Accounting and Trading Update

St. James's Place Capital PLC
11 July 2002


                     27 St. James's Place, London SW1A 1NR
               Telephone [phone]    Facsimile 020 7493 2382

                                                                    11 July 2002

                   SJPC Accounting and Current Trading Update

St. James's Place Capital plc ('SJPC'), the wealth management group, today
announces an Accounting and Current Trading update.

The text of the announcement is attached:


Enquiries:

Sir Mark Weinberg, Chairman                Tel: [phone]
Mike Wilson, Chief Executive               Tel: [phone]
Martin Moule, Finance Director             Tel: [phone]




SJPC Accounting and Current Trading up-date


1.         Introduction

The Company indicated in its full-year statement that changes in Insurance
Accounting would be likely to result in a change to the basis on which it
publishes its results.

This statement describes changes to its accounting policies which will be
implemented in the Company 's Interim Statement for 2002 to be published on 24th
July and the impact they will have on the financial results.   It also gives a
brief up-date on current trading.

In the context of current concerns about the financial health of some UK life
assurance companies, it should be noted that:

(i)         SJPC's two wholly-owned life assurance companies specialise in
unit-linked business and have as a matter of policy avoided onerous financial
guarantees (such as with-profits business and guaranteed annuity options) that
have led to these concerns; and

(ii)        it has always been the Group's policy for the life companies'
solvency reserves and free assets to be invested exclusively in deposits and
fixed interest securities.



2.         Accounting bases

SJPC's accounts as at 31st December 2001 were prepared (as they had been in
previous years) on the basis of Embedded Value accounting for the two
wholly-owned life assurance companies and statutory (i.e. cash flow) accounting
for the unit trust company. These are the Company's core businesses.

In respect of its two non-core investments (which represent less than 10% of the
Company's market capitalisation),  the Company has carried its minority
interests in

(i) LAHC at the Embedded Value shown in LAHC's management accounts and (ii) the
Italian operation Nascent at cost.

The Company will be changing its accounting policies as follows:

(i)         Embedded Value accounting will no longer be used for the
wholly-owned life assurance companies.  Instead the Company will use statutory
figures as the primary statement in its financial reporting, employing the
Modified Statutory Solvency Basis (MSSB), (now the accepted basis for reporting
the financial results of life assurance groups), for the Group as a whole.  The
MSSB basis of reporting differs from Embedded Value reporting by leaving out of
account the present value of future profits flowing from new and existing
business, so that these emerge year by year in the future.

(ii)        In order to give investors a picture of the impact of the present
value of profits,  a Supplementary Statement will be published on the Achieved
Profits basis, which is a variant of Embedded Value reporting.  This statement
will follow the new guidance on Achieved Profits issued  by the Association of
British Insurers in December 2001.

and in addition:

(iii)       SJPC will also be adopting FRS 19 (Deferred Taxation) at the
half-year, resulting in the post-tax profits of the Company's Irish life
assurance company being calculated on the basis of Irish tax rates (anticipated
to be 12.5%).  Previously a tax rate of 30 % had been used.

(iv)       As a non-core investment, the holding in LAHC will be reflected in
the Supplementary Statement on Achieved Profits on the basis shown in the
modified statutory accounts.  This should have the effect of reducing the
volatile impact on SJPC's earnings, which this non-core investment has produced
in the past.

(v)        The holding in Nascent will, at the half year and for the foreseeable
future, be carried  in the accounts of SJPC at nil.

The effect of these changes on the figures that will be shown in the
Supplementary Statement on the Achieved Profits basis is set out in Appendix 1,
which also shows the effect on prior year results of the changeover.  As will be
seen, the effect of the changeover is to leave the profits for the year 2001
from the core life and unit trust businesses virtually unchanged.

Appendix 2 shows what the profits of the Group's wholly-owned life and unit
trust businesses would have been in 2001 on the MSSB basis and reconciles them
with the restated Achieved Profits figure in Appendix 1.

Full restated profit and loss accounts, balance sheets, Statement of Recognised
Gains and Losses and cash flow statements will be included in the interim
results on 24 July.



3.   LAHC (22.7% owned)

As mentioned above the Directors have decided to carry the holding in LAHC at
the value shown in the MSSB accounts for the purposes of inclusion in the
Supplementary Statement.  At the same time the Directors have reconsidered the
treatment of the transfer of LAHC's investment business to Aberdeen Asset
Management following the receipt of LAHC's statutory accounts and have decided
it would be preferable to take the profit from this through the Statement of
Recognised Gains and Losses, rather than through the profit and loss account.
The revised 2001 accounts will therefore reflect this change.  Following these
alterations, LAHC would have been held in the MSSB balance sheet at 31 December
2001 at £56.9m and the pre-tax profit for the full year would have been a loss
of  £9.3m (post tax £6.5m).

SJPC's proportion of LAHC's Embedded Value has fallen significantly over the
first half of 2002 and is expected to be of the order of £66 million (15p per
share) at 30th June 2002 , as against the value at the end of 2001 of £88.4
million (20.5p per share).  This is the result of the fall in the value of
LAHC's holding in Aberdeen Asset Management shares (which fell in value by over
50% over the period), the reduction in the value of the in-force business
resulting from the fall in stock markets over the period and the revision of
certain tax provisions.

In appraising the performance of this investment, the figures should be seen in
the context of developments in LAHC over the past 18 months since 31 December
2000.  In SJPC's accounts at that date the holding was carried at £ 96.9 million
(22.6p per share).

As pointed out in the Chairman's Statement for the 2001 results, the accounts
for LAHC for the year 2001 were dominated by a number of one off items,
including a change to the basis of reporting in accordance with the new guidance
issued by the ABI referred to earlier in this note.  This change in reporting
involved, inter alia, the deduction from LAHC's profits of the present value of
profits from future DSS contributions, will instead emerge as an addition to
future profits as these contributions are collected from the DSS.  The deduction
representing the profits from future DSS contributions amounted, in relation to
SJPC 's holding, to £ 29.4 million (6.8p per share).

It will therefore be seen that, if the holding were to be brought in at 30 June
2002 on the previous basis of including the present value of those profits (i.e.
if the £ 29.4 million deduction were added to the  £66 million at 30 June 2002
referred to in the first paragraph of this section), it would have been worth
£95.4 million (22.2p per share) as against the carrying value at 31 December
2000 of £ 96.9 million (22.6p per share).

In economic terms, therefore, despite falling stock markets, LAHC is now of
virtually the same intrinsic value that it was at the beginning of the 18 month
period, the difference being essentially the use of the new ABI basis of
reporting.



4.         Nascent (26% owned)

SJPC has previously carried its holding in Nascent at  cost.  At 31 December
2001 this amounted to £13.4 million and, at 30th June 2002 it amounted to £18.0
million (4p per SJPC share), or approximately 2% of SJPC's market capitalisation
at that date.

Particularly in today's unsettled market conditions, it is difficult to place a
 value on SJPC's minority interest in this newly-established venture and the
Directors have decided to write down the value of SJPC's holding in Nascent to
nil.  This will be reflected in the interim results. It is not expected that any
further amounts will be invested in the company.



5.         SJP Group current trading

When we announced our first quarter results we said that owing to the investment
climate, we were unlikely to see new business for the second quarter rising
above that for the comparative period of 2001, which was the highest quarter of
the year (up 27% over the second quarter 2000 sales).

The investment climate has worsened over the last three months and whilst our
second quarter results will not be reconciled until later in the month, the
indications are that the fall in new business of 19% experienced in the first
quarter has been broadly mirrored in the second.

Gross fees generated from additional wealth management services accelerated
further in the second quarter.

Our full results for the half year will be released with our interim results on
24th July.



APPENDIX 1

The essential difference between the Embedded Value and Achieved Profits basis
from the point of view of SJPC's figures relates to the economic assumptions
underlying the valuations.  In the case of Embedded Values, these were set on a
'passive' basis - i.e. the assumptions were only altered when it was judged that
the economic environment had changed substantially.  In the case of the Achieved
Profits basis, the assumptions move on an 'active' basis in accordance with the
new ABI guidance - i.e. the assumptions are varied annually by reference to the
returns on appropriate government bonds at the end of each financial year.



            Achieved Profits restatement

(i)                 Economic assumptions


                                 Embedded Value, as          Restated  Achieved Profits
                                 reported (passive)                  (active)
                                     31 December                    31 December
                              2001 & 2000                    2001            2000
Risk discount rate            10.0%                          8.5%            8.25%
Future investment returns:
    Gilt return               6.0%                           5.0%            4.75%
    Unit linked fund growth
       Capital                5.75%                          4.5%            4.25%
       Income                 2.5%                           2.5%            2.5%
       Total                  8.25%                          7.0%            6.75%
Expense inflation             5.0%                           4.5%            4.25%
Investment smoothing                     Yes                         Yes             Yes



Smoothing is achieved by means of a recursive formula, where

smoothed price (t+1) = 0.075 x Actual price (t+1) + 0.925 x smoothed price (t) x
(1 + G)

where G is the expected rate of unit growth after tax and charges.  This
smoothing is equivalent to a short term change in the assumed investment return.

(ii)               Achieved profit results

The effect on prior period results for the Group's wholly -owned life and unit
trust businesses is as follows for the year ended 31 December 2001:


                                                   Embedded Value, as          Restated Achieved
                                                   reported (passive)           Profits (active)
                                                           £' Million                 £' Million
Group's wholly owned life business


New business profit (pre tax)               41.6                           49.6
New business profit (post tax)              29.1                           36.8

Profit before taxation                      79.5                           78.7
Profit after taxation                       55.7                           59.5


Group's wholly owned unit trust business


New business profit (pre tax)               17.6                           18.6
New business profit (post tax)              12.3                           13.0

Profit before taxation                      26.0                           26.3
Profit after taxation                       18.2                           18.4


Unit trust and life business combined


New business profit (pre tax)               59.2                           68.2
New business profit (post tax)              41.4                           49.8

Profit before taxation                      105.5                          105.0
Profit after taxation                       73.9                           77.9



Shareholder assets (including unit
trust group on an Achieved Profits
Basis)                                      As reported (passive)               Restated (active)


                                                          per SJPC                          per SJPC
                                                          share                             share
                                        £' Million                        £' Million

Group assets excluding LAHC             £501.0m           116.8p          £516.6m           120.1p

LAHC                                    £88.4m            20.6p           £56.9m*           13.2p*

Total                                   £589.4m           137.4p          £573.5m           133.3p

* reported on MSSB basis




APPENDIX 2

Modified Statutory Solvency restatement

      Wholly Owned Life Business

The following table shows what the Consolidated Profit and Loss result of the
Group ' s wholly-owned life business would have been for the prior period and
reconciles this figure with the Achieved Profit figure of £  59.5 million shown
in paragraph 3:


                                                   31 December 2001
                                                         £' Million

MSSB result

Loss after taxation                                  (12.1)

Add:
•         Amortisation of acquired interest
in long-term assurance business*                     1.6

•         Value of long-term business
generated in year                                    70.0

Achieved Profit result (restated)                    59.5




* In June 1997 SJPC purchased that part of the then JRAH Group it did not
already own.  The present value of in-force business at this date is required to
be capitalised and then amortised for the purposes of MSSB over its economic
life.



            Unit Trust Business



The equivalent figures for the unit trust business are as follows:




                                                   31 December 2001
                                                         £' Million

MSSB result

Profit after taxation (same as shown in
published accounts)
                                                     7.3

Add:
•         Value of in-force business                 11.1

Achieved Profit result (restated)                    18.4




            Total Group




                                                   31 December 2001
                                                         £' Million

MSSB result

Loss after taxation                                  (6.6)

Achieved Profit adjustment                           82.7

Achieved Profit result (restated)                    76.1






            Shareholders' Funds




                                                   31 December 2001
                                                         £' Million

MSSB Shareholders' Funds                             246.8

Adjustment for value of in force business            326.7

Achieved Profit shareholders' funds
(restated)                                           573.5






                      This information is provided by RNS
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