St James's Place Regulatory News (STJ)

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ST. JAMES'S PLACE plc

27 St. James's Place, London SW1A 1NR

Telephone 020 7493 8111 Facsimile 020 7493 2382

PRESS RELEASE

25 February 2021

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020

ROBUST NEW BUSINESS AND FINANCIAL PERFORMANCE

St. James's Place plc ("SJP"), the wealth management group, today issues its annual results for the year ended 31 December 2020:

Financial Highlights

· Underlying cash result £264.7 million (2019: £273.1 million)

· Underlying cash basic earnings per share of 49.6 pence (2019: 51.4 pence per share)

· EEV operating profit £919.0 million (2019: £952.0 million)

· EEV net asset value per share £14.49 (2019: £13.20)

· IFRS profit before shareholder tax £327.6 million (2019: £187.1 million)

· IFRS profit after tax £262.0 million (2019: £146.6 million)

Dividend

· 2019 withheld final dividend of 11.22 pence per share to be paid as an interim dividend during Q1 2021

· Proposed final dividend of 38.49 pence per share (2019: nil); full year dividend of 38.49 pence per share (2019: 49.71 pence per share)

Other Highlights

· Gross inflows of £14.3 billion (2019: £15.1 billion)

· Net inflow of funds under management of £8.2 billion (2019: £9.0 billion)

· Funds under management of £129.3 billion (2019: £117.0 billion)

· We are now represented by 4,338 qualified advisers across the Partnership

· Achieved rapid and successful transition to remote working practices, aided by pace of technology investment

· Ambitious set of five year planning assumptions published today together with revised forward-looking dividend guidance

Andrew Croft, Chief Executive Officer, commented:

"2020 was an extraordinary year for individuals, families, businesses and broader societies across the globe, with events shaped by the COVID-19 pandemic that began early in the year. Our lives have been disrupted and we have all had to adapt to protect the physical, mental and financial health of ourselves, our friends and loved ones, our colleagues, and the vulnerable.

Our operations and performance during 2020 were inevitably disrupted by the lockdowns and social distancing. However I am very pleased to report that our business has demonstrated real resilience and made further progress with net inflows of £8.2 billion for the year and funds under management closing at a record £129.3 billion. This outcome was possible because of high client engagement levels, our recent major investment in technology platforms, and the agility of our advisers and employees. Overall, I am very pleased with both our new business and financial results for 2020.

At the outset of the pandemic the Board made the difficult decision to withhold 11.22 pence of the 2019 final dividend, until such time when the financial and economic impact of COVID-19 became clearer. I am pleased to report that we have not needed to utilise those funds and, whilst the pandemic is still on-going, we now have the confidence to pay this withheld amount as a further interim dividend during the first quarter.

The Board has also proposed a final and full year dividend for 2020 of 38.49 pence per share, in line with our existing guidance which is to pay out around 80% of the underlying cash result.

Given the attractive market outlook for our face to face advisory business model, the scale of the business today, and the progress we have made in developing our technology infrastructure, we look to the future with confidence and in our results announcement have set out some of our key new planning assumptions for the next five years. I would highlight our ambition to deliver growth in new business of around 10% per annum which, with modest help from investment markets and continued high retention rates, would see

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funds under management grow to in excess of £200 billion by the end of 2025. Growth on this scale will require continued investment but given the success of our technology initiatives in recent years, we believe overall expense growth can be held to around 5% per annum thereby delivering additional value for shareholders through operational leverage in the cash result. In turn, we are intending to pay-out around 70% of the underlying cash result in dividends annually over the period.

In the near term, whilst we are encouraged by the moderate growth in new business we have seen in the early weeks of 2021, the external environment remains challenging. There remain difficult months ahead but as COVID-19 restrictions ease, we are hopeful there will be an economic recovery and we will see a return to more normal growth in new client investments. The demand for trusted advice is stronger than ever and I am confident that given the quality of The Partnership, the strength of our client proposition, and the resilience of the St. James's Place community, we are ideally placed to continue to grow and deliver on our new five year planning assumptions."

The details of the announcement are attached.

Enquiries:

Analyst results presentation webcast to be hosted at 8:30am GMT

Please click on the link below to join:

https://www.investis-live.com/st-jamess-place/60056d11dd22a114004129c1/poka [investis-live.com]

Following the presentation, a live Q&A session will commence at 9:20am GMT

This can be viewed via the webcast but if you wish to ask questions during this session please dial-in using the details below:

United Kingdom: 0800 640 6441

United Kingdom (Local): 020 3936 2999

All other locations: +44 20 3936 2999

Participant access code: 501438

You will have the opportunity to ask a question. To register, press *1 on your telephone keypad. To remove the question, press *2

Please note that the conference call facility is only available for the live Q&A session.

Replay information:

A recording will be available until Thursday 4th March 2021

UK: 020 3936 3001

All other locations: +44 203 936 3001

Access Code: 397683

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Chief Executive's Report

Introduction

2020 was an extraordinary year for individuals, families, businesses and broader societies across the globe, with events shaped by the COVID-19 pandemic that began early in the year. Our lives have been disrupted and we have all had to protect the physical, mental and financial health of ourselves, our friends and loved ones, our colleagues, and the vulnerable. All of us have had to be agile and adapt to a rapidly changing environment. Some detail on how we at St. James's Place adapted through 2020 is provided on pages 8 and 9.

Our operations and performance during 2020 were inevitably disrupted by the lockdowns and social distancing. However, amidst this most challenging of years, I am very pleased to report that our business has demonstrated real resilience and made further progress, supported by our engagement with our clients, our recent major investment in technology platforms, and the agility of our advisers and employees.

Our people, together with the broader St. James's Place community, have worked commendably in the most trying of circumstances. They have demonstrated once again the core values and behaviours that we hold dear so I would like to thank them all for their hard work, dedication and commitment.

Operating performance

After a strong start to 2020 with 12% growth in gross investments during the first quarter, the impact of the COVID-19 related restrictions in the second and third quarters resulted in gross inflows that were lower than the same periods in 2019. Encouragingly, fourth quarter gross inflows underscored the resilience of our business with a modest improvement on 2019, providing for full year gross inflows of £14.3 billion - 5% lower year on year.

The position for net investments followed a similar pattern, with a full year total of £8.2 billion - 8% lower than in 2019 but still equivalent to 7% of opening funds under management. The ability to attract and retain investments in 2020 is a great demonstration of the strength of relationships our advisers enjoy with their clients.

These strong net flows, together with robust markets, increased funds under management by 11% to a record £129.3 billion at the end of the year.

Financial performance

Whilst the growth in funds under management bodes well for future income, our income in 2020 was impacted by the more challenging new business and investment markets. Despite a more difficult external environment we continued to invest in the business, albeit at a more modest pace.

Once again, the outcome for the year was significantly impacted by the Financial Services Compensation Scheme (FSCS) levy we incurred. Our contribution to the levy in 2020 was £36.7 million some 33% higher than a year ago. Whilst we continue to support an industry safety net for consumers, the increasing size of the levy is a real concern and source of frustration. Good companies are having to continue to fund a significant cost over which they have no control or influence.

Taking all this together, the underlying cash result for 2020 was £264.7 million versus £273.1 million in 2019. Given the unprecedented and challenging conditions during the year, we see this as a very robust outcome.

As we look forward, we must ensure we are an agile and dynamic business, one that is able to flex to the changing needs of both the Partnership and clients. To ensure we have our investment, our resources, and our people in the right areas to drive our business forward, in early 2020 we began a review of how we're organised to deliver against our strategic priorities.

During 2021 we are therefore simplifying our operations where we can, removing duplication of work and stopping those tasks that are now no longer needed. Unfortunately, this streamlining of the business means a loss of around 200 roles from across the St. James's Place business. We hope, however, that a combination of filling vacant roles across the business and a voluntary redundancy programme in appropriate areas, will mitigate the number of individuals impacted by this difficult decision.

2019 withheld dividend

At the outset of the pandemic the Board made the decision to withhold 11.22 pence of the 2019 final dividend, until such time when the financial and economic impact of COVID-19 became clearer. This prudent decision provided the funds to ensure we had the ability and flexibility to continue to provide clients with the quality of service they would need through the Partnership in scenarios that had the potential to become significantly more challenging.

I am pleased to report that those potential scenarios did not come to pass and therefore we have not needed to utilise those funds. Whilst the pandemic is still on-going, we now have greater visibility on the financial and economic impact to-date and a vaccination programme is being rolled out across the UK. These developments, together with the proven financial resilience of the business, gives us confidence to now pay the withheld amount as a further 2019 interim dividend of 11.22 pence per share on 24 March 2021 to shareholders on the register at the close of business on 5 March 2021.

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2020 dividend

The dividend for 2020 has been determined under our existing dividend policy which is to pay out circa 80% of the underlying cash result. No interim dividend for 2020 was declared and the Board is therefore proposing a final dividend of 38.49 pence per share to be paid, subject to approval of shareholders at our AGM, on 21 May 2021 to shareholders on the register at the close of business on 16 April 2021. A Dividend Reinvestment Plan continues to be available for shareholders.

Supporting clients

We seek to give clients the confidence to create the futures they wish for and we recognise that supporting long-term, trusted relationships between our advisers and their clients is critical to achieving that. The value of having a trusted financial adviser was evident in this most challenging of years when market volatility was heightened, economic uncertainty reigned, and concerns over personal health and wealth will have been front of mind for many. In these circumstances, the careful, guiding hand of our advisers will have brought reassurance, comfort and confidence for clients and helped to ensure they remained on track to meet their long-term objectives.

The nature of client engagement did of course change from the physical to the virtual, so it has been important that we and our advisers adapt and evolve our service proposition accordingly. We know, for example, that advisers increased the frequency of their client interactions, making use of virtual meeting platforms to stay in touch with them at a much needed time. We naturally supported this shift and made available to advisers other technological capability to support their client engagement, including the launch of Qwil, a secure messaging app, and DocuSign, an electronic signature tool.

While we look to client and adviser satisfaction as being key yardsticks for the success of our client relationships it is nonetheless pleasing that St. James's Place continues to gain external recognition in the shape of industry awards. The highlight was once again being voted by clients as the 'Wealth Manager of the Year' in the City of London Awards for the sixth successive year, recognition of the consistent quality of our service and client proposition.

We have long recognised that financial advice provides not only financial benefits for clients, but non-financial benefits too, so we were delighted to work with the International Longevity Centre (ILC) in preparing their report that was published in 2020. This report explored the non-financial benefits of financial advice and it found that 'people who take advice are more confident about their financial future and better prepared for retirement' and that 'advice improves financial literacy, confidence, and delivers greater control, reassurance and peace of mind.'

Supporting the St. James's Place Partnership

The Partnership performed tremendously well during a very difficult operating environment in 2020. Our advisers adapted quickly to rapidly changing circumstances, demonstrating real agility and flexibility in order to maintain their support for their clients and keep their businesses healthy. Their efforts have been aided by the investments we have made over time in strengthening our overall support proposition for them, not least in technology and infrastructure.

In 2020 we safely decommissioned our legacy back-office administration systems following completion of migration to our new Bluedoor platform in 2019. The investment we have made into building this new, modern IT platform has already served the business well, providing us with a much greater degree of operational resilience through the pandemic. It has also been key to enabling the rapid deployment of complementary technologies to better service the Partnership and clients during lockdown.

Our collaboration with Salesforce gathered pace through the year and together with Bluedoor we now have a leading, scalable technology infrastructure that will benefit all stakeholders in the years ahead. We will continue to build additional functionality into our back-office systems and broader technology infrastructure, ensuring that we optimise our systems and processes.

Supporting and developing the Partnership has been critical to our success over time and we are pleased to have made further progress in 2020. In addition to the core programmes noted above, we have sought to invest in other ways to make it easier for our advisers to engage with clients and manage their businesses. We believe there is considerable potential for further growth in Partner productivity in the coming years and 'making it easier to do business' will be a key foundation to this outcome.

We retain a strong commitment to growing the Partnership so that we can provide value-added financial advice and services to more clients over time. However, during the COVID-19 crisis we took the deliberate step of slowing experienced recruitment activity. We were mindful that in the face of the challenging external environment, financial advisers across the UK will have rightly been focused on supporting their existing clients and keeping their businesses secure and we therefore did not wish to distract them from this important work.

We also made changes to our Academy programmes, pausing new intakes during the early period of the pandemic and moved all existing cohorts of 'students' to virtual learning environments.

These deliberate actions naturally resulted in lower growth in the Partnership than normal and we ended the year with a total of 4,338 advisers, 1.6% higher than at the end of 2019.

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Our proposition for advisers and clients is stronger than ever, so we remain confident in our ability to attract advisers of the highest calibre to our business. With both the recruitment of experienced advisers and new Academy intakes having now restarted, 2021 will see us getting back to building the Partnership with a recovery in growth to some 3-5% for the year.

Looking further ahead the external market of experienced advisers has not been growing materially and, taking account of the average age of these advisers, we expect the size of the adviser market to reduce in coming years. Consequently, the importance and success of the Academy will be critical to our success in future years. It is therefore pleasing that we start 2021 with 244 'students' in the Academy and we expect to see a further 350 entrants to financial advice join the Academy this year in one form or another.

Investment markets and investment management approach (IMA)

2020 was an extraordinary period for investment markets, with the first half of the year in particular characterised by extreme volatility and the second half seeing strong recovery across many investment markets. Against this backdrop the returns of our portfolios proved resilient helping to keep our clients on track towards their long-term financial goals.

We made a number of changes to our fund range during the year, including the appointment of Somerset Capital Management as the new manager of our Global Emerging Markets fund and the appointment of Pzena Investment Management, Sanders Capital and Artisan Partners to manage our Global Value fund. Later in the year, we strengthened our global equity offering through the redesign of our Global Quality fund. Alongside our Global Growth fund, these multi-manager strategies are a key pillar of global strategic asset allocation within our Growth and Income portfolios and seek to drive client returns by utilising complementary investment styles.

In December, we also evolved our fixed income range with the addition of BlueBay Asset Management to our Global High Yield Bond fund. This provides greater diversification within the fund through increased exposure to emerging market credit.

We were also very pleased to launch an innovative range of funds designed to provide investment solutions around the challenge of decumulation. Our three InRetirement funds are market leading offerings that allow clients, with the guidance of their St. James's Place adviser, to map out their objectives and find a suitable investment solution that is able to support a specific withdrawal profile, according to their specific needs.

St. James's Place has a responsibility to support positive client outcomes through our IMA but also the need to do so in a way that has a positive impact on the world we live in. We are therefore pleased to have delivered on our commitment to have all 39 of our external fund management houses as signatories to the United Nations Principles for Responsible Investment (UNPRI). We have also progressed our client disclosures around responsible investing, launching in July the first of our quarterly Portfolio Carbon Emissions Reports. This level of transparency helps us, advisers and clients consider how the carbon footprint of our portfolios compare to equivalent benchmarks. In line with our goal of greater transparency, in July we also published our first Value Assessment Statements, a detailed review of the value offered by our broad range of unit trust funds.

We strongly believe the developments we implemented in 2020 will continue the on-going journey to future proof our investment proposition and ensure we continue to offer a compelling fund range to our clients.

Asia

Our Asian operations have faced some considerable external challenges over the last two years firstly with the US/China trade rhetoric and the demonstrations in Hong Kong during 2019, and then the COVID-19 pandemic in 2020.

Whilst these challenges naturally impacted our planned growth trajectory, it is nonetheless pleasing to report gross inflows for the year of £321 million, growth of some 27% year on year whilst net inflows were 15% higher at £257 million. Funds under management ended the year 26% higher at £1.2 billion.

We remain confident about the long-term potential for St. James's Place in Asia given both the fundamental attractiveness of the opportunity for high quality wealth management businesses in those markets, and the investment we have already made to develop our scale and capabilities in our chosen territories.

Having reached more than £1bn in FUM, we have moved to prioritise a focus on accelerating the path to cash result profitability. As part of this journey we took the decision to reduce the number of new adviser entrants in the business and therefore ended 2020 with 132 remaining but experienced advisers.

This shift in focus meant that the annual net investment cost for our Asian operations peaked in 2019 with the 2020 net investment reduced. As the income from existing funds under management starts to flow through, we expect the future net investment cost to reduce year by year with the operations becoming cash result positive in 2025.

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Rowan Dartington

Rowan Dartington continues to play an important role in complementing the investment capabilities of our IMA, providing an attractive and differentiated proposition that supports our ability to attract advisers to the Partnership and for our advisers to attract and retain clients.

In 2020, the difficult trading conditions caused by the pandemic also impacted new business for Rowan Dartington with gross inflows some 17% lower at £426 million and net inflows 24% lower at £278 million. Funds under management ended 2020 at £2.9 billion which was 3% higher than the start of the year.

The combination of lower flows and volatile markets reduced the planned income of the business. However, strong expense discipline resulted in a lower net investment cost in 2020 compared to 2019. We expect the investment cost to continue to decline in coming years with the operations becoming cash generative in 2024.

Responsible Business

We aspire to be a leading responsible business, one that demonstrates positive social impact from our core business activities. It was therefore a really proud moment when SJP achieved the Business In The Community - Community Mark, one of only 37 companies worldwide who currently enjoy this status.

A key value of St. James's Place is to give back to those who are less fortunate through the work of the St. James's Place Charitable Foundation. The pandemic had a significant impact on the charity sector, with many fundraising events cancelled. The Foundation was not immune from these challenges, but I'm delighted to announce that our community still raised a fantastic £9 million (including matching) which enabled the Foundation to provide more than £10.5 million of grants to support many great causes through a difficult year. We were also able to advance future commitments and increase the flexibility of our grant giving.

As well as helping those charities with whom the Foundation had an existing relationship, a special Foundation appeal to our community raised £550,000 (including matching) for the National Emergencies Trust and NHS Charities Together, two leading charities involved in the Country's frontline COVID-19 response. The fundraising supplemented a donation of £200,000 by the Foundation to the National Emergencies Trust and a combined Corporate and Foundation donation of £150,000 to the Trussell Trust.

Of equal importance to providing financial support, was providing the time and effort of our people, so during the pandemic we allowed all employees to take unlimited volunteering days.

As covered earlier in my statement, as the custodian of £129.3 billion of our clients' savings and pensions, it is important that we invest this money in a responsible manner, ensuring that we have a positive impact on the world around us. We have developed our approach to responsible investing over time and we are also progressing our reporting frameworks with our Task Force on Climate-related Financial Disclosures (TCFD) report for 2020 to become available on our website. In 2020 we took the important step of joining the Net Zero Asset Owners Alliance (NZAOA), making a public commitment that all our investment portfolios will be carbon neutral by 2050. We have the desire for both ambition and action in order to drive positive change.

New Chair

I am delighted to welcome Paul Manduca to the Board as a Non-executive Director and, subject to regulatory approval, Chair designate. Paul brings a wealth of expertise and experience to the Board and I look forward to working with him in the years ahead.

I would like to take the opportunity to express my sincere thanks to Iain Cornish who will be stepping down from the Board as Chairman at the 2021 AGM. Iain has provided wise and valuable counsel to the Board since joining in 2011 and we wish him well for the future.

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Outlook

2020 was an extraordinary year that will be etched on our memories for many years to come and will have changed how individuals choose to live their lives and set their future aspirations. Against that backdrop, we were delighted with the resilience of the St. James's Place business which again delivered for its clients, Partners shareholders and employees.

During 2020, despite the disruption caused by COVID-19, we continued with our 5 year business planning cycle although we were able to factor in the lessons we have learned from navigating the pandemic. As part of this review, we have tested and refined our planning assumptions for St. James's Place in the light of the attractive market outlook for our face to face advisory business model, the scale of the business we have achieved today with funds under management of £129.3 billion at 31 December 2020, and the ongoing developments we have made to our technology infrastructure. The key planning assumptions for the five-year period are now:

· We believe that the demand for trusted advice and helping individuals' financial wellbeing, is stronger than ever. As the largest wealth manager in the UK, with the quality of The Partnership and the strength of our client proposition, together with the resilience of our community, we are ideally placed to continue to grow gross flows at some 10% per annum.

· This growth will be supported by the continued recruitment of experienced advisers, Academy graduations and an increase in productivity through supporting Partners to grow their businesses and making St. James's Place easier to do business with.

· The advice and service provided to clients by the Partnership, together with their strong relationships and our client proposition, will provide for continued strong retention.

· This continued growth in gross flows and strong retention should see funds under management increase to in excess of £200 billion by the end of 2025. This will, however, be influenced by investment returns.

· Whilst we will continue to invest in the business to support our continued growth and maintain our market leading position, the technological foundations that we have in put in place provide us with greater operating flexibility and efficiency such that our annual expense growth going forward will be around 5%.

· Year by year, growth in the cash income emerging from the release of funds in gestation will support significant growth in the underlying cash result.

· A dividend pay-out ratio set at 70% of the underlying cash result, balancing cash distributions to shareholders and retention in the business, in particular given the change in mix towards pensions business; future interim dividends will be set at 30% of the full year dividend for the prior year. 

Clearly the external environment will be important but achievement of these planning assumptions would see St. James's Place continue to deliver attractive new business growth over the next five years and, underpinned by the release of cash from funds in gestation, significant growth in the cash result and therefore dividends per share.

In the near term, whilst we are encouraged by the moderate growth in new business we have seen in the early weeks of 2021, the external environment remains challenging. There remain difficult months ahead but as COVID-19 restrictions ease, we are hopeful there will be an economic recovery and we will see a return to more normal growth in new client investments.

ANDREW CROFT

Chief Executive

24 February 2021

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COVID-19 Update

The COVID-19 pandemic had an impact across all areas of our business in 2020. Andrew Croft, Chief Executive Officer, answers here some key questions around how the business responded to the pandemic and what lessons have been learned for the future.

What were the key priorities for St. James's Place as the COVID-19 pandemic escalated in early 2020?

Given the speed with which the pandemic escalated here in the UK, our initial focus was on three priorities: first, ensuring the safety and wellbeing of all our people, whether employees or the Partnership; second, optimising our operating systems and processes so that we and our advisers could continue to provide uninterrupted support to clients throughout these difficult and unique times; and third, extending our financial support through the grants provided by the St. James's Place Charitable Foundation to those charities we support.

What steps did you take to address these priority areas?

Having set these priorities in place, we were then able to respond quickly and with clarity of focus. For example, we transitioned rapidly to remote working practices for our people, leveraging the flexibility that already existed within our technology estate. This meant that within a matter of days of the initial national lockdown we had all but a handful of our employees performing critical roles (for example managing the post) working from home. We also recognised the need to consider the physical and mental health of our people in this new environment so we provided staff and their families with access to online 24/7 GP services, mobilised our Mental Health First Aiders to help support our people, and increased the frequency of our communication and engagement with employees to ensure that social distancing did not result in emotional distancing.

From the perspective of our business operations, we have benefited enormously from our investment in re-platforming our UK back-office administration systems to Bluedoor. As well as facilitating electronic straight through processing, Bluedoor enabled us to accelerate the roll out of complementary technology to help advisers continue to support their clients. For example, we launched DocuSign, a secure e-signature system that streamlines document verification, and we launched Qwil, a professional and secure messaging platform that facilitates conversations between advisers and clients. The Partnership naturally seeks to remain close to clients at these times of uncertainty, providing them with continuity of advice and service. Our deployment of these innovative tools has proved helpful to our advisers in achieving this.

We know that we are in a fortunate position to have benefited from such resilience and we do not take this for granted. We have therefore continued to do our best to provide help those for those who need it, particularly through support and funding for charities that are able to make a real difference in people's lives. This has been particularly important during 2020 when the charitable sector has been hit hard by funding challenges. The St. James's Place Charitable Foundation has responded by forward funding its financial commitments to the charities with which it is associated, and by launching a special fundraising appeal, which raised £550,000 from our community, for the National Emergencies Trust and NHS Charities Together. In addition, we allowed our employees to take unlimited volunteering time in support charitable causes.

How did your approach alter as the pandemic evolved over time?

Our aim throughout has been to remain focused on our key priority areas while acting with agility and flexibility to changing circumstances over time. For example, we took heed of Government advice and guidelines to quickly close all of our corporate offices early on in the pandemic, but we were able to re-open them in a COVID-19 safe way and on a case by case basis as and when the Government advice changed accordingly. This was important for us as while we know that our colleagues can work remotely, this will not have been appropriate for all of them.

Another example is the way in which we utilised the breadth of skills and expertise across our business in a more flexible manner during the year. Recognising the need to pivot towards areas of critical business dependency during March and April 2020, we commenced Project Switch, a program to redeploy some staff to those areas for a limited period of time. This proved invaluable in ensuring we continued to deploy appropriate levels of resource into those areas of most pressing operational priority.

How has the pandemic impacted the operating performance of the business during 2020?

Overall, our business has proved resilient in the face of the challenges presented by the COVID-19 pandemic. Having sought to adapt quickly to the new operating environment, we saw the Partnership working hard to support their clients at a time of heightened uncertainty and market volatility. Virtual client meetings replaced physical ones, allowing our advisers to remain in face-to-face contact with their clients at a time when their need for a guiding hand was more important than ever. This meant that retention of client investments remained strong through 2020, and clients continued to invest in order to support their long-term financial objectives.

We have though seen some impact on the ability of advisers to attract new clients as result of lockdowns, tiering systems and general social distancing measures. Technology has played an important role in helping advisers maintain face-to-face contact with existing clients, but there is no substitute for personal, physical introductions in helping to build the levels of trust for new adviser-client relationships.

During 2020, we attracted gross inflows of £14.3 billion, highlighting the enduring attractiveness of our overall proposition for clients, while the retention of over 96% of existing client investments resulted in net inflows of £8.2 billion. We think this is a very creditable outcome given the context of the operating environment we have faced.

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Growth in the Partnership was also impacted by the COVID-19 pandemic in 2020. Sensitive to the challenging external environment for many financial advice businesses across the UK, we decided to slow the pace of our experienced adviser recruitment activity and allow financial advisers to focus fully on looking after their clients and businesses during this time.

We also paused all new intakes to our Academy programmes and moved all existing cohorts of student to virtual learning and assessment. Despite this, continued strong adviser retention coupled with modest recruitment resulted in net adviser growth to 4,338 advisers.

What has been the impact of the COVID-19 pandemic on financial performance during 2020?

From a financial perspective, our fee income was impacted by lower investment market levels, particularly in the first half of the year, as well as more modest new business volumes. We continued to invest into the business in order to underpin future growth and we also accelerated investment into technology in order to facilitate remote client engagement and servicing. However, recognising the more challenging environment we also took measures to limit, postpone or cancel discretionary expenditure where possible and where we could be confident this would not impact on our ability to service clients or the Partnership, nor our ability to accommodate new business growth. Whilst we continue to be a very profitable business, our Underlying cash result has therefore decreased from £273.1 million in 2019 to £264.7 million in 2020.

Importantly, our financial position has remained strong throughout, with the resilience of our solvency position providing protection and comfort for all stakeholders. This reflects the fundamental simplicity of our business model and therefore the way in which we manage our balance sheet, which is to do so prudently in order to ensure we can safeguard our clients' assets and protect our business. We recognise too that in order to be able to ensure our clients' interests are protected, it is important that the Partnership remains in good financial health. During 2020 and in light of the pandemic, we undertook work to consider not only the potential stresses to our solvency and liquidity that could emerge from COVID-19, but also what stresses our Partner businesses might face and therefore what support we might need to extend to them in extremis. This thinking was an important input into the Board's decision, in April, to withhold 11.22p of the proposed 2019 final dividend.

While 2020 was a very challenging year for the Partnership, I am pleased that it has entered 2021 in good shape, both operationally and financially. The COVID-19 pandemic has not ended so we will continue to carefully monitor the risk its presents to our business and the Partnership over time.

What key lessons have you learned from operating during the pandemic?

2020 has been a very challenging year but one in which we have learned numerous lessons. We would highlight the following as being especially important:

First, that an engaged workforce allied to excellent technological capability, means we have been able to work remotely very effectively. While we look forward to the time when we can all come together as colleagues once more, we see the holistic benefits of operating more flexible working practices going forward.

Second, that the Partnership represents a remarkably resilient and agile collective of businesses that really do go the extra mile to support their clients. The challenges of 2020 have been considerable, but the Partnership has adapted admirably to the circumstances, displaying true entrepreneurial spirit.

Third, that we have a community of people within St. James's Place who really do care about helping those who need it. The time and funds that out people have donated to support the St. James's Place Charitable Foundation and other good causes, highlights this key aspect of our shared culture and one that we should be proud to preserve.

How has the outlook for the business changed as a result of COVID-19?

While the COVID-19 pandemic has had a significant economic impact for the UK as a whole and for the personal finances of individuals, it has if anything increased the need for people to seek advice to help them achieve financial wellbeing.

Social distancing and lockdown restrictions have resulted in individuals of all ages becoming even more comfortable with the use of technology, whether to access data and information, or as a channel for communications. We can leverage our scale and the investment we have made into these areas in order to enhance our leading proposition as a wealth management business built on the strength of personal, trusted relationships supported by leading technology.

Providing face-to-face advice in the UK has been increasingly challenging in recent years, with industry advisers facing pressures from increased regulation, economic volatility, changing client expectations and higher professional indemnity costs. The effects of operating during the COVID-19 pandemic have made this environment even more challenging, so St. James's Place remains an attractive proposition for advisers and clients alike. We are therefore confident in our growth prospects.

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Chief Financial Officer's Report

As already stated in the Chief Executive's Report, 2020 was an extraordinary year with events shaped by the COVID-19 pandemic. Despite the disruption the business exhibited resilience, with the Partnership attracting gross inflows of £14.3 billion (2019: £15.1 billion) and net inflows of £8.2 billion (2019: £9.0 billion). The level of economic and financial uncertainty throughout most of the year particularly impacted the pace of discretionary investment flows as some clients took a more cautious approach to investing new funds. We did though continue to see positive net inflows throughout the year as clients, prompted by their advisers, took the appropriate actions in order to ensure they remain well positioned to achieve their long-term financial objectives. As we have seen in periods of market volatility historically, client retention remained strong as our advisers worked hard to provide reassurance and sound counsel in an uncertain environment.

Coupled with the impact of positive investment market returns, this new business performance resulted in funds under management closing at a record £129.3 billion (31 December 2019: £117.0 billion), up some 11% over the year and boding well for the development of our financial results in the years ahead.

The resilience in our new business performance, together with growth in funds under management, has contributed to a robust outcome for our financial results for 2020 as set out below. Despite the challenges of operating during the COVID-19 pandemic, our financial position has also proven resilient with the solvency position of our life companies and the Group as whole exhibiting considerable stability in the face of extreme market volatility. This is attributable to the simplicity of our business and our approach to managing solvency.

Although the COVID-19 pandemic is ongoing, we remain confident in our ongoing prospects and the strength of our balance sheet.

Our financial results are presented in more detail on pages 15 to 33 of the Financial Review, but we provide below a summary of financial performance on a statutory IFRS basis, as well as our chosen alternative performance measures (APMs). We also summarise key developments from a balance sheet perspective and provide shareholders with an overview of capital, solvency and liquidity.

Financial results

IFRS

IFRS profit after tax was £262.0 million in 2020 (2019: £146.6 million). As at half-year, this result has benefited from significant temporary but favourable effects linked to life insurance tax that have arisen as a result of movements in investment markets. We expect this benefit to unwind over time. Further detail on this effect, which we refer to as the impact of policyholder tax asymmetry, is included in the Financial Review on page 19.

To address the challenge of policyholder tax being included in the IFRS results we focus on IFRS profit before shareholder tax as our pre-tax measure. However, for 2020 this metric is also impacted by the effect of policyholder tax asymmetry referred to above. Therefore on this basis the result was significantly higher at £327.6 million for the year (2019: £187.1 million).

The IFRS result also includes the impact of non-cash accounting adjustments such as equity-settled share-based payment expenses, deferred income and deferred expenses, so we continue to supplement our statutory reporting with the presentation of our financial performance using two APMs: the Cash result and the European Embedded Value (EEV) result. Taking each in turn:

Cash result

The Cash result, and the Underlying cash result contained within it, are based on IFRS but adjusted to exclude certain non-cash items, so therefore represent useful guides to the level of cash profit generated by the business. All items in the Cash result, and in the commentary below, are presented net of tax.

During the year, the net income from funds under management was £455.9 million (2019: £424.9 million), representing a margin of 0.63% (2019: 0.63%) on average mature FUM, excluding DFM and Asia FUM, in line with prior guidance. It is only this mature FUM excluding DFM and Asia FUM that contributes to this net income figure and this mature stock of FUM at any given time substantially comprises all unit trust and ISA business, as well as life and pensions business written more than six years ago.

The development of mature FUM year-on-year is dependent on four principal factors:

1. new unit trust and ISA flows;

2. the amount of life and pensions FUM that moves from gestation into mature FUM;

3. the retention of FUM; and

4. investment returns on FUM.

Growth in gestation FUM has been more rapid than growth in mature FUM in recent years, mainly due to the strength of new pensions business following 'pensions freedom'. While this therefore constrains growth in net income from funds under management today, it bodes well for the future as gestation FUM matures and begins making a positive contribution. At 31 December 2020, the balance of gestation FUM stood at £43.4 billion (31 December 2019: £40.2 billion). Once this current stock of gestation FUM has all matured, it will (assuming no market movements or withdrawals) contribute in excess of £365 million to net income from funds under management and hence to the Underlying cash result.

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St. James's Place also generates a margin arising from new business where initial product charges levied on gross inflows exceed new business-related expenses. The reduction in margin arising from new business in 2020 largely reflects the decline in gross flows over the period, although the relationship between the two is not linear.

Establishment expenses in 2020 were £200.0 million (2019: £186.2 million), up 7% over the year and some £3 million below the guidance that we provided last year, reflecting management actions taken as the external environment deteriorated during the year. Management will continue to take a disciplined approach to expense management, deferring or delaying expenditure where possible and where long-term growth and our ability to respond to ongoing challenges presented by COVID-19 will not be compromised.

Operational development costs were £30.7 million (2019: £22.3 million) reflecting a period of considerable investment in the business, laying the foundations for long-term growth. This included developing our collaboration with Salesforce as previously announced. In addition, we accelerated the development of certain projects and technologies to ensure the Group and the Partnership were able to adapt effectively to the remote working environment.

For example, we invested in providing seamless electronic data capture systems, electronic signature capability, and in digital platforms to enable safe and secure virtual interactions between the Partnership and clients. These investments will benefit the business in both the short and long-term. It is worth noting that we are also mindful of increasing cyber risk so continue to take appropriate action to mitigate such risks.

Our contribution to the FSCS levy increased substantially and disappointingly during the year, to £29.7 million, up from £22.3 million in 2019. This reflected a significantly increased rate of levy, over and above the 15% increase we expected at the beginning of the year, exacerbated by a supplementary levy announced in November 2020 and by our growth as a proportion of the FSCS funding classes in which we operate.

Although we are fundamentally supportive of a mechanism that protects consumers, we agree with the comment made by the FCA chair Charles Randell when he said "…all too often, the polluter doesn't pay. The cost of bad behaviour by firms which then fail is usually mutualised through the FSCS, rather than borne by the wrongdoers". We welcome the goal that has been outlined by the FCA of redesigning the system to make the polluters pay.

Reflecting its critical role in providing a source of future organic growth in our adviser population, we continue to invest into building our Academy programmes in order to accommodate additional capacity with greater geographic reach. Academy operations adapted well to COVID-19, with the programme being delivered online for existing participants. However, given the uncertainty and logistical challenges we deferred a number of new entrants into the programmes until 2021, which has resulted in Academy costs decreasing by 13% year-on-year.

We have also further invested in developing our presence in Asia, as well as in discretionary fund management via Rowan Dartington both in the UK and overseas. The growth plans for both of these businesses have been adversely impacted by the financial uncertainties during the year, but both have still managed increases in revenues and disciplined expense management. Our investment for the future also extends to our strategic development costs, with one such example being the costs associated with reconfiguring more than 2,500 Partner websites during the year.

The Underlying cash result, which is a key metric that provides a good indicator of underlying performance and the impact of our investment programmes, was £264.7 million (2019: £273.1 million).

Recognised below the Underlying cash result, our back-office infrastructure activity has been a critical multi-year project. In 2019, the final smooth migration of business was completed which means that all of our core UK business is safely on the Bluedoor platform. We continued to incur decommissioning expenses relating to our legacy systems, and so our back-office infrastructure costs were £10.0 million for the year (2019: £38.8 million) but having sufficiently completed these exercises no further back-office infrastructure costs are anticipated for 2021.

The Cash result in 2020 was therefore £254.7 million (2019: £229.4 million).

EEV

The EEV operating profit is sensitive to new business written within the year and the 5% reduction in gross flows year-on-year is the main factor behind a reduced EEV operating profit of £919.0 million (2019: £952.0 million).

The EEV profit before tax for the period has been significantly impacted by the positive but lower investment return variance of £304.4 million compared to the prior year (2019: £768.6 million). The positive return reflects increased market values across our FUM as a result of stronger markets at year end, following the recovery in the second half of the year.

Key financial position developments

The shareholder, or Solvency II Net Assets Balance Sheet, is one that is derived from the statutory IFRS Statement of Financial Position and a reconciliation between the two can be found on page 25 of the Financial Review. There are several areas that are worthy of note.

Movements in business loans to Partners

Facilitating business loans to Partners is a key way in which we are able to support growing Partner businesses. Such loans are principally used to enable Partners to take on those businesses of retiring or downsizing Partners, and this process creates broad stakeholder benefits. First, clients benefit from enhanced continuity of St. James's Place advice and service over time; second, Partners are able to build and ultimately realise value in the high-quality and sustainable businesses they have created; and finally, the Group and, in turn, shareholders, benefit from high levels of adviser and client retention.

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In addition to recognising a strong business case for facilitating such lending, we recognise too the fundamental strength and credit quality of business loans to Partners. Over more than ten years, cumulative write-offs have totalled less than 5bps of gross loans advanced, with such low impairment experience attributable to a number of factors that help to mitigate the inherent credit risk in lending. These include taking a cautious approach to Group credit decisions, with lending secured against prudent business valuations. Demonstrating this, key loan-to-value (LTV) information is set out in the table below.

If FUM were to decrease by 10%, the Net exposure to loans where LTV is over 100% at 31 December 2020 would increase to £11.3 million.

Our credit experience also benefits from the structure of business loan to Partner repayments. The Group collects advice charges from clients. Prior to making the associated payment to Partners, we deduct loan capital and interest payments from the amount due. This means the Group is able to control repayments.

During the year we have continued to facilitate business loans to Partners, however the balance has remained stable year-on-year as new loans advanced have approximately matched repayments received.

Movements in borrowings

St. James's Place continues to pursue a strategy of diversifying and broadening its access to debt finance. We have done this successfully over time, including the creation and execution of the securitisation vehicle referred to in the previous years. For accounting purposes we are obliged to disclose on our Statement of Financial Position the value of loan notes relating to the securitisation, which has the effect of inflating the reported level of borrowings. However, these are secured only on the securitised portfolio of business loans to Partners, and hence are non-recourse to the Group's other assets.

After adjusting for this non-recourse debt, borrowings have been increasing broadly in line with the scale of the business over recent years, and we remain comfortable not only with our level of borrowings, but also with the headroom we have within our range of facilities. At 31 December 2020 the Total borrowings is temporarily reduced as a result of the with-held dividend payments during the year.

Solvency, capital and liquidity

We continue to manage the balance sheet prudently to ensure the Group's solvency is safely maintained.

Given the simplicity of our business model, our approach to managing solvency remains to hold assets to match client unit-linked liabilities plus a management solvency buffer (MSB). At 31 December 2020 we held surplus assets over the MSB of £717.3 million (2019: £580.6 million). We also ensure that our approach meets the requirements of the Solvency II regime where we have an approach, agreed with the Prudential Regulation Authority (PRA) since 2017, for our largest insurance company, the UK Life company, that targets capital equal to 110% of the standard formula requirement. This is a prudent and sustainable policy given the risk profile of our business which is largely operational.

At 31 December 2020, the solvency ratio for our Life businesses after payment of the year-end intra-Group dividend was 112%, unchanged from the position at the start of the year. For further details, refer to page 32.

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Corroborating our prudent approach to managing the balance sheet, the UK Life company has received an A+ rating from Fitch Ratings during the year.

Taking into account entities in the rest of the Group, the Group solvency ratio at 31 December 2020 was 132% (2019: 132%).

The Group has £1,527.1 million of liquid assets (2019: £1,429.8 million) largely comprising investments in AAA-rated money market funds and cash balances, as demonstrated in the table below. This represents a considerable stock of liquidity and excludes the additional headroom that we have in our borrowing facilities.

Dividends

In April 2020 we announced a decision to retain 11.22 pence per share of the 2019 Final Dividend. As we said at the time the decision to retain this amount was a prudent response to a number of very challenging potential scenarios that could have materialised. 2020 was a very challenging year but these scenarios, which were put together at the point of greatest uncertainty, have not played out and the business has shown resilience throughout. The Board therefore no longer sees a need to continue with this retention and the withheld amount of 11.22 pence per share will be paid as a further 2019 interim dividend on 24 March 2021.

The dividend in respect of 2020 has been determined under our existing dividend policy with a proposal of 38.49 pence per share providing for a pay-out ratio of 78% against the underlying cash result.

During 2020, the Board also considered the way in which future dividends should emerge from the group. Shareholders will recall that there is a dynamic within the IFRS result which defers the recognition of initial cash margin on new business, and that the quantum of this deferral is greater for investment bonds and pensions. Whilst this has always been the case, given the scale of the business and combined investment bond and pension flows today, we expect in a sustained growth scenario, to see a timing gap between the IFRS and the cash result going forward, with cash continuing to emerge ahead of IFRS and therefore distributable profit.

As we look forward, this dynamic of cash earnings emerging faster than distributable profit means that we will be moving to a pay-out ratio of around 70% of the underlying cash result starting in 2021. This move accommodates the timing mismatch between the emergence of cash and distributable profit, allows for continuing investment in the business, and provides certainty and sustainability to our pay-out ratio throughout our planning horizon.

We are also simplifying our approach to Interim Dividends which will now be based on a formulaic approach and will be calculated as being equal to 30% of the prior year ordinary dividend. For 2021, this would be calculated with reference to the 38.49p proposed dividend for 2020.

These moves will provide certainty to the pay-out ratio throughout and beyond our planning horizon.

CRAIG GENTLE

Chief Financial Officer

24 February 2021

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Summary financial information

1 The dividend per share disclosed in 2019 was 49.71 pence, which was prior to the Board's decision in April 2020 to withhold 11.22 pence per share until such a time as the financial and economic impacts of COVID-19 became clearer. The withheld amount of 11.22 pence per share has now been reinstated as a further 2019 interim dividend and will be paid on 24 March 2021 to shareholders on the register on 5 March 2021. For further information, refer to page 3.

The Cash result should not be confused with the IFRS Consolidated Statement of Cash Flows which is prepared in accordance with IAS 7.

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Financial Review

This financial review provides analysis of the Group's financial position and performance.

The Review is split into the following sections:

Section 1: Funds under Management (FUM)

1.1 FUM analysis

1.2 Gestation

As set out in our financial business model below, FUM is a key driver of ongoing profitability on all measures, and so information on growth in FUM is provided in Section 1. Find out more on pages 16 to 18.

Section 2: Performance measurement

2.1 International Financial Reporting Standards (IFRS)

2.2 Cash result

2.3 European Embedded Value (EEV)

Section 2 analyses the performance of the business using three different bases: IFRS, the Cash result, and EEV. Find out more on pages 19 to 31.

Section 3: Solvency

Section 3 addresses Solvency, which is an important area given the multiple regulated activities carried out within the Group. Find out more on pages 32 and 33.

Our financial business model

Our financial business model is straightforward. We generate revenue by attracting clients through the value of our proposition, who trust us with their investments and then stay with us. This grows our funds under management (FUM), on which we receive:

· advice charges for the provision of valuable, face-to-face advice; and

· product charges for our manufactured investment, pension and ISA/unit trust products.

Further information on our charges can be found on our website: www.sjp.co.uk/charges. A breakdown of our fee and commission income, our primary source of revenue under International Financial Reporting Standards (IFRS), is set out in Note 4 on page 50.

The primary source of the Group's profit is the income we receive from annual product management charges on FUM. As a result, growth in FUM is a strong positive indicator of future growth in profits. However, most of our investment and pension products are structured so that annual product management charges are not taken for the first six years after the business is written, so the ongoing benefit of these gross inflows into FUM for a given year will not be seen until six years later. This means that the Group always has six years' worth of FUM in the 'gestation' period. FUM subject to annual product management charges is known as 'mature' FUM. More information about our FUM and the fees we earn on it can be found in Sections 1 and 2 of the Financial Review on pages 16 and 22.

Initial and ongoing advice charges, and initial product charges levied when a client first invests into one of our products, are not major drivers of the Group's profitability, because:

· most advice charges received are offset by corresponding remuneration for Partners, so an increase in these revenue streams will correspond with an increase in the associated expense and vice versa.

· under IFRS, initial product charges are spread over the expected life of the investment through deferred income (DIR - see page 21 for further detail). The contribution to the IFRS result from spreading these historic charges can be seen in Note 4 as amortisation of DIR. Initial product charges contribute immediately to our Cash result through margin arising on new business.

Our income is used to meet overheads, pay the ongoing product expenses and to invest in the business. Overhead expenditure is carefully managed with clear targets set for the core costs of running the Group's infrastructure, which are known as 'establishment expenses'. Other ongoing expenses, including payments to Partners, increase with business levels and are generally aligned with product charges.

The Group invests in order to:

· continue building adviser capacity and attract new funds;

· enhance the Group's future capability to grow over the long term through the Academy, our discretionary fund management proposition, and St. James's Place Asia; and

· develop administration systems and processes that will accommodate growth, contribute to future improvements in Partner and client experience, and reduce the cost of business processing.

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Section 1: Funds under management

1.1 FUM analysis

Our financial business model is to attract and retain FUM on which we receive an annual management fee. As a result, the level of income we receive is ultimately dependent on the value of our FUM, and so its growth is a clear driver of future growth in profits. The key drivers for FUM are:

· our ability to attract new funds in the form of gross inflows;

· our ability to retain FUM by keeping unplanned withdrawals at a low level; and

· net investment returns.

The following table shows how FUM evolved during 2020 and 2019. Investment return is presented net of charges.

Included in the above table is Rowan Dartington Group and St. James's Place Asia FUM of £4.03 billion at 31 December 2020 (2019: £3.74 billion), gross inflows of £0.74 billion for the year (2019: £0.77 billion) and outflows of £0.21 billion (2019: £0.19 billion).

The following table shows the significant net inflows over the past six years, which combined with strong retention have resulted in consistent growth in FUM. FUM has more than doubled over the last five years.

1 Other movements in 2017 related to the matching strategy disinvestment, and in 2016 related to the acquisition of the Rowan Dartington Group.

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The table below provides a geographical and investment type analysis of FUM at 31 December.

1.2 Gestation

As explained in our financial business model on page 15, due to our product structure, at any given time there is a significant amount of FUM that has not yet started to contribute to the Cash result.

When we attract new FUM there is a margin arising on new business that emerges at the point of investment, which is a surplus of income over and above the initial costs incurred at the outset. Within our Cash result presentation this is recognised as it arises, but it is deferred under IFRS.

Once the margin arising on new business has been recognised the pattern of future emergence of cash from annual product management charges differs by product. Broadly, annual product management charges from unit trust and ISA business begin contributing positively to the Cash result from day one, whilst investment and pensions business enter a six-year gestation period during which no net income from FUM is included in the Cash result. Once this business has reached its six-year maturity point, it starts contributing positively to the Cash result, and will continue to do so in each year that it remains with the Group. Approximately 55% of gross inflows for 2020, after initial charges, move into gestation FUM (2019: 56%).

The following table shows an analysis of FUM, after initial charges, split between mature FUM that is contributing net income to the Cash result and FUM in gestation which is not yet contributing, as at the year-end for the past five years. The value of both mature and gestation FUM is impacted by investment return as well as net inflows.

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The following table gives an indication, for illustrative purposes, of the way in which the reduction in fees in the gestation period element of the Cash result could unwind, and so how the gestation balance of £43.4 billion at 31 December 2020 may start to contribute to the Cash result over the next six years and beyond. For simplicity it assumes that FUM values remain unchanged, that there are no surrenders, and that business is written at the start of the year. Actual emergence in the Cash result will reflect the varying business mix of the relevant cohort and business experience.

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Section 2: Performance measurement

In line with statutory reporting requirements we report profits assessed on an IFRS basis. The presence of a significant life insurance company within the Group means that, although we are a wealth management Group in substance with a simple business model, we apply IFRS accounting requirements for insurance companies. These requirements lead to Financial Statements which are more complex than those of a typical wealth manager and so our IFRS results may not provide the clearest presentation for users who are trying to understand our wealth management business. Key examples of this include the following:

· Our IFRS Statement of Comprehensive Income includes policyholder tax balances which we are required to recognise as part of our corporation tax arrangements. This means that our Group IFRS profit before tax includes amounts charged to clients to meet policyholder tax expenses, which are unrelated to the underlying performance of our business; and

· Our policy is to fully match our liabilities to clients, and so policyholder liabilities increase or decrease to match increases or decreases experienced on the assets held to cover them. This means that shareholders are not exposed to any gains or losses on the £126.0 billion of policyholder assets and liabilities recognised in our IFRS Statement of Financial Position, which represented over 97% of our IFRS total assets and liabilities at 31 December 2020.

To address this, we developed APMs with the objective of stripping out the policyholder element to present solely shareholder impacting balances, as well as removing items such as deferred acquisition costs and deferred income to reflect Solvency II recognition requirements and to better match the way in which cash emerges from the business. We therefore present our financial performance and position under three different bases, using a range of APMs to supplement our IFRS reporting. The three different bases, which are consistent with those presented last year, are:

· International Financial Reporting Standards (IFRS);

· Cash result; and

· European Embedded Value (EEV).

APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater insight to the financial performance, financial position and cash flows of the Group and the way it is managed. A complete Glossary of Alternative Performance Measures is set out on pages 68 to 70, in which we define each APM used in our Financial Review, explain why it is used and, if applicable, explain how the measure can be reconciled to the IFRS Financial Statements.

2.1 International Financial Reporting Standards (IFRS)

IFRS profit after tax for the year was £262.0 million (2019: £146.6 million), with the result significantly higher year-on-year primarily due to the impact of an exceptional life insurance tax-related effect arising from the market conditions that prevailed in 2020.

Life insurance tax incorporates a policyholder tax element, and the financial statements of a life insurance group need to reflect the liability to HMRC and the corresponding deductions incorporated into policy charges. In particular, the tax liability to HMRC is assessed using IAS 12 Income Taxes, which does not allow discounting, whereas the policy charges are designed to ensure fair outcomes between clients and so reflect a wide range of possible outcomes. This gives rise to different assessments of the current value of future cash flows and hence an asymmetry in the Condensed Consolidated Statement of Financial Position between the deferred tax position and the offsetting client balance. The positive effect of the asymmetry will be eliminated over time as future cash flows become less uncertain and are ultimately realised. Movement in the asymmetry is recognised in the Condensed Consolidated Statement of Comprehensive Income and analysed in Note 4 Fee and commission income. We refer to it in this Report as the impact of policyholder tax asymmetry.

Under normal conditions this asymmetry is small, but market conditions have resulted in a positive movement of £61.7 million for 2020 (2019: negative movement of £10.0 million), which increases both IFRS profit after tax and IFRS profit before shareholder tax. Ultimately the effect will be eliminated from the Condensed Consolidated Statement of Financial Position, and so it is temporary and we expect it will reverse as markets increase.

To address the challenge of policyholder tax being included in the IFRS results we focus on the following two APMs, based on IFRS, as our pre-tax metrics:

· Profit before shareholder tax; and

· Underlying profit.

Further information on these IFRS-based measures is set out below, on page 20.

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Profit before shareholder tax

This is a profit measure based on IFRS which aims to remove the impact of policyholder tax. The policyholder tax expense or credit is generally matched by an equivalent deduction or credit from the relevant funds, which is recorded within fee and commission income in the IFRS Condensed Consolidated Statement of Comprehensive Income. Policyholder tax does not therefore normally impact the Group's overall profit after tax. As a result, profit before shareholder tax, but after policyholder tax, is typically a useful metric, although it has been distorted by policyholder tax asymmetry in 2020. The following table demonstrates the way in which profit before shareholder tax is presented in the IFRS Consolidated Statement of Comprehensive Income on page 42.

Profit before shareholder tax has increased significantly year-on-year. As with the increase in profit after tax, this reflects the impact of policyholder tax asymmetry, as well as an increase in wealth management fees and a reduction in expenses.

Shareholder tax reflects the tax charge attributable to shareholders and is closely related to the performance of the business. However, it can vary year-on-year due to several factors: further detail is set out in Note 6 Income and deferred taxes.

Underlying profit

This is profit before shareholder tax (as calculated above) adjusted to remove the impact of accounting for deferred acquisition costs (DAC), deferred income (DIR) and the purchased value of in-force business (PVIF).

IFRS requires certain up-front expenses incurred and income received to be deferred. The deferred amounts are initially recognised on the Statement of Financial Position as a DAC asset and DIR liability, which are subsequently amortised to the Statement of Comprehensive Income over a future period. Substantially all of the Group's deferred expenses are amortised over a 14-year period, and substantially all deferred income is amortised over a six-year period.

The impact of accounting for DAC, DIR and PVIF in the IFRS result is that there is a significant accounting timing difference between the emergence of accounting profits and actual cash flows. For this reason, Underlying profit is considered to be a helpful metric. The following table demonstrates the way in which IFRS profit reconciles to Underlying profit.

The impact of movements in DAC, DIR and PVIF on IFRS profit before shareholder tax is further analysed as follows. Due to policyholder tax on DIR, the amortisation of DIR during the year and DIR on new business for the year set out below cannot be agreed to the figures provided in Note 7, which are presented before both policyholder and shareholder tax.

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Net impact of DAC

The scale of the £65.5 million negative overall impact of DAC on the IFRS result (2019: negative £68.5 million) is largely due to changes arising from the 2013 Retail Distribution Review (RDR). After these changes, the level of expenses that qualified for deferral reduced significantly, but the large balance accrued previously is still being amortised. As deferred expenses are amortised over a 14-year period there is a significant transition period, which could last for another four to five years, over which the amortisation of pre-RDR expenses previously deferred will significantly outweigh new post-RDR expenses deferred despite significant business growth, resulting in a net negative impact on IFRS profits.

Net impact of DIR

The reduction in new business in the year means income deferred in 2020 is lower than it was in 2019. Income released from the deferred income liability has reduced slightly reflecting a reduced opening balance. Together, these effects mean that DIR has had a positive £36.4 million impact on the IFRS result in 2020 (2019: £39.9 million positive).

2.2 Cash result

The Cash result is used by the Board to assess and monitor the level of cash profit (net of tax) generated by the business. It is based on IFRS with adjustments made to exclude policyholder balances and certain non-cash items, such as DAC, DIR, deferred tax and non-cash-settled share option costs. Further details, including the full definition of the Cash result, can be found in the Glossary of Alternative Performance Measures on pages 68 to 70. Although the Cash result should not be confused with the IAS 7 Consolidated Statement of Cash Flows, it provides a helpful supplementary view of the way in which cash is generated and emerges within the Group.

The Cash result reconciles to Underlying profit, as presented in Section 2.1, as follows.

1 The impact of policyholder tax asymmetry has been separated from other for 2020. As a result, other has decreased by £10.0 million from those amounts disclosed in 2019. Further information on the impact of policyholder tax asymmetry can be found on page 19.

The decrease in non-cash-settled share-based payments reflects the reduction in expense for adviser share schemes and the impact on employee schemes of the Group's performance during the year.

The most significant impact of deferred tax is recognition in the Cash result of the benefit from realising tax relief. This has already been recognised under IFRS, and hence Underlying profit, through the establishment of deferred tax assets. More information can be found in Note 6.

The impact of policyholder tax asymmetry is a temporary effect due to the market losses experienced during the year. For further explanation, refer to page 19.

Other represents a number of other small items, including the difference between the lease expense recognised under IFRS 16 Leases and lease payments made.

The following table shows an analysis of the Cash result using three different measures:

· Operating cash result 

This measure represents the regular emergence of cash from day-to-day business operations;

· Underlying cash result

This measure includes the cost of a number of strategic investments which are being incurred and expensed in the year, but which are expected to create long-term value; and

· Cash result

This measure includes the short-term costs associated with the back-office infrastructure project together with other items of a one-off nature.

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Consolidated cash result (presented post-tax)

Notes to the Cash result

1. Net income from FUM

The net annual management fee is the net manufacturing margin that the Group retains from FUM after payment of the associated costs, for example, investment advisory fees and Partner remuneration. Each product has standard fees, but they vary between products. Overall post-tax margin on FUM reflects business mix but also the different tax treatment, particularly Life tax on onshore investment business.

As noted on page 17 however, our investment and pension business product structure means that these products do not generate net Cash result, after the margin arising from new business, during the first six years. This is known as the 'gestation period' and is reflected in the reduction in fees in gestation period line. Further information is provided on page 17.

Net income from FUM reflects Cash result income from FUM that has reached maturity, including FUM which has emerged from the gestation period during the year, and this line is the focus of our explanatory analysis. As with net annual management fees, the average rate can vary between time periods with business mix and tax. For 2020, our net income is 0.63% (post tax) of FUM (2019: 0.63%). In 2021, we expect this margin on FUM to remain in the range of 0.63% - 0.65%.

Net income from Asia and DFM FUM is not included in this line. Instead, this is included in the net Cash result presented separately for Asia and DFM.

2. Margin arising from new business

This is the net positive Cash result impact of new business in the year, reflecting initial charges levied on gross inflows and new business-related expenses. The majority of these expenses vary with new business levels, such as the incremental third-party administration costs of setting up a new policy on our back-office systems and payments to Partners for the initial advice provided to secure the clients' investment. As a result, gross inflows are a key driver behind this line.

However, the margin arising from new business also contains some fixed expenses, and elements which do not vary exactly in line with gross inflows. For example, our third-party administration tariff structure includes a fixed fee, and to provide some stability for Partner businesses, elements of our support for them are linked to prior-year new business levels.

Therefore, whilst the margin arising from new business tends to move directionally with the scale of gross inflows generated during the year, the relationship between the two is not linear.

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3. Overhead expenses and development expenses

Expenses are treated in two different ways in the Cash result depending on their type:

i. Overhead expenses, such as establishment expenses, and development expenses which relates to the Group's core business such as back-office infrastructure costs, are presented in separate lines on the face of the Cash result.

ii. Expenses which vary with business volumes, such as payments to Partners and third-party administration expenses, and expenses which relate to investment in specific areas of the business such as DFM are netted from the relevant income lines rather than presented separately.

The table below provides a breakdown of the Group's overhead and development expenses as presented in separate lines in the Cash result.

Overhead expenses

Overhead expenses represent the cost of running the Group.

Establishment expenses have increased by 7% year-on-year, reflecting the continued growth in the scale of the business.

The costs of operating in a regulated sector include regulatory fees and the Financial Services Compensation Scheme (FSCS) levy. On a post-tax basis, these are as follows:

Our position as a market-leading provider of advice means we make a very substantial contribution to supporting the FSCS, thereby providing protection for clients of other businesses in the sector that fail. Over the last few years the levy has been at an elevated level, which was further exacerbated by the FSCS increasing the levy by more than 20% for the current funding year, the announcement of a supplementary levy in November 2020 and the continued relative growth of the Group in the sectors in which we operate.

Academy expenses represent the cost of running our Academy and Next Generation Academy. They have decreased by 13% year-on-year as a result of new intakes into the programme being deferred to 2021 following the onset of COVID-19, partially offset by the costs involved in moving delivery of the programme online for those students currently enrolled.

Development expenses

Operational development costs have increased in 2020 due to further investment, laying the foundations for long-term growth. This includes developing our collaboration with Salesforce as previously announced. In addition, we enhanced our capability to support the Partnership and enable them to service our clients effectively in a remote working environment.

Strategic development costs continue to increase as result of investment in the business, particularly from the creation of regional hubs to better support our Partner practices and the reconfiguration of 2,500 Partner websites.

Costs associated with our Bluedoor back-office infrastructure programme relate to final decommissioning work of our legacy systems, following the final smooth migration of our core UK business onto Bluedoor in 2019. No further back-office infrastructure costs are anticipated for 2021.

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4. Reconciliation to IFRS expenses

In order to reconcile the overhead and development expenses presented on separate lines in the Cash result to the total IFRS expenses set out in the Statement of Comprehensive Income on page 42, the expenses which vary with business volumes and those which relate to investment in specific areas of the business, both of which are included in the Cash result but are netted against the relevant income lines and so cannot be seen explicitly, and certain IFRS expenses which by definition are not included in the Cash result need to be added in.

Expenses which vary with business volumes

Other performance-related costs, for both Partners and employees, vary with the level of new business and the operating profit performance of the business. Payments to Partners, investment expenses and third-party administration costs are met through charges to clients, and so any variation in them from changes in the volumes of new business or the level of the stock markets does not impact Group profitability significantly.

Each of these items is recognised within the net annual management fee or margin arising from new business lines of the Cash result, depending on the nature of the expense.

Other expenses include interest expense and bank charges, operating costs of acquired independent financial advisers (IFAs) and donations to the St. James's Place Charitable Foundation. They are recognised across various lines in the Cash result, including shareholder interest and miscellaneous.

Expenses relating to investment in specific areas of the business

Asia expenses and DFM expenses both reflect disciplined expense control during the year, whilst continuing to invest to support growth. Such investment will continue going forward.

In the Cash result, Asia and DFM expenses are presented net of the income they generate.

Expenses which are not included in the Cash result

DAC amortisation, net of additions, PVIF amortisation and non-cash-settled share-based payment expenses are the primary expenses which are recognised under IFRS but are excluded from the Cash result.

5. Shareholder interest

This is the income accruing on the investments and cash held for regulatory purposes together with the interest received on the surplus capital held by the Group. It is presented net of funding-related expenses, including interest paid on borrowings and securitisation costs.

6. Tax relief from capital losses

In recent years, a deferred tax asset has been established in IFRS for historic capital losses which are regarded as being capable of utilisation over the medium term. The tax asset is ignored for Cash result purposes as it is not fungible, but instead the cash benefit realised when losses are utilised is shown in the tax relief from capital losses line.

Utilisation during the year of £13.7 million tax value (2019: £10.3 million) was slightly ahead of guidance provided at 2020 half-year that gave the expected utilisation for the year of approximately £10 million. While dependent on market performance, we continue to expect utilisation of £8 - £10 million per year.

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7. Miscellaneous

This category represents the cash flow of the business not covered in any of the other categories. It includes ongoing administration expenses and associated policy charges, utilisation of the deferred tax asset in respect of prior years' unrelieved expenses (due to structural timing differences in the life company tax computation) and movements in the fair value of renewal income assets.

8. Asia and DFM

These lines represent the net income from Asia and DFM FUM, including the Asia and DFM expenses set out in Note 4 on the previous page. The growth plans for both of these businesses have been adversely impacted by the financial uncertainties during the year, but both have still managed increases in revenues and disciplined expense management We have continued to invest to support their growth hence their contribution to the Cash result is currently a net expense.

9. Variance

This reflects a number of small non-recurring items incurred during the prior year.

Derivation of the Cash result

The Cash result is derived from the IFRS Consolidated Statement of Financial Position in a two-stage process:

Stage 1: Solvency II Net Assets Balance Sheet

Firstly, the IFRS Consolidated Statement of Financial Position is adjusted for a number of material balances that reflect policyholder interests in unit-linked liabilities together with the underlying assets that are held to match them. Secondly, it is adjusted for a number of non-cash 'accounting' balances such as DIR, DAC and associated deferred tax. The result of these adjustments is the Solvency II Net Assets Balance Sheet and the following table shows the way in which it has been calculated at 31 December 2020.

Adjustment 1 strips out the policyholder interest in unit-linked assets and liabilities, to present solely shareholder-impacting balances. For further information refer to Note 9 Investments, investment property and cash and cash equivalents to the IFRS Financial Statements.

Adjustment 2 removes items such as DAC, DIR, PVIF and their associated deferred tax balances from the IFRS Statement of Financial Position to bring it in line with Solvency II recognition requirements.

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Notes to the Solvency II Net Assets Balance Sheet

1. Property and equipment, and other payables

£133.7 million (2019: £126.6 million) of the property and equipment balance represents the right to use leased assets. It has increased period-on-period as our office footprint has grown. Lease liabilities of £132.7 million are recognised within the other payables line (2019: £118.6 million).

Notes 8 and 11 to the IFRS Financial Statements provide further detail on property and equipment, leases and other payables.

2. Deferred tax assets and liabilities

Analysis of deferred tax assets and liabilities, including how they have moved year-on-year, is set out in Note 6 Income and deferred taxes of the IFRS Financial Statements. The current year presentation of deferred tax assets and liabilities reflects a reassessment of the requirements of IAS 12 Income Taxes, with reference to the netting of certain deferred tax balances. This has resulted in some reallocation of balances between deferred tax liabilities and assets. Prior year comparatives have not been restated, as the changes are not material. Further information is set out in Note 6.

3. Other receivables and other payables

Detailed breakdowns of other receivables and other payables can be found in Note 10 Other receivables and Note 11 Other payables of the IFRS Financial Statements.

Other receivables on the Solvency II Net Assets Balance Sheet have increased from £1,391.9 million at 31 December 2019 to £1,546.2 million at 31 December 2020, principally reflecting an increase in market trade settlements in the life unit-linked funds and consolidated unit trusts.

One of the items within other receivables is the operational readiness prepayment asset. This has arisen from the investment we have made into our back-office infrastructure project, which has been a complex, multi-year programme. In addition to expensing our internal project costs through the IFRS Statement of Comprehensive Income and Cash result as incurred, we have been capitalising Bluedoor development costs as a prepayment asset on the IFRS Statement of Financial Position. The asset, which stood at £313.9 million at 31 December 2020 (2019: £299.2 million) has been amortising through the IFRS Statement of Comprehensive Income and the Cash result since 2017 and will continue to do so over the remaining life of the contract, which at 31 December 2020 is 13 years, following a five-year contract extension agreed with our back-office administration provider during the year.

The movement schedule below demonstrates how the operational readiness prepayment has built up over the past two years.

The amortisation expense is recognised within third-party administration expenses in the IFRS result, and within the net annual management fee and margin arising from new business lines of the Cash result. It is offset by the lower tariff charges on Bluedoor compared to the previous system. The monthly amortisation charge decreased during the year following the agreement of the five-year contract extension with our back-office administration provider. The charge will remain constant year-on-year following the final operational readiness spend planned for 2021. However, the tariff-saving benefits will grow as the business grows, benefiting both the IFRS and Cash results.

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4. Liquidity

Cash generated by the business is held in highly rated government securities, AAA-rated money market funds, and bank accounts. Although these are all highly liquid, only the latter is classified as cash and cash equivalents on the Solvency II Net Assets Balance Sheet. The total liquid assets held are as follows.

The Group's primary source of net cash generation is product charges. In line with profit generation, as most of our investment and pension business enters a gestation period, there is no cash generated (apart from initial charges) for the first six years of an investment. This means that the amount of cash generated will increase year on year as FUM in the gestation period becomes mature and is subject to annual product management charges. Unit trust and ISA business does not enter the gestation period, and so generates cash immediately from the point of investment.

Cash is used to invest in the business and to pay the Group dividend. Our dividend guidance is set such that appropriate cash is retained in the business to support the investment needed to meet our future growth aspirations.

Our most significant investment in the business in recent years has been the development of Bluedoor, which has had a substantial impact on our liquid assets, and borrowings positions. Since the inception of the project in 2014 we have capitalised £406.6 million of development spend on Bluedoor in our operational readiness prepayment asset. This is in addition to £196.3 million of internal project costs that we have expensed as incurred. The total cash outflow on the project is £602.9 million.

5. Borrowings

The Group has two different types of borrowings: senior unsecured corporate borrowings, which are used to manage working capital and to fund investment in the business; and a senior tranche of non-recourse securitisation loan notes, which is secured on a legally segregated portfolio of the Group's business loans to Partners. Holders of the senior tranche of non-recourse securitisation loan notes have no recourse to the assets held by any other entity within the Group.

Further information is provided in Note 12 Borrowings and financial commitments to the IFRS Financial Statements.

6. Income tax liabilities

The Group has an income tax liability of £32.7 million at 31 December 2020 compared to £115.4 million at 31 December 2019. This is due to a current tax charge of £165.4 million and tax paid of £248.1 million during the year. Further detail on the current tax charge and tax paid is provided in Note 6 Income and deferred taxes.

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Stage 2: Movement in Solvency II Net Assets Balance Sheet

After the Solvency II Net Assets Balance Sheet has been determined, the second stage in the derivation of the Cash result identifies a number of movements in that balance sheet which do not represent cash flows for inclusion within the Cash result. The following table explains how the overall Cash result reconciles into the total movement.

2.3 European Embedded Value (EEV)

Wealth management differs from most other businesses, in that the expected shareholder income from client investment activity emerges over a long period in the future. We therefore supplement the IFRS and Cash results by providing additional disclosure on an EEV basis, which brings into account the net present value of the expected future cash flows. We believe that a measure of the total economic value of the Group's operating performance is useful to investors.

As in previous reporting, our EEV continues to be calculated on a basis determined in accordance with the EEV principles originally issued in May 2004 by the Chief Financial Officers Forum (CFO Forum) and supplemented both in October 2005 and, following the introduction of Solvency II, in April 2016.

Many of the principles and practices underlying EEV are similar to the requirements of Solvency II, and we have sought to align them as closely as possible. The table below and accompanying notes summarise the profit before tax of the combined business.

A reconciliation between EEV operating profit before tax and IFRS profit before tax is provided in Note 3.

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Notes to the EEV result

1. Funds management business EEV operating profit

The funds management business operating profit has decreased to £1,077.8 million (2019: £1,121.2 million) and a full analysis of the result is shown below.

The new business contribution for the year at £766.3 million (2019: £793.0 million) was 3% lower than the prior year, primarily reflecting the decrease in new business volumes.

The unwind of the discount rate for the year increased to £279.6 million (2019: £248.5 million). This reflects the higher opening value of in-force business.

The experience variance during the year was £16.9 million (2019: £82.1 million). This reflects positive retention experience offset by increased development expenses during the year.

The impact of operating assumption changes in the year was a positive £10.5 million (2019: negative £9.9 million), reflecting a small reduction in the level of future expenses assumed.

2. Distribution business

The distribution loss includes the positive gross margin arising from advice income less payments to advisers, offset by the costs of investment in growing the Partnership and building the distribution capabilities in Asia. The gross margin has reduced year-on-year due to the fall in gross inflows during 2020. In addition, FSCS levy expenses increased to £25.2 million for the year (2019: £18.9 million), increasing the reported loss.

3. Investment return variance

The investment return variance reflects the capitalised impact on the future annual management fees resulting from the difference between the actual and assumed investment returns. Given the size of our FUM, a small difference can result in a large positive or negative variance.

The typical investment return on our funds during the year was positive 5.5% after charges, compared to the assumed investment return of positive 1.4%. This resulted in a positive investment return variance of £304.4 million (2019: positive £768.6 million).

4. Economic assumption changes

The negative variance of £47.4 million arising in the year (2019: negative £27.0 million) reflects the impact of the decrease in the economic basis arising from reduction in the 10 year Gilt yields over the year.

5. Corporation tax rate change

In the Finance Act 2016, a reduction to the UK main rate of corporation tax to 17% effective from 1 April 2020 was enacted, with the impact incorporated into the deferred tax balances in 2016. However, in the UK Budget of 11 March 2020 it was announced that the rate will remain at 19%, rather than the previously enacted reduction to 17%. This change was substantively enacted on 17 March 2020 and as a result the impact of remeasuring the relevant deferred tax balances has been recognised as a corporation tax rate change in 2020.

New business margin

The largest single element of the EEV operating profit (analysed in the previous section) is the new business contribution. The level of new business contribution generally moves in line with new business levels. To demonstrate this link, and aid understanding of the results, we provide additional analysis of the new business margin (the 'margin'). This is calculated as the new business contribution divided by the gross inflows, and is expressed as a percentage.

The table below presents the margin before tax from our manufactured business.

The overall margin for the year was consistent with 2019 at 5.3%. The change in margin for different business types reflects a reallocation of expenses.

Economic assumptions

The principal economic assumptions used within the cash flows at 31 December are set out below.

The risk-free rate is set by reference to the yield on ten-year gilts. Other investment returns are set by reference to the risk-free rate.

The inflation rate is derived from the implicit inflation in the valuation of ten-year index-linked gilts. This rate is increased to reflect higher increases in earnings-related expenses.

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EEV sensitivities

The table below shows the estimated impact on the reported value of new business and EEV to changes in various EEV calculated assumptions. The sensitivities are specified by the EEV principles and reflect reasonably possible levels of change. In each case, only the indicated item is varied relative to the restated values.

Notes to the EEV sensitivities

1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the sensitivity assumes a corresponding change in all investment returns but no change in inflation.

2. The 10% increase is applied to the withdrawal rate. For instance, if the withdrawal rate is 8% then a 10% increase would reflect a change to 8.8%.

3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in recent years the proportion invested directly in UK and overseas equities has exceeded 70%.

4. For the purposes of this sensitivity only non-fixed elements of the expenses are increased by 10%.

5. This reflects a 100bp increase in the assumed RPI underlying the expense inflation calculation.

Although not directly relevant under a market-consistent valuation, this sensitivity shows the level of adjustment which would be required to reflect differing investor views of risk.

Analysis of the EEV result

The table below provides a summarised breakdown of the embedded value position at the reporting dates.

The EEV result above reflects the specific terms and conditions of our products. Our pension business is split between two portfolios. Our current product, the Retirement Account, was launched in 2016 and incorporates both pre-retirement and post-retirement phases of investment in the same product. Earlier business was written in our separate Retirement Plan and Drawdown Plan products, targeted at the each of the two phases separately, and therefore has a slightly shorter term and lower new business margin.

Our experience is that much of our Retirement Plan business converts into Drawdown business at retirement, but, in line with the EEV guidelines, we are required to defer recognition of the additional value from the Drawdown Plan until it is crystallised. If instead we were to assess the future value of Retirement Plan business (beyond the immediate contract boundary) in a more holistic fashion, in line with Retirement Account business, this would result in an increase of approximately £385 million to our embedded value at 31 December 2020 and 31 December 2019.

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Section 3: Solvency

St. James's Place has a business model and risk appetite that result in underlying assets being held that fully match our obligations to clients. Our clients can access their investments 'on demand' and because the encashment value is matched, movements in equity markets, currency markets, interest rates, mortality, morbidity and longevity have very little impact on our ability to meet liabilities. We also have a prudent approach to investing shareholder funds and surplus assets in cash, AAA-rated money market funds and highly rated government securities. The overall effect of the business model and risk appetite is a resilient solvency position capable of enabling liabilities to be met even through adverse market conditions.

Our Life businesses are subject to the Solvency II capital regime which applied for the first time in 2016. Given the relative simplicity of our business compared to many, if not most, other organisations that fall within the scope of Solvency II, we have continued to manage the solvency of the business on the basis of holding assets to match client unit-linked liabilities plus a management solvency buffer (MSB). This has ensured that not only can we meet client liabilities at all times (beyond the Solvency II requirement of a '1 in 200 years' event), but we also have a prudent level of protection against other risks to the business. At the same time, we have ensured that the resulting capital held meets with the requirements of the Solvency II regime, to which we are ultimately accountable.

For the year ended 31 December 2020 we reviewed the level of our MSB and increased the MSB for the Life businesses to £345 million, reflecting business growth and market conditions.

The Group's overall Solvency II net assets position, MSB and management solvency ratios are as follows.

1 After payment of year-end intra-group dividend.

2 Before payment of the Group final dividend.

Solvency II Balance Sheet

Whilst we focus on Solvency II net assets and the MSB to manage solvency, we provide additional information about the Solvency II free asset position for information. The presentation starts from the same Solvency II net assets, but includes recognition of an asset in respect of the expected value of in-force cash flows (VIF) and a risk margin (RM) reflecting the potential cost to secure the transfer of the business to a third party. The Solvency II net assets, VIF and RM comprise the 'own funds', which are assessed against our regulatory solvency capital requirement (SCR), reflecting the capital required to protect against a range of '1 in 200' stresses. The SCR is calculated on the standard formula approach. No allowance has been made for transitional provisions in the calculation of technical provisions or the SCR.

An analysis of the Solvency II position for our Group, split by regulated and non-regulated entities at the year-end is presented in the table below.

1 After payment of year-end intra-group dividend.

2 Before payment of the Group final dividend.

The solvency ratio after payment of the proposed Group final dividend is 124% at the year-end. The solvency ratio after payment of the Group second interim dividend for the period to 31 December 2019 was 128%.

We continue to target a solvency ratio of 110% for SJPUK, our largest insurance subsidiary, as agreed with our regulator the PRA. As the business grows, the weighting of the balance sheet towards SJPUK will result in a gradual dilution of the Group solvency ratio, but this will not reflect any change in risk appetite, nor risk inherent in the business. The combined solvency ratio for our Life companies, after payment of the year-end intra-Group dividend, is 112% at 31 December 2020, unchanged from the position at the start of the year.

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Solvency II sensitivities

The table below shows the estimated impact on the Solvency II free assets, the SCR and the solvency ratio from changes in various assumptions underlying the Solvency II calculations. In each case, only the indicated item is varied relative to the restated values.

The solvency ratio is not very sensitive to changes in experience or assumptions, and, due to the approach to matching unit-linked liabilities with appropriate assets, can move counter-intuitively depending on circumstances, as demonstrated by the sensitivity analysis presented below.

Notes to the Solvency II sensitivities

1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the sensitivity assumes a corresponding change in all investment returns but no change in inflation.

2. The 10% increase is applied to the lapse rate. For instance, if the lapse rate is 8% then a 10% increase would reflect a change to 8.8%.

3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in recent years the proportion invested directly in UK and overseas equities has exceeded 70%.

4. For the purposes of this sensitivity all expenses are increased by 10%.

5. This reflects a 100bps increase in the assumed RPI underlying the expense inflation calculation.

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Risk and Risk Management

Overview and culture

Effective risk management is critical to the success of the St. James's Place Group. We are exposed to a wide variety of inherent risks due to the business activities and the industry in which we operate. We choose carefully the risks we accept and those to limit or avoid through the design and operation of our client and Partner proposition, including the way in which it is delivered and administered.

In addition, the Group is exposed to a number of current and emerging external factors and trends, including the impacts from COVID-19, political risks such as Brexit, macro-economic factors, cyber crime and climate change, some of which may impact on our short- and/or longer-term profitability. Under the leadership, direction and oversight of our Board, these risks are carefully understood and managed to achieve our strategic objectives.

We do not, and cannot, seek to eliminate risk entirely, rather we seek to understand our risks fully and manage them appropriately. The emphasis is on applying effective risk management strategies, so that all material risks are identified and managed within the agreed risk appetite. Risk management is embedded within our culture and therefore is a core aspect of decision-making.

Risk management forms a key part of the business planning process, including decisions on strategic developments to our client and Partner propositions, investments and dividend payments.

Our risk management and controls framework

The internal control environment is built upon a strong control culture and organisational delegation of responsibility. The 'first line' business is responsible and accountable for risk management. This is then combined with oversight from the 'second line' risk, controls and compliance functions and assurance from the 'third line' internal audit function to form a 'three lines of defence' model.

The risk management and controls framework is the combined processes by which the Group identifies, assesses, measures, manages and monitors the risks that may impact on the successful delivery of its strategic objectives. Based upon our risk appetite, the risks identified are either accepted or appropriate actions are taken to mitigate them.

The Board, through the Risk Committee, takes an active role in overseeing the Risk Management Framework, for which it is responsible. As part of this the Board robustly assesses its principal and emerging risks, which are considered in regular reporting and summarised annually in the Own Risk and Solvency Assessment: Further information on this is provided overleaf.

On behalf of the Board, the Audit Committee takes responsibility for assessing the effectiveness of the Group's risk management and internal control systems, covering all material controls, including financial, operational and compliance controls. It does this via an annual review of risk and control self-assessments and monitoring of the effectiveness of the internal control model throughout the year. The systems have been in place for the year under review and up to the date of approval of the annual report and accounts.

The Board receives regular reports from the Board Risk Committee and Audit Committee and approves key aspects of the Group's Risk Management Framework including the Risk Appetite Statement and Group ORSA.

Our risk appetite

The Board carefully sets its appetite for taking risk against the Group's strategic objectives. These choices are set out in detail in our Risk Appetite Statement, which is reviewed at least annually by the Risk Committee, senior risk owners and the Executive Board risk owners before being approved by the Board. The Risk Appetite Statement also provides clarity over ownership, enabling us to identify the key individuals within the Group who have responsibility for managing these risks.

The Risk Appetite Statement includes a risk appetite scale. This scale has several risk acceptance levels, ranging from no appetite for taking risks at all, through to acceptance of risk. The level of risk we are willing to accommodate will vary depending on individual risk scenarios.

Risk appetite can and will change over time, sometimes rapidly as economic and business environment conditions change, and therefore the statement is an evolving document. A comprehensive suite of Key Risk Indicators (KRIs) is reported regularly to enable the Risk Committee, on behalf of the Board, to monitor that the Group remains within its accepted appetite.

Own Risk and Solvency Assessment (ORSA)

We are classified as an insurance group and are subject to Solvency II insurance regulation. A key part of this regulation requires a consistent approach to risk management across the Group, supported by the production of an annual ORSA, which considers both the individual insurance entities and the Group.

The ORSA process follows an annual cycle, which links the Group's activity and strategic objectives with comprehensive risk assessments that the business faces, and ensures the Group is resilient to stresses in the short term and over a five-year period.

The solvency capital requirement (SCR) for insurers allows for at least a '1 in 200-year' risk event over a one-year time horizon. In addition, severe stresses and scenarios are used to help provide insight into the ability to maintain the regulatory capital in these conditions. Our results show that it would be possible to maintain regulatory capital across the Group under all stresses for the business planning horizon. The outcomes of these activities assist us when considering the calculations and allocation of risk capital to all major

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risks in the Group, and the adequacy of capital positions. This process ensures our continued confidence that the regulated entities remain strongly capitalised.

The ORSA uses a five-year projection period for the medium term. Due to the gestation period across our pension and investment products we do not earn annual management fees in the first six years. As a result, considering a five-year projection period, which is less than the gestation period, is a prudent view of the Group's viability as we consider ongoing revenues generated on existing business only. The ORSA is particularly useful in assessing viability as it involves a comprehensive assessment of risk and capital requirements for the business. Consideration is given to factors or events that impact on our funds under management, investment growth, retention of clients and ability to attract new clients, in addition to the effects of a market downturn. Combinations of these factors are used to form scenarios which are tested, providing for more extreme combinations of events. Therefore, assumptions are robustly analysed to predict both the immediate impact of an event along with the impact over the longer term (in the wake of the event). In addition to these more extreme 'combination' scenarios, assessments are also completed based on more current/topical or emerging risk exposures affecting the Group or financial services more generally.

The ORSA aids decision-making by bringing together the following processes:

· strategic planning;

· risk appetite consideration;

· risk identification and management; and

· capital planning and management.

The ORSA continues to evolve and further strengthen risk management processes throughout the Group.

Current risk environment

Over the past year, the emergence and impact of COVID-19 has been a major external risk event. No event of this nature can be precisely forecast and planned for, however, through our approach to the fundamentals of risk management the Group has been able to demonstrate resilience, from a financial and operational perspective, against COVID-19. We remain confident in our ability to withstand further challenges that may or may not emerge.

The Board has been actively involved in defining the Group's strategic response to COVID-19. Timely and targeted risk-based information has been provided to the Board to support decision-making and help understanding of key issues. We remain acutely aware of the changing threat to health, further restrictions and the longer-term potential macro-economic impacts, however, whilst these could further impact profitability, we continue to be confident of the ongoing resilience to risk and the viability of the Group.

Some of the key risk considerations around COVID-19 for the Group have been and continue to be:

· Safety and wellbeing of employees, Partners, clients and others in our value chain

· Maintaining operational continuity whilst working remotely and social distancing

· The impact on financial markets

· Changes in investor sentiment impacting new business inflows and retention

· Managing risks to client outcomes

· Supporting Partner businesses

· Managing operational risks

When the risk considerations from COVID-19 are broken down in this way, we can recognise that these are risks that the Group is familiar with (and are included in the Principal Risk section) and shown to be resilient through our ongoing stress and scenario testing, as well as financial and operational risk assessments.

The primary financial impact of the pandemic on the Group has been the impact on funds under management due to market performance and the reduction in new business caused by the surrounding uncertainty. However, these financial impacts have not been as severe as our more extreme stress and scenario tests. Our market risk exposure is limited because we hold matching assets for policyholder liabilities and a significant portion of our expenses are variable with the level of funds under management and new business. The Group earns income from funds under management, and although the income varies as funds under management move with markets, this provides financial resilience as it is a reliable income stream even in challenging market conditions. Our clients tend to have medium to long-term investment objectives and so our lapse experience tends to improve as market uncertainty increases; this feature of our experience also helps to provide resilience against challenging market conditions.

The nature of these extreme circumstances also presents increased operational challenges. The primary operational risks are those associated with remote working, particularly since we are an advice-led, face-to-face business. The use of technology has enabled both employees and advisers to maintain the face-to-face element of our operations whilst allowing the flexibility to work remotely, recognising that face-to-face meetings can be carried out virtually through video conferencing tools. However, we acknowledge that remote working has introduced or increased the likelihood of other risks crystallising, such as cyber security for example. The 'first line' in general has taken steps to address new risks or risks that have increased in likelihood as result of remote working. Using cyber security as example, we conduct regular phishing email tests to ensure employees remain vigilant. In most instances our internal controls continue to remain appropriately robust. Where new processes have been created in response to remote working, separate controls have been created and documented to help reduce the risk of an operational failure, with assurance provided by the internal audit function.

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The management decision-making necessary during this time has been appropriately informed by consideration of risks and we are confident that the Group continues to appropriately manage risks including those heightened due to COVID-19. The situation continues to be monitored carefully and we remain focused on understanding the degree to which the various outcomes might impact the operations of the business.

In addition to the uncertainties surrounding COVID-19, the short and longer-term consequences of Brexit impact upon investor sentiment and the wider external environment in which the Group operates. Stress and scenario testing has been performed which demonstrates that the business is resilient and we continually monitor the changing environment, to ensure our analysis and scenario testing remain appropriate.

Principal risks and uncertainties

Whilst the external risk landscape has changed dramatically over the course of the year, causing certain risks to materialise and making further downside risk more likely, the types of principal risks that the Group faces have not changed from the previous year. The strategic areas on which these risks impact, and the high-level controls and processes through which we aim to mitigate them, are set out in the tables on the following pages. Reputational damage and impacts to shareholders and other stakeholders are a likely consequence of any of our principal risks materialising.

The following symbols are used to indicate which primary strategic objectives our principal risks could impact, recognising that they could also have a secondary impact on other strategic objectives.

Key strategic areas

Grow and develop the Partnership

Achieve sustainable growth in profits

Enhance our investment proposition

Attract, retain and develop talent

Deliver positive outcomes to clients

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Emerging risks

Emerging risks are identified through conversations and workshops with stakeholders throughout the business, reviewing academic papers, attending industry events (webinars and in person), and other horizon scanning by Group Risk.

The purpose of monitoring and reporting emerging risks is to give assurance that we are prioritising our response to emerging risks appropriately in our strategy, which is the primary risk management tool for longer-term strategic risks. Examples of emerging risks which have been considered during the year include:

· risks resulting from a failure to demonstrate value for money to clients;

· risks associated with the wider macro-economic environment;

· risks associated with failing to keep our business model relevant to clients' needs;

· risks resulting from failing to adapt to the 'new working world' and the operational challenges it presents;

· risks resulting from a failure to embrace a more digital world;

· risks relating to changes in tax regimes;

· risks relating to changes in regulations;

· risks relating to climate change;

· risks resulting from geo-political events that are unforeseen; and

· risks resulting from a failure to invest in a sustainable manner.

Viability statement

How we assess our viability

The business considers five-year financial forecasts when developing the strategy. These incorporate our budget for the next financial year and four further years of forecasts based on reasonable central assumptions around development of business drivers.

At the core of assessing our viability we seek to understand how different principal risks could materialise. We consider risks which might present either in isolation or in combination and which could result in acute shocks to the business or long-term underperformance against forecasted business drivers. We consider the five-year time horizon sufficiently long to assess potential impacts and ensure that the business could remain viable whilst enacting any management actions to restore the business's prospects.

When considering how the principal risks previously described might impact the business, we consider our ability to deal with particular events such as COVID-19, which may impact one or more of the following key financial drivers:

· Reduction in client retention;

· Reduction in new business relative to forecasts;

· Market stresses;

· Increases in expenses; and

· Direct losses through operational risk events.

We carry out stress and scenario testing on these key financial drivers, alongside operational risk assessments. To provide comfort over viability over the next five years, the scenarios and assessments look at events which would be extreme, whilst still remaining plausible. This work demonstrates that, although there would be impacts on profitability, the Group is resilient and could continue to meet regulatory capital requirements over five years should even the more extreme risks materialise.

As well as robust scenario testing the Directors have given consideration to assessments of the current risk environment, including how risks are managed through controls relative to the risk appetite, and emerging risks.

Example scenario

A wide variety of stresses and scenarios are applied to test all material drivers in a variety of ways to provide understanding of any dynamic impacts. Most recently we have considered the 2021 Bank of England scenario for stress testing banks. Whilst this scenario contains many elements which are not directly relevant to the Group, we have considered how the scenario might impact the business and we believe this would have a less onerous financial impact than the scenarios which we regularly consider.

As an example of a scenario which the business developed and was considered in March 2020, we assessed the direct financial implications of COVID-19 under a range of economic recovery scenarios. Within these scenarios, we modelled and allowed for adverse market movements, a decrease in new business, increased lapses, allowances for large one-off expenses and a reduction in the yield curve (in anticipation of a reduction in base rate).

In our more pessimistic scenario we looked at the immediate impacts and the impact over five years, where we further assumed there was an "L" shaped recovery for new business and market performance over the projection period. That is to say, in this pessimistic scenario, we assumed both the market performance and the impact on new business do not fully recover. As a result, we believe that our 'pessimistic COVID-19' scenario is sufficiently extreme to adequately stress the viability of the business for all plausible impacts on

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the Group which could arise due to COVID-19. In all scenarios, the Group is expected to remain adequately capitalised with sufficient liquid resources and therefore we remain confident of the Group's viability. While we remain viable in these more extreme scenarios, the Group's profits and therefore the dividend diminish.

It is also worth noting that when extreme events materialise, or the level of uncertainty in the external environment increases, management react accordingly by taking appropriate and measured actions. For example, following the initial uncertainty around COVID-19, the Board decided to withhold around one-third of the proposed 2019 final dividend until such a time as the financial and economic impacts of COVID-19 become clearer. This prudent judgement ensured we were able to protect clients and long-term value for shareholders, as it enabled continued investment in the business so we are well placed to benefit from the growth opportunity that will undoubtedly emerge on the other side of the crisis. The Board has since concluded that while 2020 was a very challenging year, the more extreme downside scenarios we had planned for did not materialise and the business has shown resilience throughout. The Board therefore no longer sees a need to continue with this retention and the withheld amount of 11.22 pence per share will be paid as an interim dividend to shareholders.

As a result, we remain confident that the Group is able to respond to any unforeseen events to ensure it remains viable.

Resilience over different time horizons

The table below provides an indication of which risks are relevant over different timeframes and why the Group is considered to be resilient over these timeframes.

Conclusion

In accordance with the UK Corporate Governance Code (Provision 31), the Directors have assessed the Group's current financial position and prospects over the next five-year period and have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due. The Directors believe that the Group's risk planning, management processes and culture allow for a robust and effective risk management environment.

In addition to the assessment of longer-term viability and resilience set out above, the Board has assessed the Group's going concern status. Further information is provided in the Directors' Report in our annual report and accounts.

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Chair's Report

IAIN CORNISH, Chair

Introduction

Last year was a tumultuous one for all of us and I would like to begin my final Chair's review by paying tribute to all the members of the St. James's Place community for their outstanding efforts throughout 2020. Over a sustained period and in circumstances as demanding from a professional and personal perspective as any of us are likely to experience, colleagues throughout the partnership, the business and our key suppliers, performed magnificently to ensure we adapted safely to the challenges of operating in a COVID-19 environment and continued to serve our clients in a highly uncertain environment, as well as support our wider communities in a myriad of different ways. It was humbling to be a part of this and on behalf of the Board my thanks go out to everyone for their efforts during the year.

The Board

The Board significantly adapted its own operations during the year. Our meetings became virtual and they were held with significantly greater frequency as the circumstances required. Our first priority during the year was naturally to the health, safety and support of all members of the St. James's Place community. Beyond this, our focus was on ensuring the resilience of our service to the Partnership and through them to our clients. This is the core of our proposition and the ultimate driver of value to shareholders.

Performance

I am pleased to report that the business and the Partnership responded with agility and adapted rapidly to the transformed operating environment. Whilst the impact of various phases of lockdown on our core face to face proposition was of course considerable, the significant investment we have made in technology over recent years meant we were well placed for our employees, advisers and their support staff to be able to work from home. We did, however, rapidly and safely deploy additional technological functionality, which together with the creative and entrepreneurial approach of the Partnership ensured a personal touch was maintained at a point when it was needed most.

Some aspects of our operations were inevitably impacted; for example we took the decision to moderate adviser recruitment and engaging with new clients was undoubtedly challenging, particularly during the initial lockdown. Our financial results were also impacted by exceptional market volatility during the year. Under these circumstances the Board believes that the 2020 outturn represents a highly creditable performance that shows the underlying resilience of our business. During 2020, net inflows of £8.25 billion represented 7% of opening funds under management, contributing to 11% growth in total funds management for the year and boding well for future financial returns. Given the severity of the external backdrop, we believe too that the underlying cash result for 2020 of £264.7 million is a robust outcome.

In late April the Board took the difficult decision to withhold the previously declared but unpaid 2019 final dividend and not to pay an interim dividend. This decision was taken at a time when uncertainty was at its greatest and was motivated by an abundance of caution. The decision was based on consideration of a number of extremely severe, but not implausible scenarios. Had those circumstances materialised, the Board believed that it would have been in shareholders' interests to ensure that the business remained in a position to fully support the Partnership, and withholding the dividend provided this flexibility. The Board is pleased that these funds have not had to be deployed and that we remain some distance from the extreme scenarios on which the decision was based. The Board therefore no longer sees a need to continue with this retention and the withheld amount of 11.22 pence per share will be paid as an interim dividend to shareholders.

The Board is also pleased to propose a final and full year dividend for 2020 of 38.49 pence per share.

Looking to the future, in light of our planning and growth assumptions as we look out to 2025 and factoring in the likelihood of a sustained timing difference between the emergence of cash and IFRS profits, the Board considers a pay-out ratio of 70% of the underlying cash result as appropriate and sustainable for the duration of our planning horizon and beyond.

Clients

2020 was of course a difficult year for clients with heightened volatility leading to significant uncertainty in global markets, particularly at the outset of the COVID-19 pandemic worldwide. Over the course of the full year, investment market performance varied hugely with the S&P500 and Nikkei 225 for example both in strong positive territory while the FTSE 100 index declined by 14%. This highlights the importance for clients of having globally diversified investment portfolios and why we have evolved and broadened our Investment Management Approach over time.

The Board spent significant time during the year considering the performance and development of the investment proposition in support of our ambition to give clients the confidence to create the futures they want. We published our first Value Assessment Statement and put great emphasis on ensuring that it was set out clearly and transparently in a form that is accessible to clients. The statement demonstrated that the vast majority of client investments are in funds that meet their objectives, but it also highlighted a number of watchlist funds where further action was required. Clear plans have been established to address any issues identified and progress is actively monitored by the board of the Group's unit trust manager as well as the Board.

Further strong progress was made on our approach to responsible investing and we are proud that all of our fund managers are now signatories to the United Nations Principles for Responsible Investment. The Board also spent time considering the future target operating model for investment governance to ensure that it remains fit for purpose for future growth in funds under management.

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The value of advice to our clients goes well beyond narrowly measured investment performance, however, as the professionalism and expertise of our Partnership in helping clients navigate through the turmoil of the year clearly demonstrated.

Colleagues, workforce engagement and culture

I have already talked about the exceptional demands that were placed on colleagues last year, and colleague welfare and wellbeing was central to the Board's deliberations. The Executive placed tremendous emphasis on communication, support, additional technology deployment and adapting ways of working to ensure that the business could continue to operate effectively and to ensure that colleagues could remain connected in a remote working environment - an issue which the Board recognises as having increased importance the longer the pandemic continues. Whilst an immense amount of corporate support has been put in place, the culture of St. James's Place has also come very much to the fore, with colleagues and the Partnership community looking out for each other.

The Board, under the direction of Patience Wheatcroft, continued to operate a full, albeit adapted, programme of employee engagement. A key measure for the Board was the 95% response rate to the biennial employee engagement survey, which recorded staff satisfaction levels at 83%. Notwithstanding the high levels of overall satisfaction, the employee engagement programme did identify a number of themes, principally those associated with a protracted period of homeworking and how future working patterns will evolve, which will be addressed in due course. After nine years on our Board, Patience Wheatcroft will step down at the conclusion of our Annual General Meeting on 17 May 2021. Lesley-Ann Nash has been selected by the Board and has agreed to take on the role as our designated Non-executive Director for Workforce Engagement following the Annual General Meeting. I would like to take this opportunity to thank Patience for her counsel and her effective and valuable contributions to the Board and its Committees during her tenure and wish her every success for the future.

The Board continued its focus on how culture is embedded through the Company's operations. The importance of our unique culture has been fundamental to our success over time but as a business grows it can prove more challenging to transmit the culture consistently. To help us with this we have codified our culture to include everything that has made us successful today and also those aspects of our culture that we wish to evolve. A core element of our culture is giving back, which manifests itself in support for wider the societies in which our business operates. The impact of COVID-19 has illustrated forcefully how much we are part of a wider community and must play our part as an exemplary corporate citizen. Like every other aspect of the business the ways in which we have done this have had to be adapted to the new environment. In recognition of the importance of supporting the efforts of our people, who commit a considerable amount of their own time and money to support local communities, we temporarily released employees with a medical or military background to the NHS, medical organisations, emergency services or armed forces, and we also extended our volunteer allowance from two days to unlimited. The Board and Executive management also chose to donate a proportion of their salaries/fees to the National Emergencies Trust and NHS Charities.

Strategy

Notwithstanding the immediate demands of the environment, we have continued to ensure that focus remains on the long-term development of the business, with a clear focus on delivering sustainable long-term value to shareholders.

The Board remains confident in the fundamental strength of the business and the structural opportunities that exist to drive continued growth. It therefore believes that it is in shareholders' interests that we continue to invest in the business. Early in the year the Board recognised that a period of slower growth coupled with inevitable further uncertainty over the short term necessitated a review of our target operating model. Substantial work has taken place in reviewing the organisational design, and the scope for improving client and adviser service and organisational efficiency, all through the application of technology facilitated by the successful migration to the Bluedoor administration platform in 2019. These reviews have emphasised the importance of ensuring our resource is focused in the right areas and, regrettably, this has meant that we have had to make the tough decision to lose some existing roles from the business. The Board is clear that it is essential that the cost base is managed rigorously and that investment decisions continue to be taken in a disciplined way.

Concluding Remarks

In the most difficult of circumstances St. James's Place delivered a solid performance in 2020 at the same time as taking significant steps to ensure that it remains well positioned for future growth. At the forthcoming Annual General Meeting I will be retiring after nearly a decade on the Board, during the last two years of which I have been privileged to serve as Chair. I am delighted that Paul Manduca has joined the Board and will take over as Chair following the AGM. I would like to thank all my colleagues for the support which they have given me throughout my time on the Board. I wish the entire St. James's Place community all the very best for the future and have no doubt that the Company will continue to prosper.

IAIN CORNISH

Chair

24 February 2021

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Consolidated Statement of Comprehensive Income