Interim Results

St. James's Place Capital PLC 24 July 2002 INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2002 St. James's Place Capital plc ('SJPC'), the wealth management group, today announces its new business and financial results for the half year ended 30 June 2002. The text of the announcement is attached: Enquiries: Sir Mark Weinberg, Chairman Tel: 020 7514 1985 Martin Moule, Finance Director Tel: 020 7514 1985 Nitya Bolam Tel: 020 7404 5959 Brunswick INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2002 FUNDS UNDER MANAGEMENT £6.6 BILLION UP 5% St. James's Place Capital plc ('SJPC'), the wealth management group, today announces its new business and financial results for the half year ended 30 June 2002. Key points include: • Profits from core business £ 39.5 million (down 31%) • New business down 18% compared with first half of 2001 (see note 3 of Notes to Editors) • New business for second quarter 11% higher than first quarter • New sums assured of £ 2.2 billion up 22% compared with first half of 2001 • Size of partnership up 3% since the start of the year • Funds under management at £ 6.6 billion up 5% since the start of the year (8% over twelve months) • Fees from wealth management £ 4.7 million compared with £5.0 million for full year 2001, rising 47% from first to second quarter • Dividend maintained at 1.25p per share Sir Mark Weinberg, Chairman, commented: 'While it is understandable that some people have chosen to hold back on committing their money to new investments in the very unsettled conditions of the past six months, high quality advice on financial planning is at least as important in difficult times as in more normal circumstances. We believe as strongly as ever in our advice based business model. We continue to make excellent progress in establishing St. James's Place as a leading wealth management group and are well positioned to benefit when market conditions improve because of the quality and experience of the Partnership and our superior investment process.' 2002 SUMMARY INTERIM RESULTS (unaudited) Restated 6 Months 6 Months Ended Ended 30 June 2002 30 June 2001 St. James's Place Group (excluding LAHC and Nascent) ACHIEVED PRE-TAX PROFITS £'Million £'Million Life business 29.5 39.4 Unit trusts 10.0 15.2 Other - 2.3 Total 39.5 56.9 St. James's Place Capital MODIFIED STATUTORY SOLVENCY BASIS Consolidated group (loss)/profit before tax £(28.7m) £5.1m ACHIEVED PROFITS BASIS Consolidated group profit before tax £13.8m £54.9m Earnings per share 1.1p 9.5p Dividend per share 1.25p 1.25p Net asset per share 133.4p 126.9p New Business New Business (RP + 1/10th SP) - see note 3 of Notes to Editors £82.9m £101.2m New sums assured £2.2 billion £1.8 billion St. James's Place Partnership (number of Partners) 1,155 1,092 Funds under management £6.6 billion £6.1 billion Wealth management - gross fees received £4.7m £1.4m ST. JAMES'S PLACE GROUP NEW BUSINESS FIGURES FOR THE SIX MONTHS TO 30 JUNE 2002 Unaudited Unaudited 3 Months to 6 Months to 30 June 2002 30 June 2002 2002 2001 Change 2002 2001 Change £'m £'m % £'m £'m % New Regular Premiums Investment 0.1 0.4 (75%) 0.2 0.9 (78%) Pensions 8.0 15.4 (48%) 15.3 26.8 (43%) Protection 5.3 5.7 (7%) 9.7 10.3 (6%) 13.4 21.5 (38%) 25.2 38.0 (34%) New Single Premiums Investment 160.8 212.5 (24%) 306.9 408.3 (25%) Pensions 48.4 51.3 (6%) 113.4 93.0 22% 209.2 263.8 (21%) 420.3 501.3 (16%) Unit Trust Sales (including PEPs and 94.2 103.7 (9%) 157.2 187.5 (16%) ISAs) 3 Months to 6 Months to 30 June 2002 30 June 2002 Total New Business (RP + 1/10th SP) 2002 2001 Change 2002 2001 Change £'m £'m % £'m £'m % Investment 25.6 32.0 (20%) 46.6 60.5 (23%) Pensions 12.8 20.5 (38%) 26.6 36.1 (26%) Protection 5.3 5.7 (7%) 9.7 10.3 (6%) Total 43.7 58.2 (25%) 82.9 106.9 (22%) Revised Total 43.7 52.5 (17%) 82.9 101.2 (18%) (see note 3) ST. JAMES'S PLACE GROUP ADDITIONAL WEALTH MANAGEMENT SERVICES KEY BUSINESS HIGHLIGHTS FOR THE SIX MONTHS TO 30 JUNE 2002 Unaudited St. James's Place Bank Number of facilities 11,387* Number of new accounts 4,180 New mortgage advances £374.4m New credit balances £111.2m Panel Mortgages (Panel of providers excluding St. James 's Place Bank) New Mortgage advances £580.9m Portfolio Management Services (Laing and Cruickshank, Quilters) New Portfolios £31.7m Employee Benefits (Swiss Life) Sums Assured: Group life £36.8m Critical illness £3.9m PHI £15.9m p.a. Trust and Estate Planning Services (Simmons and Simmons, Halliwell Landau) Number of cases 208 Gross fees generated from additional wealth management services £4.7m *Number of facilities denotes the number of individual mortgages, personal loans, credit cards, current accounts and savings accounts, where one client may hold a number of facilities. The average number of facilities per client is 2.59. ST. JAMES'S PLACE GROUP NEW BUSINESS FIGURES FOR THE SIX MONTHS TO 30 JUNE 2002 Notes to Editors 1. 'Total New Business' is calculated following the convention in the life assurance industry, by adding together new regular premiums and one tenth of single premiums. 2. Sales of Stakeholder pensions by St. James 's Place Partnership have been included in the reported figures. These have been included under ' pensions' and amount to £4.9 million regular premiums (2001: £1.2 million) and £11.8 million single premiums (2001: £0.3 million). This equates to £6.1 million New Business premiums. 3. During the second quarter of 2001 the tax treatment of self employed pension plans changed so that premiums were paid net of tax relief rather than gross. SJP Group offered policyholders the facility to increase contributions so their net contribution remained unchanged. The overwhelming proportion of policyholders left their existing direct debits in force. This generated a one off increase in annual premiums of £5.7 million per annum. CHAIRMAN'S STATEMENT Introduction Over recent years, St. James's Place has positioned itself as a leading provider of a wide range of services in the evolving wealth management market. Its two distinct features are its commitment to making its products and services available only through the high quality, experienced members of the St. James's Place Partnership and its superior multi manager investment process. These features are as important as ever in the difficult market conditions through which we are living. Financials Many shareholders will be aware of our recent statement on financial reporting. Full details of this and of the financial results are given in the Financial Commentary which follows this statement and the notes to the accounts. The Directors remain of the view that the most meaningful measurement of the Company 's progress is given by the Supplementary Information on Achieved Profits (the version of embedded value recommended by the Association of British Insurers). In the context of current concerns about the financial health of some UK life assurance companies, we would like to emphasise 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. The St. James's Place Partnership and new business With continuing adverse market conditions, new business for the half-year was 18% lower than for the first half of last year, allowing for a one-off boost to last year's figures flowing from a change in the tax treatment of pension contributions (see note 3 of Notes to Editors). Some comfort may be drawn from the fact that business for the second quarter was 11% higher than for the first quarter. The size of the Partnership has grown during the half-year by 3% to 1155, which is 6% higher than at mid-year 2001. A higher proportion of people joining the Partnership were previously IFAs than has been the case in the past, and this trend is likely to increase once the position on depolarisation and multi-ties becomes clearer. Additional Wealth Management Services During 2001, we introduced a number of additional services through other providers enabling members of the St. James 's Place Partnership to offer a broadly based wealth management service, helping them in both acquiring new clients and securing more business from existing clients. There has been very healthy growth in this business. Gross fees generated from these services in the half-year amounted to £4.7 million, compared with £5 million for the whole of 2001. These fees increased by 47% from £ 1.9 million for the first quarter to £2.8 million for the second quarter. The implementation of the proposals on depolarisation will make it possible for us to increase both the range and competitiveness of the core products available to the Partnership. This will enable us to continue to manufacture the products on which we wish to focus on while marketing the products of other providers where appropriate. Investment Management Despite the adverse stock market conditions, funds under management have increased since the beginning of the year by 5% to £6.6 billion, reflecting both the favourable investment performance of our funds and the low rate of withdrawals. Money spread equally between our Pension Managed Funds outperformed the average Balance Managed Fund in the market by 61.3% over 10 years, 10.6% over 5 years and 5.3% over 1 year to 30th June 2002 and outperformed the FTSE All Share Index over all these periods. The recently published CAPS survey of pension fund performance showed that three of our five Managed Funds were in 1st, 2nd and 4th positions for the first half of this year out of the 86 funds covered by the survey. These pleasing results reflect the continuing success of our unique approach to investment management. The Sandler Report - and the way ahead The changes that will flow from the proposals in the Sandler Report and in the FSA 's Consultation Paper on polarisation will, we believe, lead to the marketing of investments becoming polarised in a quite different sense. On the one hand, in order to close the 'savings gap', there will be low risk low cost (capped at 1% per annum), index-tracking products that can be sold - no doubt largely by the retail banks and one or two large life companies specialising in the mass market - without any advice. On the other hand, there will be the Wealth Management businesses to which people with larger amounts to invest will look for advice on their more complicated financial affairs and will expect to pay for this added value, whether in the form of fees or higher charges. Sandler was widely reported as saying that low cost index tracking products provided better value than active management, but these reports were not put in context. After pointing out that investing in the best performing unit trusts would have produced about 120% higher growth over the past 10 years than the average unit trust while investing in the lowest charging trusts would have boosted growth by only 10%, the Report went on to say: 'In other words, if a fund is a truly superior performer, it will still be well worth investing in it even if its charges are above average. The difficulty is that taking advantage of this is only possible if the best performing funds can be identified in advance. Research suggests strongly that raw data on past performance alone is no guide to future performance. Identification of likely future performance requires highly sophisticated and time intensive analysis of performance data and fund managers' styles. Only a tiny minority of consumers have access to this sort of analysis. Yet without doing so, simply looking at past performance is of minimal value. ' It is precisely this service that is made available to clients of the St. James 's Place Partnership through our system of using external managers for our funds, in association with independent investment consultants Stamford Associates, who indeed undertake highly sophisticated and time intensive analysis of performance data and fund managers' styles in selecting, monitoring and (when necessary) changing our managers. The advice required by more affluent clients goes far beyond the issue of selecting superior investment managers, extending to such elements as estate planning, trusts, settlements and offshore investment, deciding on the appropriate level and form of life and health insurance and pensions, and the many other specialised financial issues on which even experienced business people lack - and realistically always will lack - expertise. It is this wide range of services that the members of the Partnership, through our own products and the products of the other organisations participating in our Wealth Management Service, make available to their clients. We continue to see increasing interest in our approach from high net worth individuals and families who have until now tended to use only the services of traditional private banks. We also intend to undertake a major extension of the marketing of our multi-manager investment programme for medium sized pension funds in the coming year. While it is understandable that some people have, in the face of the very unsettled conditions of the past six months, chosen to hold back on committing their money to new investments, the need for financial planning is at least as important in difficult times as in more normal circumstances. We remain confident that the strength and experience of the Partnership will enable us to continue to achieve our 15 to 20% growth target over the medium to longer term. Dividend The Board has resolved to pay an interim dividend of 1.25p a share in respect of the six months to June 2002 (2001: 1.25p per share). The dividend will be paid on 2nd September 2002 to those on the register at close of business on 2nd August 2002. Sir Mark Weinberg 24th July 2002 FINANCIAL COMMENTARY On the 11th July we announced that SJPC in line with other quoted life companies will now present its accounts in a different way. Life assurance differs from most other businesses, in that heavy expenses are incurred at the sale of a product with the cash flow benefits flowing from it emerging over a long period in the future. This complicates the reporting of life companies' financial results and to overcome this, life assurance accounts are usually presented in one of two ways: i) the statutory basis (often called the Modified Statutory Solvency Basis or MSSB) which highlights the solvency of the life company from the regulators point of view and takes no account of the likely benefits from future cash flows. ii) the Achieved Profits (or embedded value) basis which brings into account the value of those future cash flows. In the past we have - like many quoted groups owning life assurance companies - presented our accounts on an embedded value basis, with the statutory figures shown with the body of the accounts. It has now become established practice to present the accounts themselves on the statutory basis and to show the impact of future profits from in force business in Supplementary Information on Achieved Profits (which is the version of embedded value recommended by the Association of British Insurers and produces very similar results to the embedded value basis previously used by us). Full details of the changes are given in the various notes to the accounts. Financial Results Life and Pension business: Profits on our life and pensions business fell from £39.4 million to £29.5 million on a pre-tax Achieved Profits basis. This reflects both the fall in new business referred to above, and also a £ 4.8 million negative investment variance. Unit trust business: A similar picture emerges on the unit trust side where profits fell from £ 15.2 million to £10 million on a similar pre-tax Achieved Profits basis. Again this reflects the fall in new business and a negative investment variance of £ 2.4 million. Critical Illness Experience In the full year we mentioned a provision of £ 12.5 million that had been put aside against future experience on critical illness plans. Although we have had only a limited amount of claims experience since the year end, initial indications suggest the claims experience for 2002 has returned to broadly that anticipated when the products were priced. We continue to monitor the experience closely. Investing in Systems to Improve Service and Efficiency In the Chairman's Statement for the full year 2001, reference was made to our plans to invest £ 6m developing an automated new business processing system and systems infrastructure. Following the publication of the FSA paper on polarisation and the Sandler report, we have decided to defer the development of the systems until we can more clearly assess the requirements of the market place in the new environment. We remain committed to the development of appropriate systems when the picture is clearer. Non core investments LAHC: We have pointed out in earlier statements that, although our 22.7% holding in LAHC represents only a small element in our operations, its embedded value earnings have been volatile and have in turn had a disproportionate effect on SJPC 's total earnings. For the future, this holding will be included in our figures only on a statutory basis, which should have the effect of reducing its volatile impact on SJPC's earnings. On this basis, the holding (which is now carried at the equivalent of about 13p per SJPC share) represents about 8% of SJPC's market capitalisation at 30th June 2002. Full details of the change are shown on note 7 to the accounts. Earnings from the Company this year were adversely affected by the fall in value of LAHC 's holding in Aberdeen Asset Management shares. As a result LAHC's contribution was a £7.7 million pre-tax loss. Since its purchase of GAN in 1998, LAHC has suspended the payment of dividends, preferring to repay bank debt. The bank debt is anticipated to be repaid towards the end of 2004, at which point the company can recommence the payment of dividends. Current projections suggest SJPC's share of the dividend payments would amount to just over £ 10 million per annum. Nascent: At 30th June 2002 SJPC's 26% interest in the Italian joint venture Nascent represented 4p per SJPC share, or approximately 2% of the company's market capitalisation at that date. Particularly in today's unsettled market conditions, it is difficult to place a value on SJPC 's minority interests in this newly established venture and the Directors have decided to write down the value of SJPC's holdings in Nascent to nil, resulting in a one off write down of £ 18.0 million. It is not expected that any further amounts beyond that already committed will be invested in the company. We hope that these steps will help the market to focus on SJPC 's core business SUPPLEMENTARY INFORMATION TO INTERIM RESULTS ON AN ACHIEVED PROFIT BASIS ACHIEVED PROFIT RESULT (unaudited) The following supplementary information shows the result for the Group adopting an achieved profit basis for reporting life and unit trust business. SUMMARISED CONSOLIDATED PROFIT & LOSS ACCOUNT - ACHIEVED PROFIT BASIS FOR CORE BUSINESS Restated Restated 6 Months 6 Months 12 Months Ended Ended Ended 30 June 2002 30 June 2001 31 December 2001 £' Million £' Million £' Million Profit from core business Life business 29.5 39.4 78.7 Unit trust business 10.0 15.2 26.3 Other - 2.3 2.5 39.5 56.9 107.5 Profit/(losses) from other business LAHC (see note I) (7.7) (2.0) (9.3) Other investments (Nascent) (18.0) - - Achieved profit on ordinary activities before taxation 13.8 54.9 98.2 Taxation Life business (7.7) (10.1) (19.2) Unit trust business (3.0) (4.6) (7.9) Other (0.5) (0.4) 2.2 LAHC 2.3 0.6 2.8 (8.9) (14.5) (22.1) Achieved profit on ordinary activities after tax 4.9 40.4 76.1 Dividends (5.4) (5.3) (11.8) Retained achieved (loss) / profit for the financial year (0.5) 35.1 64.3 Pence Pence Pence Dividend per share 1.25 1.25 2.75 Earnings per share 1.1 9.5 17.8 Adjusted earnings per share * 5.3 9.5 17.8 Diluted earnings per share 1.1 8.9 16.8 Diluted adjusted earnings per share * 5.2 8.9 16.8 Net Asset per share 133.4 126.9 133.7 * Adjusted for Nascent write down CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Profit for the financial period 4.9 40.4 76.1 Share of participating interest - Aberdeen transaction - 19.5 19.5 Total recognised gains and losses relating to the period 4.9 59.9 95.6 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Opening shareholders' funds as previously reported 573.5 458.9 458.9 Prior year adjustment* - 27.6 27.6 Opening shareholders' funds restated 573.5 486.5 486.5 Profit for the financial period 4.9 40.4 76.1 Dividends (5.4) (5.3) (11.8) Retained (loss) / profit for the period (0.5) 35.1 64.3 Issue of share capital 0.8 0.5 3.2 Share of participating interest - Aberdeen transaction - 19.5 19.5 Net increase to shareholders' funds 0.3 55.1 87.0 Closing shareholders' funds 573.8 541.6 573.5 * Adjusted for the adoption of the achieved profits method of reporting and for the implementation of FRS19 'Deferred tax' CONSOLIDATED BALANCE SHEET - ACHIEVED PROFIT BASIS Restated Restated 30 June 30 June 31 December 2002 2001 2001 £' Million £' Million £' Million Investments Investments in participating interests 51.5 62.0 56.9 Land and buildings 1.2 1.1 1.3 Other financial investments 81.0 125.3 124.1 133.7 188.4 182.3 Value of long-term business in force - long-term insurance 328.1 260.1 302.8 - unit trusts 83.8 77.2 80.5 Assets held to cover linked liabilities 5,126.0 4,605.0 4,796.6 Reinsurers' share of technical provisions Long-term business provision 57.2 19.6 55.5 Claims outstanding 6.0 1.6 3.2 Debtors 76.3 79.8 69.4 Other assets Tangible assets 8.6 7.3 8.5 Cash and cash equivalents 53.1 59.1 47.4 Prepayments and accrued income 6.0 60.1 59.1 Deferred acquisition costs 56.2 45.1 55.0 Total assets 5,935.0 5,403.3 5,660.3 Technical provisions (123.4) (96.4) (120.9) Technical provisions for linked liabilities (5,126.0) (4,605.0) (4,796.6) Provisions for other risks and charges (19.6) (18.9) (19.8) Creditors Amounts owed to credit institutions (15.0) (14.1) (14.6) Amount due to reassurers (23.7) - (23.7) Other creditors (33.0) (107.0) (89.6) Proposed dividend (5.4) (5.3) (6.4) Accruals and deferred income (15.1) (15.0) (15.2) Total liabilities (5,361.2) (4,861.7) (5,086.8) Total net assets 573.8 541.6 573.5 Capital and reserves Share capital 64.5 64.0 64.3 Share premium 4.1 0.8 3.4 Shares to be issued 0.4 0.5 0.5 Other reserves 504.8 476.3 505.3 Equity shareholders' funds 573.8 541.6 573.5 NOTES TO THE ACHIEVED PROFIT RESULTS I. BASIS OF PREPARATION The supplementary information shows the Group 's results as measured on an achieved profit basis, which includes the results of the Group's long-term assurance business on a basis determined in accordance with the ABI Guidance ' Supplementary Reporting for long term assurance business (the achieved profits method)' issued in December 2001. A similar methodology has also been adopted in respect of the results of the Group 's unit trust business. The results of LAHC have been included on a modified statutory basis as opposed to an achieved profits basis as LAHC is a non core investment. The objective of the achieved profit basis is to provide shareholders with more realistic information on the financial position and performance of the Group than that provided by the modified statutory solvency basis. A reconciliation of the profit and net assets from that previously reported to that under the achieved profits basis is set out in note V. This information is supplementary to the financial statements. II. METHODOLOGY AND ASSUMPTIONS The achieved profits methodology recognises as profit the discounted value of the expected future statutory surpluses arising from the contracts in force at the period end ( ' the value of long term business in force ' ). These future surpluses are calculated by projecting future cash flows using realistic assumptions for each component of the cash flow. Actuarial assumptions for the mortality, morbidity and persistency experience of the contracts and the expenses and taxation expected to be incurred are based on recent experience and are reviewed annually. The future economic and investment conditions are based on the period end conditions and are likely to change from year to year. Economic Assumptions The principal economic assumptions used within the cash flows at 30 June 2002 are set out below. These assumptions are unchanged from 31 December 2001. They have been applied to all the life assurance business and the unit trust business. June 2002 and December 2001 June 2001 Risk discount rate (net of tax) 8.5% 8.25% Future investment returns: - Fixed Interest 5.0% 4.75% - Equities 7.5% 7.25% - Unit-linked funds: - Capital growth 4.5% 4.25% - Dividend income 2.5% 2.5% - Total 7.0% 6.75% Expense inflation 4.5% 4.25% Indexation of capital gains 2.5% 2.25% The risk discount rate is used to discount the projected future cash flows from the business in force to a present value. The rate is set by reference to the assumed future investment returns. The assumed future pre-tax returns on fixed interest securities are set by reference to the 15 year gilt yield index. 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 current valuation of 15 year index linked gilts. For the purposes of projecting future unit growth unit linked funds have been valued on a smoothed basis. Smoothing is achieved by 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 monthly expected rate of unit growth after tax and charges and time t is in monthly periods. The smoothing is equivalent to a short term change in the assumed investment return. Experience Assumptions The principal experience assumptions were derived as follows. All experience assumptions are reviewed annually. The persistency 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 rates following the introduction of Stakeholder pensions. Maintenance expenses have been set in line with the costs charged by the Company 's third party administrators, together with an allowance for the Company 's own maintenance 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. As described in note 17 of the Group's year end 2001 accounts, a provision of £12.5 million was set up within the cash flows to provide for adverse morbidity experience. An identical provision has been made as at 30 June 2002. Other items The value of new business has been established at the end of the reporting period. It has been calculated using actual acquisition costs. In projecting future surpluses allowance has been made for the cost of maintaining a statutory solvency margin on the business in force. Future taxation has been determined assuming a continuation of the current tax legislation. The achieved profits results are calculated on an after tax basis and are grossed up to the pre tax level for presentation in the profit and loss account. The rate of tax used was 30% except for the Irish life business, which was grossed up at 12.5%. III. COMPONENTS OF LIFE AND UNIT TRUST ACHIEVED PROFIT The pre-tax components of the achieved profit result for life and unit trust business are shown below. The basic operating achieved profit is determined using the assumptions as set out above in note II. This value is subsequently adjusted to take into account items considered to be short term variations to these longer term assumptions to show the total achieved pre and post tax profit for the respective periods. Life business Restated Restated 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2002 2001 2001 £'Million £'Million £'Million New business contribution 11.7 22.7 49.5 Profit from existing business Unwind of discount rate 18.6 14.9 29.9 Experience variances 2.7 1.0 2.3 Operating assumption changes - - 5.7 Investment income 1.3 0.8 2.0 Life operating achieved profit before tax 34.3 39.4 89.4 Investment return variances (4.8) - (9.8) Effect of economic assumption changes - - (0.9) Life achieved profit before tax 29.5 39.4 78.7 Attributed tax (7.7) (10.1) (19.2) Life achieved profit after tax 21.8 29.3 59.5 Unit trust business Restated Restated 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2002 2001 2001 £'Million £'Million £'Million New business contribution 8.3 9.8 18.7 Profit from existing business Unwind of discount rate 4.6 3.9 7.7 Experience variances (0.5) 0.3 1.4 Unit trust operating achieved profit before tax 12.4 14.0 27.8 Investment return variances (2.4) 1.2 (1.6) Effect of economic assumption changes - - 0.1 Unit trust achieved profit before tax 10.0 15.2 26.3 Attributed tax (3.0) (4.6) (7.9) Unit trust achieved profit after tax 7.0 10.6 18.4 Unit trust and life business combined Restated Restated 30 June 30 June 31 December 2002 2001 2001 £' Million £' Million £' Million New business contribution 20.0 32.5 68.2 Profit from existing business Unwind of discount rate 23.2 18.8 37.6 Experience variances 2.2 1.3 3.7 Operating assumption changes - - 5.7 Investment income 1.3 0.8 2.0 Operating achieved profit before tax 46.7 53.4 117.2 Investment return variances (7.2) 1.2 (11.4) Effect of economic assumption changes - - (0.8) Achieved profit before tax 39.5 54.6 105.0 Attributed tax (10.7) (14.7) (27.1) Achieved profit after tax 28.8 39.9 77.9 IV. SENSITIVITIES The table below shows the impact of changes in economic assumptions on the reported value of new business and value of long term business in force of changes to the risk discount rate, the assumed rate of long term investment return and market movements. Change in new business contribution Change in the post-tax value of long-term business in-force Pre-tax Post-tax £' Million £' Million £' Million Reported value at June 2002 20.0 14.7 411.9 Risk discount rate +1% (2.7) (1.9) (23.2) -1% 3.0 2.1 25.7 Investment return +1% 2.7 1.9 22.0 -1% (2.4) (1.7) (19.8) Market movement +10% - - 3.8 -10% - - (3.9) V. IMPACT OF CHANGES IN ACCOUNTING POLICY Profit Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Consolidated profits after taxation as previously reported - 35.2 59.2 Inclusion of movement in unit trust value of in-force business - 7.6 10.9 Adoption of FRS 19 - 0.1 1.5 Move to 'active' basis of achieved profits - life business - 1.4 2.3 - unit trust business - 0.1 0.2 Change in LAHC carrying value to modified statutory solvency basis - (4.0) 2.0 Consolidated achieved profits after taxation 4.9 40.4 76.1 Less movements in: Unit trust value of in-force business (3.3) (7.7) (11.1) Internally generated long-term insurance value of in-force (25.3) (27.4) (70.0) Current period amortisation of acquired long-term insurance value of in-force (1.5) (0.8) (1.6) Modified Statutory Profits after taxation (25.2) 4.5 (6.6) Restated Restated 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Net Assets Net assets as previously reported - 489.3 509.6 Inclusion of unit trust value of in-force business - 76.5 79.8 Adoption of FRS 19 - 6.2 7.6 Move to 'active' basis of achieved profits - life business - 6.4 7.3 - unit trust business - 0.7 0.7 Change in LAHC carrying value to modified statutory solvency basis - (37.5) (31.5) Consolidated net assets under Achieved Profit basis 573.8 541.6 573.5 Less: Unit trust value of in-force (83.8) (77.2) (80.5) Internally generated long-term insurance value of in-force (328.1) (260.1) (302.8) Acquired long-term insurance value of in-force amortised to date 55.1 57.4 56.6 Consolidated net assets under Modified Statutory Profits 217.0 261.7 246.8 INDEPENDENT REVIEW REPORT BY KPMG Audit Plc TO ST. JAMES'S PLACE CAPITAL PLC Introduction We have been instructed by the company to review the financial information and the supplementary financial information. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The Interim Report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts, in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/ 4: Review of interim financial information issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we not aware of any material modifications that should be made to the financial information and the supplementary information as presented for the six months ended 30 June 2002. KPMG Audit Plc Chartered Accountants London 24 July 2002 INTERIM RESULTS ON A MODIFIED STATUTORY SOLVENCY BASIS (MSSB) CONSOLIDATED PROFIT & LOSS ACCOUNT (unaudited) LONG TERM BUSINESS TECHNICAL ACCOUNT Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 Note £' Million £' Million £' Million Earned premiums, net of reinsurance Gross premiums written 4 535.9 649.3 1,308.5 Outwards reinsurance premiums (11.1) (10.6) (26.7) 524.8 638.7 1,281.8 Investment income 94.1 69.7 59.7 Other technical income - 3.8 1.5 618.9 712.2 1,343.0 Claims incurred, net of reinsurance Claims paid - gross amount (137.4) (120.8) (255.8) - reinsurers' share 6.9 10.5 19.7 (130.5) (110.3) (236.1) Change in the provision for claims - gross amount (1.4) (4.3) (0.8) - reinsurers' share 2.8 (1.8) (0.2) 1.4 (6.1) (1.0) (129.1) (116.4) (237.1) Change in other technical provisions, net of reinsurance Long term business provision - gross amount (1.1) (6.3) (34.3) - reinsurers' share 1.7 2.9 15.1 0.6 (3.4) (19.2) Technical provisions for linked business (329.4) (328.6) (520.2) Net operating expenses (78.1) (77.0) (150.2) Other technical charges (3.0) (0.8) (1.6) Investment expenses and charges (6.9) (10.0) (17.2) Unrealised losses on investments (75.6) (167.3) (407.2) Tax attributable to the long-term business (2.3) (7.7) (2.4) (623.8) (711.2) (1,355.1) Balance on the long-term business technical account (4.9) 1.0 (12.1) CONSOLIDATED PROFIT & LOSS ACCOUNT (unaudited) NON-TECHNICAL ACCOUNT Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 Note £' Million £' Million £' Million Balance on the long-term business technical account (4.9) 1.0 (12.1) Tax credit attributable to balance on the long-term business technical account (3.2) (0.4) (8.3) Shareholders' (loss)/profit from long-term business (8.1) 0.6 (20.4) Investment income Income from participating interests 7 (7.7) (2.0) (9.3) Income from other investments 1.6 3.0 6.2 Other income Income from unit trust operations 5.1 4.2 10.4 Other 2.9 2.0 3.0 Other expenses and charges (22.5) (2.7) (6.7) (Loss)/profit on ordinary activities before tax 3 (28.7) 5.1 (16.8) Tax on ordinary activities 3 3.5 (0.6) 10.2 (Loss)/profit on ordinary activities after tax 3 (25.2) 4.5 (6.6) Dividends 5 (5.4) (5.3) (11.8) Retained loss for the period (30.6) (0.8) (18.4) Pence Pence Pence (Loss)/earnings per share 6 (5.9) 1.1 (1.5) Adjusted (loss)/earnings per share 6 (1.7) 1.1 (1.5) Diluted (loss)/earnings per share 6 (5.9) 1.0 (1.5) Diluted adjusted (loss)/earnings 6 (1.7) 1.0 (1.5) per share Dividend per share 5 1.25 1.25 2.75 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million (Loss) / profit for the financial (25.2) 4.5 (6.6) period Share of participating interest - Aberdeen transaction - 19.5 19.5 Total recognised gains and losses relating to the period (25.2) 24.0 12.9 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Opening shareholders' funds previously reported 246.8 458.9 458.9 Prior year adjustment* - (216.4) (216.4) Opening shareholders' funds restated 246.8 242.5 242.5 (Loss) / profit for the financial (25.2) 4.5 (6.6) period Dividends (5.4) (5.3) (11.8) Retained loss for the period (30.6) (0.8) (18.4) Issue of share capital 0.8 0.5 3.2 Share of participating interest - Aberdeen transaction - 19.5 19.5 Net (decrease) / increase to shareholders' funds (29.8) 19.2 4.3 Closing shareholders' funds 217.0 261.7 246.8 * Adjusted for the adoption of the Modified Statutory Solvency Basis of reporting CONSOLIDATED BALANCE SHEET 30 June Restated Restated 2002 30 June 31 December 2001 2001 Note £' Million £' Million £' Million Investments Investments in participating interests 7 51.5 62.0 56.9 Land and buildings 1.2 1.1 1.3 Other financial investments 81.0 125.3 124.1 133.7 188.4 182.3 Acquired value of long-term business in force 8 55.1 57.4 56.6 Assets held to cover linked liabilities 5,126.0 4,605.0 4,796.6 Reinsurers' share of technical provisions Long-term business provision 57.2 19.6 55.5 Claims outstanding 6.0 1.6 3.2 Debtors 76.3 79.8 69.4 Other assets Tangible assets 8.6 7.3 8.5 Cash and cash equivalents 53.1 59.1 47.4 Prepayments and accrued income 6.0 60.1 59.1 Deferred acquisition costs 56.2 45.1 55.0 Total assets 5,578.2 5,123.4 5,333.6 Technical provisions (123.4) (96.4) (120.9) Technical provisions for linked liabilities (5,126.0) (4,605.0) (4,796.6) Provisions for other risks and charges 9 (19.6) (18.9) (19.8) Creditors Amounts owed to credit institutions (15.0) (14.1) (14.6) Amount due to reassurers (23.7) - (23.7) Other creditors (33.0) (107.0) (89.6) Proposed dividend (5.4) (5.3) (6.4) Accruals and deferred income (15.1) (15.0) (15.2) Total liabilities (5,361.2) (4,861.7) (5,086.8) Total net assets 217.0 261.7 246.8 Capital and reserves Share capital 10 64.5 64.0 64.3 Share premium 4.1 0.8 3.4 Shares to be issued 0.4 0.5 0.5 Other reserves 11 148.0 196.4 178.6 Equity shareholders' funds 217.0 261.7 246.8 CONSOLIDATED CASH FLOW STATEMENT (EXCLUDING POLICYHOLDER FUNDS) Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 Note £' Million £' Million £' Million Shareholders' net cash outflow from long-term business - - (20.0) Other operating cashflows attributable to shareholders 9.5 7.6 5.4 Operating activities Net cash inflow /(outflow) from operating activities 12 9.5 7.6 (14.6) Returns on investments and servicing of finance Interest received 1.6 2.9 5.2 Interest paid - (0.1) (0.6) 1.6 2.8 4.6 Taxation Corporation tax recovered / 2.7 (1.8) (3.6) (paid) Capital expenditure and financial investment Purchase of tangible fixed (2.2) (2.8) (5.4) assets Sale of fixed assets 0.5 0.4 0.7 (1.7) (2.4) (4.7) Acquisitions and disposals Disposal of subsidiary undertakings - 0.1 0.1 Cash disposed of with - (0.1) (0.1) subsidiary Investment in shares and other variable yield securities (1.6) - (6.9) (1.6) - (6.9) Equity dividends paid (6.4) (5.3) (10.7) Net cash inflow/(outflow) before financing 4.1 0.9 (35.9) Financing Issue of ordinary share capital 0.7 0.5 3.4 Increase / (repayment) of loan - 8.0 (7.0) 0.7 8.5 (3.6) Net cash inflow /(outflow) for the period 4.8 9.4 (39.5) The net cash outflow was applied as follows: Increase /(decrease) in cash holdings 8.9 13.7 (15.6) Net portfolio investments Withdrawals from credit institutions (4.1) (4.3) (23.9) Net application / (outflow) of cash flows 4.8 9.4 (39.5) NOTES TO THE ACCOUNTS 1. PRINCIPAL ACCOUNTING POLICIES The financial statements are prepared in accordance with applicable accounting standards and with the Association of British Insurers' Statement of Recommended Practice on Accounting for Insurance Business ( ' ABI SORP ' ) dated December 1998. Except as noted below, the accounting policies used by the Group in the preparation of this interim report are consistent with those applied in preparing the financial statements for the year ended 31 December 2001. Change in Accounting Policies The December 2001 financial statements commented that the accounting for insurance groups is in a state of transition. In the view of the directors, after consultation with the Group 's auditors, accounting for the present value of internally generated in force business in the financial statements is unlikely to continue. Accordingly the Company has changed its accounting policy to exclude the value of internally generated in force business. Following the above restatement profits from long term business are recognised on the basis of the statutory result arising during the period adjusted for certain items, including the deferral of acquisition costs, as required by the ABI SORP. Acquired present value of long term business in-force In accordance with the SORP the present value of long term business in force ('PVIF') on acquisition is recognised as an additional asset within the consolidated balance sheet. As part of the reconstruction of the Group in 1997, SJPC acquired the remaining portion of the long term business of St. James's Place Wealth Management Group (formally J. Rothschild Assurance Holdings plc) that it did not then own. The value determined at the date of acquisition is amortised over the anticipated lives of the related contracts in the portfolio. The amortisation charge for the year is charged to the long term business technical account, included within other technical charges. LAHC The Group's accounting policy in respect of its participating interest in LAHC has been changed, including an adjustment in respect of its internally generated long term business in force. This is detailed in Note 7. FRS19 The Group has adopted FRS 19 'Deferred Tax' which has had no material impact on the financial statements. 2. IMPACT OF CHANGE IN ACCOUNTING POLICY The impact of this restatement on the net assets of the Group as at 30 June 2001 and at 31 December 2001 is as follows: 12 Months 6 Months Ended Ended 31 December 30 June 2001 2001 Note £' Million £' Million Net assets as previously reported 489.3 509.6 Value of long-term business in-force previously reported for the SJP Group (247.5) (287.9) Acquired value of long term business in force (after 57.4 56.6 amortisation) Investment in LAHC (37.5) (31.5) FRS 19 - - Restated net assets 261.7 246.8 The post-tax profit for the 6 months ended 30 June 2001 and year ended 31 December 2001 differ from those previously reported, due to the change in accounting policy and the Aberdeen transaction (see Note 7), as shown below. 12 Months 6 Months Ended Ended 31 December 30 June 2001 2001 Note £' Million £' Million Profit on ordinary activities after tax as 35.2 59.2 previously reported Movement in internally generated value of Long term business in force (25.9) (66.2) Movement in investment in participating interest (4.0) 2.0 Amortisation of acquired value of long term business in force (0.8) (1.6) As restated 4.5 (6.6) 3. SEGMENTAL ANALYSIS OF PROFITS Profits on ordinary activities Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million St. James's Place Group Life business (8.1) 0.6 (20.4) Unit trust business 5.1 4.2 10.4 Other - 2.3 2.5 Core business (loss)/profit (3.0) 7.1 (7.5) Participating interests LAHC (7.7) (2.0) (9.3) Other investments (18.0) - - (Loss) / profit on ordinary activities before taxation (28.7) 5.1 (16.8) Taxation Life business 3.2 0.4 8.3 Unit trust business (1.5) (1.2) (3.1) Other (0.5) (0.4) 2.2 LAHC 2.3 0.6 2.8 3.5 (0.6) 10.2 (Loss) / profit on ordinary activities after taxation (25.2) 4.5 (6.6) 4. PREMIUMS WRITTEN 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Life business Single premiums 309.5 432.8 812.1 Regular premiums 48.6 48.4 99.3 Reinsurances (5.7) (6.0) (17.5) 352.4 475.2 893.9 Pension business Single premiums 101.6 93.0 245.0 Regular premiums 69.1 69.7 140.2 Reinsurances (0.7) (0.8) (1.5) 170.0 161.9 383.7 Permanent health insurance Regular premiums 7.1 5.4 11.9 Reinsurances (4.7) (3.8) (7.7) 2.4 1.6 4.2 Total net premiums 524.8 638.7 1,281.8 Gross premiums comprise: Individual business 476.4 593.2 1,254.1 Group contracts 59.5 56.1 54.4 Total gross premiums 535.9 649.3 1,308.5 Premiums written do not include stakeholder business written by other providers. Included in the above figures are new business premiums of £ 0.3 million (2001: £ 2.8m) arising from the Group's Italian operation with Nascent in the current period (based on regular premiums plus 1/10 th single premiums). 5. INTERIM DIVIDEND The Directors have resolved to pay an interim dividend of 1.25p per share (2001: 1.25p). This amounts to £ 5.4 million (2001: £5.3 million) and will be paid on 2 September 2002 to shareholders on the register on 2 August 2002. 6. EARNINGS PER SHARE Restated Restated 6 Months 6 Months 12 Months Ended Ended Ended 30 June 2002 30 June 2001 31 December 2001 Pence Pence Pence (Loss) / profit on ordinary activities after (5.9) 1.1 (1.5) taxation Adjustments - Nascent write down 4.2 - - Adjusted (loss) / earnings (1.7) 1.1 (1.5) Diluted (loss) / earnings (5.9) 1.0 (1.5) Diluted adjusted (loss) / earnings (1.7) 1.0 (1.5) The above table sets out earnings per share, adjusted earnings per share and their diluted counterparts. In accordance with FRS 14 'Earnings per Share', since the diluted loss per share is reduced, the incremental effect is ignored. The diluted loss per share is therefore the same as the loss per share. The following table sets out the various profit figures and number of shares taken into account in the above calculations: 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 (Loss) / profit on ordinary activities after taxation £(25.2 m) £4.5 m £(6.6 m) Adjusted (loss) / profit after tax £(7.2 m) £4.5 m £(6.6 m) Weighted average number of shares (including shares to be issued) 428.8 425.5 427.2 Diluted weighted average number of shares 443.5 455.3 452.8 Number of share options for which dilutive effect taken account of 58.4 58.8 57.0 7. INVESTMENTS IN PARTICIPATING INTERESTS The Group holds an investment of 22.7% (2001: 22.6%) in the shares of Life Assurance Holdings Corporation Limited ('LAHC'). This investment has been dealt with in the consolidated accounts as a participating interest and equity accounted on the basis of management accounts on the modified statutory solvency basis covering the period to 30 June 2002. In accordance with the Group's change in accounting policy outlined in notes 1 and 2, the Group 's interest in LAHC has been revised to exclude the internally generated value of long term business in force. In addition, the acquired value of long term business in force, valued in accordance with the ABI guidance, has been amortised over the average duration of the underlying policies. The impact of these adjustments on the carrying value of LAHC at 30 June 2001 and 31 December 2001 is as follows. 30 June 2001 31 December 2001 £' Million £' Million £' Million £' Million As previously reported 99.5 88.4 Value of long term business in force (93.5) (85.7) Acquired value of long term business in force (after amortisation) 56.0 54.2 (37.5) (31.5) Restated 62.0 56.9 The impact of these adjustments and the change in treatment of the Aberdeen transaction on the profit after tax for the period is as follows: 6 Months Ended Year Ended 30 June 2001 31 December 2001 £' Million £' Million £' Million £' Million Previously reported 2.6 (8.5) Movement in internally generated value of long term business in force 15.5 21.5 Aberdeen transaction (19.5) (19.5) (4.0) 2.0 Restated (1.4) (6.5) The profit on sale of LAHC 's asset management business to Aberdeen Asset Management has been restated to reflect the profit in the Statement of Recognised Gains and Losses. The movement in interest in LAHC during the 6 months to June 2002 is analysed below: £' Million Value at 1 January 2002 56.9 Share of pre-tax loss for the period (7.7) Share of tax for the period 2.3 Value at 30 June 2002 51.5 LAHC holds 15 million shares in Aberdeen Asset Management plc, which are marked to market in the accounts of LAHC. Included in the loss above is the fall in the market value of these shares during the six month period, being £ 7.1 million pre-tax (£5.0 million post tax). 8. ACQUIRED VALUE OF LONG-TERM BUSINESS IN FORCE 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Value at start of period 56.6 - - Change in accounting policy - transfer from internally generated value of in force (see notes 1 and 2) - 58.2 58.2 Amortisation (1.5) (0.8) (1.6) Value at end of period 55.1 57.4 56.6 9. PROVISION FOR OTHER RISKS AND CHARGES Deferred Tax Other Provisions Total £' Million £' Million £' Million At 31 December 2001 15.2 4.6 19.8 Movement in the period 0.2 (0.4) (0.2) At 30 June 2002 15.4 4.2 19.6 The other provisions are principally to meet obligations arising as a result of the Halifax acquisition of 60% of the share capital of SJPC plc in June 2000. As a result of this transaction, a number of share options lost their approved tax status and SJPC has agreed to compensate share option holders to ensure the effect on individuals is neutral. 10. SHARE CAPITAL Number £'Million As at 31 December 2001 428,996,108 64.3 Exercise of options 1,113,628 0.2 As at 30 June 2002 430,109,736 64.5 Options outstanding under the various share option schemes at 30 June 2002 now amount to 58.4 million shares. Of these, 46.0 million are under option to Partners of St. James's Place Partnership, 10.5 million are under option to executives and senior management and 1.9 million are under option through the SAYE scheme. These are exercisable on a range of future dates. The following table sets out the anticipated proceeds if all option holders exercise their shares at the first available opportunity. Earliest date of exercise Number of share options outstanding Anticipated proceeds Million £' Million Immediate 14.8 21.6 Jul - Dec 2002 2.8 4.1 Jan - Jun 2003 7.6 12.0 Jul - Dec 2003 4.4 10.3 Jan - Jun 2004 1.3 3.4 Jul - Dec 2004 5.3 13.3 Jan - Jun 2005 3.2 8.3 Jul - Dec 2005 7.8 21.2 Jan - Jun 2006 1.5 4.4 Jul - Dec 2006 6.2 16.2 Jan - Jun 2007 1.3 3.6 Jul - Dec 2007 1.9 4.8 Jan - Jun 2008 0.3 0.9 58.4 124.1 It is proposed to offer Partners and employees (not Directors) the opportunity to rebase the price of certain share options following the announcement of these results. This offer will apply to 27.4 million options. 11. OTHER RESERVES £' Million As at 31 December 2001 178.6 Profit for the period (25.2) Dividends (5.4) As at 30 June 2002 148.0 12. RECONCILIATION OF OPERATING (LOSS) / PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Restated Restated 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Operating (loss) / profit before taxation (28.7) 5.1 (16.8) Continuing activities Interest paid - 0.1 0.6 Interest received (1.6) (2.9) (5.2) Losses / (profits) relating to long term business 8.1 (0.6) 20.4 Transfer to long term business fund - - (20.0) Depreciation 1.6 1.6 2.9 Profit on sale of fixed assets (0.1) (0.1) (0.1) Share of loss of participating interests 7.7 2.0 9.3 Write down in carrying value of investment 18.0 - - Increase in debtors and prepayments (4.3) (25.4) (5.7) Decrease in debtor to long term business fund 11.6 - - Increase in creditor to long term business fund - 15.9 6.1 (Decrease) / increase in creditors (2.8) 12.1 (5.9) Profit on disposal of subsidiary - (0.2) (0.2) Net cash inflow / (outflow) from operating activities 9.5 7.6 (14.6) 13. MOVEMENTS IN OPERATING AND CLOSING PORTFOLIO INVESTMENTS, NET OF FINANCING 12 Months 6 Months 6 Months Ended Ended Ended 31 December 30 June 2002 30 June 2001 2001 £' Million £' Million £' Million Increase / (decrease) in cash holdings 8.9 13.7 (15.6) Increase in / (repayment of) loan - (8.0) 7.0 Portfolio investments: deposits with credit institutions (4.1) (4.3) (23.9) Total movement in portfolio investments, net of financing 4.8 1.4 (32.5) Portfolio investments, net of financing at start 27.7 60.2 60.2 Portfolio investments, net of financing at end 32.5 61.6 27.7 14. STATUTORY ACCOUNTS The financial information shown in this publication is unaudited and does not constitute statutory accounts. The comparative figures for the financial year ended 31 December 2001 are not the Company ' s statutory accounts for that financial year but are derived for them after restating for various prior year adjustments set out in note 2. Those accounts have been reported on by the Company 's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. SECRETARY AND ADVISERS Secretary and Registered Office H J Gladman St. James's Place House Dollar Street Cirencester GL7 2AQ Tel: 01285 640302 Fax: 01285 653993 www.sjpc.co.uk Auditors KPMG Audit Plc 1 Canada Square London E14 5AG Registrars and Transfer Office Computershare Investor Services Plc P.O. Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Dedicated telephone number for shareholder enquiries: 0870 702 0197 Bankers National Westminster Bank Plc 32 Market Place Cirencester GL7 2NU Brokers Cazenove & Co 12 Tokenhouse Yard London EC2R 7AN This information is provided by RNS The company news service from the London Stock Exchange

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