Constitution and purpose

a) The Boards hereby resolves to establish a Committee of the Board to be known as the Audit Committee.

Purpose

a) Its purpose is to support the relevant Board in reviewing the external financial reports of the business and its systems of internal controls for all of entities.

Membership

a) The Committee shall be comprised of at least three, and not more than four, independent non-executive directors, appointed by the Board.

b) The Chair shall be a non-executive director appointed by the Board and shall have specific responsibility for chairing and overseeing the performance of the Committee. Under the SM&CR regime, the chair shall carry out the SMF 11 function.

c) The Committee may, with approval by the Board, appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

d) At least one member of the Committee should at any time have recent relevant financial experience in relation to the Duties of the Committee, having competence in accounting and/or auditing (FCA DTR 7.1.1(R)).

e) A quorum of the Committee shall be two members.  In the absence of the Committee Chair, the remaining members present shall select one of themselves to Chair the meeting, provided such individual is independent.

Attendance at Meetings

a) The Chair, CEO, Chief Financial Officer and Chief Risk Officer shall normally attend meetings. A representative of the external auditors and internal auditors should normally attend meetings if required by any such party.   Other Board members shall have the right of attendance.

b) Any member of Scottish Friendly colleagues may be required by the Committee to attend meetings. 

c) At least once a year the Committee shall meet with each of the external auditors and internal auditors, without other Executives, management, or colleagues present.

d) The Company Secretary shall be the Secretary of the Committee.

Frequency of Meetings

a) Meetings shall be held when necessary, and not less than three times a year.  The internal or external auditors may request a meeting if they consider that one is necessary.

Authority

a) The Committee is authorised by the Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any Colleague and all Colleagues are directed to co-operate with any request made by the Committee. The Internal Auditor[1] has the right to direct access to any member of the Audit Committee if for any reason they do not wish to consult the CEO.

b) The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

Duties

For Scottish Friendly Assurance Society and all of its entities, the duties of the Committee shall be:

Control Framework

a) to review the internal control systems, including internal financial controls, and ensure that these continue to be effective; 

b)     to advise the Risk Committee as appropriate of any concerns regarding the effectiveness of the current control framework

Financial reporting

c) To review the annual financial statements and annual regulatory returns, and any formal announcements relating to Scottish Friendly’s financial performance, as well as that of the subsidiaries, before submission to the relevant Board, focusing particularly on:

1. any changes in accounting policies and practice;

2. major judgmental areas;

3. significant adjustments resulting from the audit;

4. any prior year adjustments

5. the going concern statement; and

6. compliance with accounting standards and legal requirements, including the regulations and guidance of the PRA/FCA; and 

d) To review and recommend to the Board for approval the various actuarial assumptions underlying the calculation of the technical provisions within SFAS;

External audit

a) to make recommendations to the relevant Board, for it to put to the Delegates for approval in general meeting, in relation to the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external audit;

b) to discuss with the external auditor before the audit commences the nature and scope of the audit, including agreeing the level of materiality for the Group and SFAS financial statements;

c)  to discuss problems and reservations arising from the interim and final audits, and any matters the auditor may wish to discuss (in the absence of management where necessary);

d)  to review the external auditor’s management letter and management’s response;

e) to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements;

f) to develop and implement policy on the engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm; and to report to the relevant Board, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken;

Internal audit

a) to monitor the internal audit programme in the context of the overall control systems, including approving the programme and reviewing the reports produced;

 b) to ensure co-ordination between the internal and external auditors, and that the internal audit function is adequately resourced and has appropriate standing within Scottish Friendly;

 c) to consider the major findings of any internal investigations and management’s response;

 d) to review the effectiveness of the internal audit function and approve any significant changes in the provision of this service, including the review of any updates on internal audit action points, and the appointment of any internal audit providers;

Secretarial

a) to consider other topics, as defined by the Board.

b) be provided with appropriate and timely training;

 c) give due consideration to laws and regulations ;

d) recognise and manage potential conflicts of interest in the process of its decision making.

e) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval.

 f)  The Committee shall work and liaise as necessary with all other Board Committees.

Reporting Procedures

a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board and any such other attendees as the Chair of the Audit Committee shall direct.  The Chair shall provide a verbal update on discussions and decisions made to the relevant Board meeting’s following each Committee meeting.

b) The Committee shall undertake a review of the Committee’s performance and these terms of reference annually and, where necessary, make recommendations to the relevant Board for approval.

Constitution

a)  The Board hereby resolves to establish a Committee of the Board to be known as the Risk Committee. 

Purpose

a) Its purpose is to support the relevant Board, by providing oversight and challenge on all aspects of the risk framework management, risk appetite and risk management, including capital management for all of its subsidiaries.

Membership

a) The Committee shall be comprised of at least three, and not more than four, independent non-executive directors (including the Chair of the Audit Committee as an ex officio member), appointed by the Board.

 b) The Chair shall be an independent non-executive director appointed by the Board and shall have specific responsibility for chairing and overseeing the performance of the Committee.  Under the SM&CR regime, the Chair shall carry out the SMF10 function.

c) The Committee may, with approval by the Board, appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

d) At least one member of the Committee should at any time have recent relevant experience in relation to the Duties of the Committee, having competence in risk management and regulatory related matters. 

e) A quorum of the Committee shall be two members.  In the absence of the Committee Chair, the remaining members present shall select one of themselves to Chair the meeting, provided such individual is independent

Attendance at Meetings

a) The CEO, Chief Risk Officer, Chief Financial Officer and Chief Actuary, or appointed Delegates shall normally attend meetings.  Other Board members have the right of attendance.

b) Any member of Scottish Friendly colleagues may be required by the Committee to attend meetings.

c) A representative of the external auditors, the internal auditors and the With-Profits Actuary may attend meetings if required at the discretion of the Chair.

d) At least once a year, and at any other time as the Committee shall see fit, it shall meet separately with each of the SMF 4 (Chief Risk Officer), SMF 16 (Compliance) and SMF 17 (MLRO) in the absence of other members of management.

e) The Company Secretary shall be the Secretary of the Committee.

Frequency of Meetings

a)     Meetings shall be held when necessary, and not less than four times a year.

Authority

a) The Committee is authorised by the Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any Colleague and all Colleagues are directed to co-operate with any request made by the Committee.

b) The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

c) The Chief Risk Officer has the right to direct access to any member of the Risk Committee if for any reason they do not wish to consult the CEO.

d) The Committee should have regard to any relevant advice from the Audit Committee concerning the effectiveness of the current control framework.

Duties

For Scottish Friendly Assurance and all of its subsidiaries, the duties shall be:

BAU

a)  to be aware of the business’s current risk profile and ensure consistency with the relevant Board’s appetite for risk;

b) to keep under regular review the steps taken by management to monitor, manage and mitigate risk; and, where necessary, monitor actions to keep the profile within the Board’s risk appetite;

c) To approve the Risk & Compliance Assurance plans at least on an annual basis, review of outcomes from assurance activity, and, to ensure that any matters raised are being appropriately addressed by management;

RMF

a) to review proposals in respect of overall risk appetite and tolerance and recommend them to the relevant Board;

b) to challenge the design and execution of stress and scenario testing;

c) to ensure that a satisfactory framework is in place with appropriate policies and metrics for identifying and managing all aspects of risk within the business, including the management of capital;

d) to ensure that the Risk and Compliance functions are adequately resourced to an appropriate level of quality and has appropriate standing in the organisation;

e) to provide advice, oversight and challenge necessary to embed and maintain a supportive risk culture through the business;

f) to review the annual Whistleblowing report ;

j) to review the annual MLRO report ;

Change

k) to have oversight of and challenge due diligence on risk issues relating to material transactions and strategic proposals that are subject to approval by the Board;

Advisory on behalf of Board

l) to provide advice to the relevant Board on risk strategy, including the oversight of current risk exposures of the business, including the utilisation of capital, and risk appetite statements;

m) to review and recommend the ORSA, making relevant recommendations to the SFAS Board;

n) to review and recommend the ICARA, making relevant recommendations to the SFAM Board;

o) to review other relevant regulatory reports, making relevant recommendations to the Board;

Secretarial

p) to assess the effectiveness of the Risk function (including Compliance) on an annual basis; and to consider other topics, as defined by the Board.

q) be provided with appropriate and timely training;

r) give due consideration to laws and regulations ;

s)  recognise and manage potential conflicts of interest in the process of its decision making.

t) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval.

f) The Committee shall work and liaise as necessary with all other Board Committees. The Chair of the Committee should attend the Annual General Meeting to answer any member questions on the Committee's activities.

Reporting Procedures

a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the relevant Board and any such other attendees as the Chair of the Nomination Committee shall direct.

Constitution

a) The Boards hereby resolves to establish a Committee of the Board to be known as the Remuneration Committee

Purpose

a) Its purpose is to oversee the remuneration framework and principles for the firm and approve Board and Executive remuneration.

Membership

a)  The Committee shall be comprised of three independent non-executive directors, appointed by the Board, (including the Chair of Scottish Friendly).

b) The Chair shall be an independent non-executive director appointed by the Board and shall have specific responsibility for chairing and overseeing the performance of the Committee. Under the SM&CR regime, the chair shall carry out the SMF 12 function.

c)  The Chair shall have specific responsibility for ensuring the development and oversight of Scottish Friendly’s remuneration policies and procedures and ensuring that the Committee supports such development and oversight.

d) The Committee may, with approval by the Board, appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

e) Whilst not essential, it is preferable that the Chair of the remuneration committee has previous experience as a member of a remuneration committee or has had experience as an SMF12 (Chair of remuneration committee).

f) A quorum of the Committee shall be two members.  In the absence of the Committee Chair, the remaining members present shall select one of themselves to Chair the meeting, provided such individual is independent

Attendance at Meetings

a) The CEO and the HR Director shall normally attend meetings.  The Chief Risk Officer may, with the agreement of the Committee Chair, opt to attend meetings where it is appropriate.

b) Any member of Scottish Friendly colleagues may be required by the Committee to attend meetings.

c) Any member or attendee at an agenda item where they are impacted, an interest, or conflict should recuse themselves or will be asked to leave the committee.

d) The Company Secretary shall act as Secretary of the Committee.

Frequency of Meetings

a) Meetings shall be held when necessary, and not less than twice per year.

Authority

a) The Committee is authorised by the relevant Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any colleague and all colleagues are directed to co-operate with any request made by the Committee.

b) The Committee shall adhere to the terms of the Remuneration Policy in carrying out its duties.

c) The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

Duties

The duties of the Committee shall be:

Remuneration for Board, Executive and Identified colleagues:

a)     To monitor, review and set the remuneration of the Executive Directors and other members of the Executive[1] of Scottish Friendly including policy in respect of pension rights and any compensation payments and (ii) the oversight of the remuneration of other Solvency II colleagues (who are not Board or Executive Committee members). 

b)     To monitor, review and set the remuneration of the Chair of Scottish Friendly.

c)     The remuneration of the non-executive directors of Scottish Friendly will be reviewed and set by the Board in the absence of the non-executive directors, that is by the Chair and the Executive Directors.

d)     To review remuneration policy and practices to support strategy, regulatory requirements and promote long-term sustainable success.

e)     The review annually the names of and remuneration of identified colleagues to ensure it remains appropriate and meets the regulatory requirements. 

f)       Ensure that for Executive, Senior Managers and designated employees, contractual terms on termination, and any payments made, are fair to the individual, and the firm and that failure is not rewarded.

g)     To seek input at least once annually  and respond accordingly to the advice provided by the CRO and the Chair of the Risk Committee, any risk weightings to be applied to the performance objectives for executives.

[1] Executive is considered to be all members of the Executive Committee

Remuneration Policy and Practice

a) To have responsibility for determining and setting all components of Scottish Friendly remuneration policy, including pension rights, compensation payments, bonus schemes, incentive payments and other rewards. The Committee may delegate authority to the CEO for the framework and delivery of the approved policy.

b) To ensure consistency of application of Scottish Friendly pay principles.

c) Determine performance related pay schemes, the related measurements and outcomes (consistent with the Company strategy, annual budget, medium term plan and capital requirements),

d) Determine the maximum aggregate increase in salaries for the year.

e) Oversee any major changes in employee benefits structures throughout the Company.

f) Obtain reliable, up-to-date information about remuneration in other comparable companies;

g) The Committee shall produce a remuneration report to be included in the annual report and accounts.  The Chair of the Committee should attend the Annual General Meeting to answer any member questions on the Committee's activities.

Secretarial

h) be provided with appropriate and timely training;

i) give due consideration to laws and regulations;

j) recognise and manage potential conflicts of interest in the process of determining remuneration policies and practices.

k) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval.

l) The Committee shall work and liaise as necessary with all other Board Committees. The Committee will receive input from the Board Risk Committee and Audit Committee in relation to any risk or audit matters that may have an impact on variable remuneration. 

Reporting Procedures

a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the relevant Board and any such other attendees as the Chair of the Nomination Committee shall direct.

Constitution

a) The Boards hereby resolves to establish a Committee of the Board to be known as the Remuneration Committee

Purpose

a) Its purpose is to support the relevant Board and to ensure orderly succession of an effective, capable and independent Board and Executive team, leading the process for selection, development or exit of those individuals

Membership

a) The Committee shall be comprised at least two independent non-executive directors, appointed by the Board, (including the Chair and the Senior Independent Director of Scottish Friendly) and the CEO.

b) The Chair of the Committee shall be a non-executive director appointed by the Board and shall have specific responsibility for chairing and overseeing the performance of the Committee.

c) The Senior Independent Director should lead the process for selection and annual performance of the Board Chair.

d) The Committee may, on approval by the Board appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

e) A quorum of the Committee shall be two members.  In the absence of the Committee Chair, the remaining members present shall select one of themselves to Chair the meeting.

Attendance at Meetings

a) The HR Director shall normally attend meetings. The Chief Risk Officer may, with the agreement of the Committee Chair, opt to attend meetings where it is appropriate.

b) Any member of Scottish Friendly colleagues may be required by the Committee to attend meetings.

c) The Company Secretary shall be the secretary of the committee

Frequency of Meetings

a) Meetings shall be held when necessary, and not less than once a year.

Authority

a) The Committee is authorised by the Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any Colleague and all Colleagues are directed to co-operate with any request made by the Committee.

b) The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

Duties

For Scottish Friendly Assurance and all of its entities, the duties shall be:

Board and Executive composition:

a) to lead the process for Board appointments

b) approve Executive appointments when the process has been led by management

c) ensure appointments have the required, considers capability, capacity and diversity and are assessed against objective criteria;

d) regularly review the structure, size and composition (including skills, knowledge, training and experience) required of the Board compared to its current position and make recommendations to the Board with regards to any changes;

e) consider any matters relating to the continuation of office of any executive, executive director or Board member as required including the independence, suspension or termination of employment or service subject to the provisions of the law and their letter of appointment or employment contract.

Governance and performance

f)     review annually or as required any authorisation of a conflict given by the Board in order to determine whether the authorisation given should stand on the terms and conditions on which it has been given or whether additional terms and conditions should be imposed or whether the authorisation should be revoked (subject to giving the relevant director notice of the proposed revocation);

g)     on an annual basis, following performance review by the Chair, evaluate the performance of each director, in order to show that each continues to contribute effectively and demonstrate commitment, including time commitment to the role.  The evaluation of the Chair should be led by the senior independent director, taking into account the views of the executive directors;

Secretarial:

h) be provided with appropriate and timely training;

i) give due consideration to laws and regulations ;

j) recognise and manage potential conflicts of interest in the process of its decision making.

k) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval.

l)The Committee shall work and liaise as necessary with all other Board Committees. The Chair of the Committee should attend the Annual General Meeting to answer any member questions on the Committee's activities

Reporting Procedures

a)  The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the relevant Board and any such other attendees as the Chair of the Nomination Committee shall direct.

b) The Chair shall if appropriate provide an update on discussions and decisions made to the next relevant Board meeting following each Committee meeting if appropriate.

c) The Committee shall undertake a review of the Committee’s performance and these terms of reference annually and, where necessary, make recommendations to the Scottish Friendly Assurance Society (SFAS) Board for approval.

Constitution

a)     The Board hereby resolves to establish a Committee of the Board to be known as the Investment Committee. 

Purpose

a) Its purpose is to support the Committee to have oversight of Scottish Friendly’s investments and to establish a formal process to approve the investment strategy, governance framework and policies monitoring investments.

b) The Committee shall ensure it considers all applicable and relevant risk framework, regulatory rules and guidance and applicable internal policies when carrying out its duties.

c)  The Committee will act in a way that supports the delivery of good customer outcomes and the fair treatment of customers.  The Committee will aim to deliver good customer outcomes, treat customers fairly and observe standards of market conduct.

Membership

a)     The Committee shall be comprised of up to six members to include the CEO, the Chief Financial Officer and at least two non-executive directors.

b)     The Chair shall be an independent non-executive director appointed by the Board and shall have specific responsibility for chairing and overseeing the performance of the Committee.

c)     The Committee may, with approval by the Board, appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

d)     At least one member of the Committee should at any time have recent relevant experience in relation to or have competence in setting and overseeing investment strategies for long term investments funds.

e)     A quorum of the Committee shall be two members.  In the absence of the Committee Chair, the remaining members present shall select one of themselves to Chair the meeting, provided such individual is independent.

Attendance at Meetings

a) The Chief Risk Officer may, with the agreement of the Committee Chair, opt to attend meetings where it is appropriate.  Other Board Members shall have the right of attendance.

b) Any member of Scottish Friendly colleagues may be required by the Committee to attend meetings.

c) The Company Secretary shall be the Secretary of the Committee

Frequency of Meetings

a)  Meetings shall be held when necessary, and not less than four times a year.

Authority

a)     The Committee is authorised by the Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any Colleague and all Colleagues are directed to co-operate with any request made by the Committee.

b)     The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

Duties

For Scottish Friendly Assurance Society (SFAS) and Scottish Friendly Asset Management (SFAM), the duties of the Committee shall be:

Investment strategy and performance

a) to set the strategic asset allocation and investment strategy of the asset shares for the main fund and sub-funds in line with the profile of the liabilities, the relevant risk appetite and PPFM and parameters or objectives established by the Board, in a way that is consistent with policyholder reasonable expectations and delivering a good outcome for customers;  (SFAS only)

b) to monitor the parameters under which the outsourced investment partners can make tactical asset allocation decisions, and provide oversight of the tactical position and the impact on performance; (SFAS only)

c) to set, monitor and review annually the investment parameters and fund objectives, and, where appropriate, make recommendations to the Board; (SFAS only)

d) to monitor the performance of investments made against appropriate benchmarks; (SFAS only)

Oversight and stewardship

e) to oversee compliance with prudent person principles and approve new asset classes; (SFAS only)

f) to appoint, monitor and review investment managers, their performance and costs;

g) to provide oversight of the delegated investment activity in relation to the unit-linked funds undertaken by the Unit-Linked Funds Committee; (SFAS only)

h) to approve any seed funding required for new unit-linked funds; (SFAS only)

i) to set policies in relation to Environmental, Social and Governance considerations for investments, and review compliance with these policies;

j) to provide oversight of the investment activities undertaken by the Investment Team and stewardship role of Scottish Friendly as an investor; and to consider other topics, as defined by the Board;

k) to provide oversight of the delegated investment activity in relation to the Scottish Friendly OEIC, undertaken by the Unit-Linked Funds Committee; (SFAM Only)

Secretarial

l) be provided with appropriate and timely training;

m) give due consideration to laws and regulations ;

n) recognise and manage potential conflicts of interest in the process of its decision making;

o) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval; and

p) The Committee shall work and liaise as necessary with all other Board Committees. The Chair of the Committee should attend the Annual General Meeting to answer any member questions on the Committee's activities.

Reporting Procedures

a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Board and any such other attendees as the Chair of the Investment Committee shall direct. The Chair shall provide a verbal update on discussions and decisions made to the next Board meeting following each Committee meeting.

b) The Committee shall undertake a review of the Committee’s performance and these terms of reference annually and, where necessary, make recommendations to the Board for approval.

Constitution

a) The Board hereby resolves to establish a Committee of the Board to be known as the With-Profits Committee. 

b) A copy of these Terms of Reference is available to the with-profits policyholders on the company’s website. 

c) References to With-Profits Funds should be taken to mean the totality of each of the Marine & General Fund, Rational Shelley Fund, LANMAS Fund, Scottish Legal Fund, Manulife Fund and appropriate consideration of the interests of the with-profits policyholders in the Main Fund.

Purpose

a) The with-profits committee acts in an advisory capacity to inform the decision-making of the Board or the associated subcommittee (WPAC) of the Board.  Its purpose is to assess, report on and provide clear advice and (where appropriate) recommendations to the Board or the WPAC in any matter that impacts with-profits policyholders or the with-profits fund. 

Attendance at Meetings

a. The Company Secretary shall be Secretary of the Committee. The Chief Executive, Chief Risk Officer, Chief Actuary, and With Profits Actuary shall normally attend meetings.

b. Any member of Scottish Friendly staff may be required by the Committee to attend meetings.

Membership

a)  The Committee shall be comprised of at least 3 members, the majority of whom are independent.[1]

b) A minimum of two members shall not be serving Board non-executive directors and their appointments shall be made for a three-year term. This may be extended for an additional maximum of two further three-year periods. Members of the Committee shall be appointed and removed by the Board. 

c) The Chair shall be independent, appointed by the Board, and shall have specific responsibility for chairing and overseeing the performance of the Committee.

d) The Committee may, with approval by the Board, appoint an additional member to assist the Committee in the execution of its duties who is considered to have sufficient experience and skills to contribute to the workings of the Committee.

e) any person appointed as a member of the with-profits committee or as a person carrying out the advisory arrangement must have the appropriate skills, knowledge and experience to perform, their role

f) A quorum of the Committee, shall be a minimum of three, one of whom must be the Chair of the Committee or not a serving Board non-executive Director.

[1] as defined by COBS 20.5.7G

Attendance at Meetings

a) The Company Secretary shall be Secretary of the Committee.  The CEO, Chief Risk Officer, Chief Actuary, and With Profits Actuary shall normally attend meetings.

b) Any member of Scottish Friendly staff may be required by the Committee to attend meetings.

Frequency of Meetings

a) Meetings shall be held when necessary, and not less than four times a year.

b)  In order to ensure the Committee can carry out its duties, it must receive timely information in advance of Committee and Board meetings.

Authority

a) The Committee is authorised by the Board to investigate any activity within its terms of reference.  It is authorised to seek any information it requires from any Colleague and all Colleagues are directed to co-operate with any request made by the Committee.

b) The Committee shall be able to seek external professional advice and hire consultants as appropriate to fulfil its duties.

c) The Committee is expected to work closely with the With-Profits Actuary and obtain their opinion and input as appropriate.

d) The role of the Committee is to assess, report on, provide clear advice and, where appropriate, make recommendations to the Board or the WPAC on:

1.     the way in which each with-profits fund is managed by the firm and whether this is properly reflected in the PPFM;

2.     the assessment of compliance with each With-Profit Fund’s principles and practices set out in their PPFM;

3.     any proposed changes which would result in revisions to the PPFM;

4.     the way in which discretion is exercised in relation to the With-Profit Funds;

5.     how the conflicting rights and interests of with-profits policyholders and other policyholders or stakeholders have been addressed in a way that is consistent with Principle 6 (Treating Customers Fairly) of the FCAs principles of good regulation; and

6.     any other issues with which the Board or Committee considers with-profits policyholders might reasonably expect the Committee to be involved.

 Duties

For Scottish Friendly Assurance Society, the duties of the Committee shall be:

a) decide on the specific matters it will consider in order to enable it to carry out its role described in 6.6 (d) as appropriate to the particular circumstances of each With-Profits Fund; and

b) in any event give appropriate consideration to the following non-exhaustive list of specific matters:

1. the identification of surplus and excess surplus, the merits of its distribution or retention and the proposed distribution policy;

2. how bonus rates, smoothing, the treatment of policies with guarantees and, if relevant, market value reductions have been calculated and applied;

3. if relevant, the relative interests of policyholders with and without valuable guarantees;

4. the firm's with-profits customer communications such as annual policyholder statements, product literature, changes to the PPFM and whether the With-Profits Committee wishes to make a statement or report to with-profits policyholders in addition to the annual report made by the company;

5. any significant changes to the risk or investment profile of the with-profits fund including the management of material illiquid investments and the firm's obligations in relation to strategic investments;

6. the investment strategy of each with-profits fund, including performance and fees, working in conjunction with the Investment Committee where appropriate;

7. the firm's strategy for future sales supported by the assets of the Scottish Friendly Main with-profits fund and its impact on surplus;

8. the impact of any management actions planned or implemented;

9. relevant management information such as customer complaints data (but not necessarily information relating to individual customer complaints);

10. the drafting, review, updating of and compliance with run-off plans, court schemes and similar matters;

11. the costs incurred in operating the with-profits fund and any other costs supported by the assets of the with-profits fund;

12. the identification and extent of the firm's with-profits funds, with particular regard to the considerations as to whether a part of the with-profits fund constitutes a separate with-profits fund in accordance with COBS 20.1A.2 R (Sub-funds); and

13. the use and purpose of, and terms under which, support assets are available to the with-profits fund, having regard to the considerations in COBS 20.2.33 G to COBS 20.2.34 G and COBS 20.2.34A R.

14. consider the conflicts of interests between different groups and generations of policyholders.

The Committee must:

c) advise the Board on the suitability of candidates proposed for appointment as the With-Profits Actuary; and

d) assess the performance of the With-Profits Actuary at least annually, and report its view to the Board

Secretarial

e) be provided with appropriate and timely training;

f)  give due consideration to laws and regulations ;

g) recognise and manage potential conflicts of interest in the process of its decision making.

h) arrange for periodic reviews of its own performance and, review its constitution and terms of reference annually to ensure it is operating effectively and recommend any changes it considers necessary to the Board for approval.

i) The Committee shall work and liaise as necessary with all other Board Committees. The Chair of the Committee should attend the Annual General Meeting to answer any member questions on the Committee's

Reporting Procedures

a) The Secretary shall circulate the agenda, the notice calling the meeting, and the minutes of each meeting of the Committee to all members of the Committee and of the Board or WPAC, and any such other attendees as the Chair of the With-Profits Committee shall direct.

b) The Chair shall provide an update, which may be verbal, on discussions and decisions made to the next Board or WPAC meeting following each Committee meeting.  The Committee shall keep the Board informed as to the matters considered by it and the decisions and recommendations made by it.

c) The Chair of the Committee shall have right of access to the Chair of the Board to discuss any matters which he feels should be of concern to the Board.

d) The Committee shall undertake a review of the Committee’s performance and these terms of reference annually and, where necessary, make recommendations to the Board for approval.

Constitution

a) The Board is the governing body of Scottish Friendly Asset Managers Limited (SFAM). SFAM is authorised and regulated by the Financial Conduct Authority (FCA) and has been appointed to act as the authorised corporate director (ACD) of the Scottish Friendly Investment Funds ICVC, a UK authorised open-ended investment company with variable capital (SF OEIC). SFAM also acts as the manager of the Scottish Friendly Individual Savings Account (SF ISA) and the Junior Individual Savings Account (SF JISA), Child Trust Funds (CTF’s) as well as other products with direct investments in the SF OEIC. The SFAM Board is ultimately responsible for the strategy, management, performance and long-term success of SFAM. The SFAM Board sets SFAM’s strategic aims and ensure that the appropriate resources are in place for SFAM to serve the best interests of its shareholder, act in the best interests of the SF OEIC and its investors and meet its statutory objectives and regulatory obligations.

b) These terms of reference (Terms of Reference) document the responsibilities, authority, organisation and membership of the SFAM Board.

Membership

a) The Board shall comprise of certain non-executive directors (including the Chair) and executive directors, providing a complimentary balance of skills and expertise to fully understand the strategy and the risks faced by the firm.

b) The membership of the Board and matters such as the selection and re-election of directors are the responsibilities of the Board. The recommendation for the appointment or removal of the Board is the responsibility of Scottish Friendly Assurance Society Limited, as shareholder of SFAM (acting through it’s Nomination Committee)

c) The membership of the Board shall be reviewed from time to time but shall, at all times comply with the requirements of rule 6.6.25R and associated guidance at 6.6.26G of the Collective Investment Schemes sourcebook (“COLL”), which forms part of the FCA’s Handbook of rules as made from time to time.

d) All new members of the Board shall be informed of their responsibilities and the role of the Board. They shall be provided with support and training where deemed necessary by the Chair to ensure that they are able to discharge their responsibilities effectively.

e)  The Chair shall be an independent non-executive director and shall have specific responsibility for chairing and overseeing the performance of the SFAM Board. The role of the CEO is distinct and must be held by a different individual to that appointed to the role of Chair. The CEO has overall responsibility for the day-to-day business of SFAM.

f) A quorum of the SFAM Board shall be three members.  In the absence of the Chair, the independent non-executive directors shall select one themselves to Chair the meeting.

Attendance at Meetings

a)     Only members of the SFAM Board and the Chief Risk Officer have the right to attend SFAM Board meetings.  Other individuals, such as SFAM Executive Committee members and external advisers may be invited to attend all or part of any SFAM Board meeting at the discretion of the Chair.

Voting at Meetings

a) While every attempt is usually made to reach a consensus on a decision, the Chair may call a vote, which shall be taken by a show of hands, or, if the Chair sees fit, by poll.  The result of the poll will be decided by a majority vote.  In the event of a tie, the Chair will have the casting vote.

b) Attendees are not entitled to vote on matters before the SFAM Board.

Frequency of Meetings

a) Meetings shall be held when necessary, and not less than twice a year. Additional meetings may be arranged where decision-making is required outside of scheduled meetings.

b) A meeting of the SFAM Board may be called by the Chair or the Company Secretary whenever they think it fit to do so and, where possible, will provide members with a minimum of 5 working days’ notice.

Authority

a) The SFAM Board is authorised to make any decision it sees fit which is in the best interests of SFAM and which falls within the scope laid down in the Articles of Association of the Company, applicable legislation and regulation. It is authorised to seek any information it requires from any employee of SFAS in accordance with the inter-company services agreement and any appropriate external advisers order to assist the SFAM Board in carrying out its Duties.

b) The SFAM Board may delegate its responsibilities, duties and functions to one or more committees (each a Committee). Such Committees may make further delegations to relevant sub-committees, executive directors or holders of senior management functions or certification functions of SFAM where and to the extent permitted by the relevant Committee’s terms of reference.

c) The SFAM Board may delegate authority to the CEO to review and approve the SFAM Executive Committee terms of reference, and the terms of reference of the Committee will be shared with the SFAM Board annually for noting or after any material changes are made.

Matters reserved for the SFAM Board shall be:

a) to ensure SFAM meets its obligations as an ACD;

b) to set and approve annually the dividend;

c) to review and approve annual report and accounts in respect of SFAM;

d) to review the performance of the OEIC and approve the annual and bi-annual report and accounts;

e) to consider and approve the annual ICARA ahead of submission to the regulator;

f) to set and review risk appetite and ensure steps are being taken to keep SFAM within this appetite

g) to ensure SFAM, in discharging its duties as ACD, acts solely in the interests of the Scottish Friendly Investment Funds ICVC and its shareholders; 

h)  to ensure the value for money assessment for the Scottish Friendly Investment Funds ICVC has been undertaken at least annually;

i) to ensure the strategy, risk management, performance and long-term success of SFAM is met through the SFAM Executive Committee and the SFAM Board; and

j) to oversee and ensure SFAM complies with all regulatory rules and requirements.

Reporting Procedures

a) The SFAM Company Secretary shall act as the Secretary of the SFAM Board and is responsible for circulating the notice calling the meeting and the agenda.

b) The decisions and discussions of the SFAM Board shall be evidenced by minutes which after approval by the Chair, shall be circulated to members of the SFAM Board and nominated attendees in sufficient time to allow for completion of relevant actions.

c) The SFAM Company Secretary shall ensure that all follow-up actions are appropriately assigned and monitored.

Constitution

a) The Board is the governing body of Scottish Friendly Assurance Society Limited (SFAS). SFAS is authorised and regulated by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). The Board sets the Firm’s strategic aims and ensures that the appropriate resources are in place for SFAS to serve the best interests of its policyholders and members and meet its statutory objectives and regulatory obligations.

b) The Board has authority to direct the business of the Society and its subsidiary companies.

c) Subject and aligned to certain statutory limitations and duties, the content of the Memorandum and Rules of the Society, and to any special directions given by Delegates, the Board may exercise all powers of the Society.

d) These terms of reference (TOR) document the responsibilities, authority, organisation and membership of the Board.

Membership

a) The Board shall be comprised of a minimum of five and maximum of eleven Directors. The Board shall comprise of certain non-executive directors (including the Chair) and executive directors, providing a complimentary balance of skills and expertise to fully understand the strategy and the risks faced by the firm and should comply with the associated Society Memorandum and Rules.

b) The membership of the Board and matters such as the selection and re-election of directors are the responsibilities of the Board and are further detailed in the Memorandum and Rules. The recommendation for the appointment or removal of the members is delegated to the Nomination Committee.

c) The Chair and Senior Independent Director are elected by the Board of Management each year at the Board meeting following the AGM.

d) The Chair shall be an independent non-executive director and shall have specific responsibility for chairing and overseeing the performance of the Board. The role of the CEO is distinct and must be held by a different individual to that appointed to the role of Chair. The CEO has overall responsibility for the day-to-day business of SFAS and is an ex-officio member of the Board.

e) The quorum shall be half the number of Board Members (or the whole number nearest to but not exceeding one half the number of Board Members), one of whom must be an independent non-executive director.

Attendance at Meetings

a)  Only members of the Board have the right to attend Board meetings. The Company

b)  Secretary shall normally attend meetings. Other individuals, such as SFAS Executive Committee members and external advisers may be invited to attend all or part of any Board meeting at the discretion of the Chair.

c) The Chief Risk Officer may, opt to attend meetings where it is appropriate.

d) Board Members shall, wherever possible, attend all Board meetings. The individual should inform the Chair or Secretary if they will be absent for any reason and will cease to hold office if absent without permission for more than three consecutive meetings, unless the Board resolves otherwise.

Voting at Meetings

a) While every attempt is usually made to reach a consensus on a decision, the Chair may call a vote, which shall be taken by a show of hands, or, if the Chair sees fit, by poll. The result of the poll will be decided by a majority vote. In the event of a tie, the Chair will have the casting vote.

b) Attendees are not entitled to vote on matters before the Board.

c) The Chair must call for a poll if requested to by at least two Board Members.

d) A resolution in writing, including those made via email, which is approved by all entitled Board Members shall be as valid and effective as if passed at a Board Meeting. The same quorate will apply as if the meeting was in person

Frequency of Meetings

a) Meetings will be held a minimum of six times per year, and the Board will meet as necessary to conduct the business of the organisation.

b) Additional meetings may be arranged where decision-making is required outside of scheduled meetings.

c) A meeting of the Board may be called by the Chair or the Company Secretary whenever they think it fit to do so and, where possible, will provide members with a minimum of five working days’ notice.

Authority

a) The Board is authorised to make any decision it sees fit which is in the best interests of the Firm and which falls within the scope laid down in the Memorandum and Rules of the Firm, applicable legislation and regulation. It is authorised to seek any information it requires from any employee of SFAS or any of its subsidiaries and any appropriate external advisers order to assist the SFAS Board in carrying out its Duties.

b) The Board may delegate its responsibilities, duties and functions to one or more committees (each a Committee). Such Committees may make further delegations to relevant sub-committees, executive directors or holders of senior management

c) functions or certification functions of SFAS where and to the extent permitted by the relevant Committee’s terms of reference.

Principal functions

a) support the purpose of the Society and ensure that the values and culture align with that purpose and ethical and regulatory standards;

b) determine the strategy and policies of the Society

c) promote the long-term sustainable success of the Society by identifying opportunities to create and preserve value;

d) oversee meaningful engagement with stakeholders (including all colleagues) to take account of their views when taking decisions;

e) review the business performance of the Society [and its subsidiaries];

f) determine the nature and extent of significant risks and the appetite for risk acceptance;

g) ensure judgements and decisions are taken that preserve adequate capital and avoid conduct risks;

h) determine the basis on which the Society is managed by reserving duties for the Board and delegating duties to the Board’s Committees and to Executive Directors;

i)  ensure that the business of the Society is conducted with adequate professional skills with appropriate accounting records, systems of control and review of reporting.

Delegation

a)  The Board delegates certain of its powers and responsibilities either to committees through their terms of reference or to Executive Directors (individually or jointly through their job descriptions) or to individuals or committees on an ad hoc basis as recorded in Board minutes.

b) Principally the Board delegate the day-to-day running of the firm, including the governance of Executive Committees to the CEO. The determination of the Executive Committee Terms of Reference (TOR) content shall be delegated to the CEO, with the Board noting these terms of reference on an annual basis.

c) The Board takes some decisions after having received advice and recommendations from Committees, Executive Directors and others. Some matters are reserved by the Board for its decision and are not delegated.

d) Notwithstanding any other provision of these terms of reference or the provisions of the Memorandum and Rules, the Board can change, at any time, its duties and delegations, and is not obliged to follow recommendations received.

e) All the powers and authorities of the Board, both retained and delegated, will be reviewed at least once annually, at a Board meeting, to assess the operational effectiveness during the preceding year, and hence any changes which may be considered necessary at the time. This will include the terms of reference of all Board Committees.

Matters reserved for the Board

Notwithstanding such delegation of powers, the Board retains overall authority for the activities of the Society. In particular, in the following areas any changes must be approved by the Board.

a)  The Authorisation regime for bank accounts.

b) Any changes to investment parameters and deals or acquisitions and property deals outwith parameters and limits.

c) Annual approval and any subsequent changes to the Scottish Friendly’s budget and business plan.

d) The commencement of any new strategic projects and direction.

e) The approval and distribution of policyholder surpluses and bonuses following the recommendation of the With Profits Committee.

f) Acquisitions and disposals of subsidiaries, associates, joint ventures and trade investments not in the ordinary course of business (having considered the risks of change as considered by the Risk and Capital Committee).

g) Any other matter that either the Chair or CEO considers should be considered by the Board including matters of public interest, and matters that might affect the image or reputation of the Society.

h) The formation of ad hoc Board committees, governance arrangements or changes, including the terms of reference of the Board, or of any of its Committees and their terms of reference.

i) Approval of notice of resolutions and associated documentation for general meetings.

j) Recommendations to the members in respect of changes in the legal constitution of the Society.

k) The recommendation to members to appoint or reappoint or remove the auditors and the determination of their remuneration.

l) Approval of the annual report and accounts having received confirmation that the Audit Committee considers that, taken as a whole, the reporting is fair, balanced and understandable and provides the information necessary for members to assess the Society’s performance, business model, strategy and risk disclosures.

m) The approval of the annual Single Solvency and Financial Condition report (SFCR) and the Regular Supervisory Report (RSR).

n) The Whistleblowing Report and the Whistleblowing Policy.

o) The approval of the Own Risk and Solvency Assessment (the ORSA).

p) Directors’ and Officers’ insurance coverage.

q) The prosecution, defence or settlement of litigation or alternative dispute resolution involving an actual or potential liability to costs and sums that are either in excess of £1million or which are otherwise material to the interests of the Society.

r) The approval of the appointment, removal or suspension of any Director or Non Executive Director or Chair of the Society following recommendation of the Nomination Committee.

s)     Except where delegated to a Board Committee or the Executive, the appointment of retained corporate advisors and advisors in connection with matters reserved to the Board.

t) The annual evaluation of the Board’s performance.

u) Compliance with all relevant regulatory requirements and administrative provisions, with the day-to-day management of these responsibilities delegated to the CEO.

v) Approval of the firms risk strategy, risk preferences and risk appetite statements as recommended by the Board Risk Committee.

Reporting Procedures & Administration

a) The Company Secretary shall act as the Secretary of the Board and is responsible for circulating the notice calling the meeting and the agenda.

b) The decisions and discussions of the Board shall be evidenced by minutes which after approval by the Chair, shall be circulated to members of the Board and nominated attendees in sufficient time to allow for completion of relevant actions.

c) The Company Secretary shall ensure that all follow-up actions are appropriately assigned and monitored.

d) If the Chair and the Senior Independent Director are not available to chair a meeting, the remaining Directors present will elect one of themselves to chair the meeting.

e) The Chair may adjourn the meeting at his/her discretion provided a time and date for the resumption are agreed.

f) The Minutes of the meeting must be formally adopted at a subsequent Board meeting. Once adopted, they shall be deemed a true record of the meeting.

g) The Board will receive reports from Committee Chairs on Committees’ activities and responsibilities at Board meetings.

h) The Board will receive reports from the CEO and other senior officers on their responsibilities at Board meetings.