. The segmental information in this note reflects the Operating and IFRS measures of profit or loss and the assets and liabilities for each operating segment as provided to management and the Board of directors. There are no differences between the measurement of the assets and liabilities reflected in the primary statements and that reported for the segments.

The Group is primarily engaged in the following business activities from which it generates revenue: asset management business (fee and commission income), life assurance (premium income) and financial advice (management fees). Other revenue includes gains and losses on investment securities.

The principal lines of business from which each operating segment derives its revenues are as follows:

Advice and Wealth Management

This segment comprises Old Mutual Global Investors, Quilter Cheviot Limited and Advice, including Old Mutual Wealth Private Client Advisers (OMWPCA).

Old Mutual Global Investors is a leading provider of investment solutions in the UK multi-asset market. It develops and manages investment solutions in the form of funds for the Group and third party clients. It has several fund ranges which vary on breadth of underlying asset class. The business has primarily been accumulation focused, with recent development of decumulation solutions.

Quilter Cheviot Limited provides discretionary investment management in the United Kingdom with bespoke investment portfolios tailored to the individual needs of affluent and high-net worth customers, charities, companies and institutions through a network of branches in London and the regions. Investment management services are also provided by branches in Jersey, Channel Islands and the Republic of Ireland.

Advice is a restricted financial adviser network (including OMWPCA) providing mortgage and financial planning advice and financial solutions for both individuals and businesses through a network of intermediaries. They operate across all markets, from wealth management and retirement planning advice through to dealing with property wealth and personal and business protection needs.

Wealth Platforms

This segment comprises UK Platforms and Heritage, and International cross border businesses.

UK Platform and Heritage provides advice based wealth management products and services in the UK, which serves a largely affluent customer base through advised multi-channel distribution. The Heritage business is predominantly closed book, made up of legacy products. Protection products are also part of the business.

International is a cross-border business, focusing on high net worth and affluent local customers and expatriates in Asia, the Middle East, Europe, South Africa and Latin America. Heritage is the book of legacy life and pensions business, the majority of which is closed to new business and in steady, managed run-off. This also includes the open books of protection business and Institutional business.

In addition to the two operating segments, the Group's Head Office comprises the investment return on centrally held assets, which was less than £1m in the three year historical period, head office expenses, such as Group treasury and finance functions, together with certain taxes and financing costs arising on central borrowings, along with central core structural borrowings and certain tax balances in the segmental statement of financial position.

For the year ended 31 December 2017

6: Segmental information continued

6(b)(i): Operating profit statement - segmental information for the year ended 31 December 2017

								£m
		Operating profit - Continuing business Operating segments					Reconciliation to IFRS
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Operating Profit	Consolidation Adjustments1	Adjusting items (Note 7(a))	IFRS Income Statement
Revenue
Gross earned premiums		-	148	-	148	-	-	148
Premiums ceded to reinsurers		-	(88)	-	(88)	-	-	(88)
Net earned premiums		-	60	-	60	-	-	60
Fee and commission income, and income from service activities	8(a)	382	526	-	908	(13)	-	895
Net investment income	8(b)	3	4,412	1	4,416	779	-	5,195
Other income		2	83	3	88	(75)	-	13
Segmental revenue		387	5,081	4	5,472	691	-	6,163
Expenses
Claims and benefits paid		-	(76)	-	(76)	-	-	(76)
Reinsurance recoveries		-	54	-	54	-	-	54
Net insurance claims and benefits incurred		-	(22)	-	(22)	-	-	(22)
Change in reinsurance assets and liabilities		-	85	-	85	-	-	85
Change in insurance contract liabilities		-	(78)	-	(78)	-	-	(78)
Change in investment contract liabilities		-	(4,308)	-	(4,308)	-	-	(4,308)
Fee and commission expenses, and other acquisition costs	9(a)	(52)	(198)	-	(250)	(70)	-	(320)
Change in third-party interest in consolidated funds		-	-	-	-	(673)	-	(673)
Other operating and administrative expenses	9(b)	(253)	(336)	(35)	(624)	52	(244)	(816)
Finance costs	10	-	-	-	-	-	(39)	(39)
Segmental expenses		(305)	(4,857)	(35)	(5,197)	(691)	(283)	(6,171)
Profit on the acquisition and re-measurement of subsidiaries	7(c)	-	-	-	-	-	3	3
Operating profit/(loss) before all tax		82	224	(31)	275	-	(280)	(5)
Tax attributable to policyholders' funds		-	(66)	-	(66)	-	17	(49)
Operating profit/(loss) before tax attributable to shareholders' funds		82	158	(31)	209	-	(263)	(54)
Reconciliation to IFRS:
Adjusted for non-operating items:	7(a)
Impairment of goodwill and impact of acquisition costs		(53)	-	(1)	(54)	-	54	-
Profit on the acquisition and re-measurement of subsidiaries		-	-	3	3	-	(3)	-
Business transformation costs		-	(89)	-	(89)	-	89	-
Managed separation costs		-	-	(32)	(32)	-	32	-
Finance costs		-	(1)	(38)	(39)	-	39	-
Policyholder tax adjustments		-	17	-	17	-	(17)	-
Voluntary customer remediation provision		-	-	(69)	(69)	-	69	-
Adjusting items before tax		(53)	(73)	(137)	(263)	-	263	-
IFRS profit before tax attributable to shareholders' funds		29	85	(168)	(54)	-	-	(54)

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

For the year ended 31 December 2017

6: Segmental information continued

6(b)(ii): Operating profit statement - segmental information for the year ended 31 December 2016

								£m
			Operating profit - Continuing business				Reconciliation to IFRS
		Operating segments
		Advice and Wealth	Wealth	Head	Operating	Consolidation Adjustments1	Adjusting items	IFRS Income
Revenue	Notes	Management	Platforms	Office	Profit		(Note 7(a))	Statement
Gross earned premiums		-	141	-	141	-	-	141
Premiums ceded to reinsurers		-	(84)	-	(84)	-	-	(84)
Net earned premiums		-	57	-	57	-	-	57
Fee and commission income, and income from service activities	8(a)	324	497	-	821	(18)	-	803
Net investment income	8(b)	6	5,706	-	5,712	598	-	6,310
Other income		-	-	-	-	17	-	17
Total revenue		330	6,260	-	6,590	597	-	7,187
Expenses
Claims and benefits paid		-	(72)	-	(72)	-	-	(72)
Reinsurance recoveries		-	51	-	51	-	-	51
Net insurance claims and benefits incurred		-	(21)	-	(21)	-	-	(21)
Change in reinsurance assets and liabilities		-	119	-	119	-	-	119
Change in insurance contract liabilities		-	(125)	-	(125)	-	-	(125)
Change in investment contract liabilities		-	(5,522)	-	(5,522)	-	-	(5,522)
Fee and commission expenses, and other acquisition costs	9(a)	(56)	(215)	-	(271)	(28)	-	(299)
Change in third-party interest in consolidated funds		-	-	-	-	(575)	-	(575)
Other operating and administrative expenses	9(b)	(219)	(262)	(18)	(499)	6	(161)	(654)
Finance costs	10	-	-	-	-	-	(43)	(43)
Total expenses		(275)	(6,026)	(18)	(6,319)	(597)	(204)	(7,120)
Operating profit/(loss) before all tax		55	234	(18)	271	-	(204)	67
Tax attributable to policyholders' funds		-	(94)	-	(94)	-	(8)	(102)
Operating profit/(loss) before tax attributable to shareholders' funds		55	140	(18)	177	-	(212)	(35)
Reconciliation to IFRS:
Adjusted for non-operating items:	7(a)
Impairment of goodwill and impact of acquisition costs		(51)	(1)	-	(52)	-	52	-
Business transformation costs		-	(102)	-	(102)	-	102	-
Managed separation costs		-	-	(7)	(7)	-	7	-
Finance costs		-	-	(43)	(43)	-	43	-
Policyholder tax adjustments		-	(8)	-	(8)	-	8	-
Adjusting items before tax		(51)	(111)	(50)	(212)	-	212	-
IFRS profit before tax attributable to shareholders' funds		4	29	(68)	(35)	-	-	(35)

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

For the year ended 31 December 2017

6: Segmental information continued

6(b)(iii): Operating profit statement - segmental information for the year ended 31 December 2015

								£m
			Operating profit - Continuing business				Reconciliation to IFRS
		Operating segments
	Notes	Advice and Wealth Management	Wealth Platforms	Head Office	Operating Profit	Consolidation Adjustments1	Adjusting items (Note 7(a))	IFRS Income Statement
Revenue
Gross earned premiums		-	135	-	135	-	-	135
Premiums ceded to reinsurers		-	(81)	-	(81)	-	-	(81)
Net earned premiums		-	54	-	54	-	-	54
Fee and commission income, and income from service activities	8(a)	288	552	-	840	(24)	-	816
Net investment income	8(b)	3	985	-	988	178	-	1,166
Other income		2	39	-	41	(39)	-	2
Total revenue		293	1,630	-	1,923	115	-	2,038
Expenses
Claims and benefits paid		-	(77)	-	(77)	-	-	(77)
Reinsurance recoveries		-	56	-	56	-	-	56
Net insurance claims and benefits incurred		-	(21)	-	(21)	-	-	(21)
Change in reinsurance assets and liabilities		-	40	-	40	-	-	40
Change in insurance contract liabilities		-	(32)	-	(32)	-	-	(32)
Change in investment contract liabilities		-	(949)	-	(949)	-	-	(949)
Fee and commission expenses, and other acquisition costs	9(a)	(62)	(246)	-	(308)	(54)	-	(362)
Change in third-party interest in consolidated funds		-	-	-	-	(76)	-	(76)
Other operating and administrative expenses	9(b)	(177)	(236)	(14)	(427)	15	(153)	(565)
Finance costs	10	-	-	-	-	-	(32)	(32)
Total expenses		(239)	(1,444)	(14)	(1,697)	(115)	(185)	(1,997)
Operating profit/(loss) before all tax		54	186	(14)	226	-	(185)	41
Tax attributable to policyholders' funds		-	(5)	-	(5)	-	12	7
Operating profit/(loss) before tax attributable to shareholders' funds		54	181	(14)	221	-	(173)	48
Reconciliation to IFRS:
Adjusted for non-operating items:	7(a)
Impairment of goodwill and impact of acquisition costs		(47)	-	(10)	(57)	-	57	-
Business transformation costs		-	(96)	-	(96)	-	96	-
Managed separation costs		-	-	-	-	-	-	-
Finance costs		-	-	(32)	(32)	-	32	-
Policyholder tax adjustments		-	12	-	12	-	(12)	-
Adjusting items before tax		(47)	(84)	(42)	(173)	-	173	-
IFRS profit before tax attributable to shareholders' funds		7	97	(56)	48	-	-	48

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

For the year ended 31 December 2017

6: Segmental information continued

6(c)(i): Statement of financial position – segmental information at 31 December 2017

	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Consolidation Adjustments1	Total Continuing Operations	Discontinued Operations2	£m Total
Assets
Goodwill and other intangible assets	17	412	162	-	-	574	-	574
Property, plant and equipment	18	9	9	-	-	18	-	18
Investments in associated undertakings		2	-	1	-	3	-	3
Loans and advances	19	18	180	1	-	199	-	199
Financial investments	20	-	56,562	1	7,685	64,248	-	64,248
Reinsurers' share of policyholder liabilities	25	-	2,908	-	-	2,908	-	2,908
Deferred tax assets	33	6	15	1	-	22	-	22
Current tax receivable		-	-	-	-	-	-	-
Trade, other receivables and other assets	26	208	202	18	69	497	-	497
Deferred acquisition costs	27	-	611	-	-	611	-	611
Derivative assets	21	-	1	-	86	87	-	87
Cash and cash equivalents	28	303	1,062	82	913	2,360	-	2,360
Assets of operations classified as held for sale	5(g)	-	-	-	-	-	446	446
Inter-segment funding - assets		4	-	124	(128)	-	-	-
Total assets		962	61,712	228	8,625	71,527	446	71,973
Liabilities
Long-term business insurance policyholder liabilities	31	-	489	-	-	489	-	489
Investment contract liabilities	31	-	59,139	-	-	59,139	-	59,139
Third-party interests in consolidated funds		-	-	-	7,905	7,905	-	7,905
Provisions and accruals	32	10	89	5	-	104	-	104
Deferred tax liabilities	33	40	150	-	-	190	-	190
Current tax payable		21	38	(21)	-	38	-	38
Borrowings	34	-	-	782	-	782	-	782
Trade, other payables and other liabilities	35	275	607	35	414	1,331	-	1,331
Deferred revenue	36	1	243	-	-	244	-	244
Derivative liabilities	21	-	-	-	433	433	-	433
Liabilities of operations classified as held for sale	5(g)	-	-	-	-	-	219	219
Inter-segment funding - liabilities		-	123	4	(127)	-	-	-
Total liabilities		347	60,878	805	8,625	70,655	219	70,874
Total equity								1,099

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

² Discontinued operations includes the results of the Group's Single Strategy business.

For the year ended 31 December 2017

6: Segmental information continued

6(c)(ii): Statement of financial position – segmental information at 31 December 2016

								£m
	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Consolidation Adjustments1	Total Continuing Operations	Discontinued Operations2	Total
Assets
Goodwill and other intangible assets	17	415	157	-	-	572	82	654
Property, plant and equipment	18	9	9	-	-	18	-	18
Investments in associated undertakings		-	-	1	-	1	-	1
Loans and advances	19	11	207	2	-	220	-	220
Financial investments	20	-	48,614	1	3,620	52,235	-	52,235
Reinsurers' share of policyholder liabilities	25	-	2,863	-	-	2,863	-	2,863
Deferred tax assets	33	4	-	-	-	4	4	8
Current tax receivable		-	20	-	-	20	-	20
Trade, other receivables and other assets	26	195	261	103	122	681	113	794
Deferred acquisition costs	27	-	655	-	-	655	-	655
Derivative assets	21	-	-	-	26	26	-	26
Cash and cash equivalents	28	161	736	88	533	1,518	77	1,595
Assets of operations classified as held for sale	5(g)	-	-	-	-	-	6,396	6,396
Inter-segment funding - assets		4	38	23	(65)	-	-	-
Total assets		799	53,560	218	4,236	58,813	6,672	65,485
Liabilities
Long-term business insurance policyholder liabilities	31	-	417	-	-	417	-	417
Investment contract liabilities	31	-	51,265	-	-	51,265	-	51,265
Third-party interests in consolidated funds		-	-	-	4,140	4,140	-	4,140
Provisions and accruals	32	10	18	1	-	29	-	29
Deferred tax liabilities	33	48	131	-	-	179	-	179
Current tax payable		19	13	(17)	-	15	5	20
Borrowings	34	-	-	839	-	839	-	839
Trade, other payables and other liabilities	35	261	527	13	107	908	116	1,024
Deferred revenue	36	-	261	-	-	261	-	261
Derivative liabilities	21	-	1	-	55	56	-	56
Liabilities of operations classified as held for sale	5(g)	-	-	-	-	-	6,263	6,263
Inter-segment funding - liabilities		8	15	43	(66)	-	-	-
Total liabilities		346	52,648	879	4,236	58,109	6,384	64,493
Total equity								992
Total equity and liabilities								65,485

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

Discontinued operations includes the results of Old Mutual Wealth Italy S.p.A and the Group's Single Strategy businesses.

For the year ended 31 December 2017

6: Segmental information continued

6(c)(iii): Statement of financial position – segmental information at 31 December 2015

								£m
	Notes	Advice & Wealth Management	Wealth Platforms	Head Office	Consolidation Adjustments1	Total Continuing Operations	Discontinued Operations2	Total
Assets
Goodwill and other intangible assets	17	442	151	-	-	593	77	670
Property, plant and equipment	18	7	12	-	-	19	-	19
Investments in associated undertakings		-	-	1	-	1	-	1
Loans and advances	19	9	181	-	-	190	-	190
Financial investments	20	-	41,547	-	2,611	44,158	5,136	49,294
Reinsurers' share of policyholder liabilities	25	-	2,507	-	-	2,507	-	2,507
Deferred tax assets	33	2	-	-	-	2	6	8
Current tax receivable		-	27	-	-	27	-	27
Trade, other receivables and other assets	26	147	254	55	54	510	206	716
Deferred acquisition costs	27	-	710	-	-	710	58	768
Derivative assets	21	-	-	-	971	971	-	971
Cash and cash equivalents	28	119	595	81	709	1,504	97	1,601
Inter-segment funding - assets		4	38	8	(50)	-	-	-
Total assets		730	46,022	145	4,295	51,192	5,580	56,772
Liabilities
Long-term business insurance policyholder liabilities	31	-	286	-	-	286	7	293
Investment contract liabilities	31	-	43,945	-	-	43,945	5,096	49,041
Third-party interests in consolidated funds		-	-	-	3,311	3,311	-	3,311
Provisions and accruals	32	11	19	2	-	32	3	35
Deferred tax liabilities	33	56	77	-	-	133	19	152
Current tax payable		10	(2)	(9)	-	(1)	14	13
Borrowings	34	-	-	786	-	786	-	786
Trade, other payables and other liabilities	35	196	500	12	57	765	173	938
Deferred revenue	36	-	307	-	-	307	5	312
Derivative liabilities	21	-	-	-	978	978	-	978
Inter-segment funding - liabilities		-	8	43	(51)	-	-	-
Total liabilities		273	45,140	834	4,295	50,542	5,317	55,859
Total equity								913
Total equity and liabilities								56,772

¹ Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.

² Discontinued operations includes the results of Old Mutual Wealth Italy S.p.A and the Group's Single Strategy businesses.

For the year ended 31 December 2017

6: Segmental information continued

6(d)(i): Geographical segmental information

In presenting geographical segment information, revenue is based on the geographical location of our businesses. The Group has defined two geographical areas: UK and International.

						£m
For the year ended 31 December 2017	Notes	UK	International	Total continuing operations	Discontinued	operations Total Group
Revenue
Gross earned premiums		147	1	148	-	148
Premiums ceded to reinsurers		(87)	(1)	(88)	-	(88)
Net earned premiums		60	-	60	-	60
Fee and commission income, and income from service
activities	8(a)	662	233	895	389	1,284
Net investment income	8(b)	4,149	1,046	5,195	7	5,202
Other income		11	2	13	3	16
Total revenue		4,882	1,281	6,163	399	6,562

						£m
For the year ended 31 December 2016	Notes	UK	International	Total continuing operations	Discontinued operations	Total Group
Revenue
Gross earned premiums		140	1	141	1	142
Premiums ceded to reinsurers		(83)	(1)	(84)	-	(84)
Net earned premiums		57	-	57	1	58
Fee and commission income, and income from service
activities	8(a)	579	224	803	354	1,157
Net investment income	8(b)	4,302	2,008	6,310	141	6,451
Other income		17	-	17	2	19
Total revenue		4,955	2,232	7,187	498	7,685

						£m
For the year ended 31 December 2015	Notes	UK	International	Total continuing operations	Discontinued operations	Total Group
Revenue
Gross earned premiums		134	1	135	13	148
Premiums ceded to reinsurers		(80)	(1)	(81)	-	(81)
Net earned premiums		54	-	54	13	67
Fee and commission income, and income from service
activities	8(a)	599	217	816	301	1,117
Net investment income	8(b)	1,108	58	1,166	164	1,330
Other income		2	-	2	6	8
Total revenue		1,763	275	2,038	484	2,522

For the year ended 31 December 2017

7: Other key performance information

7(a): Operating profit adjusting items

Summary of adjusting items for determination of operating profit

In determining the operating profit of the Group for core operations, certain adjustments are made to profit before tax to reflect the underlying longterm performance of the Group. The following table shows an analysis of those adjustments from operating profit to profit before and after tax.

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Expense/(income)
Goodwill impairment and impact of acquisition accounting	7(b)	54	52	57
Profit on the acquisition and re-measurement of subsidiaries	7(c)	(3)	-	-
Business transformation costs	7(d)	89	102	96
Managed separation costs	7(e)	32	7	-
Finance costs	10	39	43	32
Policyholder tax adjustments on non-operating items	7(f)	(17)	8	(12)
Voluntary customer remediation provision	7(g)	69	-	-
Total non-operating adjusting items		263	212	173
Tax on non-operating adjusting items	13(c)	(39)	(28)	(45)
Less policyholder tax adjustments on non-operating items		17	(8)	12
Total non-operating adjusting items after tax		241	176	140

7(b) Goodwill impairment and impact of acquisition accounting

When applying acquisition accounting, deferred acquisition costs and deferred revenue existing at the point of acquisition are not recognised under IFRS. These are reversed on acquisition in the statement of financial position and replaced by goodwill and other intangible assets. In determining operating profit, the Group recognises acquisition costs and deferred revenue in relation to policies sold by acquired businesses pre-acquisition. The Group excludes the impairment of goodwill, the amortisation and impairment of acquired other intangible assets as well as the movements in certain acquisition date provisions. Costs incurred on completed acquisitions are also excluded from operating profit.

The effect of these adjustments to determine operating profit are summarised below:

For the year ended 31 December 2017

				£m
	Advice and Wealth Management	Wealth Platforms	Head office	Total Group
Amortisation of other acquired intangible assets	39	-	-	39
Change in acquisition date provisions	-	-	1	1
Acquisition costs	13	-	-	13
Impairment on disposals	1	-	-	1
	53	-	1	54
For the year ended 31 December 2016
				£m
	Advice and Wealth Management	Wealth Platforms	Head office	Total Group
Amortisation of other acquired intangible assets	36	-	-	36
Change in acquisition date provisions	-	1	-	1
Acquisition costs	15	-	-	15
	51	1	-	52
For the year ended 31 December 2015
				£m
	Advice and Wealth Management	Wealth Platforms	Head office	Total Group
Amortisation of other acquired intangible assets	31	-	-	31
Acquisition costs	16	-	10	26
	47	-	10	57

For the year ended 31 December 2017

7: Other key performance information continued

7(c) Profit on the acquisition and re-measurement of subsidiaries

As part of the managed separation, on 30 November 2017, the Company acquired 100% of the whole of the issued share capital of Global Edge Technologies (Pty) Ltd ('GET'), a company incorporated in South Africa, from OM Group (UK) Limited (part of the Old Mutual plc group) for £0.8 million.

Along with recording the book values of the assets acquired and liabilities assumed of £4 million, the Company recognised a bargain purchase gain of £3.2 million.

We determined that the excess of book value over consideration paid was attributable to potential future integration costs which, if incurred, would be expensed in future periods. As potential future integrating activities do not qualify to be recorded as a liability in the application of the acquisition method of accounting, none was recorded, and we recorded the excess as a bargain purchase gain.

7(d) Business transformation costs

In 2013, the Group UK business embarked on a significant programme to develop new platform capabilities and to outsource UK business administration. This involved replacing many aspects of the existing UK platform, and on completion certain elements of service provision would be migrated to International Financial Data Services (IFDS) under a long-term outsourcing agreement. The cost of developing the new technology did not meet the criteria for capitalisation, hence these costs and the costs of decommissioning existing technology and migrating of services to IFDS are excluded from Operating profit. Only costs that are directly attributable to the programme have been excluded from Operating Profit as management is of the view that this long-term investment in operational capability is a non-operating item. For the year ended 31 December 2017, these costs totalled £53 million (2016: £102 million), (2015: £96 million).

The contracts with International Financial Data Services related to the UK Platform Transformation came to an end by mutual agreement effective as of 2 May 2017.

The Group conducted a comprehensive review of the options available to the UK Platform business and entered into a new contract with FNZ, having concluded that FNZ's scale, market-proven and functionally rich offering was the most suitable to meet the current and anticipated needs of the business.

In partnership with FNZ, the Group expects to deliver all the existing functionality of the platform with increased levels of straight-through processing and enhanced functionality by late 2018 / early 2019, with migration of the in-force book to follow shortly thereafter. For the year ended 31 December 2017, these costs totalled £21 million (2016: £nil), (2015: £nil).

The Group has historically had a number of arrangements with the wider Old Mutual plc group's South African businesses. As a consequence of Managed Separation these arrangements have been severed and, as a result, deferred acquisition cost balances totalling £10 million have been written off (included within fee and commission expenses in the income statement), together with a loss incurred of £5 million on the cancellation of reinsurance arrangements (included within other costs within the income statement). The £15 million of charges are regarded as one-off and related to the transformation of the business to a standalone group.

7(e) Managed separation costs

One-off costs related to the implementation of managed separation recognised in the IFRS income statement have been excluded from Operating Profit on the basis that they are not representative of the operating activity of the Group. These costs relate to the capacitation of the businesses in readiness to operate as standalone businesses and the execution of various transactions required to implement our managed separation strategy. They are not expected to persist in the long term as they relate to a fundamental restructuring of the Group, which is not operational in nature, rather than more routine restructuring activity which would be seen as part of the usual course of business. The treatment and the disclosure of these costs as an adjusting item are also intended to make these costs more visible to the readers of the financial statements in the context of publicly disclosed estimates previously given in relation to these items. For the year ended 31 December 2017, these costs totalled £32 million (2016: £7 million), (2015: £nil).

7(f) Policyholder tax adjustments

Adjustments to policyholder tax are made to remove distortions arising from market volatility that can, in turn, lead to volatility in the policyholder tax charge between periods. In addition, adjustments are made to remove distortions to policyholder tax arising from the utilisation of tax allowances from elsewhere in the Quilter group (e.g. capital losses) which are regarded economically as impacting shareholder tax, and from distortions arising from other non-operating adjusting items. For the year ended 31 December 2017, this adjustment to operating profit totalled £17 million, (2016: £(8) million), (2015: £12 million).

7(g) Voluntary Customer Remediation Provision

As detailed in note 32 Provisions and Accruals, the Group has provided £69 million (2016: £nil; 2015: £nil) in respect of voluntary customer remediation following the recommendations of a thematic review by the Financial Conduct Authority (FCA).

The provision has been recognised in the IFRS income statement but has been excluded from operating profit on the basis that it is not representative of the current year operating performance of the business.

For the year ended 31 December 2017

8: Details of income

This note gives further detail on the items appearing in the income section of the consolidated income statement.

8(a): Fee and commission income, and income from service activities

This note analyses the fees and commission earned by the Group from negotiating, or participating in the negotiation of a transaction for third-parties, transaction and performance fees earned and movements in deferred origination fees.

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Fee and commission income, and income from service activities
Premium based fees	114	101	85
Change in fee income receivable	32	24	41
Fund based fees	698	605	616
Fixed fees	31	33	41
Surrender charges	21	22	16
Change in deferred Income	(11)	14	14
Other fee and commission income	10	4	3
Fee and commission income, and income from service activities - continuing operations	895	803	816
Fee and commission income, and income from service activities - discontinued operations	389	354	301
Total fee and commission income, and income from service activities	1,284	1,157	1,117

Income from fiduciary activities is included within fund based fees.

8(b): Net investment income

This note analyses the investment return from the Group's investing activities.

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Net investment income
Interest and similar income
Investments and securities	53	26	22
Cash and cash equivalents	10	20	17
Total interest and similar income	63	46	39
Dividend income	83	58	41
Gains on financial instruments at fair value through income statement	5,046	6,206	1,087
Foreign currency gains and losses	3	-	(1)
Net investment income - continuing operations	5,195	6,310	1,166
Net investment income - discontinued operations	7	141	164
Total net investment income	5,202	6,451	1,330

For the year ended 31 December 2017

9: Details of expenses

This note gives further detail on the items appearing in the income section of the consolidated income statement.

9(a): Fee and commission expenses

This note analyses the fee and commission expenses and other acquisition costs.

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Fee and commission expenses
Fee and commission expense	92	50	81
Acquisition commission costs - investment contracts	80	73	84
Acquisition commission costs - insurance business	12	10	9
Renewal commission - investment contracts	84	81	103
Renewal commission - insurance contracts	-	3	3
Retrocessions paid	16	23	26
Changes in deferred acquisition costs	36	59	56
Fee and commission expenses - continuing operations	320	299	362
Fee and commission expenses - discontinued operations	62	140	126
Total fee and commission expenses	382	439	488

9(b): Other operating and administrative expenses

This note gives further detail on the items included within other operating and administrative expenses section of the consolidated income statement.

				£m
	Note	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Other operating and administrative expenses
Staff costs	11	379	288	216
Depreciation		8	7	7
Operating lease rental		8	7	2
Amortisation of intangibles		2	4	4
Amortisation of other acquired intangibles		39	36	31
Administration and other expenses		380	312	305
Other operating and administrative expenses		816	654	565
Total expenses - discontinued operations		184	142	119
Total expenses		1,000	796	684

Operating lease payments principally represent rentals payable by the Group for the rental of buildings and equipment. Administration and other expenses include business transformation costs for the year ended 31 December 2017 that totalled £74 million (2016: £102 million), (2015: £96 million) in relation to the Platform Transformation Programme and £69 million in relation to the voluntary customer remediation provision.

For the year ended 31 December 2017

10: Finance costs

This note analyses the interest costs on our borrowings (which are described in note 34) and similar charges. Finance costs comprise:

			£m
	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2017	2016	2015
Interest payable on borrowed funds	39	43	32
Loans with Old Mutual plc	39	43	32
Total finance costs - continuing operations	39	43	32

Finance costs, which represent the cost of interest and finance charges on the Group's borrowings from Old Mutual plc, borrowed to primarily fund acquisitions, including Quilter Cheviot in 2015. More details regarding the borrowed funds, including the interest rates payable, are shown in note 34.

11: Staff costs and other employee-related costs

11(a) Staff costs

				£m
	Note	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Wages and salaries		235	174	129
Bonus and incentive remuneration		69	50	32
Social security costs		28	23	19
Retirement obligations
Defined contribution plans		11	11	9
Defined benefit plans	37(b)	-	(1)	-
Share-based payments
Equity settled	30(d)	9	6	5
Other		27	25	22
Staff costs - continuing operations		379	288	216
Staff costs - discontinued operations		142	111	99
Total staff costs		521	399	315

11(b) Employee numbers

			Number
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
The average number of persons employed by the Group was:
Advice and Wealth Management	1,360	1,162	1,005
Wealth Platforms	2,514	2,341	2,151
Head office	66	51	47
Continuing operations	3,940	3,554	3,203
Discontinued operations	283	380	343
Total average number of employees during the year	4,223	3,933	3,546

For the year ended 31 December 2017

12: Auditors' remuneration

Included in other operating and administrative expenses are fees paid to the Group's auditors. These can be categorised as follows:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Fees for audit services
Group	0.4	0.2	-
Subsidiaries	2.6	1.7	1.4
Total audit fees	3.0	1.9	1.4
Fees for non-audit services
Other non-audit services	1.1	1.5	0.4
Total non-audit services	1.1	1.5	0.4
Total Group auditors' remuneration - continuing operations	4.1	3.4	1.8
Total Group auditors' remuneration - discontinued operations	0.8	0.4	0.3
Total Group auditors' remuneration	4.9	3.8	2.1

Non-recurring audit costs for the year include charges related to assurance and reporting accountant's work in respect of separation from Old Mutual plc group and listing, regulatory change including Solvency II, Platform transformation and strategic review costs.

13: Tax

This note analyses the income tax expense recognised in profit or loss for the year and the various factors that have contributed to the composition of the charge.

13(a) Tax charged to the income statement

The total tax charge for the year comprises:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Current tax
United Kingdom	43	47	45
International	3	5	3
Adjustments to current tax in respect of prior years	1	(2)	(13)
Total current tax	47	50	35
Deferred tax
Origination and reversal of temporary differences	2	46	(44)
Effect on deferred tax of changes in tax rates	(1)	-	(6)
Adjustments to deferred tax in respect of prior years	(7)	(2)	(1)
Total deferred tax	(6)	44	(51)
Total tax charged/(credited) to income statement - continuing operations	41	94	(16)
Total tax charged/(credited) to income statement - discontinued operations	29	20	15
Total tax charged/(credited) to income statement	70	114	(1)

For the year ended 31 December 2017

13: Tax continued

13(b) Reconciliation of total income tax expense

The income tax charged to profit or loss differs from the amount that would apply if all of the Group's profits from the different tax jurisdictions had been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
(Loss)/Profit before tax	(5)	67	41
Tax at UK standard rate of 19.25% (2016: 20%, 2015: 20.25%)	(1)	13	8
Different tax rate or basis on overseas operations	(3)	(5)	(6)
Untaxed and low taxed income	(2)	(3)	(3)
Disallowable expenses	8	4	(7)
Net movement on deferred tax assets not recognised	(21)	(1)	1
Effect on deferred tax of changes in tax rates	(1)	-	(6)
Income tax attributable to policyholder returns	61	86	(3)
Total tax charged/(credited) to income statement - continuing operations	41	94	(16)
Total tax charged/(credited) to income statement - discontinued operations	29	20	15
Total tax charged/(credited) to income statement	70	114	(1)

13(c) Reconciliation of income tax expense in the IFRS income statement to income tax on operating profit

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Income tax expense	41	94	(16)
Tax on non-operating adjusting items
Goodwill impairment and impact of acquisition accounting	8	8	10
Profit on the acquisition of subsidiaries, associates and strategic investments	-	-	1
Policyholder tax adjustment on non-operating items	17	(8)	12
Other shareholder tax on non-operating items	(26)	(1)	(4)
Business transformation costs	14	20	19
Managed separation costs	4	2	-
Group debt costs and other interest	8	7	7
Voluntary customer remediation provision	14	-	-
Total tax on non-operating adjusting items	39	28	45
Tax attributable to policyholders returns	(66)	(94)	(5)
Tax charged on operating profit - continuing operations	14	28	24
Tax charged on operating profit - discontinued operations	29	20	15
Tax charged on operating profit	43	48	39

For the year ended 31 December 2017

14: Earnings and earnings per share

The Group calculates earnings per share (EPS) on a number of different bases as appropriate to prevailing international, UK and South African practices and guidance. IFRS requires the calculation of basic and diluted EPS. Operating EPS reflects earnings per share that is consistent with the Group's alternative profit measure. JSE Limited (JSE) listing requirements also require the Group to calculate headline EPS. The Group's EPS on these different bases are summarised below.

Earnings per share is disclosed as required by IAS33 'Earnings per Share'. The ultimate share structure will change on initial public offering and, consequently, earnings per share for historical periods is not representative of the Group's future structure.

					Pence
	Source of guidance	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Basic earnings per share	IFRS	14(a)	120.8	26.9	65.4
Diluted basic earnings per share	IFRS	14(b)	120.8	26.9	65.4
Operating earnings per share	Group policy	14(c)	150.0	114.6	151.5
Headline earning per share (Net of tax)	JSE Listing Requirements	14(d)	69.2	26.9	82.3
Diluted headline earning per share (Net of tax)	JSE Listing Requirements	14(d)	69.2	26.9	82.3

14(a) Basic earnings per share

(i) The profit attributable to ordinary shareholders is:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
(Loss)/Profit for the financial year attributable to shareholders' of the Parent Company from continuing operations	(46)	(27)	57
Profit for the financial year attributable to shareholders' of the Parent Company from discontinued operations	203	62	28
Profit for the financial year attributable to shareholders' of the Parent Company	157	35	85
Profit for the calculation of earnings per share	157	35	85

The table below summarises the calculation of the weighted average number of ordinary shares for the purposes of calculating basic earnings per share:

			Millions
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Weighted average number of ordinary shares in issue	130	130	130
Adjusted weighted average number of ordinary shares used to calculate basic earnings per share	130	130	130
Basic earnings per ordinary share (pence)	120.8	26.9	65.4

Basic earnings per share is calculated by dividing the profit for the financial year attributable to ordinary equity shareholders of the parent by the weighted average number of ordinary shares in issue during the year excluding shares held within employee benefit trusts. Shares held within joint shares ownership plans (JSOP) have been excluded within the calculation of the number of shares as they are passed back to the Parent Company when the scheme vests. Although the weighted average number of shares has been adjusted for the JSOP shares, the time weighted calculation has reduced this impact to an insignificant amount within the above table.

For the year ended 31 December 2017

14: Earnings and earnings per share continued

14(b) Diluted earnings per share

Diluted earnings per share recognises the dilutive impact of shares and options held in trusts, to the extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full year. The table below reconciles the profit attributable to ordinary equity holders to diluted profit attributable to ordinary equity holders and summarises the calculation of weighted average number of shares for the purpose of calculating diluted earnings per share:

				£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Profit attributable to ordinary equity holders (£m)		157	35	85
Diluted profit attributable to ordinary equity holders (£m)		157	35	85
Weighted average number of ordinary shares (millions)	14(a)	130	130	130
Weighted average number of ordinary shares used to calculate diluted earnings per share (millions)		130	130	130
Diluted earnings per ordinary share (pence)		120.8	26.9	65.4

14(c) Operating earnings per share

The following table presents a reconciliation of profit for the financial year to operating profit after tax attributable to ordinary equity holders and summarises the calculation of operating earnings per share:

		+		£m
	Notes	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Profit for the financial year attributable to shareholders' of the Parent Company		157	35	85
Adjusting items	7	263	212	173
Income tax expense on adjusting items	13(c)	(39)	(28)	(45)
Profit after tax from discontinued operations	5(d)	(203)	(62)	(28)
Less policyholder tax adjustments on non-operating items	5(d)	17	(8)	12
Operating profit after tax attributable to ordinary shareholders' (£m)		195	149	197
Adjusted weighted average number of ordinary shares used to calculate adjusted operating earnings per share (millions)	14(a)	130	130	130
Operating earnings per share (pence)		150.0	114.6	151.5

14(d) Headline earnings per share

The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2015 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa.

The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic HEPS:

	+	+				£m
		Year ended 31 December 2017		Year ended 31 December 2016		Year ended 31 December 2015
	Gross	Net of tax	Gross	Net of tax	Gross	Net of tax
Profit for the financial year attributable to shareholders' of the Parent Company Adjusting items		157		35		85
(Profit)/Loss on acquisitions and disposals of subsidiaries	(83)	(67)	-	-	28	22
Headline earnings	(83)	90	-	35	28	107
Diluted headline earnings		90		35		107
Weighted average number of ordinary shares (millions)		130		130		130
Diluted weighted average number of ordinary shares (millions)		130		130		130
Headline earnings per share (pence)		69.2		26.9		82.3
Adjusted headline earnings per share (pence)		69.2		26.9		82.3

For the year ended 31 December 2017

15: Dividends

This note analyses the total dividends and other appropriations paid during the year. The final dividend to shareholders is recognised as a liability when approved at the Annual General Meeting.

				£m
	Payment date	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Ordinary dividends declared and charged to equity in the year
2015 Interim dividend paid – 18.46p per ordinary share	21 December 2015	-	-	24
2017 Special dividend paid – 161.47p per ordinary share	9 January 2017	210	-	-
Dividends to ordinary shareholders		210	-	24

The total dividend paid to ordinary shareholders is calculated using the number of shares in issue at the record date less own shares held in certain Employee Benefit Trusts.

16: Total other comprehensive income

				£m
For the year ended 31 December 2017	Other reserves	Foreign currency translation reserve	Retained earnings	Total shareholders' equity
Other movements	-	-	3	3
Total Other comprehensive income/(expense) for the year	-	-	3	3
				£m
For the year ended 31 December 2016	Other reserves	Foreign currency translation reserve	Retained earnings	Total shareholders' equity
Fair value gains
Measurement gains on defined benefit plans	-	-	(1)	(1)
Currency translation differences on translating foreign operations	(1)	3	21	23
Other movements	1	-	(3)	(2)
Total Other comprehensive income/(expense) for the year	-	3	17	20
				£m
For the year ended 31 December 2015	Other reserves	Foreign currency translation reserve	Retained earnings	Total shareholders' equity
Fair value gains
Measurement gains on defined benefit plans	-	-	(1)	(1)
Currency translation differences on translating foreign operations	-	-	(8)	(8)
Total Other comprehensive income/(expense) for the year	-	-	(9)	(9)

For the year ended 31 December 2017

17: Goodwill and intangible assets

17(a): Analysis of goodwill and intangible assets

The table below shows the movements in cost, amortisation and impairment of goodwill and intangible assets for the years ended 31 December 2017, 31 December 2016 and 31 December 2015.

				£m
	Goodwill	Software development costs	Other intangible assets	Total
Gross amount
At 1 January 2015	62	81	41	184
Acquisitions through business combinations1	299	-	291	590
Additions	-	6	-	6
Disposals or retirements	-	(2)	-	(2)
Foreign exchange and other movements	-	1	-	1
At 31 December 2015	361	86	332	779
Acquisitions through business combinations2	12	-	6	18
Additions	-	3	7	10
Foreign exchange and other movements	-	5	5	10
At 31 December 2016	373	94	350	817
Acquisitions through business combinations3	15	-	27	42
Additions	-	2	-	2
Transfer to non-current assets held for sale4	(82)	(2)	(3)	(87)
Foreign exchange and other movements	-	7	(7)	-
At 31 December 2017	306	101	367	774
Amortisation and impairment losses
At 1 January 2015	-	(76)	(2)	(78)
Amortisation charge for the year	-	(4)	(31)	(35)
Foreign exchange and other movements	-	3	1	4
At 31 December 2015	-	(77)	(32)	(109)
Amortisation charge for the year	-	(4)	(36)	(40)
Foreign exchange and other movements	-	(9)	(5)	(14)
At 31 December 2016	-	(90)	(73)	(163)
Acquisitions through business combinations	-	-	(2)	(2)
Amortisation charge for the year	-	(2)	(39)	(41)
Disposals or retirements	-	-	2	2
Transfer to non-current assets held for sale	-	2	3	5
Foreign exchange and other movements	-	-	(1)	(1)
At 31 December 2017	-	(90)	(110)	(200)
Carrying amount
At 31 December 2015	361	9	300	670
At 31 December 2016	373	4	277	654
At 31 December 2017	306	11	257	574

¹ Goodwill acquired through business combinations for the year ended 31 December 2015 of £299 million relates to the acquisition of Quilter Cheviot Limited £292 million and the completion of the acquisitions of Intrinsic Financial Services Limited £7 million.

The net carrying amount of intangible assets at year-end principally comprises:

• £195 million (2016: £223 million, 2015: £249 million) relating to distribution channels in the Quilter Cheviot business (to be amortised over a further 7 years).
• £24 million (2016: £30 million, 2015: £35 million) relating to mutual fund and asset management relationship assets in the Intrinsic business (to be amortised over a further 5 years).
• £7 million (2016: £10 million, 2015: £13 million) relating to the Quilter Cheviot brand (to be amortised over a further 2 years).
• £3 million (2016: £3 million) relating to the acquisition of OMWPCA business (to be amortised over a further 8 years).
• £3 million (2016: £3 million) relating to the acquisition of AAM Advisory Pte Ltd (to be amortised over a further 8 years).
• £10 million relating to customer distribution channels of Caerus Capital Group Limited (to be amortised over a further 8 years).
• £10 million relating to customer relationships of the PCA business (to be amortised over 6 years).
• £7 million relating to customer relationships of Attivo Investment Management Limited (to be amortised over 6 years).

² Goodwill acquired through business combinations for the year ended 31 December 2016 of £12 million relates to the acquisition of AAM Advisory Pte Ltd (£4 million) and various acquisitions by the Old Mutual Wealth Private Client Advisers business (£8 million).

³ Goodwill acquired through business combinations for the year ended 31 December 2017 of £15 million relates to the acquisition of Caerus Capital Group Limited (£10 million) and various acquisitions by the Old Mutual Wealth Private Client Advisers business (£5 million). Refer to note 5(a) for further information.

⁴ Goodwill transferred to non-current assets held for sale relates to the Single Strategy asset management business (see note 5(f).

For the year ended 31 December 2017

17: Goodwill and intangible assets continued

17(b): Allocation of goodwill to cash generating unit (CGUs) and impairment testing

Goodwill is allocated to the Group's CGUs, which are contained within the following operating segments as follows:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Goodwill (net carrying amount)
Advice and Wealth Management	148	141	137
Wealth Platforms	158	153	151
Discontinued Operations	-	79	73
Goodwill (as per the Statement of Financial Position)	306	373	361
Goodwill Held for Sale	82	-	-
Total goodwill	388	373	361

Goodwill in all business units is tested for impairment by comparing the carrying value of the cash generating unit to which the goodwill relates, to the recoverable value of that cash generating unit (CGU). In accordance with the requirements of IAS 36 'Impairment of Assets', goodwill is tested annually for impairment for each CGU, by comparing the carrying amount of each CGU to its recoverable amount, being the higher of that CGU's value-in-use or fair value less costs to sell. An impairment charge is recognised when the recoverable amount is less than the carrying value.

The cash flows attributable to the value of new business are determined with reference to latest approved three-year business plans. The threeyear business plan takes into account the management strategy for the underlying businesses, the capital available for deployment, the underlying macro-economic factors which impact the business and the region in which it operates as well as socio-economic factors. Projections beyond the plan period are extrapolated using an inflation based growth assumption.

The value-in-use calculations for life assurance operations are determined as the sum of net tangible assets, the expected future profits arising from the in-force business (after allowing for the cost of capital needed to support the business) and the expected profits from future new business. In determining the expected future profits, the same set of best estimate assumptions for persistency, expense, mortality and morbidity are used as per the Solvency II calculation. The market share and market growth information are also used to inform the expected volumes of future new business.

The cash flows that have been used to determine the value in use of the cash generating units are based on the three year business plans. These cash flows grow at different rates because of the different strategies of the cash generating units. In cases where the cash generating units have made significant acquisitions in the recent past, the profits are forecast to grow faster than the more mature businesses. Post the three year growth forecast, the growth rate used to determine the terminal value of the cash generating units approximates the long-term growth rate of the countries in which it operates.

The Group's CGUs generate revenues through their life assurance, asset management, long-term savings and advisery businesses. Goodwill is allocated to the Group's CGUs, which are contained within its distinct operating segments. On disposals of businesses, goodwill is allocated to them based on the relative value in use of the business from calculations used within the impairment reviews.

The pre-tax discount rate used for goodwill impairment testing, which reflect specific risks relating to the CGU at the date of evaluation and weighted average growth rate used in 2017 for the cash generating units within each operating segment are shown below. The growth rates include improvements in trade performance, where these are forecast in the three year operational plan for the CGU.

• Growth rate the rate used was 10% (2016: 14%), (2015: 5.0%) for the three year business plan period and the expected inflation rate for the period beyond this.
• Discount rate the rate applied was 9.4% (2016:8.7%), (2015: 9.0%) and used the relevant 10-year government bond rate as a starting point, which was adjusted for an equity market risk premium and other relevant risk adjustments, which were determined using market valuation models and other observable references.

The directors are satisfied that a reasonable change in assumptions would not cause the recoverable amount of the goodwill to fall below the carrying amount.

For the year ended 31 December 2017

18: Property, plant and equipment

The following table analyses property, plant and equipment.

			£m
	Leasehold improvements	Plant and equipment	Total
Cost
At 1 January 2015	-	59	59
Additions	-	5	5
Additions from business combinations	9	11	20
Disposals	-	(2)	(2)
At 31 December 2015	9	73	82
Additions	1	3	4
Additions from business combinations	-	1	1
Disposals	-	(6)	(6)
Foreign exchange and other movements	2	4	6
At 31 December 2016	12	73	85
Additions	1	7	8
Additions from business combinations	-	3	3
Disposals	-	(4)	(4)
Foreign exchange and other movements	-	(2)	(2)
At 31 December 2017	13	75	88
Accumulated depreciation and impairment
At 1 January 2015	-	(45)	(45)
Depreciation charge for the year	(1)	(6)	(7)
Disposals	-	2	2
Foreign exchange and other movements	(3)	(10)	(13)
At 31 December 2015	(4)	(59)	(63)
Depreciation charge for the year	(1)	(6)	(7)
Disposals	-	4	4
Foreign exchange and other movements	1	(4)	(3)
At 31 December 2016	(4)	(63)	(67)
Depreciation charge for the year	(1)	(7)	(8)
Disposals	-	4	4
Foreign exchange and other movements	(2)	1	(1)
At 31 December 2017	(7)	(63)	(70)
Carrying amount
At 31 December 2015	5	14	19
At 31 December 2016	8	10	18
At 31 December 2017	6	12	18

For the year ended 31 December 2017

19: Loans and advances

This note analyses the loans our Group companies have made.

(a) Carrying amounts

The carrying amounts of loans and advances were as follows:

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Loans to policyholders	181	205	181
Loans to brokers and other loans to clients	19	15	9
Gross loans and advances	200	220	190
Provision for impairments	(1)	-	-
Total net loans and advances	199	220	190

The carrying amount of loans approximates to their fair value which is measured as the principal amounts receivable under the loan agreements.

Policyholder loans are taken from an individual policyholder's transaction account and loaned to the specific policyholder and are therefore considered risk free. Policyholder loans are interest free.

All loans, except broker loans which have a set repayment schedule, are repayable on demand. All broker loans and other loans to clients earn interest at a rate of between annual LIBOR plus 0.5% and 10%. There have been no non-performing loans, loans subject to renegotiations or material impairments on loans and advances recognised in the financial year.

The provision for impairments is a specific impairment relating to a financial advisor that is not expected to be recovered.

20: Financial investments

The table below analyses the investments and securities that the Group invests in, either for its own proprietary behalf (shareholder funds) or on behalf of third parties (policyholder funds).

				£m
		At	At	At
		31 December	31 December	31 December
	Notes	2017	2016	2015
Government and government-guaranteed securities		2,427	905	1,330
Other debt securities, preference shares and debentures		2,401	1,983	1,328
Listed		2,220	1,779	1,150
Unlisted		181	204	178
Equity securities		12,554	8,625	6,247
Listed		11,448	8,192	5,934
Unlisted		1,106	433	313
Pooled investments		46,455	46,888	40,335
Listed		16,867	14,848	13,479
Unlisted		29,588	32,040	26,856
Short-term funds and securities treated as investments		15	23	22
Other		396	-	32
Total financial investments		64,248	58,424	49,294
Less: financial investments classified as held for sale	5(g)	-	(6,189)	-
Total financial investments net of held for sale		64,248	52,235	49,294
To be recovered within 12 months		64,072	52,127	49,109
To be recovered after 12 months		176	108	185
		64,248	52,235	49,294

The financial investments contractual maturity profile is based on the intention with which the financial assets are held. These assets, together with the reinsurers' share of investment contract liabilities, are held to cover the liabilities for linked investment contracts (net of reinsurance).

20(a) Debt instruments and similar securities

All debt instruments and similar securities are neither past due nor impaired and are analysed in the table below. These debt instruments and similar securities are classified according to their local credit rating (Standard & Poor's or an equivalent), by investment grade.

Further information of the credit rating of debt instruments and similar securities is analysed in the table in note 42(c) Capital and financial risk management.

20(b) Equity securities

Equity securities are held to cover the liabilities for linked investment contracts. The majority of the listed securities are traded on the London Stock Exchange.

The Group's holdings of unlisted equity securities arise principally from private equity investments.

For the year ended 31 December 2017

21: Derivative financial instruments – assets and liabilities

The Group has limited involvement with derivative instruments and does not use them for speculation purposes. Derivative instruments are used to manage well-defined foreign exchange risks arising out of the normal course of business. The Group enters into forward foreign exchange contracts to reduce currency risk on accounts receivable and future revenues denominated in United States dollars. The Group does not anticipate any material adverse effect on its financial position resulting from its involvement in these types of contracts, nor does it anticipate non-performance by counterparties. The Group only deals with highly rated counterparties.

All derivatives included within the statement of financial position relate to instruments included as a consequence of the consolidation of investment funds. This can be seen within the segmented statement of financial position (note 6(c)).

	£m
Derivatives included through consolidation of funds	Assets	Liabilities
As at 31 December 2017	87	(433)
As at 31 December 2016	26	(56)
As at 31 December 2015	971	(978)

22: Categories of financial instruments

The analysis of assets and liabilities into their categories as defined in IAS 39 'Financial Instruments: Recognition and Measurement' is set out in the following tables. Assets and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of IAS 39, are reflected in the non-financial assets and liabilities category.

All gains and losses on measuring the financial assets and liabilities at each reporting date are included in the determination of profit or loss for the year.

For information about the methods and assumptions used in determining fair value please refer to note 23. The Group's exposure to various risks associated with financial instruments is discussed in note 42(c).

At 31 December 2017

						£m
Measurement basis		Fair value	Amortised cost
	Held for trading	Designated at fair value through the profit or loss	Loans and receivables	Financial liabilities amortised cost	Non financial assets and liabilities	Total
Assets
Investments in associated undertakings and joint ventures1	-	-	-	-	3	3
Reinsurers' share of policyholder liabilities	-	2,525	-	-	383	2,908
Loans and advances	-	180	19	-	-	199
Financial investments	-	64,248	-	-	-	64,248
Trade, other receivables and other assets	-	-	154	-	343	497
Derivative financial instruments	87	-	-	-	-	87
Cash and cash equivalents	-	-	2,360	-	-	2,360
Total assets that include financial instruments	87	66,953	2,533	-	729	70,302
Total other non-financial assets	-	-	-	-	1,225	1,225
Total assets net of held for sale	87	66,953	2,533	-	1,954	71,527
Total assets classified as held for sale	-	-	147	-	299	446
Total assets	87	66,953	2,680	-	2,253	71,973
Liabilities
Long-term business insurance policyholder liabilities	-	-	-	-	489	489
Investment contract liabilities	-	59,139	-	-	-	59,139
Third-party interest in consolidation of funds	-	7,905	-	-	-	7,905
Borrowings	-	-	-	782	-	782
Trade, other payables and other liabilities	-	-	-	505	826	1,331
Derivative financial instruments	433	-	-	-	-	433
Total liabilities that include financial instruments	433	67,044	-	1,287	1,315	70,079
Total other non-financial liabilities	-	-	-	-	576	576
Total liabilities net of held for sale	433	67,044	-	1,287	1,891	70,655
Total liabilities classified as held for sale	-	-	-	-	219	219
Total liabilities	433	67,044	-	1,287	2,110	70,874

¹ Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.

For the year ended 31 December 2017

22: Categories of financial instruments continued

At 31 December 2016

Measurement basis		Fair value	Amortised cost			£m
	Held for	Designated at fair value through the	Loans and	Financial liabilities amortised	Non-financial assets and
Assets	trading	profit or loss	receivables	cost	liabilities	Total
Investments in associated undertakings and joint ventures1	-	-	-	-	1	1
Reinsurers' share of policyholder liabilities	-	2,560	-	-	303	2,863
Loans and advances	-	206	3	-	11	220
Financial investments	-	52,235	-	-	-	52,235
Trade, other receivables and other assets	-	-	181	-	613	794
Derivative financial instruments	26	-	-	-	-	26
Cash and cash equivalents	-	-	1,595	-	-	1,595
Total assets that include financial instruments	26	55,001	1,779	-	928	57,734
Total other non-financial assets	-	-	-	-	1,355	1,355
Total assets net of held for sale	26	55,001	1,779	-	2,283	59,089
Total assets classified as held for sale	-	6,189	14	-	193	6,396
Total assets	26	61,190	1,793	-	2,476	65,485
Liabilities
Long-term business insurance policyholder liabilities	-	-	-	-	417	417
Investment contract liabilities	-	51,265	-	-	-	51,265
Third-party interest in consolidation of funds	-	4,140	-	-	-	4,140
Borrowings	-	-	-	839	-	839
Trade, other payables and other liabilities	-	-	-	167	857	1,024
Derivative financial instruments	56	-	-	-	-	56
Total liabilities that include financial instruments	56	55,405	-	1,006	1,274	57,741
Total other non-financial liabilities	-	-	-	-	489	489
Total liabilities net of held for sale	56	55,405	-	1,006	1,763	58,230
Total liabilities classified as held for sale	-	6,155	-	-	108	6,263
Total liabilities	56	61,560	-	1,006	1,871	64,493

¹ Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.

For the year ended 31 December 2017

22: Categories of financial instruments continued

At 31 December 2015

Measurement basis		Fair value	Amortised cost			£m
	Held for trading	Designated at fair value through the profit or loss	Loans and receivables	Financial liabilities amortised cost	Non-financial assets and liabilities	Total
Assets
Investments in associated undertakings and joint ventures1	-	-	-	-	1	1
Reinsurers' share of policyholder liabilities	-	2,328	-	-	179	2,507
Loans and advances	-	181	9	-	-	190
Financial investments	-	49,294	-	-	-	49,294
Trade, other receivables and other assets	-	-	129	-	587	716
Derivative financial instruments	971	-	-	-	-	971
Cash and cash equivalents	-	-	1,601	-	-	1,601
Total assets that include financial instruments	971	51,803	1,739	-	767	55,280
Total other non-financial assets	-	-	-	-	1,492	1,492
Total assets net of held for sale	971	51,803	1,739	-	2,259	56,772
Total assets classified as held for sale	-	-	-	-	-	-
Total assets	971	51,803	1,739	-	2,259	56,772
Liabilities
Long-term business insurance policyholder liabilities	-	-	-	-	293	293
Investment contract liabilities	-	49,041	-	-	-	49,041
Third-party interest in consolidation of funds	-	3,311	-	-	-	3,311
Borrowings	-	-	-	786	-	786
Trade, other payables and other liabilities	-	-	-	112	826	938
Derivative financial instruments	978	-	-	-	-	978
Total liabilities that include financial instruments	978	52,352	-	898	1,119	55,347
Total other non-financial liabilities	-	-	-	-	512	512
Total liabilities net of held for sale Total liabilities classified as held for sale	978 -	52,352 -	- -	898 -	1,631 -	55,859 -
Total liabilities	978	52,352	-	898	1,631	55,859

¹ Investments in associated undertakings and joint ventures classified as non-financial assets and liabilities are equity accounted.

For the year ended 31 December 2017

23: Fair value methodology

This section explains the judgements and estimates made in determining the fair values of financial instruments that are recognised and measured at fair value in the financial statements. Classifying financial instruments into the three levels below, prescribed under the accounting standards, provides an indication about the reliability of inputs used in determining fair value.

23(a) Determination of fair value

The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market exit prices for assets and offer prices for liabilities, at the close of business on the reporting date, without any deduction for transaction costs.

• For units in unit trusts and shares in open ended investment companies, fair value is determined by reference to published quoted prices representing exit values in an active market.
• For equity and debt securities not actively traded in organised markets and where the price cannot be retrieved, the fair value is determined by reference to similar instruments for which market observable prices exist.
• For assets that have been suspended from trading on an active market, the last published price is used. Many suspended assets are still regularly priced. At the reporting date all suspended assets are assessed for impairment.
• Where the assets are private company shares the valuation is based on the latest available set of audited financial statements where available, or if more recent, a statement of valuation provided by the private company's management.

There have been no significant changes in the valuation techniques applied when valuing financial instruments. The general principles applied to those instruments measured at fair value are outlined below:

Reinsurers' share of policyholder liabilities

Reinsurers' share of policyholder liabilities are measured on a basis that is consistent with the measurement of the provisions held in respect of the related insurance contracts. Reinsurance contracts which cover financial risk are measured at fair value of the underlying assets.

Loans and advances

Loans and advances include loans to policyholders, loans to brokers, and other secured and unsecured loans. Loans and advances to policyholders of investment linked contracts are measured at fair value. All other loans are stated at their amortised cost.

Financial investments

Financial investments include government and government-guaranteed securities, listed and unlisted debt securities, preference shares and debentures, listed and unlisted equity securities, listed and unlisted pooled investments (see below), short-term funds and securities treated as investments and certain other securities.

Pooled investments represent the Group's holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and similar investment vehicles. Pooled investments are recognised at fair value. The fair values of pooled investments are based on widely published prices that are regularly updated.

Other financial investments that are measured at fair value are measured at observable market prices where available. In the absence of observable market prices, these investments and securities are fair valued utilising one or more of the following techniques: discounted cash flows, the application of an EBITDA multiple or any other relevant technique.

Derivatives

The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. In situations where the derivatives are traded over the counter the fair value of the instruments is determined by the utilisation of option pricing models.

Investment contract liabilities

The fair value of the investment contract liabilities is determined with reference to the underlying funds that are held by the Group.

Third-party interest in consolidation of funds

Third-party interests in consolidation of funds are measured at the attributable net asset value of each fund.

Borrowed funds

Borrowed funds are stated at amortised cost.

For the year ended 31 December 2017

23: Fair value methodology continued

23(b) Fair value hierarchy

Fair values are determined according to the following hierarchy.

Description of hierarchy	Types of instruments classified in the respective levels
Level 1 – quoted market prices: financial assets and liabilities with quoted prices for identical instruments in active markets.	Listed equity securities, government securities and other listed debt securities and similar instruments that are actively traded, actively traded pooled investments, certain quoted derivative assets and liabilities, reinsurers' share of investment contract liabilities and investment contract liabilities directly linked to other Level 1 financial assets.
Level 2 – valuation techniques using observable inputs: financial assets and liabilities with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial assets and liabilities valued using models where all significant inputs are observable.	Unlisted equity and debt securities where the valuation is based on models involving no significant unobservable data. OTC derivatives, certain privately placed debt instruments and third party interests in consolidated funds.
Level 3 – valuation techniques using significant unobservable inputs: financial assets and liabilities valued using valuation techniques where one or more significant inputs are unobservable.	Unlisted equity and securities with significant unobservable inputs, securities where the market is not considered sufficiently active, including certain inactive pooled investments.

The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional work during the valuation process.

The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain financial assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and, for them, the derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable inputs if a significant proportion of that asset or liability's carrying amount is driven by unobservable inputs.

In this context, 'unobservable' means that there is little or no current market data available for which to determine the price at which an arm's length transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be attributable to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty about the overall fair value of the asset or liability being measured.

23(c) Transfer between fair value hierarchies

The Group deems a transfer to have occurred between Level 1 and Level 2 or Level 3 when an active, traded primary market ceases to exist for that financial instrument. A transfer between Level 2 and Level 3 occurs when the majority of the significant inputs used to determine fair value of the instrument become unobservable.

23(d) Financial assets and liabilities measured at fair value, classified according to fair value hierarchy

The tables below presents a summary of the Group's financial assets and liabilities that are measured at fair value in the consolidated statement of financial position according to their IAS 39 classification, as set out in the accounting policies note 4.11 and in terms of the fair value hierarchy described in note 4.2. The majority of the Group's financial assets are measured utilising quoted market prices for identical instruments in active markets (Level 1) and there has been no significant change compared to the prior year.

The assets, together with the reinsurers' share of investment contract liabilities, are held to cover the liabilities for linked investment contracts (net of reinsurance). The difference between linked assets and linked liabilities is principally due to short term timing differences between policyholder premiums being received and invested in advance of policies being issued, and tax liabilities within funds which are reflected within the Group's tax liabilities.

		At 31 December 2017		At 31 December 2016		At 31 December 2015
	£m	%	£m	%	£m	%
Financial assets measured at fair value
Level 1	57,945	86.4%	49,775	90.5%	46,556	88.2%
Level 2	7,928	11.8%	4,671	8.5%	5,716	10.8%
Level 3	1,167	1.7%	581	1.1%	502	1.0%
Total	67,040	100.0%	55,027	100.0%	52,774	100.0%
Financial liabilities measured at fair value
Level 1	57,399	85.1%	50,206	90.5%	47,508	89.1%
Level 2	8,911	13.2%	4,674	8.4%	5,320	10.0%
Level 3	1,167	1.7%	581	1.1%	502	0.9%
Total	67,477	100.0%	55,461	100.0%	53,330	100.0%

For the year ended 31 December 2017

23: Fair value methodology continued

				£m
At 31 December 2017	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	-	87	-	87
Derivative assets	-	87	-	87
Designated (fair value through profit or loss)	57,945	7,841	1,167	66,953
Reinsurers' share of policyholder liabilities	2,525	-	-	2,525
Loans and advances	180	-	-	180
Financial investments	55,240	7,841	1,167	64,248
Total assets measured at fair value	57,945	7,928	1,167	67,040
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	-	433	-	433
Derivative financial instruments – liabilities	-	433	-	433
Designated (fair value through profit or loss)	57,399	8,478	1,167	67,044
Investment contract liabilities	57,399	573	1,167	59,139
Third-party interests in consolidated funds	-	7,905	-	7,905
Total liabilities measured at fair value	57,399	8,911	1,167	67,477
				£m
At 31 December 2016	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	-	26	-	26
Derivative assets	-	26	-	26
Designated (fair value through profit or loss)	49,775	4,645	581	55,001
Reinsurers' share of policyholder liabilities	2,560	-	-	2,560
Loans and advances	206	-	-	206
Financial investments	47,009	4,645	581	52,235
Total assets measured at fair value	49,775	4,671	581	55,027
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	1	55	-	56
Derivative financial instruments – liabilities	1	55	-	56
Designated (fair value through profit or loss)	50,205	4,619	581	55,405
Investment contract liabilities	50,205	479	581	51,265
Third-party interests in consolidated funds	-	4,140	-	4,140

For the year ended 31 December 2017

23: Fair value methodology continued

				£m
At 31 December 2015	Level 1	Level 2	Level 3	Total
Financial assets measured at fair value
Held-for-trading (fair value through profit or loss)	-	971	-	971
Derivative assets	-	971	-	971
Designated (fair value through profit or loss)	46,556	4,745	502	51,803
Reinsurers' share of policyholder liabilities	2,328	-	-	2,328
Loans and advances	181	-	-	181
Financial investments	44,047	4,745	502	49,294
Total assets measured at fair value	46,556	5,716	502	52,774
Financial liabilities measured at fair value
Held-for-trading (fair value through profit or loss)	-	978	-	978
Derivative financial instruments – liabilities	-	978	-	978
Designated (fair value through profit or loss)	47,508	4,342	502	52,352
Investment contract liabilities	47,508	1,031	502	49,041
Third-party interests in consolidated funds	-	3,311	-	3,311
Total liabilities measured at fair value	47,508	5,320	502	53,330

23(e) Level 3 fair value hierarchy disclosure

All of the assets that are classified as Level 3 are held within linked policyholder funds. This means that all of the investment risk associated with these assets is borne by policyholders and that the value of these assets is exactly matched by a corresponding liability due to policyholders. The Group bears no risk from a change in the market value of these assets except to the extent that it has an impact on management fees earned.

The table below reconciles the opening balances of Level 3 financial assets (and liabilities) to closing balances at the end of the period:

		£m
	At	At	At
	31 December 2017	31 December 2016	31 December 2015
At beginning of the year	581	502	694
Total net fair value gains recognised in: - profit or loss	(23)	13	(92)
Purchases	618	21	96
Sales	(23)	(115)	(193)
Transfers in	167	188	52
Transfers out	(152)	(31)	(55)
Foreign exchange and other	1	3	-
Total level 3 financial assets/liabilities	1,169	581	502

Amounts shown as sales and settlements arise principally from the sale of private company shares and unlisted pooled investments and from distributions received in respect of holdings in property funds.

Transfers into Level 3 assets for the current period comprise £167 million (2016: £188 million), (2015: £52 million) of private company shares that were previously shown within Level 2 and for which price updates have not been received for more than six months. Transfers out of Level 3 assets in the current period comprise £152 million (2016: £31 million), (2015: £55 million) of private company shares that were not being repriced and that have been transferred into Level 2 as they are now actively priced.

			£m
	At 31 December 2017	At 31 December 2016	At 31 December 2015
Pooled investments	187	229	191
Unlisted and stale price pooled investments	186	216	190
Suspended funds	1	13	1
Private equity investments	982	352	311
	1,169	581	502

For the year ended 31 December 2017

23: Fair value methodology continued

23(f) Effect of changes in significant unobservable assumptions to reasonable possible alternatives

Favourable and unfavourable changes are determined on the basis of changes in the value of the financial asset or liability as a result of varying the levels of the unobservable parameters using statistical techniques. When parameters are not amenable to statistical analysis, quantification of uncertainty is judgemental.

When the fair value of a financial asset or liability is affected by more than one unobservable assumption, the figures shown reflect the most favourable or most unfavourable change from varying the assumptions individually.

The valuations of the private equity investments are performed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment and in line with industry guidelines. Private equity investments are valued at the value disclosed in the latest available set of audited financial statements or if more recent information is available from investment managers or professional valuation experts at the value of the underlying assets of the private equity investment.

Details of the valuation techniques applied to the different categories of financial instruments can be found in note 23(a) above.

Management believe that in aggregate, 10% (2016 and 2015: 10%) change in the value of the financial asset or liability represents a reasonable possible alternative judgement in the context of the current macro-economic environment in which the Group operates. It is therefore considered that the impact of alternative assumptions will be in the range of £117 million, both favourable and unfavourable (2016: £51 million; 2015: £70 million). As described in note 23(e) above, changes in the value of level 3 assets are exactly matched by corresponding changes in the value of liabilities due to policyholders and therefore have no impact on the Group's profit or loss or net asset value.

23(g): Fair value hierarchy for assets and liabilities not measured at fair value

All of the Group's financial instruments are carried at fair value except for certain amounts included within 'Trade, other receivables, and other assets' and 'Trade, other payables, and other liabilities'. The carrying values of these are considered reasonable approximations of their respective fair values, as they are either short term in nature or are repriced to current market rates at frequent intervals. These instruments would be classified as Level 3 in terms of the fair value hierarchy.

24: Structured entities

24(a) Group's involvement in structured entities

Some investment vehicles are classified as structured entities because they have a narrow and well defined purpose. The table below summarises the types of structured entities the Group has an interest in. These entities are not consolidated where the Group determines that it does not have control.

Type of structured entity	Nature	Purpose	Interest held by the Group
 Investments in collective investment vehicles	 Manage shareholder funds through the investment in assets	 Generate fees from managing company assets	 Investment in units issued by the vehicles
 Investments held for the benefit of policyholders	 Manage client funds through the investment in assets	 Generate fees from managing assets on behalf of third-party investors	 Investments in units issued by the fund

The Group's holdings in investment vehicles are subject to the terms and conditions of the respective investment vehicle's offering documentation and are susceptible to market price risk arising from uncertainties about future values of those investment vehicles. All of the investment vehicles in the investment portfolios are managed by portfolio managers who are compensated by the respective investment vehicles for their services. Such compensation generally consists of an asset-based fee and a performance based incentive fee, and is reflected in the valuation of the investment vehicles.

24(b) Interests in unconsolidated structured entities

The Group invests in unconsolidated structured entities as part of its normal investment and trading activities. The Group's total interest in unconsolidated structured entities is classified as investments and securities held at fair value through profit or loss. The Group does not sponsor any of the unconsolidated structured entities. The table below provides a summary of the carrying value of the Group's interest in unconsolidated structured entities:

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Pooled investments
Listed - non-managed funds	885	826	605
Unlisted - managed funds	2,564	2,382	3,203
Unlisted - non-managed funds	40,811	37,732	37,798
	44,260	40,940	41,606

The Group's maximum exposure to loss with regard to the interests presented above is the carrying amount of the Group's investments. Once the Group has disposed of its shares or units in a fund, it ceases to be exposed to any risk from that fund. The Group's holdings in the above unconsolidated structured entities are largely less than 50% and as such the net asset value of these structured entities are likely to be significantly higher than their carrying value.

For the year ended 31 December 2017

24: Structured entities continued

24(c) Consolidation considerations for structured entities

In structured entities voting rights are not the predominant factor in deciding who controls the entity but rather it is the Group's exposure to the variability of returns from these entities. The Group acts as fund manager to a number of investment funds. Determining whether the Group controls such an investment fund usually focuses on the assessment of decision making rights as fund manager, the investor's rights to remove the fund manager and the aggregate economic interests of the Group in the fund in the form of interest held and exposure to variable returns.

In most instances the Group's decision-making authority, in its capacity as fund manager, with regard to these funds is regarded to be well-defined. Discretion is exercised when decisions regarding the relevant activities of these funds are being made. For funds managed by the Group where the investors have the right to remove the Group as fund manager without cause, the fees earned by the Group, are considered to be market related. These agreements include only terms, conditions or amounts that are customarily present in arrangements for similar services and level of skills negotiated on an arm's length basis. The Group has concluded that it acts as agent on behalf of the investors in all instances.

The Group is considered to be acting as principal where the Group is the fund manager and is able to make the investment decisions on behalf of the unit holders earn a variable fee, and there are no kick out rights that would remove the Group as fund manager.

There have been no changes in facts or circumstances which have changed the Group's conclusion on the consolidation of funds.

The Group has not provided any non-contractual support to any consolidated or unconsolidated structured entities.

Disclosure of consolidated securitisation vehicles, which are structured entities, is included in note 46.

24(d) Other interests in unconsolidated structured entities

The Group receives management fees and other fees in respect of its asset management businesses that manage investments in which the Group has no holding. These also represent interests in unconsolidated structured entities. As these investments are not held by the Group, the investment risk is borne by the external investors and therefore the Group's maximum exposure to loss relates to future management fees. The Group does not sponsor any of the funds or investment vehicles from which it receives fees.

The table below shows the assets under management of entities that the Group manages but does not have a holding in and the fees earned from those entities.

						£m
	At 31 December 2017		At 31 December 2016		At 31 December 2015
	Assets under management	Fees earned	Assets under management	Fees earned	Assets under management	Fees earned
Pooled investments
Open Ended Investment Company (OEIC)	275	6	224	3	294	5
	275	6	224	3	294	5

For the year ended 31 December 2017

25: Reinsurers' share of policyholder liabilities

This note details the reinsurance recoverables on insurance and investment contract liabilities.

25(a) Carrying amounts

The reinsurance assets at 31 December 2017 comprised:

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Reinsurers' share of policyholder liabilities
Reinsurers' share of long-term business insurance policyholder liabilities	383	303	179
Life assurance policyholder liabilities	375	290	171
Outstanding claims	8	13	8
Reinsurers' share of investment contract liabilities
Reinsurers' share of unit-linked investment contracts	2,525	2,560	2,328
Total reinsurers' share of policyholder liabilities	2,908	2,863	2,507

Of the total, £2,908 million (2016: £2,863 million), (2015: £2,507 million) is expected to be recovered in less than one year after the statement of position date.

The reinsurers' share of policyholder liabilities of £ 2,525 million (2016: £ 2,560 million), (2015: £ 2,328 million) relating to investment contracts is where the direct management of assets are ceded to a third party through a reinsurance arrangement. Due to the nature of the arrangement, there is no transfer of insurance risk.

25(b) Assumptions

The assumptions, including discount rates, used for reinsurance of policyholder liabilities follow those used for the equivalent gross policyholder liabilities. Reinsurance assets are valued net of an allowance for their recoverability.

For unit-linked business, the unit liabilities are determined as the value of units credited to policyholders. Since these liabilities are determined on a retrospective basis no assumptions for future experience are required. Assumptions for future experience are required for unit-linked business in assessing whether the total of the DAC asset and DFI liability is greater than the present value of future profits expected to arise on the relevant blocks of business (the 'recoverability test'). If this is the case, then the DAC asset is restricted to the recoverable amount. For linked contracts, the assumptions are on a best estimate basis.

25(c) Movements

Movements in the amounts outstanding in respect of reinsurers' share of unit-linked investment contracts and policyholder liabilities, other than outstanding claims, are set out below:

			£m
	At	At	At
	31 December	31 December	31 December
Unit-linked investment contracts	2017	2016	2015
Carrying amount at 1 January	2,560	2,328	2,026
Net premium income	(365)	(138)	265
Fair value movements	330	370	37
Total reinsurers' share of unit-linked investment contract liabilities	2,525	2,560	2,328

			£m
	At	At	At
	31 December	31 December	31 December
Life assurance policyholder liabilities	2017	2016	2015
Carrying amount at 1 January	290	171	131
Impact of new business	55	33	32
Impact of experience effects	23	23	14
Impact of assumption changes	7	63	(6)
	85	119	40
Total reinsurers' share of life assurance policyholder liabilities	375	290	171

The impact of assumption changes in the above analysis shows the resulting movement in the carrying value of reinsurance assets with corresponding movements in gross insurance contract liabilities. For further information on the on credit rating and maturity of reinsurer's share of policyholder liabilities see note 42(c)(i).

For the year ended 31 December 2017

26: Trade, other receivables and other assets

The note analyses total trade, other receivables and other assets.

				£m
		At	At	At
	Notes	31 December 2017	31 December 2016	31 December 2015
Debtors arising from direct insurance operations
Amounts owed by policyholders		-	-	6
Amounts owed by intermediaries		2	1	3
		2	1	9
Debtors arising from reinsurance operations		8	6	7
Outstanding settlements		216	244	161
Other receivables		414	456	380
Accrued interest		3	21	23
Prepayments and accrued income		28	27	18
Other assets		30	166	118
Total trade, other receivables and other assets		701	921	716
Less: trade, other receivables and other assets classified as held for sale	5(g)	(204)	(127)	-
Total trade, other receivables and other assets net of held for sale		497	794	716
To be settled within 12 months		469	678	581
To be settled after 12 months		28	116	135
		497	794	716

Other receivables mainly relate to fee and commission income, and income from service activities. Total other receivables of £201 million (2016: £121 million), (2015: £nil million) were transferred to held for sale during the year.

There have been no non-performing receivables or material impairments in the financial year that require disclosure. None of the receivables reflected above have been subject to the renegotiation of terms.

All amounts are current, short term and interest free with the carrying amount approximating to fair value.

27: Deferred acquisition costs

Deferred acquisition costs relate to costs that the Group incurred to obtain new business. These acquisition costs are capitalised in the statement of financial position and are amortised in profit or loss over the life of the contracts. The table below analyses the movements in deferred acquisition costs relating to insurance, investment and asset management contracts.

				£m
	Insurance contracts	Investment contracts	Asset management	Total
At 1 January 2015	27	761	41	829
New business	-	107	1	108
Amortisation	(6)	(140)	(20)	(166)
Foreign exchange and other movements	-	(3)	-	(3)
At 31 December 2015	21	725	22	768
New business	-	92	1	93
Amortisation	(4)	(138)	(14)	(156)
Foreign exchange and other movements	-	13	-	13
Transfer to non-current assets held for sale	-	(63)	-	(63)
At 31 December 2016	17	629	9	655
New business	-	79	8	87
Amortisation	(3)	(108)	(8)	(119)
Foreign exchange and other movements	-	(8)	-	(8)
Transfer to non-current assets held for sale	-	-	(4)	(4)
At 31 December 2017	14	592	5	611

For the year ended 31 December 2017

28: Statement of cash flows

This note gives further detail behind the figures in the statement of cash flows.

(a) The reconciliation of profit before tax to the net cash inflow for operating activities is:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Cash flows from operating activities
Profit before tax	227	149	84
Adjustments for non-cash movements in net profit for the year
Depreciation of property, plant and equipment	8	7	7
Amortisation and impairment of deferred acquisition costs	81	100	93
Amortisation and impairment of intangibles	41	40	35
Fair value movements on disposal of financial assets	(3,513)	(4,745)	(274)
Fair value movements in insurance and investment contract liabilities	3,703	4,895	171
Profit on sale of subsidiaries, associates and strategic investments	(83)	-	28
Change in insurance and investment contract liabilities	4,194	2,660	2,833
Reclassification interest paid to financing activities	39	43	32
Other movements	(409)	(448)	(47)
	4,061	2,552	2,878
Net changes in working capital
Decrease/(increase) in reinsurance assets	370	127	(261)
Decrease in deferred acquisition costs	(79)	(93)	(110)
Decrease/(increase) in derivatives	315	23	(12)
Decrease/(increase) in deferred revenue	14	18	(1)
Decrease/(increase) in loans and advances	23	(31)	7
Increase/(decrease) in provisions	75	(2)	(9)
Decrease in other assets	416	187	196
	1,134	229	(190)
Taxation paid	(9)	(59)	(40)
Net cash flows from operating activities	5,413	2,871	2,732
(b) Cash and cash equivalents in the statement of cash flows at 31 December comprised:
Cash and cash equivalents for the Group	1,595	1,076	892
Cash and cash equivalents in Consolidated Funds	912	533	709
Less cash and cash equivalents included in assets held for sale	(147)	(14)	-
Total net of held for sale	2,360	1,595	1,601

Except for cash and cash equivalents subject to consolidation of funds of £912 million (2016: £533 million), (2015: £709 million), management do not consider that there are any material amounts of cash and cash equivalents which are not available for use in the Group's day-to-day operations.

For the year ended 31 December 2017

29: Share capital

Share capital

Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue a variable number of own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net of tax. The Parent Company's equity capital currently comprises 130,000,257 ordinary shares of 100p each, (2016: 130,000,256), (2015: 130,000,256), of which 96% is held by its immediate parent and the ultimate parent, Old Mutual plc, with the remainder held by an employee benefit trust for the benefit of group employees as described in note 30.

This note gives details of the Parent Company's ordinary share capital and shows the movements during the year.

		£m	£m
	Number of shares	Nominal value	Share premium
At 1 January 2015	130,000,256	130	-
At 1 January 2016	130,000,256	130	-
At 1 January 2017	130,000,256	130	-
Issue of share capital	200,000,001	200	58
Reduction of share capital	(200,000,000)	(200)	-
At 31 December 2017	130,000,257	130	58

On 3 May 2017 the Parent Company issued 200 million £1 ordinary shares, for a consideration of £200 million, to its parent Old Mutual plc, and on 27 November 2017 the Parent Company carried out a share capital reduction, which cancelled the 200 million £1 ordinary shares.

On 21 December 2017, Old Mutual plc contributed £58 million to the Parent Company in exchange for the issue of 1 share.

30: Share-based payments

During the years ended 31 December 2017, 31 December 2016 and 31 December 2015, the Group participated in a number of Old Mutual plc share-based payment arrangements. This note describes the nature of the plans and how the share options and awards are valued.

The Group had the following share-based payment arrangements:

	Description of award			Contractual life	Vesting conditions
Scheme	Restricted shares	Options	Dividend entitlement	Other1	Years	Service (years)	Performance (measure)
UK Sharesave Scheme	-		-		1/2 1/2 3 - 5	3 & 5	-
UK Share Option and Deferred Delivery Plan	-			-	6	3	Target growth in EPS
UK Restricted Share Plan		-		-	3 - 5	3 & 5	-
Old Mutual plc Share Reward Plan - Share Options	-		-	-	Up to 10 years	3	-
Old Mutual plc Share Reward Plan - Restricted Shares		-		-	Not less than 3 years	-	-
Old Mutual plc Performance Share Plan - Share Options	-		-	-	Up to 10 years	3	-
Old Mutual plc Performance Share Plan - Restricted Shares		-		-	Not less than 3 years	Not less than 3 years	Target growth in EPS and ROE
Old Mutual plc 2008 Sharesave Plan	-		-		1/2 1/2 3 - 5	3 & 5	-

¹Scheme is linked to a savings plan

For the year ended 31 December 2017

30: Share-based payments continued

30(a) Reconciliation of movements in options

The movement in the options outstanding under these arrangements during the year is detailed below:

		Year ended 31 December 2017		Year ended 31 December 2016		Year ended 31 December 2015
Options over shares in Old Mutual plc (London Stock Exchange)	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding at beginning of the year	4,600,952	£1.60	4,061,293	£1.69	3,966,671	£1.51
Granted during the year	-	-	2,316,591	£1.51	1,491,938	£1.87
Forfeited during the year	(344,127)	£1.60	(1,180,443)	£1.77	(357,771)	£1.65
Exercised during the year	(1,194,526)	£1.61	(610,104)	£1.52	(1,015,432)	£1.28
Expired during the year	-	-	-	-	(1,104)	£1.63
Other transfers during the year	79,291	-	13,615	-	(23,009)	-
Outstanding at end of the year	3,141,590	£1.60	4,600,952	£1.60	4,061,293	£1.69
Exercisable at 31 December	148,449	£1.61	21,755	£1.63	88,208	£1.58

The amount outstanding at the end of the year for 2017, 2016 and 2015 includes an amount for employees who have transferred into/out of Quilter from/to other Old Mutual divisions.

The following table summarises information about options outstanding at 31 December 2017, 31 December 2016 and 31 December 2015:

Year	Range of exercise price	Outstanding options	Weighted remaining contractual life Years	Weighted average exercise price
At 31 December 2017	£1.28 to £1.87	3,141,590	1.1	£1.94
At 31 December 2016	£1.28 to £1.87	4,600,952	1.6	£1.91
At 31 December 2015	£0.94 to £1.87	4,061,293	1.8	£2.16

30(b) Measurements and assumptions

In determining the fair value of equity-settled share-based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. Specifically, management makes estimates of the likely number of shares that will vest and the fair value of each award granted which is valued and 'locked in' at the grant date.

The recognition and measurement principles in IFRS 2 - Share-based Payment have only been applied to equity settled share arrangements granted post November 2002 in accordance with the transitional provisions in IFRS 2. Any options forfeited, exercised or lapsed prior to the IFRS 2 implementation date of 1 January 2005 have not been included in the IFRS 2 valuation.

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of fair value of share options granted is measured using a Black-Scholes option pricing model.

Where share options are granted under a service and non-market based performance condition, such conditions are not taken into account in the grant date fair value measurement of the share options granted. There are no market conditions associated with the share option grants.

30(c) Forfeitable/Restricted share grants

The following summarises the fair value of restricted shares granted by the Group during the year:

Instruments granted and purchased during the year		Number granted	Weighted average fair value
UK Share Reward Plan - restricted shares	2017	-	-
	2016	2,152,628	£1.87
	2015	849,933	£2.40

The share price at measurement date was used to determine the fair value of the restricted shares. Expected dividends were not incorporated into the measurement of fair value where the holder of the restricted share is entitled to dividends throughout the vesting period.

For the year ended 31 December 2017

30: Share-based payments continued

30(d) Financial impact

The total expense recognised for the year arising from equity compensation plans was as follows:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Expense arising from equity settled share and share option plans - continuing operations	9	6	5
Expense arising from equity settled share and share option plans - discontinued operations	1	1	1
Total expense arising from equity settled and share option plans	10	7	6

30(e) Joint share ownership plan (JSOP)

During 2013, a share-based payment plan was implemented for certain key employees of Quilter. The plan is designed to reward participants for the achievement of strategic objectives, value creation and other metrics over a three year period. The shares awarded in the parent Old Mutual Wealth Management Limited when vested have the option to be called by Old Mutual plc to be converted into Old Mutual plc listed shares. The awards are accounted for as an equity settled share-based payment scheme. The cumulative amount recognised in equity for this scheme is £3,155,098 (2016: £3,548,620), (2015: £1,993,044) and an expense of £393,522 (2016: £1,555,576), (2015: £1,121,036) has been recognised in the income statement during the year.

On 22 December 2017 the employee benefit trust (EBT) which was set up for the benefit of Quilter employees, and specifically for the purposes of the JSOP, was transferred to the Group from Old Mutual plc. The EBT holds £97 million of Old Mutual Wealth Management Limited shares. As a result of this transfer, on consolidation the Group's equity will reduce by this amount (£97 million), representing the Company shares held within the trust, which are recognised as treasury shares and deducted from equity.

31: Insurance and investment contract liabilities

The following is a summary of the Group's insurance and investment contract provisions and related reinsurance assets as at 31 December 2017.

									£m
		At 31 December 2017			At 31 December 2016			At 31 December 2015
	Gross	Reinsurance	Net	Gross	Reinsurance	Net	Gross	Reinsurance	Net
Life assurance policyholder liabilities
Long-term business insurance policyholder liabilities	489	(383)	106	417	(303)	114	293	(179)	114
Life assurance policyholder liabilities	480	(375)	105	402	(290)	112	284	(171)	113
Outstanding claims	9	(8)	1	15	(13)	2	9	(8)	1
Investment contract liabilities
Unit-linked investment contracts	59,139	(2,525)	56,614	51,265	(2,560)	48,705	49,041	(2,328)	46,713
Total life assurance policyholder liabilities	59,628	(2,908)	56,720	51,682	(2,863)	48,819	49,334	(2,507)	46,827

31(a) Insurance contract liabilities (gross of reinsurance)

Movements in the amounts outstanding in respect of life assurance policyholder liabilities, other than outstanding claims, are set out below:

			£m
	At 31 December 2017	At 31 December 2016	At 31 December 2015
Carrying amount at 1 January	402	284	253
Impact of new business	42	25	24
Impact of experience effects	30	34	29
Impact of assumption changes	7	66	(10)
Currency translation loss	-	1	-
Disposal of interest in subsidiaries	-	-	(12)
Transfer to liabilities held for sale	-	(10)	-
Other movements	(1)	2	-
	78	118	31
Total insurance contract life assurance policyholder liabilities	480	402	284

For the year ended 31 December 2017

31: Insurance and investment contract liabilities continued

31(b) Assumptions – life assurance

The liabilities for non-linked contracts have been calculated using a gross premium discounted cash flow approach on a policy by policy basis, using the following assumptions:

Class of business	Mortality/morbidity	Interest rates
Non-linked protection business	Based on relevant risk reinsurance rates	1.610%
Non-linked protection business (BLAGAB)	Based on relevant risk reinsurance rates	1.287%
Pension annuity payment	100% PA92 (C2030) ult. projected using the long-term cohort basis	1.330%

During 2017, a modification was made to achieve a better match of the IFRS liabilities to available gilts. In aggregate across the non-linked protection business, there is expected to be a net income over the next 4 years. This net income has been excluded from the matching exercise and has instead been discounted using Bank of England forward rates of the relevant durations. Liabilities after these four years are matched and the rates provided above are used. For non-linked contracts (defined as insurance contracts under IFRS 4) the objective of the assumptions is to target a level of assurance within each individual assumption of at least 60%. On this basis there is a 40% chance that an event may occur over the following year that results in the actual experience being worse than that assumed in the valuation. When all of the assumptions are combined, the overall confidence levels are in excess of 60%. The interest rate assumption is calculated according to UK valuation regulations (INSPRU) and so this assumption has been set at a level to comply with the relevant rules. The liability values do not make allowance for the amortisation of the deferred acquisition cost ("DAC") asset. A separate liability adequacy test is carried out on best estimate assumptions allowing for all of the cash flows used to derive the liability values and the run off of the DAC asset.

The key assumptions considered are mortality rates, maintenance expenses, interest rates, persistency rates and methodology changes. These assumptions are based on market data, internal experience data and also external data where either no internal experience data exists or where internal data is too sparse to give credible estimates of the true expectation of experience. Anticipated future trends have been allowed for in deriving mortality and morbidity assumptions.

Impact of changes in assumptions

			£m
2017	Impact on IFRS reported profit (before reinsurance)	Impact of reinsurance	Impact on IFRS reported profit (after reinsurance)
Assumption
Mortality/morbidity rates	10.1	(10.7)	(0.6)
Maintenance expense	3.1	(0.1)	3.0
Maintenance expense inflation	0.3	-	0.3
Interest rates	(15.1)	13.0	(2.1)
Persistency rates	(5.0)	4.8	(0.2)
	(6.6)	7.0	0.4

			£m
2016	Impact on IFRS reported profit (before reinsurance)	Impact of reinsurance	Impact on IFRS reported profit (after reinsurance)
Assumption
Mortality/morbidity rates	18.4	(18.2)	0.2
Maintenance expense	12.7	(0.2)	12.5
Maintenance expense inflation	(0.6)	0.1	(0.5)
Interest rates	(93.2)	77.1	(16.1)
Methodology changes	1.9	-	1.9
Persistency rates	(5.5)	3.7	(1.8)
	(66.3)	62.5	(3.8)

For the year ended 31 December 2017

31: Insurance and investment contract liabilities continued

Impact of changes in assumptions continued

			£m
2015	Impact on IFRS reported profit (before reinsurance)	Impact of reinsurance	Impact on IFRS reported profit (after reinsurance)
Assumption
Mortality/morbidity rates	(9.0)	8.6	(0.4)
Maintenance expense	(0.3)	-	(0.3)
Maintenance expense inflation	(0.6)	-	(0.6)
Interest rates	18.0	(14.6)	3.4
Methodology changes	2.3	-	2.3
Persistency rates	(0.4)	0.2	(0.2)
	10.0	(5.8)	4.2

31(c) Unit-linked investment contract liabilities

Movements in the amounts outstanding in respect of unit-linked and other investment contracts are set out below:

			£m
	At 31 December 2017	At 31 December 2016	At 31 December 2015
Carrying amount at 1 January	51,265	49,041	46,294
Contributions received	9,717	7,587	7,704
Maturities	(220)	(226)	(222)
Withdrawals and surrenders	(5,682)	(5,229)	(4,951)
Fair value movements	3,627	4,731	337
Investment income	681	792	612
Claims and benefits	(217)	(295)	(290)
Impact of change in actuarial assumptions	-	-	3
Transfer to held for sale	-	(6,155)	-
Other movements	(77)	374	(202)
Change in liability	7,829	1,579	2,991
Currency translation loss/(gain)	45	645	(244)
Total unit-linked investment contract policyholder liabilities	59,139	51,265	49,041

For unit-linked investment contracts, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit.

The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected investments and collective fund investments, whose underlying investments include equities, debt securities, property and derivatives. This investment mix is unique to individual policyholders.

The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date.

The reinsurers share of policyholder liabilities relating to investment contract liabilities of £2,908m (2016: £2,863m), (2015: £2,507m) were rated according to the table in note 42. None of these were past due as at 31 December 2017 (2016: £nil), (2015: £nil).

31(d) Methodology and assumptions – investment contracts

For unit-linked business, the unit liabilities are determined as the value of units credited to policyholders. Since these liabilities are determined on a retrospective basis no assumptions for future experience are required. Assumptions for future experience are required for unit-linked business in assessing whether the total of the DAC asset and deferred fee income (DFI) liability is greater than the present value of future profits expected to arise on the relevant blocks of business (the 'recoverability test'). If this is the case, then the DAC asset is restricted to the recoverable amount. For linked contracts, the assumptions are on a best estimate basis.

For the year ended 31 December 2017

32: Provisions and accruals

				£m
Year ended 31 December 2017	Compensation provisions	Restructuring	Other	Total
Balance at beginning of the year	13	-	16	29
Charge to income statement	76	-	6	82
Utilised during the year	(5)	-	(5)	(10)
Foreign exchange and other movements	(2)	-	5	3
Balance at 31 December 2017	82	-	22	104

				£m
Year ended 31 December 2016	Compensation provisions	Restructuring	Other	Total
Balance at beginning of the year	12	6	17	35
Charge to income statement	4	-	8	12
Utilised during the year	-	(3)	(1)	(4)
Unused amounts reversed	(2)	(3)	(6)	(11)
Transfer to liabilities of operations held for sale	(1)	-	(2)	(3)
Balance at 31 December 2016	13	-	16	29

				£m
Year ended 31 December 2015	Compensation provisions	Restructuring	Other	Total
Balance at beginning of the year	16	14	11	41
Additions from business combinations	-	3	-	3
Charge to income statement	-	-	6	6
Utilised during the year	(2)	(3)	1	(4)
Unused amounts reversed	(2)	(8)	(1)	(11)
Balance at 31 December 2015	12	6	17	35

For the year ended 31 December 2017

32: Provisions and accruals continued

Compensation provisions

Compensation provisions totalled £82 million (2016: £13 million), (2015: £12 million).

Voluntary client remediation provision

As part of its ongoing work to promote fair customer outcomes, the Group has conducted product reviews consistent with the recommendations from the FCA's thematic feedback and the FCA's guidance 'FG16/8 Fair treatment of long-standing customers in the life insurance sector'. Following these reviews, the Group has decided to commence voluntary remediation to customers in certain legacy products, resulting in an additional provision raised during the year of £69 million, including £7 million of programme cost and £13 million of estimated interest.

The voluntary remediation relates to early encashment charges and contribution servicing charges made on pension products and following the reintroduction of annual reviews, compensation payable to a subset of Protection plan holders.

The redress comprises retrospective refunds and compensation, going back to 1 January 2009, and prospective 5% caps on early encashment charges. An FCA press release (03/03/2016) stated that its investigation will focus on disclosure of exit and paid-up charges after December 2008. From 2004 to 2007 the Financial Services Authority published a number of communications on treating customers fairly (TCF) which made it clear that all firms were required to have regard to customers' information needs through the life cycle of a product. Firms were required to implement changes to complete their TCF work no later than December 2008.

The Group intends to substantially complete the review and remediation by the end of 2018.

Estimates and assumptions

Key estimates and assumptions in relation to the provision are:

• Protection policy sustainability period assumption of 4 years; and
• The programme costs of carrying out the remediation activity and interest on remediation payments.

If past reviews had been carried out correctly, policies would be expected to have funds sufficient to provide up to four years' cover from the current balance sheet date, on the basis that future premium increases are not applied. This assumption has been used to determine the cost of reconstructing the impacted Protection policies to their expected values.

The programme costs of conducting the remediation activity are highly variable and are subject to a number of uncertainties. In calculating the best estimate of these costs, consideration has been given to such matters as the identification of impacted customers, access to and the quality of customer files, likelihood of the customer contesting the offer, the complexity of the calculations, the level of quality assurance and checking, the ease of contacting and communicating with customers and the level of customer interactions.

Sensitivities relating to the assumptions and uncertainties are provided in the table below:

Assumption	Change in assumption	Consequential change in provision
Protection policy sustainability period	Protection policy sustainability period assumption reduced to 3 years	+£3.1m
Protection policy sustainability period	Protection policy sustainability period assumption reduced to 5 years	+£3.3m
Programme cost per case of conducting the review	Estimate based on bottom of range	+/- £1.4m

No provision has been recognised for any potential enforced redress and associated penalties that may be levied by the FCA, as explained in note 39 Contingent Liabilities.

Compensation provision (other)

The compensation provision also includes amounts relating to regulatory uncertainty and multiple causal events; on-going resolution of claims as a result of mis-selling guarantee contacts; and to the provision for claw-back of prescribed claims. This provision is held to allow for the possible future payment of claims that have been previously reversed. Due to the nature of the provision, the timing of the expected cash outflows is uncertain. Estimates are reviewed annually and adjusted as appropriate for new circumstances.

Restructuring provision

Restructuring provision of £nil million (2016: £nil million), (2015: £6 million), is primarily in respect of onerous costs of vacant properties leased by the Group. The restructuring provision has been utilised.

Other provisions

Other provisions also include long-term staff benefits and amounts for the resolution of legal uncertainties and the settlement of other claims raised by contracting parties.

Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability. The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions against the Group, are uncertain and could result in adjustments to the amounts recorded.

Of the total provisions recorded above, £10 million (2016: £7 million), (2015: £13 million) is estimated to be payable after one year.

For the year ended 31 December 2017

33: Deferred tax assets and liabilities

Deferred income taxes are calculated on all temporary differences at the tax rate applicable to the jurisdiction in which the timing differences arise.

Deferred tax summary

				£m
		At	At	At
		31 December	31 December	31 December
	Notes	2017	2016	2015
Deferred tax assets
Deferred tax asset		31	11	8
Less: amounts classified as held for sale	5(g)	9	3	-
		22	8	8
Deferred tax liabilities
Deferred tax liabilities		190	199	152
Less: amounts classified as held for sale	5(g)	-	20	-
		190	179	152
Net deferred tax liability		168	171	144

33(a) Deferred tax assets

Deferred tax assets are recognised for tax losses carried forward only to the extent that realisation of the related tax benefit is probable, being where on the basis of all available evidence it is considered more likely than not that there will be suitable taxable profits against which the reversal of the deferred tax asset can be deducted.

The movement on the recognised deferred tax assets account is as follows:

					£m
Year ended 31 December 2017	At beginning of the year	Income statement (charge)/ credit	Acquisition /disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Tax losses carried forward	6	-	-	-	6
Netted against liabilities	(11)	2	-	-	(9)
Deferred fee income	4	(2)	-	-	2
Other temporary differences	9	22	-	(8)	23
Deferred tax assets at 31 December 2017	8	22	-	(8)	22

					£m
Year ended 31 December 2016	At beginning of the year	Income statement (charge)/ credit	Acquisition /disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Tax losses carried forward	7	(1)	-	-	6
Netted against liabilities	(16)	5	-	-	(11)
Deferred fee income	10	(4)	-	(2)	4
Other temporary differences	7	3	-	(1)	9
Deferred tax assets at 31 December 2016	8	3	-	(3)	8

					£m
Year ended 31 December 2015	At beginning of the year	Income statement (charge)/ credit	Acquisition /disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Tax losses carried forward	8	-	-	(1)	7
Netted against liabilities	(22)	5	-	1	(16)
Deferred fee income	16	(5)	-	(1)	10
Other temporary differences	4	-	3	-	7
Deferred tax assets at 31 December 2015	6	-	3	(1)	8

For the year ended 31 December 2017

33: Deferred tax assets and liabilities continued

Unrecognised deferred tax assets

The amounts for which no deferred tax asset has been recognised comprise:

						£m
		At 31 December 2017		At 31 December 2016	At 31 December 2015
	Gross amount	Tax	Gross amount	Tax	Gross amount	Tax
Unrelieved tax losses
Expiring in less than a year	-	-	-	-	4	1
Expiring between one and five years	-	-	21	4	6	1
Expiring after five years	471	80	362	62	336	66
	471	80	383	66	346	68
Accelerated capital allowances	108	18	167	28	159	29
Other timing differences	269	46	301	51	268	53
	848	144	851	145	773	150

33(b) Deferred tax liabilities

The movement on the deferred tax liabilities account is as follows:

					£m
Year ended 31 December 2017	At beginning of the year	Income statement (credit)/ charge	Acquisition/ disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Deferred acquisition costs	(7)	(2)	-	-	(9)
Other acquired intangibles	49	(8)	-	-	41
Netted against assets	(11)	2	-	-	(9)
Other temporary differences	148	19	-	-	167
Deferred tax liabilities at 31 December 2017	179	11	-	-	190

					£m
Year ended 31 December 2016	At beginning of the year	Income statement (credit)/ charge	Acquisition/ disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Deferred acquisition costs	16	(6)	-	(17)	(7)
Other acquired intangibles	55	(7)	1	-	49
Netted against assets	(16)	5	-	-	(11)
Other temporary differences	97	52	-	(1)	148
Deferred tax liabilities at 31 December 2016	152	44	1	(18)	179

					£m
Year ended 31 December 2015	At beginning of the year	Income statement (charge)/ credit	Acquisition/ disposal of subsidiaries	Foreign exchange and other movements	At end of the year
Deferred acquisition costs	27	(9)	-	(2)	16
Other acquired intangibles	8	(10)	57	-	55
Netted against assets	(22)	5	-	1	(16)
Other temporary differences	135	(41)	-	3	97
Deferred tax liabilities at 31 December 2015	148	(55)	57	2	152

For the year ended 31 December 2017

34: Borrowings

The following table analyses the Group's borrowed funds, repayable on demand and categorised in terms of IAS39 – Financial Instruments: Recognition and Measurement as "liabilities held at amortised cost". All amounts are payable either to the Group's current ultimate Parent Company, Old Mutual plc, or to other related entities within the Old Mutual plc group. For further information on new financing arrangements post year end refer to note 45: Events after the reporting date.

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Loans from Old Mutual plc:
Subordinated debt
Fixed rate loan at 5.50% 1	566	566	566
Other borrowed funds
Fixed rate loan note at 10% 2	-	51	46
Fixed rate loan at 0.63% 3	93	92	91
Floating rate loan at 3 month LIBOR + 0.10% 4	80	87	83
Fixed rate loan at 3.125% 5	43	43	- _
	782	839	786

^<sup>1 Commenced on 25 February 2015 and was used to finance the acquisition of the Quilter Cheviot group.

Amounts borrowed are unsecured and are repayable on demand. The carrying amount approximates to fair value which is valued as the principal amount repayable.

35: Trade, other payables and other liabilities

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Amounts payable on direct insurance business
Funds held under reinsurance business ceded	16	14	12
Amounts owed to policyholders	244	170	147
unds held under reinsurance business ceded mounts owed to policyholders mounts owed to intermediaries ounts payable on reinsurance business ruals and deferred income de creditors standing settlements\ner liabilities	50	60	69
	310	244	228
Accounts payable on reinsurance business	6	10	11
Accruals and deferred income	4	-	-
Trade creditors	36	67	39
Outstanding settlements	577	281	191
Other liabilities	584	492	469
Total trade, other payables and other liabilities	1,517	1,094	938
Less: Trade, other payables and other liabilities classified as held for sale	(186)	(70)	-
Total trade, other payables and other liabilities net of held for sale	1,331	1,024	938
To be settled within 12 months	1,295	1,008	908
To be settled after 12 months	36	16	30
	1,331	1,024	938

36: Deferred revenue

Deferred revenue relates to front-end fee income, comprising fees received at inception or receivable over an initial period for services not yet provided, is deferred through the creation of a deferred fee income liability ("DFI") on the statement of financial position and released to income as the services are provided. Equal service provision is assumed over the lifetime of the contract and, as such, the deferred revenue is amortised on a linear basis over the expected life of the contract, adjusted for expected persistency. The deferred revenue principally comprises fee income already received in cash. The table below analyses the movements in deferred revenue.

_									£m
_		Life and	Savings		Asset Mana	agement			Total
Year ended 31 December	2017	2016	2015	2017	2016	2015	2017	2016	2015
Balance at 1 January	255	294	329	6	18	36	261	312	365
Fees and commission income deferred	16	18	20	1	-	-	17	18	20
Amortisation	(33)	(45)	(56)	(5)	(12)	(18)	(38)	(57)	(74)
Foreign exchange and other movements	4	(7)	1	-	-	-	4	(7)	1
Transfer to held for sale	-	(5)	-	-	-	-	-	(5)
Balance at 31 December	242	255	294	2	6	18	244	261	312

^<sup>2 Commenced on 25 February 2015 and was used to finance the acquisition of the Quilter Cheviot group.

^<sup>3 Commenced during 2014 and was used to finance the acquisition of Intrinsic Financial Services Limited.

^<sup>4Commenced in 2011 and was used to finance other historical corporate activity.

^<sup>5 Commenced on 21 June 2016 was used to finance one of the Group's employee ownership trusts.

For the year ended 31 December 2017

37: Post-employment benefits

The Group operates a number of defined contribution and defined benefit pension schemes in the UK, the Channel Islands and Ireland.

Defined contribution pension schemes

The Group operates a number of defined contribution schemes. The Schemes require contributions to be made to funds held in trust, separate from the assets of the Group. Participants receive either a monthly pension supplement to their salaries or contributions to personal pension plans. For the defined contribution schemes, the Group pays contributions to separately administered pension schemes. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised in current service cost in the consolidated income statement as staff costs and other employee-related costs when they are due.

Defined benefit schemes

The Group operates two defined benefit schemes: The Quilter Cheviot Limited Retirement Benefits Scheme (the UK Scheme) and the Quilter Cheviot Channel Islands Retirement Benefits Scheme (the CI Scheme) which are both closed to new members. The assets of these Schemes are held in separate trustee administered funds. Pension costs and contributions relating to defined benefit schemes are assessed in accordance with the advice of qualified actuaries. Actuarial advice confirms that the current level of contributions payable to each pension scheme, together with existing assets, are adequate to secure members' benefits over the remaining service lives of participating employees. The Schemes are reviewed at least on a triennial basis or in accordance with local practice and regulations. In the intervening years the actuary reviews the continuing appropriateness of the assumptions applied.

IAS 19 disclosures

This note gives full IAS 19, Employee Benefits, disclosures for the above schemes.

37(a) Liability for defined benefit obligations

The IAS 19 value of the assets and the scheme obligations are as follows:

			£m
Year ended 31 December	2017	2016	2015
Changes in retirement benefit obligations
Total IAS 19 retirement benefit obligation at 1 January	52	45	-
Acquisitions through business combinations	-	-	62
Interest cost on benefit obligation	3	2	2
Effect of changes in actuarial assumptions	(1)	(1)	(2)
Actuarial losses/(gains)	-	11	(1)
Benefits paid	(6)	(5)	(9)
Foreign exchange and other movements	-	-	(7)
Total IAS 19 retirement benefit obligations at 31 December	48	52	45
Change in plan assets
Total IAS 19 fair value of scheme assets at 1 January	62	56	-
Acquisitions through business combinations	-	-	68
Actual return on plan assets	4	10	3
Company contributions	1	1	1
Benefits paid	(6)	(5)	(9)
Foreign exchange and other movements	-	-	(7)
Total IAS 19 fair value of scheme assets at 31 December	61	62	56
Net IAS 19 asset/(liability) recognised in statement of financial position
Funded status of plan	13	10	11
Unrecognised assets	(13)	(10)	(11)
Net IAS 19 amount recognised in statement of financial position	-	-	-

37(b) (Income)/expense recognised in the income statement

The total pension charge to staff costs for all of the Group's defined benefit schemes were:

			£m
Year ended 31 December	2017	2016	2015
Current service costs	-	(1)	-
Total charge for pension schemes (included in staff costs)	-	(1)	-

For the year ended 31 December 2017

37: Post-employment benefits continued

Actuarial gains and losses and the effect of the limit to the pension asset under IAS 19 'Employee benefits' paragraph 58 have been reported in other comprehensive income.

The cumulative amount of actuarial losses recognised in other comprehensive income is £25 million (2016: £25 million), (2015: £24 million).

Assumptions

The expected long-term rate of return on assets represents the Group's best estimate of the long-term return on the scheme assets and generally was estimated by computing a weighted average return of the underlying long-term expected returns on the different asset classes, based on the target asset allocations. The expected long-term return on assets is a long-term assumption that generally is expected to remain the same from one year to the next unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market conditions.

The Group, in consultation with its independent investment consultants and actuaries, determined the asset allocation targets based on its assessment of business and financial conditions, demographic and actuarial data, funding characteristics and related risk factors. Other relevant factors, including industry practices, long-term historical and prospective capital market returns, were also considered.

The scheme return objectives provide long-term measures for monitoring the investment performance against growth in the pension obligations. The overall allocation is expected to help protect the plan's funded status while generating sufficiently stable real returns (net of inflation) to help cover current and future benefit payments.

Both the equity and fixed income portions of the asset allocation use a combination of active and passive investment strategies and different investment styles. The fixed income asset allocation consists of longer duration fixed income securities in order to help reduce plan exposure to interest rate variation and to better correlate assets with obligations. The longer duration fixed income allocation is expected to help stabilise plan contributions over the long run.

The following table presents the principal actuarial assumptions at the end of the reporting period:

			%
	2017	2016	2015
Discount rate	2.5	2.7	3.7
Rate of increase in defined benefit funds	3.8	3.8	3.6
Inflation	3.2	3.5	3.2

The mortality assumptions used give the following life expectancy at 65:

		Life expectancy at 65 for male member currently		Life expectancy at 65 for female member currently
	Mortality table	Aged 65	Aged 45	Aged 65	Aged 45
31 December 2017	S2PA Light	22.30	23.60	23.30	24.70
31 December 2016	S2PA Light	22.40	24.00	23.50	25.30
31 December 2015	S2PA Light	22.10	23.50	23.10	24.60

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, inflation rate and rate of mortality.

The sensitivities regarding the principal assumptions used to measure the defined benefit obligations are as follows:

	Changes in mortality	Impact on scheme liabilities
Discount rate	Increase/decrease by 0.1%	Decrease/increase by 2%
Inflation assumptions	Increase/decrease by 0.1%	Increase/decrease by 1%
Rate of mortality	Increase by 1 year	Increase by 4%

37(c) Scheme assets allocation

Scheme assets are stated at their fair values at 31 December 2017. Total scheme assets are comprised as follows:

At 31 December	%
	2017	2016	2015	2017	2016	2015
Equity securities	39.3	38.7	37.5	24	24	21
Debt securities	60.7	59.7	60.7	37	37	34
Cash and other assets	-	1.6	1.8	-	1	1
Total IAS 19 fair value of scheme assets	100.0	100.0	100.0	61	62	56

For the year ended 31 December 2017

38: Master netting or similar agreements

The Group offsets financial assets and liabilities in the statement of financial position when it has a legal enforceable right to do so and intends to settle on a net basis simultaneously.

The following tables present information on the potential effect of netting offset arrangements after taking into consideration these types of agreements.

						£m
				Related amounts available for future set off
At 31 December 2017	Gross amounts	Amounts offset in the statement of financial position	Net amounts reported in the statement of financial position	Master netting agreement	Collateral received/ pledged¹	Net amount
Financial assets
Cash and cash equivalents	2,415	(55)	2,360	-	-	2,360
Financial liabilities
Trade, other payables and other liabilities	1,386	(55)	1,331	-	-	1,331
						£m
		Amounts offset	Net amounts		Related amounts available for future set off
	Gross amounts	in the statement of financial position	reported in the statement of financial position	Master netting agreement	Collateral received/ pledged¹	Net amount
At 31 December 2016 Financial assets
Cash and cash equivalents	1,722	(127)	1,595	-	-	1,595
Financial liabilities
Trade, other payables and other liabilities	1,151	(127)	1,024	-	-	1,024
						£m
				Related amounts available for future set off
	Gross	Amounts offset in the statement of financial	Net amounts reported in the statement of financial	Master netting	Collateral received/
At 31 December 2015	amounts	position	position	agreement	pledged¹	Net amount
Financial assets
Cash and cash equivalents	1,714	(113)	1,601	-	-	1,601
Financial liabilities
Trade, other payables and other liabilities	1,051	(113)	938	-	-	938

This represents the amounts that could be offset in the event of default. These arrangements are typically governed by master netting and collateral arrangements.

39: Contingent liabilities

The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. The Group recognises a provision when it has a present obligation as a result of past events, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made (see note 32). Possible obligations and known liabilities where no reliable estimate can be made or it is considered improbable that an outflow would result are reported as contingent liabilities in accordance with IAS 37: 'Provisions, Contingent Liabilities and Contingent Assets'.

Tax

1

The Revenue authorities in the principal jurisdictions in which the Group operates routinely review historical transactions undertaken and tax law interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in which they operate. All interpretations made by management are made with reference to the specific facts and circumstances of the transaction and the relevant legislation.

There are occasions where the Group's interpretation of tax law may be challenged by the Revenue authorities. The financial statements include provisions that reflect the Group's assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements are sufficient.

Due to the level of estimation required in determining tax provisions amounts eventually payable may differ from the provision recognised.

For the year ended 31 December 2017

39: Contingent liabilities continued

Contingent liabilities – implications of the Managed Separation strategy

The Group routinely monitors and reassesses contingent liabilities arising from matters such as litigation, warranties and indemnities relating to past acquisitions and disposals. Although the announcement of the Managed Separation strategy on 11 March 2016 does not affect the nature of such items, it is possible that the Group may seek to resolve certain matters as part of the implementation of the Managed Separation strategy.

UK Financial Conduct Authority notification of investigation – Old Mutual Wealth Life Assurance Limited

The Group is committed to treating customers fairly and supporting its customers in meeting their lifetime goals and treating customers fairly is central to how our businesses operate. We routinely engage with customers and regulators to ensure that we meet this commitment, but there is the risk of regulatory intervention across various jurisdictions, giving rise to the potential for customer redress which can result in retrospective changes to policyholder benefits, penalties or fines. The Group monitors the exposure to these actions and makes provision for the related costs as appropriate.

As detailed in note Provisions and Accruals, the Group has recognised a provision of £69 million in 2017 for the cost of voluntary redress for affected customers following the publication by the UK Financial Conduct Authority (FCA) of a report detailing its findings of their industry-wide thematic review on the fair treatment of long-standing customers invested in closed-book products sold by the life insurance sector (TR 16/2) (Thematic Review) and the subsequent announcement that it was initiating an investigation into a number of firms, including Old Mutual Wealth Life Assurance Limited (OMWLA), a subsidiary of the Group, in relation to potential breaches of the FCA's standards relevant to the matters covered by the Thematic Review.

The company is in the process of assessing and responding to detailed thematic review feedback. The appointment of investigators does not itself mean that the FCA has determined that rule breaches and/or other contraventions or offences have occurred, and at this stage it is not possible to assess the outcome and, by extension, whether the matter will have financial consequences for the Group.

40: Commitments

The Group has contractual commitments in respect of funding arrangements and leases which will be payable in future periods. These commitments are not recognised on the Group's statement of financial position at the year end but are disclosed to give an indication of the Group's future committed cash flows. See note 41.

41: Operating lease arrangements

The Group has entered into commercial non-cancellable leases on certain property, plant and equipment where it is not in the best interest of the Group to purchase these assets. Such leases have varying terms, escalation clauses and renewal rights. All Group leases are operating leases, being leases where the lessor retains substantially all the risks and rewards of the ownership of the leased asset.

Operating lease commitments where the Group is the lessee

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

			£m
	At	At	At
	31 December	31 December	31 December
Outstanding commitments under non-cancellable operating leases, fall due as follows:	2017	2016	2015
Within one year	14	11	11
Between one and five years	37	28	25
After five years	43	34	37
	94	73	73

42: Capital and financial risk management

42(a)(i) Capital management

The Group manages its capital with a focus on capital efficiency and effective risk management. The capital objectives are to maintain the Group's ability to continue as a going concern while supporting the optimisation of return relative to the risks. The Group ensures that it can meet its expected capital and financing needs at all times having regard to the Group's business plans, forecasts and strategic initiatives and regulatory requirements in all businesses in the Group. The Group's overall capital risk appetite is set with reference to the requirements of the relevant stakeholders and seeks to:

• Maintain sufficient, but not excessive, financial strength to support stakeholder requirements
• Optimise debt to equity structure to enhance shareholder returns
• Retain financial flexibility by maintaining liquidity including unutilised committed credit lines.

The primary sources of capital used by the Group are equity shareholders' funds, subordinated debt and borrowings. Alternative resources are utilised where appropriate. Risk appetite has been defined for the level of capital, liquidity and debt within the Group. The risk appetite includes long term targets, early warning thresholds and risk appetite limits. The dividend policy sets out the target dividend level in relation to profits.

The regulatory capital assessment for the Group is assessed under Solvency II requirements.

The Internal Capital Adequacy Assessment Process (ICAAP) is used to assess the level of capital which should be retained for the investment and advice businesses within the Group.

For the year ended 31 December 2017

42: Capital and financial risk management continued

42(a)(ii) Regulatory capital in accordance with Solvency II rules

From 1 January 2016, both the consolidated Group and regulated insurance entities (see note 46 for a list of the Group's regulated insurance entities) within the Group operating in the EU have been required to measure and monitor their capital resources under the Solvency II (SII) regulatory regime.

The Group's capital position under SII is determined by aggregating the assets and liabilities of the Group recognised and measured on a SII basis (being Own funds) and comparing this to the Group's SII solvency capital requirement (SCR) to determine surplus capital.

The Group's unaudited Solvency II surplus is £ 653 million (2016: £ 800 million), (2015: £ 794 million, representing a Solvency II ratio of 155% (2016: 175%), (2015: 182%) calculated under the standard formula. Own funds include a £566 million subordinated loan from Old Mutal plc (see note 34), and as such represents how the capital position of the Group was presented within Old Mutual plc. This subordinated loan has been effectively converted to equity after the year-end (see note 45). In accordance with the European Insurance and Occupational Pensions Authority (EIOPA) guidance, we have included the Individual Capital Guidance (ICG) requirement within our SCR in all periods. Surplus capital at individual entity level is assessed for availability to the Group and therefore may be restricted when determining Group own funds.

The estimated SCR and corresponding eligible own funds for each period (unaudited) were as follows:

			£m
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Eligible Own Funds	1,849	1,872	1,768
Solvency capital requirements (SCR)	1,196	1,072	974
Solvency II surplus	653	800	794
Coverage	155%	175%	182%

42(a)(iii) Own Risk and Solvency Assessment (ORSA)

The Solvency II directive introduced a requirement for the Group and the insurance entities located within the EU to conduct an ORSA.

The purpose of the ORSA is:

• To provide quantitative and qualitative assessments of the Group's risk profile relative to risk appetite;
• To provide assessment of regulatory and overall solvency needs and the financial condition of the Group on a forward looking basis;
• To demonstrate the link between the business strategy, risk profile and solvency needs;
• To test the financial, operational and strategic resilience of the business, identify and assess events which could threaten the viability of the Group and validate recovery plans; and
• To assess the effectiveness of risk monitoring, management and control processes.

The assessment considers both the current risk and capital position and the forward looking assessment of the risk profile over the three year planning horizon of the Group.

The assessment of capital requirements is driven by the assessment of risks within the Group. Each material risk is assessed in order to determine the potential losses which could arise in the event that risk crystalise. These assessments support strategic decisions to accept or mitigate risks.

The assessment of risk and solvency needs is in principle carried out continuously. In practice, the assessment consists of a range of specific activities and decisions carried out at different times of the year as part of an annual cycle, supplemented as necessary by ad hoc assessments of the impact of external events and developments and of internal business proposals.

Papers are presented to the Board throughout the year dealing with individual elements that make up the ORSA. The information contained in those papers and the associated decisions taken are summarised in an annual ORSA report, which is submitted to the Group's regulators as part of the normal supervisory process.

42(b) Insurance risk (risk arising within insurance contracts)

For accounting purposes insurance risk is defined as risk arising on insurance business. Contracts issued by the Group may include both insurance and financial risk. Contracts with significant insurance risk are classified as insurance contracts, while contracts with no or insignificant insurance risk are classified as investment contracts.

The Group assumes insurance risk by issuing insurance contracts, under which the Group agrees to compensate the policyholder or other beneficiary if a specified uncertain future event (the insured event) affecting the policyholder occurs. Insurance risk includes mortality and morbidity risk in the case of life assurance.

Insurance risk arises through exposure to variable claims experience on life assurance, critical illness and other protection business and exposure to variable operating experience in respect of factors such as persistency levels and management expenses. Unfavourable persistency, expenses and mortality and morbidity claim rates, relative to the actuarial assumptions made in the pricing process, may prevent the Group from achieving its profit objectives.

The Group has developed an insurance risk policy which sets out the practices which are used to monitor and manage insurance risks. As well as management of persistency, expense and claims experience, the risk policy sets requirements and standards on matters such as underwriting and claims management practices, and the use of reinsurance to mitigate insurance risk.

The sensitivity of the Group's earnings and capital position to insurance risk is monitored through the Group's business planning and capital management processes. The insurance risk profile and experience is closely monitored to ensure that the exposure remains acceptable.

For the year ended 31 December 2017

42: Capital and financial risk management continued

42(b) Insurance risk (risk arising within insurance contracts) continued

The Group effectively manages its insurance risks through the following mechanisms:

• Having an agreed risk appetite for all risk types including those related to insurance;
• The Group does not offer group insurance business in order to avoid risk concentrations;
• Analysis of mortality, morbidity, persistency and expense experience to calculate premiums and monitor claims patterns;
• Standards for underwriting and claims management, use of reinsurance and product governance;
• Reinsurance, which is used to limit the Group's exposure to large single claims and catastrophes. When selecting a reinsurer, the Group requires that reinsurers meet financial strength criteria; and
• The matching of assets, which is driven by the nature and term of the insurance liabilities. The management of assets and liabilities is closely monitored to ensure that there are sufficient interest bearing assets to match the guaranteed portion of liabilities. Hedging instruments are used at times to limit exposure to equity market and interest rate movements.

Terms and conditions of long-term insurance business

The terms and conditions attached to insurance contracts determine the level of insurance risk accepted by the Group. The following table outlines the general form of terms and conditions that apply to contracts sold in each category of business, and the nature of the risk incurred by the Group.

Category	Essential terms	Main risks	Policyholder guarantees	Policyholder participation in investment return
			The initial premium is guaranteed to
	Mortality charges may be		sustain the original cover for the first
Unit linked life assurance	re-priced	Mortality	10 years	None
			The initial premium is guaranteed to
	Mortality and morbidity charges		sustain the original cover for the first
Unit linked critical illness	may be re-priced	Mortality, Morbidity	10 years	None
Non-linked life assurance
and critical illness (fixed			Rates fixed for the life of the
term and whole of life)	Premium rates fixed at inception	Mortality, Morbidity	contract	None
Non-linked life assurance
and critical illness (rolling	Premium rates fixed, but may be		Rates fixed for the first 10 years if
term)	re-priced when the term is rolled	Mortality, Morbidity	cover levels are not altered	None

Mortality and morbidity

Mortality and morbidity risk is the risk that death, critical illness and disability claims are different from expected levels. Possible causes are new and unexpected epidemics and widespread changes in lifestyle such as eating, smoking and exercise habits. Higher than expected claims levels will reduce expected emerging profits.

For unit-linked contracts, a risk charge is applied to meet the expected cost of the insured benefit (in excess of the unit value). This risk charge can be altered in the event of changes in the expectation for future claims experience, subject to objective to provide fair customer outcomes.

The operations manage mortality and morbidity risks through the underwriting policies and external reinsurance arrangements where its policy is to retain certain types of insurance risks within specified maximum single event loss limits. Exposures above accepted limits are transferred to reinsurance counterparties.

Persistency

Persistency risk is the risk that policyholder surrenders, transfers or premium cessation on contracts occur at levels that are different to expected.

Persistency statistics are monitored monthly and a detailed persistency analysis at a product level is carried out on an annual basis. Management actions may be triggered if statistics show significant adverse movement or emerging trends in experience.

Expenses

Expense risk is the risk that actual expenses and expense inflation differ from expected levels. Higher expenses and expense inflation may result in emerging profit falling below the Group's profit objectives.

Expense levels are monitored quarterly against budgets and forecasts. An activity-based costing process is used to allocate costs relating to processes and activities to individual product lines.

Some products' structures include maintenance charges. These charges are reviewed annually in light of changes in maintenance expense levels. This review may result in changes in charge levels, subject to 'Treating Customers Fairly' principles.

Tax

Tax risk is the risk that the projected taxation basis for basic life assurance business is incorrect, resulting in contracts being incorrectly priced.

Tax risk also represents potential changes in the interpretation or application of prevailing tax legislation as paid by either policyholders or shareholders, resulting in higher taxes reducing profitability or increasing shareholder tax burdens. The taxation position of the operations is projected annually and tax changes will result in changes to new business pricing models as part of the annual control cycle. High risk issues and emerging trends are reported internally on a quarterly basis.

For the year ended 31 December 2017

42: Capital and financial risk management continued

42(b) Insurance risk (risk arising within insurance contracts) continued

42(b)(i) Sensitivity testing – life assurance

Sensitivity analysis has been performed by applying the following parameters to the statement of financial position and income statement as at 31 December 2017, 31 December 2016 and 31 December 2015.

Interest rates

The impact of an increase and decrease in market interest rates of 1% is tested (e.g. if the current interest rate is 5%, the test allows for the effects of an instantaneous change to 4% and 6% from the start of the year). The test allows consistently for similar changes in investment returns and movements in the market value of assets backing non-linked liabilities. The sensitivity of both profit and shareholders equity to interest rates is provided.

A 1% rise in interest rates would impact the value of linked funds and therefore impact the fee income that is based on the market value of the investments held for the policyholders. Linked funds would move in value by around 2% as a shift of 1% in gilt yields moves gilt market values by 10%, but only 20% of linked assets are gilts.

Perfect matching has been assumed for insurance contracts so that any movement in asset values is balanced by a movement in the insurance provision.

A decrease in interest rates by 1% would have decreased profit and shareholders' equity by £1.9m after tax (2016: £1.2m decrease), (2015: £5.9m decrease). An equal change in the opposite direction would have increased profit and shareholders' equity by £4.0m after tax (2016: £2.4m decrease), (2015: £4.1m decrease).

Equity/property

A movement in equity and property prices would impact the fee income that is based on the market value of the investments held for the policyholders. In this analysis, all linked renewal commission is assumed to be fund based and all gains are assumed to be realised gains. The sensitivity is applied as an instantaneous shock to equity and property prices at the start of the year.

An increase in equity and property prices of 10% would have increased profit by £6.2m after tax (2016: £4.1m), (2015: £6.8m). An equal change in the opposite direction would have decreased profit by £6.0m after tax (2016: £4.1m), (2015: £6.8m).

Expenses

The increase in expenses is assumed to apply to the costs associated with the maintenance and acquisition of contracts. It is assumed that these expenses are increased by 10% from the start of the year, so is applied as an expense shock rather than a gradual increase. The only administrative expenses that are deferrable are sales bonuses but as new business volumes are unchanged in this sensitivity, sales bonuses and the associated deferrals have not been increased. Administrative expenses have been allocated equally between life and pensions.

An increase in expenses of 10% would have decreased profit by £15.3m after tax (2016: £8.7m), (2015: £10.9m).

Mortality/morbidity

The impact on profit of an increase in mortality and morbidity claims rates of 5% is tested. This would affect the level of insurance contract claims and is assumed to apply throughout the year.

An increase in mortality and morbidity claims of 5% each would have decreased profit after tax by £0.9m (2016: £1.0m), (2015: £0.9m).

For the year ended 31 December 2017

42: Capital and financial risk management continued

42(c) Financial risk management

Risk is an inherent part of the Group's business activities. The Group seeks to identify, assess, monitor and manage each of the various types of risk involved it its business activities in accordance with defined policies and procedures. A key component of our approach to capital management is to ensure that the Group's policies are aligned with the Group's overall strategy, business plans and risk appetite. The Group's Capital Management Forum (CMF) reviews the capital position of each of the regulated businesses on a monthly basis.

The key focus of financial risk management for the Group is ensuring that the proceeds from its financial assets are sufficient to fund the obligations arising from its insurance and asset management operations. The material components of financial risk are credit risk, market risk (arising from changes in equity, bond prices, interest and foreign exchange rates) and liquidity risk.

42(c)(i) Credit risk

Overall exposure to credit risk

Credit risk is the risk of adverse movements in credit spreads (relative to the reference yield curve), credit ratings or default rates leading to a deterioration in the level or volatility of assets, liabilities or financial instruments resulting in loss of earnings or reduced solvency. This includes counterparty default risk, migration risk and spread risk.

The Group has established a credit risk policy which applies to all activities where the shareholder is exposed to credit risk, either directly or indirectly. The Policy sets out a suitable credit risk management framework to limit and manage the Group's exposure to credit risk.

The credit risk exposures of the Group are monitored regularly to ensure that counterparties remain creditworthy, to ensure there is appropriate diversification of counterparties and to ensure that exposures are within approved limits. At 31 December 2017, the Group's material credit exposure was to financial institutions (primarily through the investment of shareholder funds), corporate entities (including external fund managers and reinsurers) and individuals (primarily through fund management trade settlement activities).

There is no direct exposure to European sovereign debt (outside of the UK) within the shareholder investments. The Group has no significant concentrations of credit risk exposure.

Reinsurance arrangements

The Group has reinsurance arrangements in place to mitigate the risk of excessive claims on unit-linked and non-linked protection contracts. Reinsurance arrangements are also used in respect of unit-linked institutional business to access specific funds not available through direct fund links and to provide liquidity.

Since the Group uses reinsurance as a means of mitigating insurance risk, reinsurance counterparties bear a significant financial obligation to the Group.

In general, credit risk is controlled through the use of risk premium reinsurance terms, where reinsurance cover is paid for as the cover is provided. In these arrangements credit risk is limited to the risk of being unable to recover amounts due as a result of claims arising over the latest quarter, since reinsurance accounts are settled quarterly in arrears. This risk is largely mitigated since the Group would be able to withhold amounts due to the reinsurer to offset amounts due from the reinsurer.

The Group also has reinsurance arrangements in which there is a timing difference between the reinsurance premium payment and the provision of cover, which results in prepayment for cover by the company. In respect of these arrangements, a credit risk exposure can arise.

Reinsurance credit risk is managed by dealing only with reinsurance firms with credit ratings which meet the requirements of the company's credit risk policy on inception of new reinsurance arrangements. The Group monitors the exposure to and credit rating of reinsurance counterparties regularly to ensure that these remain within acceptable limits. Legal agreements are in place for all reinsurance arrangements which set out the terms of the arrangement and the rights of both the Group and the reinsurance providers.

None of the Group's reinsurance assets are either past due or impaired. Of the reinsurance assets shown in the statement of financial position all are considered investment grade with the exception of £51 million of unrated exposures (2016: £68 million, 2015: £97 million). Collateral is not taken against reinsurance assets or deposits held with reinsurers other than in limited circumstances. For further information see note 25.

Details of the age analyses and credit quality of reinsurance assets in respect of insurance contracts and investment contracts are included below.

Investment of shareholder funds

The risk of counterparty default in respect of the investment of shareholder funds is managed through:

• Setting minimum credit rating requirements for counterparties;
• Setting limits and early warning indicators for individual counterparties and counterparty concentrations;
• Monitoring exposures regularly against approved limits; and
• Reviewing counterparties and associated limits on at least an annual basis.

Risk of default by financial advisers in respect of commission debt is controlled through monthly monitoring of commission debt balances.

For the year ended 31 December 2017

42: Capital and financial risk management continued

Other credit risks

The Group is exposed to financial adviser counterparty risk through a number of loans that is makes to it makes to it's advisers and the payment of upfront commission on the sale of certain types of business, The risk of default by financial advisers is managed through monthly monitoring of loan and commission debt balances and the establishment of a net provision, when considered appropriate. The Group is exposed to the risk of default by fund management groups in respect of settlements and rebates of fund management charges on collective investments held for the benefit of policyholders. This risk is managed through the due diligence process which is completed before entering into any relationship with a fund group. Amounts due to and from fund groups are monitored for prompt settlement and appropriate action is taken where settlement is not timely.

Legal contracts are maintained where the Group enters into credit transactions with a counterparty.

Details of the credit quality of debt securities can be found in note 20(a).

Impact of credit risk on fair value

Due to the limited exposure that the Group has to credit risk, credit risk does not have a material impact on the fair value movement of financial instruments for the year under review. The fair value movements on these instruments are mainly due to changes in market conditions.

Collateral and other credit enhancements

The amount and type of collateral required by the Group depends on an assessment of the credit risk of the counterparty. Collateral held is managed in accordance with Group's guidelines and the relevant underlying agreements. The market value of securities received as collateral is monitored on a daily basis and securities received as collateral generally are not recognised on the statement of financial position.

Maximum exposure to credit risk

The table below represents the Group's maximum exposure to credit risk. The Group's maximum exposure to credit risk does not differ from the carrying value disclosed in the relevant notes to the financial statements. Exposure arising from financial instruments not recognised on the statement of financial position is measured as the maximum amount that the Group would have to pay, which may be significantly greater than the amount that would be recognised as a liability. The 'not rated' balances represent the pool of counterparties that do not require a rating. These counterparties individually generate no material credit exposure and this pool is highly diversified, monitored and subject to limits.

The Group does not have any significant exposure arising from items not recognised on the statement of financial position.

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										£m
							Credit rating relating to financial assets that are neither past due nor impaired
At 31 December 2017	AAA	AA	A	BBB	<bbb< th="">	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value
Financial investments	-	183	-	12	-	508	4,536	5,239	-	5,239
Government and government-related securities	-	183	-	-	-	-	2,244	2,427	-	2,427
Other debt securities, preference shares and debentures	-	-	-	-	-	505	1,896	2,401	-	2,401
Short-term funds and securities	-	-	-	12	-	3	-	15	-	15
Other Investments and Securities	-	-	-	-	-	-	396	396	-	396
Reinsurance assets	-	1,050	1,807	-	-	51	-	2,908	-	2,908
Loans and advances neither past due not impaired	-	-	-	-	-	199	-	199	-	199
	-	1,233	1,807	12	-	758	4,536	8,346	-	8,346

</bbb<>

										£m
		Credit rating relating to financial assets that are neither past due nor impaired
At 31 December 2016	AAA	AA	A	BBB	<bbb< th="">	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value
Financial investments	5	170	5	22	1	465	2,243	2,911	(35)	2,876
Government and government-related securities	-	164	-	18	1	1	721	905	(19)	886
Other debt securities, preference shares and debentures	-	-	-	-	-	461	1,522	1,983	-	1,983
Short-term funds and securities	5	6	5	4	-	3	-	23	(16)	7
Reinsurance assets	-	877	1,918	-	-	68	-	2,863	-	2,863
Loans and advances neither past due not impaired	-	-	-	-	-	220	-	220	-	220
	5	1,047	1,923	22	1	753	2,243	5,994	(35)	5,959

For the year ended 31 December 2017

42: Capital and financial risk management continued

</bbb<>

										£m
							Credit rating relating to financial assets that are neither past due nor impaired
At 31 December 2015	AAA	AA	A	BBB	<bbb< th="">	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value	Internally rated	Included through consolidation of funds	Carrying value including held for sale	Less: Amount classified as held for sale	Carrying value
Financial investments	187	6	6	23	1	351	2,138	2,712	-	2,712
Government and government-related securities Other debt securities, preference	187	-	-	23	1	-	1,119	1,330	-	1,330
shares and debentures	-	-	-	-	-	341	987	1,328	-	1,328
Short-term funds and securities	-	6	6	-	-	10	-	22	-	22
Other Investments and Securities	-	-	-	-	-	-	32	32	-	32
Reinsurance assets	-	685	1,725	-	-	97	-	2,507	-	2,507
Loans and advances neither past due not impaired	-	-	-	-	-	190	-	190	-	190
	187	691	1,731	23	1	638	2,138	5,409	-	5,409

Financial assets past due but not impaired

At 31 December 2017 there were no financial assets past due but not impaired (2016: nil, 2015: nil).

Financial assets individually impaired

At 31 December 2017 there was a £1 million provision in respect of financial assets individually impaired (2016: nil, 2015: nil).

The main considerations for the impairment assessment include whether there are known issues in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. The Group determines the allowance appropriate for each individually significant asset on an individual basis. Items considered when determining the allowance amount include the sustainability of the counterparty's business plan, the counterparty's ability to improve performance once a financial issue has arisen, the realisable value of collateral, and the timing of expected cash flows. The impairment losses are evaluated at each reporting date.

42(c)(ii) Market risk

(i) Overview

Market risk is the risk of a financial impact to earnings or value arising from the changes in values of financial assets or financial liabilities from changes in equity, bond and property prices, interest rates and foreign exchange rates. Market risk arises differently across the Group's businesses depending on the types of financial assets and liabilities held.

The Group has a market risk policy which set out the risk management framework, permitted and prohibited market risk exposures, maximum limits on market risk exposures, management information and stress testing requirements which are used to monitor and manage market risk. The policy is cascaded to the businesses across the Group and Group level governance and monitoring processes provide oversight of the management of market risk by the individual businesses.

The Group does not undertake any principal trading for its own account. The Group's revenue is however affected by the value of assets under management and consequently it has exposure to equity market levels and economic conditions. Scenario testing is undertaken to test the resilience of the business to severe but plausible events and to assist in the identification of management actions.

(ii) Insurance operations

For the Group's insurance operations, equity, property, volatility and interest rate risk exposure to capital and to earnings are quantified through sensitivity testing.

For the Group's unit-linked assurance operations, policyholders carry the full market risk, with the only risk to the Group being asset-based fee risk from charges on policyholder funds. In respect of the Group's shareholders' funds, market risk is addressed in the Group's Credit Risk and Liquidity Risk policies, which ensure that entities invest their shareholder funds in such a manner as to minimise market risk.

(iii) Equity and property price risk

In accordance with the market risk policy, the company does not invest shareholder funds in equity or property, or related collective investments, except where the exposure arises due to:

• Mismatches between unitised fund assets and liabilities. These mismatches are permitted, subject to maximum limits, to avoid excessive dealing costs;
• Seed capital investments. Seed capital is invested within new unit-linked funds at the time when these funds are launched. The seed capital is then withdrawn from the funds as policyholders invest in the funds.

The above exposures are not material. Due to the nature of the investments held there is no material exposure to equity and property price risk on non-linked term assurance policyholder assets.

The company derives fees (e.g. annual management charges) and incurs costs (e.g. adviser fund based renewal commissions) which are linked to the performance of the underlying assets. Therefore future earnings will be affected by equity and property market performance.

For the year ended 31 December 2017

42: Capital and financial risk management continued

			£m
		Impact on profit after tax
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Impact of 10% increase in equity and property prices	32	30	29
Impact of 10% decrease in equity and property prices	(31)	(31)	(29)

(iv) Interest rate risk

Interest rate risk arises primarily from investment in fixed interest government securities, which are exposed to fluctuations in interest rates and bank balances held with financial institutions.

Fixed interest government securities are held to match liabilities for non-linked protection business determined on an IFRS basis. Therefore, on an IFRS basis there is no material exposure to interest rate movements.

A rise in interest rates would also cause an immediate fall in the value of investments in fixed income securities within unit-linked funds, resulting in a short term fall in fund based fees.

Exposure of the IFRS income statement and statement of financial position equity to interest rates are summarised in sensitivities later within this section.

Interest rate sensitivity testing

The impact of an increase and decrease in market interest rates of 1% is tested (e.g. if the current interest rate is 5%, the test allows for the effects of an instantaneous change to 4% and 6% from the start of the year). The test allows consistently for similar changes in investment returns and movements in the market value of assets backing non-linked liabilities. The sensitivity of both profit and shareholder's equity to interest rates is provided.

A 1% rise in interest rates would impact the value of linked funds and therefore impact the fee income that is based on the market value of the investments held for the policyholders. Linked funds would move in value by around 2% as a shift of 1% in gilt yields moves gilt market values by 10%, but only 20% of linked assets are gilts. In previous years, gilts backing free capital and sterling reserves were held for regulatory purposes (2015: £75.6m) and these were subject to market movements, although the sterling reserves themselves were not included in the IFRS financial statements. These gilts are no longer required due to regulatory changes effective from 2016.

Perfect matching has been assumed for insurance contracts so that any movement in asset values is balanced by a movement in the insurance provision.

			£m
		Impact on profit after tax
	At	At	At
	31 December	31 December	31 December
	2017	2016	2015
Impact of 1% increase in interest rates	20	16	12
Impact of 1% decrease in interest rates	(10)	(12)	(13)

(v) Currency translation risk

The Group is exposed to movements in exchange rates from changes in the Sterling value of surplus assets and earnings denominated in foreign currencies. From a capital perspective, our capital is held where our risks are located and currency translation risk would only be realised if we were to require a transfer of surplus capital between regions during a period of stress. The functional currencies of the Group's principal overseas operations are Euro and Hong Kong dollars.

Some of the Groups' business operations may undertake activities that are not in their functional currencies. These activities are economically hedged by numerous activities such as the use of currency swaps, currency borrowings and forward foreign exchange contracts.

The foreign currency translation table below have been prepared on the basis that the values of the economic hedging instruments are reflected at their carrying value as opposed to their notional amounts. The tables are therefore a reflection of the foreign currency exposures in their respective currencies. Each currency is actively managed and compared with appropriate limits. The Group does not have significant concentrations of foreign currency risk exposure.

At 31 December 2017, the Group's total shareholders' equity deployed by currency was:

						£m
	GBP	EUR	USD	SEK	Other	Total
Shareholders' equity at 31 December 2017	891	7	173	21	7	1,099
Shareholders' equity at 31 December 2016	779	179	12	19	3	992
Shareholders' equity at 31 December 2015	764	148	(15)	10	6	913

For the year ended 31 December 2017

42: Capital and financial risk management continued

(vi) Liquidity risk

Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Group manages liquidity by maintaining adequate liquidity resources and banking facilities, continuously monitoring forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities. Individual businesses maintain and manage their local liquidity requirements according to their business needs, within the overall liquidity framework established by the Group. The Group maintains contingency funding arrangements to provide liquidity support to businesses in the event of severe liquidity stresses.

Information on the nature of the investments and securities held is given in note 22.

During 2016 and 2015, the Group had an implicit borrowing arrangement with its parent Old Mutual plc where it could receive funding for liquidity strains in stress scenarios should the need arise. No drawdown on this arrangement was made over the period. In January 2017, the Group established a new internal £200 million revolving credit facility with Old Mutual plc for a two year duration which was subsequently amended in May 2017 to £70 million over the same term. Further details, together with information on the Group's borrowed funds, are given in note 34.

Group operating segments are required, both in terms of their local requirements and in accordance with the Group's liquidity risk framework, to establish their own processes for managing their liquidity and capital needs and these are subject to review by their local oversight functions, with representation from the Group.

The Group does not have material liquidity exposure to special purpose entities or investment funds. The contractual maturities of the Group's financial liabilities are set out below.

42(d) Contractual maturity analysis

The following table is a maturity analysis of liability cash flows based on contractual maturity dates for investment contract liabilities and expected claim dates for insurance contracts. Investment contract policyholders have the option to terminate or transfer their contracts at any time and to receive the surrender or transfer value of their policies. Although these liabilities are payable on demand, and are therefore included in the contractual maturity analysis as due in less than three months and more than three months and less than one year, the Group does not expect all these amounts to be paid out within one year of the reporting date.

The undiscounted cash flows of discretionary participating investment contracts only include amount vested or to be vested, while their carrying amount include reserves that are payable at the discretion of the Group.

						£m
At 31 December 2017				Undiscounted cash flows
	Carrying amount	Up to three months	Three months to one year	Between one and five years	More than five years	Total
Life assurance policyholder liabilities
Insurance contracts	489	15	8	34	855	912
Life assurance policyholder liabilities	480	6	8	34	855	903
Outstanding claims	9	9	-	-	-	9
Investment contracts
Unit-linked investment contracts and similar contracts	59,139	59,139	-	-	-	59,139
Total policyholder liabilities	59,628	59,154	8	34	855	60,051

For the year ended 31 December 2017

42: Capital and financial risk management continued

						£m
				Undiscounted cash flows
At 31 December 2016	Carrying amount	Up to three months	Three months to one year	Between one and five years	More than five years	Total
Life assurance policyholder liabilities
Insurance contracts	417	22	10	56	660	748
Life assurance policyholder liabilities	402	7	10	56	660	733
Outstanding claims	15	15	-	-	-	15
Investment contracts
Unit-linked investment contracts and similar contracts	51,265	53,080	-	-	-	53,080
Total policyholder liabilities	51,682	53,102	10	56	660	53,828

						£m
			Undiscounted cash flows
At 31 December 2015	Carrying amount	Up to three months	Three months to one year	Between one and five years	More than five years	Total
Life assurance policyholder liabilities
Insurance contracts	293	23	10	49	538	620
Life assurance policyholder liabilities	284	14	10	49	538	611
Outstanding claims	9	9	-	-	-	9
Investment contracts
Unit-linked investment contracts and similar contracts	49,041	48,525	516	-	-	49,041
Total policyholder liabilities	49,334	48,548	526	49	538	49,661

42(e) Operational risk

Operational risk is the risk that failure of people, processes, systems or external events results in financial loss, damage to brand/reputation or adverse regulatory intervention or government or regulatory fine.

Operational risk includes all risks resulting from operational activities, excluding risks already described above and excluding strategic risks and risks resulting from being part of a wider group of companies.

Operational risk includes the effects of failure of the administration processes, IT maintenance and development processes, investment processes (including settlements with fund managers, fund pricing and matching & dealing), product development and management processes, legal risks (e.g. risk of inadequate legal contract with third parties), risks relating to the relationship with third party suppliers, and the consequences of financial crime and business interruption events.

In accordance with Group policies, management have primary responsibility for the identification, management and monitoring of risks, and escalation and reporting on issues to executive management.

The company executive management have responsibility for implementing the Group risk management methodologies and framework and for development and implementation of action plans to manage risk levels within acceptable tolerances and resolve issues.

42(f) Investment contract risk

Investment contract risk arises through the exposure to unfavourable operating experience in respect of factors such as persistency levels and management expenses relative to the Group's expectations when pricing contracts, which may prevent the Group from achieving its profit objectives.

43: Fiduciary activities

The Group provides custody, trustee, corporate administration and investment management and advisory services to third parties that involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements. Some of these arrangements involve the Group accepting targets for benchmark levels of returns for the assets under the Group's care. These services give rise to the risk that the Group will be accused of misadministration or under-performance.

For the year ended 31 December 2017

44: Related parties

In the normal course of business, the Group enters into transactions with related parties that relate to insurance and investment management business. These are conducted on an arm's length basis and are not material to the Group's results.

44(a) Services provided to, and by related parties

Transactions with related parties carried out by the Group during the year were as follows:

			£m
	Year ended 31 December 2017	Year ended 31 December 2016	Year ended 31 December 2015
Income earned	5	2	3
Expenses incurred	(60)	(70)	(71)
Receivable at year end	28	115	56
Payable at year end	(790)	(843)	(792)

Expenses incurred include interest on loans to Old Mutual plc and commission paid/payable to other related parties. Payables at year end mainly relate loans payable to Old Mutual plc. Interests in subsidiaries and related undertakings are set out in Appendix B.

44(b) Transactions with key management personnel, remuneration and other compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Details of the compensation paid to the Board of directors as well as their shareholdings in the Company are disclosed in the Remuneration Report.

44(c) Key management personnel compensation

	£'000	£'000	£'000
	At 31 December 2017	At 31 December 2016	At 31 December 2015
Aggregate directors' emoluments
Aggregate emoluments excluding pension contributions	4,201	2,424	2,338
Company pension contribution to defined contributions schemes	10	17	38
	4,211	2,441	2,376

Three directors had money paid to a money purchase scheme during the year (2016: 1), (2015: 1).

Five directors (2016: 2), (2015: 2) received or were due to receive shares or share options in Old Mutual plc under a long term incentive scheme. Two directors (2016: 2), (2015: 2) exercised options during the year.

	£'000	£'000	£'000
	At 31 December 2017	At 31 December 2016	At 31 December 2015
Emoluments of the highest paid director
Aggregate emoluments excluding pension contributions	1,323	1,086	1,233

The highest paid director exercised share options during the current and prior years.

The directors' emoluments disclosed above are in respect of the two directors of the Parent Company in office during the year who are directly employed by Old Mutual Wealth Business Services Limited, a subsidiary undertaking (2016: 2), (2015: 2). The above disclosure includes the remuneration of those directors in relation to their services to this Parent Company and its subsidiaries. The remuneration for each director is apportioned on the basis of time spent across the Parent Company and its subsidiaries but restricted to the period in which they were a director of the Parent Company (and also reflecting the changing group structure across the reporting period).

The above emoluments also include the fees paid to the non-executive directors except for J B Hemphill and I G Johnson as they consider that their services to the Parent Company are incidental to their duties within the Group.

44(d) Key management personnel transactions

Key management personnel and members of their close family have undertaken transactions with the Group and its subsidiaries, joint ventures and associated undertakings in the normal course of business.

Various members of key management personnel hold or have at various times during the year held, investments managed by asset management businesses of the Group. These include unit trusts and mutual funds. None of the amounts concerned are material in the context of the funds managed by the Group business concerned, and all of the investments have been made by the individuals concerned either on terms which are the same as those available to external clients generally or, where that is not the case, on the same preferential terms as were available to employees of the business generally.

For the year ended 31 December 2017

44: Related parties continued

44(e) Other related parties

Details of the Group's pension schemes, whose assets are managed by external investment managers are provided in note 37. Transactions made between the Group and related parties were made in the normal course of business. Loans from related parties are made on normal arm's length commercial terms.

45: Events after the reporting date

Acquisition of Skandia UK from Old Mutual plc

The Skandia UK Limited group of entities was acquired from Old Mutual plc on 31 January 2018 and comprises seven Old Mutual plc group entities with net asset value of £591 million. The transfer was financed by the issue of a share and with the balance represented by a merger reserve; no debt was taken on as a result of this transaction. The most significant asset within these entities is a £566m receivable which corresponds to an equivalent payable within the Group's statement of financial position. The net effect of this transaction for the Group is to replace a payable due to Old Mutual plc with equity.

Financing arrangements

On 23 February 2018, the Group entered into, and fully drew down, the New Term Loan, a £300 million senior unsecured term loan with a number of relationship banks with an annual coupon of 45 basis points above LIBOR, to be updated every three months. The New Term Loan will be repaid in full using proceeds from the sale of the Single Strategy Business following the completion of the OMGI Transaction.

On 28 February 2018, the Group issued a £200 million subordinated debt security in the form of a 10-year Tier 2 bond with a one-time issuer call option after 5 years to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478% (the "Tier 2 Bond"). Including the impact of amortisation of bond set-up costs, the issuance of the Tier 2 Bond will increase operating expenses in the Head Office function by approximately £11 million on an annual basis. The debt security is currently undocumented and unlisted and has a Fitch instrument rating of BBB-. The Group intends to finalise a prospectus and obtain a listing for the Tier 2 Bond on the regulated market of the London Stock Exchange, with a view to a potential remarketing and secondary placement of the Tier 2 Bond in due course. In addition, the Group entered into the New Revolving Facility, a £125 million revolving credit facility which is currently undrawn and is expected to remain undrawn during 2018.

Subsequent to the year end, and as part of a series of internal transactions, £566 million of intercompany indebtedness to other companies within the Old Mutual plc group has been equitised, with the effect of the intercompany indebtedness being cancelled and replaced with equity in the form of share capital and a merger reserve. The overall indebtedness also reduced by £16 million from ordinary course transactions. The remaining £200 million intercompany indebtedness was repaid in full from the new facilities referred to above and from existing cash resources on 28 February 2018. On the same date, the £70 million revolving credit facility with Old Mutual plc was cancelled.

For the year ended 31 December 2017

46: Subsidiaries

Critical accounting estimates and judgements - Consolidation set of standards

The Group has applied the following key judgements in the application of the requirements of the consolidation set of standards (IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'):

Consolidation of investment funds and securitisation vehicles

The Group acts as a fund manager to a number of investment funds. In determining whether the Group controls such a fund, it will focus on an assessment of the aggregate economic interests of the Group (comprising any carried interests and expected management fees) and the investor's rights to remove the fund manager. The Group assesses, on an annual basis, such interests to determine if the fund will be consolidated. See note 24 for disclosures in respect of the investment funds in which the Group has an interest.

Structured entities

In assessing whether the Group has power over such investees in which it has an economic interest, the Group considers numerous factors. These factors may include the purpose and design of the investee, its practical ability to direct the relevant activities of the investee, the nature of its relationship with the investee and the size of its exposure to the variability of returns of the investee. The Group has evaluated all exposures and has concluded that all investments in investment funds as well as and other funding vehicles represent investments in structured entities. Information on structured entities is included in note 24.

46(a) Principal subsidiaries and Group enterprises

The following table lists the principal Group undertakings whose results are included in the consolidated financial statements. A complete list of the Group's related undertakings comprising of subsidiaries, associates and other significant holdings is contained in note Appendix B.

Parent company

Quilter plc (formerly known as Old Mutual Wealth Management Limited)

Subsidiaries

The principal subsidiaries of the Group at 31 December 2017 are listed by country of incorporation.

Name	Nature of business	% held
United Kingdom
Old Mutual Wealth Holdings Limited	Holding company	100
Old Mutual Wealth UK Holding Limited	Holding company	100
Old Mutual Global Investors Holdings Limited	Holding company	100
Old Mutual Wealth Life Assurance Limited	Life assurance	100
Old Mutual Wealth Life & Pensions Limited	Life assurance	100
Old Mutual Investment Management Limited	Multi-asset business	100
Quilter Cheviot Limited	Investment management	100
Intrinsic Financial Services Limited	Financial Advice	100
Old Mutual Wealth Limited	Savings and Investments	100
Old Mutual Wealth Business Services Limited	Management services	100
Ireland
Old Mutual International Ireland Limited	Life assurance	100
Isle of Man
Old Mutual International Holdings Limited	Holding company	100
Old Mutual International Isle of Man Limited	Life assurance	100

All the above companies have a year end of 31 December and their financial results have been incorporated and are included in the Group financial statements from the effective date that the Group controls the entity.

46(b) Guarantees provided by the Group to subsidiaries

No significant guarantees have been provided by the Group during the financial year.

The Group provides financial support in certain cases where funds require seed capital and also provides liquidity funding in the case of large divestments from unit trust funds.

During 2016 the Parent Company made capital contributions of £35 million to its subsidiary Old Mutual Wealth Holdings Limited.

46(c) Loss of control of subsidiaries

There has been no loss of control of any major subsidiaries during the course of the current and previous year.

For the year ended 31 December 2017

Appendix A: Other accounting policies

Investments in associates

An associate is an entity over which the Group has significant influence, but not control or joint control, through its participation in the entity's financial and operating policy decisions. Significant influence is generally demonstrated by the Group holding between 20% and 50%, of the voting rights. Where voting rights are irrelevant, all other factors, contractual or otherwise, are assessed in determining whether the Group has the ability to exercise significant influence.

The results, assets and liabilities of associates, other than those that are measured at FVTPL (see below) are incorporated into these consolidated financial statements using the equity method of accounting from the date that significant influence commences until the date it ends. Under this method, the cost of the investment in an associate together with the Group's share of that entity's post-acquisition changes to shareholders' funds is included as an asset in the consolidated statement of financial position. The cost includes goodwill recognised on acquisition. The Group's share of associates' post-acquisition profits or losses is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. Where a Group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Unrealised losses are eliminated in the same way but only to the extent that there is no evidence of impairment. Investments in associates that are held with a view to subsequent resale are accounted for as non-current assets held for sale.

Where the Group has an investment in an associate, a portion of which is held by, or is held indirectly through a unit trust or similar entity, including investment-linked insurance funds, that portion of the investment is measured at FVTPL.

Foreign currency translation

The Group's presentation currency is pounds sterling (£). The functional currency of the Group's foreign operations is the currency of the primary economic environment in which these entities operate. The Parent Company functional currency is pounds sterling (£). Income statements and cash flows of foreign entities are translated into the group's presentation currency at average exchange rates for the year and their statements of financial position are translated at the year-end exchange rates. Exchange rate differences arising from the translation of the net investment in foreign subsidiaries and associates are recognised in other comprehensive income and taken to the currency translation reserve within equity. To the extent that these gains and losses are effectively hedged, the cumulative effect of such gains and losses arising on the hedging instruments are also included in that component of shareholders' equity. On disposal of a foreign entity, exchange differences are transferred out of this reserve to the income statement as part of the gain or loss on sale.

Foreign currency transactions are converted into the relevant functional currency at the exchange rate prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into the relevant functional currency at exchange rates prevailing at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency at foreign exchange rates prevailing at the dates the fair values were determined. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are converted into the functional currency at the rate of exchange ruling at the date of the initial recognition of the asset and liability and are not subsequently retranslated.

Exchange gains and losses on the translation and settlement during the period of foreign currency assets and liabilities are recognised in profit or loss. Exchange differences for non-monetary items are recognised in the statement of other comprehensive income when the changes in the fair value of the non-monetary item are recognised in the statement of other comprehensive income, and in profit or loss if the changes in fair value of the non-monetary item are recognised in profit or loss.

Property, plant and equipment

Property, plant and equipment consists principally of computer equipment, motor vehicles, fixtures and fittings, and is stated at cost less accumulated depreciation and any recognised impairment losses. Cost includes the original purchase price of the asset and the costs of bringing the asset to its working condition for its intended use. Depreciation is charged to profit or loss on a straight-line basis to write down the cost of the asset to its residual value over its estimated useful life, ranging between 3 and 10 years depending on the length of time the Group expects to derive benefit from the asset.

Management determines useful lives and residual values for assets when they are acquired, based on experience of similar assets and taking into account other relevant factors such as any expected changes in technology. The Group assesses and adjusts (if required) the useful life, residual value and depreciation method for property plant and equipment on an annual basis.

Items of property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. Where the carrying amount of an asset is greater than its estimated recoverable amount, which represents the higher of the asset's fair value less costs of disposal and value in use, it is written down immediately to its recoverable amount and an impairment loss is recognized in the income statement. Impaired non-financial assets, except goodwill, are reviewed for possible reversal of the impairment at each reporting date. On derecognition of an item of equipment, any gain or loss on disposal, determined as the difference between the net disposal proceeds and the carrying amount of the asset, is included in profit or loss in the period of the de-recognition. Items of property and equipment that are not owned by the Group, but are held under lease arrangements are accounted for in accordance with the accounting policy on leases.

Leases

Operating leases

Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as operating leases. Where the Group is the lessee, payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the term of the lease.

Finance leases

Lease agreements where the Group substantially accepts the risks and rewards of ownership of the leased asset are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments. Lease payments are allocated between the liability and finance charges so as to achieve a constant interest rate on the outstanding balance of the liability.

Finance lease obligations, net of finance charges, are included in liabilities. The interest element of the finance cost is charged to profit or loss over the lease period under the effective interest method. Where applicable, assets acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.

For the year ended 31 December 2017

Share Capital

Equity instruments

Shares are classified as equity instruments when there is no contractual obligation to deliver cash or other assets to another entity on terms that may be unfavourable. The value of the Company's share capital consists of the number of ordinary shares in issue multiplied by their nominal value. The difference between the proceeds received on issue of the shares and the nominal value of the shares issued is recorded in share premium.

Share issue costs

Incremental external costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds of the issue and disclosed where material.

Dividends

Dividends are distributions of profit to holders of the Group's share capital and as a result are recognised as a deduction in equity. Dividends payable to holders of equity instruments are recognised in the period in which they are authorised or approved. Interim dividends payable to holders of the Group's ordinary share capital are announced with the Half Year results and authorised by the directors of the Parent Company. The final dividend is announced with the Annual Report and Accounts and typically requires shareholder approval at the Annual General Meeting. For this reason it is not included in the annual consolidated financial statements.

Shares held by trusts

Shares in the Parent Company that are held by the Employee Benefit Trust (EBT) are treated as 'own shares' or Treasury shares. The EBT purchases shares in the Parent Company for delivery to employees under employee incentive plans. Purchased shares are recognised as a deduction from equity at the price paid for them.

Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to the ordinary shareholders of the Parent Company by the weighted average number of Ordinary Shares in issue during the period, excluding Ordinary Shares purchased by various share trusts of the Group and held as own shares.

Diluted earnings per share is calculated by increasing the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares, notably those related to employee share schemes.

For the year ended 31 December 2017

Appendix B: Related undertakings

The Companies Act 2006 requires disclosure of certain information about the Group's related undertakings which is set out in this note. Related undertakings comprise subsidiaries, joint ventures, associates and other significant holdings. Significant holdings are where the Group either has a shareholding greater than or equal to 20% of the nominal value of any share class, or a book value greater than 20% of the Group's assets.

The definition of a subsidiary undertaking in accordance with the Companies Act 2006 is different from the definition under IFRS. As a result, the related undertakings included within the list below may not be the same as the undertakings consolidated in the Group IFRS financial statements. Refer to accounting policies note 4.1 Group Accounting for further detail on principles of consolidation and definition of joint ventures.

The Group's related undertakings along with the country of incorporation, the registered address, the classes of shares held and the effective percentage of equity owned at 31 December 2017 are disclosed below.

Company Name	Share Class	% Held
United Kingdom
Old Mutual House, Portland Terrace, Southampton, SO14 7EJ
IFA Holding Company Limited	Ordinary	100
IFA Services Holdings Company Limited	Class A and Class B Ordinary	100
Old Mutual Wealth Business Services Limited	Ordinary	100
Old Mutual Wealth Holdings Limited	Ordinary	100
Old Mutual Wealth Life Assurance Limited	Ordinary	100
Old Mutual Wealth Life & Pensions Limited	Ordinary	100
Old Mutual Wealth Limited	Ordinary	100
Old Mutual Wealth Nominees Limited	Ordinary	100
Old Mutual Wealth Pensions Trustee Limited	Ordinary	100
Old Mutual Wealth UK Holding Limited	Ordinary	100
Onenote Limited (dissolved 24 January 2017)	Ordinary	100
Selestia Investments Limited	Class A1, B1, B2, B3 and C shares	100
Selestia Services Limited (dissolved 24 January 2017)	Class A1, B1, B2, B3, C and R shares	100
Millennium Bridge House, 2 Lambeth Hill, London, EC4V 4GG
Beaumont Robinson Limited	Ordinary	100
Commsale 2000 Limited	Ordinary	100
Dodd Murray Limited	Ordinary class B,C,D,I & K	100
DQS Financial Management Limited	Ordinary	100
Infiniti Financial Planning & Investment Management Limited	Ordinary	100
Maestro Financial Services Limited	Ordinary & preference	100
Michael Waite Independent Financial Advice Limited	Ordinary	100
NPL Financial Limited	Ordinary	100
Old Mutual Global Investors Holdings Limited	Ordinary	100
Old Mutual Global Investors (UK) Limited	Ordinary	100
Old Mutual Investment Management Limited	Ordinary	100
Old Mutual Wealth Private Client Advisers Limited	Ordinary	100
OMIFM Limited	Ordinary	100
OMW CoSec Services Limited	Ordinary	100
Premier Planning Limited	Ordinary	100
Premier Wealth Limited	Ordinary	100
Quilter Cheviot Investment Management Limited	Ordinary	100
Quilter Financial Planning Limited	Ordinary	100
Quilter International Limited	Ordinary	100
Quilter Investors Limited	Ordinary	100
Quilter Life Assurance Limited	Ordinary	100
Quilter Private Client Advisors Limited	Ordinary	100
Quilter Wealth Solutions Limited	Ordinary	100
One Kingsway, London, WC2B 6AN
Cheviot Capital (Nominees) Limited	Ordinary	100
Quilter Group Limited (formerly Cheviot GP Limited)	Ordinary	100
QUILPEP Nominees Limited	Class A and B2 shares	100
Quilter Cheviot Holdings Limited	Ordinary	100
Quilter Cheviot Limited	Ordinary	100
Quilter Limited	Ordinary	100
Quilter Nominees Limited	Class B shares	100

For the year ended 31 December 2017

Company Name	Share Class	% Held
One Kingsway, London, WC2B 6AN
Violet No2 Limited	Ordinary	100
Cheviot Exodus LP (dissolved 25 August 2017)	Ordinary	100
Wiltshire Court, Farnsby Street, Swindon, SN1 5AH
Blueprint Distribution Limited	Ordinary and cumulative redeemable preference shares	100
Blueprint Financial Services Limited	Ordinary and cumulative redeemable preference shares	100
Blueprint Organisation Limited	Ordinary and cumulative redeemable preference shares	100
Caerus Bureau Services Limited	Ordinary	100
Caerus Capital Group Limited	Ordinary and Class B shares	100
Caerus Financial Limited	Ordinary	100
Caerus Holdings Limited	Ordinary	100
Caerus Portfolio Management Limited	Ordinary	100
Caerus Wealth Limited	Ordinary	100
Caerus Wealth Solutions Limited	Ordinary	100
Intrinsic Valuation Services Limited	Ordinary	100
Intrinsic Cirilium Investment Company Limited	Class A, Class B and preference shares	100
Intrinsic Financial Planning Limited	Ordinary	100
Intrinsic Financial Services Limited	Ordinary	100
Intrinsic Financial Solutions Limited	Ordinary	100
Intrinsic Mortgage Planning Limited	Ordinary	100
Intrinsic Wealth Financial Solutions Limited	Ordinary	100
Intrinsic Wealth Limited	Ordinary	100
Riverside House, The Waterfront, Newcastle upon Tyne, NE15 8NY
Positive Solutions (Financial Services) Limited	Class B1 Shares	100
Think Synergy Limited	Ordinary	100
12-14,Upper Marlborough Road, St Albans, Hertfordshire, AL1 3UR
360 Dot Net Limited	Ordinary	13
6 Tollgate Business Park Tollgate West, Stanway, Colchester, Essex, England, CO3 8AB
Charles Derby Group Limited	Ordinary	10
Hong Kong
24th Floor, Henley Building, 5 Queen's Road
Old Mutual Global Investors (Asia Pacific) Limited	Ordinary	100
Ireland Arthur Cox Building, Earlsfort Terrace, Dublin 2, D02 CK83
Old Mutual International (Ireland) dac	Ordinary	100
Hambledon House, 2nd Floor, 19/26 Lower Pembroke Street, Dublin 2 Pembroke Quilter (Ireland) Nominees Limited	Ordinary	100
Isle of Man
King Edward Bay House, King Edward Road, Onchan, IM99 1NU
Old Mutual International Business Services Limited	Ordinary	100
Old Mutual International Holdings Limited	Ordinary	100
Old Mutual International Isle of Man Limited	Ordinary	100
Old Mutual International Trust Company Limited	Ordinary	100
Jersey 4th Floor 28/30 The Parade, St Helier, JE2 3QQ
C.I.P.M Nominees Limited	Ordinary	100
QGCI Nominees Limited	Ordinary	100
Singapore
Marina Boulevard, #05-02, Marina Bay Financial Centre Old Mutual Global Investors (Singapore) PTE. Limited	Ordinary	100
Capita Green, #06-01, 138 Market Street, 048946
AAM Advisory PTE Limited	Ordinary	100
South Africa
Mutual Gardens, Mowbary, Cape Town
Global Edge Technologies (Pty) Limited	Ordinary	100

For the year ended 31 December 2017

Switzerland
Schützengasse 4, 8001 Zürich
Old Mutual Global Investors (Switzerland) LLC	Ordinary	100
United Arab Emirates
7&8, Level 2, Gate Village 7, Dubai International Financial Centre, Dubai, 482062
Old Mutual International Middle East Limited	Ordinary and Class B and Class D redeemable preference shares	100

In addition, the following funds are consolidated and constitute related undertakings:

Fund Name	Share Class	% Held
United Kingdom
Millennium Bridge House, 2 Lambeth Hill, London, EC4V 4AJ
Old Mutual Asian Equity Income Fund	Ordinary	95
Old Mutual Absolute Return Government Bond Fund	Accumulation	48
Old Mutual Cirilium Balanced Portfolio	Accumulation	47
Old Mutual Cirilium Balanced Passive Portfolio	Accumulation	65
Old Mutual Cirilium Conservative Portfolio	Accumulation	50
Old Mutual Cirilium Conservative Passive Portfolio	Accumulation	58
Old Mutual Cirilium Dynamic Passive Portfolio	Accumulation	52
Old Mutual Cirilium Moderate Passive Portfolio	Accumulation	55
Old Mutual Compass Portfolio 2	Hedged	73
Old Mutual Compass Portfolio 3	Hedged	84
Old Mutual Compass Portfolio 4	Hedged	81
Old Mutual Compass Portfolio 5	Hedged	97
Old Mutual Europe Ex UK Smaller companies Fund	Hedged	47
Old Mutual Global Emerging Markets	Ordinary	53
Old Mutual Global Strategic Absolute Return Bond Fund	Hedged	99
Old Mutual Japanese Equity	Hedged	55
Old Mutual Local Currency Emerging Market Debt Fund	Hedged	61
Old Mutual Managed Fund	Accumulation	24
Old Mutual Monthly Income High yield Bond Fund	Hedged	98
Old Mutual Style Premia Absolute Return Fund	Hedged	96
Old Mutual Woodford Equity Income	Accumulation	100
OM Aberdeen Asia Pacific Fund	Accumulation	100
OM Artemis Income Fund	Accumulation	100
OM Artemis UK Special Situations Fund	Accumulation	100
OM Asia Pacific Fund	Accumulation	44
OM Blackrock Gold & General Fund	Accumulation	100
Old Mutual Newton UK Opportunities Fund	Accumulation	100
OM Bond 1 Fund	Income	100
OM Bond 2 Fund	Income and Accumulation	100
OM Bond 3 Fund	Income and Accumulation	100
OM Corporate Bond Fund	Income and Accumulation	50
OM Equity 1 Fund	Accumulation	100
OM Equity 2 Fund	Accumulation	100
OM Ethical Fund	Accumulation	62
OM European Equity (ex UK) Fund	Accumulation	77
OM Fidelity Global Focus Fund	Accumulation	100
OM Fidelity Moneybuilder Income Fund	Income and Accumulation	100
OM Fidelity Strategic Bond Fund	Income and Accumulation	100
OM Foundation 3 Fund	Income and Accumulation	97
OM Foundation 4 Fund	Income and Accumulation	100
OM Foundation 5 Fund	Income and Accumulation	100
OM Generation Target 3 Fund	Income and Accumulation	76
OM Generation Target 4 Fund	Income and Accumulation	85
OM Generation Target 5 Fund	Income and Accumulation	73
OM Gilt Fund	Income and Accumulation	100

For the year ended 31 December 2017

OM Global Best Ideas Fund	Accumulation	58
OM Global Equity Income Fund	Income and Accumulation	88
OM Global Property Securities Fund	Income and Accumulation	73
OM Global Strategic Bond Fund	Income and Accumulation	35
OM Henderson China Opportunities Fund	Accumulation	100
OM Henderson European Growth Fund	Accumulation	100
OM Invesco Perpetual Asian Fund	Accumulation	100
OM Invesco Perpetual Corporate Bond Fund	Income and Accumulation	100
OM JPM Emerging Markets Fund	Accumulation	100
OM JPM Natural Resources Fund	Accumulation	99
OM Monthly Income Bond Fund	Income and Accumulation	79
OM Newton Global Income Fund	Income and Accumulation	100
Old Mutual Newton UK Income Fund	Income and Accumulation	100
OM North American Equity Fund	Accumulation	28
OM Schroder Tokyo Fund	Accumulation	100
OM Schroder US Mid Cap Fund	Income and Accumulation	100
Old Mutual Creation Conservative Portfolio	Accumulation	92
Old Mutual Creation Balanced Portfolio	Accumulation	92
Old Mutual Creation Moderate Portfolio	Accumulation	92
Old Mutual Creation Dynamic Portfolio	Accumulation	89
Old Mutual JPM US Growth Advantage Fund	Accumulation	100
OM Threadneedle European Select Fund	Accumulation	100
OM Threadneedle High Yield Bond Fund	Income and Accumulation	100
OM UK Equity Income Fund	Income and Accumulation	67
OM UK Index Fund	Accumulation	100
OM Voyager Diversified Fund	Accumulation	99
OM Voyager Global Dynamic Equity Fund	Accumulation	96
OM Voyager Strategic Bond Fund	Income and Accumulation	94
OM World Index Fund	Accumulation	100
Old Mutual Cirilium Moderate Portfolio	Ordinary	39
Old Mutual Schroder European Alpha Income Fund	Ordinary	100
Old Mutual Cirilium Adventurous Portfolio	Ordinary	64
Old Mutual Cirilium Adventurous Passive Portfolio	Ordinary	71
Old Mutual Creation Adventurous Portfolio	Ordinary	100
Old Mutual Emerging Market Debt Fund	Ordinary	43
Old Mutual Financials Contingent Capital Fund	Ordinary	75
Oakhill House, 150 Tonbridge Road, Hildenborough, Tonbridge, Kent, TN11 9DZ
Fidelity Multi Asset Adventurous Fund	Accumulation	65
Luxembourg
4, Rue Jean Monnet L-2180 Luxembourg Grand Duchy of Luxembourg
Old Mutual Global Portfolios – Balanced Fund	Ordinary	100
Old Mutual Global Portfolios – Dynamic Fund	Ordinary	100
Old Mutual Global Portfolios – Cautious Fund	Ordinary	100

Unaudited Pro Forma Financial Information

SECTION A – PRO FORMA FINANCIAL INFORMATION OF QUILTER PLC

The unaudited pro forma financial information set out below has been prepared to illustrate the effect of the disposal of the Single Strategy Business, the acquisition of Skandia UK, the external debt refinancing and the repayment of an Old Mutual plc loan on the consolidated statement of financial position of Quilter plc as if they had taken place on 31 December 2017 and on the consolidated income statement of Quilter plc as if they had taken place on 1 January 2017.

The pro forma financial information is based on the audited historical financial information of Quilter plc as at and for the year ended 31 December 2017 as set out in "Historical Financial Information" of this Prospectus.

The pro forma financial information has been prepared on the basis of, and should be read in conjunction with, the notes set out below.

The pro forma financial information has been prepared in a manner consistent with the accounting policies to be adopted by Quilter plc for the year ending 31 December 2018, and in accordance with IFRS as adopted by the EU.

The pro forma financial information has been prepared for illustrative purposes only in accordance with Annex II of the Prospectus Directive. Because of its nature, the pro forma financial information addresses a hypothetical situation and, therefore, does not represent Quilter plc's actual financial position or results. It may not, therefore, give a true picture of Quilter plc'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 pro forma financial information is the responsibility of the Directors.

UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITION

		Adjustments
	Quilter plc as at 31 December 2017	Acquisition of Skandia UK	Notes	Repayment of Old Mutual plc loan	Sub total	Disposal of the Single Strategy Business	Unaudited Pro forma
	Note 1	Note 2	Note 3	Note 4		Note 5
Assets Goodwill and other intangible				(£ millions)
assets	574	-		- -	574	-	574
Property, plant and equipment Investments in	18	-		- -	18	-	18
associated undertakings Loans and	3	-		- -	3	-	3
advances Financial	199	-		- -	199	-	199
investments Reinsurers' share of policyholder	64,248	-		- -	64,248	-	64,248
liabilities Deferred tax	2,908	-		- -	2,908	-	2,908
assets Trade, other receivables and	22	-		- -	22	-	22
other assets Deferred	497	-		- (16)	481	-	481
acquisition costs	611	-		- -	611	-	611

Derivative assets Cash and cash	87	-	-	-	87	-	87
equivalents Assets of operations	2,360	26	189	(194)	2,381	585	2,966
classified as held
for sale	446	-	-	-	446	(446)	-
Total assets	71,973	26	189	(210)	71,978	139	72,117
Equity and Liabilities Equity Ordinary share
capital	130	-	-	-	130	-	130
Share premium Merger reserve	58 -	- 591	- -	- -	58 591	- -	58 591
Other reserves	39	-	-	-	39	-	39
Retained earnings	872	29	(11)	6	896	358	1,254
Total equity	1,099	620	(11)	6	1,714	358	2,072
Liabilities Long-term business insurance policyholder
liabilities Investment	489	-	-	-	489	-	489
contract liabilities Third-party interests in consolidated	59,139	-	-	-	59,139	-	59,139
funds Provisions and	7,905	-	-	-	7,905	-	7,905
accruals	104	3	-	-	107	-	107
Deferred tax liabilities Current tax	190	-	-	-	190	-	190
payable	38	-	-	-	38	-	38
Borrowings Trade, other payables and	782	(566)	200	(216)	200	-	200
other liabilities	1,331	(32)	-	-	1,299	-	1,299
Deferred revenue	244	-	-	-	244	-	244
Derivative
liabilities Liabilities of operations	433	-	-	-	433	-	433
classified as held for sale	219	-	-	-	219	(219)	-
Total liabilities	70,874	(595)	200	(216)	70,263	(219)	70,044
Total equity and liabilities	71,973	25	189	(210)	71,977	139	72,116

⁽¹⁾ The financial information for the year ended 31 December 2017 has been extracted without adjustment from the historical financial information set out in Section B of "Historical Financial Information" of this Prospectus.

__________________

⁽²⁾ Acquisition of Skandia UK Limited: The Skandia UK Limited group of entities was acquired from Old Mutual plc on 31 January 2018 and comprises seven Old Mutual plc group entities with a net asset value of £591 million. The transfer was financed by the issue of one share, with the balance represented by a merger reserve; no debt was taken on as a result of this transaction. The most significant asset within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial position. Subsequent to the year end, a series of transactions were carried out the net effect of which was to replace £566 million of intercompany indebtedness due to Old Mutual plc with equity in the form of share capital and a merger reserve.

• (3) Issue of Notes: On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semiannual coupon of 4.478%. Including the impact of amortisation of bond set-up costs, the issuance of the Notes will increase operating expenses, which will be reported as part of Head Office, by £11 million on an annual basis. The Notes have a Fitch instrument rating of BBB-.
• (4) Repayment of Old Mutual plc loan of £200 million: As at 31 December 2017, the Group had net payables due to Old Mutual plc of £766 million (representing a gross payable of £782 million offset by a £16 million receivable). The acquisition of Skandia UK Limited (see Note 2 above) in January 2018 reduced this payable by £566 million to £200 million; the remaining £200 million net liability to Old Mutual plc was settled from the new financing arrangements obtained in February 2018 and from existing cash resources.
• (5) Disposal of the Single Strategy Business: In December 2017, the Group announced that it had entered into an agreement to sell the Single Strategy Business to Bidco for an expected total consideration of approximately £600 million, comprising cash consideration of approximately £570 million payable on or before completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as surplus capital associated with the separation from the Group is released in the business. These values are subject to a number of potential price adjustments depending on the net asset value of the business and a number of other factors at the disposal date. The deferred consideration is not subject to performance conditions. Once the OMGI Transaction completes, economic ownership of the Single Strategy Business will pass to Bidco effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of the Group. On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, the New Term Loan, a £300 million senior unsecured term loan with a number of lenders with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating, to bridge the period until such time as the cash consideration from the sale of the Single Strategy Business is received. These have been netted off for the purposes of this pro forma statement, as both the loan and the sale are assumed to be completed on 1 January 2017. No interest costs have been included within the pro forma financial statements.

UNAUDITED PRO FORMA INCOME STATEMENT

				Adjustments
	Quilter plc as at 31 December 2017	Acquisition of Skandia UK	Issue of Notes	Repayment of Old Mutual plc loan	Sub total	Disposal of the Single Strategy Business	Unaudited Pro forma
	Note 1	Note 2	Note 3	Note 4		Note 5
Revenue				(£ millions)
Gross earned premiums Premiums ceded to	148	-	-	-	148	-	148
reinsurers	(88)	-	-	-	(88)	-	(88)
Net earned premiums Fee and commission income, and income	60	-	-	-	60	-	60
from service activities	895	-	-	-	895	-	895
Net investment income	5,195	-	-	-	5,195	-	5,195
Other income	13	2	-	-	15	-	15
Total revenue	6,163	2	-	-	6,165	-	6,165
Expenses
Claims and benefits paid	(76)	-	-	-	(76)	-	(76)
Reinsurance recoveries	54	-	-	-	54	-	54
Net insurance claims and benefits incurred Change in reinsurance	(22)	-	-	-	(22)	-	(22)
assets and liabilities Change in insurance	85	-	-	-	85	-	85
contract liabilities Change in investment	(78)	-	-	-	(78)	-	(78)
contract liabilities	(4,308)	-	-	-	(4,308)	-	(4,308)

Fee and commission expenses, and other acquisition costs Change in third-party interest in consolidated	(320)	-	-	-	(320)	-	(320)
funds Other operating and	(673)	-	-	-	(673)	-	(673)
administrative expenses	(816)	-	-	-	(816)	-	(816)
Finance costs	(39)	32	(11)	8	(10)	-	(10)
Total expenses	(6,171)	32	(11)	8	(6,142)	-	(6,142)
Profit on the acquisition and re-measurement of
subsidiaries	3	-	-	-	3	-	3
Profit/(loss) before tax	(5)	34	(11)	8	26	-	26
Tax expense attributable to policyholders' funds	(49)	-	-	-	(49)	-	(49)
Profit/(loss) before tax attributable to
shareholders' profits	(54)	34	(11)	8	(23)	-	(23)
Income tax expense Less: tax attributable to	(41)	(5)	-	(2)	(48)	-	(48)
policyholders' funds Tax attributable to	49	-	-	-	49	-	49
shareholders' funds	8	(5)	-	(2)	1	-	1
Profit/(loss) after tax from continuing
operations Profit after tax from	(46)	29	(11)	6	(22)	-	(22)
discontinued operations	203	-	-	-	203	235	438 (6)
Profit for the year after tax	157	29	(11)	6	181	235	416

(1) The financial information for the year ended 31 December 2017 has been extracted without adjustment from the historical financial information set out in Section B of "Historical Financial Information" of this Prospectus.

(2) Acquisition of Skandia UK Limited: The Skandia UK Limited group of entities was acquired from Old Mutual plc on 31 January 2018 and comprises seven Old Mutual plc group entities with a net asset value of £591 million. The transfer was financed by the issue of one share, with the balance represented by a merger reserve; no debt was taken on as a result of this transaction. The most significant asset within these entities is a £566 million receivable which corresponds to an equivalent payable within the Group's statement of financial position. Subsequent to the year end, a series of transactions were carried out the net effect of which was to replace £566 million of intercompany indebtedness to Old Mutual plc with equity in the form of share capital and a merger reserve.

(3) Issue of Notes: On 28 February 2018, the Group issued the Notes to J.P. Morgan Securities plc, paying a semiannual coupon of 4.478%. Including the impact of amortisation of bond set-up costs, the issuance of the Notes will increase operating expenses, which will be reported as part of Head Office, by £11 million on an annual basis. The Notes have a Fitch instrument rating of BBB-.

(4) Repayment of Old Mutual plc loan of £200 million: As at 31 December 2017, the Group had net payables due to Old Mutual plc of £766 million (representing a gross payable of £782 million offset by a £16 million receivable). The acquisition of Skandia UK Limited (see Note 2 above) in January 2018 reduced this payable by £566 million to £200 million; the remaining £200 million net liability to Old Mutual plc was settled from the new financing arrangements obtained in February 2018 and from existing cash resources.

(5) Disposal of the Single Strategy Business: In December 2017, the Group announced that it had entered into an agreement to sell the Single Strategy Business to Bidco for an expected total consideration of approximately £600 million, comprising cash consideration of approximately £570 million payable on or before completion, with approximately £30 million anticipated to be payable thereafter, paid primarily in 2019 to 2021 as surplus capital associated with the separation from the Group is released in the business. These values are subject to a number of

__________________

potential price adjustments depending on the net asset value of the business and a number of other factors at the disposal date. The deferred consideration is not subject to performance conditions. Once the OMGI Transaction completes, economic ownership of the Single Strategy Business will pass to Bidco effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of the Group. On 23 February 2018, the Group entered into, and fully drew down on 28 February 2018, the New Term Loan, a £300 million senior unsecured term loan with a number of lenders with an opening interest rate of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating, to bridge the period until such time as the cash consideration from the sale of the Single Strategy Business is received. These have been netted off for the purposes of this pro forma statement, as both the loan and the sale are assumed to be completed on 1 January 2017. No interest costs have been included within the pro forma financial statements.

(6) Breakdown of profit after tax from discontinued operations:

Profit after tax from discontinued operations	(£ million)
Profit on sale of Old Mutual Wealth Italy	80
Single Strategy Business profit after tax	123
Quilter plc as at 31 December 2017	203
Profit on sale of the Single Strategy Business	358
Remove the Single Strategy Business profit after tax	(123)
Pro Forma	438

SECTION B – ACCOUNTANTS' REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

KPMG LLP 15 Canada Square London E14 5GL United Kingdom Tel +44 (0) 20 7311 1000 Fax +44 (0) 20 7311 3311

The Directors
Quilter plc
Millennium Bridge House
2 Lambeth Hill
London
EC4V 4AJ

9 April 2018

Ladies and Gentlemen

Quilter plc

We report on the pro forma financial information (the 'Pro forma financial information') set out in Section A of "Unaudited Pro Forma Financial Information" of the prospectus dated 9 April 2018, which has been prepared on the basis described in Section A, for illustrative purposes only, to provide information about how the disposal of the Single Strategy Business, the acquisition of Skandia UK and a restructuring of the Company's debt might have affected the financial information presented on the basis of the accounting policies adopted by Quilter plc in preparing the financial statements for the year ended 31 December 2017. This report is required by paragraph 7 of Annex II of the Prospectus Directive Regulation and is given for the purpose of complying with that paragraph and for no other purpose.

Responsibilities

It is the responsibility of the directors of Quilter plc to prepare the Pro forma financial information in accordance with Annex II of the Prospectus Directive Regulation.

It is our responsibility to form an opinion, as required by paragraph 7 of Annex II of the Prospectus Directive Regulation, 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 Proforma 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.

Save for any responsibility arising under Prospectus Rule 5.5.4R (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 paragraph

13.1 of Annex IX of the Prospectus Directive Regulation, consenting to its inclusion in the prospectus.

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 Quilter 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 Proforma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of Quilter plc.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or 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 Quilter plc.

Declaration

For the purposes of Prospectus Rule 5.5.4R (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 IX of the Prospectus Directive Regulation.

Yours faithfully

KPMG LLP

KPMG LLP

Managed Separation

On 15 March 2018, when Old Mutual plc announced its results for the financial year ended 31 December 2017, it confirmed that, subject to addressing the remaining issues but consistent with the statements made when the Managed Separation strategy was unveiled in March 2016, Old Mutual plc was on track for Managed Separation to be materially complete by the end of 2018. Old Mutual plc also confirmed that, after addressing the remaining issues, it expects that the legal process of separation will include, inter alia, the issuance of shareholder documentation in relation to Managed Separation (including the publication of a prospectus in relation to Quilter plc and the Proposed Listing), a UK Court approved scheme of arrangement process which will facilitate the Quilter Separation, the creation of OML as the holding company of Old Mutual plc, including its residual assets and liabilities, and a reduction in the capital of Old Mutual plc.

The board of Old Mutual plc will only implement or procure implementation of the steps required for Managed Separation if the requisite approvals, including approval by Old Mutual plc shareholders and the UK Court approved scheme of arrangement process referred to above, are obtained for all steps and, at the relevant time, the board of Old Mutual plc considers that it continues to be in the best interests of the Old Mutual plc shareholders that Managed Separation be implemented. Further details on the Old Mutual plc shareholder approval process will be set out in the shareholder circular to be published by Old Mutual plc in connection with Managed Separation.

Terms and Conditions of the Notes

The following (save for any text in italics or footnotes) is the text of the terms and conditions of the Notes, substantially as they will appear on the Certificates in definitive form (if issued).

The £200,000,000 4.478 per cent. Fixed Rate Reset Subordinated Notes due 2028 (the "Notes") are constituted by a trust deed dated 28 February 2018 (as amended and/or restated and/or supplemented from time to time, the "Trust Deed") between Old Mutual Wealth Management Limited¹ (the "Issuer") and Citicorp Trustee Company Limited (the "Trustee", which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Notes (the "Noteholders"). These terms and conditions (the "Conditions") include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Notes referred to below. An Agency Agreement dated 28 February 2018 (as amended and/or restated and/or supplemented from time to time, the "Agency Agreement") has been entered into in relation to the Notes between the Issuer, the Trustee, Citibank, N.A., London Branch as principal paying agent and the other agents named in it. The principal paying agent, the paying agents, the agent bank, the registrar and the transfer agents for the time being appointed under the Agency Agreement (if any) are referred to below respectively as the "Principal Paying Agent", the "Paying Agents" (which expression shall include the Principal Paying Agent), the "Agent Bank", the "Registrar" and the "Transfer Agents" (which expression shall include the Registrar). Copies of the Trust Deed and the Agency Agreement are available for inspection during usual business hours and upon reasonable notice at the specified offices of the Paying Agents and the Transfer Agents.

The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the Agency Agreement.

1. Form, denomination and title

The Notes are issued in registered form in specified denominations of £200,000 and integral multiples of £1,000 in excess thereof.

The Notes are represented by registered certificates ("Certificates") and, save as provided in Condition 2(a), each Certificate shall represent the entire holding of Notes by the same Noteholder.

Title to the Notes shall pass upon registration in the register of the Noteholders that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement (the "Register"). Except as ordered by a court of competent jurisdiction or as required by law, the holder of any Note shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on the Certificate representing it or the theft or loss of the relevant Certificate and no person shall be liable for so treating the Noteholder.

On the Issue Date (as defined in the terms and conditions of the Notes) the legal name of the Issuer was Old Mutual Wealth Management Limited. As at the date of this Prospectus, the Issuer's legal name is Quilter plc.

2. Transfers of Notes

(a) Transfer of Notes

One or more Notes may, subject to Condition 2(d), be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate representing such Notes to be transferred, together with the form of transfer endorsed on such Certificate (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer), duly completed and executed and any other evidence as the Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. A Note may not be transferred unless the principal amount of the Notes transferred (and where not all of the Notes held by a Noteholder are transferred, the principal amount of the balance of the Notes not transferred) are in a specified denomination. In the case of a transfer of Notes to a person who is already a Noteholder, a new Certificate representing the enlarged holding may be issued but only against surrender of the Certificate representing the existing holding of such person. All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request.

(b) Delivery of new Certificates

Each new Certificate to be issued pursuant to Condition 2(a) shall be available for delivery within three Business Days of receipt of the form of transfer and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of any Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer or Certificate shall have been made or, at the option of the Noteholder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the Noteholder entitled to the new Certificate to such address as may be so specified, unless such Noteholder requests otherwise and pays in advance to the Registrar or relevant Transfer Agent (as applicable) the costs of such other method of delivery and/or such insurance as it may specify.

(c) Transfer free of charge

Transfers of Notes and the issue of new Certificates on transfer shall be effected without charge by or on behalf of the Issuer, the Registrar or any Transfer Agent, but upon payment of any tax or other governmental charges by the person submitting such Notes or Certificates that may be imposed in relation to the transfer or its registration (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require).

(d) Closed periods

No Noteholder may require the transfer of a Note to be registered (i) during the period of 15 days ending on the due date for redemption of that Note, (ii) during the period of 15 days prior to any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(d), (iii) after any such Note has been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date.

3. Status

(a) Ranking

The Notes constitute direct, unsecured and subordinated obligations of the Issuer and rank pari passu and without any preference among themselves. In the event of the winding-up of the Issuer (except, in any such case, a solvent winding-up solely for the purposes of a reconstruction or amalgamation or the substitution in place of the Issuer of a successor in business of the Issuer, the terms of which reconstruction, amalgamation or substitution (i) have previously been approved in writing by the Trustee or by an Extraordinary Resolution and (ii) do not provide that the Notes shall thereby become payable) or the appointment of an administrator of the Issuer where the administrator has given notice that it intends to declare and distribute a dividend, the payment obligations of the Issuer under or arising from the Notes and the Trust Deed, including any Arrears of Interest and any damages awarded for breach of any obligations in respect of the Notes, shall be subordinated in the manner provided in this Condition 3(a) and in the Trust Deed to the claims of all Senior Creditors of the Issuer, but shall rank (a) at least pari passu with all other subordinated obligations of the Issuer which constitute, or would but for any applicable limitation on the amount of such capital constitute, Tier 2 Capital and all obligations which rank, or are expressed to rank, pari passu therewith ("Pari Passu Securities"); and (b) shall rank in priority to the claims of holders of: (i) all obligations of the Issuer which constitute, or would but for any applicable limitation on the amount of such capital constitute, Tier 1 Capital and all obligations which rank, or are expressed to rank, pari passu therewith; and (ii) all classes of share capital of the Issuer (together, the "Junior Securities").

(b) Solvency Condition

Without prejudice to Condition 3(a), all payments (including, without limitation, any payments in respect of damages awarded for breach of any obligations) under or arising from the Notes and the Trust Deed shall be conditional upon the Issuer being solvent at the time for payment by the Issuer, and no amount shall be payable under or arising from the Notes and the Trust Deed unless and until such time as the Issuer could make such payment and still be solvent immediately thereafter (the "Solvency Condition").

For the purposes of this Condition 3(b), the Issuer will be solvent if (i) it is able to pay its debts owed to Senior Creditors and Pari Passu Creditors as they fall due and (ii) its Assets exceed its Liabilities. A certificate as to the solvency of the Issuer signed by two Authorised Signatories or, if there is a winding-up or administration of the Issuer, the liquidator or, as the case may be, the administrator of the Issuer shall, in the absence of manifest error, be treated and accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person.

Without prejudice to any other provision in these Conditions, amounts representing any payments of principal or interest or any other amount (including any damages awarded for breach of any obligations) in respect of which the conditions referred to in this Condition 3(b) are not satisfied on the date upon which the same would otherwise be due and payable ("Solvency Claim"), will be payable by the Issuer in the circumstances described in Condition 10(b), as further provided in Condition 3(a). A Solvency Claim shall not bear interest.

(c) Set-off, etc.

Subject to applicable law, no Noteholder may exercise, claim or plead any right of set-off, compensation or retention in respect of any amount owed to it by the Issuer arising under or in connection with the Notes and each Noteholder shall, by virtue of being the holder of any Note, be deemed to have waived all such rights of set-off, compensation or retention. Notwithstanding the preceding sentence, if any of the amounts owing to any Noteholder by the Issuer is discharged by set-off, such Noteholder shall, unless such payment is prohibited by applicable law, immediately pay an amount equal to the amount of such discharge to the Issuer or, in the event of its winding-up or administration, the liquidator or administrator, as appropriate, of the Issuer for payment to the Senior Creditors in respect of amounts owing to them by the Issuer, and, until such time as payment is made, shall hold an amount equal to such amount in trust for the Issuer, or the liquidator or administrator, as appropriate, of the Issuer (as the case may be), for payment to the Senior Creditors in respect of amounts owing to them by the Issuer and, accordingly, any such discharge shall be deemed not to have taken place.

On a winding-up of the Issuer, there may be no surplus assets available to meet the claims of the Noteholders after the claims of the parties ranking senior to the Noteholders (as provided in Condition 3) have been satisfied.

(d) References to include principal and interest

The foregoing provisions of this Condition 3 apply only to the principal, interest and other amounts under or arising from the Notes and nothing in this Condition 3 shall affect or prejudice the payment of the costs, charges, expenses, liabilities or remuneration of the Trustee or the rights and remedies of the Trustee in respect thereof and in such capacity the Trustee shall rank as an unsubordinated creditor of the Issuer.

4. Interest

(a) Interest rate and Interest Payment Dates

Subject to Condition 3(b) and Condition 5, each Note bears interest on its outstanding principal amount:

(i) from (and including) the Issue Date to (but excluding) the First Call Date at the Initial Interest Rate; and

(ii) for the Reset Period thereafter, at the Reset Interest Rate,

payable, in each case, semi-annually in arrear on each Interest Payment Date.

(b) Interest accrual

Each Note will cease to bear interest from (and including) its due date for redemption unless, upon surrender, payment of the principal in respect of the Note is improperly withheld or refused or unless default is otherwise made in respect of payment, in which event interest shall continue to accrue as provided in the Trust Deed.

(c) Calculation of interest

Interest shall be calculated per £1,000 in principal amount of the Notes (the "Calculation Amount") by applying the rate of interest referred to in Condition 4(a) to such Calculation Amount, multiplying the resulting figure by the applicable day count fraction as described below in this Condition 4(c) and rounding the resultant figure to the nearest pence (with half of any pence being rounded upwards). The amount of interest payable in respect of a Note shall be calculated by multiplying the amount of interest per Calculation Amount determined as aforesaid by the specified denomination of such Note and dividing the resulting figure by £1,000.

Where interest is to be calculated in respect of any period, the applicable day count fraction will be (a) the actual number of days in the period from and including the date from which interest begins to accrue (the "Accrual Date") to but excluding the date on which it falls due divided by (b) the actual number of days from and including the Accrual Date to but excluding the next following Interest Payment Date multiplied by two.

(d) Determination of Reset Interest Rate

The Agent Bank will on the Reset Determination Date determine the Reset Interest Rate applicable to the Reset Period and shall promptly notify the Issuer thereof.

(e) Publication of Reset Interest Rate

The Issuer shall (at its own cost and expense) cause the Agent Bank to give notice of the Reset Interest Rate to the Issuer, the Principal Paying Agent, the Trustee and to any stock exchange or other relevant authority on which the Notes are at the relevant time listed and to be notified to Noteholders in accordance with Condition 15 as soon as possible after its determination, but in no event later than the fourth Business Day thereafter. The Reset Interest Rate so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) in the event of manifest error.

(f) Notifications, etc. to be final

All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4, whether by the Reset Reference Banks (or any of them) or the Agent Bank, will (in the

absence of manifest error) be binding on the Issuer, the Trustee, the Agent Bank and all Noteholders and (in the absence of wilful default and gross negligence) no liability to the Issuer or the Noteholders shall attach to the Reset Reference Banks (or any of them), the Agent Bank or, if applicable, the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions under this Condition 4.

5. Deferral of payments

(a) Mandatory deferral of interest

Payment of interest on the Notes will be mandatorily deferred on each Mandatory Interest Deferral Date. The Issuer shall notify the Noteholders, the Principal Paying Agent, the Registrar and the Trustee of any Mandatory Interest Deferral Date in accordance with Condition 5(c).

A certificate signed by two Authorised Signatories confirming that (a) a Regulatory Deficiency Interest Deferral Event has occurred and is continuing, or would occur if payment of interest on the Notes were to be made or (b) a Regulatory Deficiency Interest Deferral Event has ceased to occur and/or payment of interest on the Notes would not result in a Regulatory Deficiency Interest Deferral Event occurring, shall be treated and accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person.

Notwithstanding any other provision in these Conditions or in the Trust Deed, the deferral of any payment of interest on a Mandatory Interest Deferral Date in accordance with this Condition 5(a) or in accordance with Condition 3(b) will not constitute a default by the Issuer and will not give Noteholders or the Trustee any right to accelerate any payment in respect of the Notes.

(b) Arrears of Interest

Any interest in respect of the Notes not paid on an Interest Payment Date as a result of the obligation on the Issuer to defer any payment pursuant to Condition 5(a) or due to the operation of the Solvency Condition contained in Condition 3(b), together with any other interest in respect of the Notes not paid on an earlier Interest Payment Date shall, so long as the same remains unpaid, constitute "Arrears of Interest". Arrears of Interest shall not themselves bear interest.

Any Arrears of Interest may (subject to Condition 3(b) and (to the extent then required by the Relevant Regulator or the Relevant Rules) to any notifications to, or consent or non-objection from, the Relevant Regulator and to any other requirements under the Relevant Rules), be paid in whole or in part at any time (provided that at such time a Regulatory Deficiency Interest Deferral Event is not subsisting and would not occur if payment of such Arrears of Interest were made) upon the expiry of not less than 14 days' notice to such effect given by the Issuer to the Trustee, the Principal Paying Agent, the Registrar and the Noteholders in accordance with Condition 15, and in any event all Arrears of Interest will become due and payable (subject, in the case of (i) and (iii) below, to Condition 3(b) and (to the extent then required by the Relevant Regulator or the Relevant Rules) to any notifications to, or consent or non-objection from, the Relevant Regulator) in whole (and not in part) upon the earliest of the following dates:

• (i) the next Interest Payment Date which is not a Mandatory Interest Deferral Date; or
• (ii) the date on which an order is made or a resolution is passed for the winding-up of the Issuer (other than a solvent winding-up solely for the purposes of a reconstruction or amalgamation or the substitution in place of the Issuer of a successor in business of the Issuer, the terms of which reconstruction, amalgamation or substitution (A) have previously been approved in writing by the Trustee or by an Extraordinary Resolution and (B) do not provide that the Notes shall thereby become payable) or the date on which any administrator of the Issuer gives notice that it intends to declare and distribute a dividend; or
• (iii) the date of any redemption or purchase of the Notes by or on behalf of the Issuer or any of its Subsidiaries pursuant to Condition 6.

(c) Notice of deferral

The Issuer shall notify the Trustee and the Principal Paying Agent in writing and notify the Noteholders in accordance with Condition 15 not less than 5 Business Days prior to an Interest Payment Date if that Interest Payment Date is a Mandatory Interest Deferral Date and specify that interest will not be paid because a Regulatory Deficiency Interest Deferral Event has occurred and is continuing or would occur if payment of interest was made (in whole or in part) on such Interest Payment Date, provided that if a Regulatory Deficiency Interest Deferral Event occurs less than five Business Days prior to an Interest Payment Date, the Issuer shall give notice of the interest deferral to the Trustee, the Principal Paying Agent, the Registrar and the Noteholders in accordance with Condition 15 as soon as reasonably practicable following the occurrence of such event and the Issuer shall not be in breach of its obligation to give not less than five Business Days' notice in such circumstances.

6. Redemption, substitution, variation, purchase and options

(a) Redemption at maturity and deferral of redemption date

• (i) Subject to Condition 3(b), Condition 6(a)(ii), Condition 6(b) and to compliance by the Issuer with regulatory rules including (to the extent then required by the Relevant Regulator or the Relevant Rules) on notification to, or consent or non-objection from, the Relevant Regulator and provided that such redemption is permitted under the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules), unless previously redeemed or purchased and cancelled as provided below, each Note shall be redeemed on the Maturity Date at its principal amount together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption in accordance with these Conditions.
• (ii) No Notes shall be redeemed on the Maturity Date pursuant to Condition 6(a)(i) or prior to the Maturity Date pursuant to Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) if a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing or would occur if redemption is made on, if Condition 6(a)(i) applies,

the Maturity Date or, if Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) applies, any date specified for redemption in accordance with such Conditions.

• (iii) If the Notes are not to be redeemed on the Maturity Date pursuant to Condition 6(a)(i) or on any date specified for redemption pursuant to Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) (as applicable) as a result of circumstances where:
• (A) a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing or would occur if the Notes were redeemed on such date;
• (B) the Solvency Condition would not be satisfied on such date and immediately after the redemption; or
• (C) the Relevant Regulator does not consent to the redemption or objects to the redemption (to the extent that consent or non-objection is then required by the Relevant Regulator or the Relevant Rules) or such redemption otherwise cannot be effected in compliance with the Relevant Rules on such date,

the Issuer shall notify the Trustee, the Registrar and the Principal Paying Agent in writing and notify the Noteholders in accordance with Condition 15 no later than five Business Days prior to the Maturity Date or, as appropriate, the date specified for redemption in accordance with Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) (or as soon as reasonably practicable if the relevant circumstance requiring redemption to be deferred arises, or is determined, less than five Business Days prior to the relevant redemption date, and the Issuer shall not be in breach of its obligation to give not less than five Business Days' notice in such circumstances).

• (iv) If redemption of the Notes does not occur on the Maturity Date or, as appropriate, the date specified for redemption in accordance with Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) as a result of Condition 6(a)(ii) or the Relevant Regulator does not consent to the redemption or objects to the redemption (to the extent that consent or non-objection is then required by the Relevant Regulator or the Relevant Rules) or such redemption otherwise cannot be effected in compliance with the Relevant Rules on such date, subject (in the case of (A) and (B) only) to Condition 3(b) and (to the extent then required by the Relevant Regulator or the Relevant Rules) to any notifications to, or consent from, the Relevant Regulator and to such redemption being otherwise permitted under the Relevant Rules, such Notes shall be redeemed at their principal amount together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption, upon the earliest of:

• (A) in the case of a failure to redeem due to the operation of Condition 6(a)(ii) only, the date falling 10 Business Days after the date the Regulatory Deficiency Redemption Deferral Event has ceased (unless, on such 10th Business Day, a further Regulatory Deficiency Redemption Deferral Event has occurred and is continuing or redemption of the Notes on such date would result in a Regulatory Deficiency Redemption Deferral Event occurring, in which case the provisions of Condition 6(a)(ii), Condition 6(a)(iii) and this

• Condition 6(a)(iv) shall apply mutatis mutandis to determine the due date for redemption); or

• (B) the date falling 10 Business Days after the Relevant Regulator has agreed to the repayment or redemption of the Notes; or
• (C) the date on which an order is made or a resolution is passed for the windingup of the Issuer (other than a solvent winding-up solely for the purposes of a reconstruction or amalgamation or the substitution in place of the Issuer of a successor in business of the Issuer, the terms of which reconstruction, amalgamation or substitution (x) have previously been approved in writing by the Trustee or by an Extraordinary Resolution and (y) do not provide that the Notes shall thereby become payable) or the date on which any administrator of the Issuer gives notice that it intends to declare and distribute a dividend.
• (v) If Condition 6(a)(ii) does not apply, but redemption of the Notes does not occur on the Maturity Date or, as appropriate, the date specified for redemption in accordance with Condition 6(c), Condition 6(d), Condition 6(e) or Condition 6(f) as a result of the Solvency Condition not being satisfied at such time and immediately after such payment, subject (to the extent then required by the Relevant Regulator or the Relevant Rules) to any notifications to, or consent or non-objection from, the Relevant Regulator and to such redemption being otherwise permitted under the Relevant Rules, such Notes shall be redeemed at their principal amount together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption on the 10th Business Day immediately following the day that (A) the Issuer is solvent for the purposes of Condition 3(b) and (B) redemption of the Notes would not result in the Issuer ceasing to be solvent for the purposes of Condition 3(b), provided that if on such Business Day specified for redemption a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing, or would occur if the Notes were to be redeemed, or if the Solvency Condition would not be satisfied on such date and immediately after the redemption, then the Notes shall not be redeemed on such date and Condition 3(b) and 6(a)(iv) shall apply mutatis mutandis to determine the date of the redemption of the Notes.
• (vi) A certificate signed by two Authorised Signatories confirming that (A) a Regulatory Deficiency Redemption Deferral Event has occurred and is continuing, or would occur if redemption of the Notes were to be made or (B) a Regulatory Deficiency Redemption Deferral Event has ceased to occur and/or redemption of the Notes would not result in a Regulatory Deficiency Redemption Deferral Event occurring or (C) that any circumstance described in Condition 6(a)(iii)(B) or (C) applies, shall be treated and accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person.
• (vii) Notwithstanding any other provision in these Conditions or in the Trust Deed, the deferral of redemption of the Notes in accordance with Condition 3(b) or this Condition 6(a) will not constitute a default by the Issuer and will not give Noteholders

or the Trustee any right to accelerate repayment of the Notes or take any other action under the Notes or the Trust Deed.

(b) Conditions to redemption, substitution, variation or purchase

Any redemption, substitution, variation or purchase of the Notes is subject to the Issuer having complied with regulatory rules including (to the extent then required by the Relevant Regulator or the Relevant Rules) on notification to, or consent or non-objection from, the Relevant Regulator and such redemption, substitution, variation or purchase being otherwise permitted under the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital). A certificate signed by two Authorised Signatories confirming such compliance shall be conclusive evidence of such compliance and shall be accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person. In the case of a redemption or purchase that is within five years of the Issue Date, such redemption or purchase shall, if required by the Relevant Rules, be (i) funded out of the proceeds of a new issuance of capital of at least the same quality as the Notes and shall be otherwise permitted under the Relevant Rules or (ii) effected by the exchange or conversion of such Notes into another form of capital of at least the same quality as the Notes and shall be otherwise permitted under the Relevant Rules.

(c) Redemption, substitution or variation at the option of the Issuer due to Taxation

If immediately prior to the giving of the notice referred to below:

• (i) as a result of a change in or proposed change in, or amendment or proposed amendment to, the laws or regulations of the UK or any political subdivision or authority therein or thereof having the power to tax, including any treaty to which the UK is a party, or any change in the application of official or generally published interpretation of such laws, including a decision of any court or tribunal, or any interpretation or pronouncement by any relevant tax authority that provides for a position with respect to such laws or regulations that differs from the previously generally accepted position in relation to similar transactions (in respect of securities similar to the Notes and which are capable of constituting Tier 2 Capital under the Relevant Rules applicable at issuance) or which differs from any specific written confirmation given by a tax authority in respect of the Notes, which change or amendment becomes, or would become, effective, or in the case of a change or proposed change in law if such change is enacted (or, in the case of a proposed change, is expected to be enacted) by UK Act of Parliament or by Statutory Instrument, on or after the Issue Date (each a "Tax Law Change"), in making any payments on the Notes, the Issuer has paid or will or would on the next payment date be required to pay Additional Amounts on the Notes and the Issuer cannot avoid the foregoing in connection with the Notes by taking measures reasonably available to it; or
• (ii) as a result of a Tax Law Change, in respect of the Issuer's obligation to make any payment of interest on the next following Interest Payment Date: (v) the Issuer would not be entitled to claim a deduction in respect of computing its taxation liabilities in the

UK, or such entitlement is reduced; (w) the Issuer would not to any extent be entitled to have a loss (if any) that has been computed taking such a deduction into account set against the profits of companies with which it is grouped for applicable UK tax purposes (whether under the group relief system current as at the date of the Tax Law Change or any similar system or systems having like effect as may from time to time exist); (x) the Notes are prevented from being treated as loan relationships for UK tax purposes; (y) the Notes or any part thereof are treated as a derivative or an embedded derivative for UK tax purposes; or (z) the Issuer would otherwise suffer adverse tax consequences, and in each such case the Issuer cannot avoid the foregoing in connection with the Notes by taking measures reasonably available to it,

then the Issuer may:

• (A) subject to Condition 3(b), Condition 6(a)(ii) and Condition 6(b) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), redeem in accordance with these Conditions (unless otherwise specified herein) at any time all, but not some only, of the Notes at their principal amount, together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption in accordance with these Conditions; or
• (B) subject to Condition 6(b) (without any requirement for the consent or approval of the Noteholders) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), substitute at any time all (but not some only) of the Notes for, or vary the terms of the Notes so that they remain or become, Qualifying Tier 2 Securities and the Trustee shall (subject to the following provisions of this paragraph (B) and subject to the receipt by it of the certificates of the Authorised Signatories referred to below and in the definition of Qualifying Tier 2 Securities) agree to such substitution or variation. The Trustee shall, at the request and expense of the Issuer, use its reasonable endeavours to assist the Issuer in the substitution or variation of the Notes for or into Qualifying Tier 2 Securities provided that the Trustee shall not be obliged to participate or assist in any such substitution or variation if the terms of the securities into which the Notes are to be substituted or are to be varied impose, in the Trustee's opinion, more onerous obligations upon it. If the Trustee does not so participate or assist as provided above, the Issuer may, subject as provided above, redeem the Notes as provided above.

Prior to the publication of any notice of substitution, variation or redemption pursuant to this Condition 6(c), the Issuer shall deliver to the Trustee (a) a certificate signed by two Authorised Signatories stating that the relevant requirement or circumstance referred to in sub-paragraph (i) or (ii) above applies and (b) an opinion in form and substance satisfactory to the Trustee of independent legal advisers or other tax advisers of recognised standing that the relevant requirement or circumstance referred to in sub-paragraph (i) or (ii) above (other than the precondition that the Issuer cannot avoid the requirement or circumstance by taking measures reasonably available to it) applies. Such certificate confirming that the relevant requirement or circumstances referred to in sub-paragraph (i) or (ii) above applies shall be conclusive evidence that such requirement or such circumstances apply and shall be accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person. Upon expiry of such notice the Issuer shall (subject to Condition 6(b) and, in the case of a redemption, to Condition 3(b), Condition 6(a)(ii), Condition 6(a)(iii), Condition 6(a)(iv) and Condition 6(a)(v)) either redeem, vary or substitute the Notes, as the case may be, pursuant to the relevant terms of this Condition 6(c).

In connection with any substitution or variation in accordance with this Condition 6(c), the Issuer shall comply with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or admitted to trading.

(d) Redemption at the option of the Issuer

Unless the Issuer shall have given notice to redeem the Notes under Condition 6(c) or Condition 6(e) or Condition 6(f) on or prior to the expiration of the notice referred to below, the Issuer may at its option, subject to Condition 3(b), Condition 6(a)(ii) and Condition 6(b) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable) redeem in accordance with these Conditions all, but not some only, of the Notes on the First Call Date at their principal amount, together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption in accordance with these Conditions.

Upon expiry of the notice referred to in this Condition 6(d) the Issuer shall (subject to Condition 6(b), Condition 3(b), Condition 6(a)(ii), Condition 6(a)(iii), Condition 6(a)(iv) and Condition 6(a)(v)) be bound to redeem the Notes in accordance with the terms of this Condition 6(d).

(e) Redemption, substitution or variation at the option of the Issuer due to Capital Disqualification Event

If immediately prior to the giving of the notice referred to below a Capital Disqualification Event has occurred and is continuing, then:

• (i) the Issuer may, subject to Condition 3(b), Condition 6(a)(ii) and Condition 6(b) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), redeem in accordance with these Conditions all, but not some only, of the Notes at any time. The Notes will be redeemed at their principal amount, together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption in accordance with these Conditions; or
• (ii) the Issuer may, subject to Condition 6(b) (without any requirement for the consent or approval of the Noteholders) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable),

substitute at any time all (and not some only) of the Notes for, or vary the terms of the Notes so that they remain or become Qualifying Tier 2 Securities and the Trustee shall (subject to the following provisions of this paragraph (ii) and subject to the receipt by it of the certificates of the Authorised Signatories referred to below and in the definition of Qualifying Tier 2 Securities) agree to such substitution or variation. The Trustee shall, at the request and expense of the Issuer, use its reasonable endeavours to assist the Issuer in the substitution or variation of the Notes for or into Qualifying Tier 2 Securities provided that the Trustee shall not be obliged to participate or assist in any such substitution or variation if the terms of the securities into which the Notes are to be substituted or are to be varied impose, in the Trustee's opinion, more onerous obligations upon it. If the Trustee does not so participate or assist as provided above, the Issuer may, subject as provided above, redeem the Notes as provided above.

Prior to the publication of any notice of substitution, variation or redemption pursuant to this Condition 6(e), the Issuer shall deliver to the Trustee a certificate signed by two Authorised Signatories stating that a Capital Disqualification Event has occurred and is continuing as at the date of the certificate. Such certificate shall be conclusive evidence that a Capital Disqualification Event has occurred and is continuing as at the date of the certificate and shall be accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person. Upon expiry of such notice the Issuer shall (subject to Condition 6(b) and, in the case of a redemption, to Condition 3(b), Condition 6(a)(ii), Condition 6(a)(iii), Condition 6(a)(iv) and Condition 6(a)(v)) either redeem, vary or substitute the Notes, as the case may be, pursuant to the relevant terms of this Condition 6(e).

In connection with any substitution or variation in accordance with this Condition 6(e), the Issuer shall comply with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or admitted to trading.

(f) Redemption, substitution or variation at the option of the Issuer for rating reasons

If a Rating Methodology Event occurs and within the period from and including the date of the occurrence of such Rating Methodology Event to and including the date which is the first anniversary of such occurrence, the Issuer gives the notice referred to below and if on the date of such notice the Rating Methodology Event is continuing, then:

(i) the Issuer may, subject to Condition 3(b), Condition 6(a)(ii) and Condition 6(b) and, having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), redeem in accordance with these Conditions all, but not some only, of the Notes at any time. The Notes will be redeemed at their principal amount, together with Arrears of Interest, if any, and any other interest accrued to (but excluding) the date specified for redemption in accordance with these Conditions; or

(ii) the Issuer may, subject to Condition 6(b) (without any requirement for the consent or approval of the Noteholders) and having given not less than 30 nor more than 60 days' notice to the Trustee, the Registrar, the Principal Paying Agent and, in accordance with Condition 15, the Noteholders (which notice shall be irrevocable), substitute at any time all (and not some only) of the Notes for, or vary the terms of the Notes so that they become Rating Agency Compliant Securities, and the Trustee shall (subject to the following provisions of this paragraph (ii) and subject to the receipt by it of certificates of Authorised Signatories referred to below and in the definition of Qualifying Tier 2 Securities and Rating Agency Compliant Securities) agree to such substitution or variation. The Trustee shall, at the request and expense of the Issuer, use its reasonable endeavours to assist the Issuer in the substitution or variation of the Notes for or into Rating Agency Compliant Securities provided that the Trustee shall not be obliged to participate or assist in any such substitution or variation if the terms of the securities into which the Notes are to be substituted or are to be varied impose, in the Trustee's opinion, more onerous obligations upon it. If the Trustee does not so participate or assist as provided above, the Issuer may, subject as provided above, redeem the Notes as provided above.

Prior to the publication of any notice of substitution, variation or redemption pursuant to this Condition 6(f) the Issuer shall deliver to the Trustee a certificate signed by two Authorised Signatories stating that a Rating Methodology Event has occurred and is continuing as at the date of the certificate. Such certificate shall be conclusive evidence that a Rating Methodology Event has occurred and is continuing as at the date of the certificate and shall be accepted by the Trustee, the Noteholders and all other interested parties as correct and sufficient evidence thereof and the Trustee shall be entitled to rely on such certificate without further investigation and without liability to any person. Upon expiry of such notice the Issuer shall (subject to Condition 6(b) and, in the case of a redemption, to Condition 3(b), Condition 6(a)(ii), Condition 6(a)(iii), Condition 6(a)(iv) and Condition 6(a)(v)) either redeem, vary or substitute the Notes, as the case may be, pursuant to the relevant terms of this Condition 6(f).

In connection with any substitution or variation in accordance with this Condition 6(f), the Issuer shall comply with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or admitted to trading.

(g) Purchases

Subject to Conditions 3(b) and 6(b), the Issuer and any of its Subsidiaries for the time being may at any time purchase Notes in the open market or otherwise and at any price.

(h) Cancellation

All Notes purchased by or on behalf of the Issuer or any of its Subsidiaries may (at the option of the Issuer or the relevant Subsidiary) be held, reissued, resold or surrendered for cancellation by surrendering the Certificate representing such Notes to the Registrar and, if so surrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith. Any Notes so redeemed or surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Notes shall be discharged.

(i) Trustee not obliged to monitor

The Trustee shall not be under any duty to monitor whether any event or circumstance has happened or exists within these Conditions and will not be responsible to Noteholders for any loss arising from any failure or delay by the Trustee to do so. Unless and until the Trustee has written notice of the occurrence of any event or circumstance within these Conditions, it shall be entitled to assume that no such event or circumstance exists.

7. Payments

(a) Method of payment

• (i) Payments of principal in respect of Notes shall be made in Sterling against surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in paragraph (ii) below.
• (ii) Interest (including Arrears of Interest) on the Notes shall be paid in Sterling to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the "Record Date"). Payments of interest on each Note shall be made in Sterling by transfer to a Sterling account maintained by or on behalf of the payee with a bank and (in the case of interest payable on redemption) upon surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar.

(b) Payments subject to fiscal laws

All payments are in all cases subject to any applicable fiscal or other laws, regulations and directives in any jurisdiction and the Issuer will not be liable to pay any additional amount in respect of taxes or duties of whatever nature imposed or levied by or pursuant to such laws, regulations or directives, but without prejudice to the provisions of Condition 8. No commission or expenses shall be charged to the Noteholders in respect of such payments. For the purpose of this paragraph, the phrase "subject to any applicable fiscal or other laws, regulations and directives" shall include any withholding or deduction required pursuant to an agreement described in section 1471(b) of the U.S. Internal Revenue Code of 1986, as amended, (the "Code") or otherwise imposed pursuant to sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretation thereof, or any law implementing an intergovernmental approach thereto.

(c) Appointment of Agents

The Principal Paying Agent, the Paying Agents, the Registrar, the Transfer Agents and the Agent Bank initially appointed by the Issuer and their respective specified offices are listed below. Subject as provided in the Agency Agreement, the Principal Paying Agent, the Paying Agents, the Agent Bank, the Registrar and the Transfer Agents act solely as agents of the Issuer and do not assume any obligation or relationship of agency or trust for or with any Noteholder. The Issuer reserves the right at any time with the prior written approval of the Trustee to vary or terminate the appointment of the Principal Paying Agent, any other Paying Agent, the Agent Bank, the Registrar and any Transfer Agent and to appoint additional or

other Paying Agents or Transfer Agents, provided that the Issuer shall at all times maintain (i) a Principal Paying Agent, (ii) a Registrar, (iii) a Transfer Agent, and (iv) whenever and for so long as a function expressed in these Conditions to be performed by the Agent Bank is required to be performed, an Agent Bank.

Notice of any such change or any change of any specified office shall promptly be given to the Noteholders in accordance with Condition 15.

(d) Non-Business Days

If any date for payment in respect of any Note is not a Business Day, the Noteholder shall not be entitled to payment until the next following Business Day and shall not be entitled to any interest or other sum in respect of such postponed payment.

8. Taxation

All payments of principal and interest by or on behalf of the Issuer in respect of the Notes shall be made free and clear of, and without withholding or deduction for or on account of, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of any Taxing Territory, unless such withholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts in relation to interest payments (but not in respect of principal) as shall result in receipt by the Noteholders of such amounts as would have been received by them had no such withholding or deduction been required by law to be made ("Additional Amounts"), except that no such Additional Amounts shall be payable with respect to any Note:

(a) Other connection

the holder of which is liable to such taxes, duties, assessments or governmental charges in respect of such Note by reason of his having some connection with that Taxing Territory other than the mere holding of the Note; or

(b) Lawful avoidance of withholding

the holder of which could lawfully avoid (but has not so avoided) such deduction or withholding by complying or procuring that any third party complies with any statutory requirements or by making or procuring that any third party makes a declaration of non-residence or other similar claim for exemption in the place where the relevant Certificate is presented for payment; or

(c) Presentation more than 30 days after the Relevant Date

in respect of which the relevant Certificate is surrendered (if relevant) more than 30 days after the Relevant Date (as defined below) except to the extent that the holder of it would have been entitled to such Additional Amounts on surrendering it on the thirtieth day after the Relevant Date; or

(d) Any combination

where such withholding or deduction arises out of any combination of paragraphs (a) to (c) above.

As used in these Conditions, "Relevant Date" in respect of any Note means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Noteholders that, upon further presentation of the relevant Certificate (if required) being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon such presentation (if required). References in these Conditions to interest shall be deemed to include any Additional Amounts that may be payable under this Condition 8 or any undertaking given in addition to or in substitution for it under the Trust Deed.

9. Prescription

Claims against the Issuer for payment in respect of the Notes shall be prescribed and become void unless made within ten years (in the case of principal) or five years (in the case of interest including, without limitation, Arrears of Interest) from the appropriate Relevant Date in respect of them.

10. Events of default and enforcement

(a) Rights to institute and/or prove in a winding-up

Notwithstanding any of the provisions below in this Condition 10, the right to institute windingup proceedings is limited to circumstances where payment has become due and is not duly paid. Pursuant to Condition 3(b), no principal, interest or any other amount will be due on the relevant payment date if the Solvency Condition is not, or would not be, satisfied, at the time of and immediately after any such payment. In the case of any payment of interest in respect of the Notes, such payment will be deferred and not be due if Condition 5(a) applies, and, in the case of payment of principal, such payment will be deferred and will not be due if Condition 6(a)(ii) applies or the Relevant Regulator does not consent to the redemption or objects to the redemption (to the extent that consent or non-objection is then required by the Relevant Regulator or the Relevant Rules), or such redemption otherwise cannot be effected in compliance with the Relevant Rules on such date.

If default is made for a period of 14 days or more in the payment of any interest due (including, without limitation, Arrears of Interest, if any) or principal due in respect of the Notes or any of them, the Trustee in its discretion may, and if so requested by Noteholders of at least one-quarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to Condition 10(d)) institute proceedings for the winding-up of the Issuer and/or prove in the winding-up or administration of the Issuer and/or claim in the liquidation of the Issuer for such payment, but may take no further or other action to enforce, prove or claim for any such payment. No payment in respect of the Notes or the Trust Deed may be made by the Issuer pursuant to this Condition 10(a), nor will the Trustee accept the same, otherwise than during or after a winding-up of the Issuer or after an administrator of the Issuer has given notice that it intends to declare and distribute a dividend, unless the Issuer has given prior written notice (with a copy to the Trustee) to, and received consent or non-objection (if required) from, the Relevant Regulator, which the Issuer shall provide or confirm in writing to the Trustee.

(b) Amount payable on winding-up or administration

If an order is made by the competent court or resolution passed for the winding-up of the Issuer (except, in any such case, a solvent winding-up, solely for the purpose of a reconstruction or amalgamation of the Issuer, the terms of which reconstruction or amalgamation (i) have previously been approved in writing by the Trustee or by an Extraordinary Resolution and (ii) do not provide that the Notes shall thereby become payable) or an administrator of the Issuer gives notice that it intends to declare and distribute a dividend, the Trustee at its discretion may, and if so requested by Noteholders of at least onequarter in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to Condition 10(d)), give notice to the Issuer (or, as applicable, the administrator or liquidator) that the Notes are, and they shall accordingly forthwith become, immediately due and repayable at their principal amount together with Arrears of Interest, if any, and any other accrued interest, and the claim in respect thereof will be subordinated as provided in Condition 3(a).

(c) Enforcement

Without prejudice to Condition 10(a) or (b) but subject to Condition 10(d), the Trustee may at its discretion and without further notice institute such proceedings against the Issuer as it may think fit to enforce any obligation, condition or provision binding on the Issuer under the Trust Deed, or the Notes (other than any payment obligation of the Issuer under or arising from the Notes or the Trust Deed including, without limitation, payment of any principal or interest (including, without limitation, Arrears of Interest, if any) in respect of the Notes and any damages awarded for breach of any obligations) and in no event shall the Issuer, by virtue of the institution of any such proceedings, be obliged to pay any sum or sums (in cash or otherwise) sooner than the same would otherwise have been payable by it. Nothing in this Condition 10(c) shall, subject to Condition 10(a), prevent the Trustee instituting proceedings for the winding-up of the Issuer, proving in any winding-up of the Issuer and/or claiming in any liquidation of the Issuer in respect of any payment obligations of the Issuer arising from the Notes or the Trust Deed (including without limitation, payment of any principal or interest (including, without limitation, Arrears of Interest, if any) in respect of the Notes and any damages awarded for any breach of any obligations).

(d) Entitlement of the Trustee

The Trustee shall not be bound to take any of the actions referred to in Conditions 10(a), 10(b) or 10(c) to enforce the obligations of the Issuer under the Trust Deed or the Notes unless (i) it shall have been so directed by an Extraordinary Resolution of the Noteholders or so requested in writing by the holders of at least one-quarter in principal amount of the Notes then outstanding and (ii) in either case, it shall have been indemnified and/or secured and/or prefunded to its satisfaction.

(e) Right of Noteholders

No Noteholder shall be entitled to proceed directly against the Issuer or to institute proceedings for the winding-up or claim in the liquidation of the Issuer or to prove in such winding-up unless the Trustee, having become so bound to proceed or being able to prove in such winding-up or claim in such winding-up, fails to do so within a reasonable period and such failure shall be continuing, in which case the Noteholder shall have only such rights against the Issuer as those which the Trustee is entitled to exercise as set out in this Condition 10.

(f) Extent of Noteholders' remedy

No remedy against the Issuer, other than as referred to in this Condition 10, shall be available to the Trustee or the Noteholders, whether for the recovery of amounts owing in respect of the Notes or under the Trust Deed or in respect of any breach by the Issuer of any of its other obligations under or in respect of the Notes or under the Trust Deed.

11. Meetings of Noteholders, modification, waiver and substitution

(a) Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any provisions of the Trust Deed. Such a meeting may be convened by the Issuer (subject to it being indemnified and/or secured and/or prefunded to its satisfaction), the Trustee or by Noteholders holding not less than 10 per cent. in principal amount of the Notes for the time being outstanding. The quorum for any meeting convened to consider an Extraordinary Resolution shall be one or more persons holding or representing a clear majority in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons holding or representing Noteholders whatever the principal amount of the Notes held or represented, unless the business of such meeting includes consideration of proposals, inter alia, (i) to amend the dates of maturity or redemption of the Notes or any date for payment of interest or Arrears of Interest on the Notes, (ii) to reduce or cancel the principal amount of the Notes, (iii) to reduce the rate or rates of interest or Arrears of Interest in respect of the Notes or to vary the method or basis of calculating the rate or rates or amount of interest or the basis for calculating any interest amount in respect of the Notes, (iv) to vary the currency or currencies of payment or denomination of the Notes, (v) to take any steps that as specified hereon may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, (vi) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass an Extraordinary Resolution, or (vii) to modify Condition 3, in which case the necessary quorum shall be one or more persons holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, in principal amount of the Notes for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on all Noteholders (whether or not they were present at the meeting at which such resolution was passed).

The agreement or approval of the Noteholders shall not be required in the case of any variation of these Conditions and/or the Trust Deed made in the circumstances described in Condition 6(c) or 6(e) in connection with the substitution or variation of the Notes so that they remain or become Qualifying Tier 2 Securities or in the circumstances described in Condition 6(f) in connection with the substitution or variation of the Notes so that they become Rating Agency Compliant Securities, and to which the Trustee has agreed pursuant to the relevant provisions of Condition 6(c), 6(e) or 6(f), as the case may be.

(b) Modification and waiver

The Trustee may agree, without the consent of the Noteholders, to (i) any modification of any of these Conditions and/or the provisions of the Trust Deed or the Agency Agreement that is in the opinion of the Trustee of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of law, and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of these Conditions and the provisions of the Trust Deed or the Agency Agreement that is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders.

Any such modification, authorisation or waiver shall be binding on the Noteholders and shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 15.

(c) Notice to Relevant Regulator

No modification to these Conditions or any provisions of the Trust Deed or the Agency Agreement shall become effective unless (to the extent then required by the Relevant Regulator or the Relevant Rules) the Issuer shall have given at least one month's prior written notice to, and received consent or no objection from, the Relevant Regulator (or such other period of notice as the Relevant Regulator may from time to time require or accept) and the Issuer shall promptly provide a copy of any such consent (or confirm in writing that it has received no objection) to the Trustee.

(d) Substitution

The Trustee may agree with the Issuer, without the consent of the Noteholders, to the substitution on a subordinated basis equivalent to that referred to in Condition 3 of any person or persons incorporated in any country in the world (the "Substitute Obligor") in place of the Issuer (or any previous Substitute Obligor under this Condition 11(d)) as a new principal debtor under the Trust Deed and the Notes provided that:

(i) a trust deed and a supplemental Agency Agreement are executed or some other form of undertaking is given by the Substitute Obligor in form and manner satisfactory to the Trustee, agreeing to be bound by the terms of the Trust Deed, the Agency Agreement and the Notes, with any consequential amendments which the Trustee may deem appropriate, as fully as if the Substitute Obligor had been named in the Trust Deed and the Agency Agreement and on the Notes as the principal debtor in place of the Issuer (or of any previous Substitute Obligor, as the case may be);

• (ii) (unless the successor in business of the Issuer is the Substitute Obligor) the obligations of the Substitute Obligor under the Trust Deed and the Notes are guaranteed by the Issuer (or the successor in business of the Issuer) on a subordinated basis equivalent to that referred to in Condition 3 and in the Trust Deed and in a form and manner satisfactory to the Trustee, and provided further that the obligations of such guarantor shall be subject to a solvency condition equivalent to that set out in Condition 3(b), such guarantor shall not exercise rights of subrogation or contribution against the Substitute Obligor without the consent of the Trustee and the only event of default applying to such guarantor shall be an event of default equivalent to that set out in Condition 10(a);
• (iii) the directors of the Substitute Obligor or other officers acceptable to the Trustee certify that the Substitute Obligor is solvent at the time at which the said substitution is proposed to be effected (and the Trustee may rely absolutely on such certification and shall not be bound to have regard to the financial condition, profits or prospects of the Substitute Obligor or to compare the same with those of the Issuer);
• (iv) (without prejudice to the rights of reliance of the Trustee under sub-paragraph (iii) above) the Trustee is satisfied that the said substitution is not materially prejudicial to the interests of the Noteholders;
• (v) (without prejudice to the generality of sub-paragraph (i) above) the Trustee may in the event of such substitution agree, without the consent of the Noteholders, to a change in the law governing the Trust Deed, the Agency Agreement and/or the Notes, provided that such change would not in the opinion of the Trustee be materially prejudicial to the interests of the Noteholders; and
• (vi) the Issuer and the Substitute Obligor comply with such other requirements in the interests of the Noteholders as the Trustee may direct.

Any such substitution shall be notified to the Noteholders in accordance with Condition 15 as soon as practicable thereafter.

In connection with any proposed substitution as aforesaid, the Trustee shall have regard to the interests of the Noteholders as a class and the Trustee shall not have regard to the consequences of such substitution or such exercise for individual Noteholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. In connection with any substitution or such exercise as aforesaid, no Noteholder shall be entitled to claim, whether from the Issuer, the Substitute Obligor or the Trustee or any other person, any indemnification or payment in respect of any tax consequence of any such substitution or any such exercise upon any individual Noteholders except to the extent already provided in Condition 8 and/or any undertaking given in addition thereto or in substitution therefor pursuant to the Trust Deed.

Any substitution pursuant to this Condition 11 shall be subject (to the extent then required by the Relevant Regulator or the Relevant Rules) to any notifications to, or consent or nonobjection from, the Relevant Regulator. A written copy of any such notification and/or consent and/or non-objection (if available) shall be provided to the Trustee.

12. Entitlement of the Trustee

In connection with the exercise of its functions (including but not limited to those referred to in Condition 11) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders and the Trustee shall not be entitled to require, nor shall any Noteholder or the Trustee be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders.

13. Limitation on Trustee actions and indemnification of the Trustee

(a) Limitation on Trustee actions

The Trustee may refrain from taking any action in any jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be contrary to any law of that jurisdiction. Furthermore, the Trustee may also refrain from taking such action if it would otherwise render it liable to any person in that jurisdiction or if, in its opinion based upon such legal advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power.

(b) Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including (i) provisions relieving it from taking any action unless indemnified and/or secured and/or prefunded to its satisfaction and (ii) provisions limiting or excluding its liability in certain circumstances. The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit.

14. Replacement of Notes and Certificates

If a Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations and stock exchange or other relevant authority regulations, at the specified office of the Registrar or such other Transfer Agent as the case may be, as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to Noteholders, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Certificate is subsequently presented for payment, there shall be paid to the Issuer on demand the amount payable by the Issuer in respect of such Certificates) and otherwise as the Issuer may require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.

15. Notices

Notices to Noteholders shall be mailed to them at their respective addresses in the Register and, if and for so long as the Notes are admitted to trading on any stock exchange, notices

will also be given in accordance with any applicable requirements of such stock exchange. Any notice shall be deemed to have been given on the second weekday (being a day other than a Saturday or a Sunday) after the date of mailing or on the date of publication, or, if published more than once or on different dates, on the first date on which publication is made.

16. Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

17. Definitions

As used herein:

"Additional Amounts" has the meaning given to it in Condition 8;

"Arrears of Interest" has the meaning given to it in Condition 5(b);

"Assets" means the unconsolidated gross assets of the Issuer, as shown in the latest published audited balance sheet of the Issuer, but adjusted for subsequent events, all in such manner as the Directors may determine;

"Authorised Signatory" has the meaning given to it in the Trust Deed;

"Business Day" means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business:

• (i) (in the case of Condition 2(b)) in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be);
• (ii) (in the case of Condition 7(d)) in London and (if relevant) in the relevant place of surrender; or
• (iii) (in any other case) in London;

A "Capital Disqualification Event" is deemed to have occurred if as a result of any replacement of or change to (or change to the interpretation by any court or authority entitled to do so of) the Relevant Rules, the principal amount of the Notes then outstanding is excluded (in whole or in part) from counting as Tier 2 Capital for the purposes of the Issuer or the Group, whether on a solo, group or consolidated basis, except (in any case) where such non-qualification is only as a result of any applicable limitation on the amount of such capital;

"Code" has the meaning given to it in Condition 7(b);

"Directors" means the directors of the Issuer;

"Extraordinary Resolution" has the meaning given to it in the Trust Deed;

"First Call Date" means 28 February 2023;

"Fitch" means Fitch Ratings Ltd (or any successor rating agency);

"Group" means, at any time, the Issuer and its Subsidiaries at such time;

"Group Insurance Undertaking" means an insurance undertaking within the meaning of the Relevant Rules whose data is included for the purposes of the calculation of the Solvency Capital Requirement of the Group pursuant to the Relevant Rules;

"Initial Interest Rate" means 4.478 per cent. per annum;

"Insolvent Insurer Winding-up" means:

• (i) the winding-up of any Group Insurance Undertaking; or
• (ii) the appointment of an administrator of any Group Insurance Undertaking,

in each case, where the Issuer has determined, acting reasonably, that the assets of that Group Insurance Undertaking may or will be insufficient to meet all the claims of the policyholders and/or beneficiaries pursuant to contracts of insurance written by that Group Insurance Undertaking which is in winding-up or administration (and for these purposes, the claims of such policyholders or such beneficiaries pursuant to a contract of insurance shall include all amounts to which such policyholders or such beneficiaries are entitled under applicable legislation or rules relating to the winding-up of insurance companies to reflect any right to receive or expectation of receiving benefits which such policyholders or such beneficiaries may have);

"Interest Payment Date" means 28 February and 28 August in each year, from (and including) 28 August 2018 to (and including) the Maturity Date;

"Issue Date" means 28 February 2018, being the date of the initial issue of the Notes;

"Junior Securities" has the meaning given to it in Condition 3(a);

"Liabilities" means the unconsolidated gross liabilities of the Issuer, as shown in the latest published audited balance sheet of the Issuer, but adjusted for contingent liabilities and for subsequent events, all in such manner as the Directors may determine;

"Mandatory Interest Deferral Date" means each Interest Payment Date in respect of which a Regulatory Deficiency Interest Deferral Event has occurred and is continuing or would occur if payment of interest (in whole or in part) were made on such Interest Payment Date;

"Maturity Date" means 28 February 2028;

"Minimum Capital Requirement" means the Minimum Capital Requirement, the minimum consolidated group Solvency Capital Requirement or such other applicable minimum capital requirements (as applicable) referred to in the Relevant Rules;

"Pari Passu Creditors" means creditors of the Issuer (including holders of Pari Passu Securities) whose claims rank, or are expressed to rank, pari passu with, the claims of the Noteholders,;

"Pari Passu Securities" has the meaning given to it in Condition 3(a);

"Qualifying Tier 2 Securities" means securities issued (including by way of exchange, conversion or otherwise) directly by the Issuer or indirectly and guaranteed by the Issuer (such guarantee to rank on a subordinated basis equivalent to that referred to in Condition 3 and in the Trust Deed) that:

• (i) have terms not materially less favourable to a holder than the terms of the Notes, as reasonably determined by the Issuer in consultation with an independent investment bank of international standing, provided that they shall (1) contain terms which comply with the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital), (2) carry the same rate of interest from time to time as that applying to the Notes, (3) rank senior to, or pari passu with, the Notes, (4) preserve any existing rights under these Conditions to any accrued interest and any Arrears of Interest which have not been paid, and (5) where the Notes which have been substituted or varied had a solicited published rating from a rating agency immediately prior to their substitution or variation, each such rating agency has ascribed, or announced its intention to ascribe, an equal or higher published rating to the relevant Qualifying Tier 2 Securities; and
• (ii) if the Notes were listed or admitted to trading on a Recognised Stock Exchange immediately prior to the relevant substitution or variation, are listed or admitted to trading on a Recognised Stock Exchange,

and provided that a certification to the effect of (i) above, signed by two Authorised Signatories, shall have been delivered to the Trustee (upon which the Trustee shall be entitled to rely without further investigation and without liability to any person) prior to the issue of the relevant securities;

"Rating Agency Compliant Securities" means securities issued directly or indirectly by the Issuer that are:

• (i) Qualifying Tier 2 Securities; and
• (ii) assigned substantially the same equity credit in the capital adequacy assessment or, at the absolute discretion of the Issuer, a lower equity credit in the capital adequacy assessment (provided such equity credit is still higher than the equity credit assigned to the Notes immediately after the occurrence of the relevant Rating Methodology Event) that was assigned by Fitch to the Notes on or around the Issue Date and provided that a certification to such effect of two Authorised Signatories shall have been delivered to the Trustee (upon which the Trustee shall be entitled to rely without further investigation and without liability to any person) prior to the issue of the relevant securities;

"Rating Methodology Event" means at any time, as a consequence of a change in, or clarification to, the rating methodology (or the interpretation thereof) of Fitch on or after the Issue Date, the equity credit in the capital adequacy assessment assigned by Fitch to the Notes as at such time is materially reduced when compared to the equity credit in the capital adequacy assessment assigned by Fitch on or around the Issue Date;

"Recognised Stock Exchange" means a recognised stock exchange as defined in section 1005 of the Income Tax Act 2007 as the same may be amended from time to time and any provision, statute or statutory instrument replacing the same from time to time;

"Record Date" has the meaning given to it in Condition 7(a);

"Regulatory Deficiency Interest Deferral Event" means any event (including, without limitation, any event which causes any Solvency Capital Requirement or Minimum Capital Requirement applicable to the Issuer or all or part of the Group (which part includes the Issuer) to be breached and such breach is an event) which under the Relevant Rules requires the Issuer to defer payment of interest (or, if applicable, Arrears of Interest) in respect of the Notes and where the Relevant Regulator has not waived the requirement to defer payment of interest under the Notes in accordance with any pre-conditions to such waiver being capable of being granted as prescribed by the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules);

"Regulatory Deficiency Redemption Deferral Event" means any event (including, without limitation, where an Insolvent Insurer Winding-up has occurred and is continuing and any event which causes any Solvency Capital Requirement or Minimum Capital Requirement applicable to the Issuer or all or part of the Group (which part includes the Issuer) to be breached and the continuation of such Insolvent Insurer Winding-up is, or as the case may be, such breach is, an event) which under the Relevant Rules requires the Issuer to defer or suspend repayment or redemption of the Notes and where the Relevant Regulator has not waived the requirement to defer or suspend repayment or redemption of the Notes in accordance with any pre-conditions to such waiver being capable of being granted as prescribed by the Relevant Rules (on the basis that the Notes are intended to qualify as Tier 2 Capital under the Relevant Rules);

"Relevant Date" has the meaning given to it in Condition 8;

"Relevant Regulator" means the UK Prudential Regulation Authority or such successor or other authority having primary supervisory authority with respect to prudential matters in relation to the Issuer and/or the Group;

"Relevant Rules" means, at any time, any legislation, rules, guidelines or regulations (whether having the force of law or otherwise) then applying to the Issuer or the Group relating, but not limited to, to own funds, capital resources, capital requirements, financial adequacy requirements or other prudential matters (including, but not limited to, the characteristics, features or criteria of any of the foregoing) and without limitation to the foregoing, includes (to the extent then applying as aforesaid) Solvency II and any legislation, rules, guidelines or regulations of the Relevant Regulator relating to such matters;

"Reset Determination Date" means the second Business Day prior to the First Call Date;

"Reset Interest Rate" means, in respect of the Reset Period, the rate of interest determined by the Agent Bank on the Reset Determination Date as the sum of:

• (i) the Reset Reference Rate in respect of the Reset Period (expressed as a rate per annum); and
• (ii) the Reset Margin;

"Reset Margin" means 3.300 per cent. per annum;

"Reset Period" means the period from (and including) the First Call Date to (but excluding) the Maturity Date;

"Reset Reference Banks" means five leading gilt dealers in the principal interbank market relating to Sterling selected by the Issuer;

"Reset Reference Rate" means in respect of the Reset Period, the gross redemption yield (as calculated by the Agent Bank in accordance with generally accepted market practice at such time) on a semi-annual compounding basis (rounded up (if necessary) to four decimal places) of the Benchmark Gilt in respect of the Reset Period, with the price of the Benchmark Gilt for the purpose of determining the gross redemption yield being the arithmetic average (rounded up (if necessary) to the nearest 0.001 per cent. (0.0005 per cent. being rounded upwards)) of the bid and offered prices of such Benchmark Gilt quoted by the Reset Reference Banks at 11.00 a.m. (London time) on the Reset Determination Date on a dealing basis for settlement on the next following dealing day in London. Such quotations shall be obtained by or on behalf of the Issuer and provided to the Agent Bank. If at least four quotations are provided, the Reset Reference Rate will be determined by reference to the rounded arithmetic mean of the quotations provided, eliminating the highest quotation (or, in the event of equality, one of the highest) and the lowest quotation (or, in the event of equality, one of the lowest). If only two or three quotations are provided, the Reset Reference Rate will be determined by reference to the rounded arithmetic mean of the quotations provided. If only one quotation is provided, the Reset Reference Rate will be determined by reference to the rounded quotation provided. If no quotations are provided, the Reset Reference Rate will be the Initial Interest Rate less the Reset Margin, where:

"Benchmark Gilt" means, in respect of the Reset Period, such United Kingdom government security customarily used in the pricing of new issues with a similar tenor having a maturity date on or about the Maturity Date as the Issuer (on the advice of an investment bank of international repute) may determine to be appropriate following any guidance published by the International Capital Market Association at the relevant time; and

"dealing day" means a day on which the London Stock Exchange plc (or such other stock exchange on which the Benchmark Gilt is at the relevant time listed) is ordinarily open for the trading of securities;

"Senior Creditors" means (a) creditors of the Issuer who are unsubordinated creditors of the Issuer including all policyholders of the Issuer and all beneficiaries under contracts of insurance written by the Issuer (for the avoidance of doubt, the claims of policyholders and such beneficiaries shall include all amounts to which policyholders or such beneficiaries are entitled under applicable legislation or rules relating to the winding-up of insurance companies to reflect any right to receive or expectation of receiving benefits which policyholders or such beneficiaries may have) and (b) other creditors of the Issuer whose claims are, or are expressed to be, subordinated to the claims of other creditors of the Issuer (other than those (A) whose claims are in respect of instruments or obligations which constitute, or would but for any applicable limitation on the amount of any such capital constitute, (i) Tier 1 Capital or (ii) Tier 2 Capital or (B) whose claims otherwise rank, or are expressed to rank, pari passu with, or junior to, the claims of the Noteholders);

"Solvency Capital Requirement" means the Solvency Capital Requirement or the consolidated group Solvency Capital Requirement (as applicable) referred to in, or any other applicable capital requirement howsoever described in, the Relevant Rules;

"Solvency II" means the Solvency II Directive and any implementing measures adopted pursuant to the Solvency II Directive including, without limitation, the Solvency II Regulation (for the avoidance of doubt, whether implemented by way of a regulation, a directive, guidelines or otherwise);

"Solvency II Directive" means Directive 2009/138/EC of the European Parliament and of the Council of the European Union of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (as amended);

"Solvency II Regulation" means the Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council of the European Union on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II) (as amended);

"Sterling" and "£" means the lawful currency of the United Kingdom;

"Subsidiary" has the meaning given to it under section 1159 of the Companies Act 2006 (as amended from time to time);

"successor in business" has the meaning given to it in the Trust Deed;

"Tax Law Change" has the meaning given to it in Condition 6(c);

"Taxing Territory" means the United Kingdom or any political subdivision or authority therein or thereof having power to tax, or any other territory or any political subdivision or authority thereof or therein having power to tax to whose taxing jurisdiction the Issuer becomes generally subject;

"Tier 1 Capital" has the meaning given to it for the purposes of the Relevant Rules from time to time (including, without limitation, by virtue of the operation of any grandfathering provisions under any Relevant Rules);

"Tier 2 Capital" has the meaning given to it for the purposes of the Relevant Rules from time to time (including, without limitation, by virtue of the operation of any grandfathering provisions under any Relevant Rules);

"UK Listing Authority" means the UK Financial Conduct Authority in its capacity as UK listing authority for the purposes of the Financial Services and Markets Act 2000 (as amended) ("FSMA") or any successor authority or authorities appointed as the competent UK listing authority for the purposes of Part VI (Official Listing) of FSMA or otherwise; and

"United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern Ireland.

18. Governing law and jurisdiction

(a) Governing law

The Trust Deed and the Notes and any non-contractual obligations arising out of or in connection with the Trust Deed and the Notes are governed by, and shall be construed in accordance with, English law.

(b) Jurisdiction

The Issuer has in the Trust Deed (i) agreed for the benefit of the Trustee and the Noteholders that the Courts of England shall have exclusive jurisdiction to settle any dispute (a "Dispute") arising from or connected with the Notes; (ii) agreed that those courts are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue that any other courts are more appropriate or convenient; and (iii) consented to the enforcement of any judgment. The Trust Deed also states that nothing contained in the Trust Deed prevents the Trustee or any of the Noteholders from taking proceedings relating to a Dispute ("Proceedings") in any other courts with jurisdiction and that, to the extent allowed by law, the Trustee or any of the Noteholders may take concurrent Proceedings in any number of jurisdictions.

Overview of the Notes while in Global Form

1. Initial Issue of Certificates

The Global Certificate (as defined in the Trust Deed) will be registered in the name of a nominee for the Common Depositary and may be delivered on or prior to the Issue Date.

Upon the registration of the Global Certificate in the name of any nominee for the Common Depositary and delivery of the Global Certificate to the Common Depositary, Euroclear or Clearstream, Luxembourg will credit each subscriber with a principal amount of Notes equal to the principal amount thereof for which it has subscribed and paid.

2. Relationship of Accountholders with Clearing Systems

Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or any other clearing system approved by the Trustee (an "Alternative Clearing System") as the holder of a Note represented by the Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or any such Alternative Clearing System (as the case may be) for his share of each payment made by the Issuer to the holder of the Global Certificate and in relation to all other rights arising under the Global Certificate, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or such Alternative Clearing System (as the case may be). Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are represented by the Global Certificate and such obligations of the Issuer will be discharged by payment to the registered holder of the Global Certificate in respect of each amount so paid.

3. Exchange

Interests in the Global Certificate will be exchangeable (free of charge to the holder), in whole but not in part, for Definitive Certificates only if:

• (a) an Event of Default (as defined out in the Trust Deed) has occurred and is continuing; or
• (b) the Issuer has been notified that Euroclear and Clearstream, Luxembourg are both closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or both announce an intention permanently to cease business or do in fact do so.

Any reference herein to Euroclear and/or Clearstream, Luxembourg, shall, wherever the context so permits, be deemed to include a reference to any Alternative Clearing System.

4. Amendments to Conditions

The Global Certificate contains provisions that apply to the Notes that it represents, some of which modify the effect of the terms and conditions of the Notes set out in this Prospectus. The following is a summary of certain of those provisions:

4.1 Payments

All payments in respect of Notes represented by the Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the Clearing System Business Day immediately prior to the date for payment (where "Clearing System Business Day" means Monday to Friday (inclusive) except 25 December and 1 January). The calculation of all payments on the Notes will be made in respect of the total aggregate amount of the Notes represented by the Global Certificate, together with such other sums and additional amounts (if any) as may be payable under the Conditions, all in accordance with the Conditions and the Trust Deed.

4.2 Meetings

For the purposes of any meeting of Noteholders, the holder of the Notes represented by the Global Certificate shall be treated as being entitled to one vote in respect of each £1,000 in principal amount of the Notes.

4.3 Trustee's Powers

In considering the interests of Noteholders while the Global Certificate is held on behalf of, or registered in the name of any nominee for, a Clearing System, the Trustee may have regard to any information provided to it by such Clearing System or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Certificate and may consider such interests as if such accountholders were the holders of the Notes represented by the Global Certificate.

4.4 Notices

So long as all the Notes are represented by the Global Certificate and it is held on behalf of a Clearing System, notices to Noteholders will be given by delivery of the relevant notice to that Clearing System for communication by it to entitled accountholders in substitution for notification as required by the Conditions, provided that, so long as the Notes are admitted to trading on any stock exchange, notices will also be given in accordance with any applicable requirements of such stock exchange. A notice will be deemed to have been given to accountholders on the day on which such notice is sent to the relevant Clearing System for delivery to entitled accountholders.

4.5 Electronic Consent and Written Resolution

While the Global Certificate is registered in the name of any nominee for a Clearing System, then:

(a) approval of a resolution proposed by the Issuer or the Trustee (as the case may be) given by way of electronic consents communicated through the electronic communications systems of the relevant Clearing System(s) in accordance with their operating rules and procedures by or on behalf of the holders of not less than 90% in principal amount of the Notes outstanding (an "Electronic Consent" as defined in the Trust Deed) shall, for all purposes (including matters that would otherwise require an

Extraordinary Resolution to be passed at a meeting), take effect as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held, and shall be binding on all Noteholders whether or not they participated in such Electronic Consent; and

(b) where Electronic Consent is not being sought, for the purpose of determining whether a Written Resolution has been validly passed, the Issuer and the Trustee shall be entitled to rely on consent or instructions given in writing directly to the Issuer, and/or the Trustee, as the case may be, by accountholders in the clearing system with entitlements to such Global Certificate or, where the accountholders hold any such entitlement on behalf of another person, on written consent from or written instruction by the person for whom such entitlement is ultimately beneficially held, whether such beneficiary holds directly with the accountholder or via one or more intermediaries and provided that, in each case, the Issuer and the Trustee have obtained commercially reasonable evidence to ascertain the validity of such holding and have taken reasonable steps to ensure that such holding does not alter following the giving of such consent or instruction and prior to the effecting of such amendment. Any resolution passed in such manner shall be binding on all Noteholders, even if the relevant consent or instruction proves to be defective. As used in this paragraph, "commercially reasonable evidence" includes any certificate or other document issued by Euroclear, Clearstream, Luxembourg or any other relevant clearing system, or issued by an accountholder of them or an intermediary in a holding chain, in relation to the holding of interests in the Notes. Any such certificate or other document shall, in the absence of manifest error, be conclusive and binding for all purposes. Any such certificate or other document may comprise any form of statement or print out of electronic records provided by the relevant clearing system (including Euroclear's EUCLID or Clearstream, Luxembourg's CreationOnline system) in accordance with its usual procedures and in which the accountholder of a particular principal or nominal amount of the Notes is clearly identified together with the amount of such holding. None of the Issuer and the Trustee shall be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by any such person and subsequently found to be forged or not authentic.

Taxation

United Kingdom Taxation

The following is a summary of the Issuer's understanding of current United Kingdom law and published HM Revenue and Customs' practice relating only to the United Kingdom withholding tax treatment of payments of interest (as that term is understood for United Kingdom tax purposes) in respect of Notes. It does not deal with any other United Kingdom taxation implications of acquiring, holding or disposing of Notes. The United Kingdom tax treatment of prospective Noteholders depends on their individual circumstances and may be subject to change in the future. Prospective Noteholders who may be subject to tax in a jurisdiction other than the United Kingdom or who may be unsure as to their tax position should seek their own professional advice.

Payments of interest on the Notes may be made without deduction of or withholding on account of United Kingdom income tax provided that the Notes carry a right to interest and the Notes are and continue to be listed on a "recognised stock exchange" within the meaning of section 1005 of the Income Tax Act 2007 ("ITA 2007"). The London Stock Exchange is a recognised stock exchange. Securities will be treated as listed on the London Stock Exchange if they are included in the Official List (within the meaning of and in accordance with the provisions of Part 6 of the FSMA) and admitted to trading on the London Stock Exchange. Provided, therefore, that the Notes carry a right to interest and are and remain so listed on a "recognised stock exchange", interest on the Notes will be payable without deduction of or withholding on account of United Kingdom tax.

Payments of interest on Notes may be made without deduction of or withholding on account of United Kingdom income tax if the Notes are "regulatory capital securities" for the purposes of the Taxation of Regulatory Capital Securities Regulations 2013. This is subject to there being no arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage (as defined in section 1139 of the Corporation Tax Act 2010) for any person as a result of the application of the Taxation of Regulatory Capital Securities Regulations 2013 in respect of the Notes.

In other cases, an amount must generally be withheld from payments of interest on the Notes that has a United Kingdom source on account of United Kingdom income tax at the basic rate (currently 20%), subject to any other available exemptions and reliefs. However, where an applicable double tax treaty provides for a lower rate of withholding tax (or for no tax to be withheld) in relation to a Noteholder, HM Revenue and Customs can issue a notice to the Issuer to pay interest to the Noteholder without deduction of tax (or for interest to be paid with tax deducted at the rate provided for in the relevant double tax treaty).

The proposed financial transactions tax ("FTT")

On 14 February 2013, the European Commission published a proposal (the "Commission's Proposal") for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the "participating Member States"). However, Estonia has since stated that it will not participate.

The Commission's Proposal has very broad scope and could, if introduced, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances.

Under the Commission's Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, "established" in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate.

Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.

Subscription and Sale

Pursuant to a Purchase and Re-sale Agreement dated 28 February 2018 as supplemented on the date of this Prospectus (the "Purchase Agreement"), J.P. Morgan Securities plc (the "Sole Lead Manager") purchased the Notes from the Issuer on 28 February 2018 at the issue price of 100% of their principal amount (the "Issue Price"). All of the Notes were purchased by the Sole Lead Manager at the Issue Price for resale by the Sole Lead Manager in the future at a price to be determined by the Sole Lead Manager in consultation with the Issuer. Under the Purchase Agreement, the Issuer has agreed to indemnify the Buyer against certain liabilities incurred by it in connection therewith and has paid a fee to the Buyer.

United States

The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act.

The Sole Lead Manager has represented that it has offered and sold the Notes, and has agreed that it will offer and sell the Notes (i) as part of their distribution at any time and (ii) otherwise until 40 days after the Remarketing Settlement Date, only in accordance with Rule 903 of Regulation S. Accordingly, neither it, its affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts with respect to the Notes, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. The Sole Lead Manager has agreed that, at or prior to confirmation of sale of Notes it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the distribution compliance period a confirmation or notice to substantially the following effect:

"The securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the Remarketing Settlement Date, except in accordance with Regulation S under the Securities Act. Terms used above have the meanings given to them by Regulation S under the Securities Act."

Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

United Kingdom

The Sole Lead Manager has represented warranted and agreed that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to such Notes in, from or otherwise involving the United Kingdom.

Prohibition of Sales to EEA Retail Investors

The Sole Lead Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the EEA. For the purposes of this provision, the expression "retail investor" means a person who is one (or more) of the following:

• (a) a retail client as defined in point (11) of Article 4(1) of MiFID II; or
• (b) a customer within the meaning of Directive 2002/92/EC, as amended, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

General

No action has been or will be taken by the Issuer or the Sole Lead Manager that would permit a public offering of the Notes, or possession or distribution of this document or other offering or publicity material relating to the Notes in any country or jurisdiction where action for that purpose is required.

The Sole Lead Manager will comply with all applicable securities laws and regulations (to the best of its knowledge and belief after due and careful enquiry) in each jurisdiction in which it purchases, offers, sells or delivers the Notes or has in its possession or distributes the Prospectus or any other offering material, in all cases at its own expense.

Additional Information

1. The Company was incorporated as a private company limited by shares in England and Wales, under the Companies Act 1985, on 19 October 2007 with registered number 06404270. On 8 July 2010, the Company name changed from Skandia UK Holdings Limited to Old Mutual Wealth Management Limited. On 27 March 2018, the Company re-registered as a public company under the Companies Act 2006 and again changed its name to Quilter plc.

The Company's registered office and principal place of business is Millennium Bridge House, 2 Lambeth Hill, London EC4V 4AJ.

The Company is not registered as an external company in South Africa.

The principal legislation under which the Company operates is the Companies Act 1985 and Companies Act 2006 and the regulations made thereunder.

The business of the Company, and its principal activity, is to act as the ultimate holding company of the Group.

1. By resolution of the Directors dated 12 March 2018, KPMG, whose registered address is at 15 Canada Square, Canary Wharf, London E14 5GL, United Kingdom, was appointed as the statutory auditor to the Company. The financial information contained in this Prospectus does not constitute full statutory accounts as referred to in section 434(3) of the Companies Act 2006. Full audited accounts have been delivered to the Registrar of Companies for the Company.

KPMG is registered to perform audit work by the Institute of Chartered Accountants in England and Wales.

3.

3.1 Old Mutual plc Separation Agreement

Overview of the Old Mutual plc Separation Agreement

In connection with the Quilter Separation, Old Mutual plc and the Company expect to enter into a separation agreement to set out the principal steps necessary to effect the Quilter Separation and other provisions to govern certain aspects of the Company's relationship with Old Mutual plc after the Quilter Separation (the "Old Mutual plc Separation Agreement").

Non-solicitation

The parties expect to agree that they shall not, for a period of two years from the date of the Quilter Separation, solicit or endeavour to entice away, employ or offer to employ, without the prior written consent of the other, any key employee of the other's group.

"Old Mutual" Name and Brand

Old Mutual plc is expected to agree that its group shall not, for the period from Quilter Separation until 31 March 2020: (i) carry on business in the UK using a name or brand containing the term "Old Mutual"; or (ii) permit any person outside of its group to use a name or brand containing the term "Old Mutual" in connection with any business in the UK, in each case that competes with the businesses of the Group; provided that (a) the restriction in (i) shall not apply to any member of the group which at the date of the agreement carried on such a business in the UK using such a name or brand nor shall it apply to a listing of Old Mutual Limited to the standard segment of the UK Official List and to trading on the London Stock Exchange's main market for listed securities; and (b) this provision will cease to have effect following the time at which Old Mutual Limited becomes the holding company of Old Mutual plc.

Allocation of liabilities and wrong pockets

Subject to any allocation of liabilities provisions contained in the other agreements relating to the Managed Separation, the agreement is expected to be that, following the Quilter Separation: (i) any liability that arises in a company in the Old Mutual plc group owing to a third party shall remain with that company unless such liability principally relates to a business within the Quilter Perimeter (as defined below) in which case such liability shall be novated to, or the relevant company shall be indemnified by, a company in the Group; and (ii) any liability that arises in a company in the Group owing to a third party shall remain with that company unless such liability principally relates to a business which is not within the Quilter Perimeter in which case such liability shall be novated to, or the relevant company shall be indemnified by, Old Mutual plc or one of its subsidiaries. For the purposes of this provision, "Quilter Perimeter" means, broadly, the businesses carried on prior to the Quilter Separation other than those transferred to the Group as part of the implementation of Managed Separation. As part of this allocation of liabilities, the Company is also expected to agree to indemnify Old Mutual plc in relation to certain tax matters relating to the sale of OMPLC Brands AB.

Following the Quilter Separation, the agreement is expected to be that if any property, asset or right relating principally to the business of either the Old Mutual plc group or the Group is found to be owned or held by the other in error, Old Mutual plc or the Company, as applicable, shall procure that the relevant property, asset or right be transferred to the other as soon as reasonably practicable.

Other matters

The Old Mutual plc Separation Agreement is also expected to include provisions relating to: (i) the sharing of information to permit each of Old Mutual plc and the Company to comply with its financial or tax reporting obligations; and (ii) the administration of the Old Mutual plc share plans in which Group employees participate.

3.2 OML Separation Agreement

Overview of the OML Separation Agreement

In connection with the Quilter Separation, the Company and Old Mutual Limited expect to enter into a separation agreement to set out provisions that will govern certain aspects of the

Company's relationship with Old Mutual Limited after the Quilter Separation (the "OML Separation Agreement").

Non-solicitation

The Company and Old Mutual Limited expect to agree that they shall not, for a period of two years from the date the Proposed Listing takes effect, solicit or endeavour to entice away, employ or offer to employ, without the prior written consent of the other, any key employee of the other's group.

"Old Mutual" Name and Brand

Old Mutual Limited is expected to agree that its group shall not, for the period from Quilter Separation until 31 March 2020: (i) carry on business in the UK using a name or brand containing the term "Old Mutual"; or (ii) permit any person outside of its group to use a name or brand containing the term "Old Mutual" in connection with any business in the UK, in each case that competes with the businesses of the Group; provided that the restriction in (i) shall not apply to any member of the group which at the date of the agreement carried on such a business in the UK using such a name or brand nor shall it apply to a listing of Old Mutual Limited to the standard segment of the UK Official List and to trading on the London Stock Exchange's main market for listed securities.

Chargeable payments

If either the Group or the Old Mutual Limited group were, within five years after the Quilter Separation, broadly to transfer value to its members with a main purpose of tax avoidance or otherwise not for genuine commercial reasons, adverse tax consequences could arise, in particular for shareholders and for the Group. Under the OML Separation Agreement therefore, the Company and Old Mutual Limited are both expected to covenant not to carry out any such transaction within that period.

Other matters

The OML Separation Agreement is also expected to include provisions relating to the sharing of information to permit each of the Company and Old Mutual Limited to comply with its financial or tax reporting obligations.

3.3 Tax Matters Agreement

Overview of Tax Matters Agreement

The tax matters agreement expected to be entered into between the Company and Old Mutual plc (the "Tax Matters Agreement") is expected to set out the general principle that each will be responsible for taxes imposed on its subsidiaries and business for any period, with each party indemnifying the other where that would otherwise not be the case. Similarly, each of the Group and the Old Mutual Limited group is expected generally to be entitled to benefit from any tax refunds relating to its subsidiaries and business. This agreement is also expected to provide for cooperation between the parties in relation to the exchange of

information, preparation and submission of tax returns and computations and communications with tax authorities on tax matters affecting both the Group and the Old Mutual Limited group.

Tax reliefs

The Tax Matters Agreement is also expected to set out arrangements relating to the allocation of and payment for certain tax reliefs between the Group and the Old Mutual Limited group in respect of periods up to the period in which the Quilter Separation takes place.

Transfer pricing

The Tax Matters Agreement is also expected to provide for adjustments and/or compensating payments where transfer pricing or similar tax rules result in an increased tax liability for one of the Group or the Old Mutual Limited group (as the case may be) for a transaction or arrangement it has undertaken with the other party.

Chargeable payments

If either the Group or the Old Mutual Limited group were, within five years after the Quilter Separation, broadly to transfer value to its members with a main purpose of tax avoidance or otherwise not for genuine commercial reasons, adverse tax consequences could arise, in particular for Old Mutual plc shareholders and for the Group. Under the Tax Matters Agreement therefore, the Company and Old Mutual plc are both expected to covenant not to carry out any such transaction within that period.

3.4 Transitional Trade Mark Licence Agreement

Following the Quilter Separation, the Group will require a licence to continue to use certain "Old Mutual" trade marks ("Marks") for a transitional period.

Old Mutual plc and OMLACSA (together, the "Licensors") have entered into an agreement to grant a non-exclusive licence to the Company to use the Marks for a transitional period of 24 months following the date on which the Quilter Separation occurs. The Company is permitted to sub-license the Marks to its subsidiaries.

The Company and its sub-licensees are permitted to use the Marks in relation to the conduct of the Old Mutual Wealth group's businesses as at the date of the Quilter Separation. Use is also restricted to use in specified territories, and in the manner in which the Marks were used by the Company and its subsidiaries in the period 24 months immediately prior to the date of the Quilter Separation.

The Licensors may terminate the licence early for material breach (which remains unremedied for 30 days following notice), insolvency, where OMWML challenges a Licensor's ownership, validity or enforceability of the Marks or where there is a change of control of the Company to a competitor.

If the Company or any group member who is a sub-licensee sells any assets, they will be permitted to assign the licence rights that relate to such assets to the purchaser (unless the purchaser is a competitor, in which case the licence will terminate in relation to those assets). In all other cases, the Licensors' prior consent to assignment will be required. The Licensors are entitled to assign their rights in the Marks to any third party (subject to transferring their rights and obligations under the licence to the assignee).

3.5 Material disposals

3.5.1 OMGI Transaction

(a) OMGI Sale and Purchase Agreement

On 18 December 2017, the Company and Bidco (a special purpose vehicle ultimately owned by funds managed by TA Associates and certain members of OMGIUK's management) entered into the OMGI SPA, pursuant to which the Company agreed, subject to certain conditions, to sell all of the shares in OMGI to Bidco for cash consideration calculated in accordance with the terms of the OMGI SPA, based on a locked box as at 31 December 2017 with customary "no-leakage" provisions.

The sale of OMGI is subject to certain conditions precedent, including in relation to a re-organisation pursuant to which all the shares in OMIML and the Multi-Asset Business will be separated and retained by the Group. Therefore, while the OMGI SPA relates to a sale of all of the shares in OMGI, given the separation and retention by the Group of the Multi-Asset Business (and OMIML which will operate the Multi-Asset Business in the future), the commercial effect of such a sale is the disposal by the Group of the Single Strategy Business and the retention of the Multi-Asset Business.

The consideration payable under the OMGI SPA is subject to a number of adjustments and the expected total consideration payable to the Company is approximately £600 million, comprising cash consideration of approximately £570 million payable on completion, with approximately £30 million anticipated to be paid thereafter, primarily in 2019 to 2021 as surplus capital of the Single Strategy Business associated with the separation from the Group is released. These values are subject to a number of potential price adjustments, depending on the net asset value of the business and other factors at the disposal date. The deferred consideration is not subject to performance conditions. At completion, economic ownership of the Single Strategy Business will pass to Bidco effective from 1 January 2018 with all profits and performance fees generated up until 31 December 2017 for the account of the Company. Proceeds from a completed transaction will be used to repay the New Term Loan in full and for general corporate purposes.

The sale of OMGI is subject to certain conditions precedent, including in relation to mandatory regulatory change of controller approvals and, as referenced above, a reorganisation pursuant to which all the shares in OMIML and the Multi-Asset Business will be separated and retained by the Group (see also the Multi-Asset Separation BTA summary below). This includes the reorganisation of the management of certain funds and the transfer of certain assets that form part of the Multi-Asset Business into new funds separate from the Single Strategy Business. The OMGI SPA may be terminated if the conditions precedent are not satisfied (or waived, if permitted) by 18 December 2018 with the latest date on which completion can occur being 31 January 2019. The parties currently expect the sale to complete in the second half of 2018.

The OMGI SPA contains typical title, capacity and seller solvency warranties, as well certain limited commercial warranties. There are also customary pre-completion undertakings relating to the conduct of the Single Strategy Business and the steps required to be taken prior completion. The OMGI SPA contains covenants given by both parties relating to the non-solicitation of employees for a period of two years after completion and also contains certain non-compete covenants given by both parties for the same period. The OMGI SPA also includes an anti-embarrassment provision pursuant to which the Company is entitled to a payment should Bidco agree to sell the Single Strategy Business or the shares of certain companies operating it to a third party before 31 December 2019. There are also certain ancillary arrangements relating to (amongst other things) investment management fees and capacity limits and the distribution of funds managed by the Single Strategy Business.

The Company's liability for breach of any of the terms of the OMGI SPA is limited to 25% of the consideration, except liability for breaches of key provisions which, along with all other claims, is limited to the amount of the consideration.

The Company will have to make certain payments to Bidco if the management fee revenue of OMGI from assets under management derived from certain distribution channels is below given amounts in calendar years 2020 and 2022. The maximum payment by the Company is £15 million in respect of each relevant year.

OMIML will continue to act as authorised corporate director or alternative investment fund manager of certain "single strategy" funds until a new authorised investment fund manager currently being established by OMGI and Bidco takes over this role, which may be after completion. During this time, investment management of all the relevant funds will continue to be fully delegated to OMGIUK, as is currently the case. OMIML benefits from certain indemnities given by OMGIUK in respect of certain liabilities incurred relating to OMIML carrying out this role from 1 January 2018 until transition to the new manager. This indemnity contains a number of carve-outs and exclusions.

On completion of the OMGI SPA other agreements will be entered into, including in relation to (i) transitional service arrangements from the Group to OMGIUK (see "— (c) OMGI Transitional Services Agreements" below); (ii) transitional service arrangements from OMGIUK to the Group (see "—(c) OMGI Transitional Services Agreements" below); and (iii) arrangements relating to intellectual property (including the use by the Single Strategy Business of certain trade marks including the name "Old Mutual") and domain names until the earlier of 12 months after completion of the OMGI SPA and 24 months after the Quilter Separation.

(b) Multi-Asset Separation Business Transfer Agreement

On 18 December 2017, OMIML (a current subsidiary of OMGI which, as noted above, will be transferred to the Company before completion of the OMGI SPA) and OMGIUK (a subsidiary of OMGI) entered into a business transfer agreement (the "Multi-Asset Separation BTA") pursuant to which the Multi-Asset Business will be separated and retained by the Group, subject to the satisfaction of certain regulatory conditions.

Pursuant to the Multi-Asset Separation BTA (i) certain assets used in the Multi-Asset Business (such as computers and certain IP rights) will be transferred to OMIML for book value, (ii) certain employment arrangements will take effect, including the transfer of a number of employees from OMGIUK to OMIML, (iii) OMIML will terminate its existing delegation of the investment management of certain multi-asset funds to OMGIUK and assume the investment management itself, (iv) investment management of certain funds where investment management has currently been delegated by OMIML to OMGIUK, and OMGIUK has then sub-delegated to a third party manager will be reorganised so that OMIML delegates directly to the relevant third party managers; (v) the investment management of certain multi-asset funds in Ireland will be sub-delegated by OMGIUK to OMIML and in due course, these funds will be merged into multi-asset funds managed directly by OMIML and (v) certain distribution arrangements (as well as the arrangements relating to rebates) relating to the Multi-Asset Business will be separated and transitioned to OMIML.

The Multi-Asset Separation BTA contains an indemnity given by OMIML to OMGIUK and each member of OMGIUK's group in respect of certain liabilities incurred relating to the operation of the Multi-Asset Business from 1 January 2018 up to completion under the Multi-Asset Separation BTA. This indemnity contains a number of carveouts and exclusions.

(c) OMGI Transitional Services Agreements

On completion of the sale of OMGI, the following two transitional services agreements will be put in place:

• the OMGI Reverse TSA: a transitional services agreement under which OMGIUK provides certain IT, operational and other services to OMIML in order to assist OMIML in continuing the Multi-Asset Business following completion of the OMGI Transaction; and
• the OMGI TSA: a transitional services agreement under which Old Mutual Wealth Business Services Limited ("OMWBS") provides certain IT, human resources, finance and facilities management services to OMGI in order to assist OMGI in continuing to operate the Single Strategy Business following completion of the OMGI Transaction.

The services provided under the OMGI Reverse TSA and the OMGI TSA shall each have a specified service term and maximum extension period, with a long-stop date of 36 months.

The OMGI Reverse TSA has fixed fees for the services primarily related to the supply of staff, which can be adjusted up or down by either party if actual costs incurred by OMGI for the relevant service (which are reported) have more than a 5% variance from the fixed fee. IT services are charged on a separate fee model based on actual variable costs (e.g. use volumes), with an estimate paid in advance and a monthly true-up.

In the OMGI TSA, fees for each service group are fixed and specified in a fee appendix. The full monthly fee is payable if any part of the service is provided for any part of the month.

(d) OMGI Intra-Group Services Agreement

On completion of the Multi-Asset Separation BTA, an intra-group services agreement (the "OMGI IGSA") will be entered into between OMIML and OMGIUK under which OMGIUK provides certain IT, operational and other services to OMIML until completion of the sale of OMGI under the OMGI SPA. At such point, the OMGI IGSA will be replaced by the OMGI Reverse TSA described in "—(c) OMGI Transitional Services Agreements" above.

The OMGI IGSA is on similar terms to the OMGI Reverse TSA, with some differences including a broader scope of services, reflecting that OMGI remains within the Group at that time and separation work will be on-going, which will also be refined in the period between signing of the Multi-Asset Separation BTA and the commencement of the OMGI IGSA.

3.5.2 New Facilities Agreement

On 23 February 2018, the Company entered into a £425 million facilities agreement (the "New Facilities Agreement") with Bank of America Merrill Lynch International Limited; BNP Paribas Fortis, London Branch; Citigroup Global Markets Limited; HSBC Bank plc and National Westminster Bank plc as mandated lead arrangers, with National Westminster Bank plc as facility agent, which will provide for a £300 million term loan facility (the "New Term Loan") and a £125 million revolving credit facility (the "New Revolving Facility", together with the New Term Loan, the "New Facilities").

(a) Purpose, fees and currency

The funds under the New Facilities will be available for general corporate purposes. A commitment fee applies to the New Revolving Facility at a rate of 35% of the then applicable margin payable on the unused and uncancelled amount of the New Revolving Facility payable from the date of the agreement. An arrangement fee, which is in line with customary terms for such facilities, will be paid in respect of the New Facilities Agreement and certain customary fees will also be payable to the facility agent. The New Facilities will be drawn in pounds sterling.

(b) Maturity and voluntary prepayment

The New Term Loan matures three years from the date of the agreement. The initial maturity of the New Revolving Facility is three years from the date of the agreement, which can be extended at the request of the Company, at the discretion of the lenders, on the first anniversary of the date of the agreement and on the second anniversary of the date of the agreement by up to an aggregate of two years. Any amounts still outstanding at that time will then be due and payable. Subject to certain conditions, all or part of the utilisations under the New Facilities Agreement may be voluntarily prepaid and all or part of the available commitment may be cancelled. Other than in respect of revolving facilities, any amount prepaid may not be redrawn but the relevant lenders do not have the right to decline any voluntary prepayments.

(c) Mandatory prepayment

In addition to voluntary prepayment, prepayment will be required in full or part under certain circumstances including (i) on the occurrence of an illegality event (that is, if it becomes unlawful in any applicable jurisdiction for a lender to perform its obligations under the New Facilities Agreement) and (ii) if (A) prior to the Proposed Listing, Old Mutual plc ceases to control the Company or (B) any person or group of persons acting in concert gains control of the Company, each lender may cancel its commitments under the New Facilities Agreement and require repayment of all of such commitments or participations in each utilisation under the New Facilities Agreement.

Prepayment of the New Term Loan will also be required if the disposal of the Single Strategy Business of the Company to TA Associates, as announced in a press release by the Company dated 19 December 2017, occurs. An amount equal to the net disposal proceeds must be applied towards prepaying and reducing the commitments under the New Term Loan.

The New Facilities Agreement contains a limited number of customary representations and warranties and customary affirmative and restrictive covenants. The representations and warranties are made by the Company and in the case of the representations and warranties relating to material litigation, sanctions and anticorruption refer to other members of the Group. In the majority of cases the covenants are applicable to the Company and in a few cases the covenants only apply to the subsidiaries of the Company. The restrictive covenants are limitations on creation of security, disposal of assets, incurrence of financial indebtedness by Subsidiaries of the Company and sanctions, and each of these covenants contains a significant number of permitted exceptions and agreed thresholds.

The New Facilities Agreement includes a financial covenant requiring the Company to maintaining a ratio of (i) the aggregate of the total borrowings of the Company less cash and cash equivalents held by the Company to (ii) the aggregate of consolidated equity shareholders' funds and hybrid capital, each as disclosed in the balance sheet of the Company, on the last day of the financial year or financial half year of the Company, of less than or equal to 0.5:1.0.

(d) Events of Default

The New Facilities Agreement contains certain customary events of default (subject in certain cases to agreed grace periods, thresholds and other qualifications), including breach of the financial covenants described above and a cross-default to debt of the Company (or a subsidiary of the Company whose total assets represent 15% or more of the consolidated total assets of the Company and all of its subsidiaries and certain other operating subsidiaries of the Company) in excess of the greater of (i) £10,000,000 and (ii) 0.50% of the aggregate of the amount paid up or credited as paid up on the share capital of the Company and the total of the capital and revenue reserves of the Company and its subsidiaries.

The occurrence of an event of default which is continuing would allow the lenders of the New Facilities to, amongst other things, upon written notice to the Company, accelerate all or part of the outstanding loans, cancel the commitments, declare all or part of the loans payable on demand or exercise its other rights under the New Facilities Agreement and other finance documents.

• 1. Save as disclosed in this Prospectus, no members of the Group entered into related party transactions during the year ended 31 December 2017 or during the period from 31 December 2017 to the date of this Prospectus.
• 1. KPMG (a member of the Institute of Chartered Accountants in England and Wales) has given and has not withdrawn its written consent to the inclusion in this Prospectus of its Accountant's Reports set out in Section A of "Historical Financial Information" and Section B of "Unaudited Pro Forma Financial Information", in the form and context in which they appear and has authorised the contents of those parts of the Prospectus which comprise its reports for the purpose of Rule 5.5.4R(2)(f) of the Prospectus Rules.
• 1. The net proceeds of the issue were used by the Issuer for general corporate purposes.
• 1. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg with a Common Code of 171347378 and an ISIN of XS1713473780.
• 1. The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.
• 1. The yield of the Notes to the First Call Date is 4.487%, on a semi-annual basis. The yield is calculated as at the Issue Date on the basis of the issue price of 100% and the initial interest rate of 4.487% per annum. It is not an indication of future yield.
• 1. The Issuer estimates that the amount of expenses related to the admission to trading of the Notes will be up to £4,200.
• 1. It is expected that the applications for the Notes to be admitted to the Official List of the UKLA and to trading on the London Stock Exchange's regulated market will be granted on or about 12 April 2018 and that such admission will become effective, and that dealings in the Notes on the London Stock Exchange will commence, on or about 12 April 2018.
• 1. The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of the Notes. The issue of the Notes was authorised by

resolutions of the board of directors of the Issuer passed on 15 February 2018 and a committee of the board of directors of the Issuer passed on 27 February 2018.

1. On 3 March 2016, the FCA issued a report detailing the findings of its industry-wide Thematic Review into the treatment of long-standing customers invested in closed-book products sold by the life insurance sector, with a focus on four areas or "outcomes": strategy and governance, communications, fund performance and charges (in particular exit charges and paid-up charges). At the same time, the FCA announced that its enforcement division was initiating investigations into six firms in connection with the findings of the Thematic Review (although an investigation into one of those firms was subsequently discontinued on 7 September 2017).

OMWLA, a subsidiary of the Group which will be rebranded, and is referred to elsewhere in this Prospectus, as Quilter Life Assurance, is one of the firms under investigation by the FCA. The Investigation covers the four outcomes/areas of focus identified in the Thematic Review and, in particular: (i) OMWLA's behaviour in respect of the disclosure of exit charges and paid up charges after December 2008 (Outcomes 2 and 4 in the Thematic Review); and (ii) whether OMWLA contravened regulatory requirements across a number of other areas assessed in the Thematic Review. In relation to point (ii), these other areas are aspects of OMWLA's strategy and governance in relation to its closed-book customers (Outcome 1 in the Thematic Review) and aspects of fund performance, again in relation to OMWLA's closed-book customers (Outcome 3 in the Thematic Review). OMWLA is working with the FCA and is cooperating with its Investigation. To date, the FCA has issued, and OMWLA has given responses in respect of, a number of information requirements. There can be no assurance at this stage as to the outcome of the matter.

Other than as mentioned above, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Group is aware) during the 12 months preceding the date of this Prospectus which may have, or have had, a significant effect on the Issuer's or the Group's financial position or profitability.

• 1. The Trust Deed provides that the Trustee may rely on certificates or reports from any auditors or other parties in accordance with the provisions of the Trust Deed whether or not any such certificate or report or engagement letter or other document in connection therewith contains any limit on the liability of such auditors or such other party.
• 1. There has been no significant change in the financial or trading position of the Issuer or the Group since 31 December 2017. There has been no material adverse change in the prospects of the Issuer or the Group since 31 December 2017.
• 1. The Prospectus will also be available for inspection on the website of the Regulatory News Service operated by the London Stock Exchange at http://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html.
• 1. Copies of the following documents will be available for inspection at the specified offices of each of the Paying Agents (as defined in the Conditions) during normal business hours, so long as any of the Notes is outstanding:
• (a) this Prospectus;
• (b) the Trust Deed;
• (c) the Agency Agreement;
• (d) the constitutional documents of the Issuer;
• (e) the historical financial information of Quilter plc in respect of the three financial years ended and as at 31 December 2015, 2016 and 2017, together with the related Accountant's Report from KPMG, which are set out in "Historical Financial Information"; and
• (f) the unaudited pro forma financial information, together with the related Accountant's Reports from KPMG, which is set out in "Unaudited Pro Forma Financial Information".
• 1. The Issuer does not intend to provide any post-issuance information in relation to the Notes.
• 1. The Sole Lead Manager and its affiliates have engaged, and may in the future engage in investment banking and/or commercial banking transactions with, and may perform services for the Issuer and its affiliates in the ordinary course of business. In addition, in the ordinary course of its business activities, the Sole Lead Manager and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or its affiliates. The Sole Lead Manager or its affiliates may have (or may in the future have) a lending relationship with the Issuer and may hedge their credit exposure to the Issuer consistent with their customary risk management policies. Typically, the Sole Lead Manager and its affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes. Any such short

positions could adversely affect future trading prices of the Notes. The Sole Lead Manager and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Definitions and Glossary of Technical Terms

The following definitions apply throughout this Prospectus unless the context requires otherwise:

"advised customers" customers who received financial advice from the Group's

network of RFPs, IFAs or Mortgage & Protection Advisers

"affluent" customers with £100,000 to £5 million of investable assets

"AIF" Alternative Investment Fund

"AIFMD" the Alternative Investment Fund Managers Directive (Directive

2011/61/EU), as amended, and any implementing legislation

"AR firm" appointed representative firm

"AuA" assets under administration, which, unless stated otherwise,

reflects gross AuA before intra-group eliminations

"AuM" assets under management, which, unless stated otherwise,

reflects gross AuM before intra-group eliminations

"AuMA" assets under management and under administration

"Bidco" Mintaka Bidco Limited, a special purpose vehicle ultimately

owned by funds managed by TA Associates and certain members

of OMGIUK's management)

"BIPRU" the Prudential sourcebook for Banks, Building Societies and

Investment Firms

"Board" the board of directors of the Company

"Brexit" the exit of the United Kingdom from the European Union, officially

announced on 29 March 2017

"Caerus" Caerus Capital Group

"CAGR" compound annual growth rate

"CASS" the Client Assets Sourcebook

"CBI" Central Bank of Ireland

"CCP" central counterparty

"CF30 Advisers" advisers who are approved by the FCA to carry out a customer

function and may provide investment advice

"CI Final Salary Scheme" the Quilter Cheviot Channel Islands Retirement Benefits Scheme

"CIA" Collective Investment Accounts

"CIB" Collective Investment Bonds

"COBS" the Conduct of Business Sourcebook

"Company" Quilter plc

"CRA" Collective Retirement Accounts

"CRD III" the Capital Requirements Directive III (Directive 2010/76/EU)

"CRD IV" the Capital Requirements Directive IV (Directive 2013/36/EU) and

the Capital Requirements Regulation (Regulation 575/2013/EU),

as amended, and any implementing legislation

"D2C" direct-to-consumer

"DB" defined benefit

"DC" defined contribution

"DFM" discretionary fund management

"DFSA" Dubai Financial Services Authority

"Directors" the directors of the Company whose names appear on page 167

of the Prospectus

"Disclosure and Transparency

Rules"

the disclosure guidance and transparency rules made by the FCA

pursuant to section 73A of the FSMA (as amended)

"DPA" 1998 Data Protection Act

"DPS" Discretionary Portfolio Service

"ECLs" expected credit losses

"EIOPA" the European Insurance and Occupations Pensions Authority

"EMIR" European Market Infrastructure Regulation (Regulation 648/2012)

"ERM" enterprise-wide risk management

"ESCA" Emirates Securities and Commodities Authority

"ETFs" exchange-traded funds

"Executive Directors" the executive directors of the Company

"FAS" the Financial Adviser School

"FATCA" the Foreign Account Tax Compliance Act

"FCA" the UK Financial Conduct Authority

"FICOD" the Financial Conglomerates Directive

"FNZ" FNZ Ltd

"FOS" the Financial Ombudsman Service

"FPC" the Financial Policy Committee

"FS Act" the Financial Services Act 2012

"FSA" the UK Financial Services Authority, the predecessor of the FCA

and the PRA

"FSCS" the UK Financial Services Compensation Scheme

"FSMA" the Financial Services and Markets Act 2000, as amended

"FTT" financial transaction tax

"FVOCI" fair value through other comprehensive income

"FVTPL" fair value through profit or loss

"GDPR" General Data Protection Regulation

"GENPRU" the FCA General Prudential Sourcebook

"GET" Global Edge Technologies Proprietary Limited

"GIAs" general investment accounts

"Group" or "Quilter" the Company and each of its consolidated subsidiaries and

subsidiary undertakings, excluding the Single Strategy Business

(unless otherwise indicated)

"Henderson" Henderson Global Investors

"high net worth" customers with over £5 million of investable assets

"HMRC" Her Majesty's Revenue and Customs

"Hong Kong SFC" Securities & Futures Commission of Hong Kong

"ICAAP" the Internal Capital Adequacy Assessment Process

"ICG" the Individual Capital Guidance

"ICO" the Information Commissioner's Office

"ICOBS" the Insurance Conduct of Business Sourcebook

"IDD" the Insurance Distribution Directive

"IFAs" Independent Financial Advisers, meaning advisers who provide

advice on an independent basis, based on a comprehensive

analysis of the whole market and free from any restrictions

"IFPRU" the Prudential sourcebook for Investment Firms

"IFRS" the International Financial Reporting Standards as adopted by the

European Union

"Integrated NCCF" NCCF that appear in more than one part of the Group's

businesses

"Intrinsic" Intrinsic Financial Services Limited

"Investigation" the FCA's investigation into OMWLA, as discussed in "Additional

Information"

"IPRU-INV" the Interim Prudential sourcebook for Investment Businesses

"IRS" the US Internal Revenue Service

"ISA" Individual Savings Accounts

"Isle of Man FSA" the Isle of Man Financial Services Authority

"JFSC" Jersey Financial Services Commission

"KID" key information document

"Licensors" Old Mutual plc and OMLACSA, under the Transitional Trade Mark

Licence Agreement, as described in "Additional Information—3.4

Transitional Trade Mark Licence Agreement"

"Listing Rules" the listing rules of the FCA made under section 74(4) of the FSMA

"London Stock Exchange" London Stock Exchange plc

"Managed Separation" the managed separation of the four largely independent

businesses within the Old Mutual Group as it existed as at 11

March 2016

"MAR" the Market Abuse Regulation (Regulation 496/2014/EU)

"Marks" certain "Old Mutual" trade marks, which the Group will continue to

use for a transitional period following the Quilter Separation

"mass affluent" customers with £100,000 to £250,000 of investable assets

"MCOB" the Mortgages and Home Finance: Conduct of Business

Sourcebook

"Member States" member states of the EEA

"MFHC" mixed financial holding company

"MiFID" Markets in Financial Instruments Directive (Directive 2004/39/EC)

"MiFID II" Markets in Financial Instruments Directive II (Directive

2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014), as amended, and any implementing

legislation

"MLD4" the Fourth Money Laundering Directive (Directive 2015/849/EU),

as amended, and any implementing legislation

"Mortgage & Protection

Advisers"

specialist financial advisers, both restricted and independent,

which provide advice on mortgages and protection solutions

"MPS" Managed Portfolio Service

"Multi-Asset Business" the Group's "multi-asset" asset management business, which will

be retained by the Group when the Single Strategy Business is sold as described in in "Additional Information—3.5.1 OMGI

Transaction"

"Multi-Asset Separation BTA"

the business transfer agreement pursuant to which the Multi-

Asset Business will be separated and retained by the Group, subject to the satisfaction of certain regulatory conditions, as described in "Additional Information—3.5.1 OMGI Transaction—0

Multi-Asset Separation Business Transfer Agreement"

"NCCF" net client cash flow, as described in "Presentation of Financial

and Other Information—2. Non-IFRS Financial Information"

"Nedbank" Nedbank Group Limited

"New Facilities" the New Term Loan and the New Revolving Facility, together

"New Facilities Agreement" the £425 million facilities agreement with Bank of America Merrill

Lynch International Limited; BNP Paribas Fortis, London Branch; Citigroup Global Markets Limited; HSBC Bank plc and National Westminster Bank plc as mandated lead arrangers, with National Westminster Bank plc as facility agent, as described in "Additional

Information—3.5.2 New Facilities Agreement"

"New Revolving Facility" the £125 million revolving credit facility, which the Group entered

into on 23 February 2018, as described in "Additional

Information—3.5.2 New Facilities Agreement"

"New Term Loan" the £300 million senior unsecured term loan with an opening

interest of 45 basis points above LIBOR subject to a margin ratchet linked to the Companyꞌs credit rating, which the Group entered into on 23 February 2018 and fully drew down on 28 February 2018, as described in "Additional Information—3.5.2

New Facilities Agreement"

"Non-Executive Directors" the non-executive Directors of the Company

"Non-IFRS Financial

Measures" certain financial measures that are not defined or recognised under IFRS, including operating profit from continuing operations,

normalised operating profit from continuing operations, normalised net management fee, normalised other revenue and

normalised expenses

"OMGI" Old Mutual Global Investors Holdings Limited

"OMGI IGSA" the intra-group services agreement entered into between OMIML

and OMGIUK, as described in "Additional Information—3.5.1 OMGI Transaction—(d) OMGI Intra-Group Services Agreement"

"OMGI SPA" the sale and purchase agreement pursuant to which the Company

agreed, subject to certain conditions being satisfied or waived, to sell the entire issued share capital of OMGI to Bidco, as described in "Additional Information—3.5.1 OMGI Transaction—(a) OMGI

Sale and Purchase Agreement"

"OMGI Reverse TSA" the reverse transitional service agreement under which OMGIUK

provides certain services to OMIML, as described in "Additional Information—3.5.1 OMGI Transaction—(c) OMGI Transitional

Services Agreements"

"OMGI Transaction" the disposal of OMGI

"OMGI TSA" the transitional service agreement under which OMWBS provides

certain services to OMGI, as described in "Additional Information—3.5.1 OMGI Transaction—(c) OMGI Transitional

Services Agreements"

"OMGIUK" Old Mutual Global Investors (UK) Limited

"OMGUK" Old Mutual Group (UK) Limited

"OMIML" Old Mutual Investment Management Limited

"OMLACSA" Old Mutual Life Assurance Company (South Africa) Limited

"OMWBS" Old Mutual Wealth Business Services Limited

"OMWLA" Old Mutual Wealth Life Assurance Limited

"ORSA" the Own Risk and Solvency Assessment

"OTC" over-the-counter

"Panama Papers" the leak of papers from a Panamanian law firm in early 2016

"Paradise Papers" the leak of papers from a law firm in Bermuda and other offshore

territories in late 2017

"PCA" Quilter Private Client Advisers, currently branded as "Old Mutual

Wealth Private Client Advisers"

"Pension Freedom" the UK pensions reforms, which took effect from April 2015 under

the Pension Schemes Act 2015

"persistency" assets retained at year end as a percentage of opening AuM

"PRA" the Prudential Regulation Authority

"premium charging basis" AuA are charged based on the original investment, rather than

based on the current market value

"PRIIPs" Packaged Retail and Insurance-Based Investment Products

"PRIIPs Regulation" the Packaged Retail and Insurance-Based Investment Products

Regulation (Regulation 1286/2014), as amended, and any

implementing legislation

"Principles" the FCA's Principles for Business

"Prospectus" this prospectus approved by the FCA and published on 9 April

2018 as a prospectus prepared in accordance with the

Prospectus Rules made under section 73A of the FSMA

"Prospectus Directive" Directive 2003/71/EC, as amended

"Prospectus Directive the Prospectus Directive Regulation EC 809/2004

Regulation"

"Q1 Results Supplement" the supplement containing a trading update for the first quarter of

2018, which the Company expects to publish on or about 30 April

2018

"Quilter Cheviot" the Group's discretionary wealth management business

"Quilter Financial Planning" the Group's advice network, which offers three advice models

(PCA, Financial Advisers (including both RFPs and IFAs) and Mortgage & Protection Advisers) and which is currently branded

as "Intrinsic"

"Quilter International" the Group's international business, which is currently branded as

"Old Mutual International"

"Quilter Investors" the Group's multi-asset management business, which is currently

branded as part of "Old Mutual Global Investors"

"Quilter Life Assurance" the Group's book of legacy life insurance, insurance bonds and

pension business, as well as the Group's open protection book of

business, which is currently branded as "OMWLA"

"Quilter Separation" the Company's separation from Old Mutual plc

"Quilter UK Tax Strategy" the Group's UK tax strategy, which will be published on the

company website post-Quilter Separation and in line with

regulatory requirements

"Quilter Wealth Solutions" the Group's UK platform, which is currently branded as "UK

Platform" and predominantly consists of the Old Mutual Wealth Life & Pensions Limited and Old Mutual Wealth Limited legal

entities

"RDR" the Retail Distribution Review

"Regulation S" Regulation S under the US Securities Act

"Revenue Code" the US Internal Revenue Code of 1986, as amended

"RFPs" Restricted Financial Planners, meaning advisers who advise on a

defined range of products and investment solutions, including investment solutions offered by the Group and by third parties that

have been pre-researched by the Group

"Roadmap" the Isle of Man FSA Roadmap

"Senior Managers" the senior management of the Group

"Separation Agreements" the agreements the Group has entered into with Old Mutual plc in

anticipation of, and in connection with, the Quilter Separation, including the Separation Agreement and the Tax Matters

Agreement

"Sesame" Sesame Bankhall

"SFTR" the Securities Financing Transactions Regulation

"Single Strategy Business" the "single strategy" asset management business to be sold by

the Group pursuant to the sale and purchase agreement described in "Additional Information—3.5.1 OMGI Transaction"

"SIPP" Self-Invested Personal Pension

"Skandia UK" Skandia UK Limited

"SMCR" the Senior Managers and Certification Regime

"Solvency I" the Solvency I Directive, as amended, and any implementing

legislation

"Solvency II" the Solvency II Directive (Directive 2009/138/EC), as amended,

and any implementing legislation

"SYSC" Senior Management, Systems and Controls

"Thematic Review" the FCA's industry-wide thematic review on the treatment of long-

standing customers invested in closed-book products sold by the

life insurance sector

"UCITS" Undertakings for Collective Investment in Transferable Securities

"UCITS Directive" the Undertakings for Collective Investment in Transferable

Securities Directive (Directive 2009/65/EC), as amended, and any

implementing legislation

"UK" the United Kingdom of Great Britain and Northern Ireland

"UK Corporate Governance

Code"

the UK Corporate Governance Code published in September

2014 by the Financial Reporting Council

"UK Final Salary Scheme" the Quilter Cheviot Retirement Benefits Scheme

"UK Platform Transformation

Programme"

the Quilter Wealth Solutions IT transformation, as described in "Business Description—5. Business Overview—5.2 Wealth

Platforms—5.2.1 Quilter Wealth Solutions—(d) Operations"

"UKLA" the United Kingdom Listing Authority

"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" US Securities Act of 1933, as amended

"whole of market" the whole market, free from any restrictions

REGISTERED AND HEAD OFFICE OF THE ISSUER

Millennium Bridge House 2 Lambeth Hill London EC4V 4AJ United Kingdom

TRUSTEE

Citicorp Trustee Company Limited

Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

REGISTRAR AND TRANSFER AGENT

Citibank, N.A., London Branch

Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

PRINCIPAL PAYING AGENT AND AGENT BANK

Citibank, N.A., London Branch

Citigroup Centre Canada Square Canary Wharf London E14 5LB United Kingdom

SOLE LEAD MANAGER

J.P. Morgan Securities plc

25 Bank Street Canary Wharf London E14 5JP United Kingdom

AUDITOR OF THE ISSUER KPMG LLP

15 Canada Square Canary Wharf London E14 5GL United Kingdom

LEGAL ADVISERS

To the Issuer Allen & Overy LLP One Bishops Square

London E1 6AD United Kingdom To the Sole Lead Manager and the Trustee

Linklaters LLP One Silk Street London EC2Y 8HQ United Kingdom