B&CE ISSUED. 7 December 2016

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1 ISSUED

2 Introduction Background AKG's Company Profile & Financial Strength Reports are designed to meet the information needs of advisers in assessing the relative strengths of onshore UK life companies, friendly societies and similar providers. Two different styles of report are published by AKG - FULL reports and SHORT reports. A FULL report is produced for each of the leading provider companies in the market, which participate in the production of the reports. For each remaining provider company which is covered, a SHORT report is produced. This is a FULL report. Each report collates relevant information from a range of sources such as a company s returns to the PRA, its Report & Accounts and material provided by the companies themselves, and incorporates expert independent assessment. For FULL report companies, the process is augmented by regular meetings and other communications with AKG. PLEASE NOTE: This report should be read in conjunction with the supporting explanatory information which is available online at About AKG AKG is an independent organisation. Originally established as an actuarial consultancy AKG has, for over 20 years, specialised in the provision of assessment, ratings, information and market assistance to the financial services industry. As the market has evolved over this period, the range of entities considered by AKG has expanded. Consequently AKG has brought additional skill sets into its operations. This has meant the inclusion of accounting, corporate finance, IT and market intelligence experience, alongside actuarial resources, to deliver an expanded professional capability. Today AKG s core purpose is in the provision of financial analysis and review services and in the delivery of key value added financial information to support the wider financial services sector and its customers. Regular Reports AKG publishes the following additional reports to assist Providers and Intermediaries: AKG Offshore Profile & Financial Strength Reports - covering offshore life companies. AKG Platform Profile & Financial Strength Reports - covering platform operators. AKG DFM Profile & Financial Strength Reports - covering discretionary fund managers. AKG UK Life Office With Profits Reports - providing further depth in the assessment of with profits funds. For further details, please contact AKG: Tel: +44 (0) or akg@akg.co.uk AKG Financial Analytics Ltd (AKG) 2016 This report is issued as at a certain date, and it remains AKG's current assessment with current ratings until it is superseded by a subsequently issued report or subsequently issued ratings (at which point the newly issued report or ratings should be used), or until AKG ceases to make such a report or ratings available. 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3 Index Main Company Page B & C E Financial Services Limited 2 General Information Distribution Products Service Investment Annual Review Page Group Overview B&CE is a not-for-profit organisation which operates for the benefit of its members and their dependants. B&CE is the UK s largest provider of financial benefits to the construction industry s employers and employees. Established in 1942 and founded in construction, B&CE s current offerings include its flagship product - The People's Pension (a workplace pension scheme), employee accident cover, employee life cover and employee healthcare. B&CE states that it exists 'to make a better life possible for everyone who needs us'. B&CE Holdings Ltd is the group's parent company. Its name was changed from Building and Civil Engineering Holidays Scheme Management Ltd in April 2016, in line with its trading activities going forwards. The company is the appointed administrator of The Building and Civil Engineering Charitable Trust and, until April 2016, administered the Building and Civil Engineering Benefits Scheme. It has two wholly owned subsidiaries: B&CE Financial Services Ltd (B&CE Financial Services) and B&CE Insurance Ltd (B&CE Insurance). Collectively these three companies are referred to as B&CE. B&CE Financial Services carries out administration services for the pension schemes and financial products operated by B&CE and is the focus of this report. B&CE Insurance is a composite insurance company, established in 1995, with the objective of offering appropriate insurance-based products to all who work in the construction industry. Additionally, The People's Pension Trustee Ltd (TPPTL) acts as corporate trustee of The People s Pension. In April 2016, B&CE acquired Constructing Better Health (CBH) from the Construction Skills Certificate Scheme (CSCS). CBH is a national scheme for the management of occupational health in the construction industry. The Building & Civil Engineering Charitable Trust was launched in 1991, offering financial assistance to construction workers and their families who are suffering hardship, principally to ease the financial distress that illness or changes to domestic circumstances can cause. The Trust is funded by B&CE which distributes a proportion of its surpluses to the charity. Since its launch, the Trust has paid out over 2m. Corporate Structure (simplified) B&CE Holdings Ltd Constructing Better Health B&CE Financial Services Ltd B&CE Insurance Ltd The People's Pension Trustee Ltd Ratings Company Overall Financial Strength Ratings With Profits Non Profit Unit Linked Service Supporting Ratings Image & Strategy Annual Review B & C E Financial Services Limited B AKG Financial Analytics Ltd Page 1

4 B & C E Financial Services Limited Corporate Data Company Type Ownership Open to New Business? Pension Administrator B&CE Holdings Limited Yes Year Established 1987 Head Office Website The People s Pension Manor Royal Crawley West Sussex, RH10 9QP Tel: Key Personnel Chief Executive Officer Chief Strategy and Marketing Officer Director of Finance Director of Risk and Regulatory Compliance Director of Strategic Delivery Director of People and Premises Director of Policy and Market Engagement Director of Business Development Director of Digital Transformation Director of IT Acting Director of Operations P I Heath-Lay J G Fiveash S J Stedman M W Phillips M Plant Z Wright D Philp R Porter M Mann C Radcliffe K Martin Company Background B&CE Financial Services' principal activity is to administer financial products on behalf of B&CE. It was appointed as administrator of The People s Pension by TPPTL on 18 December It is also the appointed administrator and registrar of the TUTMAN B&CE Contracted-out Pension Scheme (BCECOPS) and an employee life cover scheme, the Employee Life Cover (ELC) from B&CE, both of which are exclusive to the construction industry. With effect from 1 April 2015, B&CE Financial Services took control of the EasyBuild stakeholder pension scheme and with effect from 1 April 2016, the administration of all of B&CE s other pension schemes and insurance products which had previously been administered elsewhere in the B&CE group. The advent of automatic enrolment presented both a challenge and an opportunity for B&CE. B&CE felt that it was well placed to continue to specialise in workplace pensions and that in addition to continuing to serve the needs of the construction industry it also needed to broaden its appeal to the wider market. Furthermore that the EasyBuild proposition, built specifically for the construction industry and to comply with stakeholder pension requirements, needed to be replaced. B&CE s response came in November 2011, when it announced details of The People s Pension. Overall Financial Strength B The costs associated with The People s Pension currently exceed the income generated by the scheme, through the fees paid by members. However, significant levels of income should be realised in the long term once the size of the scheme has grown sufficiently. Further, a significant increase in revenue is expected in relation to the new employer charge levied against employers joining The People s Pension with effect from November B&CE Financial Services income and costs have also increased following it assuming the administration of the Building and Civil Engineering Benefits Scheme, EAC Scheme, RapidCash, Term Life and Personal Accident Insurance from 1 April Given that the level of cost is currently in excess of its income, funds have been injected into B&CE Financial Services in recent years. Capital injections totalled 9m during the year from B&CE Holdings Ltd. B&CE Financial Services had received capital injections totalling 9.5m and 7m in 2015 and 2014, respectively, and also has a letter of support from its parent company, which states the intention to make available further funding in order to ensure that it remains solvent for at least a year. Historically, B&CE Financial Services was a relatively small component of the overall group. This is changing and in 2016, for example, B&CE Financial Services accounted for around 58% of total group revenue [2015: 23%]. B&CE Financial Services remains loss making, however, and is currently dependent on its parent for financial support, albeit the level of required support is expected to reduce going forward following the introduction of the one-off set up fee for new employers joining The People's Pension. B&CE Financial Services is a strategically important part of the group, playing a key role as the administrator of The People s Pension. The anticipated return to a profitable position is important from a financial strength perspective, due to the group structure and the ongoing diminishment of the contribution to revenue from the group's insurance company. At 31 March 2016, B&CE Financial Services' available capital was 790% [2015: 882%] of its capital resources requirement of 1.9m [2015: 1.6m]. Similarly, B&CE Insurance had 612% [2015: 626%] of its capital resources requirement of 7.7m [2015: 8.2m]. TPPTL's objective is to act as the corporate trustee of The People s Pension Scheme, overseeing its operation with a fiduciary duty to act in the interests of its members. In particular TPPTL has a remit of safeguarding the Scheme s funds and ensuring that the Scheme delivers good value for members. The Board of TPPTL consists solely of independent directors with expertise in pensions/financial services. Two new Directors were appointed in April 2016 bringing the total number of Directors to five, in line with new governance guidance for master trust schemes. AKG Financial Analytics Ltd Page 2

5 B & C E Financial Services Limited Key Financial Data (for y/e: 31/03/16) Shareholder Funds 's 000's 000's Shareholder Funds b/f Changes in share capital Retained profit/loss for year Other 7,862 10,342 7,001 9,499 14,427 9,000-4,240-5,641-8, Shareholder Funds c/f 10,342 14,427 14,632 Total assets 12,185 14,504 19,318 Current liabilities Long term liabilities Total assets less liabilities 1, , ,428 4, ,632 Capital Resources 's 000's 000's Available capital resources CRR 10,609 1,334 14,124 1,601 14,754 1,850 Excess capital resources 9,275 12,523 12,904 CRR Coverage Ratio % % % CRR coverage ratio Profit & Loss 's 000's 000's Turnover/Revenue Expenses 3,002 3,586 10,219 8,720 10,949 19,464 PBIT (Profit/Loss before interest & tax) -5,501-7,140-9,021 Interest Paid PBT (Profit/Loss before tax) -5,506-7,141-9,023 Tax -1,266-1, PAT (Profit/Loss after tax) -4,240-5,642-8,651 Dividends Retained Profit/Loss -4,240-5,641-8,651 EBITDA -5,719-7,363-9,036 Financial Ratios Operating margin Pre-tax profit margin EBITDA margin Current ratio Gearing % % % 4.2x 17.2% % % % 129.3x 0.0% -88.4% -88.3% -88.2% 3.2x 15.8% B&CE Financial Services' revenue increased by 185% to 10.2m [2015: 3.6m] in the year to March The growth was partly due to it taking over the administration of the EasyBuild pension scheme from B&CE Insurance, generating 4.3m [2015: nil]. EasyBuild policyholders pay an annual management charge (AMC) based on their fund size, ranging from 0.6% to 0.95%. B&CE Financial Services receives 60% of these AMCs in respect of the administration services it provides. The remaining revenue growth arose from The People s Pension. The administration fee, which is calculated as a proportion of the funds under management of the scheme, totalled 2.8m [2015: 0.9m]. The new employer charge, introduced in November 2015, also generated 0.5m of fees [2015: nil]. Costs increased significantly during the year to 19.5m [2015: 10.9m]. This was due to the significant increase in the number of employers and their employees using The People s Pension, which has resulted in increased staff and communication costs and regulatory fees. B&CE Financial Services is responsible for meeting the administration costs associated with The People s Pension (with the exception of investment management and trustee fees). B&CE Financial Services now also provides the administration of the EasyBuild stakeholder pension scheme. The result was an increased pre-tax loss of 9.0m [2015: 7.1m], offset by capital injections. No dividend was paid [2015: nil]. B&CE Insurance reported a reduced pre-tax profit of 0.5m [2015: 18.9m], being impacted by unrealised investment losses of 2.7m [2015: 5.0m gain] and increased operating expenses of 5.4m [2015: 3.6m]. Dividends of 10.0m were paid [2015: 6.5m]. B&CE Insurance's signficance will continue to diminish as members of the EasyBuild Scheme are transferred, mainly over the next 2 years as employers reach their auto-enrolment date, to The People's Pension, which is deemed by the Board to provide better value for money for members. The group reported a consolidated pre-tax loss of 6.8m [2015: 14.5m profit]. Revenue increased from 15.7m to 17.7m and net operating expenses from 17.9m to 24.4m. Total group available capital resources reduced to 111.3m [2015: 118.9m], of which 31.1m [2015: 29.7m] was deemed by the group as Unrestricted Capital, in that amounts of 65.6m [2015: 75.1m] and 14.6m [ 14.1m] are held in B&CE Insurance and B&CE Financial Services respectively, and are restrained by regulatory requirements. AKG Financial Analytics Ltd Page 3

6 Distribution Method B&CE s approach to distribution is evolving as the shape of employers coming through the auto enrolment staging process is changing. In terms of new business acquisition, targeting opportunities and building relationships with key market influencers in the SME market, including payroll providers, accountants and bookkeepers, has become a priority area. Targeted direct channel campaigns are also being used to communicate with smaller employers and raise awareness of The People s Pension. Retention of large and mid-sized schemes for employers who are already using The People s Pension is a key area. B&CE is also looking at opportunities to engage with employers, through their intermediaries, who may be considering the replacement of their existing auto enrolment provider. The make-up of the business development team, the methods and channels being used to target new business and retain existing business are also changing to meet the evolving distribution requirements. Image and Strategy At group level the B&CE mission statement is to 'make a better life possible for everyone who needs us'. Continued growth in the number of employers and employees using, and the size of assets under management held within, The People s Pension are crucial to the future success of B&CE. Since The People s Pension became operational in October 2012 it has been a positive growth story. Growth is also critical to achieving the scale which will enable B&CE to provide members with an affordable and valued offering. B&CE is targetting lower costs and better efficiencies in terms of its administrative functions. Given the changing profile of employers reaching their auto enrolment staging dates in 2016/17 it was vital for B&CE to develop a solution for smaller employers. In November 2015 The People s Pension announced the launch of an enhanced service and support package for small employers. A one-off fee for employers signing up to The People s Pension was also introduced at this stage. B&CE reports that it has continued to obtain a relatively large market share since the introduction of this charge. The People s Pension has obtained master trust assurance. Obtaining this assurance demonstrates that a scheme has been subject to an independent review of the description, design and effective operation of its governance and administration practices against a defined set of control objectives. Protection of members using master trust schemes for automatic enrolment has been given a high profile in the pension industry recently and The People s Pension appears to be well placed to meet the requirements of the 2016 Pensions Bill. In January 2016 B&CE and the CSCS jointly announced that B&CE would be acquiring CBH. The acquisition was completed in April 2016 and aims to ensure that B&CE will play a key role in matters relating to occupational health in the construction industry moving forward. Products/Proposition Overall Product Philosophy B&CE Financial Services' principal activity is to administer financial products on behalf of the group. Administration was carried out for the following products throughout the year: The People s Pension a multi-employer defined contribution occupational pension scheme. EasyBuild a stakeholder defined contribution pension scheme. TUTMAN B&CE Contracted-out Pension Scheme ('Contracted-out pension scheme') an authorised unit trust and personal pension plan, for which B&CE Financial Services is also the registrar for the scheme. Employee Life Cover plan from B&CE ('ELC Scheme') a death benefit only occupational pension scheme. B&CE Financial Services also took on the administration of the following products from 1 April 2016: Building and Civil Engineering Benefits Scheme a multi-employer defined benefit occupational pension scheme. RapidCash a personal accident insurance product. Employee Accident Cover plan from B&CE ( EAC Scheme ) a group accident insurance product. B&CE Term Life a term assurance product. B&CE Personal Accident Insurance a personal accident insurance product. All of the products listed above are available exclusively to construction employers and employees with the exception of The People s Pension which is available to both construction and non-construction employers. The People s Pension can facilitate flexible access through uncrystallised flexible pension lump sums for members, and has plans to increase the flexibility available in the coming 12 months. It is also actively targeting pension transfer consolidation business from existing members. During the year The People s Pension also started to offer members additional guidance and advice options as they approach retirement through a partnership with LV=. Products Currently Marketed Group Products Workplace Pension Workplace Group Accident and Life Cover Product Awards and Benchmarks B&CE won DC Provider of the Year at the 2014 Professional Pensions UK Pensions Awards and Best Master Trust Provider at the 2014 Pensions Expert Pension and Investment Provider Awards. In 2015, B&CE was the winner of Business of the Year at the Gatwick Diamond Business Awards. The People's Pension was Highly Commended in the Best Group Pension Provider category at the Investment Life & Pensions Moneyfacts Awards It was also awarded Best Governance Structure at the Pensions Insight DC Awards. In 2016, The People's Pension was named as best Multiemployer DC Provider at the Pension and Investment Provider Awards and DC Master Trust of the Year at the UK Pension Awards, where it was also awarded DC Provider of the Year. The People s Pension has also been awarded PQM READY status recognising that the scheme has met Pension Quality Mark standards for Mastertrusts and Multi-Employer schemes. The People s Pension has been awarded a 5 Star Rating for automatic enrolment by Defaqto. AKG Financial Analytics Ltd Page 4

7 Service Approach B&CE sets itself a requirement to deliver service excellence as part of an approach which espouses an ability to make things easier for its customers. As well as the requirement to continue to build scale over the coming years, B&CE is committed to continue to deliver the highest level of service despite the increase in customer numbers. B&CE states that it has been adequately resourced throughout the year to meet the demand for its auto-enrolment solution, despite continuing to attract a relatively large share of the market. It has also shown an ability to weather some noticeable spikes in customer service activity, including servicing enquiries generated by the pension freedoms changes and servicing the new business volumes experienced in October/November 2015 from employers coming on board ahead of the employer fee introduction. From January 2016 customer service hours were extended, to 8am-10pm, to provide additional support at sign up for small employers. The People s Pension continues to focus on payroll functionality, API strategy and associated interaction with the payroll industry. The importance of this work in relation to servicing small employers has been recognised by the creation of a new Head of Payroll and Third Party Integration role. e-business Employees can set up, monitor and make changes to their details online. There is a range of online support for employers and as part of the new proposition for smaller employers, introduced in November 2015, employers can apply online for The People s Pension. The Adviser Centre provides intermediaries with an online toolkit as well as the ability to access and service their schemes with The People s Pension. In addition to call and servicing communication channels, B&CE has introduced online webchat functionality for members. The People's Pension continues to target reductions in the level of manual intervention required for admin/servicing tasks, including enhancements to the employer file uploading and the servicing of claims under 10k which can be settled by phone or online. B&CE has introduced a partnership with LV= to offer an online planning service for members approaching retirement. Service Standards & Awards B&CE s administrative staff work to rigorous service level agreements (SLAs) to ensure that the business maintains high levels of service for its customers. B&CE is proud of its service record, with less than 0.026% of total members making complaints during the year. Although 630 complaints were received during the year [2015: 412], this was anticipated by B&CE given the increased number of customers. B&CE has been the winner of the Call-Centre-League-of- Excellence s award for Outstanding Product Knowledge from 2013 to B&CE was awarded 3 Stars in the 2015 Financial Adviser Service Awards saw B&CE win 3 awards at the Top 50 customer service awards including best for overall customer service, a national award open to companies in all industries. Outsourcing Overflow calls and mailings are outsourced. Investment Overall Approach B&CE switched the management of the majority of its investments from Legal & General Investment Management to State Street Global Advisors (SSGA) in January 2016 as the first step in implementing a new investment approach that responds to the changing needs of its members, the market and the pension freedoms. The Shariah Fund is managed by HSBC Global Asset Management. Other investment managers may be appointed in future as appropriate. SSGA had assets under management of $2.3trn as at 31 March The decision on how to invest the funds rests with the Trustees of each scheme. Funds Under Management Funds under administration for The People s Pension at the year end totalled 949.4m [2015: 453.2m]. EasyBuild s funds under administration fell to 903.6m [2015: 952.7m] primarily due to negative investment performance. Similarly, funds under administration for the Building and Civil Engineering Benefits Scheme and the TUTMAN B&CE Contracted-Out Pension Scheme (both in run off) fell to 683m and 221m respectively [2015: 722m and 252m]. In total, B&CE managed assets over 2.9bn and paid out a total of 131m from its pension schemes in the year ending 31 March Annual Review The main development in the year was the continued increase in the membership of The People s Pension. The scheme had 1,972,337 members at the end of the year [2015: 1,315,517] and over 17,000 employer accounts, with a large number of new employers joining during the year to fulfil their obligations under the automatic enrolment pension regime. The other major change in the year was B&CE Financial Services' appointment from 1 April 2015 as administrator of EasyBuild. The EasyBuild product is no longer promoted and The People s Pension is B&CE s default workplace pension solution offered to employers. EasyBuild s membership fell from 491,868 to 481,894. The membership of the ELC Scheme totalled 138,132 at the end of the year [2015: 142,195]. Membership has fallen for several years since the loss of the construction industry s National Insurance concession in 2012, which had been used by employers to subsidise the cost of the life cover. Contributions into the ELC Scheme totalled 9.4m during the year [2015: 9.6m]. In November 2015, The People's Pension launched its 'complete pension solution', designed specifically for small businesses and with a new one-off set up charge. In May 2016, B&CE moved to a second site in Crawley in response to the expansion caused by the growth of The People s Pension. Headcount increased from 248 to 333 over the year. The People's Pension continued to win awards. B&CE was accredited with Investors in People Gold standard and placed 43rd in the Sunday Times 100 best not-for-profit organisations to work for. 212,940 was paid by the B&CE Charitable Trust [2015: 104,949]. AKG Financial Analytics Ltd Page 5

8 Guide to AKG Ratings Financial Strength Ratings - Introduction The aim of AKG s financial strength ratings is to assist advisers and others to assess the relative strengths of individual provider companies. AKG s concept of financial strength starts with the fundamental issue of a company s ability to meet all of its guaranteed payments to policyholders, but extends beyond this by aiming to factor in the degree to which a policyholder s expectations are likely to be met - or even exceeded - in the long-term. For performance-related products, where the eventual return generally depends largely upon a company s success in consistently delivering superior investment performance, and in containing expense charges, a company s ability to meet expectations is likely to be heavily dependent upon whether or not it is able to sustain its operations in the relevant market, and whether or not it can maintain, or improve, its competitive position. As a result, AKG believes that, ideally, the evaluation of financial strength should depend upon the type of product under consideration. A particular company may be judged as very strong in the context of one particular product line, but it may be weaker in another context. An illustration of this concept is a company that currently only markets unit linked business, but which has a very small closed block of with profits business, written many years ago. Such a company may be judged as good for unit linked business, whilst considered poor in respect of with profits business. Since the inception of AKG s Company Profiles and Financial Strength Reports, AKG has consistently promoted and developed the concept of providing financial strength ratings separately for each of the three major product categories - With Profits, Non Profit and Unit Linked. All AKG s financial strength ratings should be used with care, since even the more detailed approach described above represents something of a simplification. To illustrate this point, for example, the 'Non Profit' category covers a multiplicity of different products. It is clear that slightly different criteria should be used for, say, short-term policies with fully guaranteed terms (e.g. Guaranteed Bonds), than for longer-term policies with terms that can be varied at the company's discretion (e.g. Renewable or Reviewable Term). AKG assesses financial strength using consistent methodology and objective measures wherever possible, and based on the detailed analysis of the company s particular strengths and weaknesses. The objectives and criteria for each of the financial strength ratings are summarised below: With Profits Financial Strength Rating The objective is to assess the overall strength of the company s with profits funds. The initial concern is the company's ability to meet its ongoing guaranteed, or promised, commitments, i.e. existing sum assured and bonuses. However, the company's ability to continue to compete successfully in the with profits market is also particularly relevant, given that closed funds are sometimes bad news for policyholders. In such situations, overall expenses tend to increase as a proportion of the fund and investment performance may well deteriorate. These, together with other factors, may make it difficult for companies in such situations to maintain competitive bonus rates at future declarations, although existing declared bonuses are not affected (other than possibly by MVRs). The main criteria taken into account are: capital base and free asset position, with profits realistic balance sheet position, the amount of with profits business in-force, parental strength (and likely attitude towards supporting the company), and image and strategy. NOTE: More detailed analysis of with profits companies is included in AKG s UK Life Office With Profits Report. Non Profit Financial Strength Rating The objective is to assess the company's ability to meet all guaranteed payments arising from such contracts as term plans, annuities etc. The main criteria taken into account are: free assets, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), and image and strategy. AKG Financial Analytics Ltd

9 Guide to AKG Ratings Unit Linked Financial Strength Rating Whilst this is essentially a non profit line, and the primary objective is to assess the company's ability to meet all guaranteed payments arising, AKG also seeks to take into account the extent to which the company is likely to be able to sustain its unit linked operations, and whether or not it is likely to be able to maintain, or improve, its competitive position. Thus strategic issues are also relevant, because of their bearing on the quality of investment management offered, and because of companies' rights to increase charges etc. The main criteria taken into account are: free assets, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), typical fund performance achievements, and image and strategy. Overall Financial Strength Rating The objective is to provide a simple broad-brush indication of the general financial strength of a company. In addition to an assessment of the company s ability to meet all of its guaranteed payments to policyholders, AKG also aims to factor in the degree to which policyholders expectations are likely to be met - or even exceeded - in the long-term. This involves an assessment of a company s ability to survive in its current form for the long term. The overall rating inherently reflects the mix of business in-force within the company, since different types of policyholder have different expectations, and the company s particular strengths and weaknesses in respect of its key product areas. The rating takes into account those of the following criteria which are relevant (depending upon the company's mix of business in-force): capital base and free asset position, with profits realistic balance sheet position, structure (and size) of funds within the company, parental strength (and likely attitude towards supporting the company), typical fund performance achievements, and image and strategy. A B+ B B- C D Superior Very strong Strong Satisfactory Weak Very Weak Supporting Ratings - Introduction Supporting ratings are provided only in full reports, and are assessed at the brand level. AKG assesses three key supporting areas, using consistent methodology and objective measures wherever possible. The aim is to assist advisers and others to consider the relative merits of the brands that they deal with. AKG's objectives and criteria for each of these ratings are summarised below: Service Rating The objective is to assess the quality of the organisation's service to the intermediary market in respect of the brand concerned. Criteria taken into account include: performance in surveys, awards and benchmarking exercises (external and internal), the organisation's philosophy, service charters, the extent of investments designed to improve service, and feedback from intermediaries. Image and Strategy Rating The objective is to assess the effectiveness of the means by which the organisation currently positions itself to distribute its products for the brand concerned and the plans it has to maintain and/or develop its position. Criteria taken into account include: overall trends in the company s market share position, brand visibility and reputation, feedback from intermediaries and industry commentators, and AKG s view of the company s general strategy. Annual Review Rating This is an end of year view for the last year for which Report and Accounts, returns to the PRA, etc., are available, together with comment on any significant post-balance sheet events. It is an assessment of how the brand has fared against its peers, and how it is perceived externally. Criteria taken into account include: increase/decrease in market shares, expense containment, publicity - good or bad, press or market commentary, regulatory fines, and competitive position. AKG Financial Analytics Ltd

10 AKG Financial Analytics Ltd Anderton House, 92 South Street Dorking, Surrey RH4 2EW Tel No: +44 (0) Fax No: +44 (0) AKG is an independent organisation specialising in the provision of assessment, ratings, information and consultancy to the financial services industry AKG Financial Analytics Ltd 2016