Demerger proposals

Provident Financial PLC
07 June 2007



                            Provident Financial plc

   Details of the proposed demerger of the international home credit business

Provident Financial plc ('Provident') today announces details of the proposed
demerger of its international home credit business ('IHC').  Pursuant to the
demerger, IHC (comprising Provident International Holdings Limited and its
wholly-owned subsidiaries) will be transferred to International Personal Finance
plc (a newly established public limited company which has been incorporated to
be the holding company of IHC) ('IPF'). Subject, inter alia, to shareholder
approval, the demerger will result in Provident shareholders receiving one share
in IPF for every Provident share they hold.

Presentations to research analysts on each of the two businesses will be held
today at the offices of Dresdner Kleinwort, 30 Gresham Street, EC2P 2XY at
10.30a.m.  The key highlights of these presentations are:

The demerger

-     The key reason for the demerger is that the UK and international
businesses have different strategic agendas calling for different management
skills and focus. Both businesses are expected to benefit from the demerger. The
international business will be better able to capture its growth opportunities
through greater management focus and the closer alignment of management
incentives to the performance of the international business. The UK business
will be able to concentrate on developing a more broadly based business focused
on the UK non-prime consumer credit market.

-     The demerger is expected to result in stronger operational and
financial performance for both businesses.

-     The demerger will offer a choice of investment into two attractive and
successful businesses with markedly different characteristics.

-     Provident will, prior to the demerger, introduce £70 million of
additional capital into IHC to adequately capitalise it as a stand-alone
business.

-     In the absence of unforeseen circumstances, Provident and IPF intend to
pay an aggregate dividend in respect of 2007 of 36.50 pence per share, equal to
the Provident dividend per share paid in respect of 2006.

Provident - post-demerger

-     The UK home credit business will build on its leading position in the
UK specialist consumer lending market and is expected to grow and to continue to
benefit from (i) the continued diversification of marketing channels for new
customer recruitment, (ii) improved customer segmentation and contact
management, (iii) product innovation and enhanced lending decision processes and
(iv) the introduction of new technology, allowing a streamlining of its cost
structure.

-     Vanquis will continue to focus on the provision of credit cards to the
non-prime market. In the medium-term, it is believed to have the potential to
exceed 500,000 customers and £300 million net receivables and to earn a post-tax
return on equity of around 30%. Vanquis is expected to trade at around breakeven
in 2007.

-     There is an increasing market opportunity for Provident's UK businesses
because of a combination of growth in the UK non-prime market and the tightening
of lending criteria by mainstream credit providers.

-     The UK business has a large, dynamic customer base and a national
branch infrastructure.  It aims to build on its leading position in the UK
specialist, non-standard lending market and in particular to improve its
retention of the estimated 200,000 customers who migrate up the credit quality
chain each year, through extension of its product range to include agent and
non-agent collected unsecured and secured personal loans over longer repayment
terms.

-     In the absence of unforeseen circumstances, the board of directors of
Provident intends to pay a dividend per share for 2007 of 31.75 pence per share
(before adjustment for the proposed consolidation of Provident's share capital).
It is the intention of the directors to at least maintain the dividend per share
with a medium-term objective to build cover until a dividend payout ratio of 80%
is reached.

-     Provident has pro forma net assets as at 31 December 2006 of £207.1
million, after allowing for adjustments in respect of the £70 million capital
injection into IPF, net proceeds of £162.7 million from the sale of Provident
Insurance, demerger costs of £20.4 million and after deducting the 2006 final
dividend of £56.4 million paid in May 2007.

-     As at 31 December 2006, Provident has a pro forma equity to receivables
ratio of 23%. The directors consider that a capital structure with a ratio of
ordinary shareholders' capital to receivables of 15% compared with the current
target of 20% is appropriate.  This implies surplus capital of some £80 million
on demerger.  However, in light of the high dividend payout ratio, this surplus
will be retained in the near term to fund growth opportunities and provide a
sensible degree of strategic flexibility.  Provident may consider share
buy-backs as and when appropriate.

-     Cost savings of almost £3 million per annum are expected after the
demerger as a result of a reduction in corporate overhead costs.

-     The Fitch Issuer Default Rating has been maintained at BBB+ and the
estimated weighted average cost of debt is unchanged at approximately 7%.

-     The UK business has made a positive start to 2007.

IPF

-     A proven record of building successful, capital generative businesses
in emerging markets underpinned by an experienced management team.

-     A substantial business spanning six countries, with 1.8 million
customers, 28,400 agents and over 5,000 employees.

-     Pro forma pre-tax profit for 2006 of £39.9 million, based on IHC's
reported segmental profit for 2006 of £46.2 million and allowing for the
increased costs of operating as a stand-alone and listed business of £9.1
million and a reduction in borrowing costs of £2.8 million (mainly attributable
to the £70 million capital injection on demerger).

-     Significant opportunities for future growth from the fast growing
demand for consumer credit in IPF's existing markets and from a target list of
eight large new markets to enter, including Russia, India and the Ukraine.

-     A clear strategy to seize the opportunities for growth: (i) to increase
the pre-tax profit from the established Central European markets by 50% to about
£95 million at maturity, (ii) to realise the potential of the markets currently
under development, Mexico and Romania, with a target pre-tax profit from these
markets of £90 million and £20 million respectively at maturity and (iii) to
enter further emerging markets, with a plan to enter three to four countries
over the next five years.

-     Mexico is expected to report a profit in 2009 and Romania, which has
recently successfully completed the pilot stage and been approved for national
roll-out, is expected to report a profit in 2010.

-     In 2007, approximately £15 to £16 million will be invested in start-up
losses from developing markets, principally Mexico and Romania. Thereafter, for
the medium-term, IPF's target start-up losses in developing new territories is
expected to be broadly equal to 25% of pre-tax profits before such start-up
losses.

-     IPF intends, subject to satisfactory completion of due diligence, to
commence a pilot in the Russian market in the latter part of 2007 which may
include the acquisition of a small bank costing about £3 to £5 million.

-     Pro forma net assets as at 31 December 2006 of £150.2 million as
adjusted for a £70 million capital injection from Provident, giving a pro forma
equity to receivables ratio of 45%. This level of capitalisation recognises the
risk profile of the emerging markets in which IPF operates and underpins its
future requirement to attract debt finance to support its growth strategy. In
the longer term, IPF targets to reduce the equity to receivables ratio towards
20% as the business matures.

-     IPF's Central European operations are already generating substantial
surplus capital. In 2006, they generated surplus capital of £37.8 million which
was available to fund both new country development and dividends.

-     In the absence of unforeseen circumstances, IPF intends to pay a
dividend of 4.75 pence per share for 2007 and thereafter to adopt a progressive
dividend policy reflecting the profitability of IHC's businesses as well as its
capital and cash flow requirements, with a medium-term objective of moving to a
dividend payout ratio of approximately 25% of profit after tax.  IPF believes
that this will allow the capital requirements of its growth strategy to be met
from retained earnings.

-     The tax rate for 2007 and thereafter is expected to be approximately
30%.

-     IPF has made a strong start to 2007 across all markets.

Key Dates

Friday 22 June 2007        Posting and publication of circular and prospectus

Friday 13 July 2007        EGM to seek shareholder approval for the demerger

Monday 16 July 2007        Demerger effective

John van Kuffeler, Chairman of Provident, commented:

'The separation of the UK and international businesses is good for the two
businesses and good for shareholders.  The international business will be better
able to secure its exciting growth prospects, and the UK business will be free
to build on its leading position in the UK non-prime consumer credit market.
The board of Provident believes that this move will maximise shareholder value
in both the near and longer term.'

Christopher Rodrigues, Chairman Designate of IPF, commented:

'The international business has a proven and successful model and an experienced
management team.  We see many opportunities both in our existing markets and in
new emerging markets.  We are all looking forward to the next exciting phase of
the business' development.'

Enquiries:

Kevin Byram              Brunswick                                020 7404 5959

Nigel Prideaux           Brunswick                                020 7404 5959



1.                  Rationale for demerger

IHC was established in 1997 as part of Provident's strategy to develop new
sources of growth to complement its UK business.  Today, IHC has businesses in
Poland, the Czech Republic, Slovakia, Hungary, Romania and Mexico with revenue
in 2006 of £365.3 million and pro forma profit before tax and exceptional
demerger costs in 2006 of £39.9 million (based on IHC's reported segmental
profit for 2006 of £46.2 million and allowing for the increased costs of
operating as a stand-alone and listed business of £9.1 million and a reduction
in borrowing costs of £2.8 million (mainly attributable to the £70 million
capital injection on demerger)).

This impressive growth profile has been achieved in part through the financial
and operational support of the UK home credit (''UKHC'') business, but has now
reached a point where IHC is an operationally and financially self-sufficient,
stand-alone entity with its own management structure.  The UKHC and IHC
businesses have reached very different stages of development with distinct
strategic agendas calling for different management skills and focus.  UKHC is an
excellent, cash-generative business competing in a large, more mature consumer
credit market, whilst IHC continues to identify significant growth opportunities
in new and existing markets and is well placed to continue to grow rapidly.  IHC
has also developed its own knowledge base with respect to entering markets and
benchmarking growth and development. These two businesses therefore require
different management skills and strategic focus.

Accordingly, the board of Provident considers it is now appropriate to separate
these two distinct businesses into independently listed entities.

As part of a separate group, IHC will be better able to capture its growth
opportunity through:

•         exclusive management focus on the significant opportunities to capture
growth in new and existing emerging markets; and

•         greater alignment of incentives, with management and employees able to
participate directly in the success of the IHC business.

As an independently listed UK-centric business, the board of Provident considers
that it will also benefit from greater strategic focus, enabling it to
concentrate on developing a more broadly based business focused on the UK
non-prime consumer credit market.  Given the reasons for the demerger outlined
above, Provident does not intend to operate in IHC's markets.

Accordingly, the board of Provident believes that the benefits of the demerger
should be reflected in stronger operational and financial performance of both
businesses with a greater strategic focus on the development of each group.  As
a consequence, the demerger will offer a greater choice to Provident's
shareholders specifically and to investors generally regarding their investment
in the two businesses.

2.                  Demerger timetable

Provident announced on 9 May 2007 that it had agreed to sell Provident
Insurance, its non-core motor insurance business for approximately £170 million.
  The transaction is expected to complete in mid-June 2007, once the remaining
regulatory approvals for change of control have been obtained.

On 22 June 2007, following completion of the sale of Provident Insurance:

•         Provident intends to post a circular to shareholders seeking their
approval for the demerger at an extraordinary general meeting, to be held on 13
July 2007; and

•         IPF intends to publish a prospectus in respect of its separate
listing.

Subject to the approval of shareholders having been obtained, it is expected
that the demerger will complete on 16 July 2007, on which date Provident will
transfer IHC to IPF and IPF's shares will be admitted to the Official List of
the UK Listing Authority and to trading on the London Stock Exchange's market
for listed securities.

It is intended that the demerger is to be effected by Provident declaring a
special dividend equal to the book value of Provident's shareholding in
Provident International Holdings Limited (''PIHL''), the intermediate holding
company of IHC. This special dividend will be satisfied by the transfer of the
entire issued share capital of PIHL to IPF, the consideration for which will be
the allotment and issue by IPF of ordinary shares to Provident shareholders on
the basis of one share in IPF for each Provident share held.



Immediately after the demerger becomes effective, it is intended that the share
capital of Provident will be consolidated.  The purpose of this share
consolidation is to preserve the value of share options and awards under
Provident Employee Share Schemes and to maintain, so far as reasonably
practicable, the pre-demerger share price and the comparability of historic and
future earnings per share data.  Further details of the share consolidation will
be included in the circular.  Shortly after the demerger becomes effective, IPF
will also seek Court approval for a reduction of its capital in order to create
distributable reserves of approximately £410 million.



3.                  Information on the UK Group

Subsequent to the demerger, the UK Group will comprise UKHC, Vanquis and DAFS
(formerly trading as Yes Car Credit).  In the year ended 31 December 2006, these
businesses had revenue of £654.6 million and a profit before tax of £108.0
million.  The pro forma net assets of the UK Group as at 31 December 2006 were
£207.1 million.

The average number of employees of these businesses, including those providing
central functions, for the year ended 31 December 2006 was approximately 3,200.
In addition, in 2006 UKHC had on average 11,500 home credit collection agents.

The UK Group aims to build on its leading position in the UK specialist or
non-standard lending market and, in particular, to improve its retention of
customers as they migrate up the credit quality chain by continuing to develop a
more broadly based business beyond home credit.

UKHC's objective is to remain the leading community-based lender in the UK and
Ireland by developing and growing its core home-collected credit business.
Vanquis will continue to operate as a non-prime credit card business with a view
to increasing its existing customer base and trading at around breakeven in
2007.  The UK Group intends to continue to collect-out the DAFS receivables
book, although will keep all options under review.

The UK Group will thus be focused on the UK specialist lending market, where its
key strengths are:

•         its long experience of and leading position in home-collected credit;

•         its national branch and management infrastructure with in excess of
300 locations;

•         its growing position in non-prime credit cards and its understanding
of this market; and

•         the large, attractive and dynamic customer bases in UKHC and Vanquis.



4.                  Current trading of the UK Group

UKHC has made a positive start to 2007, with continued year-on-year growth in
both customer numbers and receivables.  Impairment levels remain stable despite
pressures on customers' disposable incomes, due to the benefits of tight credit
management and improvements to the arrears processes introduced during 2006.

Vanquis has generated further growth in customer numbers and receivables which,
when combined with the re-pricing of credit lines undertaken towards the end of
2006 and tight credit management, are yielding the anticipated benefits.

5.                  UKHC

Established in 1880, UKHC is the largest home credit business in the UK, with
2006 profits of £127.5 million.  It offers simple, transparent financial
products to customers with average and below average incomes, some of whom may
find it more difficult than most consumers to access mainstream credit or who
prefer the home credit offering.

Operating under the Provident and Greenwood brands, UKHC provides small,
unsecured home-collected cash loans which are delivered to the customer's home
by a self-employed agent who then calls at the customer's home regularly to
collect the repayments.

Loans in aggregate of £940.8 million were provided in 2006 and customer numbers
at the end of 2006 were just over 1.5 million, serviced by a network of 11,500
agents.  Of these customers, UKHC would typically expect to lose approximately
300,000 customers with non-performing loans and lose a further 200,000 customers
who pay off their loans and do not seek new loans, whilst recruiting 500,000 new
customers.

The wider UK consumer credit market is relatively mature, but the board of
Provident believes that UKHC is well positioned to create future growth through
a combination of cost and technology efficiencies and product innovation to
attract new customers, including through the marketing of longer, larger loans
to more established and reliable customers and pre-paid VISA cards that the
customer can use like a debit card.

Following the demerger, UKHC will continue to focus on remaining the leading
community-based lender in the UK and Ireland, developing and growing the core
home credit business and introducing direct repayment products.  The board of
Provident believes that the key strengths of UKHC from which to continue this
strategy are as follows:

•         Proven business model.  Provident is the UK's leading home credit
company.  The home-collected credit model has been developed and refined in the
UK over the past 127 years and is the cornerstone of Provident's UK business.
Its cash generation serves as a strong basis for evolving Provident's business
to secure its long-term future.

•         Experienced management team.  The UKHC management team will all remain
with the UK Group following the demerger, providing continuity and maintaining a
team with considerable experience of the consumer finance industry.

•         Well-developed product offering.  UKHC's products and charges are
simply structured and transparent, with a fixed all-in-cost and no additional
default charges, which helps customers control their spending and budgeting.

•         Knowledgeable and experienced agent force.  UKHC has 11,500 agents
based in local communities, many with years of experience, affording UKHC
in-depth knowledge of its target customer group.

•         National field coverage and infrastructure.  More than 300 local
branches, combined with substantial agent coverage throughout the UK, means that
UKHC benefits from local knowledge on a national scale.

•         Ability to adapt quickly.  Short-term lending and weekly face-to-face
contact allow UKHC to react quickly to changes in customers' circumstances.

UKHC's strategy to fulfil its objective of remaining the leading community-based
lender in the UK and Ireland consists of the following key elements:

•         Growing the customer base.  UKHC is increasing the use of new
marketing channels to complement the traditional agent-based recruitment of
customers.  In addition to expanding direct response marketing, new channels are
being developed, such as targeted direct sales in shopping centres, internet
marketing, partnerships with retailers, mail order companies and finance
companies to acquire declined credit applicants and linking up with retailers to
provide credit to their customers.  The benefits of this diversification are
already becoming apparent - in the last two years, the number of customers
recruited from non-agent sources has grown by approximately 200% from just over
45,000 in 2004 to over 140,000 in 2006, with the biggest increases being derived
from the direct mail and internet channels.

•         Maximising the retention of profitable customers.  Having incurred
cost to acquire customers, repeat and increased business from profitable
customers is a key priority for UKHC.  UKHC continues to review its product
offerings and incentives to match closely the varying requirements of existing
customers and would expect to re-serve approximately two-thirds of its current
customer base.

•         Rolling out new products and taking advantage of market opportunities.
  UKHC will continue to develop and refine its product portfolio to retain
existing, and attract new, customers. This includes offering larger loans over
longer repayment terms, providing loans in the form of pre-paid VISA debit cards
and possible remote granting or collection of loans. Furthermore, a combination
of the growth in the UK non-prime lending market and the tightening of lending
criteria by mainstream credit providers means that there is an increasing market
opportunity for Provident to develop a more broadly based business in the UK
non-prime consumer credit market, leveraging off its customer base and branch
infrastructure.

•         Enhancing lending decision processes.  UKHC will continue to build on
its credit management systems.  The agent lending process is being augmented
through a combination of enhanced credit scoring (for both new and ongoing
customers) and arrears processes.

•         Streamlining the cost structure.  By combining the field management
and administration of the Provident Personal Credit and Greenwood Personal
Credit brands and rolling out hand-held computers to field agents, UKHC
continues to streamline the organisation and support growth through a single
management and cost structure.

•         Maximising UK Group marketing opportunities.  UKHC is well positioned
to offer loans to customers who respond to Vanquis marketing and meet UKHC, but
not Vanquis, lending criteria.

6.                  Vanquis

Vanquis was established in 2003 as part of Provident's strategy to broaden its
range of credit products, and provides credit cards tailored to the needs of UK
customers on average and below average incomes.  An experienced management team
was brought together to develop the product and the business and, after a period
of market testing, a full scale roll-out commenced in January 2005.  Vanquis
currently offers credit card products, with initial credit limits of between
£250 and £5,000, principally at the lower end of this range.  By the end of
2006, it had over 250,000 cardholders.

The directors believe that the key strengths of Vanquis are derived from its
deliberate positioning and focus on the non-prime market rather than as a
mainstream provider in the mass credit card market.  The key strengths are as
follows:

•         The experience of its management team in the non-prime market.  The
Vanquis business was started in 2003, but from the outset employed a management
team with extensive knowledge of operating credit card products in the non-prime
markets.

•         Extensive knowledge of the UK non-prime customer.  Vanquis has been
offering credit cards to non-prime customers for over three years and combines
this experience with access to extensive experience and data on the UK non-prime
market generated by UKHC.  This has helped to accelerate Vanquis's development
of a stand-alone proprietary database.

•         Highly targeted marketing models.  Vanquis has developed efficient
customer acquisition targeting models using the experience gathered from its ''
test and learn approach'' to direct mailing over the past three years and
benefits from the additional insight provided by the UKHC customer base.

•         Refinement of a quantitative approach to underwriting risk and credit
management.  Vanquis has developed a highly analytical and quantitative approach
to the processes of underwriting non-prime credit risk.  This includes the
assessment of whether or not to provide a card to an applicant, and if so, what
credit limit to assign as well as the timing and amounts of credit limit
increases.

•         Positioned to extend smaller credit limits than in the prime market
with consequentially higher APR pricing.  Vanquis generally extends much smaller
credit limits than are typically made available in the overall credit card
market.  This suits customers who want to stay in control of their spending but
who welcome the convenience offered by a credit card.  As the costs of operating
a credit card account are essentially fixed, the operating costs on a low credit
limit of £250 are a greater proportion of the credit when compared with a
mainstream credit limit of more than £2,000.  Consequently, Vanquis's products
must generally carry higher interest rates and APRs than those offered in the
prime market in order to deliver adequate levels of return to Vanquis.  The
management believe that competitors with broader product portfolios who have
significant operations in the prime sector are more restricted in their
willingness to price non-prime assets properly.

Vanquis is still in the relatively early stages of its development but expects
to trade at around breakeven for 2007 and has the potential to exceed 500,000
cardholders and £300 million in net receivables, and to earn around a 30%
post-tax return on equity in the medium-term.  With a view to achieving these
goals, Vanquis is pursuing the following strategies:

•         An operation focused on the UK's non-prime credit card market.  Many
prime market credit card providers have historically avoided this part of the
market with its need for relatively low credit limits and higher risk profile,
and the consequent need to operate with higher APRs than in the prime market.
Vanquis has been developing this opportunity by focusing on this market segment.

•         Maximising market opportunities.  Following the OFT's decision to
impose a cap on credit card default charges and the need to increase interest
rates in order to maintain income levels, management believe that some lenders
are withdrawing from the non-prime credit card market in order to protect their
prime brands, rather than have them associated with higher APRs.  Together with
a combination of growth in the UK non-prime market and the tightening of lending
criteria by mainstream credit providers, this means that there is an increasing
market opportunity for Vanquis.

•         'Low & grow' policy.  Vanquis typically acquires customers with
adverse features in their credit history or limited credit history and offers a
relatively low initial credit limit (i.e. £250 or £500) with modest increments
granted over time depending on account performance.  This targeted risk
management minimises the exposure of Vanquis to defaulters at an earlier, lower
cost, stage.

•         Increased use of multi-channel marketing and refinement of targeting
methods.  Vanquis is developing additional marketing channels in order to
address a larger proportion of the UK's non-prime sector.  Although originally
established with a direct mail strategy, Vanquis estimates that the use of the
internet in particular has significantly opened up the potential market,
increasing substantially the number of customers who can be reached.  The
benefits of using complementary channels are already apparent - in the last two
years, the number of customers recruited from sources other than direct mail has
grown from virtually none in 2004 to over 60,000 in 2006 (out of a total of just
over 140,000 new customers recruited that year).  Of these, approximately
two-thirds were recruited through the internet.

•         Increased integration of Vanquis and UKHC.  By evolving the marketing
channels, customers can quickly be directed to the most appropriate product for
their requirements, ensuring rapid delivery of credit.  In addition, the
infrastructures of the two businesses can be evolved to enhance customer contact
centre management and remote collection techniques.  Increased integration with
UKHC can therefore improve customer economics from the costs of acquisition
through to the costs and benefits of maintaining customer relationships and
improving collections performance.

Now that a sound platform for growth has been established, a new managing
director of Vanquis, Michael Lenora, has been appointed to lead the next phase
of the business' development. He has 25 years of experience in the non-prime
credit card market and will join the UK Group shortly.

7.                  DAFS

DAFS is collecting the outstanding customer debt remaining after the closure of
the UK Group's Yes Car Credit activities in December 2005.  Yes Car Credit sold
used cars together with a package of credit and associated insurance products
from a network of UK branches.

In 2006, the remaining vehicle stock was sold, almost all branch leases were
surrendered and staff numbers reduced as the collection activity decreased. The
number of customer accounts reduced from 59,000 to 33,000 during 2006 and the
amounts owed by those customers fell from £235.3 million to £108.6 million over
the same period. Customer numbers will continue to decline until the final
customer contracts mature in 2009.

8.                  Pro forma statement of net assets of the UK Group

An unaudited pro forma statement of consolidated net assets of the UK Group as
at 31 December 2006 is set out in the Appendix.  This statement shows pro forma
net assets of £263.5 million, which reduce to £207.1 million after adjusting for
the 2006 final dividend paid by Provident in May 2007.

9.                  Capital and cost structures and dividend policy of the UK
Group

Capital structure

The proceeds from the sale of Provident Insurance net of costs will amount to
£162.7 million, of which £70 million will be injected as new capital into IHC.
This level of capital has been provided to support the high growth strategy that
IHC plans to pursue in order to capture the opportunities for profitable growth
in emerging markets.  As at 31 December 2006, Provident has a pro forma equity
to receivables ratio of 23%. The directors consider that a capital structure
with a ratio of ordinary shareholders' capital to receivables of 15% compared
with the current target of 20% is appropriate.  This implies surplus capital of
some £80 million on demerger.  However, in light of the high dividend payout
ratio, this surplus will be retained in the near term to fund growth
opportunities and provide a sensible degree of strategic flexibility.  Provident
may consider share buy-backs as and when appropriate.

Cost structure

Following the demerger, the UK Group's costs of funding will remain unchanged
but it is expected that it will benefit from a cost saving of almost £3 million
per annum as a result of a streamlined central corporate team and the
simplification of the business following the separation of IHC.

Dividend policy

In the absence of unforeseen circumstances, the directors of Provident intend to
declare aggregate dividends of 31.75 pence per Provident share in respect of
2007, before adjustment for the proposed consolidation of Provident's shares.
Thereafter, the directors of Provident intend to at least maintain the annual
dividend per share, with a medium-term objective to move to a dividend payout
ratio of approximately 80% of profit after tax, which they believe is
appropriate for the Provident group as configured after the demerger.

Tax rate

The UK Group will be primarily a UK group for tax purposes and it is therefore
likely that, following the demerger, its effective tax rate will be 30%,
reducing to around 28% once the mainstream rate of corporation tax falls to that
level as proposed from 1 April 2008.

10.               Overview of IHC

IHC is headquartered in the UK and, since 1997, has successfully entered into
six emerging markets.  The Polish and Czech businesses opened in 1997 with
further operations following in Slovakia and Hungary (2001), Mexico (2003) and
Romania (2006).

The principal overseas subsidiaries operate 179 branches across Central Europe,
Romania and Mexico, and have approximately 1.8 million customers in aggregate.
IHC has some 5,000 direct employees and also engages approximately 28,400
agents, of whom around 4,200 are employed.  The four established Central
European markets are very profitable, earning reported profit before tax for
2006 of £65.7 million (£64.1 million on a pro forma basis) on average
receivables of £293 million and this success has allowed the investment in
opening new markets in Mexico and Romania (with start-up losses for 2006 of
£12.3 million on a pro forma basis).  IHC is well positioned to build on this
success and to grow rapidly by optimising profits from its home credit product
in its established Central European markets, developing the full potential of
the markets currently under development (Mexico and Romania), expanding into
further emerging markets and extending its offering of credit products to the
non-prime market.

The home-collected credit product currently accounts for almost all of the
business of IHC with pilot tests of other credit products being performed in
Poland and the Czech Republic.  Home-collected credit involves the provision of
small sum unsecured cash loans (typically £50 to £700, depending on the market)
normally repayable over 26 to 52 week terms.  The loan is delivered to the
customer's home by an agent (usually within 48 hours of first contact), who is
thereafter the primary customer relationship manager and meets the customer each
week in their home to collect repayments and discuss their requirements for
further loans.  The home visit also enables the agent to gather key income
information about the customer before a loan is granted.

Home-collected credit products are primarily purchased by customers in the
non-prime sector on average to below average incomes who have limited access to
mainstream credit, largely dictated by socio-demographic factors.  Given the
higher credit risk profile of the customer base, the business expects a certain
level of missed payments and factors this into product pricing and its response
to missed payments.  Accordingly, the products are priced transparently, with no
added interest for late payment, no hidden charges and no default charges and
there is scope to take a flexible approach with late paying customers.

Markets and competitive position



IHC currently operates in six emerging markets: Poland, the Czech Republic,
Slovakia, Hungary, Mexico and Romania. These markets share common features:
strong economic growth accompanied by a growing demand for consumer products in
conjunction with an underdeveloped supply of consumer credit.



The table below shows the penetration and the compound annual growth rates of
consumer credit in each market.


                                  Poland        Czech      Hungary     Slovakia      Mexico      Romania
                                             Republic


2006 GDP (US$ bn)                  338.7        137.0        111.1         55.2       840.0        115.3


Population (million)                38.1         10.2         10.0          5.5       107.4         21.6


GDP per capita (US$)               8,883       13,405       11,135       10,133       7,818        5,326


2003 consumer credit market         27.2          9.2         11.3          2.9        68.4          0.5
(US$ bn)


2006 consumer credit market         64.6         25.4         24.9          9.1       124.3          9.1
(US$ bn)


2006 consumer credit market        19.1%        18.6%        22.4%        16.5%       14.8%         7.9%
as % of GDP


2003 to 2006 consumer credit       22.5%        31.1%        26.5%        36.5%       20.5%       134.8%
market CAGR




Unless otherwise stated, market information has been sourced from independent
consumer credit statistics.



The consumer credit industry in all these markets is dynamic, with both new
players entering and increasing consolidation amongst existing providers. The
markets are as yet relatively un-segmented and, to some extent, competitive
positions are transitory with some players likely to be serving customers in
market segments that they will not occupy in the longer term. This situation has
been evolving. In all IHC's markets at the time of its entry there has been a
very small prime segment and large non-prime and unservable segments. The
non-prime segments had in most markets been provided with credit from local
banks and non-bank finance companies on a limited scale. At this stage,
instalment credit provided at the point of sale to customers who could provide a
guarantee was the most common source of credit. As the markets have developed,
the extent and range of credit products provided to near prime customers has
increased and the requirement for guarantors has reduced. At the same time, the
size of the prime and non-prime segments in these markets has increased and the
unservable segments have reduced.

IHC has succeeded in establishing a strong, national market position in the
non-prime segment in all of the Central European markets and has created the
home credit category in all the markets it has entered. Local copycat home
credit providers have emerged and offer some local, but not national,
competition in the home credit category in all markets except Slovakia, where
there is a national competitor. In the Central European markets, customers,
particularly near prime customers, do now have a choice of credit products and
providers and IHC has successfully faced active competition in these rapidly
growing markets in recent years. In Mexico the market is less developed but IHC
believes similar trends can be expected in the future.

11.               Financial information on IHC

The tables below set out IHC's consolidated income statements and balance sheets
for the period indicated and have been extracted from the consolidation
schedules which support the audited financial statements of Provident
for the years ended 31 December 2004, 31 December 2005 and 31 December 2006.
The (?c=64257)nancial information has been prepared in accordance with IFRS.

Summary income statement
                                                                         2004          2005          2006
                                                                           £m            £m            £m

Total income                                                            275.2         364.7         372.5
Total costs                                                           (238.4)       (319.1)       (334.4)
Profit before taxation                                                   36.8          45.6          38.1
Central Europe                                                           49.8          60.7          65.7
Mexico                                                                  (2.3)         (3.1)         (9.7)
Romania                                                                     -             -         (2.4)
UK central costs                                                       (10.7)        (12.0)        (11.3)
Profit before taxation and demerger costs                                36.8          45.6          42.3
Demerger costs                                                              -             -         (4.2)
Profit before taxation                                                   36.8          45.6          38.1
Tax expense                                                            (12.1)        (13.8)        (12.7)
Profit after taxation                                                    24.7          31.8          25.4


The summary income statements above are shown after allocating to IHC a portion
of Provident's corporate overhead in addition to that reflected in the reported
divisional profit. In 2006, the reported divisional profit was £46.2 million and
the additional divisional corporate overhead allocation was £3.9 million, which
gives the profit before tax and demerger costs of £42.3 million set out above.
The income statements do not include the expected full cost of running a
separate corporate office and IT function in Leeds.  It is estimated that
corporate office and IT costs would have been approximately £5.2 million higher
than the Provident allocation included in the 2006 income statement above.

In addition, the above income statements do not take account of the revisions to
the IHC funding structure and financing arrangements following demerger, which
would have resulted in the interest cost in 2006 being approximately £2.8
million lower.

Taking into account all of these adjustments, the pro forma profit before tax
and demerger costs for IHC for the year ended 31 December 2006 was £39.9
million.

Summary balance sheet
                                                                          2004         2005          2006
                                                                            £m           £m            £m
Non-current assets                                                        28.8         38.0          60.2
Current assets
Amounts receivable from customers                                        285.1        328.7         331.0
Other current assets                                                     137.1        182.4         217.4
Total current assets                                                     422.2        511.1         548.4
Current liabilities
Borrowings                                                             (135.4)      (199.1)       (297.8)
Other current liabilities                                               (38.9)       (43.5)        (59.0)
Total current liabilities                                              (174.3)      (242.6)       (356.8)
Non-current liabilities
Borrowings                                                             (244.3)      (242.1)       (169.6)
Other non-current liabilities                                          (10.4)         (8.2)            -
Total non-current liabilities                                          (254.7)      (250.3)       (169.6)
Net assets                                                              22.0         56.2          82.2


Pro forma net assets as at 31 December 2006 are £150.2 million, as adjusted for
a £70 million capital injection from Provident and £2 million of other
adjustments principally relating to demerger costs, giving a pro forma equity to
receivables ratio of 45%.

12.               Current trading of IHC

IHC has made a strong start to 2007 across all markets. The strong improvement
in credit quality seen in Poland during the latter part of 2006 has continued,
and the investment in expanding the agent force during the last quarter of 2006
has resulted in a return to customer growth during the last three months. The
other Central European markets are also performing well, with steady customer
growth and good credit quality.



In Mexico, the main focus has been to improve the quality of the business before
re-commencing the branch network expansion. Nonetheless, customer numbers have
expanded strongly, by 45,000 to 297,000 in total by the end of May 2007, from
the existing infrastructure. An improved collections performance has been seen
across the Puebla region, aided by stronger controls over new credit issued and
significantly improved staff retention which is now at Central European levels.
Guadalajara, the second region under development, continues to perform well. The
start-up losses for Mexico in 2007 are expected to be broadly similar to those
in 2006.

The Romanian pilot continues to perform very well. Rates of customer recruitment
are in line with expectations and customers now exceed 13,000.  Credit quality
also remains good.  National roll-out later in 2007 has recently been approved
and it is expected that the investment in start-up losses in 2007 will be £3 to
£4 million.

13.               Strengths of IHC

IHC believes that its key strengths are as follows:



Proven, self-sufficient business model. The basic home-collected credit model
has been developed and refined in the UK over the past 127 years. IHC has
benefited from the significant knowledge and expertise transferred from the UK
business and has adapted this successful business model to the particular
requirements of each overseas market. IHC expects to generate substantial
surplus capital from its established Central European businesses which it
intends largely to invest in the development of new markets.



Experienced and successful management team. IHC's management team has a strong
track record having been integral to the successful roll-out of the
international home-collected credit business and growing combined revenues to
£365.3 million in 2006 since IHC's inception in 1997. IHC expects to maintain
its knowledge pool, as most of the senior management in the Provident group with
a significant involvement in the IHC business will be remaining with IHC, and to
increase this by the transfer of skills to new recruits.



Effective country entry and expansion model. IHC is experienced in and has a
successful track record of building substantial home-collected businesses from
scratch in emerging markets. IHC has developed stringent selection criteria to
enable it to effectively target countries with emerging economies that offer
attractive returns with acceptable operating and financial risk. Initial
small-scale pilot operations with low fixed-entry costs are then established to
test the operating assumptions and to provide confidence as to long-term
profitability whilst minimising financial exposure. Experienced teams are
available to establish the administrative and physical infrastructure needed to
roll-out to national scale once the pilot has successfully concluded.



Well-developed product offering with high customer satisfaction and retention.
IHC's home-collected credit products and charges are simply structured and
transparent and its service is fast, personal and flexible. Customer acquisition
is achieved through a multi-channel strategy employing a combination of field
marketing techniques allied to extensive use of mass media. The evidence of the
effectiveness of the IHC's overall approach is that the average acquisition cost
across its markets is just £14, compared to the average annual profit per
customer of approximately £40. This equates to less than 5% of average annual
issue value. To encourage customer retention, IHC employs direct mail strategies
built around a bespoke customer relationship management system. Since inception,
over 50% of IHC's customers have taken out more than one loan and, in 2006, over
75% of eligible customers took out a subsequent loan. This is the result of a
number of factors, of which the two most important are high customer
satisfaction (IHC has consistently enjoyed customer satisfaction ratings of 80%
or more) and the 'low and grow' strategy of loan value management, whereby
initial small value loans are gradually increased in size, which helps to
prevent customers from overreaching their capability to repay.



Ability to build effective large scale agency forces. IHC has the ability to
build large networks of agents, who establish strong relationships with
customers in their local areas through the weekly collections process and build
up detailed pictures of customers' financial requirements and repayment
capability. The personal service delivered to customers in their homes is a
differentiating feature of IHC's business and the cornerstone of its success. As
the experience of agents develops, they increasingly make improved lending
decisions, resulting in better collections performance and lower levels of
impairment. Recently this has been supplemented by three new strategies, namely
application scoring, behavioural scoring and centralised, call centre based
arrears management. By rolling out these techniques across its markets, IHC aims
to reduce impairment as a percentage of revenue to around 25% to 30% and IHC's
experience during 2006 has quickly demonstrated that these techniques can
augment and improve agent decision taking and so improve credit performance.



Extensive agency networks and infrastructure. IHC has proven expertise in
establishing and managing substantial branch and agency networks. The full,
national networks already established in Poland, the Czech Republic, Hungary and
Slovakia, which comprise approximately 23,000 agents and 143 branches, enable
cost effective national advertising coupled with fast, local service. This
infrastructure will be further leveraged by the planned extension of the range
of credit products offered.



Flexibility to adapt. Emerging markets have less well-defined markets and
legislative structures and so it is important to be able to adapt to changing
circumstances. IHC's rapid and effective responses to the introduction of an
interest rate cap in Poland and the suspension of lending by the PSZAF in
Hungary demonstrate this flexibility. In Slovakia, IHC's smallest market, the
government is currently considering putting forward legislation to cap APRs.
However, based on the current construction of the cap, IHC is confident that it
will be able to adapt its products to minimise the impact of any such
development.



14.               IHC's strategy

Following the demerger, IHC's objective is to take advantage of the significant
opportunities to capture growth in new and existing emerging markets. Whilst in
the short-term, new market entry start-up losses suppress earnings, IHC's
long-term prospects and profitability will depend on the right mix of starting
up new operations and maximising profitability in its more established markets,
such as Poland and the Czech Republic. IHC's strategy to fulfil this objective
consists of the following key elements:



Increase pre-tax profit from established Central European markets by 50% at
maturity. IHC estimate that annual profits before tax of £95 million would be a
reasonable target for the Central European markets once they reach maturity.
This is expected to be achieved by growing customer numbers, using enhanced
credit scoring techniques and increasing profit margins. Customer numbers are
expected to continue to grow in the established markets as a result of increased
penetration of the potential market. The average loan size is also expected to
rise, firstly as a result of real rises in customers' per capita incomes and
secondly because as the customer base matures a greater proportion of customers
take longer, larger loans. These factors are expected to result in increased
revenue driven by rising customer numbers and real increases in revenue per
customer (with a long-term target of a 20% increase in revenue per customer).
Operating costs per customer are expected to increase by less than revenue
because of the fixed nature of part of the cost base and the increased revenue
per customer, leading to increased profit margins.



Develop Mexico and Romania to achieve their full potential. The Mexican
operation has proved to be IHC's fastest growing business to date, with 297,000
customers as at May 2007. Mexico has a population of 107 million and an IHC
estimated target for a customer base of three million. The intention of IHC is
to roll-out the home-collected credit model on a regional basis, from the
current two up to a maximum of five regions, each with a population of around 20
million. IHC believes that annual profit before tax of £90 million would be a
reasonable long-term target once the Mexican market reaches maturity. Romania is
currently in a pilot phase with full roll-out of the business due to commence in
July 2007. IHC estimates that a reasonable long-term target for the Romanian
business would be 500,000 customers and profit before tax of £20 million.



Expansion into new territories. IHC intends progressively to take advantage of
the potential of several markets which could meet IHC's stringent selection
criteria to launch pilot operations and, if successful, to invest in new
markets. IHC has a target list of eight large markets: Russia, India, the
Ukraine, Brazil, Turkey, Thailand, Vietnam and Argentina. Preparations for
market entry into Russia are well advanced and, subject to confirmatory due
diligence, is expected to occur in late 2007. India and the Ukraine are
candidates for a pilot operation to commence in 2008. IHC will favour investing
in new regions within existing countries ahead of commencing operations in a new
country, in order to yield the highest returns, but it is nevertheless
considering entering three to four new countries in the next five years. IHC
does not intend to operate in mature markets such as the UK, given the
difference in profile to IHC's current operations. In 2006, £12.3 million was
invested in start-up losses in Mexico and Romania on a pro forma basis, which
was equivalent to 24% of IHC's profit before taxation before such start-up
losses. IHC is planning to accelerate the rate of investment in developing new
territories and currently it expects to invest approximately £15 to £16 million
in start-up losses in 2007. These losses in 2007 will principally relate to the
continuing start-up losses from Mexico and Romania. Thereafter, in the
medium-term, the target start-up losses in developing new territories is
expected to be broadly equal to 25% of pre-tax profits before such start-up
losses, with an increasing amount of these losses relating to developing
operations in additional new territories.



Extension of the product range. Having incurred cost to acquire customers, the
profitable retention of these customers is central to IHC's long-term strategy.
Alongside the core weekly home credit product, IHC is therefore developing and
piloting additional credit products that leverage off the agent and branch
infrastructure of the home-collected credit business in order to retain current
customers and to attract new customers in the non-prime markets. Through this
strategy IHC expects to benefit from a growing existing and potential customer
base, as these economies (and customers) evolve and become more sophisticated.



15.               Dividend policy and tax rates

In the absence of unforeseen circumstances, IPF intends to pay a dividend of
4.75 pence per share for 2007 and thereafter to adopt a progressive dividend
policy reflecting the profitability of IHC's businesses as well as its capital
and cash flow requirements, with a medium-term objective of moving to a dividend
payout ratio of approximately 25% of profit after tax. IPF believes that this
will allow the capital requirements of its growth strategy to be met from
retained earnings.



The IHC tax charge and the effective tax rate is a function of the following
features: Operating entities overseas are subject to corporate income tax on
operating profits at lower overseas tax rates than the historic UK rate of 30%.
However, the benefit of taxing overseas profits at lower overseas tax rates is
offset by the increase in the tax charge caused by the relatively high levels of
tax disallowable items, particularly in the Central European jurisdictions. As a
result, IHC's tax rate for 2007 and thereafter is expected to be approximately
30%.



APPENDIX



Set out below is an unaudited pro forma statement of consolidated net assets of
the UK Group as at 31 December 2006, which has been prepared on the basis
described in the notes below to illustrate the effect on the consolidated net
assets of the UK Group of the demerger as if it had occurred at 31 December
2006.  Because of its nature, the pro forma statement addresses a hypothetical
situation and, therefore, it does not represent the UK Group's actual financial
position or results following completion of the demerger and has been provided
for illustrative purposes only.
                                                                 Adjustments
                                    Provident         Sale of     IHC as at         Demerger       Proforma
                                  group as at       Provident        31 Dec      adjustments       UK Group
                                  31 Dec 2006       Insurance          2006                        as at 31
                                                                                                   Dec 2006
                                           £m              £m            £m               £m             £m

                                       note 1          note 2        note 3           note 4
                                                                                      
ASSETS
Non-current assets
Goodwill                                  3.1               -             -                -            3.1
Other intangible assets                  30.0           (4.4)        (14.0)                -           11.6
Property, plant and equipment            58.7           (2.7)        (30.2)                -           25.8
Retirement benefit asset                  8.9            10.0         (0.4)                -           18.5
Deferred tax assets                      30.8           (2.8)        (15.6)                -           12.4
                                        131.5             0.1        (60.2)                -           71.4
Current assets
Financial assets:

-- Amounts receivable from customers:

-            due within one year      1,103.2               -       (312.4)                -          790.8

-            due in more than           129.5               -        (18.6)                -          110.9
             one year
-- Intra-group receivables                  -               -       (157.7)            157.7              -

-- Derivative financial instruments       2.7           (0.2)         (0.6)                -            1.9
 
-- Cash and cash equivalents            438.8         (365.7)        (44.5)                -           28.6

Trade and other receivables              30.6           (4.0)         (6.5)                -           20.1
Insurance assets                         56.2          (56.2)             -                -              -
Current tax assets                        8.1               -         (8.1)                -              -
                                      1,769.1         (426.1)       (548.4)            157.7          952.3

Total assets                          1,900.6         (426.0)       (608.6)            157.7        1,023.7

LIABILITIES
Current liabilities
Financial liabilities:
-- Bank and other borrowings           (87.4)               -         218.4          (144.1)         (13.1)

-- Intra-group borrowings                   -               -          79.4           (79.4)              -

-- Derivative financial instruments    (44.1)             3.5           2.3                -         (38.3)

Trade and other payables              (114.1)            12.6          35.0                -         (66.5)
Insurance accruals and
deferred income
                                      (328.3)           328.3             -                -              -
Current tax liabilities                (37.3)             1.0          21.7                -         (14.6)
Provisions                              (1.8)               -             -                -          (1.8)
                                      (613.0)           345.4         356.8          (223.5)        (134.3)
Non-current liabilities
Financial liabilities

-- Bank and other borrowings          (933.6)           162.7         169.6           (24.6)        (625.9)

                                      (933.6)           162.7         169.6           (24.6)        (625.9)
Total liabilities                   (1,546.6)           508.1         526.4          (248.1)        (760.2)
NET ASSETS                              354.0            82.1        (82.2)           (90.4)          263.5



Notes to the pro forma statement of net assets

1)     The net assets of the Provident group have been extracted
without adjustment from the audited consolidated balance sheet of the Provident
group as at 31 December 2006.

2)     The adjustment reflects the sale of Provident Insurance
which is expected to complete in mid-June 2007 before demerger. The adjustment
comprises:

      a)    the removal of the net assets of Provident Insurance which have been
extracted without adjustment from the consolidation schedules used to prepare
the Provident group consolidation for the year ended 31 December 2006, except
for:

          (i)    the exclusion of the pension asset, net of deferred tax, 
relating to Provident Insurance of £0.7 million which will be retained by 
Provident on completion; and

         (ii)   the exclusion of a dormant subsidiary which had net assets of 
£0.7 million as at 31 December 2006 and will not form part of the sale.

     b)    inclusion of a S75 pension contribution of £10.0 million to be made 
into the Provident group's defined benefit pension schemes by Provident 
Insurance following sale. The net cost of this, being the gross contribution of 
£10.0 million less tax recoverable by the purchaser, will be borne by the 
Provident group as part of an adjustment to the purchase price (see 2c below).

     c)    the net cash inflow from the disposal, amounting to £162.7 million, 
has been assumed to reduce bank and other borrowings and comprises:

                                                                              £m

Gross consideration                                                        170.0
Costs of disposal                                                          (5.4)
Settlement of interest rate swaps, net of tax*                             (5.6)
S75 pension contribution, net of tax                                       (7.0)
Settlement of intra-group debt                                              10.7
                                                                           162.7

*   the interest rate swaps were being held to hedge the interest rate on the
    short-term deposits of Provident Insurance. These have been terminated in
    readiness for completion of the disposal of Provident Insurance.

No tax liability is expected to arise on the disposal profits due to the
availability of substantial shareholdings relief.

3)  The net assets of IHC as at 31 December 2006 have been
extracted from the consolidation schedules which support the audited 
financial statements of Provident for the year ended 31 December 2006.

4)  Demerger adjustments comprise:
                                                    Demerger adjustments
                                             a            b             c         Total
                                            £m           £m            £m            £m
Current assets
Financial assets:
--  Intra-group receivables                  -            -         157.7         157.7
Current liabilities
Financial liabilities:
--  Bank and other borrowings                -            -       (144.1)       (144.1)
--  Intra-group borrowings                   -            -        (79.4)        (79.4)
Non-current liabilities
Financial liabilities:
--  Bank and other borrowings           (70.0)       (20.4)          65.8        (24.6)
NET ASSETS                              (70.0)       (20.4)             -        (90.4)

            Notes:

a)       £70.0 million of capital contributions to be made by Provident into IHC
prior to the demerger.  The capital contributions are assumed to increase bank
and other borrowings.

b)       £20.4 million of further cash costs relating to the demerger (which are
not expected to have a continuing impact) which had not been incurred by the
Provident group as at 31 December 2006.  The costs are assumed to increase bank
and other borrowings.  Total demerger costs, including those incurred in 2006,
are expected to be approximately £40.0 million, comprising the following: £10.5
million of legal and accounting advisors' fees; £9.0 million of financial
advisors' fees; £7.0 million of IT separation costs; £5.5 million of IFRS 2
share-based payment charges; £4.5 million of bonuses; £1.0 million in respect of
establishing IHC's headquarters and £2.5 million of other costs.

c)       On demerger, the amounts outstanding on intra-group accounts will be
immediately settled.  As at 31 December 2006, the UK Group owed IHC a net amount
of £78.3 million comprising amounts due to IHC of £157.7 million and amounts due
from IHC of £79.4 million.  The repayment of the intra-group accounts is to be
funded by external borrowings.

5)                   No account has been taken of the results, cashflows or
other transactions (including the payment of the 2006 final dividend of £56.4
million) of the Provident group since 31 December 2006.


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