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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. PART 2 OF THIS DOCUMENT COMPRISES AN EXPLANATORY STATEMENT UNDER SECTION 897 OF THE COMPANIES ACT. If you are in any doubt about the action you should take, you should consult your stockbroker, bank manager, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom, or from another appropriately authorised financial adviser if you are taking advice in a territory outside the United Kingdom. If you have sold or otherwise transferred all of your Ordinary Shares, please return this document together with the accompanying documents (but excluding the personalised Forms of Proxy) to the Company. If you have sold or transferred part only of your Ordinary Shares, you should retain these documents and consult the Company. The accompanying Forms of Proxy are personalised. If you have recently purchased or been transferred Ordinary Shares, you should contact the Registrars by telephoning the helpline, details of which are set out on page 4 of this document, to obtain replacements of these documents. The distribution of this document in, into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves of, and observe, any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. RECOMMENDED CASH OFFER FOR NISA RETAIL LIMITED

BY CO­OPERATIVE GROUP HOLDINGS (2011) LIMITED to be effected by means of a scheme of arrangement under Part 26 of the Companies Act 2006

Nisa Shareholders should read carefully the whole of this document, any information incorporated by reference into this document and the accompanying Forms of Proxy. Your attention is drawn to the letter from the Chairman of Nisa in Part 1 of this document, which contains the unanimous recommendation of the Nisa Directors that you vote in favour of the Scheme at the Court Meeting and the Special Resolution at the General Meeting. A letter from Lazard on behalf of the Nisa Directors explaining the Offer and the Scheme in greater detail appears in Part 2 of this document.

The Scheme will require the approval of the Shareholders at the Court Meeting to be held at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds LS11 0ES at 11.00 a.m. on 13 November 2017. The Scheme will also require the approval of Nisa Shareholders of the Special Resolution at the General Meeting to be held at the same place at 11.15 a.m. on 13 November 2017 (or as soon thereafter as the Court Meeting has concluded or been adjourned). Notices of the Shareholder Meetings are set out in Part 9 and Part 10 respectively of this document.

The action to be taken by Nisa Shareholders in respect of the Shareholder Meetings is set out on page 3 of this document. Please read this information carefully. It is important that, for the Court Meeting, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of shareholder opinion. You are therefore strongly urged to complete, sign and return your Forms of Proxy or transmit a proxy instruction as soon as possible.

Completing and returning the Forms of Proxy will not prevent you from attending and voting in person at either Shareholder Meeting, or any adjournment of either Shareholder Meeting, if you so wish and are so entitled. If you wish to attend any of the meetings in person, please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the Company reserves the right to refuse you entry if you do not bring these documents with you.

If you have any questions relating to this document (or any information incorporated by reference into this document), the Shareholder Meetings or the completion and return of the Forms of Proxy, please telephone the helpline, details of which are set out on page 4 of this document.

IMPORTANT NOTICES Lazard is acting exclusively for Nisa and no one else in connection with the Offer and will not be responsible to anyone other than Nisa for providing the protections afforded to clients of Lazard or for providing advice in connection with the Offer or any matter referred to herein. Neither Lazard nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard in connection with this document, any statement contained herein, the Offer or otherwise.

Neither the Offer nor this document is subject to the applicable requirements of the City Code on Takeovers and Mergers.

Overseas Shareholders The availability of the Offer to Overseas Shareholders and the distribution of this document in, into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves of, and observe, any such restrictions. Failure to comply with any such restrictions may constitute 169882 Proof 6 Tuesday, October 24, 2017 17:00

a violation of the securities laws of any such jurisdiction. If any Overseas Shareholder remains in any doubt, it should consult an appropriate independent professional adviser in its relevant jurisdiction without delay. To the fullest extent permitted by applicable law, the companies and persons involved in the Offer disclaim any responsibility or liability for the violation of such restrictions by any person. This document has been prepared for the purposes of complying with the law of England and Wales and the information disclosed may not be the same as that which would have been disclosed if this document and the accompanying documents had been prepared in accordance with the laws of jurisdictions outside of England and Wales. Neither this document nor any of the accompanying documents are intended to, and do not, constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval pursuant to the Scheme or otherwise, in any jurisdiction in which such offer, invitation or solicitation is unlawful.

Forward­looking statements This document (including any information incorporated by reference into this document) contains statements about the Co­op and Nisa that are or may be forward­looking statements which are prospective in nature. All statements other than statements of historical facts may be forward­looking statements. Often, but not always, forward­looking statements can be identified by the use of forward­looking words such “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “estimates”, “synergy”, “cost­saving”, “projects”, “goal” or “strategy” or, words or terms of similar substance or the negative thereof. Forward­looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the Co­op’s or Nisa’s operations and potential synergies resulting from the Offer; and (iii) the effects of government regulation on the Co­op’s or Nisa’s business. These forward­looking statements are not guarantees of future financial performance. Such forward­looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward­looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward­looking statements, which speak only as of the date of this document. All subsequent oral or written forward­looking statements attributable to the Co­op or Nisa or any of their respective members, directors, officers or employees or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. The Co­op and Nisa disclaim any obligation to update any forward­looking or other statements contained in this document (or in the information incorporated by reference into this document), except as required by applicable law.

No profit forecasts or estimates No statement in this document (or any information incorporated by reference into this document) is intended as a profit forecast or estimate for any period and no statement should be interpreted to mean that earnings for the Co­op or Nisa, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for the Co­op or Nisa, as appropriate. Information relating to Nisa Shareholders Please be aware that addresses, electronic addresses and certain information provided by Nisa Shareholders, persons with information rights and other relevant persons for the receipt of communications from Nisa, may be provided to the Co­op following the date of this document.

Publication on websites and availability of hard copies This document will be available free of charge (subject to any applicable restrictions relating to persons resident in Restricted Jurisdictions) on the following website during the course of the Offer: • http:corporate.nisaretail.com/shareholders. Nisa Shareholders, persons with information rights in Nisa and any other person to whom this document has been sent, may request a hard copy of this document (and any information incorporated by reference into this document) by contacting Lazard during business hours by telephone on 020 7187 2000 or by submitting a request in writing to Lazard at Lazard, 50 Stratton Street, Mayfair, London W1J 8LL. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines will be open between 9.00 a.m. to 5.00 p.m., Monday to Friday excluding public holidays in England and Wales. Unless such a person makes such a request, a hard copy of this document and any such information incorporated by reference in it will not be sent to that person. Such persons may also request that all future documents, announcements and information to be sent to them in relation to the Offer be in hard copy form.

Rounding Certain figures included in this document have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Definitions Certain words and terms used in this document are defined in Part 8 of this document.

Date This document is dated 25 October 2017.

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ACTION TO BE TAKEN

1. Voting at the Shareholder Meetings The Scheme will require the approval of the Scheme Shareholders at the Court Meeting to be held at 11.00 a.m. on 13 November 2017 at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds LS11 0ES. The Scheme will also require the approval of Scheme Shareholders of the Special Resolution at the General Meeting to be held at the same place at 11.15 a.m. on 13 November 2017 (or as soon thereafter as the Court Meeting has concluded or been adjourned). Notices of the Shareholder Meetings are set out in Part 9 and Part 10 respectively of this document.

2. Please check you have received with this document: a. a WHITE Form of Proxy for use at the Court Meeting; b. a YELLOW Form of Proxy for use at the General Meeting; and c. a reply­paid envelope for use in the United Kingdom. If you have not received these documents, please contact the Registrars on the helpline, details of which are set out on this page 4 of this document.

3. To vote at the Shareholder Meetings using the Forms of Proxy: Whether or not you plan to attend the Shareholder Meetings, please complete the enclosed Forms of Proxy in accordance with the instructions printed on them and return them to: Computershare Investor Services Plc at The Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible and, in any event, so as to be received by no later than: a. 11.00 a.m. on 9 November 2017 in the case of the WHITE Form of Proxy for the Court Meeting; and b. 11.15 a.m. on 9 November 2017 in the case of the YELLOW Form of Proxy for the General Meeting, (or in the case of any adjournment, not later than 48 hours (excluding non­working days) before the time fixed for the adjourned meeting). A reply­paid envelope is provided for use in the United Kingdom only. Forms of Proxy returned by fax will not be accepted. If the WHITE Form of Proxy for use at the Court Meeting is not received by the Registrars by 11.00 a.m. on 9 November 2017, it may be handed to the Chairman of the Court Meeting before the taking of the poll at the Court Meeting. However, if the YELLOW Form of Proxy for the General Meeting is not received by the Registrars by 11.15 a.m. on 9 November 2017, it will be invalid.

4. Electronic appointment of proxies: Shareholders entitled to attend and vote at the Shareholder Meetings may appoint a proxy electronically by logging on to www.investorcentre.co.uk/eproxy. You will need your Shareholder Reference Number (SRN) and Personal Identification Number (PIN) as shown on your Forms of Proxy. For an electronic proxy appointment to be valid, your appointment must be received by the Registrars before 11.00 a.m. on Thursday 9 November 2017 in respect of the resolution at the Court Meeting and before 11.15 a.m. on 9 November 2017 in respect of the resolution at the General Meeting. If you have any difficulties using the service please contact the Company’s Registrars, on the helpline, details of which are set out on this page 4 of this document. Completing and returning the Forms of Proxy or appointing a proxy electronically will not prevent you from attending and voting in person at the Shareholder Meetings, or any adjournment of the Shareholder Meetings, if you so wish and are so entitled. IT IS IMPORTANT THAT, FOR THE COURT MEETING, AS MANY VOTES AS POSSIBLE ARE CAST SO THAT THE COURT MAY BE SATISFIED THAT THERE IS A FAIR AND REASONABLE REPRESENTATION OF SCHEME SHAREHOLDER OPINION. YOU ARE THEREFORE STRONGLY URGED TO COMPLETE, SIGN AND RETURN YOUR FORMS OF PROXY OR TRANSMIT A PROXY INSTRUCTION (ELECTRONICALLY ) AS SOON AS POSSIBLE. IF YOU WISH TO ATTEND ANY OF THE MEETINGS IN PERSON, PLEASE NOTE THAT TO GAIN ACCESS TO THE MEETING YOU MUST BRING IDENTIFICATION TO VERIFY YOUR IDENTITY. IF YOU ARE REPRESENTING A SHAREHOLDER WHICH IS A CORPORATE ENTITY, YOU NEED TO DEMONSTRATE THAT YOU HAVE AUTHORITY OF THAT SHAREHOLDER TO ATTEND AND VOTE. YOU CAN DO THIS BY BRINGING WITH YOU A SIGNED LETTER AUTHORISING YOU TO ACT ON THE SHAREHOLDER’S BEHALF. PLEASE NOTE THAT THE COMPANY RESERVES THE RIGHT TO REFUSE YOU ENTRY IF YOU DO NOT BRING THESE DOCUMENTS WITH YOU.

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HELPLINE If you have any questions relating to this document (or any information incorporated by reference into this document), the Shareholder Meetings or the completion and return of the Forms of Proxy, please telephone the Company’s Registrars, Computershare Investors Services Plc, on 0370 707 1127 from within the United Kingdom or on +44 3707071127 if calling from outside the United Kingdom. Lines will be open between 9.00 a.m. to 5.00 p.m., Monday to Friday excluding public holidays in England and Wales. Calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Acquisition nor give any financial, legal or tax advice.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The following indicative timetable sets out the expected dates for implementation of the Scheme. All dates and times are based on Nisa’s and the Co­op’s current expectations and are subject to change.

Event Time and/or date Latest time for lodging Forms of Proxy for the:

Court Meeting (WHITE Form of Proxy) 11.00 a.m. on 9 November 20171

General Meeting (YELLOW Form of Proxy) 11.15 a.m. on 9 November 20172

Voting Record Time 6.00 p.m. on 9 November 20173

Court Meeting 11.00 a.m. on 13 November 2017

General Meeting 11.15 a.m. on 13 November 20174

Certain of the following dates are subject to change (please see note (5) below):

Court Hearing to sanction scheme date to be confirmed following fulfilment of the Conditions including the Merger Control Condition being “D”

Scheme Record Time 6.00 p.m. on D + 1 Business Day

Effective Date D+1 Business Day

Settlement of the Initial Consideration payable under the Offer Within 14 days of the Effective Date

Long­Stop Date 31 July 20185

1 The WHITE Form of Proxy for the Court Meeting should be received by the Registrars before 11.00 a.m. on 9 November 2017, or, if the Court Meeting is adjourned, not later than 48 hours (excluding non­working days) before the time fixed for the holding of the adjourned Court Meeting . WHITE Forms of Proxy not so received may be handed to the Chairman of the Court Meeting before the taking of the poll at the Court Meeting.

2 The YELLOW Form of Proxy for the General Meeting must be lodged with the Registrars before 11.15 a.m. on 9 November 2017 in order for it to be valid, or, if the General Meeting is adjourned, not later than 48 hours before the time fixed for the holding of the adjourned General Meeting (excluding non­ working days). The YELLOW Form of Proxy cannot be handed to the Chairman of the General Meeting at that meeting.

3 If a Shareholder Meeting is adjourned, only those Scheme Shareholders (in the case of the Court Meeting) and Nisa Shareholders (in the case of the General Meeting) on the register of members of the Company at 6.00 p.m. on the day which is two days (excluding non­working days) before the adjourned meeting will be entitled to attend and vote.

4 To commence at the time fixed or, if later, immediately after the conclusion or adjournment of the Court Meeting.

5 This is the last date on which the Scheme may become effective unless the Co­op and Nisa, with the approval of the Court (if required), agree a later date.

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CONTENTS

Page Part 1 Letter from the Chairman of Nisa 6

Part 2 Explanatory Statement 14

Part 3 Conditions of the Scheme 29

Part 4 Taxation 33

Part 5 Financial Information 35

Part 6 Additional Information 36

Part 7 The Scheme of Arrangement 44

Part 8 Definitions 54

Part 9 Notice of Court Meeting 58

Part 10 Notice of General Meeting 61

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PART 1

LETTER FROM THE CHAIRMAN OF NISA

NISA RETAIL LIMITED (Incorporated in England and Wales with registered number 00980790)

Directors: Registered office: Peter Christopher Hartley (Non­Executive Chairman) Member Support Centre Arnu Kumar Misra (Chief Executive Officer) Waldo Way Robin Brown (Chief Financial Officer) Normanby Enterprise Park Bharatkumar Jashbhai Amin (Member Director) Scunthorpe Neil Henry Ashworth (Independent Non­Executive Director) North Lincolnshire Sukhjinder Singh Gill (Member Director) DN15 9GE Mukhtar Singh Goraya (Member Director) Matthew Alexander Hunt (Member Director) Vimanji Nathaji Odedra (Member Director) Kamraj Singh Sangha (Member Director) Alison Strong (Member Director) Jetinder Singh Sunner (Member Director) Sukhwinder Singh Tiwana (Member Director)

25 October 2017

To all holders of Ordinary Shares

Dear Shareholder,

Recommended cash offer for Nisa by the Co­op

1. Introduction On 10 October 2017, the boards of Nisa and the Co­op announced that they had reached agreement on the terms of a recommended offer by the Co­op to acquire the entire issued share capital of Nisa.

I am writing to you on behalf of the Nisa Board to explain the background to, and terms of, the Offer, to encourage you to vote at each of the Court Meeting and the General Meeting to be held on 13 November 2017 to consider the Offer, and to explain why the Nisa Board is unanimously recommending that Nisa Shareholders vote in favour of the resolutions to be put at those meetings.

2. The Offer It is proposed that the Offer be implemented by means of a Court­sanctioned scheme of arrangement under Part 26 of the Companies Act, which requires the approval of Nisa Shareholders at the Court Meeting and General Meeting and the sanction of the Court.

Under the terms of the Offer which is subject to the Conditions (including the approval by the CMA as set out in the Merger Control Condition) and further terms set out in Part 3 (Conditions of the Scheme) and Part 7 (The Scheme of Arrangement) of this document, Scheme Shareholders (other than the Trust) at the Scheme Record Time will receive:

• a payment of up to £20,000 in cash per Scheme Shareholder within 14 days of the Effective Date (the “Initial Consideration”)

• a payment of up to £1,654 in cash per Scheme Share in three equal instalments payable in April 2019, April 2020 and April 2021 (the “Deferred Consideration”)

• a payment to each Scheme Shareholder up to an additional 1% of the rebateable turnover for each such Scheme Shareholder payable quarterly for four years from the Effective Date (the “Rebate Consideration”)

(the “Scheme Consideration”).

The Nisa Retail Members’ Trust will receive consideration for its shares of an amount equal to the amount of its loan owed to the Company at the Scheme Record Time (the “Outstanding Loan Amount”).

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The Offer values the entire issued ordinary share capital of Nisa at £137,463,406, (plus the Outstanding Loan Amount repayable by the Trust to the Company) and in no circumstances shall the total aggregate amount of Scheme Consideration payable by Co­op to Scheme Shareholders exceed such amount.

Further details of the terms of the Offer are set out below.

Nisa Shareholders should read the whole of this document carefully to make themselves aware of the conditions attaching to payment of the Scheme Consideration and the potential for deductions to be made from the Scheme Consideration.

3. Background to and the Co­op’s reasons for the Offer The Co­op’s food business has a stated strategy to grow its scale, to compete in the increasingly competitive convenience retail landscape; one way of achieving this is through wholesale and franchise. The Co­op believes that an acquisition of Nisa would allow it to access commercial wholesale capability, at scale and at pace, and acquire a successful wholesale brand and generate greater scale for the Co­op, the Nisa members and the Independent Societies with whom it has existing relationships.

4. Co­op strategic plans The Co­op wishes, if the Acquisition is successful, to bring together the Co­op’s history as a wholesaler for the Independent Societies with whom it has existing relationships and a strong Nisa brand, to provide future growth potential and the platform to service operators with an entrepreneurial spirit.

It believes that powered by the Co­op, Nisa can provide a safe harbour for independent retailers attracted by a good balance between greater scale and flexibility to trade their business in their way.

In turn, the Co­op believes that the future proposition will attract new customers (independent retailers, commercial wholesale partners of scale and franchisees) enhancing the benefits for all.

The Co­op intends to achieve this through a step change in the Nisa proposition, coupled with key elements of what makes Nisa great today. This will include a continued voice for the Nisa members through a Nisa Monitoring Group.

The Co­op currently intends to maintain Nisa as a separate legal entity, including the Members Support Centre, which underpins support to all members. The Co­op does not intend to make changes to the Nisa symbol brand, existing member support, the delivery network, IT infrastructure or existing electronic point of sale systems. The only changes the Co­op intends to make to the Membership Agreement and member service level agreements immediately after the Effective Date are in order to remove references to members holding shares in the Company.

To further supplement the Nisa performance, the Co­op intends to enable the Nisa members to apply to become Co­op franchisees. Franchisees would have access to the full Co­op brand/fascia, the Co­op membership proposition and additional services.

5. Management and employees The Co­op has confirmed that it is keen to create an efficient combined business, but does not envisage any significant immediate changes to the operational structure, other than the buying teams working together.

The existing Nisa Executive team will be supplemented with the Co­op representatives, and the CEO of Nisa shall be appointed to the Co­op Food executive team.

Strong communication between the businesses shall be ensured, taking the best ways of working into the future, from both organisations.

Furthermore, we believe that the Co­op’s values are aligned with the mutual history of Nisa and the Co­op’s mission, “a better way of doing business for you and your communities”, mirrors Nisa’s focus on making a difference at local level, whilst ensuring the Company remains ethical, responsible and sustainable nationally.

6. Background to and reasons for the recommendation In 2015, we appointed new leadership to deliver a transformation plan for Nisa. The overriding objective of this plan was to deliver an organisation which helps our members flourish. As previously communicated, we have made considerable progress with this plan. We have delivered improved business performance each year, with an EBITDA last year of £8.6m. We have also delivered an improved financial position for the Company, with new, improved and expanded finance facilities provided by HSBC Invoice Finance (UK) Limited and Wells Fargo Capital Finance (UK) Limited from 23 June 2017. This improvement to our business was demonstrated in the increased competition to provide those finance facilities.

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When embarking on our transformation plan, we could not have foreseen the amount of corporate activity in our market. From a wholesale perspective, our main competitors included (but were not limited to) Spar, Booker, One Stop and Bestway. Against these players, we believe we provide a very compelling proposition for our members. Over the course of the last year, we have seen the scale and buying power of our competition increase; Tesco has entered the market (subject to approval of their acquisition of Booker) and Morrisons signed a supply deal with McColl’s. It is also clear to us that other multiples are looking to enter the wholesale market.

At the same time, our convenience shopper continues to evolve. We are hearing from our members, and seeing across the sector, that top­up shopping is increasing. Shoppers have greater focus on fresh and healthy food, and are demanding local and higher quality products alongside a strong own­label offering, which helps to differentiate against other competition. These are all elements of a member proposition which are strongest when backed by considerable scale, something which we do not have compared to new entrants in the market.

It is within this context that we want to offer our members an exceptional value proposition that delivers for your customers, alongside excellent service and independence. We believe that an acquisition, by the right partner, who provides assurances over your independence and maintaining the excellent service you are used to, is the best way to deliver this.

In addition to the attractive deal value, the Co­op offers a leading proposition in the convenience sector that we believe can best serve our members. The Co­op’s stated objective is to be “the number one convenience retailer in the UK”, and it is a clear specialist in our field having won the Convenience Retailer of the Year at the Retail Industry Awards for the last two years.

With a buying power of c.£6bn, we believe that the Co­op will materially improve the scale of Nisa and strengthen its ability to deliver competitive prices to members in the face of the changing grocery market. The Co­op through its strategy wants to attract additional independents, further enhancing the scale of the whole group and creating a virtuous circle of value. The Co­op’s range is extensive (over 23,700 products), particularly in fresh and chilled (over 7,800 lines), serving small convenience stores through to 35,000 sq ft supermarkets.

Furthermore, the Co­op’s private label is a leading household brand:

• having won 14 awards at this year’s Grocer Own Label awards;

• which has achieved double­digit like­for­like (LFL) growth over the last three years;

• helping the Co­op to win the Convenience Retailer of the Year in 2016 and 2017; and

• achieving 3.5% overall LFL growth for the Co­op Food business in the first half of 2017.

Importantly for our members, we believe that the Co­op understands the importance of your independence and mutuality. The Co­op wants members to continue to run their business with the same entrepreneurial spirit and freedom that makes Nisa what it is today. We believe that with these common values in mind, the Co­op will deliver significant benefits to members and shareholders, while maintaining Nisa’s existing delivery and service.

The Nisa Directors have taken into account the current market conditions, including the short term and long term challenges and opportunities for the business, and considered the Acquisition in relation to the value and prospects of the underlying business in reaching its conclusion. Accordingly, the Nisa Directors unanimously recommend that Nisa Shareholders vote in favour of the Scheme at the Court Meeting and the Special Resolution relating to the Scheme and the Acquisition to be proposed at the General Meeting.

7. Further information on the Offer (Scheme Consideration) The Scheme Consideration comprises the Initial Consideration, Deferred Consideration and Rebate Consideration, further details of which are set out below.

As well as the conditions set out further below, to be eligible to receive the Scheme Consideration, you must be on the register of members of Nisa as a Nisa Shareholder and remain on the register of members at the Effective Date. Nisa members who are “Deemed Members” under the Membership Agreement (and so do not hold Ordinary Shares) and Nisa Shareholders who cease to trade with Nisa and so transfer their Ordinary Shares before the Effective Date are therefore not eligible to receive any Scheme Consideration. A Nisa Shareholder who transfers his business to a person (or a company) which the Co­op (or a nominated executive or executives in the Co­op Group) considers is a “family member” of the Nisa Shareholder either before or after the Effective Date and continues to trade with Nisa shall remain eligible to receive any Scheme Consideration.

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The Scheme Consideration has been agreed with the Co­op on the basis of there being 1,186 Scheme Shareholders in Nisa (excluding the Trust) and Nisa having 50,389 Ordinary Shares in issue (excluding the shares held by the Trust), in each case as at 21 September 2017. The Nisa Directors are confident that these numbers of Nisa Shareholders and Ordinary Shares are accurate. However if the numbers were to be different the amount of Scheme Consideration payable to each Scheme Shareholder and/or in respect of each Scheme Share would be affected as described further below.

In the Bid Conduct Agreement, Nisa has undertaken not to allot or issue any new Ordinary Shares and not to register any transfers of Ordinary Shares. With the Co­op’s agreement, the Company is carrying out a small rationalisation exercise in respect of up to 37 holders of Ordinary Shares whose identity is not the same as the company or person that currently trades with Nisa. This exercise is expected to be completed before the Effective Date such that the trading member and the registered shareholder should be identical in each case.

The register of members of Nisa is therefore currently closed (save as aforesaid) (and has been closed since 21 September 2017). Any person joining Nisa as a trading member from 21 September 2017 joins as a Deemed Member. If any of the Conditions are not satisfied or the Scheme otherwise does not proceed to completion, applications for the transfer or subscription of Ordinary Shares will be re­opened at a date which will be communicated to all Nisa members.

Initial Consideration Up to £20,000 will be payable to each Scheme Shareholder (other than the Trust), after the Effective Date.

This amount is based on there being 1,186 Scheme Shareholders (other than the Trust), as at 21 September 2017 and that number not increasing before the Effective Date. If a greater number of Scheme Shareholders (other than the Trust) are found to exist at the Effective Date, the £20,000 per Scheme Shareholder would reduce, so that the total payment remains £23,720,000. Conversely, however, if there are fewer than 1,186 Scheme Shareholders (not counting the Trust) on the Effective Date, the £20,000 per Scheme Shareholder payment is not increased.

If there is any Leakage (see below) which is identified prior to the Effective Date, then the Initial Consideration payable to Scheme Shareholders would be reduced by the amount of such Leakage.

The Nisa Board is confident that the number of Scheme Shareholders of 1,186 is accurate. Furthermore, based on the information it has to date, the Nisa Board does not expect that there will be any Leakage and that therefore the £20,000 per Scheme Shareholder payment should be made in full.

Deferred Consideration A payment totalling £1,654 per share will be made to Scheme Shareholders (other than the Trust) in three equal amounts (subject to the conditions below), within 10 Business Days of each of 31 March 2019, 2020 and 2021 (each an “Instalment Date”). The two­week period is to allow time for the rebateable turnover condition to be calculated for each Scheme Shareholder.

This is based on there being 50,389 issued shares as at 21 September 2017 (excluding the shares held by the Trust) and that number not increasing before the Effective Date. In the event that there are a greater number of shares, the price per share will be reduced such that the total value of the Deferred Consideration remains at £83,343,406. The Nisa Board is confident that this number of shares is accurate and has resolved not to allow any transfers of shares to existing or new members following 21 September 2017 (save for the rationalisation exercise and business transfers to family members referred to above).

There are two additional conditions that apply to the Deferred Consideration:

1. the Scheme Shareholder remains a Nisa trading member at the relevant Instalment Date and has not, on or prior to the relevant Instalment Date, served notice, or had notice served on it, to terminate its status as Nisa trading member in accordance with the Membership Agreement; and

2. in the 12­month periods ending on the relevant Instalment Date (each a “Relevant Calculation Period”), the Scheme Shareholder has Rebateable Turnover (defined below) equal to or greater than its Rebateable Turnover for the 12­ month period ended on 2 July 2017 (or in the case of any Scheme Shareholder whose trading with the Company commenced after 2 July 2016, the period from the start of such trading up to 2 July 2017).

“Rebateable Turnover” means purchases of products (excluding tobacco and spirits) net of VAT.

If a Scheme Shareholder fails to meet condition 1 above on an Instalment Date, no payment of Deferred Consideration shall be due to that Scheme Shareholder in respect of that Instalment Date or any future Instalment Date (other than, for the avoidance of doubt, any Deferred Consideration already received by such Scheme Shareholder).

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If a Scheme Shareholder meets condition 1 above but fails to meet condition 2 above in any Relevant Calculation Period, then their entitlement to the Deferred Consideration is reduced in proportion to the amount by which the Scheme Shareholder’s Rebateable Turnover for the Relevant Calculation Period in question was less than the Hurdle Amount (ie a pro rata reduction).

If there is any Leakage (see below) which is identified after the Effective Date, then the first available Deferred Consideration payment to Scheme Shareholders would be reduced by the amount of such Leakage. Based on its current information, the Nisa Board does not expect that there will be any Leakage and that therefore the Deferred Consideration should not be affected by Leakage.

Rebate Consideration Scheme Shareholders will receive, subject to the conditions below, a payment equal to an additional 1% of such Scheme Shareholder’s Rebateable Turnover for the four years following the Effective Date (the “Rebate Consideration”). This is separate from any existing rebate that any Nisa Shareholder is entitled to.

To be entitled to the Rebate Consideration the following condition applies (the “Rebate Consideration Qualifying Condition”):

• the Scheme Shareholder remains a Nisa trading member at the relevant quarterly payment date and has not, on or prior to the relevant quarterly payment date, served notice, or had notice served on it, to terminate its membership of Nisa in accordance with the Membership Agreement.

There is also a cap on the total Rebate Consideration payable in aggregate to the Scheme Shareholders as a whole in any given year through the four years of £7.6 million per year (the “Rebate Consideration Cap”).

Subject to having satisfied the Rebate Consideration Qualifying Condition (as defined above), at the end of each Quarterly Period in any Rebate Year each Scheme Shareholder shall receive a payment of 1% of their Rebateable Turnover for the relevant Quarterly Period (or, if lower, an amount that is 1% of one quarter of such Scheme Shareholder’s Hurdle Amount). However, the payment to Scheme Shareholders at the end of the fourth Quarterly Period in each Rebate Year will be adjusted to ensure they have each received an amount equal to 1% of their Qualifying Rebateable Turnover in the relevant Rebate Year. This final payment smooths out the impact of the quarterly cap on seasonal fluctuations in Rebateable Turnover.

In addition, if the total amount to be paid to all Scheme Shareholders in a Rebate Year is less than 1% of the total Rebateable Turnover of all of the Scheme Shareholders in that Rebate Year (up to the Rebate Consideration Cap) then the difference between those amounts (the “Surplus”) shall be paid to those Scheme Shareholders who have satisfied the Rebate Consideration Qualifying Condition at the relevant payment date and exceeded their applicable Hurdle Amount in that Rebate Year. The Surplus shall be paid to the qualifying Scheme Shareholders in such proportions as the Co­op, acting reasonably, directs.

Leakage As part of the Bid Conduct Agreement entered into by the Company on 9 October 2017, as is typical of a deal of this type, there are restrictions on what payments and value can leave the Company between the relevant accounting date (which in this case is 2 July 2017) and the Effective Date. It means that the Nisa business should continue in the ordinary course and that there should be no material changes to rebates, management salaries and bonuses or significant disposals of assets (this is not an exhaustive list). In the event that value “leaks” out of Nisa during the period from 2 July 2017 to the Effective Date, then this would be classified as “Leakage”. Further details of Leakage is set out in paragraph 8 of Part 2 of this document

If Leakage occurs, then the Initial Consideration and/or Deferred Consideration payable to Scheme Shareholders (other than the Trust) will be reduced on a £ for £ basis equal to the amount of the Leakage.

Based on its current information, the Nisa Board does not expect that there will be any Leakage and that therefore the deal consideration should not be affected by Leakage.

8. Further Information on the Offer (Future Member Proposition) As part of the Offer made to Scheme Shareholders, the Co­op expects to improve the member proposition. Key benefits of the member proposition proposal by the Co­op include:

Cost of goods Collectively, the Co­op and Nisa would expect to purchase more than c.£7bn of products per year and represent 7,000 stocking points within the UK, which should result in better deals from suppliers. The Co­op also acknowledges that if the

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member proposition is not compelling, members will have the opportunity to choose other partners and therefore the Co­op would fail to achieve their broader ambition from the investment in this partnership. To ensure appropriate transparency, the Co­op has confirmed that it will provide Nisa members with a cost price index, fully weighted for both volume and promotions, on a monthly basis. The competitiveness of that index against both existing competitors, and any future competitors, will be a key KPI for the Co­op and Nisa commercial teams. The Co­op has confirmed its intention that Nisa members will retain independence to operate their shops in the way they choose, and to source their range from whomever they choose; the Co­op simply hopes to create such a compelling proposition that members will want to buy more from Nisa.

Improvement to range The Co­op has an extensive range (over 23,700 lines) that it has indicated will be available to members following a successful acquisition and implementation period. In particular, the Co­op has key strengths as compared with the current Nisa proposition in fresh, chilled and frozen, as well as food to go and local lines, that will allow members to cater to the growth of these categories, as well as the growing shopper trend towards convenient, top­up shopping. This range has helped the Co­op to deliver continued increases in sales, demonstrated in recent results of 14 consecutive quarters of convenience sales growth.

Recent wholesale trials have generated encouraging sales uplifts driven by improved and enhanced product ranges, all of which will become available to Nisa members upon acquisition of the business.

Furthermore, the Co­op understands the importance of national, regional and local ranges, and has increased their local range to great effect, with 35% like­for­like performance in local lines in recent store launches.

The Co­op’s experience suggests local products generate sales and profit, and are also loved by customers.

In addition, the breadth of the Co­op’s non­food offering currently helps support the Co­op’s largest stores; specifically, 377 stores over 7,000 sq ft including 156 over 10,000 sq ft and the largest at 35,000 sq ft.

Market leading private label The Co­op has indicated that members will gain access to the Co­op branded private label range of over 3,500 products, to support members in offering a leading private label proposition. These include increasingly important innovation categories in areas such as “Free From”, “Food To Go” and seasonally relevant categories.

The Co­op’s private label has won numerous awards over the last year, including 14 at this year’s Grocer Own Label Awards. Every product is benchmarked against its competitive set and is targeted to at least match the best in class for taste, texture, appearance, aroma and nutritional value.

We are informed that, following completion of the Acquisition, the Co­op will make its full range of own label products available to Nisa, expecting stronger volumes than currently achieved through the Heritage range.

Appropriate in­store marketing materials will be made available to support the Co­op brand within members’ stores.

Rebates We have been informed that there are no plans to alter members’ current rebate structure. The additional 1% rebate to Scheme Shareholders as part of the financial consideration for the shares in the Company shall be paid in addition to the current rebate structure under the Membership Agreement.

Over time, the Co­op hopes to understand opportunities to improve and simplify the rebate structure through conversations with the Nisa Monitoring Group. The intention is to incentivise growing business volumes, further enhancing the scale of the combined organisation.

Franchise The Co­op is currently trialling and learning lessons from a seven­store franchise pilot. The Co­op has informed us that the results of its recent trials are very encouraging with significant sales uplifts.

The Co­op expects to articulate its franchise model to the Nisa Monitoring Group and discuss the timetable for further trials. The choice to franchise will be a joint one and the Co­op recognises its offer will need to be attractive relative to the competitive set.

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Operations The Co­op has made it clear that the ethos of the Acquisition is evolution, and not revolution, of Nisa. It has confirmed that it intends to focus on stability first, ensuring a smooth implementation, followed by identifying further improvements to the Nisa proposition.

Nisa will remain a separate legal entity within the Co­op Group after the Effective Date, including the Members Support Centre (MSC), which underpins support to all members. The Co­op has confirmed that there are no planned changes to member SLAs, the Nisa symbol brand, existing member support (in the form of Retail Development Managers), the delivery network, IT infrastructure or existing EPOS systems. The Co­op is planning improvements to some elements over time, such as the efficiency of the distribution network and investment in the Nisa EPOS systems. As such, the Co­op has confirmed that members will continue to receive the same service that they do today. We understand that members will also be provided with the same level of 3­week promotions that they currently receive, but this is expected to move to a rolling 1­week cycle.

Values, independence and mutuality In addition to the benefits stated above, the Co­op has confirmed that members may choose to retain key aspects of independence that they enjoy today. Members will continue to have a voice. The Co­op has confirmed that insight from members is valued highly, and continuation of this shall be approached in two ways:

1. continuation of existing senior management engagement and regional meetings; and

2. a Nisa Monitoring Group, representing the Nisa voice. This group will meet 10 times a year with the Nisa Executive and the Co­op Food Commercial Team. Representatives on this group will be democratically elected by Nisa members.

The Co­op has confirmed that it is keen to create an efficient combined business, but does not envisage any significant immediate changes to the operational structure, other than the buying teams working together. The existing Nisa Executive team will be supplemented with Co­op representatives, and the CEO of Nisa shall be appointed to the Co­op Food Executive. Strong communication between the businesses shall be ensured, taking the best ways of working into the future, from both organisations.

Furthermore, we believe that the Co­op’s values are aligned with the mutual history of Nisa. The Co­op’s mission, “a better way of doing business for you and your communities”, mirrors Nisa’s focus on making a difference at local level, whilst ensuring the Company remains ethical, responsible and sustainable nationally.

The Co­op has said that it intends to work with the Making A Difference Locally charity, and to understand how it can fit together with Co­op community and charity activities; exemplifying the cultural fit between our two organisations.

9. Irrevocable undertakings Each of the Member Directors have undertaken to the Co­op to use their reasonable endeavours to procure that the company in which they respectively have an interest and which owns shares in Nisa shall vote in favour of the Scheme at the Court Meeting and the Special Resolution to be proposed at the General Meeting. Further details of the companies owning shares in Nisa and in which each Member Director has an interest are set out in Part 6.

The Nisa Retail Members’ Trust has undertaken that it will consent to the Scheme at the Court Meeting.

10. Bid Conduct Agreement On 9 October 2017, the Company and the Co­op entered into a bid conduct agreement to govern the terms on which the Offer was to be made in the form of the Scheme and to regulate the conduct of the Company during the period up to the Effective Date.

Further information on the Bid Conduct Agreement is set out in Part 6 of this document.

11. AGM, the Scheme and the Shareholder Meetings As part of the Scheme process, there will be two meetings which will be held on 13 November 2017 as follows: • a Court Meeting which will be convened to enable Scheme Shareholders to consider and, if thought fit, approve the Scheme; and • a General Meeting which will be convened to enable Nisa Shareholders to consider and, if thought fit, approve a special resolution to make certain amendments to the Nisa Articles to facilitate the Scheme.

Notices of the Court and General Meetings are set out in Parts 9 and 10, respectively of this document.

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As part of the Scheme process, one of the resolutions to be considered at the General Meeting is to amend Nisa’s Articles to dispense with the requirement to hold an Annual General Meeting of the Company in 2017 (“AGM”). As the resolution approving the amendments to Nisa’s Articles will only be known on 13 November 2017, the Company shall also in the meantime take steps, in the ordinary course, to commence the nominations process and to start to make arrangements to hold the Company’s AGM which is due to take place on Tuesday 19 December 2017. You will receive a separate letter commencing the nomination process for member director vacancies.

If the resolutions at the Court and General Meetings are successfully passed, then the Company shall dispense of the requirement to hold this year’s AGM which will mean that the nomination process, which will still be underway at the time of the Court and General Meetings, shall also be terminated and no AGM shall be held this year.

Under the terms of the Scheme, the Nisa Retail Members’ Trust, is treated as a separate class of shareholder, with the remaining shareholders constituting a single class. This is because the Nisa Retail Members’ Trust is the only shareholder that is permitted under Nisa’s Articles to be a shareholder without having a trading relationship with the Company. Additionally, there are other unique features to the Trust’s shareholding, including the fact that the 250 shares maximum shareholding does not apply to the Trust. As the Trust does not have a trading relationship with the Company it will not be eligible to participate in the Deferred Consideration or the Rebate Consideration.

The Trustees of the Trust have carefully considered the terms of the Offer and undertaken that they will consent to the Scheme. As the Nisa Retail Members’ Trust’s shares are non­voting, the Trust is unable to vote at the General Meeting.

Please refer to paragraph 10 of Part 2 of this document for details of the actions to be taken by the Shareholders in relation to voting at the Shareholder Meetings.

It is important that, for the Court Meeting, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of Scheme Shareholder opinion. You are therefore strongly urged to complete, sign and return your Forms of Proxy or transmit a proxy instruction as soon as possible. If you wish to attend any of the meetings in person, please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the Company reserves the right to refuse you entry if you do not bring these documents with you.

12. Overseas Shareholders Persons resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom should refer to paragraph 13 of Part 2 of this document.

13. Action to be taken Details of the Shareholder Meetings to be held and the action to be taken in respect of the Scheme are set out on page 26 in paragraph 10 of Part 2 of this document.

14. Recommendation Following careful consideration of the above factors, the Nisa Directors, who have received financial advice from Lazard as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing advice to the Nisa Directors, Lazard has relied upon the commercial assessments of the Nisa Directors.

Accordingly, the Nisa Directors recommend unanimously that Nisa Shareholders vote in favour of the Scheme at the Court Meeting and the Special Resolution to be proposed at the General Meeting.

15. Further information Please read carefully the remainder of this document (and the information incorporated by reference into this document), in particular the letter from Lazard on behalf of the Nisa Directors set out in Part 2 of this document, being the explanatory statement made in compliance with section 897 of the Companies Act. The information in this letter is not a substitute for reading the remainder of this document.

Yours faithfully

Peter Christopher Hartley Chairman

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PART 2

EXPLANATORY STATEMENT (in compliance with section 897 of the Companies Act)

Lazard & Co., Limited 50 Stratton Street Mayfair London W1J 8LL

To all holders of Ordinary Shares

Dear Nisa Shareholder,

Recommended cash offer for Nisa by Co­op

1. Introduction On 10 October 2017, the boards of Nisa and the Co­op announced they had reached agreement on the terms of a recommended cash offer pursuant to which the Co­op would acquire the entire issued and to be issued share capital of Nisa.

Your attention is drawn to the letter from the Chairman of Nisa set out in Part 1 of this document, which forms part of this explanatory statement. The Chairman’s letter contains, among other things, (a) information on the background to and reasons for the Offer and (b) the unanimous recommendation of the Nisa Directors that Nisa Shareholders vote in favour of the Scheme at the Court Meeting and the Special Resolution at the General Meeting.

The Chairman’s letter also states that the Nisa Directors, who have received financial advice from Lazard as to the financial terms of the Offer, consider the terms of the Offer to be fair and reasonable. In providing advice to the Nisa Directors, Lazard has relied upon the commercial assessments of the Nisa Directors.

We have been authorised by the Nisa Directors to write to you to explain the terms of the Offer and the Scheme and to provide you with other relevant information.

2. The Offer It is proposed that the Offer be implemented by means of a Court­sanctioned scheme of arrangement under Part 26 of the Companies Act, which requires the approval of Nisa Shareholders at the Court Meeting and General Meeting and the sanction of the Court.

Under the terms of the Offer which is subject to the Conditions set out in Part 3 (Conditions of the Scheme) and Part 7 (The Scheme of Arrangement) of this document, Scheme Shareholders (other than the Trust) will receive:

• a payment of up to £20,000 in cash per Scheme Shareholder within 14 days of the Effective Date (the “Initial Consideration”)

• a payment of up to £1,654 in cash per Scheme Share in three equal instalments payable in April 2019, April 2020 and April 2021 (the “Deferred Consideration”)

• a payment to each Scheme Shareholder up to an additional 1% of the rebateable turnover for each such Scheme Shareholder payable quarterly for four years from the Effective Date (the “Rebate Consideration”)

(the “Scheme Consideration”).

The Offer values the entire issued ordinary share capital of Nisa at £137,463,406 (plus the Outstanding Loan Amount repayable by the Trust to the Company), and in no circumstances shall the total aggregate amount of Scheme Consideration payable by the Co­op to Scheme Shareholders exceed £137,463,406.

The Scheme Consideration comprises the Initial Consideration, Deferred Consideration and Rebate Consideration, further details of which are set out in paragraph 8 of this Part 2.

As part of the offer made to Scheme Shareholders, the Co­op expects to improve the member proposition. Key benefits of the member proposition include:

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Cost of goods Collectively, the Co­op and Nisa would expect to purchase more than c.£7bn of products per year and represent 7,000 stocking points within the UK, which should result in better deals from suppliers. The Co­op also acknowledges that if the member proposition is not compelling, members will have the opportunity to choose other partners and therefore the Co­op would fail to achieve their broader ambition from the investment in this partnership. To ensure appropriate transparency, the Co­op has confirmed that it will provide Nisa members with a cost price index, fully weighted for both volume and promotions, on a monthly basis. The competitiveness of that index against both existing competitors, and any future competitors, will be a key KPI for the Co­op and Nisa commercial teams. The Co­op has confirmed its intention that Nisa members will retain independence to operate their shops in the way they choose, and to source their range from whomever they choose; the Co­op simply hopes to create such a compelling proposition that members will want to buy more from Nisa.

Improvement to range The Co­op has an extensive range (over 23,700 lines) that it has indicated will be available to members following a successful acquisition and implementation period. In particular, the Co­op has key strengths as compared with the current Nisa proposition in fresh, chilled and frozen, as well as food to go and local lines, that will allow members to cater to the growth of these categories, as well as the growing shopper trend towards convenient, top­up shopping. This range has helped the Co­op deliver continued increases in sales, demonstrated in recent results of 14 consecutive quarters of convenience sales growth.

Recent wholesale trials have generated encouraging sales uplifts driven by improved and enhanced product ranges, all of which will become available to Nisa members upon acquisition of the business.

Furthermore, the Co­op understands the importance of national, regional and local ranges, and has increased their local range to great effect, with 35% like­for­like performance in local lines in recent store launches. The Co­op’s experience suggests local products generate sales and profit, and are also loved by customers.

In addition, the breadth of the Co­op’s non­food offering currently helps support the Co­op’s largest stores; specifically, 377 stores over 7,000 sq ft including 156 over 10,000 sq ft and the largest at 35,000 sq ft.

Market leading private label The Co­op has indicated that members will gain access to the Co­op’s branded private label range of over 3,500 products, to support members in offering a leading private label proposition. These include increasingly important innovation categories in areas such as “Free From”, “Food To Go” and seasonally relevant categories.

The Co­op’s private label has won numerous awards over the last year, including 14 awards at this year’s Grocer Own Label Awards. Every product is benchmarked against its competitive set and is targeted to at least match the best in class for taste, texture, appearance, aroma and nutritional value.

We are informed that the Co­op will make its full range of own label products available to Nisa, expecting stronger volumes than currently achieved through the Heritage range.

Appropriate in­store marketing materials will be made available to support the Co­op brand within members’ stores.

Rebates Nisa has been informed that there are no plans to alter members’ current rebate structure. The additional 1% rebate to Scheme Shareholders as part of the financial consideration for the shares in the Company shall be paid in addition to the current rebate structure under the Membership Agreement.

Over time, the Co­op hopes to understand opportunities to improve and simplify the rebate structure through conversations with the Nisa Monitoring Group. The intention is to incentivise growing business volumes, further enhancing the scale of the combined organisation.

Franchise The Co­op is currently trialling and learning lessons from a seven­store franchise pilot. The Co­op has informed us that the results of its recent trials are very encouraging with significant sales uplifts.

The Co­op expects to articulate its franchise model to the Nisa Monitoring Group and discuss the timetable for further trials. The choice to franchise will be a joint one and the Co­op recognises its offer will need to be attractive relative to the competitive set.

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Operations The Co­op has made it clear that the ethos of the proposed acquisition is evolution, and not revolution, of Nisa. It has confirmed that it intends to focus on stability first, ensuring a smooth implementation, followed by identifying further improvements to the Nisa proposition.

Nisa understands that Nisa Retail will remain, including the Members Support Centre (MSC), which underpins support to all members. The Co­op has confirmed that there are no planned changes to member SLAs, the Nisa symbol brand, existing member support (in the form of Retail Development Managers), the delivery network, IT infrastructure or existing EPOS systems. The Co­op is planning improvements to some elements over time, such as the efficiency of the distribution network and investment in Nisa’s EPOS systems. As such, the Co­op has confirmed that members will continue to receive the same service that they do today. Nisa understands that members will also be provided with the same level of 3­week promotions that they currently receive, but this is expected to move to a rolling 1­week cycle.

Values, independence and mutuality In addition to the benefits stated above, the Co­op has confirmed that members may choose to retain key aspects of independence that they enjoy today. Members will continue to have a voice. The Co­op has confirmed that insight from members is valued highly, and continuation of this shall be approached in two ways:

1. continuation of existing senior management engagement and regional meetings; and

2. a Nisa Monitoring Group, representing the Nisa voice. This group will meet 10 times a year with the Nisa Executive and Co­op Food Commercial Team. Representatives on this group will be democratically elected by Nisa members.

The Co­op has confirmed that it is keen to create an efficient combined business, but does not envisage any significant immediate changes to the operational structure, other than the buying teams working together. The existing Nisa Executive team will be supplemented with Co­op representatives, and the CEO of Nisa shall be appointed to Co­op Food Executive. Strong communication between the businesses shall be ensured, taking the best ways of working into the future, from both organisations.

Furthermore, Nisa believes that the Co­op’s values are aligned with the mutual history of Nisa. The Co­op’s mission, “a better way of doing business for you and your communities”, mirrors Nisa’s focus on making a difference at local level, whilst ensuring the Company remains ethical, responsible and sustainable nationally.

The Co­op has said that it intends to work with the Making A Difference Locally charity, and to understand how it can fit together with the Co­op community and charity activities; exemplifying the cultural fit between the two organisations.

3. Information on the Co­op The origins of the Co­op Group dates back to 1863 when a group of retail societies based in the North of England registered the North of England Co­operative Society with the aim of supporting the growing retail consumer co­operative movement. In 1872, the North of England Co­operative Society became the Co­operative Wholesale Society and continued to serve its members by enabling them to take advantage of the collective purchasing power of its members. Over the next century, Co­operative Wholesale Society opened factories in order to produce goods to supply to members and developed services such as banking and insurance to support their operations.

The Co­op Group is one of the world’s largest consumer co­operatives, owned and controlled by over 4.6 million active members. The Co­op Group comprises a diverse range of businesses including food, general insurance, legal services and home electrical goods. In the first half of 2017 the Co­op gave £29 million back to its members and nearly £6 million to local community causes.

The Co­operative Group Holdings (2011) Limited (the “Co­op”) (the purchaser of the Scheme Shares in the Acquisition) is the main investment holding company for the Co­op Group. It owns the shares of the Co­op Group’s food, funerals, electricals and legal services businesses. It is used as a vehicle for acquiring, holding and disposing of shares, stocks or debentures in any society, company or other body corporate for the Co­op Group. The Co­op also acts as a property management company for all of the Co­op Group’s properties, whether held by the Co­operative Group Holdings (2011) Limited or other entities within the Co­op Group.

The Co­op’s funeral care business providing funeral care homes and funeral plans is the largest provider of funerals in the UK with a 16.4% market share.

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4. Co­op financial trading

Co­op Group Performance – First Half of 2017 The first half of 2017 was important for the Co­op Group. In six months it delivered significant value for its members and demonstrated delivering on the purpose it set in 2014 – to champion a better way of doing business for its members and their communities.

The Co­op Group revenue fell slightly to £4.6bn (2016: £4.7bn) and profit before tax for the period was £25m, up 47% (2016: £17m).

The Co­op Group's key profit measure is underlying profit before tax which looks at its core trading performance less underlying interest (interest on borrowings). Underlying profit before tax decreased by £13m to £14m (2016: £27m) principally as a result of the £12m fall in the Co­op Insurance business profit, and reflects its plans over the last few years to invest in “Rebuild” (the current phase of the Co­op Group’s 5 year strategy).

This includes rewarding its members with £29m (through the ‘5% for you’ rewards) and a strong performance in the Co­op food business, with like­for­Iike sales up 3.5% and 14 quarters of like­for­like growth.

Debt levels remain well below the £0.9bn target the Co­op had set for its Rebuild phase, with net debt of £680m at the end of the period.

By April 2017 there was clear proof of the community difference the Co­op is already making as it celebrated the first payout from its 1% rewards. The Co­op’s message, as it distributed £9m to 4,000 local causes, was that ‘great things happen when we work together’.

Each local cause received on average £2,250, enabling them to make a real difference in local communities.

Co­op Food In the first six months of the financial year the Co­op’s food business reported sales of £3,476m (2016: £3,518m). The decrease compared to last year is due to the disposal of 298 smaller food stores to McColl’s Retail Group plc and a number of petrol filling stations to enable investment in new stores in targeted locations and to serve a wider convenience mission. Like­for­like store sales remain strong at 3.5% up, ahead of the market by 1.5%.

Convenience store like­for­like sales are up 4.5% as the Co­op food business continues to focus on convenience retailing.

Underlying profit was in line with last year at £65m (2016: £63m), a strong performance given that this includes the cost of member rewards which started during the second half of 2016 and further investment in improving its stores and depot infrastructure.

The Co­op’s food business also opened 34 new stores in the first half of the year, improved 93 of its existing stores, and is on track to hit its target of 100 new stores by the end of 2017.

5. Information on Nisa Founded in 1977, Nisa is a unique member owned organisation, helping independent retailers remain competitive in the food and drink markets.

With the retail sector being largely dominated by the multiples, Nisa’s objective is to create benefit, including negotiating the best deals on products, to allow its members to compete effectively.

Nisa supports over 1,300 local retailers and more than 3,000 stores across the UK. Some operate under the Nisa brand and others under their own names. Nisa supplies the stock they need and the retail support that helps them to grow their business.

Nisa provides every service that an independent might need to survive and grow in the grocery marketplace, including: • a deep understanding of members’ needs, built up over 40 years; • buying at a scale that delivers good value for members; • a wide product range and reliable delivery, designed for small stores, along with an award­winning in­house brand, “Heritage”; and • Making a Difference Locally – the in­house charity, designed to help members build local community relationships.

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6. Nisa financial and trading prospects The following summary of Nisa’s financial and trading prospects is extracted from Nisa’s annual report and accounts for the financial year ended 31 March 2017, to be published to Nisa Shareholders shortly:

“The company was pleased to exceed its year end EBITDA plan of £8.5m, finishing the year at £8.6m, 17.8% ahead of FY16. Perhaps more pleasing was our profit before tax, which increased to £2.8m in FY17, a £8.1m turnaround from FY16, largely driven by our significant reduction of exceptional costs. A further indication of the progress made over the last year is the steady achievement of gross margin at 10.8%, in line with our plan and reflecting the delivery of better pricing from suppliers direct to members.

This is in the context of an evolving environment – more food and hot drinks to go, more meal solutions at home as well as an increase in distressed purchases. More recently, there have been unhelpful trends – basket sizes and number of customer visits a week decreasing – as well as a decrease in impulse sales.

Turnover was marginally down on FY16 as a result of 2 principal factors.

• Like for Like was down 1.5% as a result of competitive pressure and price investment

• The departure of former member My Local which went into administration in June 2016. We had supplied them since they opened their doors in October 2015.

This decrease was mitigated by an increase in sales to new businesses – with a net gain in member numbers. Nisa welcomed 515 new stores compared to 476 in FY16, a significant uplift in an increasingly competitive market place. This is testament to the flexibility and strength of the proposition Nisa can bring its members. Much of this growth was driven by two large contract wins; namely the 298 stores MRG acquired from the Coop and the 47 stores acquired from the Bourne Leisure estate. In FY17, these two contracts contributed £8m to our sales, but they are expected to deliver over £200m to Nisa’s annual turnover in FY18.

The increase in new business is particularly important as it adds valuable scale to the business such that Nisa can negotiate more competitively for the benefit of all our membership. These larger contracts have the added benefit of providing commitment to our Heritage own label range which in turn gives us much greater scope to invest in this key area of our business. Heritage, along with our Making A Difference Locally charity, our Epositive Evolution system and our new Store of the Future 2 Evolution format (170 new stores this year), are considered to be cornerstones of our future strategy and so much of our focus in the year to come will centre on these areas.

It was also pleasing to see progress made in the year with regards our member engagement. Nisa is a Member owned company and as such, it is vital that the Executive team and colleagues at the Member Support Centre in Scunthorpe work closely with our members for the benefit of the whole company. The second half of FY17 saw a definite step change in our approach to member engagement. Our focused programme of activity at the conferences in Rome and Stoneleigh, our regional meetings and our informal Pie and Pint evenings have all driven greater interaction.

Member engagement was further assisted by the decision to restructure the retail team in FY17. The introduction of the key accounts team has brought new focus to field operations, while combining format and development, fresh food development and category management has helped improve the overall offer to members.

The uplift in performance throughout FY17 continued to build on the foundations laid in FY16, as Nisa returned to profitable growth. It has also helped us to convey a message of long term sustainability key to securing the confidence of our banking partners in recent refinancing discussions. The business now has the security of a larger £120m facility for a period extending to five years, the terms of which are more favourable than the previous facility. Nisa is well placed to continue the execution of its three­year strategy and to profitably grow and create a sustainable business model for the future.”

The following information is extracted from Nisa’s half year trading update for the 26 week trading period to 1 October 2017, published on 6 October 2017:

“Highlights: • Strong H1 performance with total sales of £728m, +12.4% on last year.

• Strong non­tobacco sales of £505m, +0.8% on a like for like basis, with tobacco sales falling 2.7%, better than the wider market. Our core retail trade showed like for likes of +1.9%.

• Sales driven by strong growth in new stores and new Member recruitment, with 409 new stores in H1, compared to 188 last year with net new at +284 (last year ­110).

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The strong performance was aided by new business wins, driven by both existing Members expanding their estates and significant new Member recruitment. The strong Member recruitment reflected continued investment in our offer, a good return from marketing initiatives, and Nisa’s award winning own label range.”

“Appointment of interim CEO Further to the succession planning announcement of 29 September, Nisa is pleased to announce that Arnu Misra has been appointed interim CEO.

Arnu has been an Independent Non­Executive Director at Nisa since November 2016. He is a highly­experienced retail executive, having held significant senior executive roles at Matalan, Asda, and Loblaw’s in Canada. He also spent six years as CEO of private equity backed Cannons Health, doubling its membership base before selling to Nuffield Health.

Arnu has a strong track record developing value for stakeholders and is highly experienced working with low cost business operating models.

He takes over the role from Nick Read, who joined in December 2014 with a remit to stabilise and set out a future strategic direction for the Company and its Members.”

Nisa continues to trade well and in line with expectations and is advanced in its planning for the well­publicised roll back of the McColl’s Retail Group stores that will take place in 2018. It is not anticipated that this will substantially impact Nisa’s cash flow or profitability.

7. Financing of the Offer The Co­op has confirmed that it has discussed the Offer with its banking syndicate. The size of the proposed Acquisition required the Co­op to seek consent from the banking syndicate to increase the annual aggregate value of acquisitions in 2018 in order to complete the transaction. This permission was granted in September 2017.

There are no other terms in the relevant facilities that prevent the Co­op completing the Acquisition and the Co­op has surplus cash and existing lines of credit (indicating c£600m of available funds as at the date of the 2017 interim results) that are more than adequate to fund the proposed Acquisition.

8. The Scheme and the Shareholder Meetings Structure of the Scheme The Acquisition is being effected by means of the Scheme, although the Co­op and Nisa may agree to implement the Offer by means of a Takeover Offer.

The purpose of the Scheme is to provide for the Co­op to become the holder of the entire issued ordinary share capital of Nisa. Following the Scheme becoming Effective, the Scheme Shares will be transferred to the Co­op, in consideration for which Scheme Shareholders whose names appear on the register of members of Nisa at the Scheme Record Time will receive the Scheme Consideration as described further below in this explanatory statement.

The Trust will receive as consideration for its Scheme Shares an amount equal to the amount of the loan it has from the Company to the extent outstanding to the Company at the Effective Date (the “Outstanding Loan Amount”).

If the Company has made or makes any payments between 2 July 2017 and the Effective Date which are not Permitted Leakage (as defined in detail in Part 7 of this document but, broadly, being ‘business as usual’ payments), the Co­op has the right to deduct an amount equal to such payments from the Initial Consideration and/or Deferred Consideration. This right to make deductions from Scheme Consideration is explained in more detail below.

For the purposes of this Part 2:

“Hurdle Amount” means, in respect of a Scheme Shareholder, that Scheme Shareholder’s Rebateable Turnover for the 12 month period ended on 2 July 2017 (or in the case of any Scheme Shareholders whose trading with the Company commenced after 2 July 2016, the period from the start of such trading up to 2 July 2017);

“Nisa trading member” means a Scheme Shareholder who is party to a Membership Agreement with Nisa;

“Qualifying Rebateable Turnover” means, in respect of a Scheme Shareholder, the lower of:

(a) that Scheme Shareholder’s actual Rebateable Turnover in a Rebate Year; and

(b) that Scheme Shareholder’s Hurdle Amount;

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“Quarterly Period” means each three month period ending on the Sunday nearest to 31 March, 30 June, 30 September and 31 December (whether such Sunday occurs before or after such month end), and commencing on the Monday following the last day of the previous Quarterly Period;

“Rebate Year” means each of the four successive 12 month periods in the Rebate Period, the first such 12 month period to commence on the first day of the first Quarterly Period commencing after the Effective Date; and

“Rebateable Turnover” means purchases of products (excluding tobacco and spirits) made by the Scheme Shareholder from Nisa net of VAT.

Scheme Shareholders should read the whole of this Part 2 and Part 7 (The Scheme of Arrangement) of this document carefully to make themselves aware of the conditions attaching to payment of the Deferred Consideration and the Rebate Consideration and the potential for deductions to be made from the Initial Consideration and/or Deferred Consideration.

The Initial Consideration Consistent with Nisa’s mutual principles and the fact that the number of Scheme Shares held by each Scheme Shareholder does not correlate with volume of product purchased from Nisa by that Scheme Shareholder, the Co­op will make a flat payment for the benefit of each Scheme Shareholder (other than the Trust) of up to £20,000 in cash. This payment to Scheme Shareholders (other than the Trust) may be reduced if there is “Leakage” (see below) and assumes that the number of Scheme Shareholders (excluding the Trust) does not exceed 1,186.

This payment will be funded by the Co­op paying (i) an amount of £23,720,000 in cash together with (ii) the Outstanding Loan Amount on the Effective Date in the following way:

1. an amount equal to the Outstanding Loan Amount shall be paid to the Trust in respect of the Scheme Shares held by the Trust (which the Trustee would apply in repaying in full the Outstanding Loan Amount); and

2. £23,720,000 shall be paid to the Scheme Shareholders (other than the Trust) in respect of the Scheme Shares held by the Scheme Shareholders (other than the Trust) resulting in a payment of up to £20,000 to each Scheme Shareholder (other than the Trust).

The payment of the Initial Consideration to Scheme Shareholders will be settled no later than 14 days following the Effective Date.

Deferred Consideration Subject to the qualifying conditions set out below, the Co­op will pay Scheme Shareholders up to a total aggregate amount of £83,343,406 in cash for the Scheme Shares. This equates to a total payment of up to £1,654 per Scheme Share. This payment will be made in three equal annual instalments of £551.33 per Scheme Share. The payments will be made within 10 Business Days of 31 of March in each of 2019, 2020 and 2021 (each an “Instalment Date”).

The Deferred Consideration is conditional on Scheme Shareholders meeting the qualifying conditions for payment as set out below.

Deferred Consideration Qualifying Conditions To receive each annual instalment of the Deferred Consideration, Scheme Shareholders must meet each of the following qualifying conditions:

1. the Scheme Shareholder remains a Nisa trading member at the relevant Instalment Date and has not, on or prior to the relevant Instalment Date, served notice, or had notice served on it, to terminate its status as a Nisa trading member in accordance with the Membership Agreement; and

2. in the 12 month period ending on the relevant Instalment Date (“Calculation Period”), the Scheme Shareholder has Rebateable Turnover which is greater than or equal to the Hurdle Amount.

If the first qualifying condition is not met by a Scheme Shareholder on an Instalment Date, no payment of Deferred Consideration shall be due to the Scheme Shareholder in respect of that Instalment Date or any future Instalment Date.

If the first qualifying condition is met by a Scheme Shareholder on an Instalment Date but the second qualifying condition is not met, the amount of Deferred Consideration payable to that Scheme Shareholder in respect of that Instalment Date shall be adjusted downward in proportion to the amount by which the Scheme Shareholder’s Rebateable Turnover for the Calculation Period in question was less than the Hurdle Amount, as follows:

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“P” = the amount in pounds sterling payable per Scheme Share in respect of the Instalment Date

“c1” = the amount of Rebateable Turnover of the Scheme Shareholder in the Calculation Period

“c2” = the Hurdle Amount c1 P = — x £551.33 [c2] Where a Scheme Shareholder has not met the second qualifying condition (but has met the first qualifying condition) at an Instalment Date, and the Co­op (or any nominated executive or executives in the Co­op Group) judge that the second qualifying condition has not been met by that Scheme Shareholder due to exceptional circumstances, the Co­op (or any nominated executive or executives in the Co­op Group) may, at its sole discretion and without being required to publish its reasons, choose to pay to that Scheme Shareholder a discretionary amount of Deferred Consideration being not more than it would have been entitled to had it satisfied both qualifying conditions as at the Instalment Date.

Rebate Consideration The Co­op will invest a total aggregate amount of up to £7.6 million per annum in providing to Scheme Shareholders a payment equal to an additional 1% of Scheme Shareholders Rebateable Turnover in the four years following the Effective Date (“Rebate Period”) (such payments being the “Rebate Consideration”). The Rebate Consideration is quite separate from, and in addition to, rebates payable under the terms of the Membership Agreement and will be available only to Scheme Shareholders in consideration for the acquisition of their Scheme Shares; trading members who join Nisa after the Scheme Record Time (and so who are not Scheme Shareholders) will not be eligible to participate in the Rebate Consideration.

Subject to the qualifying condition set out below, the Co­op will pay the Rebate Consideration to each Scheme Shareholder on the amount of their respective Rebateable Turnover in each of the four years following the Effective Date. The Rebate Consideration will be calculated on Rebateable Turnover and paid quarterly (in arrears) in respect of each Quarterly Period save for the last Quarterly Period in any Rebate Year which shall be calculated as set out below. The Rebate Consideration amount will be paid to Scheme Shareholders within 10 Business Days of the end of the relevant Quarterly Period (the “Rebate Consideration Date”).

The Rebate Consideration is capped at a total payment by the Co­op of £7.6 million per Rebate Year (the “Rebate Consideration Cap”). Subject to having satisfied the Rebate Consideration Qualifying Condition (as defined below), at the end of each Quarterly Period in any Rebate Year each Scheme Shareholder shall receive a payment of 1% of their Rebateable Turnover for the relevant Quarterly Period (or, if lower, an amount that is 1% of one quarter of such Scheme Shareholder's Hurdle Amount). However, the payment to Scheme Shareholders at the end of the fourth Quarterly Period in each Rebate Year will be adjusted to ensure they have each received an amount equal to 1% of their Qualifying Rebateable Turnover in the relevant Rebate Year. This final payment smooths out the impact of the quarterly cap on seasonal fluctuations in Rebateable Turnover.

In addition, if the total amount to be paid to all Scheme Shareholders in a Rebate Year is less than 1% of the total Rebateable Turnover of all of the Scheme Shareholders in a Rebate Year (up to the Rebate Consideration Cap) then the difference between the those amounts (the “Surplus”) shall be paid to those Scheme Shareholders who have satisfied the Rebate Consideration Qualifying Condition at the relevant payment date and exceeded their applicable Hurdle Amount in that Rebate Year. The Surplus shall be paid to the qualifying Scheme Shareholders in such proportions as the Co­op, acting reasonably, directs.

Entitlement to Rebate Consideration payments is conditional on Scheme Shareholders meeting the qualifying condition for payment as set out below.

Rebate Consideration Qualifying Condition For each quarterly instalment of the Rebate Consideration, Scheme Shareholders must meet the following qualifying condition (the “Rebate Consideration Qualifying Condition”):

• the Scheme Shareholder remains a Nisa trading member at the relevant Rebate Consideration Date and has not, on or prior to the relevant Rebate Consideration Date, served notice, or had notice served on it, to terminate its membership of Nisa in accordance with the Membership Agreement.

If the qualifying condition is not met on the relevant Rebate Consideration Date by a Scheme Shareholder, no payment shall be due to the Scheme Shareholder.

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“Locked Box” and “Leakage”

(a) “Locked Box” Accounts It is common in private company share purchase transactions for the vendor and the purchaser to adjust the price, post­completion, to reflect the financial position of the target group at completion. This is ordinarily achieved through a completion accounts mechanism in the share purchase agreement which provides for verification of the financial position of the target group as at completion and for any consequent price adjustment following completion. However, given the nature of the Acquisition and the fact it is being effected by the Scheme, any adjustment to price of the Ordinary Shares after the Scheme had become effective would have been complex, could have led to dispute, and therefore resulted in delay in the payment of the Initial Consideration and price uncertainty for both the Co­op and the Scheme Shareholders. For these reasons, the Nisa Directors negotiated with the Co­op for a fixed price for the Ordinary Shares by reference to an unaudited statement of financial position of Nisa as at 2 July 2017 (the “Reference Date”).

In determining the price that it was willing to pay, the Co­op took account of similar factors to those dealt with by a post­completion accounts mechanism to fix the price for the Ordinary Shares on a debt free, cash free and normalised working capital basis. The fundamental differences are that:

• all adjusting items were negotiated and agreed by reference to the Reference Date (which is not the date upon which the Scheme becomes effective) before this document was posted;

• the Co­op takes the economic risk and reward of trading of the Nisa Group from the Reference Date (again not from the Effective Date); and

• there is no comparable post­completion financial verification or price adjustment mechanism (either for the position at the Reference Date or as at the Effective Date), save for the Leakage provisions noted below.

(b) Leakage and Permitted Leakage In return for the Co­op taking the economic risk and reward of the Nisa Group from the Reference Date, following the Effective Date, the Co­op will have a period of 12 months to determine if there has been any “Leakage” (broadly, a payment or transfer of value) from Nisa to or for the benefit of the Nisa Shareholders (other than “Permitted Leakage”, as to which see below) up to the Effective Date being:

• any dividend or distribution of any kind or any redemption, re­purchase or other payment in respect of the Scheme Shares declared, paid or made or agreed to be paid to any Nisa Shareholders or their Affiliates by the Nisa Group;

• any rebates or payments made or agreed to be made by or on behalf of any member of the Nisa Group to any Nisa Shareholder or its Affiliates;

• any assets transferred or agreed to be transferred, or any rights or benefits given or assigned, or liabilities assumed, indemnified or incurred by or on behalf of any member of the Nisa Group, to or for the benefit of any Nisa Shareholder or its Affiliates;

• the waiver or agreement to waive any amount owed to any member of the Nisa Group by the Nisa Shareholders or any Affiliate of any Nisa Shareholder (other than a member of the Nisa Group);

• any Acquisition Costs (except to the extent such Acquisition Costs are Permitted Leakage);

• other than trade credit in the ordinary course of business, any amounts borrowed from any member of the Nisa Group by any Nisa Shareholder or its Affiliates and not repaid in full on or prior to the Effective Date;

• payments of directors’ fees or consultancy fees, salary, emoluments (including bonuses), expenses, pensions and other benefits of the Nisa Directors;

• payments of bonuses to participants in the Executive Long Term Incentive Plan;

• any member of the Nisa Group entering into any transaction or arrangement with any Nisa Shareholder other than in the ordinary course of business and on arm’s length commercial terms;

• any amounts paid or payable, or assets disposed of or transferred or liabilities incurred by any member of the Nisa Group which required the consent of the Co­op in accordance with clause 14 of the Bid Conduct Agreement (which regulates the conduct of Nisa’s business up to the Effective Date) and which were not consented to or which were consented to on the condition that they be categorised as Leakage;

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• any member of the Nisa Group agreeing conditionally or unconditionally to do any of the things referred to above; and

• any charge to Tax incurred by any member of the Nisa Group as a consequence of any of the matters referred to above (excluding recoverable VAT).

The Co­op has agreed certain categories of payments and other trading liabilities known as “Permitted Leakage” (broadly representing ‘business as usual’ and as described in more detail below) which Nisa can make and incur between the Reference Date and the Effective Date without incurring an adjustment to the price the Co­op will pay for the Scheme Shares. The categories of ‘business as usual’ payments and liabilities which Nisa can make or incur between the Reference Date and the Effective Date are:

(i) any payments or benefits made or agreed to be made by or on behalf of the Nisa Group to the Nisa Shareholders or any Affiliate of the Nisa Shareholders’ Groups in accordance with the Membership Agreement or with the consent of the Co­op (including consent that they be categorised as Permitted Leakage);

(ii) any payment made or agreed to be made or liability incurred in respect of any matter undertaken by or on behalf of any member of the Nisa Group with the consent or at the written request or with the prior written agreement of the Co­op (including the consent, request or agreement of the Co­op that they be categorised as Permitted Leakage);

(iii) directors’ fees or consultancy fees, salary and other emoluments paid to the Nisa Directors in accordance with their contractual entitlements as at the Reference Date (or as such contractual terms may be amended with the consent of the Co­op in accordance with clause 14 of the Bid Conduct Agreement);

(iv) any payment of bonuses to employees and former employees of the Nisa Group (including under the Executive Long Term Incentive Plan) and related employer’s national insurance which is either contractual or, if discretionary, agreed by the Co­op in writing in advance of payment, up to an aggregate amount of £1,700,000;

(v) Acquisition Costs together with the costs of settlement of the former Chief Executive Officer, Mr N. Read, up to a total aggregate amount of £5,500,000 plus any net costs savings (not in excess of £100,000) arising as a result of employment personnel changes in the Nisa Group following the departure of Mr N. Read;

(vi) any recoverable VAT incurred by the Nisa Group in respect of Acquisition Costs; and

(vii) any charge to Tax incurred by any member of the Nisa Group as a consequence of any of the matters referred to in paragraphs (i) to (iv) (inclusive) above.

(c) Claims for Leakage If the Co­op brings a claim for any “Leakage” during the period of 12 months from the Effective Date and an Expert agrees and determines the amount of such Leakage, then the Initial Consideration and/or Deferred Consideration to be received by the Scheme Shareholders (other than the Trust) shall be reduced by the amount of such claim for Leakage.

Further details regarding the process for bringing claims for Leakage is set out in Part 7 of this document.

Court Meeting and General Meeting To become effective, the Scheme requires, among other things, the approval by the requisite majority of Scheme Shareholders at the Court Meeting and the passing of the Special Resolution by Nisa Shareholders at the General Meeting.

Following the Shareholder Meetings and the satisfaction (or, where applicable, waiver) of the other Conditions, the Scheme must also be sanctioned by the Court. The Scheme will become effective only upon a certified copy of the Court Order being delivered to the Registrar of Companies.

It is expected that the Scheme will become effective by no later than 31 July 2018, subject to the satisfaction or (where applicable) waiver of the Conditions.

Any adjournment of a Shareholder Meeting or the Court Hearing, or a decision by Nisa to propose such an adjournment, will be announced promptly by Nisa. If the meeting or hearing is adjourned to a specified date, the announcement will set out the relevant details of the adjourned meeting or hearing. If no such date is specified the adjourned date will be announced separately.

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Further details of the Shareholder Meetings and the Conditions are set out below.

The Shareholder Meetings The Scheme will require the approval of the Scheme Shareholders at the Court Meeting to be held at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds, LS11 0ES at 11.00 a.m. on 13 November 2017. The Scheme will also require the approval of Nisa Shareholders of the Special Resolution at the General Meeting to be held at the same place at 11.15 a.m. on 13 November 2017 (or as soon thereafter as the Court Meeting has concluded or been adjourned). Notices of the Court Meeting and General Meeting are set out in Part 9 and Part 10 respectively of this document.

Whether or not you vote in favour of the resolutions to be proposed at the Shareholder Meetings, if the Scheme becomes effective, your Scheme Shares will be transferred to the Co­op and you will receive the consideration due under the terms of the Scheme.

As soon as practicable and, in any event, by no later than 10.00 a.m. on the Business Day following the Shareholder Meetings, Nisa shall make an announcement stating whether or not the resolutions put to shareholders at the Shareholder Meetings were passed by the requisite majorities (and, if not, that the Scheme has lapsed) and giving voting results in relation to the Shareholder Meetings.

Court Meeting The Court Meeting is being held at the direction of the Court and has been convened to enable the Scheme Shareholders to consider and, if thought fit, approve the Scheme. At the Court Meeting, voting will be by poll and each Scheme Shareholder present (in person or by proxy) will be entitled to one vote for each Scheme Share held by him.

The approval required at the Court Meeting is the approval of a majority in number of those Scheme Shareholders present and voting (and entitled to vote), either in person or by proxy, at the Court Meeting (or any adjournment thereof), representing not less than 75 per cent. in value of the Scheme Shares held by such voting Scheme Shareholders.

It is important that, for the Court Meeting, as many votes as possible are cast so that the Court may be satisfied that there is a fair and reasonable representation of Scheme Shareholder opinion. You are therefore strongly urged to complete, sign and return your Forms of Proxy or transmit a proxy instruction as soon as possible.

General Meeting The General Meeting has been convened to enable all Nisa Shareholders to consider and, if thought fit, approve the Special Resolution to authorise:

(i) the Nisa Directors to effect the Scheme; and

(ii) certain amendments to the Nisa Articles (as described below).

The Special Resolution will require votes in favour of not less than 75 per cent. of the votes cast by Nisa Shareholders voting in person or by proxy at the General Meeting in order to be passed.

The proposed changes to the Nisa Articles are contained in the notice of the General Meeting set out in Part 10 of this document and provide amongst other things, that (i) from the date the Special Resolution is passed the requirement to hold an Annual General Meeting is dispensed with unless the Scheme does not become Effective before the Long­Stop Date in which case the requirement to hold an Annual General Meeting shall be reinstated and (ii) that with effect from the Effective Date the provisions in Nisa’s Articles that Ordinary Shares shall only be allotted or transferred to Nisa Retail members and the maximum 250 share entitlement shall be deleted and the quorum for directors meetings be amended.

If the Scheme is not approved by the Scheme Shareholders at the Court Meeting, the General Meeting will be adjourned indefinitely as the Scheme will not be proceeding.

Entitlement to vote at the Shareholder Meetings Each holder of Scheme Shares whose name appears on the register of members of Nisa at the Voting Record Time will be entitled to attend and vote at the Court Meeting. Each holder of Ordinary Shares whose name appears on the register of members of Nisa at the Voting Record Time will be entitled to attend and vote at the General Meeting. If either Shareholder Meeting is adjourned, only those Scheme Shareholders (in the case of the Court Meeting) and Nisa Shareholders (in the case of the General Meeting) on the register of members of Nisa at 6.00 p.m. on the day which is two days (excluding any day that is not a Business Day) before the adjourned meeting will be entitled to attend and vote.

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Each Nisa Shareholder is entitled to appoint a proxy or proxies to attend and to vote instead of him or her. A proxy need not be a Nisa Shareholder. Please see paragraph 10 of this Part 2 of this document for further information on actions to be taken in order to vote at the Shareholder Meetings and to appoint proxies. If you wish to attend any of the meetings in person, please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the Company reserves the right to refuse you entry if you do not bring these documents with you.

Sanction of the Scheme by the Court Under the Companies Act, the Scheme also requires the sanction of the Court.

Any Scheme Shareholder or other person who has an interest in the Scheme (each an “Interested Party”) and who is concerned that the Scheme may adversely affect him or her is entitled to be heard by the Court. If an Interested Party wishes to raise concerns in relation to the Scheme with the Court or to appear at the Court Hearing, it is recommended that he or she should seek independent legal advice. The hearing for the sanction of the Scheme will be held at the Rolls Building, 7 Rolls Building, Fetter Lane, London, EC4A 1NL and will be listed following the fulfilment of the Merger Control Condition. The Company shall notify Scheme Shareholders within 7 days of the fulfilment of the Merger Control Condition.

The practice of the Court is to consider written objections to a scheme of arrangement which are not in the form of written answers and/or to allow a person who has not lodged written answers to appear at a hearing on that scheme. Each Interested Party should note that, despite that practice, the Court might require an Interested Party to lodge written answers in order to raise objections to the Scheme and/or appear at the Court Hearing.

The Court Hearing is expected to be held no later than 14 days after the satisfaction or waiver by the Co­op of the Merger Control Condition.

If the Court sanctions the Scheme at the Court Hearing, a certified copy of the Court Order will be delivered to the Registrar of Companies. The Scheme will only become effective after this delivery.

As soon as possible following the Court Hearing, Nisa shall make an announcement stating the decision of the Court and details of whether the Scheme will proceed or has lapsed.

The Co­op shall undertake to the Court to execute and do or procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to this Scheme.

Conditions

The Conditions to the Acquisition and the Scheme are set out in Part 3 of this document and, in summary, include:

• the approval of the Scheme by the requisite majority of Scheme Shareholders at the Court Meeting (or any adjournment thereof);

• the passing of the Special Resolution by the requisite majority of Nisa Shareholders at the General Meeting (or at any adjournment thereof);

• the sanction of the Scheme by the Court (with or without modification but subject to any modification being on terms acceptable to the Co­op and Nisa) and the delivery of a copy of the Court Order to the Registrar of Companies;

• certain key events, such as insolvency proceedings being advanced against the Nisa Group, having not occurred; and

• the satisfaction or waiver of the Merger Control Condition.

Effective Date The Scheme will become effective upon the delivery of a certified copy of the Court Order to the Registrar of Companies. This is expected to occur with two Business Days of the Court Hearing to sanction the Scheme.

As soon as practicable on the Effective Date, Nisa or the Co­op shall make an announcement stating that the Scheme has become effective.

Upon the Scheme becoming effective, it will be binding on all Scheme Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting (and, if they attended and voted, whether or not they voted in favour).

If the Scheme is not Effective by the Long­Stop Date, the Scheme will not be implemented and the Scheme will not proceed.

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Return of documents of title If the Scheme lapses or is withdrawn, all documents of title lodged by any Scheme Shareholder with any Form of Proxy shall be returned to such Scheme Shareholder as soon as practicable (and in any event within 14 days of such lapsing or withdrawal).

Modifications and revision The Scheme contains a provision for the Co­op and Nisa jointly to consent on behalf of all persons affected to any modification of, or addition to, the Scheme or to any condition approved or imposed by the Court. The Court would be unlikely to approve any modification of, or additions to, or impose a condition to the Scheme which might be material to the interests of Scheme Shareholders unless Scheme Shareholders were informed of any modification, addition or condition. It would be a matter for the Court to decide, in its discretion, whether or not a further meeting of Scheme Shareholders should be held in these circumstances.

The Co­op reserves the right to elect, with the agreement of Nisa, to implement the Acquisition by means of a Takeover Offer. In such event, the Acquisition will be implemented on substantially the same terms subject to appropriate amendments, including (without limitation) an acceptance condition set at 90 per cent. of the shares to which such offer relates (or such less percentage, being more than 50 per cent. of the Nisa shares carrying voting rights, as the Co­op in its sole discretion may decide), so far as applicable, as those which would apply to the Scheme.

Any modification or revision to the Scheme shall be made no later than the date which is 14 days prior to the date of the Shareholder Meetings (or any later date to which such meetings are adjourned).

9. Directors’ interests The following Nisa Directors, or a company they are connected to, hold interests in Nisa Shares.

Name Number of Ordinary Shares Jash Limited (a connected person of Bharatkumar Jashbhai Amin) 100 SR Retail Limited (a connected person of Sukhjinder Singh Gill) 10 Total Retail Limited (a connected person of Mukhtar Singh Goraya) 10 Filco Supermarkets Limited (a connected person of Matthew Alexander Hunt) 250 V&N (UK) Limited (a connected person of Vimanji Nathaji Odedra) 250 Kamraj Singh Sangha and Palwinder Singh Sangha 100 JD Hunter & Co Limited (a connected person of Alison Strong) 250 Michael Supermarkets Limited (a connected person of Jetinder Singh Sunner) 150 Longford Convenience Limited (a connected person of Sukhwinder Singh Tiwana) 178

The Nisa Directors listed above have all entered into an irrevocable undertaking in relation to the Offer, further details of which are set out at paragraph 9 of Part 1 of this document.

Of the executive Nisa Directors, Robin Brown has a “change of control” clause in his service agreement with Nisa, entitling him to a compensatory payment in the event that his employment is terminated following the Scheme becoming Effective, further details of which are set out in paragraph 5 of Part 6 of this document.

10. Action to be taken The Scheme will require the approval of the Scheme Shareholders at the Court Meeting to be held at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds, LS11 0ES at 11.00 a.m. on 13 November 2017. The Scheme will also require the approval of Nisa Shareholders of the Special Resolution at the General Meeting to be held at the same place at 11.15 a.m. on 13 November 2017 (or as soon thereafter as the Court Meeting has concluded or been adjourned). Notices of the Court Meeting and General Meeting are set out in Part 9 and Part 10 respectively of this document.

You will also find enclosed with this document:

• a WHITE Form of Proxy for use at the Court Meeting;

• a YELLOW Form of Proxy for use at the General Meeting; and

• a reply­paid envelope for use in the United Kingdom.

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Whether or not you plan to attend the Shareholder Meetings, please complete the Forms of Proxy in accordance with the instructions printed on them and to return them to: Computershare Investor Services Plc, The Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible and, in any event, so as to be received by no later than:

• 11.00 a.m. on 9 November 2017 in the case of the WHITE Form of Proxy for the Court Meeting; and

• 11.15 a.m. on 9 November 2017 in the case of the YELLOW Form of Proxy for the General Meeting,

(or, in the case of any adjournment, not later than 48 hours (excluding any part of a day that is not a Business Day) before the time fixed for the adjourned meeting). A reply­paid envelope has been provided for use in the United Kingdom only. Forms of Proxy returned by fax will not be accepted. The Scheme requires approval at both the Court Meeting and the General Meeting.

If the WHITE Form of Proxy for the Court Meeting is not received by the Registrars by 11.00 a.m. on 9 November 2017, it may be handed to the Chairman of the Court Meeting before the taking of the poll at the Court Meeting. However, if the YELLOW Form of Proxy for the General Meeting is not received by the Registrars by 11.15 a.m. on 9 November 2017, it will be invalid.

Shareholders entitled to attend and vote at the Shareholder Meetings may appoint a proxy electronically by logging on to www.investorcentre.co.uk/eproxy. You will need your Shareholder Reference Number (SRN) and Personal Identification Number (PIN) as shown on your proxy form. For an electronic proxy appointment to be valid, your appointment must be received by the registrars before 11.00 a.m. on Thursday 9 November 2017 in respect of the resolution at the Court Meeting and before 11.15 a.m. on 9 November 2017 in respect of the resolutions at the General Meeting. If you have any difficulties using the service please contact the Company’s Registrars, Computershare Investor Services Plc on 0370 707 1127.

Completing and returning the Forms of Proxy or appointing a proxy electronically will not prevent you from attending and voting in person at the Shareholder Meetings, or any adjournment of the Shareholder Meetings, if you so wish and are so entitled.

It is particularly important that as many votes as possible are cast at the Court Meeting so that the Court may be satisfied that there is a fair representation of Scheme Shareholder opinion. You are therefore strongly urged to return your Forms of Proxy or transmit a proxy instruction as soon as possible. If you wish to attend any of the meetings in person, please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the Company reserves the right to refuse you entry if you do not bring these documents with you.

11. Settlement and share certificates Subject to the Scheme becoming Effective, settlement of the Initial Consideration to which any Scheme Shareholder is entitled under the Scheme will be effected within 14 days of the Effective Date in the manner set out below.

Settlement of Scheme Consideration to which any Scheme Shareholder is entitled under the Scheme will be implemented in full in accordance with the terms of the Scheme free of any lien, right of set­off, counterclaim or other analogous right to which the Co­op may otherwise be, or claim to be, entitled against such Scheme Shareholder.

Settlement of any cash consideration payable by Co­op to Scheme Shareholders shall be paid by the Co­op in pounds sterling and either:

(i) by cheque drawn on the branch of a UK clearing bank or otherwise to the Scheme Shareholders to whom the consideration shall be paid. Cheques shall be despatched as soon as practicable and by the due date relevant to the part of the Scheme Consideration as set out in Part 7 of this document to the persons entitled thereto at their respective addresses as appearing in the register of members of Nisa at the Scheme Record Time, or in the case of joint holders, at the address of that member that stands first in the register of members in respect of that holding. None of Nisa, the Co­op or any of their respective nominees or agents shall be responsible for any loss or delay in the transmission of cheques sent in this way, and such cheques shall be sent at the risk of the person entitled thereto; or

(ii) by transfer of immediately available funds through to the account of the Scheme Shareholder held by Nisa (from time to time) for such Scheme Shareholder as Nisa trading member as soon as practicable and by the due date relevant to the part of the Scheme Consideration as set out in Part 7 of this document.

On the Effective Date, each certificate representing a holding of Ordinary Shares in the name of someone other than the Co­op will cease to be valid. Following settlement of the Initial Consideration to which Scheme Shareholders are

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entitled under the Scheme, such Scheme Shareholder will be bound on the request of Nisa either (i) to destroy such certificate(s); or (ii) return such certificate(s) to Nisa, or to any person appointed by Nisa for cancellation.

12. United Kingdom taxation Your attention is drawn to Part 4 of this document relating to United Kingdom taxation. Nisa Shareholders who are in any doubt about their taxation position or who are resident or otherwise subject to taxation in a jurisdiction outside the United Kingdom are strongly advised to contact an appropriate independent professional tax adviser immediately.

13. Overseas Shareholders The availability of the Acquisition to Overseas Shareholders and the distribution of this document in, into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves of, and observe, any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. If any Overseas Shareholder remains in any doubt, it should consult an appropriate independent professional adviser in its relevant jurisdiction without delay. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person. This document has been prepared for the purposes of complying with the laws of England and Wales, and the information disclosed may not be the same as that which would have been disclosed if this document and the accompanying documents had been prepared in accordance with the laws of jurisdictions outside of England and Wales.

Neither this document nor any of the accompanying documents are intended to, and do not, constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval pursuant to the Scheme or otherwise, in any jurisdiction in which such offer, invitation or solicitation is unlawful.

14. Further information Your attention is drawn to the full text of the Scheme as set out in Part 7 (The Scheme of Arrangement) of this document.

Your attention is also drawn to the following parts of this document, which are deemed to form part of this explanatory statement: Part 3 (Conditions of the Scheme); Part 5 (Financial information); Part 6 (Additional Information); Part 9 (Notice of Court Meeting); and Part 10 (Notice of General Meeting).

Yours faithfully

Lazard & Co., Limited

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PART 3

CONDITIONS AND FURTHER TERMS OF THE ACQUISITION AND THE SCHEME

Part A: Conditions of the Acquisition and the Scheme 1. The Acquisition is conditional upon the Scheme becoming unconditional and Effective by not later than, the Long­Stop Date or such later date (if any) as the Co­op and Nisa may agree and (if required) the Court may allow.

2. The Scheme is subject to the following conditions:

2.1 its approval at the Court Meeting by a majority in number representing not less than 75 per cent. in value of the Scheme Shareholders on the register of members of Nisa at the Voting Record Time who are present in person or by proxy;

2.2 the Special Resolution required to approve and implement the Scheme being duly passed by the requisite majority of the Scheme Shareholders (other than the Trust) on the register of members of Nisa at the Voting Record Time at the General Meeting; and

2.3 the sanction of the Scheme by the Court (with or without modification but subject to any modification being on terms acceptable to Nisa and the Co­op) and the delivery of a copy of the Court Order to the Registrar of Companies.

3. In addition, the Acquisition shall be conditional upon the following Conditions and, accordingly, the necessary actions to make the Scheme Effective, will not be taken unless such Conditions (as amended if appropriate) have been satisfied or, where relevant, waived:

3.1 the CMA deciding: (a) not to make a Phase 2 reference (pursuant to Section 33 of the Enterprise Act 2002 or as a result of accepting undertakings in lieu of reference on terms reasonably satisfactory to the Co­op under Section 73 of the Enterprise Act 2002); or (b) where the CMA has made a Phase 2 reference, the Co­op deciding to proceed with the Acquisition, and confirmation having been received by the Co­op from the CMA that: (i) the Acquisition may proceed without any undertakings, conditions or orders; or (ii) the Acquisition may proceed subject to the giving of undertakings or the imposition of conditions or orders on terms reasonably satisfactory to the Co­op, and all necessary approvals or consents for clearance having been provided by the CMA. For the purposes of this paragraph 3.1, unless otherwise agreed between the Co­op and Nisa, any undertakings, conditions or orders shall be “on terms reasonably satisfactory to the Co­op” if they require the divestment of up to 30 of the Co­op’s stores;

3.2 to the extent that the Acquisition gives rise to a mandatory merger filing requirement to any of the Channel Islands Authorities, merger clearance having been obtained in the relevant jurisdiction on terms reasonably satisfactory to the Co­op;

3.3 other than in respect of the conditions at paragraphs 3.1 and 3.2 above, no government or governmental, quasi­governmental, supranational, statutory, regulatory, environmental or investigative body, court, trade agency, association, institution or any other body or person whatsoever in any jurisdiction (each a “Third Party”) having given notice in writing of a decision to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference (and in each case not having withdrawn the same) or enacted, made or proposed any statute, regulation, decision or order, or having taken any other steps which would or might reasonably be expected to:

3.3.1 require, prevent or delay the divestiture, or materially alter the terms envisaged for any proposed divestiture by any member of the Co­op Group or by any member of the Nisa Group of all or any portion of their respective businesses, assets or property or impose any material limitation on the ability of any of them to conduct their respective businesses (or any of them) or to own any of their respective assets or properties or any material part thereof which, in any such case, is material in the context of the Co­op Group or the Nisa Group, in either case taken as a whole or in the context of the Acquisition;

3.3.2 require the divestiture by any member of the Co­op Group of any shares or other securities in the Nisa Group;

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3.3.3 other than pursuant to the implementation of the Scheme, require any member of the Co­op Group or any member of the Nisa Group to acquire or offer to acquire any shares, other securities convertible into shares (or the equivalent) or interest in any member of the Nisa Group or any asset owned by any third party which is material in the context of the Nisa Group or the Co­op Group, in either case taken as a whole or in the context of the Acquisition;

3.3.4 impose any limitation on, or result in a delay in, the ability of any member of the Co­op Group directly or indirectly to acquire or to hold or to exercise effectively any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in the Nisa Group or the Co­op Group or to exercise management control over any such member which is material in the context of the Co­op Group or the Nisa Group, in either case taken as a whole or in the context of the Acquisition;

3.3.5 result in any company in the Nisa Group ceasing to be able to carry on business under the name “Nisa”;

3.3.6 impose any material limitation on the ability of any member of the Co­op Group or any member of the Nisa Group to conduct, integrate or coordinate all or any part of their respective businesses with all or any part of the business of any other member of the Co­op Group and/or the Nisa Group in each case in a manner which is materially adverse to the Co­op Group and/or the Nisa Group taken as a whole or in the context of the Acquisition;

3.3.7 make the Acquisition or its implementation or the acquisition or proposed acquisition by the Co­op or any member of the Co­op Group of any shares or other securities in, or control or management of, Nisa void, illegal, and/or unenforceable under the laws of any relevant jurisdiction, or otherwise, directly or indirectly, materially restrain, restrict, prohibit, delay or otherwise materially interfere with, or impose material adverse conditions or obligations with respect to, the Acquisition or the acquisition of any shares or other securities in, or control or management of, Nisa by any member of the Co­op Group or require a material amendment of the Scheme;

3.4 other than as a result of the change in control of Nisa pursuant the Scheme, a Termination Event having occurred under the ABL Facility Agreement (“Termination Event” having the meaning given to it in the ABL Facility Agreement) in respect of which the Agent (as defined in the ABL Facility Agreement) has taken action pursuant to the ABL Facility and such action (in the opinion of the Co­op acting reasonably) has a material adverse effect on the business, operations or financial position of the Nisa Group as a whole;

3.5 the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of the Nisa Group (other than retention of title rights imposed by suppliers in the ordinary course of business) and which is material in the context of the Nisa Group taken as a whole or in the context of the Acquisition;

3.6 no litigation, arbitration proceedings, prosecution or other legal proceedings to which the Nisa Group is or is likely to become a party (whether as a claimant, defendant or otherwise) and no investigation by any Third Party against or in respect of the Nisa Group having been instituted announced or threatened in writing by or against or remaining outstanding in respect of the Nisa Group which in any such case might be reasonably expected to have a material adverse effect on the Nisa Group;

3.7 any member of the Nisa Group taking or proposing any steps, corporate action or having any legal proceedings instituted or threatened in writing against it in relation to a moratorium of any indebtedness, its winding up (voluntary or otherwise), dissolution, reorganisation or for the appointment of any administrator, receiver, manager, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or appointing any analogous person in any jurisdiction or having any such person appointed;

3.8 any member of the Nisa Group being unable, or admitting in writing that it is unable, to pay its debts as they fall due or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or having ceased or threatened to cease carrying on all or a substantial part of its business;

3.9 no steps having been taken and no omissions having been made which are reasonably likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Nisa Group, which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which is material and would have an adverse effect on the Nisa Group taken as a whole;

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3.10 the Co­op not having discovered that:

3.10.1 in relation to any release, emission, accumulation, discharge, disposal or other fact or circumstance which has impaired or is reasonably likely to impair the environment (including property) or harmed or is reasonably likely to harm the health of humans, animals or other living organisms or eco systems, no past or present member of the Nisa Group (i) having committed any violation of any applicable laws, statutes, regulations, authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions or approvals, notices or other requirements of any Third Party; and/or (ii) having incurred any liability (whether actual or contingent) to any Third Party; and/or (iii) being reasonably likely to incur any liability (whether actual or contingent), or being required, to make good, remediate, repair, re­instate or clean up the environment (including any property), in each case which is material in the context of the Nisa Group taken as a whole or in the context of the Acquisition;

3.10.2 any past or present director, officer or employee of the Nisa Group, or any person that performs or has performed services for or on behalf of any such company is or has, at any time during the course of such person’s employment with, or performance of services for or on behalf of, any member of the Nisa Group, engaged in any activity, practice or conduct (or omitted to take any action) in contravention of the UK Bribery Act 2010 or any other applicable anti­corruption legislation;

3.10.3 any past or present director, officer or employee of the Nisa Group, or any person that performs or has performed services for or on behalf of any such company has, during the course of such person’s employment with, or performance of services for or on behalf of, any member of the Nisa Group, engaged in any activity or business with, or made any investments in, or made any funds or assets available to, or received any funds or assets from any government, entity or individual covered by any of the economic sanctions administered by the United Nations or the European Union (or any of their respective member states) or the United States Office of Foreign Assets Control or any other governmental or supranational body or authority in any jurisdiction;

3.10.4 any asset of any member of the Nisa Group constitutes criminal property as defined by Section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition); and

3.11 Nisa not having materially breached the undertakings in clause 14.2 of the Bid Conduct Agreement; and for the purposes of this paragraph 3.11, a breach (or series of breaches) shall be “material” if it has had, or will through the passage of time have, the effect of reducing (i) the earnings before interest, tax, depreciation and amortisation of the Nisa Group (on an annualised basis); or (ii) the gross assets of the Nisa Group, in each case by an amount of £1,000,000 (one million pounds sterling) or more.

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Part B: Further terms of the Scheme and the Acquisition 1. Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.

2. Any of the Conditions other than the Conditions set out in paragraphs 1 and 2, may be waived in whole or in part by the Co­op giving written notice to Nisa that it is waiving such Condition.

3. The Co­op and Nisa may agree that the Acquisition will be implemented by means of a Takeover Offer. In such event, the Acquisition will be implemented on substantially the same terms, subject to appropriate amendments, so far as applicable, as those which would apply to the Scheme, including (without limitation) an acceptance condition set at 90 per cent. of the shares to which such offer relates (or such less percentage, being more than 50 per cent. of the Nisa shares carrying voting rights, as the Co­op may in its sole discretion decide).

4. The availability of the Offer to Overseas Shareholders and the distribution of this document in, into or from jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons into whose possession this document comes should inform themselves of, and observe, any such restrictions.

5. Unless otherwise determined by the Co­op and permitted by applicable law and regulation, the Acquisition is not being, and will not be, made, directly or indirectly, in or into or by the use of the mails of, or by any other means or instrumentality (including, without limitation, facsimile transmission, telex, telephone, internet or other forms of electronic transmission) of interstate or foreign commerce of, or by any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and will not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.

6. The Ordinary Shares which will be acquired under the Scheme will be acquired with full title guarantee, fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre­emption and any other third party rights and interests of any nature and together with all rights now or hereafter attaching or accruing to them, including voting rights and the right to receive and retain in full all dividends and other distributions (if any), and any other return of capital (whether by way of reduction of share capital or share premium account or otherwise), declared, made or paid on or after the Effective Date.

7. The Co­op reserves the right for any other member of the Co­op Group from time to time to implement the Acquisition.

8. The Scheme is governed by the law of England and Wales and is subject to the jurisdiction of the English courts. The Scheme is subject to the Conditions and further terms set in this Part 3.

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PART 4

UNITED KINGDOM TAXATION

1. The comments set out in this Part 4 are based on current UK tax law as applied in England and Wales and HM Revenue & Customs (“HMRC”) published practice (which may not be binding on HMRC), both of which are subject to change, possibly with retrospective effect. No representation is made or intended by the Company that changes in relevant laws or HMRC practice or their application or interpretation will not be made in the future.

2. The information contained in this Part 4 is intended as a general guide and does not address the particular circumstances of any individual, company or partnership (including partnerships which may include companies as partners), nor does it address all possible tax consequences relating to the holding or sale of Ordinary Shares or treatment of the Scheme Consideration. The information applies only to shareholders of the Company who are resident and, in the case of an individual, domiciled for tax purposes in the UK and to whom “split year” treatment does not apply, and who are the absolute beneficial owners of Ordinary Shares.

3. Nisa Shareholders are recommended to consult their own professional advisers as to the tax treatment of receipt of Scheme Consideration taking into account their own particular circumstances.

General: sale of Scheme Shares pursuant to the Scheme 4. A Scheme Shareholder who is resident for tax purposes in the UK and whose Ordinary Shares are subject to the Scheme should be treated as making a disposal of such Ordinary Shares for the purposes of the UK taxation of capital gains (“UK CGT”). Receipt of Scheme Consideration in respect of such a disposal may, depending upon the Scheme Shareholder’s circumstances and subject to available exemptions or reliefs, give rise to a capital gain or allowable capital loss for UK CGT purposes. However, see the sections below on “Initial Consideration”, “Deferred Consideration” and “Rebate Consideration” for information about which elements of the Scheme Consideration are likely to be treated for tax purposes as capital receipts in respect of the disposal of Ordinary Shares and which as trading income.

5. For UK resident individual Scheme Shareholders, any capital gain arising after taking account of reliefs and exemptions will generally be subject to capital gains tax at the rate of 10 per cent. for basic rate taxpayers to the extent that their taxable gains and taxable income when aggregated do not exceed the higher rate threshold (£45,000 for 2017/18 assuming the individual is entitled to full personal allowance). For higher rate taxpayers with taxable income and gains above the higher rate threshold, the gains are treated as the top slice of such aggregate amount and subject to capital gains tax at the rate of 20 per cent. to the extent that such gains exceed the higher rate threshold.

6. The capital gains annual exemption (£11,300 for 2017/18) may be available for UK resident individual Scheme Shareholders to offset any capital gain (to the extent it has not already been utilised).

7. For UK resident Scheme Shareholders within the charge to corporation tax, the rate of corporation tax on chargeable gains is 19%. An indexation allowance with respect to original base cost may be available to reduce the amount of any chargeable gain subject to corporation tax payable on a disposal of the Scheme Shares.

Tax treatment of receipt of Initial Consideration 8. The Initial Consideration should be treated for tax purposes as a capital receipt forming part of the consideration for the disposal of a Scheme Shareholder’s Scheme Shares and therefore, subject to available exemptions or reliefs, give rise to a capital gain or allowable capital loss for UK CGT purposes.

Tax treatment of Deferred Consideration 9. It is also considered that the Deferred Consideration should be treated for tax purposes as a capital receipt forming part of the consideration for the disposal of a Scheme Shareholder’s Scheme Shares and therefore, subject to available exemptions or reliefs, give rise to a capital gain or allowable capital loss for UK CGT purposes.

10. The amount of the Deferred Consideration which will actually be payable to a particular Scheme Shareholder is not ascertainable at the Effective Date (because it depends in part on the Scheme Shareholder having a certain level of Rateable Turnover over the period to 31 March 2021). This means that the Deferred Consideration will have to be valued at the Effective Date, and that value will need to be included in the Scheme Shareholder’s calculation of capital

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gains arising in relation to the disposal of Shares on the Effective Date. Further capital gains or allowable losses may then arise on the future receipt of Deferred Consideration depending on the amount received. The valuation will need to be undertaken by your own tax adviser or accountant since it is dependant on your personal trading circumstances.

11. Whilst it is considered that the Deferred Consideration should be regarded for tax purposes as capital, Scheme Shareholders should note that there is a risk of HMRC arguing that because the amount of the payment is partly linked to Rateable Turnover, the Deferred Consideration represents trading income and should be taxed accordingly. It is considered that this risk is low as there should be sufficient indicators present to be able to argue for capital treatment, but you should consult your own professional adviser.

Rebate Consideration 12. It is considered likely that the Rebate Consideration, being linked to the amount of a Scheme Shareholder’s Rebateable Turnover in the four year period following the Effective Date, will be treated for tax purposes in the same way as the Scheme Shareholder’s existing rebate receipts. It is expected that in most cases this will mean that the Rebate Consideration will be treated as trading income for tax purposes, and not as a capital receipt in respect of the disposal of the Scheme Shares.

13. For Scheme Shareholders who are companies, the same rate of corporation tax will apply to trading income as for chargeable gains.

14. For Scheme Shareholders who are individuals, the rate of income tax applicable to trading income may be higher than the rate of tax applicable to capital gains. The basic rate of income tax up to the higher rate threshold (currently £45,000 assuming the individual is entitled to full personal allowance) is 20% and the higher rate is 40%. For individuals with income in excess of £150,000, the “additional rate” of income tax of 45% applies.

15. However, for both individuals and companies, there may be losses or other reliefs or costs within the Scheme Shareholder’s trade which could be set off against (and so reduce) the amount of taxable trading income.

Stamp Duty and Stamp Duty Reserve Tax 16. No UK stamp duty or stamp duty reserve tax should be payable by Scheme Shareholders as a result of Scheme Shares being transferred pursuant to the Scheme.

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PART 5

FINANCIAL INFORMATION

Part A: Financial information relating to Nisa The following information is incorporated into this document by reference:

• the audited consolidated accounts of Nisa for the 53 weeks ended 3 April 2016 are set out in pages 32 to 57 (both inclusive) in the Company’s annual report for the financial year ended 3 April 2016 available at http://corporate.nisaretail.com/shareholders by opening the link entitled “Annual Report 2016”.

Part B: Financial information relating to Co­op The following information is incorporated into this document by reference:

• the financial statements for the 26 weeks ended 1 July 2017 are available from the Co­operative Group Limited’s website at https://www.co­operative.coop/investors/reports by opening the link entitled “Interim Report 2017”; and

• the audited consolidated accounts of the Co­operative Group Limited for the financial period ended 31 December 2016 set out in pages 96 to 192 (both inclusive) in the Co­operative Group Limited’s annual report for the financial period ended 31 December 2016 available from the Co­operative Group Limited’s website at https://www.co­ operative.coop/investors/reports by opening the link entitled “Annual Report 2016”; and

• the audited consolidated accounts of the Co­operative Group Limited for the financial year ended 31 December 2015 set out in pages 74 to 196 (both inclusive) in the Co­operative Group Limited’s annual report for the financial year ended 31 December 2015 available from the Co­operative Group Limited’s website at https://www.co­ operative.coop/investors/reports by opening the link entitled “Annual Report 2015”.

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PART 6

ADDITIONAL INFORMATION

1. Responsibility 1.1 The Nisa Directors, whose names are set at paragraph 2.1 of this Part 6, each accept responsibility for the information contained in this document other than the information contained in this document in respect of the Co­op or the Co­op Group, for which responsibility is taken by the Co­op Directors pursuant to the paragraph immediately below. To the best of the knowledge and belief of the Nisa Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

1.2 The Co­op Directors, whose names are set at paragraph 2.2 of this Part 6, each accept responsibility for the information contained in this document relating to the Co­op, the Co­op Group, the Co­op Directors including, without limitation, information relating to the Co­op’s strategy and the Co­op’s current future intentions for Nisa. To the best of the knowledge and belief of the Co­op Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. Directors 2.1 The Nisa Directors and their respective positions are set out below:

Name Position held Peter Christopher Hartley Chairman Arnu Kumar Misra Chief Executive Officer Robin Brown Chief Financial Officer Bharatkumar Jashbhai Amin Member Non­Executive Director Neil Henry Ashworth Independent Non­Executive Director Sukhjinder Singh Gill Member Non­Executive Director Mukhtar Singh Goraya Member Non­Executive Director Matthew Alexander Hunt Member Non­Executive Director Vimanji Nathaji Odedra Member Non­Executive Director Kamraj Singh Sangha Member Non­Executive Director Alison Strong Member Non­Executive Director Jetinder Singh Sunner Member Non­Executive Director Sukhwinder Singh Tiwana Member Non­Executive Director

2.2 Co­op Directors and their respective positions are set out below:

Name Position held Alistair Asher Director Anthony Crossland Director Andrew Lang Director James Tully Director

3. Ordinary Shares At the close of business on 23 October 2017 (being the last practicable date prior to the publication of this document), there were 59,760 Ordinary Shares in issue.

4. Disclosure of interests and dealings Definitions and references For the purposes of this paragraph 4:

“acting in concert” with Nisa or the Co­op, as the case may be, persons who, pursuant to an agreement of understanding (whether formal or informal) co­operate to obtain or consolidate control of Nisa or the Co­op, as the case may be, or to frustrate the successful outcome of the Acquisition;

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“arrangement” includes any indemnity or option arrangement and any agreement or understanding, formal or informal, of whatever nature relating to relevant securities of Nisa which may be an inducement to deal or refrain from dealing;

“connected person” means, in relation to any person who is a director of a company, any other person whose interests in shares the director is taken to be interested in pursuant to Part 22 of the Companies Act 2006 and related regulations;

“control” means an interest or interests in shares carrying in aggregate 30 per cent. or more of the “voting rights” of a company, irrespective of whether the holding or holdings gives de facto control;

“dealing” or “dealt” means:

(i) acquiring or disposing of relevant securities, of the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to relevant securities or of general control of relevant securities;

(ii) taking, granting, acquiring, disposing of, entering into, closing out, terminating, exercising (by either party) or varying an option (including a traded option contract) in respect of any relevant securities;

(iii) subscribing or agreeing to subscribe for relevant securities;

(iv) exercising or converting, whether in respect of any new or existing securities, or any relevant securities carrying conversion or subscription rights;

(v) acquiring, disposing of, entering into, closing out, exercising (by either party) of any rights under, or varying, a derivative referenced, directly or indirectly, to relevant securities;

(vi) entering into, terminating or varying the terms of any agreement to purchase or sell relevant securities; and

(vii) any other action resulting, or which may result, in an increase or decrease in the number of relevant securities in which a person is interested;

“relevant securities” means:

(i) Ordinary Shares and any other securities of Nisa conferring voting rights;

(ii) the equity share capital of any member of the Co­op Group; and

(iii) securities of Nisa and any member of the Co­op Group carrying conversion or subscription rights into any of the foregoing;

“voting rights” means all of the voting rights attributable to a company’s share capital which are currently exercisable at a general meeting. Any shares which are subject to:

(a) a restriction on the exercise of voting rights:

(i) in an undertaking or agreement by or between a shareholder and the company or a third party; or

(ii) arising by law or regulation; or

(b) a suspension of voting rights implemented by means of the company’s articles of association or otherwise, will normally be regarded as having voting rights which are currently exercisable at a general meeting.

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Interests and rights to subscribe in relevant securities of Nisa Nisa Directors 4.1 As at 23 October 2017, the Nisa Directors (and their connected persons) were interested in the following Ordinary Shares:

Name Number of Ordinary Shares Jash Limited (a connected person of Bharatkumar Jashbhai Amin) 100 SR Retail Limited (a connected person of Sukhjinder Singh Gill) 10 Total Retail Limited (a connected person of Mukhtar Singh Goraya) 10 Filco Supermarkets Limited (a connected person of Matthew Alexander Hunt) 250 V&N (UK) Limited (a connected person of Vimanji Nathaji Odedra) 250 Kamraj Singh Sangha and Palwinder Singh Sangha 100 JD Hunter & Co Limited (a connected person of Alison Strong) 250 Michael Supermarkets Limited (a connected person of Jetinder Singh Sunner) 150 Longford Convenience Limited (a connected person of Sukhwinder Singh Tiwana) 178

Dealings in the shares in Nisa and Co­op Nisa Directors 4.2 Since 1 January 2017, no Nisa Directors have dealt in the shares of Nisa or the Co­op.

Co­op Directors 4.3 Since 1 January 2017, no Co­op Directors have dealt in the shares of Nisa.

Co­op 4.4 The Co­op does not own any shares in Nisa.

Nisa 4.5 Nisa does not own any shares in the Co­op.

General 4.6 As at 23 October 2017, save for the irrevocable undertakings described in paragraph 7 of this Part 6, there is no arrangement relating to relevant securities in Nisa which exists between the Co­op or any person acting in concert with the Co­op and any other person, nor between Nisa or any person acting in concert with Nisa and any other person.

5. Service contracts and letters of appointment of the Nisa directors 5.1 The following executive directors have entered into service agreements with the Nisa Group, as summarised below:

Arnu Misra 5.1.1 Mr Misra entered into a service agreement with Nisa with effect from 6 October 2017 for an initial fixed period until 31 March 2018 and shall continue thereafter until terminated by at least three months’ written notice given by Nisa to Mr Misra or at least three months’ written notice given by Mr Misra to Nisa (such notice not to expire prior to 30 June 2018).

5.1.2 Under the service agreement, Mr Misra receives an annual salary of £250,000. Mr Misra is eligible to participate in Nisa’s discretionary bonus scheme under which Mr Misra is currently eligible to receive a maximum annual bonus of 100% of his salary (such amount to be pro­rated for the period to 31 March 2018).

5.1.3 Nisa contributes 5% of Mr Misra’s basic salary to the Nisa Group Personal Pension Scheme. The benefits provided to Mr Misra include a car allowance. Further benefits provided to Mr Misra include private medical cover (for Mr Misra, his spouse and children), and death­in­service life cover. Mr Misra is entitled to 25 working days’ paid holiday in each calendar year and will be reimbursed all out of pocket expenses reasonably and properly incurred by him in the performance of his duties.

5.1.4 Mr Misra is subject to various restrictions on activities during his appointment and to restrictions relating to non­compete and non­solicitation of employees for the twelve months after its termination.

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Robin Brown Mr Brown entered into a service agreement with Nisa with effect from 30 July 2015. The principal terms of such agreement are as follows:

5.1.5 the service agreement is terminable by each of Nisa and Mr Brown on 12 months’ written notice to the other. Nisa is entitled to terminate Mr Brown’s employment immediately and make a payment in lieu of notice comprising Mr Brown’s basic salary in respect of the notice period;

5.1.6 under the service agreement, Mr Brown receives an annual salary of £226,600. Mr Brown is eligible to participate in Nisa’s discretionary bonus scheme under which Mr Brown is currently eligible to receive a maximum annual bonus of 150% of his salary;

5.1.7 Nisa contributes 15% of Mr Brown’s gross basic salary to the Nisa Group Personal Pension Scheme. Mr Brown does not currently contribute to the pension scheme. The benefits provided to Mr Brown include a car allowance. Further benefits provided to Mr Brown include private medical cover (for Mr Brown and his spouse), and death­in­service life cover. Mr Brown is entitled to 26 working days’ paid holiday in each calendar year and will be reimbursed all out of pocket expenses reasonably and properly incurred by him in the performance of his duties;

5.1.8 Mr Brown is subject to various restrictions on activities during his appointment and to restrictions relating to non­compete and non­solicitation of employees for the twelve months after its termination; and

5.1.9 Mr Brown’s service agreement contains change of control provisions whereby if either Mr Brown or Nisa terminates Mr Brown’s employment within 12 months following a “change of control” event, Mr Brown is entitled to receive the aggregate of 12 months’ salary, an average of the three preceding annual bonus payments and the value of 12 months’ pension contributions and other benefits. The completion of the Acquisition would constitute a “change of control” for these purposes.

Mr Brown indicated his desire to leave employment with Nisa at the end of October 2017. To ensure Mr Brown remains with Nisa until at least 31 March 2018, revised terms have been approved by Nisa’s remuneration committee and the Nisa Board, as set out below:

• Mr Brown continuing in his role as Chief Financial Officer until at least 31 March 2018;

• Mr Brown’s salary being increased to £235,000 per annum with effect from 6 October 2017;

• Mr Brown receiving a one­off exceptional bonus payment in an amount of £125,000 in recognition of his outstanding performance during 2017 (such payment has now been paid to Mr Brown);

• Mr Brown remaining eligible to receive the deferred element of his 2015/2016 bonus award in an amount of £82,500 under the relevant bonus plan rules;

• Mr Brown remaining eligible to receive a payment in respect of his participation in the Nisa bonus plan for the 2016/2017 financial year, to be calculated using the same methodology applied to the resolution of the internal grievance relating to the bonus plan for the 2016/2017 financial year;

• Mr Brown remaining eligible to receive a payment in respect of his participation in the Nisa bonus plan for the 2017/2018 financial year, the amount of any such bonus payable under the 2017/2018 Nisa bonus plan being at the absolute discretion of Nisa’s remuneration committee;

• the restrictive covenants in Mr Brown’s service agreement being amended to restrict him from being engaged or employed by any of Sainsbury's Group, McColl’s Retail Group, the Morrisons Group or the Co­operative Group in competition with Nisa (such restriction in relation to the Co­operative Group shall not apply following completion of the Acquisition);

• in the event Mr Brown’s employment terminates at the end of March 2018, Mr Brown being eligible to a payment in lieu of his notice period, being the aggregate of 12 months’ salary, an average of the three preceding annual bonus payments and the value of 12 months’ pension contributions and other benefits in the event that by, a date to be agreed, the Scheme shall become Effective subject only to the implementation of any undertakings, conditions or orders imposed by the CMA on the Co­op, and in the alternative his notice would be paid at his basic salary only (less statutory deductions);

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• In the event that the Acquisition is not approved at the Shareholder Meetings, it is proposed that Mr Brown would continue in his role as Chief Financial Officer until 31 March 2018 and leave Nisa's employment at that date and on that basis he would be entitled to receive the revised terms as set out above but his pay in lieu of notice would be paid at his basic salary level (less statutory deductions); and

• Nisa contributing a maximum of £10,000 plus VAT to Mr Brown’s legal fees in respect of the revised terms.

5.2 The following non­executive directors have entered into service agreements or letters of appointment (as appropriate) with the Nisa Group as summarised below:

Peter Christopher Hartley 5.2.1 Mr Hartley was appointed as a non­executive director of Nisa by a letter of appointment dated 29 September 2016. The appointment has an initial term of three years, subject to board approval and AGM re­election. Notwithstanding this, the appointment is terminable by either party on three months’ written notice to the board. Mr Hartley receives a fee of £75,000 per annum and is reimbursed all out of pocket expenses reasonably and properly incurred by him in the performance of his duties.

Neil Henry Ashworth 5.2.2 Mr Ashworth was appointed as a non­executive director of Nisa by a letter of appointment dated 17 November 2016. The appointment has an initial term of three years, subject to board approval and AGM re­election. Notwithstanding this, the appointment is terminable by either party on three months’ written notice to the board. Mr Ashworth receives a fee of £40,000 per annum and is reimbursed all out of pocket expenses reasonably and properly incurred by him in the performance of his duties. Mr Ashworth has tendered his resignation as a non­executive director which will take effect from 31 January 2018.

6. Material contracts in connection with the Acquisition

Bid conduct agreement between (1) Nisa and (2) the Co­op dated 9 October 2017 6.1 On 9 October 2017, the Company and the Co­op entered into the Bid Conduct Agreement to govern the terms on which the Acquisition was to be made in the form of the Scheme and to regulate the conduct of the Company during the period of the Acquisition.

6.2 The main terms of the Bid Conduct Agreement are as follows:

Consideration 6.2.1 The consideration payable by the Co­op comprises three elements as follows: • the Initial Consideration; • the Deferred Consideration; and • the Rebate Consideration.

6.2.2 Further information on the terms of the Scheme Consideration is set out in the Explanatory Statement in Part 2 of this Document.

6.2.3 The Co­op shall be entitled to deduct from either the Initial Consideration or the Deferred Consideration any amounts of “Leakage” (being any amounts outside the ordinary course between the Reference Date of 2 July 2017 and the Effective Date) provided full details of the leakage are notified within 12 months of the Effective Date;

6.2.4 Before any amount of Leakage can be deducted from either the Initial Consideration or the Deferred Consideration, the Co­op shall provide full details of any proposed leakage to an Expert who will decide whether Leakage has occurred and, if so, the amount of such leakage;

Terms and conditions of the Offer 6.2.5 The Offer would only be made to shareholders of the Company who remain on the register of members of the Company on the Effective Date;

6.2.6 The Scheme becoming unconditional and effective on or before the 31 July 2018 being the Long Stop Date;

6.2.7 The Scheme being conditional only on the Conditions which are set out in Part A of Part 3 of this document and no other conditions.

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Non­solicitation 6.2.8 The Bid Conduct Agreement sets out non­solicitation provisions which prevents Nisa from:

6.2.8.1 soliciting (directly or indirectly) or initiating or seeking any enquiries, approaches from any person or entity in relation to any competing proposal to the Acquisition;

6.2.8.2 entering into or participating in any discussions or negotiations or other communications with any person (other than the Co­op and the Company’s advisors) in relation to any such competing proposal;

6.2.8.3 entering into any agreement, understanding or arrangement with any person or entity for the purpose of securing or in connection with any competing proposal; or

6.2.8.4 providing information relating to the Company and its group to any person or entity (other than the Co­op and its advisors) in relation to and for the purposes of a competing proposal;

6.2.8.5 a breach of the non­solicitation provisions is a ground for payment of the break fee by Nisa to the Co­op (see paragraph 6.2.15 below);

Superior Proposal 6.2.9 Nisa is under a duty to notify the Co­op as soon as possible if a competing proposal is submitted orally or in writing to Nisa, any director of Nisa or any adviser or agent acting on behalf of Nisa;

6.2.10 notwithstanding the above restrictions, if a competing offer is received by Nisa which the Nisa directors determine is a superior proposal to that by the Co­op, then Nisa and Nisa’s directors shall not recommend the superior proposal nor withdraw, qualify or adversely modify the recommendation of the Offer unless the Co­op has been given the opportunity to make an offer or proposal which would be equal to or better than the superior proposal;

Conduct of target business 6.2.11 the Bid Conduct Agreement sets out various provisions relating to the conduct of Nisa from 9 October 2017 is entered into until the Effective Date. These provisions provide the Co­op with comfort that Nisa is run in the ordinary course of business and that certain actions can only be taken with the Co­op’s consent (such consent not to be unreasonably withheld or delayed).

6.2.12 A material breach of the conduct of business provisions is a ground for termination of the Bid Conduct Agreement and is a condition which would, if invoked, permit the Co­op not to proceed with the Acquisition (see paragraph 3.11 of the Conditions in Part A of Part 3 of this document above).

Break fees 6.2.13 the Bid Conduct Agreement contains break fees payable by the Co­op to Nisa and by Nisa to the Co­op in certain circumstances;

6.2.14 if:

6.2.14.1 the Co­op does not proceed to make the Acquisition in accordance with the terms of the Bid Conduct Agreement a break fee of up to £2,000,000 for costs and expenses of Nisa is payable to Nisa;

6.2.14.2 the Co­op does not satisfy the Merger Control Condition a break fee of £3,000,000 is payable to Nisa;

6.2.15 a break fee of up to £2,000,000 for costs and expenses of the Co­op is payable by Nisa if:

6.2.15.1 the directors of Nisa withdraw, modify or qualify their recommendation for the Acquisition;

6.2.15.2 the directors of Nisa recommend any competing proposal (including any superior proposal) to the Nisa Shareholders;

6.2.15.3 Nisa breaches any of the non­solicitation provisions (as summarised in paragraph 6.2.8 (above)); or

6.2.15.4 Nisa commits a material breach of any of the conduct of its undertakings to implement the Scheme.

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Asset backed lending agreement between (1) Nisa and (2) HSBC Invoice Finance (UK) Limited and others dated 23 June 2017 6.3 On 23 June 2017, Nisa entered into an asset backed lending agreement with, inter alios, HSBC Invoice Finance (UK) Limited and Wells Fargo Capital Finance (UK) Limited, providing for secured bank facilities of up to £120,000,000 (“ABL Facility Agreement”).

6.4 The ABL Facility Agreement contains a number of Termination Events (as defined) typical of asset based lending facilities of this nature, the occurrence of which, if continuing, entitle the Agent (as defined) if so directed by the Majority Lenders (as defined) to take certain actions including (but not limited to) the immediate reduction or withdrawal of the facilities; alteration of the terms upon which the facilities are made available; the ability to make demand of the whole outstanding balance of the facilities together with all outstanding interest and other fees and termination charges; and/or terminate the facilities.

6.5 Termination Events (as defined) include (but are not limited to) the following:

6.5.1 non­payment on the due date of any amount payable by Nisa under the ABL Facility Agreement;

6.5.2 breach by Nisa of any financial covenants set out in the ABL Facility Agreement; or

6.5.3 a change of control of Nisa.

6.6 The moneys borrowed by Nisa under the ABL Facility Agreement are fully secured against Nisa.

6.7 Upon the occurrence of a Change of Control (as defined in the ABL Facility Agreement and which would be triggered by the Acquisition), if the Reduced Majority Lenders (as defined) so request, the facilities will be cancelled and all outstanding amounts together with charges and interest accrued under the ABL Facility Agreement shall become due and payable within 30 days of the occurrence of such event.

7. Irrevocable undertakings Nisa Directors 7.1 The Co­op has received irrevocable undertakings from those Nisa Directors set out below to use their reasonable endeavours to procure that the company in which they respectively have an interest and which owns Nisa Shares (as stated below) shall vote in favour of the Scheme at the Court Meeting and the Special Resolution to be proposed at the General Meeting:

Name Number of Ordinary Shares Jash Limited (a connected person of Bharatkumar Jashbhai Amin) 100 SR Retail Limited (a connected person of Sukhjinder Singh Gill) 10 Total Retail Limited (a connected person of Mukhtar Singh Goraya) 10 Filco Supermarkets Limited (a connected person of Matthew Alexander Hunt) 250 V&N (UK) Limited (a connected person of Vimanji Nathaji Odedra) 250 Kamraj Singh Sangha and Palwinder Singh Sangha 100 JD Hunter & Co Limited (a connected person of Alison Strong) 250 Michael Supermarkets Limited (a connected person of Jetinder Singh Sunner) 150 Longford Convenience Limited (a connected person of Sukhwinder Singh Tiwana) 178

Trust The Nisa Retail Members’ Trust has undertaken that it will consent to the Scheme at the Court Meeting.

8. Other Information Lazard has given and has not withdrawn its written consent to the issue of this document with the inclusion herein of the references to its name in the form and context in which they appear.

Save as disclosed in this document, there is no agreement, arrangement or understanding (including any compensation arrangements) between the Co­op or any person acting in concert with it and any of the directors, recent directors, shareholders or recent shareholders of Nisa or any person interested or recently interested in Ordinary Shares having any connection with or dependence on or which is conditional upon the outcome of the Acquisition.

There is no agreement, arrangement or understanding whereby the beneficial ownership of any of the Ordinary Shares to be acquired by the Co­op will be transferred to any other person, save that the Co­op reserves the right to transfer any such

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shares to any member of the Co­op Group. No member of the Co­op Group holds any interest in the relevant securities of Nisa.

Save as disclosed in this document, the Nisa Directors are not aware of any significant change in the financial or trading position of Nisa which has occurred since 2 October 2017, being the date of the end of the last financial period for which interim financial information was published.

9. Documents on display Copies of the following documents will be available, free of charge, at http://corporate.nisaretail.com/shareholders during the course of the Offer:

9.1 the Nisa Articles;

9.2 a draft of the Nisa Articles as proposed to be amended by the Special Resolution;

9.3 Lazard’s letter of consent referred to in paragraph 8 of this Part 6;

9.4 a copy of this document; and

9.5 the financial information incorporated by reference into this document and set out in Part 5.

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PART 7

THE SCHEME OF ARRANGEMENT

IN THE HIGH COURT OF JUSTICE Claim No. CR­2017­007381 BUSINESS AND PROPERTY COURT OF ENGLAND AND WALES COMPANIES COURT

IN THE MATTER OF NISA RETAIL LIMITED

– and –

IN THE MATTER OF THE COMPANIES ACT 2006

SCHEME OF ARRANGEMENT (under Part 26 of the Companies Act 2006)

BETWEEN

NISA RETAIL LIMITED

AND

THE SCHEME SHAREHOLDERS (as hereinafter defined)

PRELIMINARY (A) In this Scheme, unless inconsistent with the subject or context, the following expressions bear the following meanings:

“£” or “pence” means the lawful currency of the United Kingdom;

“Acquisition Costs” means all fees, costs, expenses and other liabilities (including any irrecoverable VAT) paid, payable or otherwise assumed by the Nisa Group in connection with the Acquisition whether due for payment before or after the Effective Date;

“Affiliate” means, in relation to a person, each or any other person who for the time being directly or indirectly controls, is controlled by or is under common control with such person, and “control” for these purposes means (a) holding the majority of the voting rights or share capital of such person; or (b) otherwise having the power to direct the management and policies of such person;

“Bid Conduct Agreement” means the bid conduct agreement dated 9 October 2017 made between (1) the Co­op and (2) Nisa ;

“Business Day” means any day which is not a Saturday, Sunday or a bank or public holiday in England;

“Co­op” means Co­operative Group Holdings (2011) Limited, a registered society incorporated in England and Wales (registered number 28501R) whose registered office is at 1 Angel Square, Manchester, England, M60 0AG;

“Co­op Group” means the Co­op and its Group and any reference to a “member of the Co­op Group” shall include any undertakings within the Co­op Group;

“Companies Act” means the Companies Act 2006, as amended from time to time;

“Company” or “Nisa” means Nisa Retail Limited, a private limited company incorporated in England and Wales with registered number 00980790 whose registered office is at

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Member Support Centre, Waldo Way, Normanby Enterprise Park, Scunthorpe, North Lincolnshire DN15 9GE;

“Court” means the High Court of Justice, Business and Property Court of England and Wales, Companies Court;

“Court Meeting” means the meeting (including any adjournment thereof) of the Scheme Shareholders (or the relevant class or classes thereof) convened under an order of the Court under section 896 of the Companies Act for the purposes of considering and, if thought fit, approving this Scheme (with or without amendment) to be held at Leeds United Football Club, Elland Road, Leeds LS11 0ES at 11.00 a.m. on 13 November 2017;

“Deferred Consideration” has the meaning given in paragraph 2.2.1;

“Deferred Consideration has the meaning given in paragraph 2.2.4; Qualifying Condition”

“Effective Date” means the date upon which this Scheme becomes effective in accordance with paragraph 5.1;

“Executive Long Term Incentive Plan” means the executive long term incentive plan scheme 2016/2017 of the Nisa Group;

“Expert” means a firm of chartered accountants or other senior officer for the time being of the Institute of Chartered Accountants in England and Wales which is independent from the Co­op;

“Group” means, in relation to any person its subsidiaries, subsidiary undertakings and Affiliates;

“holder” means a registered holder and includes any person entitled by transmission;

“Hurdle Amount” means, in respect of a Scheme Shareholder, that Scheme Shareholder’s Rebateable Turnover for the 12 month period ended on 2 July 2017 (or in the case of any Scheme Member whose trading with the Company commenced after 2 July 2016, the period from the start of such trading up to 2 July 2017);

“Initial Consideration” has the meaning given in paragraph 2.1;

“Leakage” means any of the following to the extent occurring in the period from and including the Reference Date to and including the Effective Date:

(a) any dividend or distribution of any kind or any redemption, re­purchase or other payment in respect of the Nisa Shares declared, paid or made or agreed to be paid to any Nisa Shareholders or their Affiliates by the Nisa Group;

(b) any rebates or payments made or agreed to be made by or on behalf of any member of the Nisa Group to any Nisa Shareholder or its Affiliates;

(c) any assets transferred or agreed to be transferred, or any rights or benefits given or assigned, or liabilities assumed, indemnified or incurred by or on behalf of any member of the Nisa Group, to or for the benefit of any Nisa Shareholder or its Affiliates;

(d) the waiver or agreement to waive any amount owed to any member of the Nisa Group by the Nisa Shareholders or any Affiliate of any Nisa Shareholder (other than a member of the Nisa Group);

(e) any Acquisition Costs;

(f) other than trade credit in the ordinary course of business, any amounts borrowed from any member of the Nisa Group by any Nisa

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Shareholder or its Affiliates and not repaid in full on or prior to the Effective Date;

(g) payments of directors’ fees or consultancy fees, salary, emoluments (including bonuses), expenses, pensions and other benefits of the Nisa Directors;

(h) payments of bonuses to participants in the Executive Long Term Incentive Plan;

(i) any member of the Nisa Group entering into any transaction or arrangement with any Nisa Shareholder other than in the ordinary course of business and on arm’s length commercial terms;

(j) any amounts paid or payable, or assets disposed of or transferred or liabilities incurred by any member of the Nisa Group which required the Co­op’s consent in accordance with clause 14 of the Bid Conduct Agreement and which were not consented to or which were consented to on the condition that they be categorised as Leakage;

(k) any member of the Nisa Group agreeing conditionally or unconditionally to do any of the things referred to in paragraphs (a) to (j) (inclusive) above; and

(l) any charge to Tax incurred by any member of the Nisa Group as a consequence of any of the matters referred to in paragraphs (a) to (k) (inclusive) above (excluding recoverable VAT),

save in each case to the extent those matters constitute Permitted Leakage;

“Leakage Claim” means any claim by the Co­op for Leakage;

“Locked Box Accounts” means the unaudited consolidated balance sheet of the Nisa Group as at the Reference Date in the form agreed with the Co­op;

“Long Stop Date” means 31 July 2018;

“members” means members of the Company party to the Membership Agreement;

“Membership Agreement” means the Nisa retail membership terms and conditions dated February 2017 entered into with each of the Nisa Shareholders;

“Nisa Group” Nisa and its Group;

“Nisa Shareholders” means the holders of Ordinary Shares from time to time up to the Effective Date or Long Stop Date whichever is the earlier;

“Nisa trading member” means a person who is party to a Membership Agreement with Nisa;

“Ordinary Shares” or “Nisa Shares” means the ordinary shares of £1.00 each in the capital of the Company;

“Outstanding Loan Amount” means an amount equal to the amount owing by the Trustee to Nisa as at the Effective Date pursuant to a loan agreement dated 18 December 2008 as amended and restated on 1 July 2013;

“parent undertaking” and have the respective meanings given by the Companies Act; “subsidiary undertaking”

“Permitted Leakage” means:

(a) any payments or benefits made or agreed to be made by or on behalf of the Nisa Group to the Nisa Shareholders or any Affiliate of the Nisa Shareholders’ Groups in accordance with the Membership Agreement or with the consent of the Co­op (including consent that they be categorised as Permitted Leakage);

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(b) any payment made or agreed to be made or liability incurred in respect of any matter undertaken by or on behalf of any member of the Nisa Group with the consent or at the written request or with the prior written agreement of the Co­op (including the consent, request or agreement of the Co­op that they be categorised as Permitted Leakage);

(c) directors’ fees or consultancy fees, salary and other emoluments paid to the Nisa Directors in accordance with their contractual entitlements as at the Reference Date (or as such contractual terms may be amended with the consent of the Co­op in accordance with clause 14 of the Bid Conduct Agreement);

(d) any payment of bonuses to employees and former employees of the Nisa Group (including under the Executive Long Term Incentive Plan) and related employer’s national insurance which is either contractual or, if discretionary, agreed by the Co­op in writing in advance of payment, up to an aggregate amount of £1,700,000;

(e) Acquisition Costs together with the costs of settlement of the former Chief Executive Officer, Mr N. Read, up to a total aggregate amount of £5,500,000 (five million, five hundred thousand pounds sterling) plus any net costs savings (not in excess of £100,000) arising as a result of employment personnel changes in the Nisa Group following the departure of Mr N. Read;

(f) any recoverable VAT incurred by the Nisa Group in respect of Acquisition Costs; and

(g) any charge to Tax incurred by any member of the Nisa Group as a consequence of any of the matters referred to in paragraphs (a) to (d) (inclusive);

“Qualifying Rebateable Turnover” means, in respect of a Scheme Shareholder, the lower of: (a) that Scheme Shareholder’s actual Rebateable Turnover in a Rebate Year; and (b) that Scheme Shareholder’s Hurdle Amount;

“Quarterly Period” means each three month period ending on the Sunday nearest to 31 March, 30 June, 30 September and 31 December (whether such Sunday occurs before or after such month end), and commencing on the Monday following the last day of the previous Quarterly Period;

“Rebate Period” has the meaning given in paragraph 2.3.1;

“Rebate Year” means each of the four successive 12 month periods in the Rebate Period, the first such 12 month period to commence on the first day of the first Quarterly Period commencing after the Effective Date;

“Rebate Consideration” has the meaning given in paragraph 2.3.1;

“Rebate Consideration Qualifying has the meaning given in paragraph 2.3.4; Condition”

“Rebateable Turnover” means purchases of products (excluding tobacco and spirits) made by the Scheme Shareholder from Nisa net of VAT;

“Reference Date” means 2 July 2017;

“Scheme” means this scheme of arrangement in its present form or with or subject to any modification, addition or condition which Nisa and the Co­op may agree and, if required, the Court may approve or impose;

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“Scheme Record Time” means 6.00 p.m. on the date of the hearing at which the Court sanctions the Scheme;

“Scheme Shareholders” means the holders of Scheme Shares;

“Scheme Shares” means the Ordinary Shares:

(a) in issue at 6.00 p.m. on the date of this document;

(b) (if any) issued after 6.00 p.m. on the date of this document and prior to the Voting Record Time; and

(c) (if any) issued on or after the Voting Record Time and on or prior to the Scheme Record Time either on terms that the original or any subsequent holders thereof shall be bound by the Scheme, or in respect of which the holders thereof shall have agreed in writing to be bound by the Scheme,

and, in each case remaining in issue at the Scheme Record Time;

“Tax” means any form of tax and any duty, withholding, contribution, impost or tariff in the nature of tax (including, for the avoidance of doubt, any liability under Section 455 of the Corporation Tax Act 2010 and any national insurance contribution liabilities or deductions under PAYE in the United Kingdom and any equivalent or similar obligations elsewhere), together with all related penalties and interest;

“Trust” means the Nisa Retail Members’ Trust established by way of deed entered into on 18 December 2008;

“Trustee” means Computershare Trustees (Jersey) Limited or such other body appointed to act as trustee of the Trust; and

“Voting Record Time” 6.00 p.m. on the day which is two days (excluding any day which is not a Business Day) before the date of the Court Meeting or, if the Court Meeting is adjourned, 6.00 p.m. on the day which is two days (excluding any day which is not a Business Day) before the date of such adjourned meeting;

References to paragraphs are to paragraphs of this Scheme, and references to time are to London time.

(B) The share capital of the Company as at the close of business on 23 October 2017 (being the latest practicable date prior to the date of this Scheme) was £59,760 divided into 59,760 Ordinary Shares, all of which were credited as fully paid.

(C) As at the close of business on 23 October 2017 (being the latest practicable date prior to the date of this Scheme), no Ordinary Shares were registered in the name of or beneficially owned by the Co­op or any other member of the Co­op Group.

(D) The Co­op has agreed to appear by Counsel at the hearing to sanction this Scheme and to submit to be bound by and to undertake to the Court to be bound by this Scheme and to execute and do or procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by it for the purpose of giving effect to this Scheme.

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THE SCHEME 1. Transfer of the Scheme Shares 1.1 Upon and with effect from the Effective Date, the Co­op and/or its nominee(s) shall acquire all of the Scheme Shares with full title guarantee, fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre­ emption and any other third party rights and interests of any nature and together with all rights now or attaching or accruing to them at the Effective Date, including voting rights and the right to receive and retain in full all dividends and other distributions (if any), and any other return of capital (whether by way of reduction of share capital or share premium account or otherwise), declared, made or paid on or after the Effective Date.

1.2 For the purposes of such acquisition, the Scheme Shares shall be transferred to the Co­op and/or its nominee(s) by means of a form of transfer or other instrument or instruction of transfer and, to give effect to such transfers, any person may be appointed by the Co­op to execute as transferor an instrument of transfer of, or give any instructions to transfer, any Scheme Shares and every instrument or instruction of transfer so executed or instruction given shall be effective as if it had been executed or given by the holder or holders of the Scheme Shares thereby transferred. Such instrument or instruction of transfer shall be deemed to be the principal instrument of transfer and the equitable or beneficial interest in the Scheme Shares shall only be transferred to the Co­op and/or its nominee(s), together with the legal interest in such Scheme Shares, pursuant to such instruction or instrument or transfer.

1.3 Pending the registration of the Co­op or its nominee(s) as the holder of any Scheme Share to be transferred pursuant to this Scheme, the Co­op shall be empowered upon and with effect from the Effective Date to appoint any person to act as attorney or, failing that, agent on behalf of each holder of any such Scheme Share in accordance with such directions as the Co­op may give in relation to any dealings with or disposal of such share (or any interest therein), exercising any rights attached thereto or receiving any distribution or other benefit accruing or payable in respect thereof and the registered holder of such Scheme Share shall exercise all rights attaching thereto in accordance with the directions of the Co­op but not otherwise, such that from the Effective Date, no Scheme Shareholder shall be entitled to exercise any voting rights attached to the Scheme Shares or any other rights or privileges attaching to the Scheme Shares.

2. Consideration for the transfer of the Scheme Shares The total aggregate consideration for the acquisition of the Scheme Shares shall be an amount in cash of up to £137,463,406 comprising the Initial Consideration, the Deferred Consideration and the Rebate Consideration each to the extent payable in accordance with the provisions of paragraphs 2.1 to 2.3 (inclusive) of this Part 7. In no circumstances shall the total aggregate amount of Scheme Consideration payable by the Co­op exceed £137,463,406.

2.1 Initial Consideration The Co­op shall pay (i) an amount of £23,720,000 in cash together with (ii) the Outstanding Loan Amount (together, the “Initial Consideration”) on the Effective Date in the following way:

2.1.1 an amount equal to the Outstanding Loan Amount shall be paid to the Trust in respect of the Scheme Shares held by the Trust (which the Trustee would apply in repaying in full the Outstanding Loan Amount); and

2.1.2 £23,720,000 in aggregate shall be paid to the Scheme Shareholders (other than the Trust) in respect of the Scheme Shares held by the Scheme Shareholders (other than the Trust), which, on the basis of there being 1,186 Scheme Shareholders (other than the Trust), will result in a payment of up to £20,000 to each Scheme Shareholder (other than the Trust).

2.2 Deferred Consideration 2.2.1 Subject to the Deferred Consideration Qualifying Conditions and the other provisions of this paragraph 2.2, the Co­op shall pay up to a total aggregate amount of £83,343,406 in cash for the Scheme Shares held by the Scheme Shareholders (other than the Trust) (“Deferred Consideration”) which, on the basis of there being 50,389 Scheme Shares (other than the Scheme Shares held by the Trust), will result in a payment of up to £1,654 per Scheme Share.

2.2.2 The Deferred Consideration shall be payable in three annual instalments of up to £551.33 per Scheme Share (in accordance with paragraph 2.2.3) with each annual instalment being divided by the number of Scheme Shares and payable to Scheme Shareholders (other than the Trust) in accordance with the number of Scheme Shares which each Scheme Shareholder was the registered holder of as at the Effective Date.

2.2.3 The Deferred Consideration (if payable) shall be paid within 10 Business Days of 31 March in each of 2019, 2020 and 2021 (each an “Instalment Date”) by the Co­op paying or procuring the payment of such amount

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of Deferred Consideration to those Scheme Shareholders who meet the Deferred Consideration Qualifying Conditions at each Instalment Date or who otherwise qualify for payments of Deferred Consideration (or part thereof) in accordance with paragraph 2.2.6 or 2.2.7, by either (i) despatching cheques in pounds sterling drawn on the branch of a UK clearing bank or otherwise to Scheme Shareholders or (ii) with the agreement of Nisa, by putting Nisa in cleared funds of an amount equal to the Deferred Consideration to be paid to the Scheme Shareholders, by transfer of immediately available funds to the account of the Scheme Shareholder held by Nisa (from time to time) for such Scheme Shareholder as Nisa trading member.

2.2.4 The “Deferred Consideration Qualifying Conditions” are that:

2.2.4.1 the Scheme Shareholder remains a Nisa trading member at the relevant Instalment Date and has not, on or prior to the relevant Instalment Date, served notice, or had notice served on it, to terminate its status as a Nisa trading member in accordance with the Membership Agreement; and

2.2.4.2 in the 12 month period ending on the relevant Instalment Date (“Calculation Period”), the Scheme Shareholder has Rebateable Turnover which is greater than or equal to the Hurdle Amount.

2.2.5 If the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.1 is not met by a Scheme Shareholder on an Instalment Date, no payment of Deferred Consideration shall be due to that Shareholder in respect of that Instalment Date or any future Instalment Date.

2.2.6 If the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.1 is met by a Scheme Shareholder on an Instalment Date but the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.2 is not met, the amount of Deferred Consideration payable to that Scheme Shareholder in respect of that Instalment Date shall be adjusted downward in proportion to the amount by which the Scheme Shareholder’s Rebateable Turnover for the Calculation Period in question was less than the Hurdle Amount, as follows:

“P” = the amount in pounds sterling payable per Scheme Share in respect of the Instalment Date

“c1” = the amount of Rebateable Turnover of the Scheme Shareholder in the Calculation Period

“c2” = the Hurdle Amount c1 P = — x £551.33 [c2]

2.2.7 Where a Scheme Shareholder has not met the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.2 (but has met the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.1) at an Instalment Date, and the Co­op (or such executive or executives of the Co­op Group as the Co­op may nominate) resolve that the Deferred Consideration Qualifying Condition set out in paragraph 2.2.4.2 has not been met by that Scheme Shareholder due to exceptional circumstances, the Co­op (or such executive or executives of the Co­op Group as the Co­op may nominate) may, at its sole discretion and without being required to publish its reasons therefor, resolve to pay to that Scheme Shareholder a discretionary amount of Deferred Consideration being not more than it would have been entitled to had it satisfied both Deferred Consideration Qualifying Conditions as at the Instalment Date.

2.3 Rebate Consideration 2.3.1 As further consideration for the acquisition of the Scheme Shares held by the Scheme Shareholders (other than the Trust) and subject to the Rebate Consideration Qualifying Condition and the other provisions of this paragraph 2.3, the Co­op shall pay up to a total aggregate amount of £30,400,000 in cash (“Rebate Consideration”) to Scheme Shareholders in respect of their Rebateable Turnover in the four years following the Effective Date (“Rebate Period”).

2.3.2 The amount of Rebate Consideration payable to each Scheme Shareholder shall be calculated as follows:

2.3.2.1 each Scheme Shareholder shall be eligible to receive an amount equal to 1% of that Scheme Shareholder’s Qualifying Rebateable Turnover for each Rebate Year; and

2.3.2.2 the total aggregate amount of Rebate Consideration payable to all Scheme Shareholders in a Rebate Year shall not exceed £7,600,000 and, save as provided in paragraph 2.3.3.2 or in respect of any Surplus (as defined below), the total aggregate amount of Rebate Consideration payable to all Scheme Shareholders in a Quarterly Period shall not exceed £1,900,000.

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2.3.3 Subject to paragraph 2.3.2 above, Rebate Consideration shall be paid to Scheme Shareholders (in arrears) in respect of each Quarterly Period within 10 Business Days of the end of that Quarterly Period (each a “Rebate Consideration Date”) and shall accrue as follows:

2.3.3.1 in respect of each Quarterly Period of a Rebate Year, a Scheme Shareholder shall receive an amount equal to 1% of the lower of:

(i) that Scheme Shareholder’s actual Rebateable Turnover in the Quarterly Period; and

(ii) 25% of that Scheme Shareholder’s Hurdle Amount;

2.3.3.2 if, at the end of a Rebate Year, as a function of paragraph 2.3.3.1, a Scheme Shareholder would receive Rebate Consideration which is less than 1% of their Qualifying Rebateable Turnover in that Rebate Year, the amount payable to that Scheme Shareholder on the final Rebate Consideration Date in that Rebate Year shall be increased so that the Scheme Shareholder shall receive an amount equal to the difference between:

(i) the amount of Rebate Consideration received in respect of the first three Quarterly Periods in that Rebate Year; and

(ii) 1% of that Scheme Shareholder’s Qualifying Rebateable Turnover in that Rebate Year;

2.3.3.3 if the total aggregate Rebate Consideration actually paid to all Scheme Shareholders in respect of a Rebate Year is less than 1% of actual Rebateable Turnover of all Scheme Shareholders in that Rebate Year, then the amount by which it is so lower, subject always to a cap on the total Rebate Consideration to be paid to Scheme Shareholders of £7,600,000 million in any Rebate Year, (“Surplus”) shall be paid to Scheme Shareholders who:

(i) exceeded their Hurdle Amount during that Rebate Year; and

(ii) meet the Rebate Consideration Qualifying Condition at the final Rebate Consideration Date in that Rebate Year

(“Qualifying Shareholders”), such Surplus to be distributed between Qualifying Shareholders at the discretion of the Co­op (or such executive or executives of the Co­op Group as the Co­op may nominate) acting reasonably.

2.3.4 The “Rebate Consideration Qualifying Condition” is that the Scheme Shareholder remains a Nisa trading member at the relevant Rebate Consideration Date and has not, on or prior to the relevant Rebate Consideration Date, served notice, or had notice served on it, to terminate its membership of Nisa in accordance with the Membership Agreement.

2.3.5 If the Rebate Consideration Qualifying Condition is not met on the relevant Rebate Consideration Date by a Scheme Shareholder, no payment of Rebate Consideration shall be due to that Scheme Shareholder.

2.4 Potential reductions of the Consideration 2.4.1 The amount of Initial Consideration payable to each Scheme Shareholder as set out in paragraph 2.1.2 and the maximum amount of Deferred Consideration which may be payable per Scheme Share as set out in paragraph 2.2.1 has each been calculated by reference to the register of members of Nisa as at 21 September 2017 and is a function of the total amount of Initial Consideration and maximum amount of Deferred Consideration. Accordingly, if between 9 October 2017 and the Effective Date, the number of Scheme Shareholders increases or Nisa allots additional Scheme Shares, the amount of Initial Consideration payable to each Scheme Shareholder and the maximum amount of Deferred Consideration which may be payable per Scheme Share shall be reduced by a corresponding amount.

2.4.2 For the avoidance of doubt, if and to the extent that a Scheme Shareholder receives (in accordance with the provisions of this Part 7) less than its full entitlement to the Deferred Consideration or (subject to paragraph 2.3.3.3 above) the Rebate Consideration, the amount (or amounts) that would otherwise have been payable to that Scheme Shareholder shall not be allocated to other Scheme Shareholders but shall instead remain with the Co­op and not be payable.

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2.5 Leakage 2.5.1 Subject to paragraphs 2.5.2 to 2.5.5 (inclusive) of this Part 7, the Co­op shall be able to deduct from the Initial Consideration and/or the Deferred Consideration payable to the Scheme Shareholders (other than the Trust) an amount in cash equal to any Leakage.

2.5.2 The Co­op shall be able to deduct any amount in respect of any Leakage determined as set out below against the Initial Consideration and/or Deferred Consideration payable to the Scheme Shareholders (other than the Trust) (as it shall in its absolute discretion determine) provided that full details of any Leakage Claim have been given to an Expert within twelve months of the Effective Date in order for the Expert to determine whether Leakage has occurred and if so, the amount of such Leakage.

2.5.3 The Co­op shall nominate an Expert and procure that the Expert is required to:

2.5.3.1 operate independently of the Co­op and the interests of the Co­op and to determine the issues before it on the basis of its independent judgement; and

2.5.3.2 make its determination available to the Company and the Scheme Shareholders.

2.5.4 The Expert will determine its own procedure and act on the following basis:

2.5.4.1 the Expert will act as an expert and not as an arbitrator;

2.5.4.2 the Co­op will provide the Expert with all information relating to the matter which the Expert reasonably requires and the Expert will be entitled (to the extent he considers appropriate) to base his determination on such information and on the accounting and other records of Nisa;

2.5.4.3 the decision of the Expert will be, in the absence of fraud or manifest error, final and binding on the parties;

2.5.4.4 the Expert’s fees and expenses (including the costs of his nomination and any fees and expenses of any professional advisers appointed by him) shall be borne equally by the Co­op and Nisa and Nisa’s portion of the Expert’s fees and expenses added to the Leakage amount and deducted from the Consideration in accordance with paragraph 2.5.6 below;

2.5.4.5 determination of the Expert will be in writing and made available for collection by each of the Co­op, the Company and the Scheme Shareholders at the offices of the Expert at such time as it will determine.

2.5.5 The determination of the Leakage or the amount of such Leakage (as the case may be) following the procedure set out in this paragraph 2.5 will be the Leakage or the amounts of such Leakage (as the case may be) for the purposes of the Scheme and shall be final and binding on the Co­op and Nisa.

2.5.6 Any Leakage Claim determined by the Expert in accordance with this Part 7 shall (to the extent practically possible) be applied against all Scheme Shareholders (other than the Trust) such that the Scheme Consideration (excluding the Rebate Consideration) shall be reduced pro rata to the Scheme Shareholder’s (other than the Trust’s) proportionate entitlement to the Scheme Consideration (excluding the Rebate Consideration) but provided always that the Co­op shall be able to deduct the amount of determined Leakage in full from the next following instalment of Scheme Consideration due for payment (whether Initial Consideration or Deferred Consideration but excluding the Rebate Consideration). If the next following instalment of Scheme Consideration is less than the amount of determined Leakage, the Co­op shall carry over the shortfall and deduct it from later instalments of Scheme Consideration (excluding the Rebate Consideration).

2.5.7 All sums to be deducted pursuant to this paragraph 2.5 from the Scheme Consideration otherwise payable to the Scheme Shareholders (other than the Trust) shall be deducted free and clear of any other deductions or withholdings (including Tax) unless the deduction or withholding is required by law, in which event, such additional amounts shall be deducted from the Scheme Consideration otherwise payable to the relevant Scheme Shareholder (other than the Trust) as shall be required to ensure that the net amount retained by the Co­op (after Tax) will be equal to the full amount which would have been retained by it had no such deduction been made and/or no such liability to Tax been incurred.

2.5.8 If any Leakage has resulted in a deduction being made pursuant to this paragraph 2.5 and such Leakage has given rise to a relief, allowance, deduction, exemption or set­off relevant to the computation of any liability for Tax (“Relief”) which would not otherwise have arisen and such Relief has been used by any member of the Co­op

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Group to actually realise a reduction in the amount of a liability for Tax of such member of the Co­op Group (a “Tax Saving”) then the deduction to be made under this paragraph 2.5 shall be reduced to the extent of the Tax Saving.

3. Share certificates and transfer of entitlements With effect from and including the Effective Date:

3.1 all certificates representing Scheme Shares shall cease to have effect as documents of title to the Scheme Shares comprised therein and every Scheme Shareholder shall be bound at the request of the Company to deliver up their share certificate(s) to the Company or to destroy the same; and

3.2 subject to the completion of such transfers as are required in accordance with paragraph 1.2 and the payment of UK stamp duty thereon the Company shall make appropriate entries in the register of members with effect from the Effective Date to reflect the transfer of the Scheme Shares to the Co­op and/or its nominees.

4. Mandates All mandates and other instructions to the Company in force at the Scheme Record Time relating to Scheme Shares shall cease to be valid and effective on the Effective Date.

5. Effective Date 5.1 This Scheme shall become effective as soon as a copy of the order of the Court sanctioning this Scheme under section 899 of the Companies Act shall have been delivered to the Registrar of Companies in England and Wales.

5.2 Unless this Scheme shall have become effective on or before the Long Stop Date, or such later date, if any, as the Company and the Co­op may agree and the Court may allow, this Scheme shall never become effective.

6. Modification The Company and the Co­op may jointly consent on behalf of all concerned to any modification of, or addition to, this Scheme or to any condition which the Court may approve or impose.

7. Governing Law This Scheme is governed by the laws of England and Wales and is subject to the jurisdiction of the English courts.

Dated: 24 October 2017

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PART 8

DEFINITIONS

The following definitions apply throughout this document, other than in Part 7 of this document and the notices of the Shareholder Meetings, unless the context requires otherwise.

“£” or “pence” means the lawful currency of the United Kingdom;

“ABL Facility Agreement” means the asset backed lending agreement dated 23 June 2017 between inter alios, the Company, HSBC Invoice Finance (UK) Limited and Wells Fargo Capital Finance (UK) Limited, providing for secured bank facilities of up to £120,000,000;

“Acquisition” means the recommended acquisition by the Co­op of the entire issued and to be issued ordinary share capital of Nisa to be effected by means of the Scheme or (should the Co­op so elect) by means of a Takeover Offer;

“Acquisition Costs” means all fees, costs, expenses and other liabilities (including any irrecoverable VAT) paid, payable or otherwise assumed by the Nisa Group in connection with the Acquisition whether due for payment before or after the Effective Date;

“Affiliate” means, in relation to a person, each or any other person who for the time being directly or indirectly controls, is controlled by or is under common control with such person, and “control” for these purposes means (a) holding the majority of the voting rights or share capital of such person; or (b) otherwise having the power to direct the management and policies of such person;

“Bid Conduct Agreement” means the bid conduct agreement entered into between (1) Nisa and (2) the Co­op on 9 October 2017;

“Business Day” means a day which is not a Saturday, Sunday or a bank or public holiday in England;

“Channel Islands Authorities” means the Jersey Competition Regulatory Authority and the Guernsey Competition and Regulatory Authority;

“CMA” means the Competition and Markets Authority;

“Co­op” means Co­operative Group Holdings (2011) Limited, a registered society incorporated in England and Wales (registered number 28501R) whose registered office is at 1 Angel Square, Manchester, England, M60 0AG;

“Co­op Group” means the Co­op and its Group and any reference to a “member of the Co­op Group” shall include any undertaking within the Co­op Group;

“Companies Act” means the Companies Act 2006, as amended from time to time;

“Conditions” means the conditions to the Acquisition and the implementation of the Scheme, as set out in Part 3, Part A (Conditions of the Scheme) of this document;

“Court” means the High Court of Justice, Business and Property Court of England and Wales, Companies Court;

“Court Hearing” means the hearing of the Court to sanction the Scheme;

“Court Meeting” means the meeting (including any adjournment thereof) of the Scheme Shareholders (or the relevant class or classes thereof) convened under Section 896 of the Companies Act for the purposes of considering and, if thought fit, approving the Scheme (with or without amendment);

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“Court Order” means the order of the Court sanctioning the Scheme under Section 899 of the Companies Act, to be granted at the Court Hearing;

“Deferred Consideration” has the same meaning given in paragraph 2 of Part 1 of this document;

“Effective Date” means the date upon which:

(a) the Scheme becomes effective in accordance with its terms; or

(b) if the Co­op elects to implement the Acquisition by means of a Takeover Offer, the Takeover Offer becomes or is declared unconditional in all respects;

and “Effective” shall be construed accordingly;

“Executive Long Term Incentive Plan” means the executive long term incentive plan scheme 2016/2017 of the Nisa Group;

“Expert” means a firm of chartered accountants or other senior officer for the time being of the Institute of Chartered Accountants in England and Wales which is independent from the Co­op;

“Forms of Proxy” means the WHITE form of proxy for use by Scheme Shareholders (excluding the Trust) in connection with the Court Meeting and the YELLOW Form of proxy for use by Nisa Shareholders in connection with the General Meeting, both of which accompany this document;

“General Meeting” means the general meeting (including any adjournment thereof) of the Scheme Shareholders to be convened in connection with the Scheme, notice of which is set out in Part 10 of this document;

“Group” means in relation to any person its subsidiaries, subsidiary undertakings by and Affiliates;

“Hurdle Amount” means, in respect of a Scheme Shareholder, that Scheme Shareholder’s Rebateable Turnover for the 12 month period ended on 2 July 2017 (or in the case of any Scheme Shareholders whose trading with the Company commenced after 2 July 2016, the period from the start of such trading up to 2 July 2017);

“Initial Consideration” has the same meaning given in paragraph 2 of Part 1 of this document;

“Lazard” means Lazard & Co., Limited;

“Leakage” has the same meaning given in Part 7 of this document;

“Long­Stop Date” means 31 July 2018;

“Membership Agreement” means the Nisa retail membership terms and conditions dated February 2017 entered into with each of the Nisa Shareholders;

“Members” or “members” means Nisa shareholders who trade with the Company pursuant to the Membership Agreement at any relevant date or time and (where the context permits other persons not being Nisa Shareholders who are “Deemed Members” pursuant to the terms of the Membership Agreement);

“Merger Control Condition” means the conditions set out in paragraphs 3.1 and 3.2, Part 3, Part A (Conditions of the Scheme) of this document;

“Nisa” or the “Company” means Nisa Retail Limited, a private limited company incorporated in England and Wales with registered number 00980790 whose registered office is at Member Support Centre, Waldo Way, Normanby Enterprise Park, Scunthorpe, North Lincolnshire DN15 9GE;

“Nisa Articles” means the articles of association of Nisa, as amended from time to time;

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“Nisa Directors” means the directors of Nisa whose names are set out in Part 1 of this document and “Nisa Director” shall mean any one of them;

“Nisa Executive” means the executive management team responsible for the day to day running of the Company, before or after the Effective Date as applicable;

“Nisa Group” means Nisa and its Group and any reference to a “member of the Nisa Group” shall include any undertaking within the Nisa Group;

“Nisa Retail Members’ Trust” or the “Trust” means the Nisa Retail Members’ Trust established by way of deed entered into on 18 December 2008;

“Nisa Shareholders” means the holders of the Ordinary Shares from time to time up to the Effective Date or the Long Stop Date whichever is the earlier;

“Nisa Shares” means the entire issued ordinary share capital of Nisa;

“Offer” means the offer by the Co­op to make the Acquisition;

“Ordinary Shares” means the ordinary shares of £1.00 each in the capital of Nisa;

“Outstanding Loan Amount” means an amount equal to the amount owing by the Trustee to Nisa as at the Effective Date pursuant to a loan agreement dated 18 December 2008 as amended and restated on 1 July 2013;

“Overseas Shareholders” means Nisa Shareholders (or nominees, custodians or trustees of Nisa Shareholders) who are resident in, or nationals or citizens of jurisdictions outside of the United Kingdom or who are citizens or residents of countries other than the United Kingdom;

“Qualifying Rebateable Turnover” means, in respect of a Scheme Shareholder, the lower of: (a) that Scheme Shareholder’s actual Rebateable Turnover in a Rebate Year; and (b) that Scheme Shareholder’s Hurdle Amount;

“Quarterly Period” means each three month period ending on the Sunday nearest to 31 March, 30 June, 30 September and 31 December (whether such Sunday occurs before or after such month end), and commencing on the Monday following the last day of the previous Quarterly Period;

“Rebate Consideration” has the same meaning given in paragraph 2 of Part 1 of this document;

“Rebate Period” means the four years following the Effective Date;

“Rebate Year” means each of the four successive 12 month periods in the Rebate Period, the first such 12 month period to commence on the first day of the first Quarterly Period commencing after the Effective Date;

“Reference Date” means 2 July 2017;

“Registrar of Companies” means the registrar of companies in England and Wales;

“Registrars” means Computershare Investors Services Plc having its registered office at The Pavilions, Bridgwater Road, Bristol, BS99 6ZY;

“Restricted Jurisdiction” means any jurisdiction where participation in the Acquisition would

(a) constitute a violation of the relevant laws and regulations of such jurisdictions;

(b) result in a requirement to comply with any governmental or other consent or any registration, filing or any other formality which Nisa or the Co­op regards as unduly onerous or would result in significant risk or civil regulatory or criminal exposure if information concerning the Acquisition is sent or made available in that jurisdiction;

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“Scheme” means the scheme of arrangement under Part 26 of the Companies Act between Nisa and the Scheme Shareholders to effect the Acquisition, the full terms of which are set out in Part 7 of this document, with or subject to any modification, addition or condition approved or imposed by the Court and agreed by Nisa and the Co­op;

“Scheme Consideration” has the same meaning given in paragraph 2 of Part 1 of this document;

“Scheme Record Time” means 6.00 p.m. on the Business Day immediately after the date on which the Court Order is made;

“Scheme Shareholders” means the holders of Scheme Shares;

“Scheme Shares” means the Ordinary Shares:

(a) in issue at 6.00 p.m. on the date of this document;

(b) (if any) issued after 6.00 p.m. on the date of this document and prior to the Voting Record Time; and

(c) (if any) issued on or after the Voting Record Time and on or prior to the Scheme Record Time either on terms that the original or any subsequent holders thereof shall be bound by the Scheme, or in respect of which the holders thereof shall have agreed in writing to be bound by the Scheme,

and in each case remaining in issue at the Scheme Record Time;

“Shareholder Meetings” means the General Meeting and the Court Meeting;

“Special Resolution” means the special resolution to be proposed by Nisa at the General Meeting in connection with, among other things, the implementation of the Scheme and certain amendments to be made to the Nisa Articles, as set out in the notice of General Meeting set out in Part 10 of this document;

“Takeover Offer” means a takeover offer (as defined in Section 974 of the Companies Act) to be made if the Acquisition is implemented by way of a contractual takeover offer;

“Tax” means any form of tax and any duty, withholding, contribution, impost or tariff in the nature of tax (including, for the avoidance of doubt, any liability under Section 455 of the Corporation Tax Act 2010 and any national insurance contribution liabilities or deductions under PAYE in the United Kingdom and any equivalent or similar obligations elsewhere), together with all related penalties and interest;

“Trustee” means Computershare Trustees (Jersey) Limited or such other body appointed to act as trustee of the Trust; and

“Voting Record Time” means 6.00 p.m. on the day which is two days (excluding any day that is not a Business Day) before the date of the Court Meeting or, if the Court Meeting is adjourned, 6.00 p.m. on the day which is two days (excluding any day that is not a Business Day) before the date of such adjourned meeting.

For the purposes of this document, “associated undertaking”, “parent undertaking”, “subsidiary undertaking” and “undertaking” have the respective meanings given thereto by the Companies Act.

References to an enactment include references to that enactment as amended, replaced, consolidated or re­enacted by or under any other enactment before or after the date of this document.

All the times referred to in this document are London times unless otherwise stated.

References to the singular include the plural and vice versa.

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PART 9

NOTICE OF COURT MEETING

NISA RETAIL LIMITED (Incorporated in England and Wales with registered number 00980790)

NOTICE IS HEREBY GIVEN that, by an order dated 24 October 2017 (the “Order”), the High Court of Justice, Business and Property Court of England and Wales, Companies Court (“Court”) has directed a meeting (the “Court Meeting”) to be convened of the Scheme Shareholders (excluding the Trust), for the purpose of considering and, if thought fit, approving (with or without modification) a scheme of arrangement (the “Scheme of Arrangement”) pursuant to Part 26 of the Companies Act 2006 (“Companies Act”) proposed to be made between Nisa Retail Limited (the “Company” or “Nisa”) and the Scheme Shareholders, and that such Court Meeting will be held at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds LS11 0ES on 13 November 2017 at 11.00 a.m., at which place and time all Scheme Shareholders (excluding the Trust) are requested to attend. Terms defined in the document of which this notice forms part shall have the same meaning in this notice unless otherwise expressly defined

At the Court Meeting, the following resolution will be proposed:

“That the scheme of arrangement dated 24 October 2017 (the “Scheme”), between the Company and the Scheme Shareholders (as defined in the Scheme), a print of which has been produced to this meeting and, for the purposes of identification, signed by the chairman hereof, in its original form or with, or subject to, any modification, addition or condition approved or imposed by the Court and jointly consented to by the Company and Co­operative Group Holdings (2011) Limited, be and is hereby approved and the directors of the Company be and are hereby authorised to take all such actions as they consider necessary or appropriate for carrying the Scheme into effect.”

A copy of the Scheme and a copy of the explanatory statement required to be furnished pursuant to section 897 of the Companies Act are incorporated in the document of which this notice forms part. In accordance with section 897(4) of the Companies Act, a hard copy of the explanatory statement can be obtained by creditors of the Company or Scheme Shareholders, free of charge, by submitting a request in writing to Lazard & Co., Limited, 50 Stratton Street, Mayfair, London W1J 8LL.

Scheme Shareholders may vote in person at the Court Meeting or they may appoint another person, as their proxy to attend, speak and vote on their behalf. A proxy need not be a shareholder of the Company. A WHITE form of proxy for use at the Court Meeting is enclosed with this notice. Completion of the WHITE form of proxy shall not prevent a Scheme Shareholder from attending and voting at the Court Meeting.

Voting on the resolution will be by poll which may be conducted as the chairman of the Court Meeting shall determine. For the Court Meeting (or any adjournment thereof) to be properly convened, a quorum of two persons entitled to vote on the business to be transacted, each being a Scheme Shareholder, the proxy of a Scheme Shareholder or (where the Scheme Shareholder is a corporation) a duly authorised representative, must be present.

Entitlement to attend and vote at the Court Meeting or any adjournment thereof and the number of votes which may be cast thereat shall be determined by reference to the register of members of the Company at 6.00 p.m. on 9 November 2017 or, if the meeting is adjourned, on the day which is two days (excluding non­working days) before the date of such adjourned meeting. In each case, changes to the register of members of the Company after such time shall be disregarded.

By the Order, the Court has appointed Peter Hartley, to act as chairman of the Court Meeting (or in his absence, any director of the Company) and has directed the chairman to report the result thereof to the Court.

The Scheme of Arrangement will be subject to the subsequent sanction of the Court.

Dated: 25 October 2017

DLA Piper UK LLP Princes Exchange Princes Square Leeds LS1 4BY Solicitors for the Company

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Notes:

(1) Scheme Shareholders entitled to vote at the meeting may vote in person at the said meeting or they may appoint another person, whether a shareholder of the Company or not, as their proxy to attend, speak and vote on their behalf. A proxy need not be a shareholder of the Company.

(2) A WHITE form of proxy is enclosed with this notice. Instructions for use are shown on the form. Completing and returning the WHITE form of proxy will not prevent the Scheme Shareholder from attending and voting at the Court Meeting (or any adjournment of the Court Meeting) in person, should he subsequently decide to do so. Please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the company reserves the right to refuse you entry if you do not bring these documents with you.

(3) To be valid the WHITE form of proxy, together with any power of attorney or other authority (if any) under which it is signed, or a notarially certified or office copy of such power or authority, must be received at the offices of Computershare Investors Services Plc, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY not less than 48 hours (excluding non­working days) before the time of the Court Meeting (in other words, by 11.00 a.m. on 9 November 2017) or, as the case may be, the adjourned Court Meeting. A reply­paid envelope has been provided for this purpose for use in the United Kingdom only. WHITE forms of proxy not returned by that time may be handed to the Chairman before the poll is taken and will still be valid.

(4) Scheme Shareholders may appoint more than one proxy provided that each proxy is appointed to exercise rights attaching to different Scheme Shares.

(5) If a Scheme Shareholder wishes to appoint multiple proxies, they may: (a) photocopy a WHITE form of proxy, fill in each copy in respect of different Scheme Shares and send the multiple forms together to: Computershare Investors Services Plc, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, or alternatively (b) call Computershare on the number in paragraph 20 below who will then issue the Scheme Shareholders with multiple proxy forms. In each case, please ensure that all of the multiple proxy forms in respect of one registered holding are sent in the same envelope if possible.

(6) Subject to the following principles where more than one proxy is appointed, where a WHITE form of proxy does not state the number of Scheme Shares to which it applies (a “blank proxy”) then that proxy is deemed to have been appointed in relation to the total number of Scheme Shares registered in the name of that Scheme Shareholder (the “member’s entire holding”). In the event of a conflict between a blank proxy and a WHITE form of proxy which does state the number of Scheme Shares to which it applies (a “specific proxy”), the specific proxy shall be counted first, regardless of the time it was sent or received (on the basis that as far as possible, the conflicting forms of proxy should be judged to be in respect of different shares) and remaining Scheme Shares will be apportioned to the blank proxy (pro rata if there is more than one).

(7) Where there is more than one proxy appointed and the total number of Scheme Shares in respect of which proxies are appointed is not greater than the Scheme Shareholder’s entire holding, it is assumed that proxies are appointed in relation to different Scheme Shares, rather than that conflicting appointments have been made in relation to the same Scheme Shares.

(8) If two or more valid but different instruments of proxy are received in respect of the same Scheme Share for use at the Court Meeting, the one which is last received (regardless of its date or of the date of its execution) shall be treated as replacing and revoking the others as regards that Scheme Share and if the Company is unable to determine which was the last received, none of them shall be treated as valid in respect of that Scheme Share.

(9) If conflicting proxies are sent or received at the same time in respect of (or deemed to be in respect of) the Scheme Shareholder’s entire holding, none of them shall be treated as valid.

(10) Where the aggregate number of Scheme Shares in respect of which proxies are appointed exceeds the Scheme Shareholder’s entire holding and it is not possible to determine the order in which they were sent or received (or they were all sent or received at the same time), the number of votes attributed to each proxy will be reduced pro rata (on the basis that as far as possible, conflicting forms of proxy should be judged to be in respect of different Scheme Shares).

(11) Where the application of paragraph (10) above gives rise to fractions of Scheme Shares, such fractions will be rounded down.

(12) WHITE forms of proxy returned by fax will not be accepted.

(13) If the Scheme Shareholder appoints a proxy or proxies and then decides to attend the Court Meeting in person and vote using their poll card, then their vote in person will override the proxy vote(s). If the Scheme Shareholder votes in person in respect of their entire holding then all proxy votes will be disregarded. If, however, the Scheme Shareholder votes at the Court Meeting in respect of less than their entire holding and the Scheme Shareholder indicates on their polling card that all proxies are to be disregarded, that shall be the case; but if the Scheme Shareholder does not specifically revoke proxies, then the Scheme Shareholder’s vote in person will be treated in the same way as if it were the last received proxy and earlier proxies will only be disregarded to the extent that to count them would result in the number of votes being cast exceeding the Scheme Shareholder’s entire holding.

(14) In relation to paragraph (13) above, in the event that the Scheme Shareholder does not specifically revoke proxies, it will not be possible for the Company to determine the Scheme Shareholder’s intentions in this regard. However, in light of the aim to include votes wherever and to the fullest extent possible, it will be assumed that earlier proxies should continue to apply to the fullest extent possible.

(15) Entitlement to attend and vote at the meeting or any adjournment thereof and the number of votes which may be cast thereat shall be determined by reference to the register of members of the Company at 6.00 p.m. on 9 November 2017, or if the meeting is adjourned, on the day which is two days (excluding non­working days) before the date of such adjourned meeting. In each case, changes to the register of members of the Company after such time shall be disregarded.

(16) Scheme Shareholders entitled to attend and vote at the Court Meeting may appoint a proxy electronically by logging on to www.investorcentre.co.uk/eproxy. You will need your Shareholder Reference Number (SRN) and Personal Identification Number (PIN) as shown on your proxy form. For an electronic proxy appointment to be valid, your appointment must be received by the registrars before 11.00 a.m. on Thursday 9 November 2017. If you have any difficulties using the service please contact the Company’s Registrars, Computershare Investor Services Plc on 0370 707 1127 (or from overseas, +44 370 707 1127).

(17) Completing and returning the WHITE form of proxy or appointing a proxy electronically will not prevent you from attending and voting in person at the Court Meeting, or any adjournment of the Court Meeting, if you so wish and are so entitled.

(18) A Scheme Shareholder which is a company (a corporation) and which wishes to be represented at the Court Meeting by a person with authority to speak, vote on a show of hands and vote on a poll (a corporate representative) must appoint such a person by resolution of its directors. A corporate

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representative has the same powers on behalf of the corporation he/she represents as that corporation could exercise if it were an individual Scheme Shareholder.

(19) In the case of joint holders, the votes of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of other joint holders. For this purpose, seniority will be determined by the order in which the names stand in the Company’s register of members in respect of that joint holding.

(20) If you are in any doubt about completing the WHITE form of proxy please telephone Computershare on 0370 707 1127 from within the United Kingdom or on +44 3707071127 if calling from outside the United Kingdom. Lines will be open between 9.00 a.m. to 5.00 p.m., Monday to Friday excluding public holidays in England and Wales. Calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the resolution nor give any financial, legal or tax advice.

(21) Any question relevant to the business of the Court Meeting may be asked at the Court Meeting by anyone permitted to speak at the Court Meeting. A Scheme Shareholder may alternatively submit their question in advance by way of a letter addressed to the Chairman.

(22) Voting on the resolution at the Court Meeting will be conducted on a poll rather than a show of hands.

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PART 10

NOTICE OF GENERAL MEETING

NISA RETAIL LIMITED (Incorporated in England and Wales with registered number 00980790)

NOTICE IS HEREBY GIVEN that a general meeting of Nisa Retail Limited (the “Company” or “Nisa”) shall be held at The Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds LS11 0ES on 13 November 2017 at 11.15 a.m. (or as soon thereafter as the Court Meeting has concluded or been adjourned) for the purpose of considering and, if thought fit, passing the following resolution, which shall be proposed as a special resolution (terms defined in the document of which this notice forms part shall have the same meaning in this notice unless otherwise expressly defined):

SPECIAL RESOLUTION THAT:

1. For the purpose of giving effect to the scheme of arrangement dated 24 October 2017 (the “Scheme”) proposed to be made between the Company and the Scheme Shareholders, a print of which has been produced to this meeting and for the purposes of identification signed by the Chairman of the Company, in its original form, or subject to any modification, addition or condition agreed by the Company and Co­operative Group Holdings (2011) Limited (“Co­op”) and approved or imposed by the Court:

1.1 the directors of the Company be authorised to take all such action as they may consider necessary or appropriate for carrying the Scheme into effect;

1.2 with effect from the passing of this resolution, the articles of association of the Company be amended as follows:

1.2.1 by the adoption and inclusion of the following new article 3A:

“3A SCHEME OF ARRANGEMENT

(a) In this Article 3A, the “Scheme” means the scheme of arrangement dated 24 October 2017 between the Company and the holders of its Scheme Shares under Part 26 of the Companies Act 2006 in its original form or with or subject to any modification, addition or condition approved or imposed by the Court in accordance with its terms. Expressions defined in the Scheme shall have the same meanings in this Article 3A (save as expressly defined in these Articles).

(b) Notwithstanding any other provision of these Articles, if the Company issues any Ordinary Shares (other than to the Co­op or its nominee(s)) at or after the Voting Record Time and at or before the Scheme Record Time, such shares shall be issued subject to the terms of the Scheme (and shall be Scheme Shares for the purposes thereof) and the holders of such shares shall be bound by the Scheme accordingly.

(c) Subject to the implementation of the Scheme, if any Ordinary Shares are issued or transferred to any person or his nominee (a “New Member”) (other than under the Scheme to the Co­op or its nominee(s)) after the Scheme Record Time (the “Post­Scheme Shares”) they shall be immediately transferred to the Co­op (or as it may direct in writing) who shall be obliged to acquire all Post­Scheme Shares in consideration for, and conditional on, the payment by the Co­op of an amount in cash for each Post­Scheme Share as that New Member would have been entitled to under the Scheme for those Post­Scheme Shares had they been Scheme Shares, provided that the cash payment per share to be paid to a New Member pursuant to this paragraph (c) of this Article may be adjusted by the Directors, in such manner as the auditors of the Company may determine, on any reorganisation of or material alteration to the share capital of either the Company (including, without limitation, any subdivision and/or consolidation) effected after the close of business on the Effective Date. References in this Article to Ordinary Shares shall, following such adjustment, be construed accordingly.

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(d) To give effect to any transfer of Post­Scheme Shares, the Company may appoint any person as attorney for the New Member to transfer the Post­Scheme Shares to the Co­op and/or its nominee(s) and do all such other things and execute and deliver all such documents as may in the opinion of the attorney be necessary or desirable to vest the Post­Scheme Shares in the Co­op or its nominee(s) and pending such vesting to exercise all such rights attaching to the Post­Scheme Shares as the Co­op may direct. If an attorney is so appointed, the New Member shall not thereafter (except to the extent that the attorney fails to act in accordance with the directions of the Co­op) be entitled to exercise any rights attaching to the Post­Scheme Shares unless so agreed by the Co­op. The attorney shall be empowered to execute and deliver as transferor a form of transfer or other instrument or instruction of transfer on behalf of the New Member (or any subsequent holder) in favour of the Co­op or its nominees and the Company may give a good receipt for the consideration for the Post­Scheme Shares and may register the Co­op or its nominees as holder thereof and issue to it certificates for the same. The Company shall not be obliged to issue a certificate to the New Member for the Post­ Scheme Shares.

(e) The Co­op shall settle or procure the settlement of the consideration due under paragraph (c) of this Article within 14 days after the transfer of the Post­Scheme Shares to the Co­op and/or its nominee(s).

(f) Notwithstanding any other provision of these Articles, neither the Company nor the Directors shall register the transfer of any Scheme Shares effected between the Scheme Record Time and the Effective Date, save where the Board determines it is necessary in order to rectify any discrepancies where a Nisa Retail Member is not the registered shareholder.”

1.2.2 that the provision of Article 8 (Annual General Meetings) shall be dispensed with unless the Acquisition (as such term is defined in the Scheme) is not Effective (as such term is defined in the Scheme) on or before the Long­Stop Date (as such term is defined in the Scheme) in which case the provision of Article 8 shall be reinstated;

1.3 with effect from the Effective Date, the articles of association of the Company be amended such that:

1.3.1 the provisions of Article 2.2 and Article 2.3.1 are deleted;

1.3.2 Article 23 be deleted and replaced with the following “The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed, shall be two Directors”.

By order of the Board Registered office: Rachel Bamforth Member Support Centre Company Secretary Waldo Way, 25 October 2017 Normanby Enterprise Park, Scunthorpe, North Lincolnshire DN15 9GE

Notes:

(1) Shareholders of the Company entitled to attend and vote at the meeting may vote in person at the said meeting or they may appoint another person, whether a shareholder of the Company or not, as their proxy to attend, speak and vote on their behalf. A proxy need not be a shareholder of the Company.

(2) A YELLOW form of proxy is enclosed with this notice. Instructions for use are shown on the form. Completing and returning the YELLOW form of proxy will not prevent the shareholder from attending and voting at the meeting (or any adjournment of the meeting) in person, should he subsequently decide to do so. Please note that to gain access to the meeting you must bring identification to verify your identity. If you are representing a shareholder which is a corporate entity, you need to demonstrate that you have authority of that shareholder to attend and vote. You can do this by bringing with you a signed letter authorising you to act on the shareholder’s behalf. Please note that the company reserves the right to refuse you entry if you do not bring these documents with you.

(3) To be valid, the YELLOW form of proxy, together with any power of attorney or other authority (if any) under which it is signed, or a notarially certified or office copy of such power or authority, must be received at the offices of Computershare Investors Services Plc, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY not less than 48 hours before (excluding non­working days) the time of the meeting (in other words, by 11.15 a.m. on 9 November 2017) or, as the case may be, the adjourned meeting. A reply­paid envelope has been provided for this purpose for use in the United Kingdom only. YELLOW forms of proxy returned by fax will not be accepted.

(4) Shareholders may appoint more than one proxy provided that each proxy is appointed to exercise rights attaching to different shares.

(5) If a shareholder wishes to appoint multiple proxies, they may: (a) photocopy the YELLOW form of proxy, fill in each copy in respect of different shares and send the multiple forms together to Computershare Investors Services Plc, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, or alternatively (b) call

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Computershare on the number in paragraph 19 below who will then issue the shareholder with multiple proxy forms. In each case, please ensure that all of the multiple proxy forms in respect of one registered holding are sent in the same envelope if possible.

(6) Subject to the following principles where more than one proxy is appointed, where a YELLOW form of proxy does not state the number of shares to which it applies (a “blank proxy”) then that proxy is deemed to have been appointed in relation to the total number of shares registered in the name of that shareholder (the “member’s entire holding”). In the event of a conflict between a blank proxy and YELLOW form of proxy which does state the number of shares to which it applies (a “specific proxy”), the specific proxy shall be counted first, regardless of the time it was sent or received (on the basis that as far as possible, the conflicting forms of proxy should be judged to be in respect of different shares) and remaining shares will be apportioned to the blank proxy (pro rata if there is more than one).

(7) Where there is more than one proxy appointed and the total number of shares in respect of which proxies are appointed is not greater than the shareholder’s entire holding, it is assumed that proxies are appointed in relation to different shares, rather than that conflicting appointments have been made in relation to the same shares.

(8) If two or more valid but different instruments of proxy are received in respect of the same share for use at the same meeting or on the same poll, the one which is last received (regardless of its date or of the date of its execution) shall be treated as replacing and revoking the others as regards that share and if the Company is unable to determine which was the last received, none of them shall be treated as valid in respect of that share.

(9) If conflicting proxies are sent or received at the same time in respect of (or deemed to be in respect of) a shareholder’s entire holding, none of them shall be treated as valid.

(10) Where the aggregate number of shares in respect of which proxies are appointed exceeds a shareholder’s entire holding and it is not possible to determine the order in which they were sent or received (or they were all sent or received at the same time), the number of votes attributed to each proxy will be reduced pro rata (on the basis that as far as possible, conflicting forms of proxy should be judged to be in respect of different shares).

(11) Where the application of paragraph (10) above gives rise to fractions of shares, such fractions will be rounded down.

(12) If a shareholder appoints a proxy or proxies and then decides to attend the meeting in person and vote using their poll card, then their vote in person will override the proxy vote(s). If the shareholder votes in person in respect of their entire holding then all proxy votes will be disregarded. If, however, the shareholder votes at the meeting in respect of less than their entire holding and they indicate on their polling card that all proxies are to be disregarded, that shall be the case; but if they do not specifically revoke proxies, then their vote in person will be treated in the same way as if it were the last received proxy and earlier proxies will only be disregarded to the extent that to count them would result in the number of votes being cast exceeding their entire holding.

(13) In relation to paragraph (12) above, in the event that a shareholder does not specifically revoke proxies, it will not be possible for the Company to determine their intentions in this regard. However, in light of the aim to include votes wherever and to the fullest extent possible, it will be assumed that earlier proxies should continue to apply to the fullest extent possible.

(14) Entitlement to attend and vote at the meeting or any adjournment thereof and the number of votes which may be cast thereat shall be determined by reference to the register of members of the Company at 6.00 p.m. on 9 November 2017 or, if the meeting is adjourned, on the day which is two days (excluding non­working days) before the date of such adjourned meeting. In each case, changes to the register of members of the Company after such time shall be disregarded.

(15) Shareholders entitled to attend and vote at the General Meeting may appoint a proxy electronically by logging on to www.investorcentre.co.uk/eproxy. You will need your Shareholder Reference Number (SRN) and Personal Identification Number (PIN) as shown on your proxy form. For an electronic proxy appointment to be valid, your appointment must be received by the registrars before 11.15 a.m. on 9 November 2017. If you have any difficulties using the service please contact the Company’s Registrars, Computershare Investor Services Plc on 0370 707 1127 (or from overseas +44 370 707 1127).

(16) Completing and returning the YELLOW form of proxy or appointing a proxy electronically will not prevent you from attending and voting in person at the General Meeting, or any adjournment of the General Meeting, if you so wish and are so entitled.

(17) A shareholder which is a company (a corporation) and which wishes to be represented at the meeting by a person with authority to speak, vote on a show of hands and vote on a poll (a corporate representative) must appoint such a person by resolution of its directors. A corporate representative has the same powers on behalf of the corporation he/she represents as that corporation could exercise if it were an individual member of the Company.

(18) In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of other joint holders. For this purpose, seniority will be determined by the order in which the names stand in the Company’s register of members in respect of the joint holding.

(19) If you are in any doubt about completing the YELLOW form of proxy please telephone Computershare on 0370 707 1127 from within the United Kingdom or on +44 3707071127 if calling from outside the United Kingdom. Lines will be open between 9.00 a.m. to 5.00 p.m., Monday to Friday excluding public holidays in England and Wales. Calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the resolution nor give any financial, legal or tax advice.

(20) Any question relevant to the business of the meeting may be asked at the meeting by anyone permitted to speak at the meeting. A shareholder may alternatively submit their question in advance by way of a letter addressed to the Chairman.

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sterling 169882