Final Results

St. James's Place Capital PLC 19 February 2001 PRESS RELEASE 19 February 2001 St. James's Place Capital Preliminary Announcement St. James's Place Capital plc has announced its annual results for the year ended 31 December 2000. The text of the announcement is attached. Enquiries: Mike Wilson, Chief Executive Tel: 020 7514 1909 Martin Moule, Finance Director Tel: 020 7514 1909 Nitya Bolam Brunswick Tel: 020 7404 5959 Announcement of annual results for the year to 31st December 2000. St. James's Place Capital (SJPC) today announces annual results for the year ended 31st December 2000. Highlights include: St. James's Place Group (formerly J. Rothschild Assurance Group) * pre-tax profits (before exceptionals) up 33% to £79.5 million (1999: £60.0 million) * life business pre-tax operating profits up 25% to £66.4 million (1999: £53.0 million) * unit trust business pre-tax profits up 18% to £6.7 million (on an embedded value basis profits were up 186% to £41.7 million) * new business from the St. James's Place Partnership up 42%, following growth of more than 40% in each quarter during the year * size of the Partnership up 8% to 1050 * assets under management up 24 % to £5.7 billion Nascent Group SA * new Italian venture off to successful start in the second half of 2000. Final dividend of 1.25p per share making a total dividend for the year of 2.25p (1999:1.75p) up 29%. Mike Wilson, Group Chief Executive, commented: 'During the year, the group made considerable progress towards its objective of offering a complete wealth management service through the members of the St. James's Place Partnership - we feel we are now particularly well placed to be a major force in providing an integrated range of financial services for the 4 million or so higher net worth and higher income individuals in the UK' Supporting Statement The first year of the new millennium was one of outstanding progress for St. James's Place Capital, in terms of growth in new business and profits, as well as the establishment of a platform for future growth. Halifax Shareholders will be aware that the Halifax partial offer for 60% of SJPC's share capital was completed on 2 June 2000. We are delighted to welcome Halifax as a shareholder and in particular to welcome James Crosby, the Chief Executive of Halifax and Jim Spowart, the Chief Executive of Intelligent Finance, to our Board. With Lord Stevenson, the Chairman of Halifax, who has been on our Board for some years, they are the three appointees of Halifax provided for in the agreement which regulates the relationship between the two companies. As indicated in my statement at the half year we have adopted a unified brand for the Group, built around the identity of the highly respected St. James's Place Unit Trust Group with its exceptional long term investment record. During October 2000, the Partnership became the St. James's Place Partnership and over the next two years the life assurance companies will also change their names. The change of name has taken place very smoothly and everyone in the Group has embraced the new name with enthusiasm. The rebranding will be reinforced with the launching of St. James's Place Bank referred to later in this statement. Financial Results The Group's financial results for the year were very pleasing - driven by the excellent new business results which are described in more detail below. Last year's result benefited from the one-off exceptional profit from the sale of GAM, while this years include the one-off costs of the Halifax transaction. However profits before exceptionals (see note 4) grew from £93.2 million pre tax to £95.9 million despite the fact that the 1999 figure included the one off benefit of a £12.9 million basis change from LAHC. Particularly impressive was the growth in the earnings from the Group's life businesses. As in previous years these are reported on an embedded value basis, since this gives shareholders the best measure of how their business is progressing. The pre-tax operating profits of the life businesses (before exceptional items) are set out in note 4, which shows a 25% rise in profits from £53.0 million to £66.4 million. The figures for life profits include the costs of the transition to level loaded pensions. As I have mentioned in previous statements, the Company has subsidised the commission paid on pension plans during a transitional phase to assist the cash flow of the Partnership. The subsidy came to an end on 1st October and, in line with the estimates we gave last year, cost £3.8m pre-tax during the year (£4.4 million last year). Pre tax unit trust profits have grown from £5.7m to £6.7m. Although this represents an 18% increase in profits, a more helpful measure of the businesses economic performance is given by the increase in embedded value over the year. This is set out in the supplementary information, and shows that on this basis unit trust profits increased from £14.6 million pre tax in 1999 to £41.7 million in 2000 an increase of 186%. The pre-tax profits of life plus unit trust business on an embedded value basis rose from £67.6 million to £108.1 million, an increase of 60%. Again this is shown in the supplementary information. The accounts for the current year contain an exceptional item of £13.2 million pre-tax which relates to the professional fees and other costs flowing from the Halifax transaction and certain of the costs of rebranding the Group. As part of the transaction, certain share options needed to be cancelled and reissued, giving rise to income tax which the Company agreed to pay on behalf of optionholders. The sharp rise in the SJPC share price led to a further increase in this tax liability, which accounts entirely for the £2.1m increase in the exceptional costs since my statement at the half year. LAHC, in which the Group has a 23% interest, made no acquisitions during the year. It contributed £16.4 million pre-tax (1999 £27.4 million) to the Group's profits. Both this year's and last year's profits benefited from various one-offs and the underlying profitability of the business in 2000 remained similar to that in previous years. The Partnership and New Business New business for the St. James's Place Partnership grew by 42% over the year, and indeed new business for each quarter was more than 40% higher than in the corresponding quarter of 1999. At the time of writing complete industry statistics are not available, but initial indications are that sales figures in the industry were flat, making the achievement of the Partnership even more impressive. Particularly notable was the increase in new unit trust and ISA business, which grew by 122% over the year. The standard industry measure of new business (regular premiums plus ten per cent of single premiums), while used as the basis of comparison of sales between companies, is a comparatively crude guide to new business profitability, since profitability as a percentage of premium varies widely between different classes of product. Internally the Group uses its own measure of new business profitability, (new business indicator or NBI). It is this measure which is used by the Group in setting its long-term growth target of 15 to 20% per annum. New business on this measure, which reflects the impact of product mix, rose from £47.5 million in 1999 to £61.5 million in 2000, an increase of 29%. The size of the partnership grew by 8% from 972 to 1050 during the year 2000. It will be appreciated that much the greater part of the rise in new business represents a large increase in the productivity of the Partnership. Investment Management The Group has always believed that the best prospect of obtaining consistent superior investment performance over the long term comes from contracting out its fund management to a select Group of respected investment management firms and then closely monitoring them through the Group's Investment Monitoring Committee. The performance of our funds during the difficult market conditions of the year 2000 reinforces that belief. An investment spread equally between our pension managed funds produced (on an offer to offer basis) a greater return than any of the S & P 500, FTSE Actuaries World Europe (excluding UK), FTSE All Share and Nikkei 225 Stock Average indices and outperformed the FTSE 100 Index by a considerable margin. Over three-quarters of our whole range of life, pension and unit trust and offshore (managed) funds performed in the first and second quartiles of the funds in their respective classes. Over five years, a similar pattern emerges. Of particular note is the performance of our flagship St James's Place Pension Managed Fund, which was the 2nd best performing fund out of 108 funds in its class and has achieved compound growth (after allowing for annual management charges) of 15.5% p.a. over the period, compared with 10.7% p.a. for the average pension balance managed fund. The St. James's Place Life Managed fund was the 4th best performing fund out of 102 funds in its class. Assets under management at the end of the year were £5.7bn, an increase of 24% over the figure of £4.6bn at the end of 1999. International We announced with our half yearly results that we had entered into an agreement with Securitas Capital LLP ('Securitas'), a global private equity fund, to establish a new European financial services business called Nascent. Subject to formal regulatory approval, this new venture has taken over the previous project for SJPC to establish a Continental European operation for its Irish based subsidiary, J. Rothschild International Assurance. Paul Bradshaw heads this new European operation, with Patrizia Misciattelli delle Ripe as 'Amministratore Delegato' of the Italian operation. As foreshadowed in our half-yearly statement, Paul Bradshaw resigned from the Board of SJPC on 5th December 2000. Although there were earlier pilot operations, the Company effectively started writing business in September and got off to a very encouraging start. Up to the end of the year Nascent made investment sales of £47 million, of which £30 million related to products of other fund management firms. New annual premiums amounted to £770,000. At the end of the year Nascent had 62 sales people under contract. As stated at the half year, we are searching for a partner with appropriate knowledge and expertise in Italy to take a minority stake in the operation. Final Dividend Following an excellent year's results and subject to the approval of shareholders at the Annual General Meeting, a final dividend of 1.25p per share will be paid to shareholders on the register on 6th April 2001 making a total of 2.25p for the full year. This represents a 29% increase over 1999, when the total dividend was 1.75p per share. The Way Forward In my statement last year, I expressed the view that the internet, by making it possible to bring together information on the various products held by an individual client, provided the opportunity for us to achieve significant improvements in the productivity of the Partnership through expanding the range of products they were able to offer beyond those produced directly by our Group. I referred to the fact that we had introduced a Mortgage Advisory Service in the last quarter of 1999 and intended through joint venture to extend the range to include deposits and other services outside the traditional field of life assurance and investment Groups. This process has come to be known within the Group as 'the wheel', with the Partnership as the hub and the range of services they can offer the spokes. Since then, a number of these services have been introduced or announced. A Trust and Estate Planning service is now in place in association with two leading firms of solicitors and a Portfolio Management Service through two leading firms of stockbrokers. From 6th April we will, through the Partnership, be offering the complete range of Clerical Medical individual and Group Stakeholder-compliant pension plans alongside a new St. James's Place branded Pension Plan for higher net worth individuals offering investments in our normal multi-manager range of investment funds. Shortly afterwards we will be adding the Swiss Life range of Group Employee Benefit plans (Group Life, Group PHI and Group Critical Illness). Our ability to offer these Clerical Medical and Swiss Life products flows from the recent relaxations of the polarisation regime proposed by the Financial Services Authority. In the coming months, we will be launching our extensive range of banking services under the name St. James's Place Bank, under a joint venture with the Intelligent Finance division of the Halifax, which will offer Partners' clients a home for their deposit funds (and other banking needs) alongside our existing equity and fixed interest based funds. Like the other services described above, the banking services will produce some additional income for both the Partners and SJPC. More fundamentally, by putting Partners in a position to offer a full range of private banking services to their clients, we believe that this will lead to improved growth prospects for our core business, by increasing both the productivity of our existing Partners and the flow of high quality advisers to the Partnership. It will not have escaped the attention of shareholders that few weeks pass by without yet another bank announcing the creation of a private banking division. We do not believe that these initiatives offer a serious threat to our plans because there is an essential difference between most of these banks and us. They start with a mere transactional relationship with a customer and then introduce the customer to an individual within the private banking division with whom they hope the customer will develop a trusting personal advisory relationship. We start with a trusting personal advisory relationship between the client and the Partner, who then makes the much less difficult introduction to the banking relationship. We remain committed to making our products available solely on an advisory basis through members of the Partnership and regard the internet solely as a tool for improving the service the Partners can provide to their clients. During the year, we introduced a service enabling clients to examine on the internet details and current valuations relating to each of their life, pensions and onshore and offshore investments within the Group. Similar facilities will be available for products of the St. James's Place Bank. The vision of the Group is that the St. James's Place Partnership should be recognised as the most professional and trusted provider of advice in personal financial services in the United Kingdom. While others can seek to replicate our products and services, we do not believe that they can replicate the Partnership. Sir Mark Weinberg 19 February 2001 Consolidated Profit and Loss account LONG-TERM BUSINESS Technical Account Restated Year Year Ended Ended 31 31 December December 2000 1999 £'Million £'Million Earned premiums, net of reinsurance Gross premiums written 1,135.0 752.2 Outwards reinsurance premiums (22.9) (27.0) 1,112.1 725.2 Increase in value of long-term 53.5 60.5 business in force Investment income 560.2 247.7 Unrealised gains on investments - 434.3 Other technical income 8.0 9.0 1,733.8 1,476.7 Claims incurred, net of reinsurance Claims paid - Gross amount (236.6) (165.9) - Reinsurers' share 18.6 13.2 (218.0) (152.7) Change in the provision for claims - Gross amount (5.1) (2.8) - Reinsurers' share 1.7 0.1 (3.4) (2.7) (221.4) (155.4) Changes in other technical provisions, net of reinsurance Long-term business provision - Gross amount 2.2 (31.8) - Reinsurers' share (1.3) 5.8 0.9 (26.0) Technical provisions for linked (796.7) (1,095.9) liabilities Net operating expenses (161.3) (129.2) Investment expenses and charges (12.7) (10.1) Unrealised losses on investments (452.4) - Tax attributable to the (48.7) (23.1) long-term business (1,692.3) (1,439.7) Balance on the long-term business technical account 41.5 37.0 The notes and information following form part of this announcement. Consolidated profit and loss account non-technical Account Year Year Ended Ended 31 31 December December 2000 1999 Notes £' Million £' Million Balance on the long-term business technical account 41.5 37.0 Tax credit attributable to balance on long-term business technical account 16.0 16.0 Shareholders' profit from 57.5 53.0 long-term business Investment income Income from participating interests - continuing 11 16.4 27.4 - discontinued - 5.8 Income from other investments 7.3 4.3 Investment expenses and charges (0.5) (1.8) Other income 25.5 27.0 Other charges (23.5) (22.5) Operating profit Continuing 82.7 87.4 Discontinued - 5.8 82.7 93.2 Disposal of participating interest - 81.6 (discontinued) Profit on ordinary activities 4 82.7 174.8 before tax Tax on profit on ordinary 4 activities (24.9) (49.3) Profit on ordinary activities after tax, being profit for the financial year 57.8 125.5 Dividends 9 (9.5) (7.4) Retained profit for the financial 48.3 118.1 year Pence Pence Dividend per share 9 2.25 1.75 Earnings per share 10 13.7 30.0 Adjusted earnings per share 10 16.3 13.9 Fully diluted earning per share 10 13.1 28.6 Fully diluted adjusted earnings 10 15.7 13.2 per share In arriving at operating profit, unless otherwise stated, all amounts are in respect of continuing operations. Consolidated Statement of Total Recognised Gains and Losses Year Ended Year Ended 31 December 31 December 2000 1999 £' Million £' Million Profit for the financial year 57.8 125.5 Currency translation movements - 0.6 Total gains recognised during the year 57.8 126.1 Consolidated Balance Sheet at 31 December 2000 1999 Notes £'Million £'Million ASSETS Investments Land and buildings 1.2 1.1 Investments in participating interests 11 96.9 85.4 Other financial investments Shares and other variable yield 12 6.6 - securities Debt securities and other fixed income 37.3 23.0 securities Deposits with credit institutions 108.4 121.1 Deposits with ceding undertakings - 3.8 250.4 234.4 Value of long-term business in force 8 221.7 184.4 Assets held to cover linked liabilities 4,276.4 3,479.7 Reinsurers' share of technical provisions Long-term business provision 16.7 18.0 Claims outstanding 3.4 1.7 20.1 19.7 Debtors Debtors arising out of direct insurance operations 8.4 4.0 - due from policyholders Other debtors 55.9 42.6 64.3 46.6 Other assets Tangible assets 6.4 6.0 Cash at bank and in hand 51.4 47.3 57.8 53.3 Prepayments and accrued income Deferred acquisition costs 37.3 30.6 Other prepayments and accrued income 41.4 21.0 78.7 51.6 Total assets 4,969.4 4,069.7 Consolidated Balance Sheet at 31 December 2000 1999 Notes £'Million £' Million LIABILITIES Capital and reserves Called up share capital 13 63.8 63.3 Share premium account 0.5 0.1 Shares to be issued 0.6 1.0 Other reserves 162.0 124.7 Profit and loss account 232.0 221.0 Equity shareholders' funds 458.9 410.1 Technical provisions Long-term business provision 73.2 75.4 Claims outstanding 12.6 7.5 85.8 82.9 Technical provisions for linked 4,276.4 3,479.7 liabilities Provisions for other risks and charges 16.9 9.2 Creditors Creditors arising out of direct 10.8 8.1 insurance operations Amounts owed to credit institutions 10.8 11.7 Other creditors including taxation and 83.4 48.4 social security Proposed dividend 5.3 4.2 110.3 72.4 Accruals and deferred income 21.1 15.4 Total liabilities 4,969.4 4,069.7 Consolidated cash flow statement (EXCLUDING policyholder funds) Year Year Ended Ended 31 31 December December 2000 1999 Notes £' Million £' Million Shareholders' net cash inflow - (21.7) from long-term business Other operating cashflows (3.2) 10.7 attributable to shareholders Net cash outflow from 17 (3.2) (11.0) operating activities Dividends received from - 2.2 participating interests Interest Interest received 6.9 4.3 Interest paid (0.5) (1.8) 6.4 2.5 Taxation Corporation tax paid (17.8) (8.6) Capital expenditure Purchase of tangible (3.8) (3.9) fixed assets Sale of fixed assets 0.5 0.3 (3.3) (3.6) Acquisitions and disposals Disposal of - 102.3 participating interest Equity dividends paid (8.4) (6.3) Financing Repayment of loan - (6.4) Issue of ordinary share capital 0.5 0.1 0.5 (6.3) Net cash (outflow)/inflow (25.8) 71.2 Net cash (outflow)/inflow was applied/invested as follows: (Decrease)/increase in cash holdings (0.2) 20.3 Net portfolio investments (Withdrawals)/deposits (25.6) 50.9 with credit institutions Net (application)/ (25.8) 71.2 investment of cash flows Notes to the Announcement 1. Basis of Preparation The consolidated financial statements have been prepared in accordance with the provisions of section 255A of, and the special provisions relating to insurance groups of Schedule 9A to, the Companies Act 1985 and with applicable accounting standards. The financial statements are prepared in accordance with the Association of British Insurers' Statement of Recommended Practice on Accounting for Insurance Business ('ABI SORP') dated December 1998. The ABI SORP, however, does not address the recognition of the present value of in-force long-term assurance business, which has been included as an additional asset in these financial statements. The directors consider this provides a more appropriate presentation for the shareholders. 2. Long-term Business Profit Recognition Profits from the long-term assurance business are determined on the embedded value basis which recognises as profit the statutory surplus arising in the period, determined by the subsidiary companies' Appointed Actuaries following their annual investigations, together with the change in the present value of future surpluses expected to emerge from the business currently in force. The embedded valuation is determined in consultation with independent actuaries on an annual basis. The statutory surplus arising in the period is required to be adjusted under the Companies Act 1985 (Insurance Companies Accounts) Regulations 1993 for certain items, including the deferral of acquisition costs and movements in certain reserves, to give the modified statutory surplus, which is recognised in the long-term business technical account. The excess of the embedded value profit arising in the period over the modified statutory surplus is reported separately within the long-term business technical account as the 'increase in value of long-term business in force'. The value of long-term business in force included in the balance sheet is net of taxation and includes both acquired and self-generated business. The embedded value profits are initially calculated at the post-tax level and are grossed up on the basis that they will be taxed in the UK at the underlying rate of tax. The excess or deficit of the post tax embedded value profit or loss over the modified statutory surplus arising in the period is transferred to non-distributable reserves and is treated as non-distributable until such time as it emerges as part of the surplus arising during subsequent years. 3. Other Accounting Policies The other accounting policies used by the group in preparing the results are also consistent with those applied in preparing statutory accounts for the year ended 31 December 1999 with the exception of the adoption of the accounting standard FRS 16 'Current Tax'. In accordance with FRS 16, franked investment income is now included net of the associated tax credits previously included in taxation. The comparative figures of the Technical Account have accordingly been restated. 4. Segmental Analysis Profit on ordinary activities Year Ended Year Ended 31 December 31 December 2000 1999 £' Million £' Million St. James's Place Group Life business (before 66.4 53.0 exceptionals) Unit trust business 6.7 5.7 Other 6.4 (0.5) Release of provision against - 1.8 litigation 79.5 60.0 Participating interests LAHC 16.4 27.4 GAM - 5.8 16.4 33.2 Profit before exceptionals 95.9 93.2 Exceptionals - Halifax transaction and (13.2) - re-branding costs - Disposal of GAM - 81.6 (13.2) 81.6 Profit on ordinary 82.7 174.8 activities before taxation Taxation Life business (18.0) (16.0) Unit trust business (2.0) (1.7) Other (1.9) 0.3 LAHC (4.9) (8.3) GAM - (0.9) Exceptionals - Halifax transaction and 1.9 - re-branding costs - Disposal of GAM - (22.7) (24.9) (49.3) Profit on ordinary 57.8 125.5 activities after taxation Included within 'Other' is a foreign exchange gain of £1.2 m arising from the proceeds on the 1999 sale of GAM held in an escrow account. The net asset value per share at 31 December 2000, calculated on the number of shares in issue at that date, was 107.9 pence (1999: 97.2 pence). 5. Gross New Business Year Year Ended Ended 31 31 December December 2000 1999 £' Million £' Million Regular Premiums (annualised) Life 25.5 27.1 Pension 36.4 34.3 61.9 61.4 Single Premiums Life 779.0 477.6 Pension 133.1 82.1 Unit trust 341.6 154.0 1,253.7 713.7 Total New Business Life 103.4 74.9 Pension 49.7 42.5 Unit trust 34.2 15.4 187.3 132.8 Included in the above figures are total new business figures of £2.1 million (1999: £2.2 million) arising from the group's new Italian operation with Nascent in the current year and from previous international distribution networks in the prior year. Halifax's offer for 60% of SJPC gave shareholders the opportunity to take loan notes rather than cash. During the last quarter of 2000 an offer was made to loan note holders to convert their holdings to unit trusts. The resulting unit trust sales of £23.4 million have been excluded from the unit trust figures above. 6. St. James's Place Partnership Members of the St. James's Place Partnership numbered 1,050 at 31 December 2000 (31 December 1999: 972), representing growth of 8%. 7. St. James's Place Group Assets Under Management Assets under management for St. James's Place Group totalled £5.7 billion at 31 December 2000 (31 December 1999: £4.6 billion), representing growth of 24%. 8. Embedded Value Assumptions The principal economic assumptions used for both 1999 and 2000 were as follows: Risk discount rate 10.0% Future investment returns: - Fixed interest 6.0% - Unit-linked funds: - Capital growth 5.75% - Dividend income 2.5% - Total 8.25% Expense inflation 5.0% Indexation of capital gains 3.5% The risk discount rate is used to discount projected future cash flows from the business in force to a present value. The rate represents the best estimate of the long term rate of return on Government bonds together with a margin for risk. Future investment returns represent the best estimate of the long term rates of return that will be achieved. They have been determined having regard to past, current and expected future experience. The expense inflation and indexation of capital gains assumptions represent best estimates of the long term rates, consistent with the assumptions for investment returns. All assets have been valued at market value. For the purposes of projecting future unit growth in the embedded value calculation, unit linked funds have been valued on a smoothed basis. The value of new business has been calculated using actual acquisition costs. Mortality and morbidity assumptions have been set by reference to the company's own experience, published industry data and the rates charged by the company's reassurers. Lapse experience is derived where possible from the company's own experience, or otherwise from external industry experience. Lapse rates for pension policies have been adjusted to take into account a one-off increase in off rates following the introduction of Stakeholder pensions. In projecting future surpluses allowance has been made for the target surplus being the cost of maintaining a statutory solvency margin on the business in force. Maintenance expenses have been set to be in line with the costs charged by the company's third party administrators, together with an allowance for the company's own maintenance costs. All experience assumptions are reviewed annually. 9. Dividends Year Year Year Year Ended Ended Ended Ended 31 31 31 31 December December December December 2000 1999 2000 1999 Pence Pence per share per share £' Million £' Million Interim dividend 1.00 0.75 4.2 3.2 paid Final dividend 1.25 1.00 5.3 4.2 proposed 2.25 1.75 9.5 7.4 The proposed dividend of 1.25p per share is payable on 9 May 2001 to those shareholders on the register on 6 April 2001. 10. Earnings per Share Year Ended Year Ended 31 December 31 December 2000 1999 Pence per Pence per share share Profits on ordinary activities 13.7 30.0 after taxation Adjustments Halifax exceptional costs 2.6 - Disposal of GAM - (14.1) Other (2.0) Adjusted earnings 16.3 13.9 Fully diluted earnings 13.1 28.6 Fully diluted adjusted earnings 15.7 13.2 The above table sets out earnings per share, adjusted earnings per share and their fully diluted counterparts. Adjusted earnings per share figures have been presented to eliminate exceptional items. The earnings per share has been calculated using the profit on ordinary activities after the tax of £57.8 million (1999: £125.5 million) and a weighted average number of shares in issue for the year ended 31 December 2000 of 423.2 million (1999: 418.1 million). The adjusted earnings per share has been calculated using an adjusted profit after tax of £69.1 million (1999: £57.8 million). The fully diluted earnings per share has been calculated using 441.3 million shares (1999: 438.3 million) which takes account of the dilutive effect of options over 58.3 millions shares (1999: 40.4 million). 11. LAHC £' Million Carrying Value At 1 January 2000 85.4 Share of pre-tax results in 16.4 year Share of tax in year (4.9) As at 31 December 2000 96.9 The investment is held indirectly by the company and has been dealt with in the consolidated accounts as a participating interest and equity accounted on the basis of management accounts covering the year ended 31 December 2000. On this basis, the group holds an investment of 22.6% (1999: 22.8%) in the 1 pence shares of Life Assurance Holding Corporation Limited ('LAHC') at 31 December 2000. LAHC is registered in England and Wales and operates principally in the United Kingdom. Year Ended Year Ended Year Ended Year Ended 31 31 31 31 December December December December 2000 2000 1999 1999 LAHC SJPC Share LAHC SJPC Share £'Million £'Million £'Million £'Million Profit before tax 72.7 16.4 122.6 27.4 Profit after tax 50.9 11.5 85.5 19.1 Capital and 428.5 96.9 377.6 85.4 reserves 12. Nascent Group SA On 25 July 2000 it was announced that SJPC intended to enter into a venture with Securitas Capital Partners LLP. Completion of this transaction occurred on 5 December 2000 resulting in SJPC acquiring a holding in Nascent Group SA (' Nascent') for a value of £6.6m. Due to the terms of the Shareholders' Agreement, SJPC considers its holding in Nascent to be an investment. Nascent is a holding company incorporated in Luxembourg with the objective of establishing a pan-European financial services business. The classes of share and the percentage held in Nascent are as detailed below. Class of share No % Ordinary shares of Euro1.25* 41,027 22.7 12.5% cumulative redeemable preference shares of Euro1.25 64,464 33.3 *SJPC also has voting power over 17,758 ordinary shares in an employee trust giving it voting control of 32.6% of the ordinary shares. 13. Share Capital Authorised Number Nominal value £' Million Ordinary shares at 15p each At 1 January 2000 and 31 December 2000 605,000,000 90.8 In addition, the authorised share capital includes one Special Rights Redeemable Preference Share of £1 to the J. Rothschild Name Company Limited, an entity formed to protect the use of the name 'J. Rothschild'. Issued, Allotted and Fully Paid Ordinary shares at 15p each Number Nominal value £' Million At 1 January 2000 421,727,467 63.3 Exercise of options 3,679,895 0.5 At 31 December 2000 425,407,362 63.8 In addition, the company has issued one Special Rights redeemable Preference Share of £1. This share may be redeemed at par by the Shareholder at any time by giving notice to the company. The holder of the Special Rights Redeemable Preference Share is entitled to repayment of the capital paid up on the Special Share in priority to any repayment of capital to any other member, but does not have the right to participate in the profits of the Company. The holder of the Special Share is entitled to receive notice of, and to attend and speak at general meetings, but is not entitled to vote at general meetings except on resolutions changing the names of any subsidiary so as to exclude the words J. Rothschild. 14. Share Options On the acquisition of the remaining share capital of St. James's Place Holdings plc (formerly J. Rothschild Assurance Holdings plc ('JRAH')) in 1997, SJPC agreed to issue further shares, up to a maximum of 25.8 million, to satisfy the exercise of options held over JRAH shares at the time of acquisition. A reserve for shares to be issued was established in recognition of the commitment and 3.8 million shares have still to be issued from this reserve. During the year options over 23.2 million shares have been granted at a range of prices between £2.34 and £4.24. In addition, during June 2000 options over some 5.8 million SJPC shares, previously issued to members of the St. James's Place Partnership and a small number of employees at prices ranging between £ 2.50 and £3.20 were surrendered and new options over the same number of shares were issued to the relevant individuals at £2.49. On 2 June 2000, Halifax Group plc acquired 60% of the SJPC share capital. Under the terms of the existing share option schemes at that date, on completion of the acquisition, those SJPC share options became exercisable. SJPC share option holders were given the opportunity to cancel their existing share options in consideration for a grant of replacement options (over SJPC shares) on similar terms to the existing SJPC share options. These replacement options have been issued over the same number of SJPC share as the previous SJPC share options (existing prior to 2 June 2000) and at the same option price. Options outstanding under the various share option schemes at 31 December 2000 now amount to 58.3 million shares. Of these, 48.1 million are under option to Partners of the St. James's Place Partnership, 8.7 million are under option to executives and senior management and 1.5 million are under option through the former SAYE scheme. These are exercisable on a range of future dates. 15. Reserves £' Million At 1 January 2000 346.8 Profit for the year 57.8 Dividends (9.5) At 31 December 2000 395.1 16. Compensation for Pension Policyholders In common with many other UK life companies, the group has liabilities in respect of pension transfer and opt-out business, and also freestanding additional voluntary contribution business. The accounts include both a long-term business provision for rectification and review costs and also an allowance for recoveries from professional indemnity insurers. The net effect of these is to include a liability of £6.9 million at 31 December 2000 (1999: £12.5 million). Taking into account payments during the year, this represents a net reduction in pre-tax liabilities of £0.3 million. 17. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities Year Year Ended Ended 31 31 December December 2000 1999 £' Million £' Million Operating profit before tax 82.7 93.2 Continuing activities Interest paid 0.5 1.8 Interest received (6.9) (4.3) Profits relating to long-term business (57.5) (53.0) Transfer of long-term business fund - (21.7) Profit on sale of fixed assets (0.1) - Depreciation 2.9 2.1 Share of profit of associated undertakings (16.4) (27.4) Increase in debtors and prepayments (11.9) (6.1) Increase in creditors 20.6 5.2 Increase in creditor to long-term business - 5.0 fund Increase in debtor to long-term business (17.1) - fund Discontinued activities Share of profit of participating interest - (5.8) Net cash outflow from operating activities (3.2) (11.0) 18. Movement in Opening and Closing Portfolio Investments, Net of Financing Year Ended 31 December 2000 £' Million Decrease in cash holdings Repayment of loan (0.2) Portfolio investments: deposits with credit (25.6) institutions Total movement in portfolio investments, net of financing (25.8) Portfolio investments, net of financing at (78.2) 1 January 2000 86.0 Portfolio investments, net of financing at 31 December 2000 60.2 19. Unaudited Statements The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 1999 or 2000. Statutory accounts for 1999 have been delivered to the registrar of companies, and those for 2000 will be delivered following the company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1995. 20. Annual Report The company's annual report and accounts for the year ended 31 December 2000 is expected to be posted to the shareholders by 4 April 2001. Copies of both this announcement and the annual report and accounts will be available to the public at the company's registered office at J. Rothschild House, Dollar Street, Cirencester GL7 2AQ and through the company's website at www.sjpc.co.uk. Supplementary Information on Group Life and Unit Trust Embedded Values The following information is provided for the combined 'embedded value' of the group's life and unit trust business. Year Ended Year Ended 31 December 2000 31 December 1999 ________________________ ________________________ Post tax profits £'Million £'Million £'Million £'Million Profit from new business (at point of sale) Life 26.6 21.8 Unit trust 13.1 39.7 5.4 27.2 ___________ ___________ Unwind of discount rate Life 23.6 18.8 Unit trust 5.0 28.6 4.2 23.0 ___________ ___________ Other Life (1.7) 3.3 Unit trust 11.1 9.4 0.6 3.9 Basic operating profit after taxation Life 48.5 43.9 Unit trust 29.2 77.7 10.2 54.1 Exceptionals Life (7.0) (6.9) Unit trust - (7.0) - (6.9) ___________ ___________ Profit after taxation Life 41.5 37.0 Unit trust 29.2 10.2 ___________ ___________ __________ __________ 70.7 47.2 ___________ ___________ Notes 1. The figures show the earnings for the group's life and unit trust businesses accounted for on an embedded value basis. 2. The figures for unit trusts include the earnings on a conventional accounting basis of £4.7 million after taxation (1999: £4.0 million). 3. The embedded value profit before taxation for unit trust business was £ 41.7 million (1999: £14.6 million). 4. Halifax's offer for 60% of SJPC gave shareholders the opportunity to take loan notes rather than cash. During the last quarter of 2000 an offer was made to loan note holders to convert their holdings to unit trusts. The value of the resulting unit trust sales of £24.3 million has been included in the profit from new business at point of sale shown above. This contributed £0.9 million to the value shown. 5. Inclusion of the unit trust value of in force business would increase group net assets by £68.9 million (1999: £44.4 million). This would increase the net assets per share from 107.9 pence to 124.1 pence (see note 4 of the announcement). 6. Unit trust funds under management amounted to £1.4 billion at 31 December 2000 (1999: £1.1 billion). 7. The exceptional items in 2000 include transaction and re-branding costs associated with the acquisition of SJPC shares by Halifax Group plc.

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