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

29 July 2015

INTERIM STATEMENT

FOR THE SIX MONTHS TO 30 JUNE 2015

CONTINUED GROWTH IN FUND FLOWS

AND A 20% DIVIDEND INCREASE

New Investment and Funds under Management

• Gross inflow of funds under management of £4.4 billion (2014: £3.8 billion)

• Continued strong retention of client funds

• Net inflow of funds under management of £2.7 billion (2014: £2.4 billion)

• Funds under management of £55.5 billion (2014: £47.6 billion)

St. James's Place Partnership

• Partnership numbers at 2,194 - up 2.9% since the start of the year

• Total number of advisers at 2,968 - up 4.7% since start of the year

Profit

- EEV basis:

• New business profits of £205.9 million (2014: £181.3 million)

• Operating profit at £265.3 million (2014: £260.7 million)

• Net asset value per share 683.7 pence (2014: 604.9 pence)

- IFRS basis:

• Underlying profit before shareholder tax of £72.9 million (2014: £78.3 million)

• Profit before shareholder tax of £67.0 million (2014: £82.4 million)

• Net asset value per share 189.3 pence (2014: 178.8 pence)

- Cash result:

• Underlying post tax cash result of £84.9 million (2014: £78.5 million)

Interim Dividend

• Interim dividend 10.72 pence per share

Broadening Client Services

• Agreement to acquire Rowan Dartington Holdings Ltd (a provider of discretionary investment and stockbroking services) with in excess of £1 billion funds under management

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David Bellamy, Chief Executive, commented:

"I am pleased to once again be reporting a strong first half performance and continued momentum in all aspects of our business. Against a backdrop of a volatile market, new investments grew to £4.4 billion. Retention of our existing client funds remained consistent with previous years such that net inflows increased to £2.7 billion taking total funds under management at the half year to £55.5 billion, up 6.7% since the beginning of the year.

As our business grows, we continue to seek opportunities to broaden our investment and related services for clients. That was the rationale behind our new banking service, the St. James's Place Money Management account, we introduced in association with Metro Bank earlier this year.

As part of that strategy, today we're pleased to announce that we have entered into an agreement to acquire Rowan Dartington Holdings Ltd, a specialist stockbroking and discretionary investment service. The supplementary services, which include advisory portfolio management, direct equity, trust and charity portfolio management, will broaden the range of investment options we can offer to existing clients and enable us to access new clients who value such services.

Disappointingly, our profits have been impacted by the Financial Services Compensation Scheme levy, which has almost trebled from £6.9 million to £20 million. Despite this significant cost, the sustained growth and maturity of our funds under management continues to provide growth in the underlying post tax cash result and the Board has declared a 20% increase in the interim dividend to 10.72 pence per share.

I am also pleased to report that through the combination of our recruitment efforts in the UK, expansion in Asia and the continued success of our Academy, qualified adviser numbers are up 4.7% since the start of the year, to 2,968.

Our success has been and continues to be built on our fundamental belief in the value of a human relationship and the highly personal interaction, putting the client and adviser at the core of everything we do. If we continue to focus on achieving the best possible outcomes for our clients through the provision of sound advice, a reliable ongoing service and our distinctive approach to the management of their wealth, I am confident we will continue to grow our business in line with our objectives, in 2015 and beyond."

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The details of the announcement are attached.

Enquiries:

Notes to editors:-

St. James's Place has been looking at providing a Discretionary Fund Management (DFM) service for some time and the acquisition of Rowan Dartington Holdings Ltd provides an excellent platform from which to build this additional service for our clients.

The addition of a discretionary and advisory portfolio service, including advisory services, direct equity, trust and charity portfolio management is complementary to our own distinctive investment approach and broadens the range of investment options we can offer clients.

Rowan Dartington Holdings Ltd is a Bristol-based independent wealth manager, established in 1990, which specialises in advisory and discretionary investment management, as well as providing a broad range of stockbroking services. The firm employs around 100 people, including 31 investment executives across 10 regional offices and has in excess of £1 billion funds under management.

The acquisition is subject to regulatory approval.

An interview with David Bellamy, discussing today's results, will be available later today on www.sjp.co.uk

Analyst presentation 10.45am (GMT)

Bank of America Merrill Lynch Financial Centre

2 King Edward Street

London EC1A 1HQ

Alternatively, if you are unable to attend but would like to watch a livestream of the presentation on the day, please click on the link below or via our website

(Live and On-demand):

http://www.investis-live.com/st-jamess-place/559e97b827d29508001fc4f9/hy15 

There will also be a Dial in:

Conference call dial in details:

United Kingdom (Local) 020 3059 8125

All other locations + 44 20 3059 8125

Participant Password: St James's Place

Replay Dial-in details (available for 7 days)

United Kingdom 0121 260 4861

United States 1 866 268 1947

All other locations + 44 121 260 4861

Passcode: 1283311#

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ST. JAMES'S PLACE WEALTH MANAGEMENT

GROSS INFLOWS

FOR THE SIX MONTHS TO 30 JUNE 2015

We have historically reported our new business using both the wealth management measure of fund flows and the life assurance measure of Annual Premium Equivalent (APE). As the APE measure no longer reflects the nature of our wealth management business nor accurately reflects the shareholder value added, we have decided to simplify our new business reporting going forwards (as notified in our press release of 2 July 2015). The reported new business therefore now reflects the gross and net inflows into the Group's funds under management. This measure has been further analysed between investment, pension and unit trust/ISA business. This approach will more closely align reported figures with our business model and with that reported by other wealth management companies.

Historic data for the past five years on this new basis of reporting can be found on our Investor Relations website at http://www1.sjp.co.uk/investor-relations/results-archive/2015.

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INTERIM MANAGEMENT STATEMENT

CHIEF EXECUTIVE'S REPORT

I am pleased to once again be reporting a strong first half performance and continuing growth momentum in all aspects of our business.

Our strategy of building long-term relationships with our clients and providing them with face-to-face advice they can rely on and managing their investments well, is serving our stakeholders well. We are continuing to attract more clients and ultimately growing our funds under management.

As part of that strategy, we continue to seek opportunities to broaden our investment and related services for our clients. Such was the rationale behind our new banking service, the St. James's Place Money Management account, introduced in association with Metro Bank earlier this year.

Similarly, alongside our results we have announced the acquisition of Rowan Dartington Holdings Ltd, a group that specialises in discretionary investment management as well as a range of stockbroking services. The group has a strong management team, led by Graham Coxell, and employs around 100 people, including 31 investment executives, across 10 regional offices and funds under management in excess of £1.1 billion.

Whilst the Discretionary Fund Management (DFM) market is different from our traditional markets, there are a number of parallels, with client relationships managed by an Investment Executive and a focus on building long term relationships, albeit the DFM service is essentially investment-led rather than financial planning-led, with different investment strategies.

In addition to establishing a direct presence in the DFM market this acquisition will provide our Partners with the ability to meet a wider set of clients' investment needs including the management of existing portfolios and direct equity ownership. It also opens opportunities to meet the specific investment requirements of the growing trust and charity sector.

New investment and Funds under Management

Against a backdrop of a volatile market, the momentum continued across all aspects of our business. New investments in the second quarter were up 17% allowing us to report gross inflows of £4.4 billion in the first six months, a 15% increase over the same period last year.

Once again our Partners did an excellent job of looking after clients and this is demonstrated by the continued strong retention of existing funds. Consequently net inflows remained strong at £2.7 billion, which is 5% of the opening funds under management and up 9% on the same period last year, taking our funds under management to £55.5 billion.

Financial Performance

As reported by our Chief Financial Officer, the strong business performance in the first half of the year is reflected in the financial performance for the period, with growth in all the business fundamentals, and in most of the key profit and net asset value measures.

The strength of the financial performance was only marred by the levy charged by the Financial Services Compensation Scheme (FSCS levy) and in particular the very significant increase year on year. We expect the cost for the current period to be some £20 million (£15.9 million post tax), an increase of £13.1 million compared to last year's charge of £6.9 million (£5.3 million post tax), and this significant expense impacts all profit measures.

We are naturally concerned about the scale of this year's levy and the burden on shareholders and will be actively engaging in the FCA's review of the allocation and application of the future levy.

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Dividend

The scale, growth and maturity of our funds under management continues to provide growth in the underlying post tax cash result and this trend is expected to continue.

The interim underlying cash result has, as indicated above, been impacted by a significant increase in the FSCS levy that was both unpredictable and disappointing. Despite this increased cost, the Underlying Cash Result for the six months was up 8% at £84.9 million (30 June 2014: £78.5 million). By way of comparison, if we were to strip out the increase in the FSCS levy the Underlying Cash Result would have been some 22% higher.

Given the business performance, the Board has declared a 20% increase in the interim dividend to 10.72 pence per share and it is our intention, subject to no unforeseen circumstances, to increase the full year dividend by a similar amount.

The interim dividend for 2015 will be paid on 2 October to shareholders on the register at the close of business on 4 September. A Dividend Reinvestment Plan ("DRP") continues to be available for shareholders.

Clients

At the heart of our sustained growth is the importance we place on building and maintaining long lasting relationships with our Partners and clients and serving them well.

We firmly believe that this highly personalised approach has a very strong place in UK financial services both today and in the future. Indeed, the radical and somewhat complex pension changes introduced earlier this year serve as a timely reminder of the increasingly important role that our advisers play in helping clients to understand the options that are available to them so that they can make the right decisions and plan accordingly.

Investment Management

After a positive start to the year, which saw the FTSE 100 index break through the 7,000 threshold for the first time and the S&P 500 index hit a 15 year high, global markets were more volatile in the period from April to June as a number of long running macroeconomic issues came to the fore, including the future of Greece within the Eurozone, the timing of an increase in US interest rates and political uncertainty in advance of the General Election in May.

Despite these more challenging market conditions, I'm pleased to report that our Investment Funds and Portfolios have reassuringly performed in line with our expectations.

Central to our approach is the work our investment committee do in identifying and finding the most talented investment managers globally and making available investment options and portfolios that meet our clients current and future needs. With this in mind, later this year we plan to add two new funds to our range, a Diversified Bond fund and a Strategic Income fund.

As the name suggests, the Diversified Bond fund will be a global bond fund focused on seeking opportunities in the credit markets through the complimentary expertise of specialist investment managers.

The Strategic Income fund will aim to be a genuinely high income fund with a yield of circa 5% after charges, earned by accessing parts of the fixed income and equity markets that are not widely utilised in a typical portfolio. We are in the process of selecting managers who the Committee feel are best placed to access opportunities, whilst placing a great deal of emphasis on risk management.

We believe that the new funds will work well for clients seeking alternative sources of income in retirement and will provide additional capacity and flexibility in bond markets.

The St. James's Place Partnership

Increasing the number of Partners and providing them with the tools and support to deliver high quality outcomes for clients is one of the key drivers to achieving our long-term growth objectives so I am therefore pleased to report that through the combination of our normal recruitment efforts in the UK, expansion in Asia and the continued success of our Academy, qualified adviser numbers increased to 2,968, up 4.7%.

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Our Business Acquisition Managers continue to do an excellent job in attracting high quality businesses to the Partnership, often with more than one qualified adviser. In addition, we're seeing more evidence of our existing Partners investing in their own practices by recruiting advisers to work for them and increasing their support team. Hence the stronger growth in total adviser numbers than Partners and I believe that this bodes well for our continued growth and succession in our Partner businesses.

The qualified adviser growth and practice succession is also being supported through our "next generation" Academy, where we have seen over 40 advisers become fully qualified advisers in their respective businesses, and our now established mainstream Academy through which 25 have already graduated this year. We anticipate a similar number to do so in the second half of the year.

It will take time for our overseas operations to make a material contribution to the Group, given our scale, but in time it will. In the short term, our focus is on building the qualified advisers team. So far this year, albeit from a small base, we've already increased the adviser numbers by 35%, to 70. We've also attracted £27 million of new investments.

In summary, we are confident growth in the number of Partners and qualified advisers is being well served by normal recruitment activity and our initiatives in the Far East, the Academy, next generation Academy and the development of existing Partner practices. As we look ahead, we see additional opportunities for growth in the DFM market.

'Back-office' Administration

The roll out of our new back office system continues following the unification of our admin teams last year under the single management of IFDS. Having successfully transferred the administration of some of the pensions business, we have also begun processing certain other classes of business on the new platform. We will continue this transition in the coming months and expect to see the financial as well as the business benefits of this important investment begin to crystallise in 2016.

Partners, Employees and the St. James's Place Foundation

I'd like to once again thank the entire St. James's Place community for these results. There is no doubt in my mind that the strength and continued growth of the business is due to their hard work, dedication and commitment to clients and each other.

The St. James's Place Foundation has always been an important part of the Group's culture and we aim to make a significant difference to the lives of those less fortunate than us.

Already this year we have raised in excess of £4 million through the collective efforts of the whole of our community, including employees, Partners, advisers, suppliers and others connected to SJP.

I would like to thank everyone, including our shareholders, for their continued support in helping to raise such impressive sums.

Outlook

Our success has been and continues to be built on our fundamental belief in the value of a human relationship and the highly personal interaction, putting the client and adviser at the core of everything we do. If we continue to focus on achieving the best possible outcomes for our clients through the provision of sound advice, a reliable ongoing service and our distinctive approach to the management of their wealth, I am confident we will continue to grow our business in line with our objectives, in 2015 and beyond.

David Bellamy

Chief Executive

28 July 2015

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INTERIM MANAGEMENT STATEMENT

CHIEF FINANCIAL OFFICER'S REPORT

The strong business performance in the first half of the year is reflected in the financial performance for the period, with growth in all the business fundamentals, and in most of the key profit and net asset value measures.

The strength of the financial performance was, however, adversely impacted by a very significant increase in the levy charged by the Financial Services Compensation Scheme (FSCS levy). We expect the cost for the current period to be some £20 million (£15.9 million post tax), an increase of £13.1 million compared to the prior year charge of £6.9 million (£5.3 million post tax). This significant expense negatively impacts all profit measures.

Despite the impact of the FSCS levy most profit measures continued to grow and in particular the Underlying Cash Result, which has enabled the Board to propose a 20% increase in the dividend.

Financial results

Shareholders will be aware that we report our results on both IFRS and EEV bases, as well as providing further detail on the cash emergence from the business. Detailed explanation and analysis of these measures is provided on pages 11 and 12.

IFRS Result

To aid investors in understanding the IFRS result we present both the Profit before shareholder tax, which removes the impact of policyholder tax, and an Underlying profit before shareholder tax measure, which adjusts the profit before shareholder tax for movements in intangible assets and liabilities (DAC/DIR/PVIF see page 18).

We regard the Underlying profit measure as the most appropriate measure, based upon IFRS, for assessing operating performance.

The performance on these measures is noted in the table below:

Both measures have been impacted by the £13.1 million increase in the FSCS levy and, as anticipated when we last reported, the Profit before shareholder tax result has also been adversely effected by a reduction of £10.0 million in the DAC/DIR/PVIF adjustments.

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Cash Result

At £84.9 million (30 June 2014: £78.5 million), the Underlying Cash Result for the six months was up 8%, reflecting the strong underlying growth in income from Funds under Management (up 19%), partially offset by the additional FSCS levy (£10.6 million post-tax). For comparison, if we were to adjust for the increase in the FSCS levy, the Underlying Cash Result would have been some 22% higher.

Taking into account the cost of our investment into the back office infrastructure and other timing variances, the Cash Result was £81.8 million (30 June 2014: £60.1 million).

EEV Result

The EEV New Business Profit was up 14% during the period at £205.9 million (30 June 2014: £181.3 million), reflecting the strong gross inflows.

We were also pleased to note the continuing positive experience variance from better than assumed retention of client funds, and as a result the EEV Operating Profit for the period was £265.3 million (30 June 2014: £260.7 million). This increase reflects the increase in EEV New Business Profit (above), and is despite the impact of the FSCS levy. The 2015 result is also negatively impacted by a lower opening risk discount rate (5.0% in 2015 v 6.2% in 2014), resulting in a lower contribution from the unwind of discount rate of some £20.7 million.

The net asset value per share on an EEV basis at the end of the period is 683.7 pence, up 4% since the start of the year.

Dividend

At the time of the 2014 final results we increased the final dividend by 50% giving a full year dividend of 23.3p per share, growth of 46%. This represented an underlying cash pay-out ratio of 69% and we indicated our intention to increase this pay-out ratio to 75% in the coming years.

Given the continued strong performance of the business and the growth in the underlying cash result in the six months, the Board has declared an interim dividend of 10.72p per share, up 20%. It is our intention, subject to no unforeseen circumstances, to increase the final dividend at a similar rate.

Capital

We continue to manage the balance sheet prudently to ensure the Group's solvency is maintained safely through the economic cycle. This is important not only for the safeguarding of our clients' assets, but also to ensure we can maintain returns to shareholders.

Following the period end we have refinanced and extended our borrowing arrangements, providing us with funding for the acquisition announced this morning and committed facilities for the future should they be required.

Concluding remarks

2015 has started with another strong financial performance, albeit negatively impacted by the significant increase in the FSCS levy. In particular the Cash Result has continued to grow during the period and we are positive about the future, giving us confidence to increase the interim dividend by 20% and declare our intention to increase the full year dividend at a similar rate.

In summary, our core business and its financials are in good shape and well set for further growth. Taking advantage of this strong position we are now laying the foundations for future growth in the business, not only in our core business but also in Asia and with the acquisition of Rowan Dartington announced this morning.

Andrew Croft

Chief Financial Officer

28 July 2015

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INTERIM MANAGEMENT STATEMENT

FINANCIAL REVIEW

The Financial Model

The Group's strategy is to attract and retain retail Funds under Management (FUM) on which we receive an annual management fee for as long as we retain the funds. This is the principal source of income for the Group out of which we meet the overheads of the business, invest in growing the Partnership and invest in acquiring new funds under management.

The level of income is dependent on the level of client funds and the level of asset values. In addition, since much of our business does not generate net cash in the first six years, the level of income will increase as a result of new business from six years ago becoming cash generative. This deferral of cash generation means the business always has six years' worth of funds in the 'gestation' period.

Group expenditure is carefully managed with clear targets set for growth in establishment expenses in the year. Many other expenses increase with business levels and are met from margins in the products (see page 34). However, the Group also invests in new client services, computer systems and other corporate initiatives, all of which are reported as development expenditure.

A small proportion of Group expenditure is required to support management of existing funds, but the majority of expenditure is investment in growing the Partnership and acquiring new funds. The resulting new business is expected to generate income for an average of 14 years, and is expected to provide a good return on the investment (see page 26).

As the business matures, the proportion of the cash emergence from the existing business required to support the acquisition of new business is reducing. This has resulted in strong growth in underlying cash emergence in recent years which has ultimately fed through to growth in the dividend.

Profit Measurement

In line with statutory reporting requirements we report profits assessed on an IFRS basis. However given the long-term nature of the business and the high level of investment in new business generation each year, management believes the IFRS result does not provide an easy guide to the cash likely to emerge in future years, nor does it reflect the total economic value of the business. We therefore complement our statutory IFRS reporting with additional analysis.

Firstly, we provide additional analysis in relation to the tax reported under IFRS. The IFRS methodology requires that the tax recognised in the financial statements should include the tax incurred on behalf of policyholders in our UK life assurance company. Since the policyholder tax charge is unrelated to the performance of the business, management believes it is useful to separately identify the profit before shareholder tax. This measure reflects the profit before tax adjusted for tax paid on behalf of policyholders.

Secondly, the IFRS standards promote recognition of profits in line with the provision of services and so, for long-term business, some of the initial cash flows are spread over the life of the contract through the use of intangible assets and liabilities (known as DAC - Deferred Acquisition Costs and DIR - Deferred Income). Our products are typically well matched in relation to initial charges to meet initial costs, and this treatment results in the establishment of largely offsetting DAC and DIR balances. However, the implementation of the changes to adviser charging rules in 2013 resulted in changes to the nature of some of those cashflows, moving them from long-term manufacturing margins to short-term advice margins, which resulted in significant accounting presentation changes despite the fundamentals of our vertically-integrated business remaining unchanged. Management has therefore developed a new 'non-GAAP' Underlying profit measure which doesn't have the complexity associated with these adjustments since it is derived from the IFRS profit by adjusting for these intangibles. This measure was reported for the first time in the 2014 Annual Report and Accounts. Management regards the Underlying profit measure as the most appropriate measure, based upon IFRS, for assessing operating performance.

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The cash result measure was developed with the aim of assisting investors seeking to understand the sources of cash emergence and to create a measure which more reflected the underlying cash generated by the business.

It is similar to the underlying profit measure in that it is based upon the IFRS result adjusted for the DAC, DIR and PVIF intangibles, but also for deferred tax and share-option costs. In addition it also includes adjustments to reflect solvency constraints on profits emerging from regulated companies such as our insurance businesses.

Since the cash result can be impacted by one off items, timing variances and changes in insurance reserves, management believes it is also useful to present an underlying cash result, which excludes these effects. Neither of the cash result measures should be confused with the IFRS cash flow statement which is prepared in accordance with IAS 7 and disclosed on page 54.

It is the underlying cash result that the Board considers when determining the dividend payment to shareholders.

As noted previously, the reported results reflect strong investment in new business each year. Management believes it is useful to understand the contribution to profits from the in-force business separately, as this reflects the value being generated by the underlying business. We therefore provide breakdown of the cash result, identifying the new business impact and making clear the ongoing contribution from the established business.

Finally, we also present an embedded value result. Management believes this is particularly useful for investors seeking to assess the full value of the long-term emergence of shareholder cash returns, since it includes an asset in the valuation reflecting the net present value of the expected future cash flows from the business. This type of presentation is also commonly referred to as a 'discounted cash flow' valuation. Our embedded value is based on the EEV principles, which were set out as an industry standard by the Chief Financial Officers (CFO) Forum in 2004.

Many of the future cash flows derive from fund charges, which change with movements in stock markets. Since the impact of these changes is unrelated to the performance of the business, management believes that the EEV operating profit (reflecting the EEV profit before tax, adjusted to reflect only the expected investment performance and no change in economic basis) provides the most useful measure of performance in the year.

Given the importance of Funds under Management (FUM) to profit generation by the business we have provided an analysis of the FUM development and make-up in Section 1. Sections 2-4 provide commentary on the performance of the business on the IFRS, Cash and EEV result bases; whilst Section 5 covers expenses and other matters of interest to shareholders.

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SECTION 1: FUNDS UNDER MANAGEMENT

During 2015 we have seen gross inflows of funds under management of £4.40 billion (30 June 2014: £3.84 billion), up 15% and a net inflow of £2.67 billion (30 June 2014: £2.44 billion) growth of 9%. This result combined with a positive investment performance, provided for total funds under management of £55.5 billion.

Analysis of the development of the funds under management is provided in the following tables.

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Notes:

1. Regular income withdrawals represent those amounts selected by clients which are paid out by way of periodic income. The withdrawals are anticipated in the calculation of EEV New Business Profit.

2. Maturities are those sums paid out where the plan has reached the selected maturity date (e.g. retirement date). The expected maturity date is anticipated in the calculation of EEV New Business Profit.

3. Surrenders and part surrenders are those amounts where clients have chosen to withdraw money from their plan. Surrenders are assumed in the calculation of the EEV New Business Profit and the level is based on analysis of actual experience taking into account plan duration and the age of the client. The implied surrender rate shown in the table above is very much a simple average and reflects only recent experience. Whilst it could be compared with the long-term assumptions underlying the calculation of the embedded value, it should not be assumed that small movements in this rate will result in a change to the long term EEV assumptions.

Geographical and segmental analysis

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SECTION 2: INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

As noted at the start of this review, the two key measures based on IFRS are Profit before shareholder tax, which removes the impact of policyholder tax, and Underlying profit, which removes the impact of changes in certain intangibles (DAC/DIR/PVIF). Management regards the Underlying profit measure as the most appropriate measure, based on IFRS, for assessing operating performance.

All the measures have been adversely impacted by a significant increase in the FSCS levy year on year. We expect the cost for the current period to be some £20.0 million (£15.9 million post tax), an increase of £13.1 million (10.6 million post tax). In addition, the costs associated with our strategic back office infrastructure programme of £9.1 million (30 June 2014: £4.1 million) were £5.0 million higher than the prior period.

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Underlying Profit before shareholder tax

The result for the six months was £72.9 million (30 June 2014: £78.3 million). The decrease reflects the underlying increase in income from funds under management but more than offset by the increase in the FSCS levy. A breakdown by segment of the Underlying profit is provided in the following table:

Funds Management business

The increase in profit in the period by nearly 15% to £118.2 million (30 June 2014: £102.9 million) principally reflects higher income from funds under management. The change in split of the profit between Life and Unit Trust business reflects an internal reallocation of overhead expenses.

Distribution business

St. James's Place is a vertically integrated firm, allowing it to benefit from the synergies of combining funds management with distribution. Therefore, as well as the income generated on the funds under management, there is a further margin from the distribution activity, which depends principally upon the levels of new business and expenses.

Despite the increase in new business, the result in the period was negatively impacted by the £13.1 million increase in the FSCS levy to £20.0 million (30 June 2014: £6.9 million). This amount reflects the full year FSCS levy and is not expected to increase.

Other

Other operations made a negative contribution of £21.8 million (30 June 2014: loss of £15.8 million). This reflects the costs of the strategic back-office infrastructure programme of £9.1 million (30 June 2014: £4.1 million), Academy costs of £2.5 million (30 June 2014: £1.8 million) and £2.8 million (30 June 2014: £2.4 million) of other development costs.

It also includes the cost of expensing share options of £5.6 million (30 June 2014: £5.3 million). In the second half of 2015 we will be launching a new Partner share scheme and anticipate this will increase costs by some £4.0 million in the second half year.

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DAC/DIR/PVIF before shareholder tax

The net movement in the DAC, DIR and PVIF intangibles resulted in a negative contribution to profit of £5.9 million for the period, compared with a positive contribution to profit of £4.1 million for the same period in 2014.

The reduction, year on year, in the amortisation stems from the changes in adviser charging rules in 2013, which changed the nature of certain cash flows in the Group, moving them from long term manufacturing margins to short term advice margins.

The positive contribution from the amortisation of accumulated DAC, DIR and PVIF balances from prior years has, as anticipated and reported previously, reduced at 30 June 2015 and is expected to do so again at a similar rate for the next few years. By contrast, the new business addition amount is expected to move in line with new business growth.

It is important to note the intangible and deferred nature of these items, meaning that they don't reflect the operating performance of the business. This is why management regards the Underlying profit measure as the most appropriate measure, based upon IFRS, for assessing operating performance.

Profit before shareholder tax

The Profit before shareholder tax for the six months was £67.0 million (30 June 2014: £82.4 million). Whilst the Underlying profit before shareholder tax has reduced year on year due to the impact of the FSCS levy, the impact of the negative contribution from the net movement in DAC/DIR/PVIF intangibles, noted above, is the other major contributor to the lower Profit before shareholder tax result in the current period.

Shareholder Tax

The actual tax rate in each of the periods may be impacted by significant one-off items and events such as a change in corporation tax rate. Therefore, to assist shareholders, the table below provides a high level analysis of shareholder tax, and a more detailed analysis is included in Note 5 to the condensed half year financial statements.

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The expected shareholder tax principally reflects the current UK corporation tax and overseas rates applicable and will vary from year to year depending upon the emergence of profit between the different tax regimes which apply to the St. James's Place Group companies. More detail is included in Note 5 to the condensed half year financial statements.

There has been no recognition of value from capital losses in the period (30 June 2014: £0.8 million) and the combined negative impact of a number of other small tax adjustments was £0.2 million (30 June 2014: £nil).

The overall impact of these effects is to decrease the tax charge on an IFRS basis to £12.9 million at 30 June 2015 (30 June 2014: £16.3 million charge).

In the summer Budget of 8 July 2015, the Chancellor announced future tax reductions of 1% from 1 April 2017 and another 1% from 1 April 2020. We estimate that these changes will reduce our net deferred tax liability by around £5 million. This will be recognised when the changes in rates are substantively enacted.

IFRS profit before tax

Analysis of the IFRS profit before tax and IFRS profit after tax is presented in the table below, which also shows the impact of the tax incurred on behalf of policyholders:

The reduction in IFRS profit before tax to £103.7 million (30 June 2014: £110.4 million) reflected the underlying reduction in Profit before shareholder tax (as described above), which was not offset by the increase in policyholder tax charges to £36.7 million in 2015 (30 June 2014: £28.0 million). The increase in policyholder tax charge was as a result of higher fund growth in 2015 compared to 2014.

IFRS profit after tax

The IFRS profit after tax reduced from £66.1 million in 2014 to £54.1 million in 2015 in line with the movement in the Profit before shareholder tax, which has been analysed above.

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Analysis of IFRS Assets and Net Assets per Share

The table below provides a summarised breakdown of the IFRS position at the reporting dates:

* net of deferred tax

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SECTION 3: CASH RESULT AND CAPITAL

The Cash Result is based on the Underlying profit after tax, adjusted for deferred tax and to reflect the level of regulatory solvency constraint on profits emerging from regulated companies, such as our insurance businesses, in line with that required by regulators. It is also adjusted for the share option cost in the year.

Since the cash result can be impacted by timing variances and capitalised impacts in the solvency requirements, management believes it is also useful to present an Underlying Cash Result excluding these effects, which the Board reviews, in conjunction with Group solvency, when determining the proposed dividend to shareholders.

The table below shows the movement from the Underlying profit on page 16 to the Underlying Cash Result:

The underlying cash result for the half year at £84.9 million increased by 8% over the same period last year principally reflecting the higher income from funds under management. The result has however been adversely impacted by the additional £10.6 million (post tax) FSCS levy in 2015.

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The Cash Result is a combination of the cash emerging from the business in force at the start of the year less the investment made to acquire new business during the year, and the tables and commentary below provide an indicative analysis into these two elements.

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Twelve Months Ended 31 December 2014

Notes

All numbers are expressed after tax at the prevailing tax rate for each year.

1. The net annual management fee: This is the manufacturing margin the Group retains from the funds under management after payment of the associated costs (e.g. investment advisory fees and Partner remuneration). Broadly speaking the Group receives an average rate of 0.77% (post tax) of funds under management (2014: 0.77% (post tax)).

The level of net annual management fee was some 19% higher than the same period in 2014, reflecting the higher average funds under management in the first six months of 2015.

2. Unwind of early withdrawal charge: This relates to the reserving methodology applied to the withdrawal charge within the structure of the single premium life and pensions business. At the outset of the product we establish a liability net of the outstanding withdrawal charge which would apply if the policy were to be encashed.

As the withdrawal charge reduces to zero, so the liability to the policyholder is enhanced by increasing their funds by 1% per annum over the first six years of the product life. In other words there is a cost which offsets the annual management fee above. This is known as the 'unwind' of the withdrawal charge.

Like the net annual management fee, the unwind of the withdrawal charge has increased due to growth in funds under management. However, the increase is adjusted by the fact that the funds under management added six years ago have completed the withdrawal charge period.

3. Margin arising from new business: This is the cash impact of new business in the year reflecting growth in new business and also production related expenses.

4. Establishment expenses: These are the expenses of running the Group's infrastructure as shown in the table on page 34. In line with the rest of this table they are presented after allowance for tax.

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5. Development and academy expense: These represent the sum of the other expenditure noted in the table on page 34 for developments and the academy.

6. Regulatory fees: This reflects the fees payable to the regulatory bodies.

7. FSCS levy: This reflects the expected full year FSCS levy.

8. Shareholder interest arising from regulated and non-regulated business: This is the assumed income accruing on the investments and cash held for regulatory purposes together with the interest received on the surplus capital held by the Group.

9. Utilisation of capital losses: In recent years, a deferred tax asset has been established for historic capital losses which are now regarded as being capable of utilisation over the medium term.

The utilisation in the first half of 2015 was higher than our expected £2-3 million for a six month period.

10. Asia: This reflects the net profit impact of the Asian operations.

11. Miscellaneous: This represents the cash flow of the business not covered in any of the other categories, including utilisation of the deferred tax asset in respect of prior year's unrelieved expenses (due to structural timing differences in the life company tax computation).

12. Back office infrastructure: These costs relate to a major project seeking to combine our back offices under one management team and to put in place one unified, client centric administration system, enabling them to deliver improved service and improved efficiency for the business.

13. Variance: This reflects variances in the cash result in a year due to the impact of actual experience (including economic assumptions changes and investment performance) on insurance reserves, as well as variances in the settlement of tax related liabilities between the policyholders (unit-linked funds), the shareholder and HMRC.

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Return on In-force Business

As shown in the tables above, the return on the in-force business is mainly driven by the level of the annual management fees, the unwind of the early withdrawal charge, and the level of expenses.

The vast majority of the return relates to the net income from funds under management (annual management fees less the unwind of the early withdrawal charge). Funds under management have been increasing and, as they continue to develop, the future net income should also increase correspondingly. 

In addition, a proportion of the new business has an early withdrawal charge which unwinds during the first six years and, consequently, this business does not make a meaningful contribution to the cash result until year seven. The table below provides an estimated current value of the funds under management where the early withdrawal charge applies. These funds under management are not yet generating income within the cash result.

This £17.1 billion represents some 31% of the total funds under management which, if all the business reached the end of the early withdrawal charge period, would contribute an additional £131.3 million to the annual post-tax cash result (based on 0.77% post-tax earnings from funds under management).

The Board therefore expects the cash earnings from the in-force business to increase as funds under management grows and the business matures.

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The Business Case for Investment in New Business

As noted in the table on page 22, £50.4 million (30 June 2014: £36.4 million) of the cash arising from the in-force business has been re-invested in acquiring the new business during the year. The increase in the current period is principally due to the additional £13.1 million FSCS levy in 2015.

This investment in new business will generate income in the future that should significantly exceed the cost of investment and therefore provide positive returns for shareholders. The table below provides details of the new business added during the reporting periods and different measures of valuing the investment:

The level of investment to acquire new business (excluding variations due to the FSCS levy) is not expected to increase significantly in future years, and therefore the proportion of the cash generated from the in-force business that will be available to pay dividends to shareholders is expected to continue expanding.

Capital Position

In addition to presenting an IFRS balance sheet (on page 53) and an EEV balance sheet (on page 41), we believe it is beneficial to provide a balance sheet using the approach underlying our cash result. This is because the cash result is adjusted for non-cash items such as DAC, DIR and deferred tax. The Board therefore considers this cash result balance sheet provides the best indication of the net asset position of the Group.

The following table analyses the differences between the IFRS balance sheet and the cash result balance sheet. These adjustments include netting out assets and liabilities of the policyholder interest in unit-linked funds, and removal of a number of significant 'non-cash' adjustments (in particular DAC, DIR and deferred tax).

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