Key Features of With-Profits Bond

Key Features of With-Profits Bond The Financial Conduct Authority is a financial services regulator. It requires us, Clerical Medical, to give you this important information to help you decide whether our With-Profits Bond is right for you. You should read this document carefully so that you understand what you are buying and then keep it safe for future reference. These key features should be read with the enclosed illustration. Its aims To provide growth over the medium to long term from a mix of assets including stockmarket investments. To provide a regular income if you choose. To allow you to withdraw part or all of your investment when you want. Your commitment You agree to invest an additional lump sum to an existing With-Profits Bond. The minimum additional investment you can make is 1,000 by cheque. You accept that your additional investment is a medium to long-term investment, ideally held for five years or more. Risks The value of an investment and any income from it can go up and down as a result of market and currency movements. You may get back less than you invested. Your circumstances may change, forcing you to cash in your bond early. If you do this in the first five years there will be an early encashment charge and you might not get all your money back. The earlier you cash in the bond the less likely you are to receive the best return. Investment growth could be lower than the growth shown in your personal illustration. Our charges could increase. A high regular income withdrawal rate could reduce the capital value of your bond below the value of your cash investment amount. You have a right to cancel your additional investment within 30 days of receiving your documents. If you do cancel and the value of the additional investment has fallen, you will get back less than you invested. Tax rules may change in the future. As you are investing in the With-Profits Fund: What you receive will be affected by a deduction that we are currently making to support the guarantees on policies of other groups of investors, for example because investment returns are below guaranteed levels. We may apply a market value reduction (MVR) if you take money out of the fund. Please see the section How does the With-Profits Fund work? for more details. The ultimate value of a with-profits investment depends on future bonuses which cannot be guaranteed. 1 Clerical Medical

Questions and answers What is the With-Profits Bond? Clerical Medical s With-Profits Bond is a unitised, single premium, whole of life assurance plan issued as 100 identical policies. You must be at least 18 years old to apply for a With-Profits Bond and the maximum age at entry is 90. How does the With-Profits Fund work? We share out the performance of our With-Profits Fund (the profits ) to its investors, through a system of bonuses. In this way, all of the investors share in the fortunes of the fund. This does not mean that all investors get the same return. It depends, amongst other things, on the particular terms of their policies. There are two types of bonus: A regular bonus (sometimes called bonus interest ), which increases your investment s value over time. We decide the rate once a year, but we can change it midyear if investment conditions change significantly. We add it to your investment by increasing the value of the units you have in the With-Profits Fund (the unit price) throughout the coming year. A possible final bonus (sometimes called terminal bonus ), which we may add on death or when you take money out of the With-Profits Fund (including regular income withdrawals). We normally review this twice a year, but we may need to change it at short notice if investment conditions change significantly. The calculation and payment of any bonus on an investment in a With-Profits Fund will be decided by Clerical Medical. The bonuses depend on the investment performance which Clerical Medical achieves, adjusted to smooth through some of the peaks and troughs of stockmarket investment. The regular bonus rate and the final bonus are declared net of any administration expenses and other costs. The ultimate value of a with-profits policy depends on the level of future bonuses which cannot be guaranteed. As you are investing in the With-Profits Fund, please note that: What you receive will be affected by a deduction that we are currently making to support the guarantees on policies of other groups of investors, for example because investment returns are below guaranteed levels. This is an example of how different groups of with-profits investors collectively share in the fortunes of the whole With-Profits Fund. If you take money out of the With-Profits Fund, we may make a reduction called a market value reduction (MVR) and pay out less than the value of your units. We will only do this if the value of your units meant your investment would be worth more than your fair share of the With-Profits Fund. We do not apply the MVR in the following circumstances: when there is a death claim when you have requested regular income withdrawals, provided that the request was received before the publication or notification to financial advisers of an MVR (this includes publication on our website), and provided that the amount of withdrawals in any twelve months is not more than 7.5% per year of the amount invested in the fund. We recommend that you read our With-profits summary which gives more information about how we run the fund, including the market value reduction and how we aim to ensure that policyholders interests are dealt with fairly. What might I get back? Your personal illustration Inside this key features document you will find information and a personal illustration on your With- Profits Bond. This will give you details of the charges for your bond. These key features together with your illustration will answer some of your questions and help you find out more from your financial adviser. Only you, as legal owner of the bond, can receive payments from it. 2 Clerical Medical

Can I encash part of my investment? You can make one-off encashments at any time. Any amount up to a maximum of 7.5% per bond year (including regular income withdrawals) of the amount invested in any individual policy, can be taken free of any early encashment charge. If you cash in more than 7.5% per bond year, in the first five years, we will make an early encashment charge. We will not make an early encashment charge on a death claim. If you do not use your full penalty-free encashment allowance each bond year, you can carry the unused amount forward to subsequent years. For example, if no income withdrawals or encashments are taken in the first year, up to 15% of the amount invested in any individual policy can be taken in the second year. Unless you tell us differently, we will always manage any one-off encashments to ensure that the minimum early encashment charge is made, if one applies. Encashments may also be subject to an MVR. Any unused amount of the 7.5% per year MVR allowance does not carry forward to subsequent years. The minimum encashment is 240. The minimum amount that can remain in your bond is 1,000. Can I take regular income withdrawals from my bond? You can arrange to take income withdrawals, up to a maximum of 7.5% per year of the amount invested in any individual policy, free of any early encashment charge. The income will be paid directly into your bank account. The minimum amount you can withdraw is 240 per year and this can be divided into regular payments either: monthly quarterly every four months every six months once a year. You can choose whether the amount you withdraw increases each year, or is fixed. The options you can choose from are: A fixed amount each year the amount paid will not change unless you give us new instructions. A fixed amount increasing each year with inflation as measured by the Retail Prices Index (RPI). We will calculate the annual increase on each anniversary of your first regular income withdrawal and the new level of payments will start from this date. If the amount paid in subsequent years is more than the maximum of 7.5% per year of the amount invested in any individual policy, an early encashment charge and/or an MVR may apply. The RPI increase will be based on the difference in the RPI figures published two and fourteen months before the withdrawal anniversary. A percentage each year of your total cash investment amount the amount paid will not change unless you make an additional investment or give us new instructions. Regular income withdrawals are made by encashing units. Income withdrawals are treated as a withdrawal of capital for tax purposes. You should be aware of the tax implications. Your financial adviser can give you further details. Can I change funds? No, it is not possible to switch to any other Clerical Medical fund in this bond. Is there any life cover? In the event of a death claim the amount payable will be 101% (or 100% if you are 80 or over when the bond is taken out) of the value of the units allocated together with any final bonus. We will not make an early encashment charge on a death claim. On a joint life first death basis, the reference age applies to the oldest life assured, and on a joint life last death basis, to the youngest life. All bonds with more than one life assured will be set up on a joint life last death basis unless you tell us that you require joint life first death at the time the application is submitted. We can make the payments on any day of the month from the 1st to the 28th. Please note that it may take up to seven working days, from the date you choose, for the payment to reach your account. 3 Clerical Medical

How much will the advice I receive cost? If you ve received advice your financial adviser will tell you this cost. If you didn t receive advice before investing, the above bullet doesn t apply. From 31 December 2012, we ll no longer be paying commission to your financial adviser for additional investments. As the commission charge is already included in the product charges, we ve increased the allocation rate for your additional investment. This is shown on your personal illustration. Any commission arrangements for existing investments aren t affected. How will I know how my bond is doing? We will send you a statement every year to show how your bond is doing. You can check the progress of your fund on our website: www.clericalmedical.co.uk/funds Or you can contact our customer service desk on 0345 030 6243. Further information Can I change my mind? After we accept your application you will receive a notice of your right to cancel your additional investment. You will then have 30 days in which you can change your mind. If you do decide to change your mind, you will need to sign and return the cancellation notice that will be sent with the documents. (See How to contact us.) Please note that if you exercise your right to cancel, and the value of the additional investment falls, you will get back less than you invested. Personal tax The proceeds of your bond are payable free of any personal liability to income tax at basic rate, or to capital gains tax. However, there may be an income tax charge at the difference between the basic rate and higher or additional rate of income tax if you re a higher or additional rate tax payer when the gain arises or if the gain results in you becoming a higher or additional rate tax payer. There is no liability to the UK basic rate of tax because growth on the underlying investments is taxed via Corporation Tax, at a rate deemed equivalent to the UK basic rate of income tax. It is not possible to claim back any of the UK basic rate tax treated as paid on a gain. If you cash in the whole of your bond or individual policies and there has been an overall profit on those policies (taking into account previous amounts taken from the bond and chargeable event gains), then you may have to pay income tax on that profit. Encashing complete policies may mean a lower tax liability than making a withdrawal equally across all policies, however, the amount of early withdrawal charge which might apply at encashment could be higher. Any one-off withdrawals from the bond made by cancelling units across policies are treated as a return of capital and special tax rules apply. A tax charge may arise where the amounts withdrawn exceed your 5% tax deferred withdrawal allowance. Your 5% tax deferred withdrawal allowance is 5% per policy year of the amount that you have invested in each individual policy. This 5% withdrawal allowance is cumulative. Any unused allowance can be carried forward to future years, subject to the total cumulative 5% allowance amount not exceeding 100% of the amount you have paid into your bond. Large withdrawals from your bond can result in an excessive and artificially high tax liability, it is recommended that you speak to your financial adviser or tax office before taking any withdrawals in excess of the 5% allowable allowance. Certain Personal allowances and Tax credits may also be reduced if a chargeable event occurs and a chargeable event gain arises. Plans written under trust Special considerations apply to plans written under trust. Your financial adviser will be pleased to advise you further. Clerical Medical taxation Clerical Medical will be liable to tax on the income and gains arising from the investment of the underlying assets of the With-Profits Fund. This is allowed for in the bonuses. Conflict of interest policy In accordance with FCA regulations, Clerical Medical, which is a member of the Lloyds Banking Group, has established and implemented a Conflicts Policy. The Conflicts Policy sets out how we must seek to identify and manage all material conflicts of interest. Such conflicts of interest can occur in our day to day business activities, for example, where one of our clients could make a gain at the direct expense of another client, or we might be faced with an opportunity to make a gain but this would be to the direct disadvantage of one or more of our clients. Depending on the exact nature of the conflict of interest involved, we may take certain actions in accordance with the Conflicts Policy to lessen the potential impact of the conflict. Such actions may include putting in place controls between the opposing sides of the conflict, which may control or 4 Clerical Medical

prevent the exchange of information, and / or involve the appropriate management of staff activities and segregation of duties. In instances where such controls would not be enough to eliminate the potential material risk of damage to clients from specific conflicts, we ll disclose the general nature and / or source of those conflicts of interest to you before we take on the relevant business. The Conflicts Policy may be revised and updated from time to time according to FCA regulations. If you d like more information on the Conflicts Policy, or on any specific conflict of interest that you think might affect you, please contact us. Important note All features described in this document are those current at the time of publication and may be changed in the future. The information is based upon our understanding and application of current legislation and HM Revenue & Customs practice. These can, of course, also change. Law The laws applicable to the contract are the Laws of England and Wales. The policy provisions for the With-Profits Bond and any further communications will be supplied in English. Financial Services Compensation Scheme (FSCS) Your bond with Clerical Medical is fully covered by the Financial Services Compensation Scheme. More information about compensation arrangements is available from the Financial Services Compensation Scheme, who can be contacted on 0800 678 1100 or 0207 741 4100 or via their website at www.fscs.org.uk Solvency II Returns Our Solvency and Financial Condition Report (SFCR) and associated solvency reporting templates can be found via our website at: http://www.scottishwidows.co.uk/about_us/ financial_information/solvency-2-returns.html The SFCR is produced annually to help you understand the management and performance of our business, and the strength of our solvency position. For the Scottish Widows Insurance Group, including its three main insurance companies, the report covers key aspects of our: business and performance system of governance risk profile valuation for solvency purposes capital management. How to contact us Remember your financial adviser will normally be your first point of contact. If you have questions, or you wish to close or cancel your policy, you can telephone us, send a fax, e-mail us or you can write to us: Call us on 0345 030 6243 during the following times: Monday to Friday 8.30am to 6pm. We may record your call for quality and training purposes. Fax number: 0345 601 1761 Website: www.clericalmedical.co.uk Email: cmig.policyholder@clericalmedical.co.uk Administration address: Clerical Medical PO Box 28121 15 Dalkeith Road Edinburgh EH16 9AS Complaints Our aim is to provide you with the highest standard of service. If you have a concern, please call us on 0345 030 6243 and we will be happy to help. A copy of our published complaints procedure is available on request. Complaints we cannot settle may be referred to the Financial Ombudsman Service at Exchange Tower, London E14 9SR. Telephone: 0800 023 4567. Making a complaint will not prejudice your right to take legal action. Clerical Medical is a trading name of Scottish Widows Limited. Scottish Widows Limited is entered on the Financial Conduct Authority s Register and its register number is 181655. www.clericalmedical.co.uk Clerical Medical is a trading name of Scottish Widows Limited. Scottish Widows Limited is registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655. X1226/0717