Merger Update

10th Sep 2007 07:02

Friends Provident PLC10 September 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THERELEVANT LAWS OF SUCH JURISDICTION For immediate release 10 September 2007 FRIENDS PROVIDENT PLC AND RESOLUTION PLC: MERGER UPDATE Friends Provident plc ("Friends Provident") and Resolution plc ("Resolution")announce further progress towards the creation of Friends Financial Group plc("Friends Financial") announced on 25 July 2007. Since the end of July, FriendsProvident and Resolution have met shareholders and considered the optimalstructure to execute the merger, have analysed further the benefits arising fromthe merger and have advanced their merger integration planning. The Boards of Friends Provident and Resolution share a continuing and strongbelief in the growth and value creation which would be delivered by thecombination of Friends Provident's new business capability and Resolution'scashflow generation. The Boards of Friends Provident and Resolution announce: • a change to the legal structure of the merger, moving to a Court-sanctioned scheme of arrangement between Friends Provident and Friends Provident Shareholders; and • confirmation of the previously announced Friends Financial merger benefits of £100 million in annualised pre-tax cost savings and financial synergies by the end of 2010. In addition, the Board of Resolution announces: • the operational merger of Resolution's two existing life divisions to form one division by November 2007, creating a platform for the realisation of synergies; • Resolution's estimate of financial synergies from its planned 2008 fund merger has increased from £150 million to £250 million; • the acquisition of the Scottish Provident broker consultant business (comprising 65 brokers) from Abbey for Intermediaries with effect from 28 September 2007; and • Resolution's ability to move the management of all cash investments of the former Abbey life companies to Resolution Asset Management over the course of the next year. The merger remains conditional on shareholder, regulatory and other approvals. Commenting, Mike Biggs, Group Chief Executive of Resolution, said: "The actions that we have announced today, along with the restructuring of themerger, demonstrate our commitment to the merger and reinforce the strong growthand value we expect to create from Friends Financial. The restructuring of the merger is in the best interests of our shareholders asa whole, as it allows the transaction to proceed without disruption, in theabsence of any competing offer for Resolution. We remain relentlessly focused onmaximising value for shareholders and nothing in this restructuring will inhibitanyone from making such a competing offer." Philip Moore, Chief Executive of Friends Provident, said: "Our conviction that the Friends Financial transaction provides significantvalue opportunities for shareholders and customers alike, driven by the powerfulcombination of Friends Provident's new business capability, Resolution's cashflow generation, and the broad distribution capabilities of both parties,remains absolute. We remain focused on successfully completing this merger andour announcement today highlights the detailed work that is taking place toensure that the best possible value opportunities are realised, and thatshareholders are given full opportunity to benefit from them." Change to implementation of the merger The legal structure to implement the merger has been changed, moving to aCourt-sanctioned scheme of arrangement between Friends Provident and FriendsProvident Shareholders, rather than a scheme of arrangement between Resolutionand Resolution Shareholders, and, with the consent of the Panel Executive, thescheme of arrangement of Resolution will not proceed. The merger is thereforeconditional upon the approval of a simple majority of Resolution Shareholdersvoting at Resolution's Extraordinary General Meeting and a majority in numberrepresenting 75 per cent. in value of those who vote at a meeting of FriendsProvident Shareholders convened by order of the Court. Accordingly, the MergerAgreement entered into by Friends Provident and Resolution on 25 July 2007 hasbeen amended to reflect this change to the implementation of the mergerstructure. There is no change to the commercial or financial terms of themerger. Changes to the terms of the merger and Merger Agreement from thoseannounced on 25 July 2007 are those appropriate to facilitate the mergerfollowing the change to the merger structure(1). Merger benefits confirmation Friends Provident and Resolution confirm the annualised pre-tax cost savings andfinancial synergies of £100 million announced on 25 July and 30 July 2007 withsupporting letters from the financial advisers and reporting accountants of bothResolution and Friends Provident, contained in Appendix II of this announcement. Merger highlights Through the combination of Friends Provident's new business capability andResolution's cashflow generation, Friends Financial can provide shareholderswith profitable new business growth, growing dividend income and the prospect ofa return of capital to shareholders from 2008. • The merger is expected to be earnings per share accretive on an EEV EPS basis(2) and accretive to embedded value per share by 2009 for both Friends Provident and Resolution shareholders(3). • In the longer term, it is expected that significant revenue benefits will be captured through taking advantage of increased scale and financial strength, cross-selling to the existing Friends Provident and Resolution customer bases and exploiting the complementary product and distribution capabilities. Resolution and Friends Provident see specific areas to accelerate profitable newbusiness through: • Friends Provident's existing annuity product being made available to capture a share of the approximately £900 million per annum of future vesting pensions on Resolution's books; • greater penetration of the Abbey bancassurance relationship, with Friends Provident's broader product suite, national sales and training network, and experience of servicing other bank distribution partners; and • developing new business products under the Friends Provident brand for Resolution's approximately 7 million customers. Asset management will remain central to Friends Financial's strategy with acombined total of £165 billion of funds under management as at 31 December 2006.It is proposed that RAM will be combined with F&C on terms to be agreed with theBoard of F&C. F&C will continue to be separately listed and majority owned bythe Combined Group. Resolution organisational changes to deliver greater efficiency Resolution is announcing the operational merger of its two existing lifedivisions, Life Division North and Life Division South, to form one division byNovember 2007. This merger, together with the Capita outsourcing deal which wasannounced on 30 May 2007, will: • allow Resolution to complete the delivery of the targeted expense synergies of £10 million per annum announced at the time of the acquisition of the former Abbey life companies; • prepare Resolution's business for the fund merger planned for 2008 (see below); and • enhance the compatibility of Resolution's business with the organisational structure to be adopted by the enlarged group following completion of the merger. The Managing Director of the merged Resolution life division will be GrahamSingleton, currently Managing Director of Life Division North. Other keymanagement appointments are Kerr Luscombe (Deputy Managing Director), PaulStockton (Finance Director) and Mike Merrick (Chief Actuary). These changes arenot conditional upon completion of the Friends Financial merger. Resolution estimate of financial synergies from 2008 fund merger increased to£250 million In June 2006 Resolution announced that the acquisition of the former Abbey lifecompanies provided potential to achieve financial synergies from futurerestructurings with a net present value, at a 12 per cent. risk discount rate,of £114 million. In its 2006 annual report, Resolution provided an update on thepotential value achievable from future financial synergies, noting that it wasestimated that a future fund merger would increase Resolution's EEV by a net£150 million. During the first half of 2007 Resolution has, with the assistance of externaladvisers, conducted more detailed work to determine both the optimal structurefor this future fund merger, and the expected uplift in EEV. It has now beenconcluded that the most appropriate restructuring will be to transfer thebusiness of the current Life Division North companies (Scottish Mutual AssuranceLimited, Scottish Provident Limited and Phoenix Life Assurance Limited) toPhoenix Life Limited, which is currently the main Life Division South lifecompany. It is now estimated by Resolution that the increase in EEV arising from such areconstruction, which is expected to be implemented during 2008, will beapproximately £250 million after tax and implementation costs. This revisedfigure has been reported on by Ernst & Young and Resolution's financial advisersand copies of their letters are contained in Appendix III. The key assumptions on which this statement has been based are that: • FSA and Court approvals are obtained for the transfer of the life insurance funds of Scottish Mutual Assurance Limited, Scottish Provident Limited and Phoenix Life Assurance Limited to Phoenix Life Limited under Part VII of the Financial Services and Markets Act 2000; • the Part VII transfer takes place in the final quarter of 2008; and • the standard rate of corporation tax is 28 per cent. The impact of the fund merger on Resolution's EEV has been prepared using themethodology and assumptions described in the audited supplementary informationon pages 164 to 186 of the Resolution plc 2006 annual report and accounts. Thedelivery of these financial synergies is not conditional upon completion of theFriends Financial merger. Distribution capabilities enhanced Resolution and Abbey have entered into a binding agreement under whichResolution, through its subsidiary Resolution Management Services Limited("RMS"), will acquire the Scottish Provident protection broker consultantbusiness (comprising 65 brokers) from Abbey for Intermediaries ("AFI") witheffect from 28 September 2007 (the "Intermediary Acquisition"). The IntermediaryAcquisition will give Resolution the broker consultant capability to complementits existing product manufacturing capability and is expected to result incloser alignment of the broker consultants with Resolution's strategicobjectives. It will also lead to a closer relationship between Resolution andthe IFAs that recommend its products. Following Resolution's acquisition of the former Abbey life companies inSeptember 2006, AFI remained responsible for promoting Resolution's awardwinning Scottish Provident protection products to IFAs under the terms of anIntermediary Distribution Agreement ("IDA"). Under the IDA, Resolution pays AFIProduct Acquisition Fees ("PAFs") based on the volume of new business writtenthrough this channel. Following completion of the Intermediary Acquisition, Resolution will incur thecosts of promoting its products to IFAs directly and will cease paying PAFs toAFI. Resolution believes that the direct costs it will incur in relation to thebroker consultants will be lower than the PAFs which would otherwise have beenincurred under the terms of the IDA. As a result, had the IntermediaryAcquisition completed on 31 December 2006, Resolution believes that the value ofnew business written in the first half of 2007 would have been higher than thevalue which will be reported in its interim results on 18 September. The Intermediary Acquisition is not conditional upon completion of the FriendsFinancial merger. Under the Intermediary Acquisition Resolution will acquiregross assets with a value of approximately £140,000. Revision to the Abbey cash management agreements As part of the acquisition of the former Abbey life companies, Resolutionentered into two cash management agreements under which Abbey was appointed tomanage all cash investments in respect of the former Abbey life companies until31 August 2016. Abbey currently manages £3.5 billion of cash assets on behalf ofResolution under these agreements. Resolution and Abbey have now amended thecash management agreements such that Resolution will be able to move themanagement of all of the cash investments of the former Abbey life companiesfrom Abbey to Resolution Asset Management over the course of the next year.These changes are not conditional upon completion of the Friends Financialmerger. Structure of the Friends Financial merger • On completion, Resolution Shareholders and Friends Provident Shareholders are expected to hold approximately 50.9 per cent. and approximately 49.1 per cent. of the Combined Group respectively, before the effect of the Friends Provident Convertible Bonds. These proportions are unchanged from those set out in the original announcement of the merger on 25 July 2007. • Friends Provident Shareholders will receive 4 New Friends Financial Shares for every 13 Friends Provident Shares held. • The merger will be implemented by means of a scheme of arrangement under section 425 of the Companies Act and will be conditional on, amongst other things, the approval of Friends Provident Shareholders and Resolution Shareholders and the sanction of the Scheme by the Court. The merger is also conditional on regulatory clearance from the FSA and from certain overseas regulators and appropriate merger control clearances. The conditions to, and certain further terms of, the merger are set out in Appendix I and other than the changes consequential upon the change to the legal structure of the merger, those conditions and further terms remain unchanged from those set out in the original announcement of the merger on 25 July 2007. Expected timetable The expected timetable to closing of the merger is as follows: Resolution interim results announcement 18 September 2007 Formal documents sent to shareholders Early October 2007 Friends Provident EGM Late October 2007 Resolution EGM Late October 2007 Scheme meeting Late October 2007 Effective Date of Scheme Late November 2007 The Directors of Friends Provident, who have been so advised by JPMorganCazenove and Goldman Sachs, consider the terms of the merger to be fair andreasonable. In providing their advice to the Directors of Friends Provident,JPMorgan Cazenove and Goldman Sachs have each taken into account the commercialassessments of the Directors of Friends Provident. Goldman Sachs is deemed to be a connected party to Resolution and is thereforenot providing advice in relation to Rule 3 of the City Code to the Directors ofFriends Provident in connection with the merger. The Directors of Friends Provident consider that the merger is in the bestinterests of Friends Provident Shareholders as a whole and accordingly haveunanimously agreed to recommend that Friends Provident Shareholders vote infavour of the resolutions relating to the merger to be proposed at the FriendsProvident Extraordinary General Meeting and the Scheme Meeting as they haveirrevocably undertaken to do in respect of their own beneficial holdings of222,590 Friends Provident Shares representing, in aggregate, approximately 0.01per cent. of the existing issued share capital of Friends Provident. The Directors of Resolution, who have been so advised by Lazard and Citi,consider the terms of the merger to be fair and reasonable and that the changesto the merger structure set out in this announcement are in the best interestsof Resolution Shareholders as a whole. In providing their advice to theDirectors of Resolution, Lazard and Citi have each taken into account thecommercial assessments of the Directors of Resolution. The Directors of Resolution consider that the merger is in the best interests ofResolution Shareholders as a whole and accordingly have unanimously agreed torecommend that Resolution Shareholders vote in favour of the resolutionsrelating to the merger to be proposed at the Resolution Extraordinary GeneralMeeting as they have irrevocably undertaken to do in respect of their ownbeneficial holdings of 25,460,415 Resolution Shares representing, in aggregate,approximately 3.7 per cent. of the existing issued share capital of Resolution. Enquiries: Friends Provident Resolution+44 (0)845 641 7832 +44 (0)20 7489 4880Sir Adrian Montague Clive CowderyPhilip Moore Mike BiggsNick Boakes Steve Riley JPMorgan Cazenove Lazard(Lead financial adviser) +44 (0)20 7187 2000+44 (0)20 7588 2828 Jon HackTim Wise Edmund DilgerConor Hillery Goldman Sachs International Citi(Joint financial adviser) +44 (0)20 7986 4000+44 (0)20 7774 1000 Chris JillingsSimon Dingemans Andrew Thompson Finsbury Temple Bar Advisory+44 (0)20 7251 3801 +44 (0)20 7002 1080James Murgatroyd Alex Child-VilliersVanessa Neill Tom AllisonAlex Simmons Notes 1) Resolution retains the right under the Merger Agreement to execute the merger by way of an offer for Friends Provident rather than a scheme. 2) Based on underlying EEV EPS for Friends Provident and operating EEV EPS for Resolution. 3) This should not be interpreted as meaning that the EEV EPS or embedded value per share of the Combined Group for the current or future financial years will necessarily match or exceed the historical published EEV EPS or embedded value per share of Resolution. This summary should be read in conjunction with the full text of the followingannouncement and the Appendices. The conditions to, and certain further termsof, the merger are set out in Appendix I. Certain definitions and terms used inthis announcement are set out in Appendix V. JPMorgan Cazenove is acting as financial adviser to Friends Provident and no oneelse in connection with the merger and will not be responsible to any otherperson for providing the protections afforded to the clients of JPMorganCazenove nor for providing advice in relation to the merger or any other matterreferred to in this announcement. Goldman Sachs is acting as financial adviser to Friends Provident and no oneelse in connection with the merger and will not be responsible to any otherperson for providing the protections afforded to the clients of Goldman Sachsnor for providing advice in relation to the merger or any other matter referredto in this announcement. Lazard is acting as financial adviser to Resolution and no one else inconnection with the merger and will not be responsible to any other person forproviding the protections afforded to the clients of Lazard nor for providingadvice in relation to the merger or any other matter referred to in thisannouncement. Citi is acting as financial adviser to Resolution and no one else in connectionwith the merger and will not be responsible to any other person for providingthe protections afforded to the clients of Citi nor for providing advice inrelation to the merger or any other matter referred to in this announcement. Overseas jurisdictions The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore any personswho are subject to the laws of any jurisdiction other than the United Kingdomshould inform themselves about, and observe, any applicable requirements. Thisannouncement has been prepared for the purposes of complying with English law,the City Code and the Listing Rules and the information disclosed may not be thesame as that which would have been disclosed if this announcement had beenprepared in accordance with the laws and regulations of any jurisdiction outsideof England. This announcement is not intended to, and does not constitute, or form part of,an offer to sell, purchase or exchange or the solicitation of an offer to sell,purchase or exchange any securities or the solicitation of any vote or approvalin any jurisdiction. This announcement does not constitute a prospectus or aprospectus equivalent document. Shareholders of Friends Provident and Resolutionare advised to read carefully the formal documentation in relation to the mergeronce it has been despatched. The proposals relating to the merger will be madesolely through the Scheme Document, which will contain the full terms andconditions of the merger, including details of how to vote with respect to theScheme. Any acceptance or other response to the proposals should be made only onthe basis of the information in the Scheme Document. In particular, this announcement is not an offer of securities for sale in theUnited States and the New Friends Financial Shares, which will be issued inconnection with the merger, have not been, and will not be, registered under theUS Securities Act of 1933 as amended (the "US Securities Act") or under thesecurities law of any state, district or other jurisdiction of the UnitedStates, Australia, Canada or Japan and no regulatory clearance in respect of theNew Friends Financial Shares has been, or will be, applied for in anyjurisdiction other than the UK. The New Friends Financial Shares may not beoffered, sold, or, delivered, directly or indirectly, in, into or from theUnited States absent registration under the US Securities Act or an exemptionfrom registration. The New Friends Financial Shares may not be offered, sold,resold, delivered or distributed, directly or indirectly, in, into or fromCanada, Australia or Japan or to, or for the account or benefit of, any residentof Australia, Canada or Japan absent an exemption from registration or anexemption under relevant securities law. It is expected that the New FriendsFinancial Shares will be issued in reliance upon the exemption from theregistration requirements of the US Securities Act provided by Section 3(a)(10)thereof. Under applicable US securities laws, persons (whether or not USpersons) who are or will be "affiliates" within the meaning of the US SecuritiesAct of Friends Provident or Resolution prior to, or of Friends Financial after,the Effective Date will be subject to certain transfer restrictions relating tothe New Friends Financial Shares received in connection with the Scheme. Notice to US Investors: The merger relates to the shares of a UK company and isproposed to be made by means of a scheme of arrangement provided for under thelaws of England and Wales. The merger is subject to the disclosure requirementsand practices applicable in the United Kingdom to schemes of arrangement, whichdiffer from the disclosure and other requirements of US securities laws.Financial information included in the relevant documentation will have beenprepared in accordance with accounting standards applicable in the UnitedKingdom that may not be comparable to the financial statements of US companies. If the merger is implemented by way of an offer, it will be made in accordancewith the procedural and filing requirements of the US securities laws, to theextent applicable. If the merger is implemented by way of an offer, the NewFriends Financial Shares to be issued in connection with such offer will not beregistered under the US Securities Act or under the securities laws of anystate, district or other jurisdiction of the United States and may not beoffered, sold or delivered, directly or indirectly, in the United States exceptpursuant to an applicable exemption from, or in a transaction not subject to,the registration requirements of the US Securities Act or such other securitieslaws. Resolution does not intend to register any such New Friends FinancialShares or part thereof in the United States or to conduct a public offering ofthe New Friends Financial Shares in the United States. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Friends Provident or Resolution all "dealings" in any"relevant securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the date on which any offer becomes, or is declared,unconditional as to acceptances (or, if implemented by a scheme of arrangement,such scheme becomes effective), lapses or is otherwise withdrawn or on which the"offer period" otherwise ends. If two or more persons act together pursuant toan agreement or understanding, whether formal or informal, to acquire an"interest" in "relevant securities" of Friends Provident or Resolution, theywill be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Resolution by Friends Provident or of Friends Provident byResolution, or by any of their respective "associates", must be disclosed by nolater than 12.00 noon (London time) on the London business day following thedate of the relevant transaction. A disclosure table, giving details of thecompanies in whose "relevant securities" "dealings" should be disclosed, and thenumber of such securities in issue, can be found on the Takeover Panel's websiteat www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Takeover Panel's website. If you are in any doubt as to whether or notyou are required to disclose a "dealing" under Rule 8, you should consult theTakeover Panel. Forward looking statements This announcement may contain forward looking statements that are based oncurrent expectations or beliefs, as well as assumptions about future events.Generally, the words "will", "may", "should", "continue", "believes", "expects","intends", "anticipates" or similar expressions identify forward-lookingstatements. These statements are based on the current expectations of managementand are naturally subject to risks, uncertainties and changes in circumstances.Undue reliance should not be placed on any such statements because, by theirvery nature, they are subject to known and unknown risks and uncertainties andcan be affected by other factors that could cause actual results, andmanagement's plans and objectives, to differ materially from those expressed orimplied in the forward looking statements. There are several factors which couldcause actual results to differ materially from those expressed or implied inforward looking statements. Among the factors that could cause actual results todiffer materially from those described in the forward looking statements are theability to combine successfully the businesses of Friends Provident andResolution and to realise expected synergies from that combination, changes inthe global, political, economic, business, competitive, market and regulatoryforces, future exchange and interest rates, changes in tax rates and futurebusiness combinations or dispositions. Neither Friends Provident nor Resolutionundertakes any obligation (except as required by the Listing Rules and theDisclosure and Transparency Rules and the rules of the London Stock Exchange) torevise or update any forward looking statement contained in this announcement,regardless of whether that statement is affected as a result of new information,future events or otherwise. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THERELEVANT LAWS OF SUCH JURISDICTION For immediate release 10 September 2007 FRIENDS PROVIDENT PLC AND RESOLUTION PLC: MERGER UPDATE 1. Introduction On 25 July 2007 the Boards of Friends Provident and Resolution announced thatthey had agreed the terms of a recommended all-share merger of the two companiesto create Friends Financial. They are pleased to today announce further progresstowards the merger. The merger creates a leading UK-based life assurer, valued at approximately £8.4billion(1) with: • a customer base that combines Friends Provident's approximately 2.5 million customers with Resolution's approximately 7 million customers; • combined embedded value of £7.9 billion(2); and • assets under management of £165 billion(3). The merger will create a significant new force in the UK life and pensionsmarket. Through its combination of new business capability and cashflowgeneration, Friends Financial can provide shareholders with both profitable newbusiness growth and growing dividend income. Given its enhanced scale andcapability, Friends Financial will be well placed to participate in futureconsolidation in the UK life and pensions sector over time. The Combined Group will benefit from the complementary fit between Resolutionand Friends Provident. Friends Provident brings extensive UK and internationalnew business expertise, product capabilities and strength in IFA distribution.Resolution brings strong surplus cashflow, sector-leading management of in-forcebusiness and the distribution relationship with Abbey. In addition, both groupshave broad customer bases and industry management expertise. Change to implementation of the merger The legal structure to implement the merger has been changed, moving to aCourt-sanctioned scheme of arrangement between Friends Provident and FriendsProvident Shareholders, rather than a scheme of arrangement between Resolutionand Resolution Shareholders, and, with the consent of the Panel Executive, thescheme of arrangement of Resolution will not proceed. The merger is thereforeconditional upon the approval of a simple majority of Resolution Shareholdersvoting at Resolution's Extraordinary General Meeting and a majority in numberrepresenting 75 per cent. in value of those who vote at a meeting of FriendsProvident Shareholders convened by order of the Court. Accordingly, the MergerAgreement entered into by Friends Provident and Resolution on 25 July 2007 hasbeen amended to reflect this change to the implementation of the mergerstructure. There is no change to the commercial or financial terms of themerger. Changes to the terms of the merger and Merger Agreement from those announced on25 July 2007 are those appropriate to facilitate the merger following the changeto the merger structure(4). Merger benefits confirmation Friends Provident and Resolution confirm the annualised pre-tax cost savings andfinancial synergies of £100 million announced on 25 July and 30 July 2007 withsupporting letters from the financial advisers and reporting accountants of bothResolution and Friends Provident, contained in Appendix II of this announcement. Resolution organisational changes to deliver greater efficiency Resolution is announcing the operational merger of its two existing lifedivisions, Life Division North and Life Division South, to form one division byNovember 2007. This merger, together with the Capita outsourcing deal which wasannounced on 30 May 2007, will: • allow Resolution to complete the delivery of the targeted expense synergies of £10 million per annum announced at the time of the acquisition of the former Abbey life companies; • prepare Resolution's business for the fund merger planned for 2008 (see below); and • enhance the compatibility of Resolution's business with the organisational structure to be adopted by the enlarged group following completion of the merger. The Managing Director of the merged Resolution life division will be GrahamSingleton, currently Managing Director of Life Division North. Other keymanagement appointments are Kerr Luscombe (Deputy Managing Director), PaulStockton (Finance Director) and Mike Merrick (Chief Actuary). These changes arenot conditional upon completion of the Friends Financial merger. Resolution estimate of financial synergies from 2008 fund merger increased to£250 million In June 2006 Resolution announced that the acquisition of the former Abbey lifecompanies provided potential to achieve financial synergies from futurerestructurings with a net present value, at a 12 per cent. risk discount rate,of £114 million. In its 2006 annual report, Resolution provided an update on thepotential value achievable from future financial synergies, noting that it wasestimated that a future fund merger would increase Resolution's EEV by a net£150 million. During the first half of 2007 Resolution has, with the assistance of externaladvisers, conducted more detailed work to determine both the optimal structurefor this future fund merger, and the expected uplift in EEV. It has now beenconcluded that the most appropriate restructuring will be to transfer thebusiness of the current Life Division North companies (Scottish Mutual AssuranceLimited, Scottish Provident Limited and Phoenix Life Assurance Limited) toPhoenix Life Limited, which is currently the main Life Division South lifecompany. It is now estimated by Resolution that the increase in EEV arising from such areconstruction, which is expected to be implemented during 2008, will beapproximately £250 million after tax and implementation costs. This revisedfigure has been reported on by Ernst & Young and Resolution's financial advisersand copies of their letters are contained in Appendix III. The key assumptions on which this statement has been based are that: • FSA and Court approvals are obtained for the transfer of the life insurance funds of Scottish Mutual Assurance Limited, Scottish Provident Limited and Phoenix Life Assurance Limited to Phoenix Life Limited under Part VII of the Financial Services and Markets Act 2000; • the Part VII transfer takes place in the final quarter of 2008; and • the standard rate of corporation tax is 28 per cent. The impact of the fund merger on Resolution's EEV has been prepared using themethodology and assumptions described in the audited supplementary informationon pages 164 to 186 of the Resolution plc 2006 annual report and accounts. Thedelivery of these financial synergies is not conditional upon completion of theFriends Financial merger. Distribution capabilities enhanced Resolution and Abbey have entered into a binding agreement under whichResolution, through its subsidiary Resolution Management Services Limited("RMS"), will acquire the Scottish Provident protection broker consultantbusiness (comprising 65 brokers) from Abbey for Intermediaries ("AFI") witheffect from 28 September 2007 (the "Intermediary Acquisition"). The IntermediaryAcquisition will give Resolution the broker consultant capability to complementits existing product manufacturing capability and is expected to result incloser alignment of the broker consultants with Resolution's strategicobjectives. It will also lead to a closer relationship between Resolution andthe IFAs that recommend its products. Following Resolution's acquisition of the former Abbey life companies inSeptember 2006, AFI remained responsible for promoting Resolution's awardwinning Scottish Provident protection products to IFAs under the terms of anIntermediary Distribution Agreement ("IDA"). Under the IDA, Resolution pays AFIProduct Acquisition Fees ("PAFs") based on the volume of new business writtenthrough this channel. Following completion of the Intermediary Acquisition, Resolution will incur thecosts of promoting its products to IFAs directly and will cease paying PAFs toAFI. Resolution believes that the direct costs it will incur in relation to thebroker consultants will be lower than the PAFs which would otherwise have beenincurred under the terms of the IDA. As a result, had the IntermediaryAcquisition completed on 31 December 2006, Resolution believes that the value ofnew business written in the first half of 2007 would have been higher than thevalue which will be reported in its interim results on 18 September. The Intermediary Acquisition is not conditional upon completion of the FriendsFinancial merger. Under the Intermediary Acquisition Resolution will acquiregross assets with a value of approximately £140,000. Revision to the Abbey cash management agreements As part of the acquisition of the former Abbey life companies, Resolutionentered into two cash management agreements under which Abbey was appointed tomanage all cash investments in respect of the former Abbey life companies until31 August 2016. Abbey currently manages £3.5 billion of cash assets on behalf ofResolution under these agreements. Resolution and Abbey have now amended thecash management agreements such that Resolution will be able to move themanagement of all of the cash investments of the former Abbey life companiesfrom Abbey to Resolution Asset Management over the course of the next year.These changes are not conditional upon completion of the Friends Financialmerger. 2. Terms of the merger The merger will be implemented by means of a scheme of arrangement pursuant towhich existing Friends Provident Shares will be cancelled in exchange for anissue of New Friends Financial Shares to Friends Provident Shareholders. Underthe terms of the merger, Resolution Shareholders will retain their shares inResolution (to be renamed Friends Financial) and Friends Provident Shareholderswill receive: for every 13 Friends Provident Shares held at the relevant record date 4 New Friends Financial Shares. Fractional entitlements to New Friends Financial Shares will be disregarded andwill not be issued. The terms of the merger are based on the relative equity market capitalisationsof the two companies in the period prior to the original announcement of themerger on 25 July 2007. Upon completion of the merger, Resolution Shareholderswill hold approximately 50.9 per cent. and Friends Provident Shareholders willhold approximately 49.1 per cent. of the enlarged issued share capital ofFriends Financial, based on the current issued share capital of the twocompanies and before the effect of the Friends Provident Convertible Bonds.These proportions are unchanged from those set out in the original announcementof the merger on 25 July 2007. Resolution Shareholders and Friends ProvidentShareholders are expected to hold approximately 49.0 per cent. and approximately51.0 per cent. respectively assuming that all holders of the Friends ProvidentConvertible Bonds exercise their conversion rights before the Scheme Record Time. 3. Irrevocable undertakings Irrevocable undertakings to vote in favour of the Scheme at the Court Meetingand in favour of the resolutions required in connection with the merger at theFriends Provident EGM have been received by Resolution from the FriendsProvident Directors in respect of their aggregate holding of 222,590 FriendsProvident Shares, representing approximately 0.01 per cent. of the existingissued share capital of Friends Provident. Irrevocable undertakings to vote in favour of the merger at the Resolution EGMhave been received by Friends Provident from the Resolution Directors in respectof their aggregate holding of 25,460,415 Resolution Shares, representingapproximately 3.7 per cent. of the issued share capital of Resolution. Since the merger is to be implemented by Court approval of the Scheme, theirrevocable undertakings cease to be binding in certain circumstances where therelevant directors' fiduciary duties require. The irrevocable undertakings in respect of the previous legal structure forimplementing the merger have been replaced by the irrevocable undertakings setout above. 4. Background to and reasons for the merger As explained in the original announcement of the merger on 25 July 2007, themerger will create a UK-based life assurer which will have the scale andfinancial strength to grow new business in accordance with its IRR targets andthe strategic flexibility to participate in a broader range of consolidationopportunities than either Friends Provident or Resolution could do on its own. At the core of the combination is the complementary fit between FriendsProvident and Resolution that extends across products, customers, distribution,financial profiles and management capabilities. In particular, Resolution brings: • strong cashflow and capital base - Resolution had approximately £1.5 billion surplus cash receivable from subsidiaries during the first half of 2007, of which £695 million(5) has been used to pay down existing debt. Resolution had a surplus of £1.4 billion in respect of the group capital adequacy test as at 31 December 2006; • a substantial customer base of approximately 7 million customers, as well as the Abbey distribution relationship; • strength in protection products through the Scottish Provident franchise which distributes to both IFAs and Abbey customers; • proven expertise in extracting value from in-force business where Resolution is a leading acquirer and consolidator of closed life funds in the UK; and • an asset management business with approximately £60 billion of assets under management, which is proposed to be combined, on terms to be agreed, with F&C to create a business with greater scale and opportunities. Friends Provident brings: • a strong new business franchise in the UK - contribution to profit from new business has grown at a compound annual rate of 36 per cent. since 2004; • a high quality specialist international business, comprising FPI and Lombard; • product capabilities extending across group pensions, protection, investment products and annuities as well as high net worth and high value products through Friends Provident's international operations; • a strong brand in IFA distribution where it had an approximate 7 per cent. share of new business in 2006; • administrative efficiency and service excellence - evidenced through its straight-through processing capabilities and its innovative e-select protection platform; and • majority ownership of F&C, a substantial asset manager with over £100 billion of funds under management. By bringing these complementary strengths together, the merger will createtangible benefits for both Friends Provident and Resolution shareholders. Inparticular, it will create a group with: • the financial strength and new business platform to accelerate profitable growth in the UK and internationally; • broad distribution across the IFA and direct channels and the distribution relationship with Abbey; • a balanced profile of embedded value earnings and cash emergence; • annualised pre-tax cost savings and financial synergies expected to be £100 million by the end of 2010(6); • an attractive dividend return with a targeted growth rate of at least 5 per cent. per annum, including an uplift to Friends Provident Shareholders through the adoption of Resolution's dividend policy; • the strategic flexibility to pursue a broader range of both organic growth and acquisition opportunities; and • a combined management team with a unique blend of experience. The merger is expected to be earnings accretive on an EEV EPS basis(7) andaccretive to embedded value per share by 2009 for both Friends Provident andResolution shareholders. This should not be interpreted as meaning that the EEVEPS or embedded value per share of the Combined Group for the current or futurefinancial years will necessarily match or exceed the historical published EEVEPS or embedded value per share of Resolution. 5. Strategy Friends Financial's strategy will be to: • become a top 5 provider, measured by new business value added, in the UK life and pensions market differentiated by its values, customer focus and service excellence; • continue to participate in consolidation of the UK life and pensions sector over time; • grow international operations in selected geographies and market segments to diversify and enhance returns; and • expand the multi-boutique model of asset management into a leading pan-European player. UK life operations New business In 2006, the Combined Group had £4,758(8) million of combined new business salesin UK life and pensions with market leading positions in key segments of themarket and a balanced distribution profile. Friends Provident has delivered 36 per cent. compound annual growth in UKcontribution to profit from new business since 2004. Friends Provident'sextensive product capabilities, market-leading administration and strength inIFA distribution are complemented by Resolution's own capabilities in theprotection market and its distribution relationship with Abbey. Friends Financial intends to pursue opportunities to grow new businessprofitably. It will have the capital, the product capabilities and thedistribution to support this objective. The group will benefit from FriendsProvident's customer base of approximately 2.5 million and Resolution's customerbase of approximately 7 million and the merger will provide the opportunity toapply Friends Provident's new business expertise and the shared aspiration ofcustomer focus to the enlarged customer base. Recognising its profile and heritage, the Friends Provident name will become theprimary brand for UK life and pensions operations after a transitional period.The Scottish Provident brand will, however, be retained. Friends Financial will seek to: • accelerate growth in segments of the market where either Friends Provident or Resolution already has strengths, for example: - in protection where, bringing together the Friends Provident and Scottish Provident franchises, Friends Financial will compete more effectively with the largest providers; - in group pensions, where Friends Provident is a leader and where market trends present a significant opportunity for providers with the critical mass and capital resources to seize it; and - in annuities, where Friends Provident already sells products to a large number of customers with vesting policies on attractive margins, driven by disciplined pricing; • apply Friends Provident's new business expertise and the Combined Group's shared customer focus to Resolution's customer base. There is a significant opportunity to broaden the product offering to Abbey, Scottish Provident and other in-force customers; • expand into new areas as opportunities arise and new trends emerge. For example, in wraps, SIPPs and in post-retirement products where Friends Financial's natural strengths in financial and capital risk management can be applied; • be a more compelling partner of choice in the negotiation of new distribution relationships with banks, IFAs, affinity schemes and other distribution channels; and • participate in future consolidation opportunities in the UK life and pensions sector over time. All new business opportunities will be subject to the strict discipline ofFriends Financial's IRR target of at least 12 per cent. over the full productlife cycle on a fully costed basis. Protection will remain a core area for Friends Financial, with a combined marketshare of approximately 14 per cent. in this segment. Although this marketremains competitive, Friends Financial's management believes that the combinedstrengths and scale of the Friends Provident and Scottish Provident franchiseswill enable the Combined Group to compete more effectively with other largeproviders and build further market share, whilst maintaining attractive returns. The market for group pensions is expected to see significant growth from definedcontribution pension schemes over the coming years. The Combined Group will lookto build on its leading position in this market, with a combined market share ofapproximately 11 per cent., but will remain selective in the segments in whichit chooses to participate to protect margins. It is expected that its grouppensions business will exceed the Combined Group's 12 per cent. IRR target andwill be self-financing by 2011. The growth in demand for account aggregation and open architecture funds has ledto the development of wrap platforms which is expected to support the growth ofinvestment products, including bonds. This will be a key area of growth forFriends Financial. Friends Financial has the technology, service and distributorrelationships that are key to capturing assets. The Combined Group's wrapplatform will be rolled out through 2008, starting with an initial release inlate 2007. The demographics of an ageing UK population presents an attractive opportunityfor the Combined Group to expand in the post-retirement market by selling moreannuities to existing customers and by developing other structured productsusing Friends Financial's natural strengths in financial and capital riskmanagement. Post-retirement is a rapidly growing segment of the UK market andmaturing policies from Friends Provident's and Resolution's in-force booksprovide a large customer base. In-force Friends Financial will have one of the largest in-force businesses in the UK andwill continue to extract value through operating, financial and capitalefficiencies. The strong cash flows and capital generation from the CombinedGroup's in-force book will support the growth of profitable new business.Resolution continues to work towards the planned merger of its in-force funds bythe end of 2008. The combination of Resolution and Friends Provident will enable better servicingof Resolution's in-force customers - both its continuing relationships andholders of maturing policies. Friends Provident's brand will replace Resolutionbrands for in-force business over time. International life operations Friends Provident has a well established international business built up throughacquisitions and organically, comprising FPI and Lombard. In 2006, FriendsProvident's international business represented nearly 50 per cent. of FriendsProvident's contribution to profit from new business, reflecting the stronggrowth and attractive returns from its international operations. The merger brings the capital and scale to fund further expansion of FriendsProvident's international business and that of Scottish Provident. Friends Financial intends to grow its international operations in selectedterritories and product segments to diversify and enhance returns. Inparticular, it proposes to export its UK skills - in product design, managementof distribution relationships and service through technology - to new marketsenabling it to achieve strong differentiation and enhance pricing andcompetitiveness. Lombard's business model is built around partnering with leading specialistadvisers and distribution partners. The scale, profile and enhanced credentialsof Friends Financial will make Lombard more attractive to distribution partners. Friends Financial will continue to expand organically and by selectiveacquisitions in markets where attractive opportunities exist. Asset management Asset management will be a core activity of the Combined Group which had totalfunds under management of £165 billion as at 31 December 2006. Followingcompletion of the merger, it is proposed that RAM will be combined with F&C onterms to be agreed between the boards of the Combined Group and F&C. Followingany combination, F&C will continue to be separately listed and majority owned byFriends Financial. The combined asset management operations would be a leading manager of UK lifefund assets as well as a significant manager of third party funds. It isestimated that total annualised cost savings of approximately £26 million beforetax could be achieved from the combination of RAM and F&C. F&C will remain committed to its three year accelerated growth plan announcedwith its preliminary results in March this year. Subject to reaching anagreement with the F&C Board, F&C's management will lead the integration of F&Cand RAM in such a way as to build on the capabilities and skills of bothbusinesses. The combined business will work closely with joint venture partnersof both groups. 6. Financial Potential for cost savings and financial synergies As stated in the original announcement of the merger on 25 July, and the mergerupdate announcement on 30 July 2007, the merger is expected to generate £100million in annualised pre-tax cost savings and financial synergies by the end of2010, to be delivered by a management team with a proven track record ofsuccessful integration. The synergies will be achieved through: • creating a single group management structure and head office functions; • integrating the Combined Group's UK life and pensions operations; • combining sales and marketing for the UK protection and Isle of Man businesses; and • delivering a rationalised governance and financial management operating model over time around areas of best practice within the two organisations. The figure of £100 million of pre-tax synergies includes £52 million of costsavings from the integration of the life and pensions operations and headoffice, £22 million from financial synergies and £26 million of total savingsexpected to be achieved from the combination of RAM and F&C(6). The estimated pre-tax cost of achieving the synergies is expected to beapproximately £120 million before taxes, of which £46 million relates to assetmanagement. The financial synergies of £22 million per annum before tax are in addition tothe estimated net increase in embedded value of £250 million resulting from theResolution fund merger planned for 2008. Detailed work has not yet beenundertaken to determine the extent of any one-off financial synergies whichmight be achievable in the future through the merger of Resolution lifecompanies and Friends Provident life companies. Any such synergies, ifidentified, would not be expected to be realised for a number of years. The expense synergies have been determined after allowing for the fullimplementation of Resolution's existing rationalisation and cost reduction plansas required to deliver the synergies targeted at the time of the Resolution LifeGroup - Britannic merger and the acquisition of the former Abbey life companies. Confirmation of these merger benefits, including information on the sources andbases of preparation and supporting letters from the financial advisers andreporting accountants of both Friends Provident and Resolution, is provided inAppendix II. Capital strength and cashflows Friends Financial will have a strong capital position and Operational Cashflows.In particular, its Operational Cashflows are expected to be more than sufficientto fund planned new business growth (having an indicative cash requirement of£250 million per annum based on 2006 results) and dividend commitments and toprovide opportunities for further investment over the next three years. FriendsFinancial will adhere to strict disciplines in the deployment of its resources. The combined capital adequacy of Friends Financial based on the position at 31December 2006 was a surplus in excess of £2.4 billion. Friends Provident and Resolution believe that, in the absence of other valuecreating investment opportunities, Friends Financial will be able to contemplatea return of cash to shareholders from 2008 onwards. Financial disciplines In achieving its strategic ambitions, the management of Friends Financial willmeasure its performance and assess opportunities against the following financialtargets: • new business - an IRR of at least 12 per cent. over the product life cycle on a fully costed basis both in the UK and internationally; • acquisitions - currently a pre-leveraged IRR of at least 12 per cent. The new Board of Friends Financial will consider whether this is an appropriate discipline going forward. Its considerations will include moving to a post-leveraged IRR underpinned by a pre-leveraged margin in excess of the Combined Group's weighted average cost of capital; • capital adequacy - maintain existing capital policies; • credit rating - manage the balance sheet on metrics consistent with an "A" rating at holding company level (with debt to gross embedded value gearing normally in the range of 25 to 35 per cent.); and • dividends - will only be paid out of accumulated embedded value earnings. Following completion of the merger, Friends Financial will review its portfolioof assets to identify any non-core assets which, if sold, would increase theCombined Group's return on embedded value. In the event of such divestitures,Friends Financial would expect to utilise the proceeds to either return capitalto shareholders or to invest in more value accretive opportunities. Resolution has commenced discussions with a number of parties in relation to thepotential disposal of a portfolio of business which has already been identifiedas non-core. Financial reporting Friends Provident published its interim results for 2007 on 8 August 2007.Resolution will publish its interim results for 2007 on 18 September 2007. Thepreliminary announcement for the year ending 31 December 2007 will include theconsolidated IFRS results for the Combined Group which will combine the fullyear results of Resolution with the post acquisition results of FriendsProvident. A combined consolidated EEV income statement for the full year willalso be presented at that time. Consolidated balance sheets on an IFRS and EEVbasis for the Combined Group as at 31 December 2007 will also be included in theannouncement. 7. Benefits for policyholders Both companies share a commitment to managing life funds in a way that treatscustomers fairly and delivers leading standards of service. Friends Financialwill maintain a continued focus on its customers, developing and promotingproducts and services that meet the needs of customers, providing clearinformation and quality of service. Friends Financial's complementary strengths will create a customer-ledorganisation, seeking to add value through clear differentiation in operationalexcellence and financial management. These strengths are expected to enhanceFriends Financial's returns from both new and in-force business. The positive disclosure and information initiatives introduced by Resolution andFriends Provident will continue. These are designed to help policyholders makeinformed decisions about their policies. 8. Employees and share schemes The Boards of Friends Provident and Resolution believe that the prospects ofemployees of both groups generally will be enhanced as a result of thestrengthened market position and growth prospects of the Combined Group.Undertaking a merger of this size means that some redundancies will beinevitable in due course but these will be kept to a minimum and are anticipatedto be fewer than would normally be expected from a merger of this magnitude. Theintegration process is likely to take place over a period of two to three yearsand every effort will be made to minimise the number of compulsory job losses.The Combined Group intends to be flexible to employee needs and to use a varietyof alternatives before implementing compulsory redundancies. Communication and consultation with employees will play a major part in theintegration process and there will be a fair and transparent process forselection of people to fill management and staff positions in the CombinedGroup. Management and staff positions are intended to be filled with the bestpeople from Friends Provident and Resolution. Friends Financial will be committed to policies and practices which are expectedto provide enhanced opportunities for employees generally to learn and growthrough experience and training. The Resolution Board has given assurances to the Friends Provident Directorsthat, following the merger becoming effective, the existing contractualemployment rights of all employees of the Friends Provident Group will be fullysafeguarded. Any process of harmonising employment terms and conditions will beundertaken with the full involvement of recognised employee representativebodies. Participants in the Resolution Share Schemes and the Friends Provident ShareSchemes will be advised separately in due course of the impact of the merger ontheir entitlements and of the choices available to them. 9. Board and management The Board of Friends Financial will comprise the Chairman, Deputy Chairman,eight other non-executive directors and six executive directors. The Chairman will be Clive Cowdery, currently Chairman of Resolution. Sir AdrianMontague, currently Chairman of Friends Provident, will be the Deputy Chairmanand senior independent director. Mike Biggs, currently Group Chief Executive ofResolution, will be Group Chief Executive of the Combined Group and PhilipMoore, currently Group Chief Executive of Friends Provident, will be DeputyGroup Chief Executive with specific responsibility for the Combined Group'sinternational business, asset management operations and certain group functions. The eight other non-executive directors will consist of Ray King, Sir MervynPedelty, and Gerhard Roggemann from Friends Provident and David Allvey, SirDavid Cooksey and Sir Brian Williamson from Resolution, together with two newappointments expected to be made by the time of completion of the merger, or assoon as possible thereafter. The Combined Group will establish three principalBoard committees. The Governance and Nominations Committee will be chaired bySir Adrian Montague and will comprise all the non-executive directors. The AuditCommittee will be chaired by Ray King. The Remuneration Committee will bechaired by Sir David Cooksey. In addition to the Group Chief Executive and Deputy Group Chief Executive, theexecutive directors will be: Name Position Jim Newman Group Finance DirectorBen Gunn Chief Executive, Friends Provident Life and PensionsIan Maidens Group Chief Actuary and Corporate Development DirectorAlain Grisay Chief Executive of F&C Asset Management Sir Adrian Montague, Philip Moore, Ray King, Sir Mervyn Pedelty, GerhardRoggemann, Ben Gunn and Alain Grisay will join the Board of Friends Financial oncompletion of the merger, subject to agreement of letters of appointment or theterms of their service contracts, as appropriate. A summary of the terms oftheir proposed letters of appointment or service contracts, as appropriate, willbe included in the circular to be sent to Resolution Shareholders in relation tothe merger and the Scheme Document. In addition, an executive committee will be put in place to manage theday-to-day operations of the group. 10. Branding and locations The holding company name will be Friends Financial Group plc. In the CombinedGroup's core UK life and pensions operations, it is proposed to move most newbusiness activities to the single brand of Friends Provident, reinforcing itscommitment to establishing a leading market position. The Combined Group willretain the Scottish Provident brand and will build on its strength and heritagein the protection market. The F&C brand will be used for asset management and the Lombard and FriendsProvident International brands will continue to be used in the internationalmarkets. The Combined Group's head office will be Resolution's current head office inLondon. It is intended that the key operating locations of both FriendsProvident and Resolution will be maintained. 11. Dividend policy The Combined Group will adopt Resolution's existing dividend policy followingthe completion of the merger. Accordingly, the dividend policy will be to targetat least 5 per cent. per annum growth, with one-third payable as an interimdividend and two-thirds payable as a final dividend. Dividends will be paid outof accumulated embedded value earnings. Friends Provident's and Resolution's interim dividends in respect of the yearended 31 December 2007 are unaffected. Following completion of the merger, thefinal dividend declared by the Combined Group is expected to be set at a levelwhich will provide shareholders in Friends Financial with the same level ofpayout as would have been received by Resolution Shareholders had the merger nottaken place. In the absence of unforeseen circumstances, this will result in afinal dividend for Friends Financial shareholders of 18.33 pence per share,equivalent to 5.64 pence per existing Friends Provident Share, an increase of 38per cent. over the final Resolution dividend for 2006 and an increase to FriendsProvident Shareholders of 8.5 per cent. over the final dividend for 2006. In addition, Resolution Shareholders who are on the register of Resolution as atclose of business on 5 October 2007 will be entitled to receive Resolution's2007 interim dividend, expected to be 9.17 pence per share, and FriendsProvident Shareholders who are on the register of Friends Provident as at closeof business on 12 October 2007 will be entitled to receive Friends Provident's2007 interim dividend, of 2.70 pence per share. The New Friends Financial Sharesto be issued to Friends Provident Shareholders under the terms of the mergerwill not carry the right to receive Resolution's 2007 interim dividend. 12. Structure of the merger The terms of the merger are based on the relative equity market capitalisationsof the two companies in the period prior to the original announcement of themerger on 25 July 2007. The merger will be implemented by means of a Court-sanctioned scheme ofarrangement between Friends Provident and Friends Provident Shareholders undersection 425 of the Companies Act. Under the Scheme, Friends Provident's entireissued share capital will be cancelled and re-issued to Resolution. Resolutionwill therefore be the listed holding company of the Combined Group and willchange its name to Friends Financial Group plc upon the Scheme becomingeffective. Friends Provident Shareholders will receive: for every 13 Friends Provident Shares held at the relevant record date 4 New Friends Financial Shares. Fractional entitlements to New Friends Financial Shares will be disregarded andwill not be issued. The merger will be subject to the conditions and further terms set out inAppendix I, including the approval of the merger by shareholders of both FriendsProvident and Resolution as described below, satisfaction of certain regulatoryconditions and sanction of the Scheme by the Court. The Scheme will require approval by a special resolution of Friends ProvidentShareholders to be proposed at the Friends Provident Extraordinary GeneralMeeting. The Scheme will also require approval separately by Friends ProvidentShareholders at a meeting to be convened by order of the Court. The approvalrequired at that Scheme Meeting is a majority in number representing 75 percent. in value of those holders who vote in person or by proxy at that meeting.Once the Scheme becomes effective, the terms will be binding on all FriendsProvident Shareholders whether or not they voted in favour. The Scheme can only become effective if all the conditions to the merger havebeen satisfied or, where relevant, waived. The Scheme will become effective uponthe delivery to the Registrar of Companies by Friends Provident of a copy of theCourt Order and the registration of such order. As a result of the size of the transaction, the merger will also requireapproval of Resolution Shareholders at the Resolution Extraordinary GeneralMeeting. Resolution is required to prepare and send to its shareholders theResolution Shareholder Circular summarising the background to and reasons forthe merger (which will include a notice convening the Resolution ExtraordinaryGeneral Meeting). Resolution will also be required to publish a Prospectus in connection with theissue of the New Friends Financial Shares. The Prospectus will containinformation relating to the Combined Group and the New Friends Financial Shares. It is expected that the Scheme will become effective and that the merger willcomplete during the fourth quarter of 2007. Expected timetable The expected timetable to closing of the merger is as follows: Resolution interim results announcement 18 September 2007 Formal documents sent to shareholders Early October 2007 Friends Provident EGM Late October 2007 Resolution EGM Late October 2007 Scheme meeting Late October 2007 Effective Date of Scheme Late November 2007 13. Merger Agreement and Inducement Fee Friends Provident and Resolution have entered into the Merger Agreement whichprovides, among other things, for the implementation of the merger in accordancewith an agreed indicative timetable and contains assurances and confirmationsbetween the parties, including provisions to implement the Scheme on a timelybasis and governing the conduct of the businesses of Friends Provident andResolution during the period prior to the merger becoming effective. Each of Friends Provident and Resolution have agreed that, immediately prior tothe Court Hearings, they shall waive all remaining Conditions other than thosein set out in paragraphs 1, 2, 3.1, 3.2 and 3.5 of Appendix I unless the otherparty has notified it and provided reasonable evidence that an event hasoccurred or circumstance has arisen which is sufficient for the Panel to permitthe other party to withdraw from the merger. In addition, the Merger Agreement contains certain covenants from each party toproceed to implement the Scheme after the passing of the resolutions at theFriends Provident Extraordinary General Meeting and the Resolution ExtraordinaryGeneral Meeting, in which the shareholders of Friends Provident and Resolutionshall direct their respective directors, subject only to the Conditions, to usetheir reasonable endeavours to ensure that the Scheme becomes effectivenotwithstanding any Alternative Proposal or any fiduciary duties which theirrespective directors might otherwise have. Each party has agreed under the Merger Agreement to pay to the other theInducement Fee if: • an Alternative Proposal becomes or is declared wholly unconditional, becomes effective, or is otherwise completed before or within 12 months of the date on which the merger is withdrawn, not implemented or lapses; or • either Board does not unanimously and unqualifiedly recommend the merger or withdraws, or adversely modifies or qualifies such recommendation and the merger is withdrawn, not implemented or lapses; or • the shareholder resolutions required by either party to implement the merger are not passed by the requisite majorities or in the case of Friends Provident, if it fails to obtain the sanction for the Scheme by the Court, and the merger is withdrawn, not implemented or lapses; or • the merger is withdrawn, not implemented or lapses as a result of either party committing a breach of its obligations under the Merger Agreement which is so material as to have caused or to have contributed materially to such withdrawal, failure to implement, or lapse. Under the Merger Agreement, Friends Provident and Resolution have undertakenthat they should not offer or agree to any inducement fee or any similararrangement with any third party prior to the termination of the MergerAgreement. Friends Provident and Resolution have each agreed that they will not initiate orsolicit any discussion for the purposes of procuring an Alternative Proposal.They have also each agreed that they will notify each other of any approachregarding an Alternative Proposal, the material terms of any such approach andthey have undertaken, subject to the directors' fiduciary duties, not towithdraw, modify or qualify their recommendation within 48 hours of suchnotification unless the other party confirms it is not willing to revise theScheme or, in the case of Resolution, exercise its right to make a takeoveroffer for Friends Provident. Resolution has reserved the right to elect to implement the merger by means of atakeover offer, such offer to be on terms no less favourable to FriendsProvident's Shareholders, to be subject to a 50 per cent. acceptance conditionand to remain open until day 60 under the City Code. The Merger Agreement nolonger contains a right for Friends Provident to elect to implement the mergerby means of a takeover offer to Resolution's Shareholders, previously containedin the Merger Agreement and referred to in the original announcement of themerger on 25 July 2007. The Merger Agreement shall terminate in certain circumstances including, withoutprejudice to the rights of either party that may have arisen prior totermination and without prejudice to the Inducement Fee, if: • the merger does not become effective on or before the Long Stop Date; • any Condition becomes incapable of satisfaction or is invoked; • an Alternative Proposal becomes or is declared wholly unconditional or is completed; or • following the occurrence of any of the events triggering a payment of the Inducement Fee. The change to the legal structure of the merger does not trigger any payment ofthe Inducement Fee. 14. Current trading and outlook Friends Provident On 8 August 2007, Friends Provident released its interim results for the sixmonths to 30 June 2007. Friends Provident's business is currently performing inline with management's expectations. Resolution Resolution will announce its interim results for the six months to 30 June 2007on 18 September 2007. Resolution's business is currently performing in line withmanagement's expectations. 15. Information on Resolution Resolution is a specialist manager of in-force UK life funds and a member of theFTSE 100 Index. It was formed on 6 September 2005 when the merger of BritannicGroup and Resolution Life Group ("RLG") was completed. Britannic's heritage dates back to 1866, but it was only in 2003 that it closedfor new business to focus on acquiring closed life funds. Britannic acquired thelife operations of Allianz Cornhill in December 2004 for £115 million and theCentury Group in March 2005 for £45 million. RLG was formed for the purpose of buying and managing closed life funds. Itacquired the Royal & Sun Alliance life companies in September 2004 for £850million and Swiss Life UK for £205 million in March 2005. On 1 September 2006 Resolution completed the acquisition of the UK and offshorelife insurance businesses of Abbey together with the associated new businessinfrastructure and services companies. The total consideration was £3.6 billion. Resolution's head office is in London and it has significant administrationoperations in Wythall and Glasgow. Resolution's asset management operations arealso based in Glasgow. Resolution has total policyholder invested assets of £55 billion, comprising thefinancial assets and investment properties on the balance sheet at 31 December2006. Total funds under management at that date including third party fundstotalled £61 billion. Resolution's embedded value at 31 December 2006 was £4,197million and its EEV profit before tax for the year then ended was £669 million(including the results of the former Abbey businesses for the second half of theyear). Reported IFRS profits before tax for the year ended 31 December 2006 were£482 million including the results of the former Abbey businesses from 10 August2006. Gross assets on an IFRS basis as at 31 December 2006 were £65,374 million. 16. Information on Friends Provident Friends Provident is a leading UK financial services group and a member of theFTSE 100 Index. Friends Provident has three core businesses: • the UK Life and Pensions business is a leading UK life and pensions provider with approximately 2.5 million customers, and markets a comprehensive range of life protection, income protection, pensions and investment products for individual customers and corporate clients throughout the UK; • the International Life and Pensions business operates throughout Europe, Asia, and the Middle East, and incorporates the Luxembourg-based company Lombard International which specialises in providing life assurance based estate planning solutions; and • the Asset Management business - F&C Asset Management plc - manages funds of over £100 billion and markets a wide range of investment products both to personal and institutional customers. Friends Provident's head office is in Dorking, with significant functions inLondon, Salisbury, Exeter, Manchester and Edinburgh. Friends ProvidentInternational has offices in the Isle of Man, Hong Kong, Dubai and Singapore.Lombard has offices in Luxembourg and Switzerland. Friends Provident's total embedded value as at 31 December 2006 was £3,660million. Reported EEV underlying profit before tax was £509 million and IFRSunderlying profit before tax was £400 million in 2006. Friends Provident'sinterim results for the six months to 30 June 2007 were announced on 8 August2007. Gross assets on an IFRS basis as at 30 June 2007 were £57,395 million. The terms of the merger value the existing ordinary issued share capital ofFriends Provident at £4,141 million. 17. Merger benefits The Boards of Resolution and Friends Provident have conducted an update of theiranalysis to reconfirm the statement of estimated cost savings and financialsynergies announced on 25 July 2007. The overall level of annualised pre-tax cost savings and financial synergies isestimated to be £100 million by the end of 2010. The synergies are calculated after Resolution's existing plans forrationalisation and cost reduction have been implemented. The total pre-tax synergies comprise: £m Cost savings from integration of life and pension operations and head office 52 Asset management cost synergies from the proposed combination of F&C and 26 RAM(6) Financial synergies 22 Total 100 This statement of estimated cost savings and financial synergies should be readin conjunction with the further detail set out in Appendix II. 18. Settlement, listing and dealing It is intended that the UKLA and the London Stock Exchange will be requestedrespectively to cancel the listing of the Friends Provident Shares from theOfficial List and the trading in Friends Provident Shares on the London StockExchange's market for listed securities on the Effective Date. As soon aspossible after the Effective Date it is intended that Friends Provident bere-registered as a private limited company. Applications will be made to the UKLA and the London Stock Exchange for the NewFriends Financial Shares to be admitted to the Official List and to trading onthe London Stock Exchange's main market for listed securities. It is expectedthat listing of the New Friends Financial Shares will become effective and thatdealings for normal settlement will commence at 8.00a.m. on the date on whichthe Scheme becomes effective. Resolution Shareholders who hold their shares in certificated form will retaintheir existing certificates which will remain valid. New certificates in thename of Friends Financial will be issued when transfers to persons who wish tohold their Resolution Shares in certificated form are lodged for registration.Certificates for New Friends Financial Shares to be issued to Friends ProvidentShareholders are expected to be despatched shortly after the day on which theScheme becomes effective. Further details on settlement, listing and dealing will be included in thedocuments to be sent to Friends Provident Shareholders and ResolutionShareholders. 19. Interests in shares Save as set out below, as at close of business on 7 September 2007, being thelatest practicable date prior to the date of this announcement, save in respectof any shares held within funds under management, or by exempt principal tradersconnected to any such person, neither Resolution nor any director of Resolution,nor, so far as Resolution is aware, any party acting in concert with Resolution,owns or controls any Friends Provident Shares or any securities convertible orexchangeable into, or any rights to subscribe for or purchase, or any options topurchase any Friends Provident Shares or holds any derivatives referenced toFriends Provident Shares. As at close of business on 6 September 2007 (the latest practicable date fordetermining relevant interests prior to the date of this announcement), Citi hadan interest in 81,310 Friends Provident Shares, representing less than 0.01 percent. of Friends Provident's issued share capital. 20. Securities in issue In accordance with Rule 2.10 of the City Code, as at close of business on 7September 2007, being the latest practicable date prior to the date of thisannouncement, Friends Provident has 2,171,528,063 total authorised shares of 10pence each, of which 21,557,085 are treasury shares and 2,149,970,978 are votingshares in issue (ISIN number GB0030559776) and Resolution has 686,021,187ordinary shares of 5 pence each in issue (ISIN number GB0004342563). 21. Friends Provident Convertible Bonds In addition, Friends Provident has in issue 289,999 5.25 per cent. FriendsProvident Convertible Bonds with a nominal value of £1,000 each due 11 December2007 (ISIN number XS0159504801). The conversion price is £1.71 per FriendsProvident Share. Unless previously purchased, cancelled, redeemed or converted,the Friends Provident Convertible Bonds will be converted on or before 11December 2007. Holders of the Friends Provident Convertible Bonds have the right to convertthem into fully paid Friends Provident Shares at the applicable conversion priceunder the terms and conditions of the Friends Provident Convertible Bonds. Where Friends Provident Shares are issued to holders of the Friends ProvidentConvertible Bonds before the Scheme Record Time, they will be subject to theScheme and the relevant holders of the Friends Provident Convertible Bonds willbe able to participate in the Scheme on the same basis as other FriendsProvident Shareholders. At the Friends Provident Extraordinary General Meeting, Friends ProvidentShareholders will be asked to consider and, if thought fit, approve certainchanges to the articles of association of Friends Provident (further details ofwhich will be set out in the notice of the Friends Provident ExtraordinaryGeneral Meeting to be included in the Scheme Document). Under the proposedchanges to the articles of association of Friends Provident, Friends ProvidentShares issued upon conversion of the Friends Provident Convertible Bonds afterthe Scheme Record Time shall be immediately transferred to Friends Financial inconsideration of and conditional on the issue of 4 New Friends Financial Sharesfor every 13 Friends Provident Shares held. Fractional entitlements will bedisregarded and will not be issued. 22. Recommendations The Directors of Friends Provident, who have been so advised by JPMorganCazenove and Goldman Sachs, consider the terms of the merger to be fair andreasonable. In providing their advice to the Directors of Friends Provident,JPMorgan Cazenove and Goldman Sachs have each taken into account the commercialassessments of the Directors of Friends Provident. Goldman Sachs is deemed to be a connected party to Resolution and is thereforenot providing advice in relation to Rule 3 of the City Code to the Directors ofFriends Provident in connection with the merger. The Directors of Friends Provident consider that the merger is in the bestinterests of Friends Provident Shareholders as a whole and accordingly haveunanimously agreed to recommend that Friends Provident Shareholders vote infavour of the resolutions relating to the merger to be proposed at the FriendsProvident Extraordinary General Meeting and the Scheme Meeting as they haveirrevocably undertaken to do in respect of their own beneficial holdings of222,590 Friends Provident Shares representing, in aggregate, approximately 0.01per cent. of the existing issued share capital of Friends Provident. The Directors of Resolution, who have been so advised by Lazard and Citi,consider the terms of the merger to be fair and reasonable and that the changesto the merger structure set out in this announcement are in the best interestsof Resolution Shareholders as a whole. In providing their advice to theDirectors of Resolution, Lazard and Citi have each taken into account thecommercial assessments of the Directors of Resolution. The Directors of Resolution consider that the merger is in the best interests ofResolution Shareholders as a whole and accordingly have unanimously agreed torecommend that Resolution Shareholders vote in favour of the resolutionsrelating to the merger to be proposed at the Resolution Extraordinary GeneralMeeting as they have irrevocably undertaken to do in respect of their ownbeneficial holdings of 25,460,415 Resolution Shares representing, in aggregate,approximately 3.7 per cent. of the existing issued share capital of Resolution. 23. General The merger will be governed by English law and will be subject to thejurisdiction of the English courts. The merger will be subject to the Conditions and further terms set out hereinand in Appendix I and to the full terms and conditions which will be set out inthe Scheme Document. The Scheme Document convening the Friends Provident Extraordinary GeneralMeeting and Scheme Meeting will be sent to Friends Provident Shareholders, otherthan certain overseas shareholders, in due course. At the same time or as nearlyas practicable at the same time as these documents are sent to Friends ProvidentShareholders, the Resolution Shareholder Circular convening the ResolutionExtraordinary General Meeting will be sent to Resolution Shareholders. Inaddition, a Prospectus will be made available by Resolution in accordance withthe requirements of the Prospectus Rules. Resolution reserves the right to elect to implement the merger by making atakeover offer for the entire issued and to be issued share capital of FriendsProvident. If Resolution elects to implement the merger by means of a takeoveroffer, that offer will be implemented on the same terms, so far as applicable,as those which would apply to the Scheme. Enquiries: Friends Provident Resolution+44 (0)845 641 7832 +44 (0)20 7489 4880Sir Adrian Montague Clive CowderyPhilip Moore Mike BiggsNick Boakes Steve Riley JPMorgan Cazenove Lazard(Lead financial adviser) +44 (0)20 7187 2000+44 (0)20 7588 2828 Jon HackTim Wise Edmund DilgerConor Hillery Goldman Sachs International Citi(Joint financial adviser) +44 (0)20 7986 4000+44 (0)20 7774 1000 Chris JillingsSimon Dingemans Andrew Thompson Finsbury Temple Bar Advisory+44 (0)20 7251 3801 +44 (0)20 7002 1080James Murgatroyd Alex Child-VilliersVanessa Neill Tom AllisonAlex Simmons Notes: 1) Based on Resolution's closing share price on 7 September 2007 of 626 penceand approximately 1,348 million shares expected to be in issue in FriendsFinancial following completion. 2) Combined embedded value is based on Friends Provident and Resolution netembedded values as at 31 December 2006 without adjustment for differences inmethodology. Friends Provident embedded value includes F&C at its attributablemarket value. 3) As at 31 December 2006. 4) Resolution retains the right under the Merger Agreement to execute the mergerby way of an offer for Friends Provident rather than a scheme. 5) Of the £695 million of surplus cash used to repay existing debt, £200 millionwas used to pay down amounts outstanding under a revolving credit facility,which amount is available to be re-drawn. 6) Annualised cost synergies arising from the proposed combination of F&C andRAM comprise £26 million. These synergies may be shared with the minorityshareholders of F&C. 7) Based on underlying EEV EPS for Friends Provident and operating EEV EPS forResolution. 8) Combined new business represents the full year 2006 new business sales forFriends Provident together with new business sales of the life businessesacquired from Abbey for the half year to 31 December 2006. The conditions to, and certain further terms of, the merger are set out inAppendix I. Certain definitions and terms used in this announcement are set outin Appendix V. JPMorgan Cazenove is acting as financial adviser to Friends Provident and no oneelse in connection with the merger and will not be responsible to any otherperson for providing the protections afforded to the clients of JPMorganCazenove nor for providing advice in relation to the merger or any other matterreferred to in this announcement. Goldman Sachs is acting as financial adviser to Friends Provident and no oneelse in connection with the merger and will not be responsible to any otherperson for providing the protections afforded to the clients of Goldman Sachsnor for providing advice in relation to the merger or any other matter referredto in this announcement. Lazard is acting as financial adviser to Resolution and no one else inconnection with the merger and will not be responsible to any other person forproviding the protections afforded to the clients of Lazard nor for providingadvice in relation to the merger or any other matter referred to in thisannouncement. Citi is acting as financial adviser to Resolution and no one else in connectionwith the merger and will not be responsible to any other person for providingthe protections afforded to the clients of Citi nor for providing advice inrelation to the merger or any other matter referred to in this announcement. Overseas jurisdictions The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore any personswho are subject to the laws of any jurisdiction other than the United Kingdomshould inform themselves about, and observe, any applicable requirements. Thisannouncement has been prepared for the purposes of complying with English law,the City Code and the Listing Rules and the information disclosed may not be thesame as that which would have been disclosed if this announcement had beenprepared in accordance with the laws and regulations of any jurisdiction outsideof England. This announcement is not intended to, and does not constitute, or form part of,an offer to sell, purchase or exchange or the solicitation of an offer to sell,purchase or exchange any securities or the solicitation of any vote or approvalin any jurisdiction. This announcement does not constitute a prospectus or aprospectus equivalent document. Shareholders of Friends Provident and Resolutionare advised to read carefully the formal documentation in relation to the mergeronce it has been despatched. The proposals relating to the merger will be madesolely through the Scheme Document, which will contain the full terms andconditions of the merger, including details of how to vote with respect to theScheme. Any acceptance or other response to the proposals should be made only onthe basis of the information in the Scheme Document. In particular, this announcement is not an offer of securities for sale in theUnited States and the New Friends Financial Shares, which will be issued inconnection with the merger, have not been, and will not be, registered under theUS Securities Act of 1933 as amended (the "US Securities Act") or under thesecurities law of any state, district or other jurisdiction of the UnitedStates, Australia, Canada or Japan and no regulatory clearance in respect of theNew Friends Financial Shares has been, or will be, applied for in anyjurisdiction other than the UK. The New Friends Financial Shares may not beoffered, sold, or, delivered, directly or indirectly, in, into or from theUnited States absent registration under the US Securities Act or an exemptionfrom registration. The New Friends Financial Shares may not be offered, sold,resold, delivered or distributed, directly or indirectly, in, into or fromCanada, Australia or Japan or to, or for the account or benefit of, any residentof Australia, Canada or Japan absent an exemption from registration or anexemption under relevant securities law. It is expected that the New FriendsFinancial Shares will be issued in reliance upon the exemption from theregistration requirements of the US Securities Act provided by Section 3(a)(10)thereof. Under applicable US securities laws, persons (whether or not USpersons) who are or will be "affiliates" within the meaning of the US SecuritiesAct of Friends Provident or Resolution prior to, or of Friends Financial after,the Effective Date will be subject to certain transfer restrictions relating tothe New Friends Financial Shares received in connection with the Scheme. Notice to US Investors: The merger relates to the shares of a UK company and isproposed to be made by means of a scheme of arrangement provided for under thelaws of England and Wales. The merger is subject to the disclosure requirementsand practices applicable in the United Kingdom to schemes of arrangement, whichdiffer from the disclosure and other requirements of US securities laws.Financial information included in the relevant documentation will have beenprepared in accordance with accounting standards applicable in the UnitedKingdom that may not be comparable to the financial statements of US companies. If the merger is implemented by way of an offer, it will be made in accordancewith the procedural and filing requirements of the US securities laws, to theextent applicable. If the merger is implemented by way of an offer, the NewFriends Financial Shares to be issued in connection with such offer will not beregistered under the US Securities Act or under the securities laws of anystate, district or other jurisdiction of the United States and may not beoffered, sold or delivered, directly or indirectly, in the United States exceptpursuant to an applicable exemption from, or in a transaction not subject to,the registration requirements of the US Securities Act or such other securitieslaws. Resolution does not intend to register any such New Friends FinancialShares or part thereof in the United States or to conduct a public offering ofthe New Friends Financial Shares in the United States. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Friends Provident or Resolution all "dealings" in any"relevant securities" of that company (including by means of an option inrespect of, or a derivative referenced to, any such "relevant securities") mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the date on which any offer becomes, or is declared,unconditional as to acceptances (or, if implemented by a scheme of arrangement,such scheme becomes effective), lapses or is otherwise withdrawn or on which the"offer period" otherwise ends. If two or more persons act together pursuant toan agreement or understanding, whether formal or informal, to acquire an"interest" in "relevant securities" of Friends Provident or Resolution, theywill be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Resolution by Friends Provident or of Friends Provident byResolution, or by any of their respective "associates", must be disclosed by nolater than 12.00 noon (London time) on the London business day following thedate of the relevant transaction. A disclosure table, giving details of thecompanies in whose "relevant securities" "dealings" should be disclosed, and thenumber of such securities in issue, can be found on the Takeover Panel's websiteat www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Takeover Panel's website. If you are in any doubt as to whether or notyou are required to disclose a "dealing" under Rule 8, you should consult theTakeover Panel. Forward looking statements This announcement may contain forward looking statements that are based oncurrent expectations or beliefs, as well as assumptions about future events.Generally, the words "will", "may", "should", "continue", "believes", "expects","intends", "anticipates" or similar expressions identify forward-lookingstatements. These statements are based on the current expectations of managementand are naturally subject to risks, uncertainties and changes in circumstances.Undue reliance should not be placed on any such statements because, by theirvery nature, they are subject to known and unknown risks and uncertainties andcan be affected by other factors that could cause actual results, andmanagement's plans and objectives, to differ materially from those expressed orimplied in the forward looking statements. There are several factors which couldcause actual results to differ materially from those expressed or implied inforward looking statements. Among the factors that could cause actual results todiffer materially from those described in the forward looking statements are theability to combine successfully the businesses of Friends Provident andResolution and to realise expected synergies from that combination, changes inthe global, political, economic, business, competitive, market and regulatoryforces, future exchange and interest rates, changes in tax rates and futurebusiness combinations or dispositions. Neither Friends Provident nor Resolutionundertakes any obligation (except as required by the Listing Rules and theDisclosure and Transparency Rules and the rules of the London Stock Exchange) torevise or update any forward looking statement contained in this announcement,regardless of whether that statement is affected as a result of new information,future events or otherwise. Appendix I Conditions to and certain further terms of the merger The merger will be conditional upon the Scheme becoming unconditional andeffective by 31 March 2008 or such later date as Resolution and FriendsProvident may agree and (if required) the Court may allow. 1 The Scheme will be subject to the following conditions: 1.1 approval by a majority in number representing not less thanthree-fourths in value of the holders of Scheme Shares, present and voting,whether in person or by proxy, at the Court Meeting (or any adjournment thereof)and such approval not subsequently being revoked; 1.2 the resolutions required to implement the Scheme being passed atthe Friends Provident Extraordinary General Meeting (or any adjournmentthereof); and 1.3 the sanction of the Scheme and the confirmation of the CapitalReduction by the Court (in either case with or without modification (but subjectto such modification being acceptable to Friends Provident and Resolution)),office copies of the Court Order and of the minute of reduction being deliveredto the Registrar of Companies and, in relation to the Capital Reduction, beingregistered by him. 2 The merger will be conditional upon the passing at theResolution Extraordinary General Meeting (or any adjournment thereof) of suchresolution or resolutions as are necessary to approve, implement and effect themerger and the acquisition of Friends Provident Shares pursuant to the merger orotherwise (as such resolutions may be set out in the Resolution ShareholderCircular, including a resolution or resolutions to increase the share capital ofResolution and authorise the creation and allotment of the New Friends FinancialShares) and such resolutions not subsequently being revoked. 3 Friends Provident and Resolution have agreed that, subjectto the provisions of paragraph 5 of this Appendix I below and the requirementsof the Panel in accordance with the City Code, the Scheme will also beconditional upon, and accordingly the necessary actions to effect the mergerwill only be taken on, the satisfaction, or where relevant, waiver of thefollowing Conditions: 3.1 all necessary and/or appropriate merger control clearances andapprovals from Competition Authorities being obtained in terms reasonablysatisfactory to Friends Provident and Resolution and all waiting or other timeperiods (including any extensions thereof) having expired, lapsed or terminated; 3.2 Admission becoming effective in accordance with the ListingRules and the admission of such shares to trading becoming effective inaccordance with the Admission and Disclosure Standards of the London StockExchange or, if Friends Provident and Resolution so determine, and subject tothe consent of the Panel, the UKLA agreeing to admit such shares to the OfficialList and the London Stock Exchange agreeing to admit such shares to tradingsubject only to (i) the allotment of such shares and/or (ii) the merger becomingEffective; 3.3 except as (i) publicly announced in accordance with the ListingRules or Disclosure and Transparency Rules by Friends Provident or Resolutionprior to 25 July 2007, (ii) disclosed in the annual report and accounts ofResolution for the financial year ended 31 December 2006, (iii) disclosed in theannual report and accounts of Friends Provident for the financial year ended 31December 2006, or (iv) fairly disclosed by or on behalf of Friends Provident orResolution to the other prior to 25 July 2007, there being no provision of anyagreement, arrangement, licence, permit or other instrument to which any memberof the wider Friends Provident Group or the wider Resolution Group is a party orby or to which any such member or any of its assets may be bound, entitled orsubject, which in consequence of the merger or because of a change in thecontrol or management of Friends Provident or Resolution or otherwise, would ormight reasonably be expected to result (in each case to an extent which ismaterial in the context of the wider Resolution Group as a whole or the widerFriends Provident Group as a whole) in: 3.3.1 any moneys borrowed by or any other indebtedness (actual orcontingent) of, or grant available to any such member, being or becomingrepayable or capable of being declared repayable immediately or earlier thantheir or its stated maturity date or repayment date or the ability of any suchmember to borrow moneys or incur any indebtedness being withdrawn or inhibitedor being capable of becoming or being withdrawn or inhibited; 3.3.2 any such agreement, arrangement, licence, permit or instrumentor the rights, liabilities, obligations or interests of any such memberthereunder being terminated or modified or affected or any obligation orliability arising or any action being taken thereunder; 3.3.3 any assets or interests of any such member being or falling tobe disposed of or charged or any right arising under which any such asset orinterest could be required to be disposed of or charged otherwise than in theordinary course of business; 3.3.4 the creation or enforcement of any mortgage, charge or othersecurity interest over the whole or any part of the business, property or assetsof any such member or any such mortgages, charge or other security interest(whenever arising or having arisen) becoming enforceable; 3.3.5 the rights, liabilities, obligations or interests of any suchmember in or to, or the business of any such member with, any person, firm orbody (or any arrangement or arrangements relating to any such interest orbusiness) being terminated or adversely modified or affected; 3.3.6 the value of any such member or its financial or tradingposition being prejudiced or adversely affected; 3.3.7 any such member ceasing to be able to carry on business underany name under which it presently does so; or 3.3.8 the creation of any liability, actual or contingent, by any suchmember, and no event having occurred which, under any provision of any agreement,arrangement, licence, permit or other instrument to which any member of thewider Friends Provident Group or the wider Resolution Group is a party or by orto which any such member or any of its assets may be bound, entitled or subject,would result in or would reasonably be expected to result in any of the eventsor circumstances as are referred to in sub-paragraphs 3.3.1 to 3.3.8 of thisparagraph 3.3 (in each case to an extent which is material in the context of thewider Friends Provident Group as a whole or the wider Resolution Group as awhole); 3.4 no government or governmental, quasi-governmental,supranational, statutory, regulatory, environmental or investigative body,court, trade agency, association, institution or any other body or person(whether or not a governmental or similar body or person) whatsoever in anyjurisdiction (each a "Third Party") having decided to take, institute, implementor threaten any action, proceeding, suit, investigation, enquiry or reference,or enacted or made any statute, regulation, decision or order, or having takenany other steps which would or would reasonably be expected to (in each case toan extent which is material in the context of the wider Friends Provident Groupas a whole or the wider Resolution Group as a whole): 3.4.1 require, prevent or delay the divestiture, or alter the termsenvisaged or agreed for any proposed divestiture by any member of the widerFriends Provident Group or any member of the wider Resolution Group of all orany portion of their respective businesses, assets or property or impose anymaterial limitation on the ability of any of them to conduct their respectivebusinesses (or any of them) or to own any of their respective assets orproperties or any material part thereof; 3.4.2 impose any limitation on, or result in a delay in, the abilityof any member of the wider Friends Provident Group or the wider Resolution Groupdirectly or indirectly to acquire or to hold or to exercise effectively anyrights of ownership in respect of shares or loans or securities convertible intoshares or any other securities (or the equivalent) in any member of the widerResolution Group or the wider Friends Provident Group or to exercise managementcontrol over any such member; 3.4.3 otherwise adversely affect the business, assets or profits ofany member of the wider Friends Provident Group or of any member of the widerResolution Group; 3.4.4 make the merger or its implementation or the acquisition orproposed acquisition by Friends Provident or any member of the wider FriendsProvident of any shares or other securities in, or control of Resolution void,illegal and/or unenforceable under the laws of any jurisdiction, or otherwisedirectly or indirectly, restrain, restrict, prohibit, delay or otherwisematerially interfere with the same, or impose additional conditions orobligations with respect thereto, or otherwise challenge or materially interferetherewith; 3.4.5 require any member of the wider Friends Provident Group or thewider Resolution Group to offer to acquire any shares or other securities (orthe equivalent) or interest in any member of the wider Resolution Group or thewider Friends Provident Group owned by any third party; or 3.4.6 result in any member of the wider Friends Provident Group or thewider Resolution Group ceasing to be able to carry on business under any nameunder which it presently does so, and all applicable waiting and other time periods during which any such ThirdParty could institute, implement or threaten any action, proceeding, suit,investigation, enquiry or reference or any other step under the laws of anyjurisdiction in respect of the merger having expired, lapsed or been terminated; 3.5 all necessary filings or applications having been made inconnection with the merger and all applicable waiting periods under anyapplicable legislation or regulations having expired and all statutory orregulatory obligations in any jurisdiction having been complied with inconnection with the merger and all authorisations, orders, recognitions, grants,consents, licences, confirmations, clearances, permissions and approvals(collectively "Consents") reasonably deemed necessary and/or appropriate for orin respect of, the merger having been obtained in terms and in a form reasonablysatisfactory to Friends Provident and Resolution from all appropriate ThirdParties or persons with whom any member of the wider Friends Provident Group orthe wider Resolution Group has entered into contractual arrangements, and allsuch Consents together with all material Consents reasonably necessary and/orappropriate to carry on the business of any member of the wider FriendsProvident Group or the wider Resolution Group remaining in full force and effectand all filings, notifications or applications necessary and/or appropriate forsuch purpose having been made and there being no notice or intimation of anyintention to revoke or not to renew any of the same at the time at which themerger otherwise becomes Effective and all necessary and/or appropriatestatutory or regulatory obligations in any jurisdiction having been compliedwith in all material respects; 3.6 except as (i) publicly announced in accordance with the ListingRules or Disclosure and Transparency Rules by Friends Provident or Resolutionprior to 25 July 2007, (ii) disclosed in the annual report and accounts ofResolution for the financial year ended 31 December 2006, (iii) disclosed in theannual report and accounts of Friends Provident for the financial year ended 31December 2006, or (iv) fairly disclosed by or on behalf of Friends Provident orResolution to the other prior to 25 July 2007, no member of the wider ResolutionGroup having, since 31 December 2006, and no member of the wider FriendsProvident Group having, since 31 December 2006: 3.6.1 save as between Friends Provident and wholly-owned subsidiariesof Friends Provident, or as between Resolution and wholly-owned subsidiaries ofResolution, or for Friends Provident Shares issued pursuant to the exercise ofoptions granted under the Friends Provident Share Schemes, or for ResolutionShares issued pursuant to the exercise of options granted under the ResolutionShare Schemes, issued, authorised or proposed the issue of additional shares ofany class; 3.6.2 save as between Friends Provident and wholly-owned subsidiariesof Friends Provident, or as between Resolution and wholly-owned subsidiaries ofResolution, or for the grant of options under the Friends Provident ShareSchemes or the Resolution Share Schemes, issued or agreed to issue, authorisedor proposed the issue of securities convertible or exchangeable into shares ofany class or rights, warrants or options to subscribe for, or acquire, any suchshares or convertible securities; 3.6.3 other than to another member of the Friends Provident Group orthe Resolution Group and save as provided for in respect of Resolution orFriends Provident in this announcement, recommended, declared, paid or made orproposed to recommend, declare, pay or make any bonus, dividend or otherdistribution whether payable in cash or otherwise; 3.6.4 save pursuant to the merger, merged or demerged with any bodycorporate or acquired or disposed of or transferred, mortgaged or charged orcreated any security interest over any assets or any right, title or interest inany asset (including shares and trade investments) or authorised or proposed orannounced any intention to propose any merger, demerger, acquisition ordisposal, transfer, mortgage, charge or security interest which, in any case, isnot in the ordinary course of business and is material in the context of thewider Friends Provident Group taken as a whole or the wider Resolution Grouptaken as a whole; 3.6.5 save for intra-Friends Provident Group or intra-Resolution Grouptransactions, made or authorised or proposed or announced an intention topropose any change in its loan capital; 3.6.6 issued, authorised or proposed the issue of any debentures or(save for intra-Friends Provident Group or intra-Resolution Group transactions),save in the ordinary course of business, incurred or increased any indebtednessor become subject to any guarantee or contingent liability, which in any case ismaterial in the context of the wider Friends Provident Group taken as a whole orthe wider Resolution Group taken as a whole; 3.6.7 purchased, redeemed or repaid or announced any proposal topurchase, redeem or repay any of its own shares or other securities or reducedor, save in respect to the matters mentioned in sub-paragraph 3.6.1 above, madeany other change to any part of its share capital; 3.6.8 implemented, or authorised, proposed or announced its intentionto implement, any reconstruction, amalgamation, scheme, commitment or othertransaction or arrangement which, in any case, is not in the ordinary course ofbusiness and is material in the context of the wider Friends Provident Grouptaken as a whole or the wider Resolution Group taken as a whole, or entered intoor changed the terms of any contract with any director or senior executive; 3.6.9 entered into or varied or authorised, proposed or announced itsintention to enter into or vary any contract, transaction or commitment (whetherin respect of capital expenditure or otherwise) which is of a long term, onerousor unusual nature or magnitude or which is or would be reasonably likely to bematerially restrictive on the businesses of the wider Resolution Group or thewider Friends Provident Group taken as a whole or which involves or couldinvolve an obligation of such a nature or magnitude or which is other than inthe ordinary course of business, and in each such case is or would be reasonablylikely to be material in the context of the wider Resolution Group taken as awhole or the wider Friends Provident Group taken as a whole; 3.6.10 (other than in respect of a member which is dormant and wassolvent at the relevant time) taken any corporate action or had any legalproceedings started or threatened against it for its winding-up, dissolution orreorganisation or for the appointment of a receiver, administrative receiver,administrator, trustee or similar officer of all or any of its assets orrevenues or any analogous proceedings in any jurisdiction or had any such personappointed; 3.6.11 been unable, or admitted in writing that it is unable, to pay itsdebts or having stopped or suspended (or threatened to stop or suspend) paymentof its debts generally or ceased or threatened to cease carrying on all or asubstantial part of its business; 3.6.12 made or agreed or consented to any material change to the terms orthe trust deeds and rules constituting any pension schemes established for itsdirectors and/or employees and/or their dependants or to the benefits whichaccrue, or to the pensions which are payable, thereunder, or to the basis onwhich qualification for or accrual or entitlement to such benefits or pensionsare calculated or determined or to the basis on which such liabilities of suchpension schemes are funded or calculated, or agreed or consented to any changeto the trustees which is material and adverse in the context of the wider HoldCoGroup or the wider SchemeCo Group; 3.6.13 entered into any contract, transaction or arrangement which wouldbe restrictive on the business of any member of the wider Resolution Group orthe wider Friends Provident Group other than to a nature and extent which isnormal in the context of the business concerned, to an extent which is or wouldbe reasonably likely to be material in the context of the wider Resolution Grouptaken as a whole or wider Friends Provident Group taken as a whole; 3.6.14 waived or compromised any claim otherwise than in the ordinarycourse of business and in any case which is or would be reasonably likely to bematerial in the context of the wider Friends Provident Group taken as a whole orthe wider Resolution Group taken as a whole; or 3.6.15 entered into any contract, commitment, arrangement or agreementotherwise than in the ordinary course of business or passed any resolution ormade any offer (which remains open for acceptance) with respect to or announcedany intention to, or to propose to, effect any of the transactions, matters orevents referred to in this condition; 3.7 except as (i) publicly announced in accordance with the ListingRules or Disclosure and Transparency Rules by Friends Provident or Resolutionprior to 25 July 2007, (ii) disclosed in the annual report and accounts ofResolution for the financial year ended 31 December 2006, (iii) disclosed in theannual report and accounts of Friends Provident for the financial year ended 31December 2006, or (iv) fairly disclosed by or on behalf of Friends Provident orResolution to the other prior to 25 July 2007: 3.7.1 no material adverse change or deterioration having occurred inthe business, assets, financial or trading position or profits of the widerFriends Provident Group or the wider Resolution Group taken as a whole; 3.7.2 no litigation, arbitration proceedings, prosecution or otherlegal proceedings to which any member of the wider Friends Provident Group orthe wider Resolution Group is or may become a party (whether as a plaintiff,defendant or otherwise) and no inquiry or investigation by any Third Partyagainst or in respect of any member of the wider Friends Provident Group or thewider Resolution Group having been instituted, announced or threatened by oragainst or remaining outstanding in respect of any member of the wider FriendsProvident or the wider Resolution Group which in any such case would have orwould reasonably be expected to have a material adverse effect on the widerFriends Provident Group or the wider Resolution Group as a whole; 3.7.3 no contingent or other liability having arisen or beenidentified which would have or would reasonably be expected to have a materialadverse effect on the wider Friends Provident Group or the wider ResolutionGroup as a whole; or 3.7.4 no steps having been taken which are likely to result in thewithdrawal, cancellation, termination or modification of any licence held by anymember of the wider Friends Provident Group or the wider Resolution Group whichis necessary for the proper carrying on of its business and the absence of whichin any case would have or would reasonably be expected to have a materialadverse effect on the wider Friends Provident Group or the wider ResolutionGroup as a whole; 3.8 save as (i) publicly announced in accordance with the ListingRules or Disclosure and Transparency Rules by Friends Provident or Resolutionprior to 25 July 2007, (ii) disclosed in the annual report and accounts ofResolution for the financial year ended 31 December 2006, or (iii) disclosed inthe annual report and accounts of Friends Provident for the financial year ended31 December 2006, Friends Provident not having discovered in relation to thewider Resolution Group and Resolution not having discovered in relation to thewider Friends Provident Group: 3.8.1 that any financial, business or other information concerning thewider Friends Provident Group or the wider Resolution Group as contained in theinformation publicly disclosed or disclosed to Friends Provident at any time byor on behalf of any member of the wider Resolution Group, or to Resolution atany time by or on behalf of any member of the wider Friends Provident Group, ismaterially misleading, contains a material misrepresentation of fact or omits tostate a fact necessary to make that information not materially misleading; or 3.8.2 that any member of the wider Friends Provident Group or thewider Resolution Group is subject to any liability (contingent or otherwisewhich is material in the context of the Friends Provident Group or theResolution Group as a whole) which is not disclosed in the annual report andaccounts of Resolution for the year ended 31 December 2006 or of FriendsProvident for the year ended 31 December 2006. 4 For the purposes of these conditions the "wider ResolutionGroup", "wider Friends Provident Group" "subsidiary undertaking", "associatedundertaking", "undertaking" and "significant interest" are defined in thedefinitions in Appendix 3. 5 Subject to the requirements of the Panel in accordance withthe City Code: 5.1 Friends Provident reserves the right to waive, in whole or inpart, all or any of the above conditions, except the conditions in paragraphs 1,2 and 3.2, so far as they relate to Resolution, the wider Resolution Group, orany part thereof; and 5.2 Resolution reserves the right to waive, in whole or in part, allor any of the above conditions, except the conditions in paragraphs 1, 2 and3.2, so far as they relate to Friends Provident, the wider Friends ProvidentGroup, or any part thereof. 6 Either party may terminate the Merger Agreement if at anytime prior to the conclusion of the Court Hearing any of these Conditionsbecomes incapable of satisfaction or is invoked by that party. 7 The merger will not proceed if, after the date of thisannouncement and before the Court Hearing, all necessary and/or appropriatemerger control clearances and approvals from Competition authorities beingobtained in terms reasonably satisfactory to Friends Provident and Resolutionand all waiting or other time periods (including any extensions thereof) haveexpired, lapsed or terminated. 8 If Resolution is required by the Panel to make an offer forFriends Provident Shares under the provisions of Rule 9 of the City Code,Resolution may make such alterations to any of the above conditions as arenecessary to comply with the provisions of that Rule. 9 Resolution may decide to implement the merger by way of anoffer. In such event the merger will be implemented on the same terms (subjectto appropriate amendments including (without limitation) an acceptance conditionset at 50 per cent. of the shares to which the merger relates or such otherpercentage as may be required by the Panel and subject to availability of anexemption from the registration requirements of the US Securities Act and suchamendments that Resolution deems necessary or appropriate in respect of USSecurities laws), so far as applicable, as those which would apply to theimplementation of the merger by means of the Scheme. 10 The merger will be governed by English Law and be subject tothe jurisdiction of the English Courts, and to the Conditions set out in thisannouncement and in the formal Scheme Document. 11 This announcement is not an offer of securities for sale in theUnited States and the New Friends Financial Shares, which will be issued inconnection with the merger, have not been, and will not be, registered under theUS Securities Act or under the securities law of any state, district or otherjurisdiction of the United States, Australia, Canada or Japan and no regulatoryclearance in respect of the New Friends Financial Shares has been, or will be,applied for in any jurisdiction other than the UK. The New Friends FinancialShares may not be offered or sold in the United States absent registration underthe US Securities Act or an exemption from registration. It is expected that theNew Friends Financial Shares will be issued in reliance upon the exemption fromthe registration requirements of the US Securities Act provided by Section 3(a)(10) thereof. Under applicable US securities laws, persons (whether or not USpersons) who are or will be "affiliates" (for the purposes of the US SecuritiesAct) of Friends Provident or Resolution prior to, or of Resolution after, theEffective Date will be subject to certain transfer restrictions relating to theNew Friends Financial Shares received in connection with the merger. Appendix II Merger benefits - explanation of sources of costs savings and financial synergies Sources of Cost Savings Life company and head office cost synergies Combining group functions Synergies will be achieved through creating a single group management structureand head office function, specifically: • creation of a single board and executive management team; • combination of group functions and removal of duplication in areas including group finance, treasury, tax, corporate development and legal; • rationalisation of head office locations; and • reduction in regulatory fees. Combining finance and governance functions Synergies will be achieved through centralising life company functions byestablishing centres of excellence, optimising finance and actuarial operations,creating common management information and adopting single risk, compliance andinternal audit functions. Reviewing operational functionality and processes Cost synergies to be achieved through rationalising the governance of UKoperational activity, optimising the target operating model and combining andrationalising supporting functions including human resources, training andpayroll. Integrating the Resolution protection new business unit into Friends Provident To be achieved through rationalising new business pricing, distribution,processing and the integration of marketing management. In addition to the above savings, similar principles of combining management andoptimising back office functions apply to the international operations in theIsle of Man. Asset Management cost synergies The synergies of £26 million will be achieved through the proposed combinationof Resolution Asset Management and F&C, including: • creating a single management structure; • merging the investment desks; • rationalising sales and marketing activities and moving to a single brand; and • integrating back office functions. Financial synergies The increase in the value of new business which can be achieved from writingfuture new Resolution protection business in an existing Friends Providentcompany will deliver financial synergies. The excess income available in FriendsProvident life companies to relieve expenses which otherwise cannot be relievedin Resolution life companies will directly improve the value of new businessbefore tax. Cost of achieving synergies The overall cost of achieving these savings and synergies is expected to be £120million, to be incurred during the period of realisation of the savings andsynergies, being by the end of 2010. £46 million of these costs relate to assetmanagement. General Basis of Preparation The estimate of total cost savings and financial synergies has been reported onunder the City Code on Takeovers and Mergers by Ernst & Young and Resolution'sfinancial advisers (Citi and Lazard) and by KPMG and Friends Provident'sfinancial advisers (JPMorgan Cazenove and Goldman Sachs). Cost synergies Baseline cost numbers were agreed to the underlying business plans of bothparties to the merger and, for the synergies arising from the combination ofgroup functions, organisation charts and role profiles were reviewed. In determining the cost synergies, the size of roles and level of experiencerequired to perform these roles effectively post merger, received dueconsideration and formed part of discussions involving Resolution and FriendsProvident management. Where appropriate, assumptions have been made regarding investment in systemsand processes and the consequent synergies. The cost of such investment has beenincluded in the £120 million total implementation cost. Existing initiatives inprogress in each party to the Merger also have the potential to generatesynergies and this has been taken into account in arriving at total synergies of£100 million. Asset management synergies The 2007 forecast cost base of Resolution Asset Management was reviewed togetherwith organisational and functional structures having confirmed that actual costsare being incurred in line with business plans. The level of anticipatedsynergies has been reviewed and assessed on the assumption that RAM will becombined with F&C on terms to be agreed with the F&C Board and that F&C willcontinue to be separately listed and majority owned by the combined Group. Thesynergies arising may be shared with the minority shareholders of F&C. Financial synergies The financial synergies have been determined by Resolution on the basis thatexcess taxable income exists in Friends Provident such that expenses in respectof Resolution new business written in Friends Provident life companies, ratherthan Resolution, which would otherwise not be available for relief from tax willbecome relievable. The relative tax positions of each party to the Merger hasbeen discussed and agreed by management. Notes to this Appendix (i)The estimated cost savings in the announcement should notbe interpreted as meaning that the earnings per share of the combined Group forthe current or future financial years will necessarily match or exceed thehistorical published earnings per share of Resolution. (ii)Due to the scale of the Combined Group, there may beadditional changes to the Combined Group's operations. As a result, and the factthat the changes relate to the future, the resulting cost savings may bematerially greater or less than those estimated. (iii)In arriving at the estimate of cost savings set out in thisAppendix, the Directors of Friends Provident and of Resolution have assumed thatthere will be no significant impact on the business of the Combined Grouparising from any decisions made by competition authorities or regulatory bodies. The Directors 7 September 2007Resolution plcJuxon House Ernst & Young LLP100 St Paul's Churchyard 1 More London PlaceLondon London SE1 2AFEC4M 8BU Lazard & Co., Limited50 Stratton StreetLondonW1J 8LL Citigroup Global Markets LimitedCitigroup CentreCanada SquareCanary WharfLondonE14 5LB Dear Sirs PROPOSED MERGER BETWEEN RESOLUTION PLC AND FRIENDS PROVIDENT PLC (the "Merger") We refer to the statement regarding the Statement of Merger Benefits ("theStatement") made by Resolution plc "Resolution" and the bases of preparationthereof set out in the announcement to be issued by Resolution dated 10September 2007 (the "Document") in connection with the Merger. Responsibility The Statement is the sole responsibility of the directors of Resolution ("theDirectors"). It is our responsibility and that of Lazard & Co., Limited("Lazard") and Citigroup Global Markets Limited ("Citi", together with Lazard,"the Financial Advisers"), to form respective opinions, as required by Note 8(b)to Rule 19.1 of the City Code on Takeovers and Mergers ("the Code"), as towhether the Statement has been made by the Directors with due care andconsideration. Basis of opinion We conducted our work in accordance with the Statements of Investment CircularReporting Standards issued by the Auditing Practices Board. We have reviewed the relevant bases of belief (including sources of information)and calculations underlying the Statement. We have discussed the Statementtogether with the relevant bases of belief (including sources of information)with the Directors and those officers and employees of Resolution who developedthe underlying plans and with the Financial Advisers. Our work did not involveany independent examinations of any of the financial or other informationunderlying the Statement. We have also considered the letter dated 10 September2007 from the Financial Advisers to the Directors on the same matter. We do not express any opinion as to the achievability of the cost savingsidentified by the Directors. Opinion In our opinion, based on the foregoing, the Statement by Resolution has beenmade with due care and consideration, in the form and context in which it wasmade. Our work in connection with the Statement has been undertaken solely for thepurposes of reporting under Note 8(b) to Rule 19.1 of the Code to the Directorsand the Financial Advisers. We accept no responsibility to Friends Provident plcor its shareholders or any other person (other than the Directors and theFinancial Advisers) in respect of, arising out of or in connection with thatwork. Yours faithfully Ernst & Young LLP KPMG Audit Plc Tel +44 (0) 20 7311 1000Canary Wharf (9th Floor) Fax +44 (0) 20 7311 52621 Canada Square DX 38050 BlackfriarsLondon E14 5AGUnited Kingdom Private & Confidential The DirectorsFriends Provident PlcPixham EndDorkingSurreyRH4 1QA JP Morgan Cazenove Limited20 MoorgateLondonEC2R 6DA Goldman Sachs InternationalPeterborough Court133 Fleet StreetLondonEC4A 2BB 10 September 2007 Dear Sirs Friends Provident Plc We refer to the statement of the estimated cost savings and financial synergiesmade by the directors of Friends Provident plc ('the Directors') set out insection 17 of the announcement dated 10 September (the "Statement"). The Statement has been made in the context of the disclosures in Appendix II ofthe announcement setting out, inter alia, the basis of the Directors' belief(including sources of information) supporting the Statement and their analysisand explanation of the underlying constituent elements. This report is required by Note 8(b) to Rule 19.1 of the City Code on Takeoversand Mergers ('the City Code') and is given for the purpose of complying withthat requirement and for no other purpose. Responsibility The Statement is the responsibility of the Directors. It is our responsibilityand that of JPMorgan Cazenove Limited and Goldman Sachs International to formour respective opinions, as required by Note 8(b) to Rule 19.1 of the City Codeas to whether the Statement has been made by the Directors with due care andconsideration. Save for any responsibility which we may have to those persons to whom thisreport is expressly addressed, to the fullest extent permitted by law we do notassume any responsibility and will not accept any liability to any other personfor any loss suffered by any such other person as a result of, arising out of,or in connection with this report. Basis of opinion We have discussed the Statement, together with the relevant bases of belief(including the assumptions and sources of information summarised in Appendix IIto the Statement), with the Directors and with JPMorgan Cazenove Limited andGoldman Sachs International. We have also considered the letter dated 10September 2007 from JPMorgan Cazenove Limited and Goldman Sachs International tothe Directors on the same matter. Our work did not involve any independentexamination of any of the financial or other information underlying theStatement. We conducted our work in accordance with Standards for InvestmentReporting issued by the Auditing Practices Board of the United Kingdom. We do not express any opinion as to the achievability of the benefits identifiedby the Directors in the Statement. The Statement is subject to uncertainty asdescribed in Appendix II to the Statement. Because of the significant changes inthe enlarged group's operations expected to flow from the merger and because theStatement relates to the future, the actual merger benefits achieved are likelyto be different from those anticipated in the Statement and the differences maybe material. Opinion On the basis of the foregoing, we report that in our opinion the Directors havemade the Statement, in the form and context in which it is made, with due careand consideration. Yours faithfully KPMG Audit Plc Citigroup Global Markets Limited Lazard & Co., LimitedCitigroup Centre 50 Stratton StreetCanada Square London W1J 8LLCanary WharfLondon E14 5LB 10 September 2007 The DirectorsResolution plcJuxon House100 St Paul's ChurchyardLondon EC4M 8BU Dear Sirs, Resolution plc merger with Friends Provident plc Citigroup Global Markets Limited and Lazard & Co., Limited (together, "we")refer to the statement of the estimated cost savings and financial synergiesmade by Resolution plc set out in section 17 of the announcement dated 10September 2007 (the "Statement"), and the bases of preparation thereof set outin Appendix II and the notes thereto for which the Directors of Resolution plcare solely responsible. We have discussed the Statement, together with the relevant bases of belief(including the assumptions and sources of information summarised in Appendix IIto the Announcement), with the Directors of Resolution plc and those officersand employees of Resolution plc and its subsidiaries who developed theunderlying plans. The Statement is subject to uncertainty as described inAppendix II to the Statement and our work did not involve any independentexamination of any of the financial or other information underlying theStatement. We have relied upon the financial and other information reviewed by us beingaccurate and complete (in each case in all material respects) and have assumedsuch accuracy and completeness for the purposes of this letter. In giving theconfirmation set out in this letter, we have reviewed the work carried out byErnst & Young LLP and have discussed with them the conclusions stated in theirletter dated 7 September 2007. We do not express any opinion as to the achievability of the cost savingsestimated by Resolution plc. On the bases of the foregoing, each of us considers that the Statement has beenmade with due care and consideration in the form and context in which it ismade. This letter is provided pursuant to our respective engagement letters withResolution plc solely to the Directors of Resolution plc for the purposes ofreporting to Resolution plc under Note 8(b) to Rule 19.1 of the City Code onTakeovers and Mergers and for no other purpose. We accept no responsibility toFriends Provident plc or to its or Resolution plc's shareholders or any otherperson, other than the Directors of Resolution plc, in respect of the contentsof, or any matter arising out of or in connection with, this letter. Yours faithfully, For Citigroup Global Markets Limited For Lazard & Co., Limited Chris Jillings Jon HackManaging Director Managing Director JPMorgan Cazenove Limited Goldman Sachs International20 Moorgate Peterborough CourtLondon 133 Fleet StreetEC4A 2BB EC2R 6DA London 10 September 2007 The DirectorsFriends Provident plcPixham EndDorking, SurreyEngland RH4 1QA Dear Sirs, Resolution plc merger with Friends Provident plc JPMorgan Cazenove Limited and Goldman Sachs International (together, "we") referto the statement of the estimated cost savings and financial synergies made byFriends Provident plc set out in section 17 of the announcement dated 10September (the "Statement"), and the bases of preparation thereof set out inAppendix II and the notes thereto for which the Directors of Friends Providentplc are solely responsible. We have discussed the Statement, together with the relevant bases of belief(including the assumptions and sources of information summarised in AppendixII), with the Directors of Friends Provident plc and those officers andemployees of Friends Provident plc and its subsidiaries who developed theunderlying plans. The Statement is subject to uncertainty as described inAppendix II and our work did not involve any independent examination of any ofthe financial or other information underlying the Statement. We have relied upon the accuracy and completeness of all the financial and otherinformation reviewed by us and have assumed such accuracy and completeness forthe purposes of this letter. In giving the confirmation set out in this letter,we have reviewed the work carried out by KPMG Audit plc and have discussed withthem the conclusions stated in their letter dated 10 September 2007. We do not express any opinion as to the achievability of the cost savings andfinancial synergies estimated by Friends Provident plc. On the bases of the foregoing, each of us considers that the Statement has beenmade with due care and consideration in the form and context in which it ismade. This letter is provided pursuant to our respective engagement letters withFriends Provident plc solely to the Directors of Friends Provident plc for thepurposes of reporting to Friends Provident plc under Note 8(b) to Rule 19.1 ofthe City Code on Takeovers and Mergers and for no other purpose. We accept noresponsibility to Friends Provident plc or to its or Resolution plc'sshareholders or any other person, other than the Directors of Resolution plc, inrespect of the contents of, or any matter arising out of or in connection with,this letter. Yours faithfully, For JPMorgan Cazenove Limited For Goldman Sachs International T.P. Wise Simon Dingemans Managing Director Managing Director Appendix III Profit forecast The Directors 7 September 2007 Resolution plc Juxon House Ernst & Young LLP100 St Paul's Churchyard 1 More London PlaceLondon London SE1 2AFEC4M 8BU Citigroup Global Markets LimitedCitigroup CentreCanada SquareCanary WharfLondonE14 5LB Lazard & Co., Limited50 Stratton StreetLondonW1J 8LL 7 September 2007 Dear Sirs We report on the profit forecast made by Resolution plc (the "Company")comprising the £250m increase in the European Embedded Value of the ResolutionGroup arising from a fund merger of the Life Division North companies withPhoenix Life Limited in 2008 (the "Profit Forecast"). The Profit Forecast is to be included in the announcement to be issued by theCompany on 10 September 2007 (the "Announcement"). The Profit Forecast, and thematerial assumptions upon which it is based, are set out on page 4 of theAnnouncement to be issued by the Company dated 10 September 2007. This report isrequired by Rule 28.3(b) of The City Code on Takeovers and Mergers (the "Code")and is given for the purpose of complying with that rule and for no otherpurpose. Responsibilities It is the responsibility of the directors of the Company to prepare the ProfitForecast in accordance with the requirements of the Code. It is our responsibility to form an opinion as required by the Code as to theproper compilation of the Profit Forecast and to report that opinion to you. Basis of preparation of the Profit Forecast The Profit Forecast has been prepared on the basis stated on page 4 of theAnnouncement and is based on the published European Embedded Value of Resolutionplc for the year ended 31 December 2006. The Profit Forecast is required to bepresented on a basis consistent with the European Embedded Value accountingpolicies of the Company and its subsidiaries (the "Resolution Group"). Basis of opinion We conducted our work in accordance with Standards for Investment Reportingissued by the Auditing Practices Board in the United Kingdom. Our work includedevaluating the basis on which the historical financial information included inthe Profit Forecast has been prepared and considering whether the ProfitForecast has been accurately computed based upon the disclosed assumptions andthe accounting policies of the Group. Whilst the assumptions upon which theProfit Forecast are based are solely the responsibility of the Directors, weconsidered whether anything came to our attention to indicate that any of theassumptions adopted by the Directors which, in our opinion, are necessary for aproper understanding of the Profit Forecast have not been disclosed or if anymaterial assumption made by the Directors appears to us to be unrealistic. We planned and performed our work so as to obtain the information andexplanations we considered necessary in order to provide us with reasonableassurance that the Profit Forecast has been properly compiled on the basisstated. Since the Profit Forecast and the assumptions on which it is based relate to thefuture and may therefore be affected by unforeseen events, we can express noopinion as to whether the actual results reported will correspond to those shownin the Profit Forecast and differences may be material. Our work has not been carried out in accordance with auditing or other standardsand practices generally accepted in the United States of America or otherjurisdictions and accordingly should not be relied upon as if it had beencarried out in accordance with those standards and practices. Opinion In our opinion, the Profit Forecast has been properly compiled on the basis ofthe assumptions made by the Directors and the basis of accounting used isconsistent with the European Embedded Value accounting policies of theResolution Group. Yours faithfully Ernst & Young LLP Citigroup Global Markets Limited Lazard & Co., LimitedCitigroup Centre 50 Stratton StreetCanada Square London W1J 8LLCanary WharfLondon E14 5LB 10 September 2007 The DirectorsResolution plcJuxon House100 St Paul's ChurchyardLondon EC4M 8BU Dear Sirs, Resolution plc merger with Friends Provident plc Citigroup Global Markets Limited and Lazard & Co., Limited (together, "we")refer to the forecast (the "Profit Forecast") made by Resolution plc which isincluded in the announcement by Resolution plc dated 10 September 2007,comprising the £250m increase in the European Embedded Value of the ResolutionGroup arising from a fund merger of the Life Division North companies withPhoenix Life Limited in 2008 (the "Profit Forecast"). We have discussed the Profit Forecast and the bases and assumptions on which ithas been prepared with you as Directors of Resolution plc and with Ernst & YoungLLP, Resolution plc's auditors. We have also discussed the accounting policiesand calculations for the Profit Forecast with Ernst & Young LLP and we haveconsidered their letter dated 7 September 2007 addressed to you and us on thismatter. This letter is provided solely in connection with our obligations under Rule28.3 of the City Code on Takeovers and Mergers. On the basis of the foregoing, each of us considers that the Profit Forecastreferred to above, for which you as Directors are solely responsible, has beencompiled with due care and consideration by the Directors. Yours faithfully, For Citigroup Global Markets Limited For Lazard & Co., Limited Chris Jillings Jon Hack Managing Director Managing Director Appendix IV Sources and bases 1. Unless otherwise stated: (i) financial information relating to Resolution has beenextracted (without material adjustment) from the audited annual report andaccounts for Resolution for the year ended 31 December 2006; (ii)financial information relating to Friends Provident has beenextracted (without material adjustment) from the audited annual report andaccounts for Friends Provident for the year ended 31 December 2006. 2.The terms of the merger value the Friends Provident Group at£4,141 million, based on a share price of 626 pence per Resolution Share (theClosing Price on 7 September 2007, the last trading date prior to thisannouncement) and approximately 661.5 million New Friends Financial Shares to beissued to Friends Provident Shareholders, before the effect of the FriendsProvident Convertible Bonds. 3. As at the close of business on 7 September 2007, FriendsProvident had in issue 2,149,970,978 ordinary shares of 10 pence each, excludingshares held in treasury; and Resolution had in issue 686,021,187 ordinary sharesof 5 pence each. 4.The expected operational cost savings have been calculatedon the basis of the existing cost and operating structures of the Resolution andFriends Provident Groups and, in the case of Resolution, after existing plansfor rationalisation and cost reduction have been implemented. These statementsof estimated cost savings and one-off costs for achieving them relate to futureactions and circumstances which, by their nature, involve risks, uncertaintiesand other factors. Because of this, the cost savings referred to may not beachieved, or those achieved could be materially different from those estimated.This statement is not intended to be a profit forecast and should not beinterpreted to mean that the earnings per share in 2007 or any subsequentfinancial period, would necessarily match or be greater than those for therelevant preceding financial period. 5.The embedded value for the Combined Group at 31 December2006 on a combined basis amounts to £7.9 billion. The embedded valuemethodologies adopted by Friends Provident and Resolution are materiallyconsistent except for the reporting of covered businesses. Friends Provident andResolution have both adopted a market-consistent approach to embedded value.However, while Friends Provident includes its service company expenses on a"look-through" basis and its asset management business at market value,Resolution includes these businesses on the basis of IFRS net worth. Other thanmoving to a consistent definition of covered business, the impact of fullyharmonising the embedded value economic methodologies and assumptions would notbe expected to result in a material change to the combined embedded value. 6.UK life and pensions market share figures are for the yearended 31 December 2006 and are sourced from the Association of British Insurers. Appendix V Definitions In this announcement, the following definitions apply unless the contextrequires otherwise: "Abbey" means Abbey National plc; "Abbey life companies" means the former life companies of Abbey National plc; "Admission" means the admission of the New Friends Financial Shares to theOfficial List, in accordance with the Listing Rules, and the admission of theNew Friends Financial Shares to trading on the London Stock Exchange's mainmarket for listed securities in accordance with the Admission and DisclosureStandards; "Alternative Proposal" means a transaction or series of transactions, enteredinto by Friends Provident or Resolution which would be reasonably likely topreclude, impede, delay or prejudice the implementation of the merger; "Business Day" means a day (other than a Saturday or Sunday or public holiday)on which banks are open for business in London; "Capital Reduction" means the proposed reduction of Friends Provident's sharecapital in connection with the merger under section 135 of the Companies Act; "Citi" means Citigroup Global Markets Limited; "City Code" means the City Code on Takeovers and Mergers; "Closing Price" means the closing middle market price of a relevant share asderived from SEDOL on any particular day; "Combined Group" means with effect from the Effective Date, the combined FriendsProvident Group/Resolution Group; "Companies Act" or the "Act" means the Companies Act 1985 (as amended); "Competition Authorities" shall mean (i) all the competition authorities havingjurisdiction over the merger and to which notification of the merger ismandatory and/or appropriate, under applicable merger control laws, and (ii) theUK competition authorities, should they have jurisdiction over the merger underapplicable merger control laws; "Conditions" means the conditions to the merger set out in Appendix I to thisannouncement; "Court" means the High Court of Justice in England and Wales; "Court Hearings" means the hearings by the Court of the petition to sanction theScheme and to confirm the Capital Reduction; "Court Order" means the orders of the Court sanctioning the Scheme under section425 of the Companies Act and confirming the Capital Reduction; "Disclosure and Transparency Rules" means the Disclosure and Transparency Rules,as published by the FSA; "Effective" means the Scheme having become effective pursuant to its terms; "Effective Date" means the date on which the Scheme becomes Effective; "F&C" means F&C Asset Management plc; "Friends Financial" means Friends Financial Group plc, being Resolutionfollowing its change of name on the Effective Date and the holding company ofthe Combined Group; "FPI" means Friends Provident International; "Friends Provident" means Friends Provident plc; "Friends Provident Convertible Bonds" means the 5.25 per cent. Convertible bondsissued by Friends Provident with a nominal value of £1,000 each due 11 December2007 (ISIN number XS0159504801); "Friends Provident Directors" means the directors of Friends Provident; "Friends Provident Extraordinary General Meeting" means the extraordinarygeneral meeting of Friends Provident Shareholders to be convened for thepurposes of considering and, if thought fit, approving certain resolutionsrequired to implement or appropriate in connection with the Scheme and themerger; "Friends Provident Group" means Friends Provident, its subsidiaries andsubsidiary undertakings; "Friends Provident Shares" means ordinary shares of 10 pence each in the capitalof Friends Provident; "Friends Provident Shareholders" means the holders of Friends Provident Shares; "Friends Provident Share Schemes" means The Friends Provident plc Executive LongTerm Incentive Plan; The Friends Provident plc Executive Share Option Scheme;The Friends Provident plc Deferred Bonus Plan 2005; The Friends Provident plcShare Incentive Plan; The Friends Provident plc Inland Revenue ApprovedSharesave plan; "FSA" means the Financial Services Authority; "Goldman Sachs" means Goldman Sachs International; "Inducement Fee" means the fee in the maximum amount permitted under the CityCode payable by Friends Provident to Resolution, or by Resolution to FriendsProvident as set out in the Merger Agreement; "Intermediary Acquisition" means Resolution's binding agreement with Abbey underwhich Resolution, through its subsidiary Resolution Management Services Limited,will acquire the 65 strong protection broker consultant business from Abbey forIntermediaries with effect from 28 September 2007; "JPMorgan Cazenove" means JPMorgan Cazenove Limited; "Lazard" means Lazard & Co., Ltd; "Life Division North" means the former life companies of Abbey National plc; "Life Division South" means the former life companies of Britannic plc and theformer life companies of Resolution Life Group; "Listing Rules" means the rules and regulations of the UKLA, as amended fromtime to time and contained in the UKLA's publication of the same name; "Lombard" means Lombard International Assurance SA; "London Stock Exchange" means London Stock Exchange plc; "Long Stop Date" means 31 March 2008 (or such later time or date as FriendsProvident and Resolution may agree, with the approval of the Court and/or thePanel if required); "merger" means the merger of Friends Provident and Resolution; "Merger Agreement" means the amended and restated agreement, dated 10 September2007 between Friends Provident and Resolution governing implementation of themerger; "New Friends Financial Shares" means the new Friends Financial shares proposedto be issued, credited as fully paid up, pursuant to the merger; "Official List" means the official list of the UKLA; "Operational Cashflows" means the combined earnings and capital releases fromthe operating companies within Friends Financial; "Panel" means the Panel on Takeovers and Mergers; "pence" and "£" means the lawful currency of the United Kingdom; "Prospectus" means the prospectus, or document equivalent to a prospectus, to bepublished by Resolution in respect of Admission; "RAM" means Resolution Asset Management; "Registrar of Companies" means the Registrar of Companies in England and Wales,within the meaning of the Companies Act; "Resolution" means Resolution plc, to be renamed Friends Financial Group plc onthe Effective Date; "Resolution Directors" means the directors of Resolution; "Resolution Extraordinary General Meeting" means the extraordinary generalmeeting of Resolution Shareholders to be convened for the purposes ofconsidering and, if thought fit, approving the merger and to pass certainresolutions in connection with the merger; "Resolution Group" means Resolution, its subsidiaries and subsidiaryundertakings; "Resolution Shareholders" means the holders of Resolution Shares; "Resolution Shareholder Circular" means the circular to be dispatched toResolution Shareholders outlining the merger and containing the notice conveningthe Resolution Extraordinary General Meeting; "Resolution Shares" means the ordinary shares of 5 pence each in the capital ofResolution; "Resolution Share Schemes" means Resolution 1998 Unapproved Share Option Scheme;Resolution 1998 Approved Share Option Scheme; Resolution 1998 Savings RelatedShare Option Scheme; Resolution 2002 Long Term Incentive Plan; Resolution 2005Long Term Incentive Plan; Resolution 2005 Savings Related Share Option Scheme;Resolution Share Matching Plan 2006; Resolution Deferred Bonus Plan 2007; "Scheme" means the proposed scheme of arrangement of Friends Provident undersection 425 of the Act including the cancellation of the entire issued sharecapital of Resolution under section 135 of the Act, as modified or varied; "Scheme Document" means the document to be dispatched to Friends ProvidentShareholders in relation to the Scheme comprising the particulars required bysection 426 of the Companies Act; "Scheme Meeting" means the meeting of the Scheme Shareholders to be convened byan order of the Court under section 425 of the Companies Act to consider and, ifthought fit, approve the Scheme (with or without amendment) and any adjournmentthereof; "Scheme Record Time" means 6.00pm on the day immediately preceding the date ofthe Court hearing to confirm the Capital Reduction; "Scheme Shareholders" means the holders of Scheme Shares; "Scheme Shares" means (a) the existing unconditionally issued Friends ProvidentShares at the date of the Scheme Document; (b) any further Friends ProvidentShares which are unconditionally issued after the date of the Scheme Documentbut before the Scheme Voting Record Time; and (c) any Friends Provident Sharesissued at or after the Scheme Voting Record Time and before the Scheme RecordTime in respect of which the original or any subsequent holders thereof are, orshall have agreed in writing to be, bound by the Scheme; in each case other thanany Friends Provident Shares beneficially owned by Resolution; "Scheme Voting Record Time" means 48 hours prior to the time at which the SchemeMeeting is held or, if the Scheme Meeting is adjourned, 48 hours prior to thetime of such adjourned meeting; "Scottish Provident" means Scottish Provident International Life Assurance; "SEDOL" means the London Stock Exchange Daily Official List; "significant interest" means a direct or indirect interest in ten per cent. ormore of the equity share capital (as defined in the Companies Act) in a company; "subsidiary", "subsidiary undertaking", "associated undertaking" and"undertaking" have the meanings ascribed to them under the Companies Act, otherthan paragraph 20(1)(b) of Schedule 4A to that Act which shall be excluded forthis purpose; "wider Friends Provident Group" means Friends Provident and its subsidiaryundertakings, associated undertakings and other undertakings in which FriendsProvident and/or such undertakings (aggregating their interests) have asignificant interest; "wider Resolution Group" means Resolution and its subsidiary undertakings,associated undertakings and other undertakings in which Resolution and/or suchundertakings (aggregating their interests) have a significant interest; "UK Listing Authority" or "UKLA" means the Financial Services Authority in theUK acting in its capacity as the competent authority for the purposes of Part VIof the Financial Services and Markets Act 2000; "US" or "United States" means the United States of America, its territories andpossessions, any state in the United States of America and the District ofColumbia; and "US Securities Act" means the United States Securities Act of 1933 (as amended). Unless otherwise stated, all times referred to in this announcement arereferences to London time. Any reference to any provision of any legislation shall include any amendment,modification, re-enactment or extension thereof. Appendix VI Schedule of irrevocable undertakings +-------------------------------------+--------------------------------------+-------------------------------------+ Name of Friends Number of Friends Percentage of Friends Provident Director Provident Shares Provident issued share capital +-------------------------------------+--------------------------------------+-------------------------------------+ Sir Adrian Montague 6,174 0.0003 +-------------------------------------+--------------------------------------+-------------------------------------+ Philip Moore 53,084 0.002 +-------------------------------------+--------------------------------------+-------------------------------------+ Jim Smart 19,205 0.0009 +-------------------------------------+--------------------------------------+-------------------------------------+ Alain Grisay NONE N/A +-------------------------------------+--------------------------------------+-------------------------------------+ Ben Gunn 106,262 0.005 +-------------------------------------+--------------------------------------+-------------------------------------+ Lady Judge 17,865 0.0008 +-------------------------------------+--------------------------------------+-------------------------------------+ Ray King 10,000 0.0005 +-------------------------------------+--------------------------------------+-------------------------------------+ Alison Carnwath 10,000 0.0005 +-------------------------------------+--------------------------------------+-------------------------------------+ Sir Mervyn Pedelty NONE N/A +-------------------------------------+--------------------------------------+-------------------------------------+ Gerhard Roggemann NONE N/A +-------------------------------------+--------------------------------------+-------------------------------------+ Total 222,590 0.0104 +-------------------------------------+--------------------------------------+-------------------------------------+ +-------------------------------------+--------------------------------------+-------------------------------------+ Name of Resolution Number of Resolution Percentage of Director Shares Resolution issued share capital +-------------------------------------+--------------------------------------+-------------------------------------+ Clive Cowdery 20,548,532 2.9953 +-------------------------------------+--------------------------------------+-------------------------------------+ Sir Malcolm Williamson 37,777 0.0055 +-------------------------------------+--------------------------------------+-------------------------------------+ Sir Brian Williamson 37,777 0.0055 +-------------------------------------+--------------------------------------+-------------------------------------+ David Allvey 1,133 0.0002 +-------------------------------------+--------------------------------------+-------------------------------------+ Sir David Cooksey 371,553 0.0542 +-------------------------------------+--------------------------------------+-------------------------------------+ Paul Spencer 4,722 0.0007 +-------------------------------------+--------------------------------------+-------------------------------------+ Aram Shishmanian NONE N/A +-------------------------------------+--------------------------------------+-------------------------------------+ David Woods 11,474 0.0017 +-------------------------------------+--------------------------------------+-------------------------------------+ Mike Biggs 1,482,483 0.2161 +-------------------------------------+--------------------------------------+-------------------------------------+ Jim Newman NONE N/A +-------------------------------------+--------------------------------------+-------------------------------------+ Ian Maidens 1,482,482 0.2161 +-------------------------------------+--------------------------------------+-------------------------------------+ Brendan Meehan 1,482,482 0.2161 +-------------------------------------+--------------------------------------+-------------------------------------+ Total 25,460,415 3.7113 +-------------------------------------+--------------------------------------+-------------------------------------+ This information is provided by RNS The company news service from the London Stock Exchange

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