EEV Restatement
St. James's Place Capital PLC
08 December 2005
PRESS RELEASE
8 December 2005
RESTATEMENT OF 2004 FULL YEAR RESULTS UNDER
EUROPEAN EMBEDDED VALUE PRINCIPLES
St. James's Place Capital plc, the wealth management group, today publishes the
restatement of its 2004 full year results under European Embedded Value ('EEV')
principles.
•Pre-tax new business contribution has increased by 20.5% to £45.8
million.
•Pre-tax operating profit 5.3% lower at £75.8 million.
•Group net assets at 31 December 2004 have increased by 3.6% to £663.4
million. Resulting net asset value per share has increased by 5.2 pence to
151.0 pence per share.
•A bottom-up market-consistent approach to allow for risk has been adopted
in calculating EEV.
Andrew Croft, Group Finance Director, commented
'The EEV Principles are an important step forward for the insurance sector. In
applying them, we have used a rigorous and market consistent methodology to
reflect the risks of our business.
'The EEV results show an increase in the value of our in-force and new business
contribution relative to our achieved profits approach.
'As shareholders are aware the Group does not write with-profit or annuity
business, nor do our products offer any significant financial guarantees or
options; therefore no allowance needs to be made for these areas.
'EEV reporting has no impact on our solvency, cash generation or dividend
policy.'
The text of the transition restatement is attached.
Enquiries:
Andrew Croft, Group Finance Director Tel: 020 7514 1985
Nitya Bolam, Brunswick Group Tel: 020 7404 5959
ST. JAMES'S PLACE CAPITAL PLC
RESTATEMENT OF 2004 FULL YEAR RESULTS UNDER EUROPEAN EMBEDDED VALUE PRINCIPLES
CONTENTS
Page Number
Summary Financial Information 3
Commentary 4
Consolidated Profit and Loss Account for year ended 31 December 2004 6
Summarised Net Asset Statement at 31 December 2004 7
Reconciliation to IFRS Net Assets 7
Notes to the Results 8
EEV Methodology 10
• Basis of preparation
• Covered business
• Allowance for risk
• Deriving the risk discount rate
• Cost of solvency capital
• Non-market risk
• New business
• Expenses
• Taxation
• Other issues considered
European Embedded Value Assumptions 13
European Embedded Value Sensitivities 15
Auditor's Report 16
SUMMARY FINANCIAL INFORMATION
YEAR ENDED 31 DECEMBER 2004
The summary financial information shows the result of the Group adopting the
European Embedded Value Principles compared to the previously reported Achieved
Profit basis.
European Achieved
Embedded Profit*
Value
-------- ---------
£' Million £' Million
Pre-tax operating profit 75.8 80.0
-------- ---------
Total pre-tax profit 130.9 140.1
-------- ---------
Pre-tax new business profit 45.8 38.0
-------- ---------
Total net assets 663.4 640.4
-------- ---------
Net asset value per share 151.0p 145.8p
-------- ---------
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
COMMENTARY
Introduction
In May 2004 the Chief Financial Officers Forum published the European Embedded
Value ('EEV') Principles. The purpose of this document is to set out the impact
of the adoption of these Principles.
We have developed our EEV methodology in conjunction with our consulting
actuaries Tillinghast. This document has also been reviewed by our auditors KPMG
Audit Plc and an audit report is included on page 16.
The purpose of this document is to restate the 2004 Achieved Profit ('AP')
result to an EEV basis. These EEV figures will replace the AP numbers previously
reported as Supplementary Information and will be included as the comparatives
for the year ended 31 December 2005.
Methodology
We have adopted a market-consistent approach to set the risk discount rates at
each balance sheet date and allowed a margin for non-market risk. The risk
discount rate used within the EEV at 31 December 2004 is 7.7% (AP basis 8%) with
an associated equity risk premium of 3% (AP basis 2.5%). Included within the
discount rate is an allowance of 0.8% for non-market risks. There have been a
number of other changes to the economic assumptions adopted which are detailed
on page 13.
Experience assumptions have been amended to a 'best estimate' basis as required
under EEV guidance.
Maintenance costs have been increased to bring them into line with EEV guidance.
This has resulted in certain irregular costs now being incorporated by way of
higher maintenance expense loadings.
As shareholders are aware, the Group does not write with-profit or annuity
business, nor do our products offer any significant financial guarantees or
options, therefore no allowance needs to be made for these areas. Furthermore
neither the Group nor the covered business has any external debt, nor does the
Group have any Defined Benefit Pension Scheme deficit.
Impact of changes
Detailed below is the impact of the EEV changes on the pre-tax new business
contribution for the year ended 31 December 2004, the pre-tax operating profit
for the same period and the net assets of the Group at 31 December 2004.
The restated pre-tax new business contribution has increased by £7.8 million to
£45.8 million (a movement of £5.9 million post-tax).
The principal reason for this increase is the move to the market-consistent
valuation method, as adjusted to allow for the impact of non-market risk. There
has also been some impact from the amendment of certain experience assumptions
to a 'best estimate' basis. The impact of the higher maintenance costs has been
offset to some extent by a reduction in the level of acquisition expenses.
£' million
New business contribution on AP basis 38.0
Market-consistent valuation 13.7
Non-market risk adjustment (7.3)
Experience assumptions 2.5
Expense and tax assumptions (1.1)
New business contribution on an EEV basis 45.8
The restated pre-tax operating profit for the year ended 31 December 2004 is
£4.2 million lower than the AP result.
The reduction in the pre-tax operating profit, despite the increase in the new
business contribution discussed above, is principally due to a smaller unwind of
the risk discount rate (resulting from the reduction of 0.3% in the rate used
for the EEV) and a reduction in the experience variances. Much of the change in
experience variances arises from the following two sources - firstly the
amendments to certain assumptions to move them to a 'best estimate' basis (which
reduces the positive experience variances by around £2 million), and secondly
changes to the method used to calculate the value of the tax relief on carried
forward unutilised expenses (which reduces the experience variances by around
£6 million).
£' million
Operating profit on AP basis 80.0
New business contribution 7.8
Unwind of risk discount rate (1.6)
Experience variances (9.2)
Operating assumption changes (1.2)
Restated operating profit on an EEV basis 75.8
The net asset value has increased by 3.6% from £640.4 million on the AP basis to
£663.4 million.
The principal reason for this increase is the move to the bottom-up
market-consistent valuation method, as adjusted to allow for the impact of
non-market risk. There has also been an increase due to the impact of amendments
to certain experience assumptions to a 'best estimate' basis, and a reduction in
the value due to the higher future maintenance costs assumed.
£' million
Net assets on AP basis 640.4
Market-consistent valuation 58.0*
Non-market risk adjustment (31.1)
Experience assumptions 8.8
Expense and tax assumptions (12.7)*
Revised net asset value on an EEV basis 663.4
* These numbers include a total reduction of £3.2 million in the value of future
tax relief on carried forward unutilised expenses. This arises from both changes
to assumptions and the move to a market-consistent approach.
CONSOLIDATED PROFIT & LOSS ACCOUNT
YEAR ENDED 31 DECEMBER 2004
The following information shows the result of the Group adopting the EEV
Principles compared to the previously reported AP basis.
European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
Life business 57.3 62.9
Unit trust business 30.9 29.5
Other (6.8) (6.8)
-------- --------
81.4 85.6
IT systems development (5.6) (5.6)
-------- --------
Operating profit 75.8 80.0
Investment return variances 26.5 30.0
Economic assumption changes 0.6 2.1
-------- --------
Profit from core business 102.9 112.1
LAHC profit on sale 28.0 28.0
-------- --------
Profit on ordinary activities before tax 130.9 140.1
Tax
Life business (19.1) (23.4)
Unit trust business (12.0) (11.6)
Other 1.2 1.2
LAHC - -
-------- --------
(29.9) (33.8)
-------- --------
Profit on ordinary activities after tax 101.0 106.3
======== ========
Pence Pence
Basic earnings per share 23.2 24.5
Diluted earnings per share 22.5 23.7
-------- --------
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
SUMMARISED NET ASSET STATEMENT
AT 31 DECEMBER 2004
European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
Value of in-force
Unit trust 113.5 104.8
Long-term insurance 377.2 362.9
Other assets 172.7 172.7
-------- --------
Consolidated net assets 663.4 640.4
-------- --------
Pence Pence
Net asset value per share 151.0 145.8
-------- --------
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
RECONCILIATION TO IFRS NET ASSETS
European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
IFRS net assets 222.2 222.2
Less acquired value of in-force (70.5) (70.5)
Add deferred tax on acquired value of in-force 21.0 21.0
-------- --------
172.7 172.7
Add long-term insurance business in-force 377.2 362.9
Add unit trust in-force 113.5 104.8
-------- --------
663.4 640.4
-------- --------
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
NOTES TO THE RESULTS
Components of Life and Unit Trust Profit
The pre-tax components of the result for life and unit trust business for the
year ended 31 December 2004 are shown below:
Life business European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
New business contribution 29.9 23.7
Profit from existing business:
Unwind of discount rate 36.0 38.1
Experience variances (11.2) (2.8)
Operating assumption changes (0.5) 0.7
Investment income 3.1 3.2
-------- --------
Life operating profit before
tax 57.3 62.9
Investment return variances 17.2 20.6
Economic assumption changes 0.9 2.3
-------- --------
Life profit before tax 75.4 85.8
Attributed tax (19.1) (23.4)
-------- --------
Life profit after tax 56.3 62.4
-------- --------
New business contribution after tax is £22.3 million (£17.5 million on the AP
basis).
Unit trust business European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
New business contribution 15.9 14.3
Profit from existing business
Unwind of discount rate 9.8 9.3
Experience variances 5.2 5.9
Operating assumption changes - -
-------- --------
Unit trust operating profit before
tax 30.9 29.5
Investment return variances 9.3 9.4
Economic assumption changes (0.3) (0.2)
-------- --------
Unit trust profit before tax 39.9 38.7
Attributed tax (12.0) (11.6)
-------- --------
Unit trust profit after tax 27.9 27.1
-------- --------
New business contribution after tax is £11.1 million (£10.0 million on the AP
basis).
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
Life and unit trust business combined European Achieved
Embedded Profit*
Value
-------- --------
£' Million £' Million
New business contribution 45.8 38.0
Profit from existing business
Unwind of discount rate 45.8 47.4
Experience variances (6.0) 3.1
Operating assumption changes (0.5) 0.7
Investment income 3.1 3.2
-------- --------
Operating profit before tax 88.2 92.4
Investment return variances 26.5 30.0
Economic assumption changes 0.6 2.1
-------- --------
Profit before tax 115.3 124.5
Attributed tax (31.1) (35.0)
-------- --------
Profit after tax 84.2 89.5
-------- --------
New business contribution after tax is £33.4 million (£27.5 million on an AP
basis).
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
EEV METHODOLOGY
Basis of Preparation
The EEV results presented in this document have been prepared in accordance with
the EEV Principles issued by the Chief Financial Officers Forum in May 2004.
They will replace the Achieved Profit basis previously reported as supplementary
information for the covered business and will be included as the comparatives
for the year ended 31 December 2005. The treatment within this supplementary
information of all business other than the covered business is unchanged from
the primary financial statements on an IFRS basis.
The EEV results should be considered in conjunction with the Group's
International Financial Reporting Standards ('IFRS') restatement press release
dated 26 July 2005. This contained information regarding the Group's financial
statements prepared in accordance with IFRS issued by the International
Accounting Standards Board ('IASB') and adopted for use in the EU. This
preliminary IFRS financial information forms the starting point for the EEV
supplementary information. The underlying IFRS preliminary financial
information, and therefore this EEV supplementary information, may require
adjustment before its inclusion as comparative information because the policies
to be adopted will be determined finally only when the annual financial
statements are prepared for the year ending 31 December 2005, reflecting
additional interpretations and developing industry guidance. This may bring
about changes to the accounting policies used to prepare the underlying
preliminary IFRS financial information.
The preliminary IFRS financial information is based on the UK GAAP financial
statements approved by the Board on 28 February 2005 and adjusted to comply with
IFRS. In accordance with IFRS 1 there have been no adjustments to the estimates
made at the time of the preparation of the UK GAAP financial statements.
The Directors acknowledge their responsibility for the preparation of the
preliminary supplementary information, which has been prepared in accordance
with the EEV Principles using the approach expected to be adopted when the Board
prepares the Group's first set of EEV supplementary information for the year to
31 December 2005. The Directors approved the preliminary supplementary
information on 7 December 2005.
Under the EEV methodology, profit is recognised as it is earned over the life of
the products within the covered business. The embedded value of the covered
business is the sum of the shareholders' net worth in respect of the covered
business, and the present value of this projected stream of profit.
Covered business
The covered business is the life, pension and investment business, including
unit trust business, undertaken by the Group.
Allowance for risk
The allowance for risk in the shareholder cash flows is a key feature of the EEV
Principles. The EEV guidance set out three main areas to allow for risk in an
embedded value;
•The risk discount rate
•The allowance for the cost of financial options and guarantees
•The cost of holding both prudential reserves and any additional capital
required
The reported EEV allows for risk via a risk discount rate based on a bottom-up
market-consistent approach plus an appropriate additional margin for non-market
risk.
Deriving the risk discount rate
A market-consistent embedded value for each product class has been calculated.
In principle, each cash flow is valued using the discount rate applied to such a
cash flow in the capital markets. However in practice, where cash flows are
either independent or move linearly with market movements, it is possible to
apply a simplified method known as the 'certainty equivalent' approach. Under
this approach all assets are assumed to earn the risk free rate and are
discounted using that risk free rate.
As part of this approach, an appropriate adjustment has been made to reflect the
fact that the value of tax relief on expenses does not move linearly with market
movements, as described later in these notes.
A market-consistent cost of holding the required capital has also been
calculated and an additional allowance for non-market risk has been made by
increasing the discount rate.
For presentational purposes, a risk discount rate has then been calculated which
under the EEV basis gives the same value determined above. This provides an
average risk discount rate for the EEV.
This same average risk discount rate has also been used to calculate the
published value of new business.
Cost of solvency capital
In light of the results of internal analysis, the Directors consider that the
minimum regulatory capital provides adequate capital cover for the risks
inherent in the covered business. The required capital for the EEV calculations
has therefore been set to the minimum required capital.
The EEV includes a reduction for the frictional cost of holding the required
capital. No allowance has been made for any potential agency cost adjustment,
this representing the potential markdown to the EEV that investors may apply
because they do not have direct control over their capital. Any such adjustment
would be subjective, as different investors will have different views of what,
if any, adjustment should be made.
Non-market risk
Best estimate assumptions have been established based on available information
and when used within the market consistent calculations provide the primary
evaluation of the impact of non-market risk. However, some non-market
operational risks are not symmetric, with adverse experience having a higher
impact on the EEV than favourable experience. Allowance has been made for this
by increasing the risk discount rate by 0.8%.
New business
The new business contribution arising from reported new business premiums has
been calculated using the same assumptions as used in the EEV at the end of the
financial year. The value of contractual incremental premiums to existing
business is treated as new business in the year of the increment, rather than at
the outset of the policy. This approach better reflects the way the Group
manages its business.
Expenses
The expense assumptions include allowance for both the costs charged by the
relevant third party administrators for acquisition and maintenance, and the
corporate costs incurred in respect of covered business.
The corporate costs have been appropriately apportioned, so that the total
maintenance costs represent the anticipated ongoing expenses, including the
systems development costs, which are expected to arise in future years in
meeting the policy servicing requirements of the in-force business.
Taxation
The EEV includes the present value of relief for expenses calculated on a
market-consistent basis. This calculation takes into account all expense
(including carried forward unutilised expenses) and income amounts projected for
the in-force business. In determining the market-consistent value an appropriate
allowance is made to reflect the fact that the value of tax relief on expenses
does not move linearly with market movements. The impact of this is assessed
using a stochastic simulation model, calibrated to market conditions at each
balance sheet date.
When calculating the value of new business, first priority is given to relieving
the expenses relating to that business.
Other issues considered
In adopting the EEV Principles, consideration has been given to the following
matters that were not relevant to the Group;
•The Group does not write with-profit or annuity business
•The Group does not have products which offer any significant financial
guarantees or options
•The Group does not have any debt
•The Group does not have a defined benefit pension scheme deficit.
EUROPEAN EMBEDDED VALUE ASSUMPTIONS
Economic Assumptions
The principal economic assumptions used within the cash flows at 31 December
2004 are set out below:
European Achieved
Embedded Profit*
Value
-------- ----------
£' Million £' Million
Risk discount rate (net of tax) 7.7% 8.0%
Future investment returns:
- Gilts 4.7% 4.5%
- Equities 7.7% 7.0%
- Unit-linked funds:
- Capital growth 4.2% 3.7%
- Dividend income 2.8% 2.8%
- Total 7.0% 6.5%
Expense inflation 4.4% 4.25%
Indexation of capital gains 2.1% 1.8%
* These figures are as reported in the interim statement issued on 26 July 2005
and have not been subject to an audit.
The approach to determining the risk discount rate was described earlier. The
risk discount rate is used to discount the projected future cash flows from the
business in force to a present value.
The assumed future pre-tax returns on fixed interest securities are set by
reference to the yield on 10 year gilts. The other investment returns are set by
reference to this assumption.
The expense inflation and indexation of capital gains assumptions are based on
the rate of inflation implicit in the valuation of 10 year index-linked gilts
(2.9% at 31 December 2004). This rate is increased by 1.5%, to reflect higher
increases in earnings, to derive the expense inflation assumption. The rate is
reduced by 10% to derive the indexation of capital gains for the proportion of
the fund invested in equities.
Experience assumptions
The principal experience assumptions have been set on a best estimate basis,
whereas under the achieved profit basis SJPC set assumptions on a moderately
passive basis.
•The persistency assumption is derived from the Group's own experience, or
where insufficient data exists, from external industry experience.
•Maintenance expenses have been set in line with the costs charged by the
Group's third party administrators, together with an allowance for the
Group's own maintenance costs.
•Mortality and morbidity assumptions have been set by reference to the
Group's own experience, published industry data and the rates set by the
Group's reassurers.
These assumptions will be reviewed on an annual basis.
A provision of £7.0 million before tax has been included within the cash flows
to provide for adverse morbidity experience on critical illness plans.
Other Points
The value of new business has been established at the end of the reporting
period and has been calculated using actual acquisition costs.
Profit from existing business comprises the expected return on the value of in
force business at the start of the year plus the impact of any changes in the
assumptions regarding future operating experience, changes in reserving basis
(other than economic assumption changes) and profits and losses caused by
differences between the actual experience for the period and the assumptions
used to calculate the embedded value at the end of the period.
Future taxation has been determined assuming a continuation of the current tax
legislation. The EEV result has been calculated on an after tax basis and has
been grossed up to a pre tax level for presentation in the profit and loss
account. The corporation tax rate used for this grossing up is 28% for UK life
and pensions business, 12.5% for Irish life and pensions business and 30% for
unit trust business.
A pre-tax provision of £4.0 million has been included to cover the possible
impact on the Group from an expected repositioning of the VAT exemption for
insurance related services following a recent ruling in the European Court of
Justice.
EUROPEAN EMBEDDED VALUE SENSITIVITIES
The table below shows the estimated impact on the combined life and unit trust
reported value of new business and EEV to changes in various EEV calculated
assumptions. In each case, only the indicated item is varied relative to the
restated values.
Change in new business contribution Change in the European
Embedded Value
Notes Pre-tax Post-tax
£' Million £' Million £' Million
Restated value
at 31 December 2004 45.8 33.4 663.4
1% reduction in
risk discount rate 1 8.0 5.8 40.1
1% reduction in
risk-free rates,
with corresponding
change in fixed
interest asset values 0.5 0.4 2.7
10% reduction in
withdrawal rates 4.8 3.5 23.7
10% reduction in expenses 7.8 5.8 9.8
10% reduction in
market value of
equity assets n/a n/a (46.3)
5% reduction in
mortality and morbidity 0.2 0.3 1.6
1% increase in
equity expected returns 2 - - -
£10 million increase in
capital requirements
(for embedded value) n/a n/a (0.8)
1. Although not directly relevant under a market-consistent valuation where the
risk discount rate is a derived disclosure only, this sensitivity shows the
level of adjustment which would be required to reflect differing investor views
of risk.
2. As a market-consistent approach is used, equity expected returns only affect
the derived discount rate and not the embedded value or contribution to profits
from new business.
Special Purpose Audit Report of KPMG Audit Plc to St James's Place Capital plc
on its European Embedded Value ('EEV') Supplementary Information.
In accordance with the terms of our engagement letter we have audited the EEV
supplementary information of St James's Place Capital plc ('the Company') as at
31 December 2004, set out on pages 6 to 15.
As described in the basis of preparation on page 10, the EEV supplementary
information has been prepared in accordance with the European Embedded Value
Principles issued in May 2004 by the European CFO Forum ('the EEV Principles').
Respective responsibilities of directors and KPMG Audit Plc
As described on page 10, the Directors of the Company have accepted
responsibility for the preparation of the EEV supplementary information in
accordance with the EEV Principles. It has been prepared as part of the
Company's conversion of its supplementary information, previously prepared in
accordance with the guidance issued in December 2001 by the Association of
British Insurers entitled 'Supplementary Reporting for Long Term Insurance
Business (the Achieved Profits Method)' ('on the Achieved Profits basis') to an
EEV basis.
The accounting policies that have been adopted in preparing the underlying
preliminary IFRS financial information which is the starting point for the EEV
supplementary information are consistent with those that the directors currently
intend to use in the next annual financial statements. There is however, a
possibility that the Directors may determine that some changes to these policies
are necessary when preparing the full annual financial statements for the first
time in accordance with those IFRSs adopted for use by the European Union. This
is because, as disclosed in the basis of preparation on page 10, the Directors
may be required make adjustments to accounting policies as a result of
additional interpretations and developing industry guidance.
Our responsibilities as independent auditors are established in the United
Kingdom by the Auditing Practices Board, our profession's ethical guidance, and
the terms of our engagement. Under the terms of engagement we are required to
report to you our opinion as to whether the EEV supplementary information has
been properly prepared in all material respects in accordance with the basis of
preparation set out in the methodology section on pages 10 to 12 of the EEV
supplementary information. We also report to you if, in our opinion, we have not
received all the information and explanations we require for our audit.
Our report has been prepared for the Company solely in connection with the
Company's conversion of its supplementary information, previously prepared on
the Achieved Profits basis, to an EEV basis.
We read the other information accompanying the EEV supplementary information and
consider whether it is consistent with the EEV supplementary information. We
consider the implications for our report if we become aware of any apparent
mis-statements or material inconsistencies with the EEV supplementary
information.
Our report was designed to meet the agreed requirements of the Company
determined by the Company's needs at the time. Our report should not therefore
be regarded as suitable to be used or relied on by any party wishing to acquire
rights against us other than the Company for any purpose or in any context. Any
party other than the Company who chooses to rely on our report (or any part of
it) will do so at its own risk. To the fullest extent permitted by law, KPMG
Audit Plc will accept no responsibility or liability in respect of our report to
any other party.
Basis of audit opinion
We conducted our audit having regard to Auditing Standards issued by the UK
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the EEV supplementary
information. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the EEV supplementary
information, and of whether the accounting policies are appropriate to the
Group's circumstances, consistently applied and adequately disclosed. We planned
and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to
give reasonable assurance that the EEV supplementary information is free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the EEV supplementary information.
Emphasis of matters
Without qualifying our opinion, we draw your attention to the following matters:
• As described in the basis of preparation note to the EEV supplementary
information, as part of its conversion from the Achieved Profits basis to an
EEV basis, the Company has prepared the EEV supplementary information for
the year ended 31 December 2004 to establish the financial position and
results of operations of the Company necessary to provide the comparative
supplementary information expected to be included in the Company's first
complete set of EEV supplementary information to be included in the annual
report for the year ending 31 December 2005.
• As explained in the basis of preparation, in accordance with IFRS 1
First-time Adoption of International Financial Reporting Standards, in
arriving at the underlying preliminary IFRS financial information which
forms the starting point for the EEV supplementary information, no
adjustments have been made for any changes in estimates made at the time of
approval of the UK Generally Accepted Accounting Practices financial
statements on which the preliminary IFRS Financial Information is based.
Opinion
In our opinion, the accompanying EEV supplementary information for the year
ended 31 December 2004 has been properly prepared, in all material respects, in
accordance with the basis of preparation set out in the methodology section on
pages 10 to 12, which describes how the EEV Principles have been applied.
KPMG Audit Plc
Chartered Accountants
London
7 December 2005
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