St James's Place Regulatory News (STJ)

31 Jul 2007 07:01

St. James's Place PLC31 July 2007 ST. JAMES'S PLACE PLC PRESS RELEASE 31 July 2007 INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2007 St. James's Place plc ("SJP"), the wealth management group, today announces itsnew business and financial results for the half year ended 30 June 2007. The text of the announcement is attached: Enquiries: Mike Wilson, Chairman Tel: 020 7514 1985Andrew Croft, Group Finance Director Tel: 020 7514 1985 Brunswick Tel: 020 7404 5959 ST. JAMES'S PLACE WEALTH MANAGEMENT ANNOUNCES 2007 INTERIM RESULTS SUBSTANTIAL GROWTH IN BOTH NEW BUSINESS AND OPERATING PROFIT NEW BUSINESS UP 33% OPERATING PROFIT UP 50% Highlights of the interim results for the half year to 30 June 2007: New business: • Total new business of £213.5 million (on an APE basis) up 33% Profit - EEV basis: • Group operating profit at £120.7 million (2006: £80.3 million) up 50% • New business profits of £71.5 million (2006: £51.5 million) up 39% • Net asset value per share 239.6 pence (2006: 196.5 pence) up 22% over the twelve months - IFRS basis: • Profit before shareholder tax of £19.9 million (2006: £43.3 million) • Net asset value per share 83.0 pence (2006: 68.1 pence) up 22% over the twelve months Interim Dividend: • Interim dividend increased to 1.75 pence per share up 17% Funds Under Management: • Funds under management increased to £17.3 billion since the start of the year up 12% St. James's Place Partnership at 1,187 up 2.6% since the start of the year Mike Wilson, Chairman, commented: "We are delighted to report that the substantial growth in new business andprofits over the last three years has continued in the first half of 2007. "We are particularly pleased that total new single premiums were some £500million higher for the first six months this year than in 2006, and increased by41% from £1.18 billion to £1.67 billion. "Although we face much stronger new business comparatives for the remainder ofthe year, as a result of the strong first half new business performance, theBoard now expects (subject to no major change in circumstances), new businessgrowth for the year to be at the top end of our longer term objective of 15 -20% growth per annum." CONTENTS PART ONE NEW BUSINESS FIGURESPART TWO CHAIRMAN'S STATEMENT AND FINANCIAL COMMENTARYPART THREE EUROPEAN EMBEDDED VALUE BASISPART FOUR INTERNATIONAL FINANCIAL REPORTING STANDARDS BASIS PART ONE ST. JAMES'S PLACE WEALTH MANAGEMENT NEW BUSINESS FIGURES FOR THE SIX MONTHS TO 30 JUNE 2007 LONG TERM SAVINGS Unaudited Unaudited 3 Months to 6 Months to 30 June 2007 30 June 2007NEW PREMIUMS 2007 2006 Change 2007 2006 Change £'m £'m % £'m £'m %New Regular Premiums Pensions 19.7 21.9 (10%) 36.7 31.2 18% Protection 5.0 5.9 (15%) 9.8 11.5 (15%) 24.7 27.8 (11%) 46.5 42.7 9% New Single Premiums Investment 430.4 299.9 44% 781.2 588.8 33% Pensions 247.5 161.0 54% 479.8 274.0 75% 677.9 460.9 47% 1,261.0 862.8 46% Unit Trust Sales 231.3 176.1 31% 408.5 319.5 28%(including PEPs and ISAs) Unaudited Unaudited 3 Months to 6 Months to 30 June 2007 30 June 2007New Business (RP + 1/10th 2007 2006 Change 2007 2006 ChangeSP) £'m £'m % £'m £'m % Investment 66.2 47.6 39% 119.0 90.8 31%Pensions 44.5 38.0 17% 84.7 58.6 45%Protection 5.0 5.9 (15%) 9.8 11.5 (15%) Total 115.7 91.5 26% 213.5 160.9 33% ST. JAMES'S PLACE WEALTH MANAGEMENT OTHER WEALTH MANAGEMENT SERVICES KEY BUSINESS HIGHLIGHTS FOR THE SIX MONTHS TO 30 JUNE 2007 Unaudited Gross fees generated from additionalwealth management services £16.8m up 8% (2006: £15.5m) New Mortgage Advances £2,730.4m St. James's Place Bank £279.9mOther lenders £2,450.5m Portfolio Management Services New portfolios £24.6m Trust and Estate Planning Services Number of cases 282 St. James's Place Bank - in-force business *Number of facilities 70,705Number of accounts 29,263Credit balances £860.1mMortgages £1,828.3mAverage mortgage value £196.5kLoans £4.2m *Number of facilities denotes the number of individual mortgages, personalloans, credit cards, current accounts and savings accounts, where one client mayhold a number of facilities. The average number of facilities per client is2.4. ST. JAMES'S PLACE WEALTH MANAGEMENT NEW BUSINESS FIGURES FOR THE SIX MONTHS TO 30 JUNE 2007 Notes 1. New business from long term savings is calculated in accordance withthe standard industry measure of adding together new regular premiums andone-tenth of single premiums and unit trust sales ("APE"). 2. Sales of manufactured business on an APE basis for the six months were88% of the total reported (2006: 86%). Sales of non-manufactured pensions including stakeholder by St. James's PlacePartnership have been included in the reported figures under Pensions. Theseamount to £9.8 million regular premiums (2006: £9.5 million) and £22.0 millionsingle premiums (2006: £29.5 million) for the six months to 30 June 2007. Thisequates to £12.0 million new business premiums (2006: £12.4 million). Sales of annuities by St. James's Place Partnership have been included in thereported figures under Pensions. These amount to £36.9 million single premiumsfor the six months to 30 June 2007 (2006: £17.4 million) and equate to £3.7million new business premiums (2006: £1.7 million). Sales of protection business by St. James's Place Partnership through a panel ofproviders have been included in the reported figures under New Regular PremiumsProtection. These amount to £5.7 million of new regular premiums (2006: £7.2million) for the six months to 30 June 2007. This equates to £5.7 million newbusiness premiums (2006: £7.2 million). Sales of non-manufactured single premium investment business amounting to £39.0million have been included in the reported figures under Investments for the sixmonths to 30 June 2007 (2006: £5.3 million). This equates to £3.9 million newbusiness premiums (2006: £0.5 million). PART TWO CHAIRMAN'S STATEMENT I am delighted to report that the substantial growth in new business and profitsover the last three years has continued in the first half of 2007. New business from long-term savings and investments (measured on an APE basis,the standard industry measure of annual premiums plus one tenth of singlepremiums) was £213.5 million up 33% and EEV operating profit of £120.7 millionwas up 50%. Financial Performance The financial results have been presented on both an IFRS (InternationalFinancial Reporting Standards) basis and an EEV (European Embedded Value) basis.As shareholders will be aware, the Board believe that the EEV basis provides amore meaningful measure of the Group's performance. On the IFRS basis the operating profit, before shareholder tax, was £19.9million compared with £43.3 million for the prior year, which included a one-offamount of £22.6 million. The total pre-tax profit for the period increased from£48.0 million to £65.8 million. On the EEV basis the pre-tax operating profit increased by 50% from £80.3million to £120.7 million. Within this figure new business profit increased by39% from £51.5 million to £71.5 million. The total pre-tax profit for the sixmonths, including the investment variance, increased by 58% from £84.6 millionto £133.6 million. The Financial Commentary on pages 10 to 18 provides further details on theresults for the period. Dividend The strong performance and cash generation has continued during the first halfof the year. Consequently the Board has resolved to increase the interimdividend by 17% to 1.75 pence per share. The dividend will be paid on 19September 2007 to those shareholders on the register at the close of business on10 August 2007. Once again shareholders will be offered the alternative of a scrip dividend. Barring unforeseen circumstances, shareholders can expect a similar increase inthe full year dividend. New Business New business for the six month period was up 33% at £213.5 million. Thisfollows three consecutive years of growth (2004 - 2006) of 19%, 25% and 58%respectively. Pensions new business was up 45% for the first six months and 17% for the secondquarter, as we continue to benefit from the Pensions A Day changes introduced inApril 2006. Investment new business was up 31% for the first six months and 39% for thesecond quarter. Total new single premiums were some £500 million higher for the first six monthsof this year than in 2006 and increased by 41% from £1.18 billion to £1.67billion. Our own manufactured products represented 88% of total APE, exceeding our statedobjective of 80% and the 86% achieved for the corresponding period of 2006. Gross fees from our other wealth management services for the six monthsincreased by 8% to £16.8 million. The St. James's Place Partnership The productivity per Partner for the first six months was £182,000 up from£140,000 for the comparative period. This represents a further increase inproductivity of some 30% which follows on from the 61% productivity gain for thefull year in 2006. Although productivity is at a record level the Boardcontinues to believe that the quality of the Partnership provides for furthergrowth in productivity. The size of the Partnership grew by 30 to 1,187 at 30 June 2007, an increase of2.6% for the six months. This keeps us on track to achieve our stated target of5% growth in the number of Partners for the full year. We remain committed toonly recruiting the highest quality financial advisers into the Partnership. Investment management As at the half year, our total funds under management were £17.3 billion, upnearly £2 billion since the start of the year, and 28% higher than the same timein 2006. The first half of 2007 has been challenging from an investment perspective. Asuccession of increases in interest rates around the world, renewed fears overinflation, concerns surrounding the sub-prime mortgage market in the US, thecontinued fall of the Dollar and weakness in the Japanese Yen all contributed toa more volatile and difficult environment for investment managers. Despitethis, our investment approach continues to deliver strong returns to our clientsover the longer term. The launch of the new funds in January, which I mentioned in my last report, hasbeen well received. The range of new managers and funds proved popular with ISAinvestors in the run up to the end of the 2006/07 tax year and we enjoyed ourmost successful ISA season and are now ranked as one of the top ten ISAproviders in terms of funds under management in the UK. Further developments, including more new funds providing further diversificationfor our clients, are planned for the second half of the year. We remaincommitted to evolving and improving the St. James's Place investment approach asour business grows. Partners and Staff On behalf of the Board and shareholders I would like to thank the Partnership,our employees and the staff in our administration centres for their continuedoutstanding contribution to our results. The enthusiasm, commitment anddedication at every level is exceptional. Board changes On 29 May 2007 we announced the appointment of David Bellamy as Chief Executive.David had been the Group's Managing Director over the last five years and hadtaken over the day-to-day running of the Group following the departure of theprevious Chief Executive earlier this year. His appointment followed a thorough search process conducted by the NominationCommittee, chaired by Michael Sorkin, the Senior Independent Director. David's appointment is a reflection of the Board's confidence in his experienceand proven management ability. David has been with St. James's Place since theGroup's inception 15 years ago. His appointment has been widely welcomed bothinternally (by the Partnership and employees) and externally. Outlook We said at the time of our first quarter new business announcement that, despitethe 41% increase in that quarter's new business, we faced much stronger newbusiness comparatives during the remainder of the year and that relative growthwould be lower. This continues to be the case, although the growth of 26%achieved in the second quarter exceeded our expectations. As a result of the strong first half new business the Board now expects (subjectto no major change in circumstances) new business growth for the year to be atthe top end of our longer term objective of 15-20% growth per annum. The social, economic and demographic environment remains positive for ourbusiness. We are confident that the St. James's Place Partnership will enableus to capitalise on the rapidly expanding market for advice on wealthmanagement. Mike Wilson30 July 2007 FINANCIAL COMMENTARY The Financial Commentary is as usual presented in two sections: a sectionproviding a commentary on the results presented on both an IFRS and EEV basis,and a second section covering other matters of interest to shareholders andinvestors. Section 1: Commentary on the Results INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS") The IFRS result is shown on pages 26 to 35. The table below shows the pre-taxprofit of the Group on this basis. 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business 15.3 36.5 85.5Unit trust business 8.6 8.9 18.0Other (4.0) (2.1) (2.9) Operating profit 19.9 43.3 100.6Profit on sale of LAHC - - 7.0 Profit before shareholder tax 19.9 43.3 107.6Policyholder tax 45.9 4.7 72.3 Total pre-tax profit 65.8 48.0 179.9 Taxation:Tax on policyholders' return (45.9) (4.7) (72.3)Tax on shareholders' return 8.4 (14.9) (19.6) (37.5) (19.6) (91.9) Profit after tax 28.3 28.4 88.0 The IFRS result requires the pre-tax profit of the life business to be 'grossedup' for certain tax in the unit linked funds, with the corresponding amount thenbeing deducted within the tax charge. This 'grossing up' does not reflect theshareholder return from the life business and consequently the results tableabove and the accompanying narrative have been presented after eliminating the 'gross up'. The IFRS result is further complicated by the interaction between policyholderand shareholder tax and therefore the profit before shareholder tax can bedistorted by this interaction. In the second half of the year we will beexploring, in conjunction with our auditors, an alternative presentation of thepolicyholder / shareholder tax position to reduce any future distortion. Life business The pre-tax profit from the life business for the six months was £15.3 millioncompared with £36.5 million for the prior year. Shareholders will recall thatthe prior year figure was boosted by a one-off impact of £22.6 million inrespect of tax relief on b/fwd expenses. During the current year there has been a small change to the Group's expenserecharging mechanism that has resulted in a £2.0 million benefit in the currentyear. Taking these points into account the current year profit is in line with the2006 result. Unit Trust business The pre-tax profit from the unit trust business for the six months was £8.6million in line with the prior year. As noted above, there has been a small change in the Group's expense rechargingmechanism which has resulted in some £2.0 million additional expenses beingattributable to the unit trust business. Other Other operations contributed a loss for the period of £4.0 million, comparedwith a loss of £2.1 million for 2006. Included within the current year loss isa £5.9 million cost of expensing share options (2006: £2.2 million). Theexpected cost for the full year is in the region of £12.0 million (2006: £7.6million). As can be seen from the table above, the total pre-tax profit before shareholdertax for the six months is £19.9 million and after taking into account a taxcredit of £8.4 million, the post tax profit attributable to shareholders is£28.3 million. This figure includes a £5.8 million benefit from the corporationtax rate reducing from 30% to 28% from April 2008. The prior year comparativeof £28.4 million includes the one-off impact of £22.6 million noted earlier. The total net assets were £394.0 million (31 December 2006: £382.2 million)resulting in a net asset value per share of 83.0 pence (31 December 2006: 82.4pence). EUROPEAN EMBEDDED VALUE BASIS The EEV result is shown on pages 19 to 25. The table below summarises thepre-tax profit of the combined business: 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business 96.7 64.3 139.0Unit trust business 28.0 18.1 39.9Other (4.0) (2.1) (2.9) Operating profit 120.7 80.3 176.0 Investment return 24.3 11.9 70.8Economic assumption changes (11.4) (7.6) (9.8) Profit from core business 133.6 84.6 237.0 LAHC - - 7.0 Total pre-tax profit 133.6 84.6 244.0 Taxation:Normalised (32.7) (22.7) (59.8)Tax rate change 20.1 - - (12.6) (22.7) (59.8) Profit after tax 121.0 61.9 184.2 The operating profit for the period of £120.7 million was up 50% over thecorresponding period of 2006. Within this figure new business profit increasedby 39% from £51.5 million to £71.5 million. Total pre-tax profit at £133.6million was up 58%. Life Business Operating profit has increased by 50% from £64.3 million to £96.7 million and afull analysis of the result is shown on page 23. The new business profit has increased by 54% to £53.3 million (2006: £34.6million). The growth in this figure is the result of the increased volumes, the favourablebusiness mix, limiting establishment expense growth, together with a £2.0million benefit from the change in the expense recharging mechanism notedearlier in this statement. The experience variance during the period has increased operating profit by £6.5million (2006: £0.4 million). As usual this figure reflects a combination ofpositives and negatives. The one variance worthy of note is that, followingcorrespondence with HM Revenue & Customs, we have been able to obtain relief forprior years excess unrelieved foreign withholding tax which has resulted in aone-off benefit of £8.9 million. The balance of the experience variance represents a number of small negativeitems. Unit Trust Business The operating profit has increased from £18.1 million to £28.0 million, anincrease of 55%, and a full analysis of the unit trust result is shown on page23. Within operating profit the new business profit has increased by 8% to £18.2million from £16.9 million for the prior year, reflecting the stronger newbusiness during the period. The current year operating and new business profitfigures include some £2.0 million of additional expenses resulting from thechange in the expense recharging mechanism. Following the implementation of the FSA Prudential Sourcebook for UCITS Firms(UPRU) with effect from 2007, the minimum solvency capital for the Company hasincreased by some £4.0 million. As the EEV includes a reduction for the cost ofholding the required capital, the result has been reduced in the first half ofthe year by £0.9 million to reflect this additional capital requirement. Thiscost has been included within the experience variance. Other The loss from other operations has previously been commented on in the IFRSsection. Investment Return The investment return reflects the average after tax increase in our fund pricesover and above that assumed in the calculation of the embedded value. During2007 this average after tax increase was some 2 - 3% higher than the returnassumed resulting in a positive investment return of £24.3 million (2006: £11.9million reflecting 1 - 3% higher return than assumed). Economic Assumption Change Gilt yields have increased by 0.8% since the start of the year impacting theeconomic assumptions underlying the embedded value. This has resulted in areduction in the embedded value of £11.4 million (2006: a reduction of £7.6million following an increase in the gilt yields of 0.6%). The total pre-tax profit for the six months was £133.6 million compared with£84.6 million for the prior year, an increase of some 58%. Corporation Tax Change The 2007 Finance Bill has now been substantially enacted and within theprovisions of the Bill the Corporation tax rate will be reduced to 28% from 1April 2008. Consequently, as the future margins from the in-force businessemerge as statutory profit, they will in future be taxed at the lowercorporation tax rate. The capitalised effect of the reduced future taxation is£20.1 million and has been shown separately in the analysis of the tax charge. The total net assets on an EEV basis were £1,137.2 million (31 December 2006:£1,032.7 million) resulting in a net asset value per share of 239.6 pence (31December 2006: 222.6 pence). Section 2: Other Matters Noted below are a number of issues about the Group that are of interest toshareholders. (i) New business margin The insurance sector has historically disclosed new business in terms of AnnualPremium Equivalent (APE). Most commentators would agree that APE no longer hasmuch correlation with the underlying profitability of the new business andconsequently the industry is moving to provide additional disclosure on thepresent value of new business premiums (PVNBP). APE is calculated as the sum of regular premiums plus 1/10th single premiums.PVNBPs are calculated as single premiums plus the present value of expectedpremiums from regular premium business, allowing for lapses and other EEVassumptions. The PVNBP calculation only includes our manufactured business as it is notsensible to apply the principles to the non-manufactured business. Noted in thetable below is the new business margin calculated both as a % of APE and PVNBP.The development of the new business margin, measured as new business profitdivided by APE, is detailed in the following tables: Life business 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 New business profit (£' m) 53.3 34.6 87.6 APE (£'m) 172.7 129.0 294.6New business margin (%) 30.9 26.8 29.7 PVNBP (£'m) 1,272.9 892.9 2,124.1Margin (%) 4.2 3.9 4.1 Unit trust business 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 New business profit (£' m) 18.2 16.9 27.6 APE (£'m) 40.8 31.9 54.5New business margin (%) 44.6 52.9 50.6 PVNBP (£'m) 408.5 319.5 534.2Margin (%) 4.4 5.2 5.2 Total business 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 New business profit (£' m) 71.5 51.5 115.2 APE (£'m) 213.5 160.9 349.1New business margin (%) 33.5 32.0 33.0 PVNBP (£'m) 1,681.4 1,212.4 2,658.3Margin (%) 4.3 4.2 4.3 The total new business margin expanded to 33.5% from 33% achieved for the 2006full year and from the 32% in the first half of 2006. Total new business margin has been beneficially affected by the rate of growthin new business, the proportion of manufactured business, the underlyingbusiness mix and by maintaining the growth in the level of expenses to wellbelow the growth in new business. The new business margin by product line hasin addition been affected by the change to the expense recharges commented onearlier. (ii) Expenses This section provides a reminder to shareholders of categories and nature ofexpenditure incurred. Shareholders will recall that "commission, investment expenses and third partyadministration costs" are met from corresponding policy margins. Any variationin these costs flowing from changes in the volumes of new business or the levelof the stock markets does not directly impact the profitability of the Company. The "other new business related costs", such as sales force incentivisation,vary with the level of sales - determined on our internal measure. Asproduction rises or falls these costs will move in the corresponding direction. "Establishment costs" are the running costs of the Group's infrastructure andare relatively fixed in nature in the short term. The "contribution from third party product sales" reflects the net incomereceived from other wealth management services of £3.2 million (2006: £2.9million), sales of stakeholder products of £0.4 million (2006: £0.5 million) andsales through the Protection Panel of £3.8 million (2006: £4.9 million). The table below provides a breakdown of the expenditure for the combinedfinancial services activities. Table of Expenditure 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionPaid from policy marginsCommission 92.6 76.7 167.2Investment expenses 32.8 25.0 55.7Third party administration 12.2 9.8 20.9 137.6 111.5 243.8 Management expensesOther related new business costs 20.3 15.3 35.4Establishment costs 44.4 41.2 86.2Contribution from third party product sales (7.4) (8.3) (17.7) 57.3 48.2 103.9 194.9 159.7 347.7 As indicated in the 2006 full year Financial Commentary, we have set a target ofmaintaining the growth in the establishment expenses to less than 10%, resultingin a gap of 5 - 10% between the new business growth and expense growth. The establishment expense growth for the six months was 7.8% and the gap betweenthe new business growth and the expense growth was some 25%. Consequently, asshown above, the new business margin expanded. Shareholders should be aware that if new business growth for the remainder ofthe year continues to be well above our 15 - 20% stated objective, thenestablishment expense growth is likely to exceed our 5 - 10% target. Howeverthe gap between expense and new business growth will exceed our statedobjective. (iii) Cashflow In my Financial Commentary in the 2006 Annual Report, I provided new disclosureon the underlying cashflow of the Group and this has been repeated for the halfyear below. The information is provided post tax. It is first necessary to adjust the post tax IFRS profits for the 'non- cash'items to obtain an adjusted post tax figure which is more representative of theunderlying cashflow of the business. The table below sets out these adjustments: 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Post tax IFRS result 28.3 28.4 88.0 AdjustmentsMovement in deferred acquisitions cost (43.8) (29.6) (68.6)Movement in deferred income 27.0 18.8 42.2Amortisation of purchased VIF 1.6 1.6 3.1Movement in financial reassurance balance - - (8.9)Release of LAHC provision - - (7.0)Share option expense 5.9 2.2 7.6Movement in deferred tax asset (10.4) 0.3 (13.3)Movement in deferred tax liability* 3.0 10.9 23.2Other 1.5 (3.3) (0.9) Adjusted post tax cashflow 13.1 29.3 65.4 * excluding amounts in respect of the unit linked funds Taking account of these non-cash adjustments the Group generated positivecashflow of £13.1 million during the first six months (2006: £29.3 million).The table and commentary below provide an indicative unaudited analysis of thesources of this cashflow. Note 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Net annual management fee 1 60.3 43.8 93.2Unwind of surrender penalties 2 (21.8) (15.9) (32.6)Loss / profit arising on new business 3 (4.7) 2.8 1.9Establishment expenses 4 (32.5) (29.7) (62.1)Investment income 5 4.5 2.8 9.4Miscellaneous 6 7.3 2.9 12.1 Underlying cash flow 13.1 6.7 21.9Tax relief on b/fwd expenses 7 - 22.6 22.6FSA reserving change 8 - - 20.9 Post tax cashflow 13.1 29.3 65.4 The underlying cash flow of the Group increased from £6.7 million in 2006 to£13.1 million in the current year. The increased level of pension business during the current year has resulted inan initial cash loss for the six months of £4.7 million. Notes 1. The net annual management fee: this is the income on the funds undermanagement that the Group retains after payment of the associated costs.Broadly speaking the Group retains around 1% pre-tax of funds under management. 2. Unwind of surrender penalties: this relates to the reservingmethodology applied to the surrender penalties within the charging structure ofthe single premium life bonds. At the outset of the life bond we establish aliability net of the outstanding surrender penalty which would apply if thepolicy were to be encashed. As the surrender penalty reduces to zero so theliability to the policyholder is enhanced by increasing their funds by 1% perannum over the first six years of the product life, to correspond to this 'unwind' of the surrender penalty. In other words there is a cash transfer fromthe shareholder to the policyholder. 3. Loss / profit arising from new business: this is the cash flow arisingin the year after taking into account the directly attributable expenses. 4. Establishment expenses: these are the post tax expenses commented on inpoint (ii) above and represent the running costs of the Group's infrastructure. 5. Investment income: this is the income accruing on the investments andcash held for regulatory purposes together with the interest received on thesurplus capital held by the Group. 6. Miscellaneous: this represents the cashflow of the business not coveredin any of the other categories. It will include miscellaneous product charges,reserving changes, experience variances and the income and expenses includedwithin the Other operations of the business. 7. Tax relief on expenses b/fwd: during the first half of 2006 we obtainedtax relief for some expenses brought forward, which gave rise to positivecashflow of £22.6 million. 8. The adoption of the FSA reserving changes in the second half of 2006resulted in the one-off increase of £20.9 million. (iv) Analysis of Embedded Value The table below provides a summarised breakdown of the Embedded Value positionat the reporting dates. 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionValue of in-force - Life 682.9 549.4 590.8 - Unit trust 192.8 150.7 171.5Net assets 261.5 199.7 270.4 1,137.2 899.8 1,032.7 (v) Share options maturity Options outstanding under the various share option schemes at 30 June 2007amount to 38.5 million (31 December 2006: 46.2 million). The total number of options including those in the SJP Employee Trust, togetherwith their anticipated proceeds are set out in the table below: Number of Average share options AnticipatedEarliest date of exercise exercise price outstanding proceeds £ Million £' Million Immediate 1.71 13.4 22.8Jul - Dec 2007 1.55 4.2 6.6Jan - Jun 2008 1.05 2.3 2.4Jul - Dec 2008 1.83 0.4 0.8Jan - Jun 2009 2.24 1.1 2.4Jul - Dec 2009 2.75 16.2 44.5Jan - Jun 2010 2.84 0.7 2.1Jul - Dec 2010 2.57 0.2 0.5 38.5 82.1 Andrew Croft30 July 2007 PART THREE EUROPEAN EMBEDDED VALUE BASIS The following information shows the result for the Group adopting a EuropeanEmbedded Value (EEV) basis for reporting the results of its wholly owned lifeand unit trust businesses. CONSOLIDATED INCOME STATEMENT 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business 96.7 64.3 139.0Unit trust business 28.0 18.1 39.9Other (4.0) (2.1) (2.9) Operating profit 120.7 80.3 176.0 Investment return variances 24.3 11.9 70.8Economic assumption changes (11.4) (7.6) (9.8) Profit from core business 133.6 84.6 237.0 Profit on sale of LAHC - - 7.0 EEV profit on ordinary activities before tax 133.6 84.6 244.0 TaxLife business (25.9) (16.4) (46.5)Unit trust business (9.9) (7.3) (19.4)Other 3.1 1.0 6.1LAHC - - -Tax rate change 20.1 - - (12.6) (22.7) (59.8) EEV profit on ordinary activities after tax 121.0 61.9 184.2 Dividends 39.4 8.3 15.1 Proposed dividend per share 1.75 1.5 3.65Basic earnings per share 26.1 13.8 40.7Diluted earnings per share 24.7 13.1 38.5 EUROPEAN EMBEDDED VALUE BASIS Consolidated Statement of Changes in Equity 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Opening equity shareholders' funds on an EEV basis 1,032.7 828.8 828.8Post-tax profit for the year 121.0 61.9 184.2Dividends (39.4) (8.3) (15.1)Issue of share capital 23.7 18.3 30.3Consideration paid for own shares (7.7) (5.4) (5.4)P & L reserve credit in respect of share option charges 5.9 2.2 7.6P & L reserve credit in respect of proceeds from exercise of 1.0 2.3 2.3share options for shares held in trust Closing equity shareholders' funds on an EEV basis 1,137.2 899.8 1,032.7 EUROPEAN EMBEDDED VALUE BASIS CONSOLIDATED BALANCE SHEET 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionAssetsIntangible assets Deferred acquisition costs 437.4 354.6 393.6 Value of long-term business in-force - long-term insurance 595.6 483.3 524.1 - unit trusts 192.8 150.7 171.5 1,225.8 988.6 1,089.2Property & equipment 6.2 6.5 6.3Deferred tax assets 94.2 70.2 83.8Investment property 708.4 397.9 568.2Investments 11,999.8 9,210.6 10,573.8Reinsurance assets 31.7 81.1 28.3Insurance contract receivables 11.9 12.5 11.5Income tax assets 30.5 20.0 9.7Other receivables 166.4 116.5 87.1Cash & cash equivalents 1,593.9 1,480.2 1,606.9 Total assets 15,868.8 12,384.1 14,064.8 LiabilitiesInsurance contract liability provisions 401.8 438.8 374.3Other provisions 3.3 9.3 3.1Financial liabilities 13,300.5 10,269.8 11,833.0Deferred tax liabilities 279.9 202.9 258.4Reinsurance payables - 8.9 -Payables related to direct insurance contracts 33.0 24.3 18.5Deferred income 318.9 268.5 291.9Income tax liabilities 35.7 13.7 19.9Other payables 144.1 140.5 100.5Net asset value attributable to unit holders 214.4 107.6 132.5 Total liabilities 14,731.6 11,484.3 13,032.1 Net assets 1,137.2 899.8 1,032.7 Shareholders' equityShare capital 71.2 68.7 69.6Share premium 79.5 46.3 57.4Other reserves 986.5 784.8 905.7 Total shareholders' equity 1,137.2 899.8 1,032.7 Pence Pence PenceNet assets per share 239.6 196.5 222.6 NOTES TO THE EUROPEAN EMBEDDED VALUE BASIS I. BASIS OF PREPARATION The interim supplementary information on pages 19 to 25 shows the Group'sresults for the six months ended 30 June 2007 as measured on a European EmbeddedValue (EEV) basis with reduced disclosure, for interim reporting purposes, fromthat which would be required under the EEV Principles. The results of the life,pension and investment business, including unit trust business, undertaken bythe Group are measured on a basis determined in accordance with the EEVPrinciples issued in May 2004 by the Chief Financial Officers Forum, a group ofchief financial officers from 19 major European insurers, as supplemented by theAdditional Guidance on EEV disclosures in October 2005 (together "the EEVPrinciples"). The treatment of all other transactions and balances is unchangedfrom the statutory financial statements which are prepared on an IFRS basis.The objective of the interim supplementary information is to provideshareholders with more realistic information on the financial position andperformance of the Group than that provided by the IFRS basis. Under the EEV Principles, profit is recognised as it is earned over the life ofthe products within the covered business. The embedded value of the coveredbusiness is the sum of the shareholders' net worth on an IFRS basis in respectof the covered business and the present value of this projected profit stream. II. METHODOLOGY AND ASSUMPTIONS The methodology used to derive the European Embedded Values at both June 2006and June 2007 is unchanged from that used at the end of 2006 and set out indetail on pages 118 to 120 of the 2006 Report and Accounts. Apart from the assumptions set out below, there have been no changes toassumptions from those used at the end of 2006 and set out in detail on page 120and 121 of the 2006 Report and Accounts. a). Economic Assumptions The principal economic assumptions used within the cash flows at 30 June 2007are set out below. 30 June 30 June 31 December 2007 2006 2006 Risk free rate 5.7% 4.9% 4.9%Inflation rate 3.3% 3.1% 3.0%Risk discount rate (net of tax) 8.8% 8.0% 8.0%Future investment returns:- Gilts 5.7% 4.9% 4.9%- Equities 8.7% 7.9% 7.9%- Unit-linked funds: - Capital growth 4.8% 4.5% 4.5% - Dividend income 3.2% 2.8% 2.8% - Total 8.0% 7.3% 7.3% Expense inflation 3.9% 4.6% 3.6%Indexation of capital gains 2.4% 2.2% 2.2% The risk free rate is set by reference to the yield on 10 year gilts. The otherinvestment returns are set by reference to these. The inflation rate is derivedfrom the implicit inflation in the valuation of 10 year index-linked gilts.This rate is increased by 1.5%, to reflect higher increases in earnings and theexpense inflation assumption is calculated as 80% of earnings inflation. Therate is reduced by 10% to derive the indexation of capital gains for theproportion of the fund invested in equities. b). Taxation Following the change in future taxation enacted in the 2007 Budget, thecorporation tax rate used for grossing up UK life and pensions business haschanged from 28% to 26% and unit trust business from 30% to 28%. III. COMPONENTS OF LIFE AND UNIT TRUST EEV PROFIT Life business 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £'Million £'Million £'Million New business contribution 53.3 34.6 87.6Profit from existing business Unwind of discount rate 33.7 26.9 50.3 Experience variance 6.5 0.4 (2.6) Operating assumption changes (0.3) - (2.4)Investment income 3.5 2.4 6.1Life operating profit before tax 96.7 64.3 139.0 Investment return variances 16.2 6.3 46.8Economic assumption changes (10.6) (8.3) (10.6)Life profit before tax 102.3 62.3 175.2 Attributed tax (25.9) (16.4) (46.5)Tax rate change 15.8 - -Life profit after tax 92.2 45.9 128.7 New business contribution after tax is £39.5 million (30 June 2006: £25.3million). Unit trust business 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million New business contribution 18.2 16.9 27.6Profit from existing business Unwind of discount rate 9.9 7.6 15.2 Experience variances (0.2) (2.2) 0.2 Operating assumption changes 0.1 (4.2) (3.1)Unit trust operating profit before tax 28.0 18.1 39.9 Investment return variances 8.1 5.6 24.0Economic assumption changes (0.8) 0.7 0.8Unit trust profit before tax 35.3 24.4 64.7 Attributed tax (9.9) (7.3) (19.4)Tax rate change 4.3 - -Unit trust profit after tax 29.7 17.1 45.3 New business contribution after tax is £13.1 million (30 June 2006: £11.8million). 6 Months 6 Months 12 MonthsCombined life and unit trust business Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million New business contribution 71.5 51.5 115.2Profit from existing business Unwind of discount rate 43.6 34.5 65.5 Experience variances 6.3 (1.8) (2.4) Operating assumption changes (0.2) (4.2) (5.5)Investment income 3.5 2.4 6.1Operating profit before tax 124.7 82.4 178.9 Investment return variances 24.3 11.9 70.8Economic assumption changes (11.4) (7.6) (9.8)Profit before tax 137.6 86.7 239.9 Attributed tax (35.8) (23.7) (65.9)Tax rate change 20.1 - -Profit after tax 121.9 63.0 174.0 New business contribution after tax is £52.6 million (30 June 2006: £37.1million). IV. SENSITIVITIES The table below shows the estimated impact on the combined life and unit trustreported value of new business and EEV to changes in various EEV calculatedassumptions. In each case, only the indicated item is varied relative to therestated values. Change in new business contribution Change in European Embedded Value Note Pre-tax Post-tax Post-tax £' Million £' Million £' MillionValue at 30 June 2007 71.5 52.6 1,137.2 100bp reduction in risk rate discount 1 8.6 6.2 69.4 100bp reduction in risk free rates, with (0.3) (0.2) (0.6)corresponding change in fixed interest assetvalues 10% reduction in withdrawal rates 5.5 4.0 52.2 10% reduction in expenses 0.9 0.7 12.1 10% reduction in market value of equity - - (92.6)assets 5% reduction in mortality and morbidity 2 0.4 0.3 5.2 100bp increase in equity expected returns 3 - - - Note 1: Although not directly relevant under a market-consistent valuationwhere the risk discount rate is a derived disclosure only, this sensitivityshows the level of adjustment which would be required to reflect differinginvestor views of risk. Note 2: Assumes the benefit of lower experience is passed on to clients andreassurers at the earliest opportunity. Note 3: As a market consistent approach is used, equity expected returns onlyaffect the derived discount rates and not the embedded value or contribution toprofit from new business. V. RECONCILIATION OF IFRS AND EEV PROFIT BEFORE TAX AND NET ASSETS 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million IFRS profit before tax 65.8 48.0 179.9Movement in life value of in-force 41.1 21.5 17.4Movement in unit trust value of in-force 26.7 15.1 46.7Total EEV profit before tax 133.6 84.6 244.0 IFRS net assets 394.0 312.0 382.2Less: acquired value of in-force (62.7) (65.8) (64.3)Add: deferred tax on acquired value of in-force 17.5 19.6 19.2Add: life value of in-force 595.6 483.3 524.1Add: unit trust value of in-force 192.8 150.7 171.5EEV net assets 1,137.2 899.8 1,032.7 PART FOUR INTERNATIONAL FINANCIAL REPORTING STANDARDS BASIS CONSOLIDATED INCOME STATEMENT 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December Note 2007 2006 2006 £' Million £' Million £' Million Insurance premium revenue 45.7 47.9 101.2Less premiums ceded to reinsurers (13.8) (14.7) (33.8)Net insurance premium revenue 31.9 33.2 67.4 Fee and commission income 44.3 44.3 87.6Profit on sale of investment in Life Assurance Holding - - 7.0CorporationOther investment income 931.7 480.5 1,519.3Total investment income 931.7 480.5 1,526.3 Other operating income 2.1 2.5 1.8Net income 2 1,010.0 560.5 1,683.1 Policy claims and benefits incurred (27.5) (32.4) (58.2)Less reinsurance recoveries 10.1 14.4 23.1Net policyholder claims and benefits incurred (17.4) (18.0) (35.1) Change in insurance contract liabilities Gross amount (25.1) (1.8) 62.0 Reinsurers' share 3.0 0.8 (41.0)Net change in insurance contract liabilities (22.1) (1.0) 21.0 Investment contract benefits (720.4) (331.4) (1,139.3) Fees, commission and other acquisition costs (135.8) (122.2) (260.6)Administration expenses (46.9) (38.3) (86.1)Other operating expenses (1.6) (1.6) (3.1) (184.3) (162.1) (349.8) Operating profit 2 65.8 48.0 179.9 Financing costs - - -Profit before tax 2 65.8 48.0 179.9 Tax on policyholders' return 3 (45.9) (4.7) (72.3)Tax on shareholders' return 3 8.4 (14.9) (19.6) Total tax expense (37.5) (19.6) (91.9)Profit for period attributable to shareholders 28.3 28.4 88.0 2 Dividends 4 39.4 8.3 15.1 Pence Pence PenceProposed dividend per share 4 1.75 1.5 3.65Basic earnings per share 5 6.1 6.3 19.4Diluted earnings per share 5 5.8 6.0 18.4 INTERNATIONAL FINANCIAL REPORTING STANDARDS BASIS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Note 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Opening equity shareholders' funds 382.2 274.5 274.5Profit for the financial period, being total 28.3 28.4 88.0recognised income for the financial period Dividends 4 (39.4) (8.3) (15.1) Issue of share capital Scrip dividend 10.5 6.3 11.1 Exercise of share options 13.2 12.0 19.2Consideration paid for own shares (7.7) (5.4) (5.4)P & L reserve credit in respect of share option 5.9 2.2 7.6chargesP & L reserve credit in respect of proceeds from 1.0 2.3 2.3exercise of share options for shares held in trust Net increase to shareholders' funds 11.8 37.5 107.7 Closing equity shareholders' funds 394.0 312.0 382.2 INTERNATIONAL FINANCIAL REPORTING STANDARDS BASIS CONSOLIDATED BALANCE SHEET 30 June 30 June 31 December Note 2007 2006 2006 £' Million £' Million £' MillionAssetsIntangible assets Deferred acquisition costs 7 437.4 354.6 393.6 Acquired value of in force business 62.7 65.8 64.3 500.1 420.4 457.9Property & equipment 6.2 6.5 6.3Deferred tax assets 8 94.2 70.2 83.8Investment property 708.4 397.9 568.2Investments Equities 10,416.4 7,802.1 9,014.5 Fixed income securities 655.5 629.6 595.2 Investment in Collective Investment Schemes 927.1 778.5 963.9 Currency forwards 0.8 0.4 0.2Reinsurance assets 31.7 81.1 28.3Insurance contract receivables 11.9 12.5 11.5Income tax assets 30.5 20.0 9.7Other receivables 166.4 116.5 87.1Cash & cash equivalents 1,593.9 1,480.2 1,606.9 Total assets 15,143.1 11,815.9 13,433.5 LiabilitiesInsurance contract liability provisions 401.8 438.8 374.3Other provisions 9 3.3 9.3 3.1Financial liabilities Investment contracts 13,288.2 10,254.0 11,819.8 Borrowings 12.3 15.4 13.1 Currency forwards - 0.4 0.1Deferred tax liabilities 10 297.4 222.5 277.6Reinsurance payables - 8.9 -Payables related to direct insurance contracts 33.0 24.3 18.5Deferred income 11 318.9 268.5 291.9Income tax liabilities 35.7 13.7 19.9Other payables 144.1 140.5 100.5Net asset value attributable to unit holders 214.4 107.6 132.5 Total liabilities 14,749.1 11,503.9 13,051.3 Net assets 394.0 312.0 382.2 Shareholders' equityShare capital 12 71.2 68.7 69.6Share premium 79.5 46.3 57.4Other reserves (12.2) (8.2) (8.4)Retained earnings 255.5 205.2 263.6 Total shareholders' equity 394.0 312.0 382.2 Pence Pence PenceNet assets per share 83.0 68.1 82.4 INTERNATIONAL FINANCIAL REPORTING STANDARDS BASIS CONSOLIDATED STATEMENT OF CASH FLOWS 6 Months 6 Months Year Ended Ended Ended 31 December 30 June 2007 30 June 2006 2006 £' Million £' Million £' MillionCash flows from operating activitiesProfit before tax for the period 65.8 48.0 179.9Adjustments for:Depreciation 1.1 1.4 2.5Amortisation of acquired value of in-force business 1.6 1.6 3.1Fair value gains on non-operating investments - - (0.1)P & L reserve credit in respect of share option charges 5.9 2.2 7.6Profit on sale of investment - - (7.0) Changes in operating assets and liabilitiesIncrease in deferred acquisition costs (43.8) (29.6) (68.6)Increase in investment property (140.2) (78.5) (248.8)Increase in investments (1,426.0) (737.0) (2,100.2)(Increase) / decrease in reassurance assets (3.4) (3.2) 49.6(Increase) /decrease in insurance contract receivables (0.4) 2.6 3.6Increase in other receivables (91.9) (23.6) (3.5)Increase / (decrease) in insurance contract liability provisions 27.5 8.2 (56.3)Increase / (decrease) in provisions 0.2 (0.3) 0.5Increase in financial liabilities (excluding borrowings) 1,468.3 840.0 2,405.5Decrease in reinsurance liabilities - - (8.9)Increase/ (decrease) in payables related to direct insurance 14.5 4.8 (1.0)contractsIncrease in deferred income 27.0 18.8 42.2Increase in other payables 43.6 69.0 29.1Increase in net assets attributable to unit holders 81.9 15.3 40.2 Cash generated from operations 31.7 139.7 269.4 Income taxes paid (20.5) (0.4) (9.3) Net cash from operating activities 11.2 139.3 260.1 Cash flows from investing activitiesAcquisition of property & equipment (1.1) (2.0) (3.0)Proceeds from sale of plant & equipment 0.1 0.1 0.2Investments: Proceeds from sale - - 3.9 Net cash from investing activities (1.0) (1.9) 1.1 Cash flows from financing activitiesProceeds from the issue of share capital 23.7 12.0 30.3Consideration paid for own shares (7.7) (5.4) (5.4)Proceeds from exercise of options over shares held in trust 1.0 2.3 2.3Repayment of borrowings (0.8) (1.8) (4.1)Dividends paid (39.4) (2.0) (15.1) Net cash from financing activities (23.2) 5.1 8.0 Net (decrease) / increase in cash & cash equivalents (13.0) 142.5 269.2Cash & cash equivalents at 1 January 1,606.9 1,337.7 1,337.7 Cash & cash equivalents 1,593.9 1,480.2 1,606.9 INTERNATIONAL FINANCIAL REPORTING STANDARDS BASISNOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PREPARATION The consolidated interim financial statements for the six months ended 30 June2007 comprise the interim financial statements of St. James's Place plc (the "Company") and its subsidiaries (together referred to as the "Group"). This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the Group'spublished consolidated financial statements for the year ended 31 December 2006. 2. SEGMENT REPORTING 6 Months 6 Months 12 MonthsNet Income Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business Net insurance premium income 31.9 33.2 67.4 Net movement on deferred income (11.4) (8.0) (23.3) Investment income - unit linked 916.7 479.2 1,503.9 policyholders (i)Total life business 937.2 504.4 1,548.0 Unit trust business Fee income (excluding deferred income) 43.3 34.2 67.7 Movement on deferred income (15.6) (10.8) (18.9)Total unit trust business 27.7 23.4 48.8 Other business Commission income 28.0 28.9 62.1 Investment income - sale of investment in - - 7.0 LAHC Investment income - other shareholders 4.0 3.1 6.7 Investment income - other(ii) 11.0 (1.8) 8.7 Other operating income 2.1 2.5 1.8Total other business 45.1 32.7 86.3 Total net income 1,010.0 560.5 1,683.1 (i) The investment return disclosed for the 6 months ended 30 June 2006 has beengrossed up to reflect the cost of investment transactions. The correspondingexpense has been included under administrative expenses within the incomestatement. There is no effect on profit or net assets. (ii) Investment income - other relates to investment income on third partyinterest holdings in the St. James's Place unit trusts which are subject toconsolidation (the third party interest holdings are disclosed as "net assetvalue attributable to unit holders" within the balance sheet). This income isoffset by a change in investment contract benefits within the income statement. Segment Result 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionLife business Shareholder 15.3 36.5 85.5 Policyholder tax gross up 45.9 4.7 72.3Unit trust business 8.6 8.9 18.0Profit on sale of investment - LAHC - - 7.0Other loss (4.0) (2.1) (2.9)Total other business (4.0) (2.1) 4.1Total operating profit 65.8 48.0 179.9 Financing costs - - -Profit before tax 65.8 48.0 179.9 Income taxes Policyholder tax (45.9) (4.7) (72.3) Shareholder tax 8.4 (14.9) (19.6) Profit after tax 28.3 28.4 88.0 3. INCOME TAXES 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionPolicyholder taxOverseas withholding tax 9.1 4.6 9.2Deferred tax 16.5 0.1 41.8UK corporation tax Current year 22.6 - 21.3 Prior year (2.3) - -Total policyholder tax charge for the period 45.9 4.7 72.3 Shareholder taxUK corporation tax 4.0 3.7 8.7Group relief (5.9) (0.5) 0.1Overseas tax 0.6 0.3 0.9Deferred tax (credit)/charge On unrelieved expenses (9.8) 5.2 (1.1) Other 2.7 6.2 11.0Total shareholder tax (credit)/charge for the (8.4) 14.9 19.6period 4. DIVIDENDS The following dividends have been paid by the Company: 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million 2005 final dividend - 1.85 pence per ordinary - 8.3 8.3share2006 interim dividend - 1.50 pence per ordinary - - 6.8share2006 final dividend - 2.15 pence per ordinary 10.0 - -share2006 special dividend - 6.35 pence per ordinary 29.4 - -share Total dividends paid 39.4 8.3 15.1 The directors have resolved to pay an interim dividend of 1.75 pence per share(2006: 1.5 pence). This amounts to £8.3 million (2006: £6.8 million) and willbe paid on 19 September 2007 to shareholders on the register at 10 August 2007. 5. EARNINGS PER SHARE 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 Pence Pence Pence Basic earnings per share 6.1 6.3 19.4Adjustments - disposal of LAHC - - (1.5)Basic adjusted earnings per share 6.1 6.3 17.9 Diluted earnings per share 5.8 6.0 18.4Adjustments - disposal of LAHC - - (1.5)Diluted adjusted earnings per share 5.8 6.0 16.9 The calculation of diluted earnings per share is based on the following figures: 6 Months 6 Months 12 Months Ended Ended Ended 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionEarningsProfit after tax (for both basic and diluted EPS) 28.3 28.4 88.0Adjustment - disposal of LAHC - - (7.0)Adjusted profit (for both basic and diluted EPS) 28.3 28.4 81.0 Weighted average number of sharesWeighted average number of ordinary shares in 463.7 m 448.7 m 452.8 missue (for basic EPS) Adjustments for outstanding share options 25.9 m 25.3 m 25.8 m Weighted average number of ordinary shares (for 489.6 m 474.0 m 478.6 mdiluted EPS) 6. ASSETS HELD TO COVER LINKED LIABILITIES Included within the balance sheet are the following assets and liabilities whichrepresent the net assets held to cover linked liabilities. The differencebetween these assets and liabilities and those shown in the consolidated balancesheet represents assets and liabilities held outside the unit-linked funds. 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' MillionAssetsInvestment property 708.4 397.9 568.2Investments Equities 10,212.2 7,696.4 8,883.0 Fixed income securities 609.1 561.7 544.4 Investment in Collective Investment 733.3 635.0 728.6 Schemes Currency forwards 0.8 0.4 0.2Other receivables 90.0 60.7 39.4Cash and cash equivalents 1,476.2 1,365.4 1,501.4Total assets 13,830.0 10,717.5 12,265.2 LiabilitiesFinancial liabilities Currency forwards - 0.4 0.1Deferred tax liabilities 156.2 99.8 139.8Other payables 75.4 80.3 33.5Total liabilities 231.6 180.5 173.4 Net assets held to cover linked liabilities 13,598.4 10,537.0 12,091.8 7. DEFERRED ACQUISITION COSTS 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business - insurance DAC 26.6 27.8 26.7Life business - investment DAC 328.4 263.5 296.5Unit trust business - investment DAC 82.4 63.3 70.4 Total deferred acquisition costs 437.4 354.6 393.6 The movement on deferred acquisition costs is reflected in the fees, commissionand other acquisition costs line in the income statement. 8. DEFERRED TAX ASSETS 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business - unrelieved expenses 26.9 10.8 17.1Life business - deferred income 32.5 33.0 34.6Unit trust business - deferred income 25.4 20.1 22.5Other 9.4 6.3 9.6 Total deferred tax assets 94.2 70.2 83.8 9. OTHER PROVISIONS 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million At beginning of period 3.1 9.6 9.6Movement in the period 0.2 (0.3) (6.5) At end of period 3.3 9.3 3.1 Other provisions at 30 June 2007 consist of £2.0 million to meet obligationsarising as a result of the closure of offices, £0.8 million in respect of thepolicyholder costs of redress for endowment business and £0.6 million in respectof miscellaneous items. 10. DEFERRED TAX LIABILITIES 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million On deferred acquisition costs 113.4 97.0 108.2On purchased value of in-force business 17.5 19.6 19.2Within unit-linked funds 156.6 99.8 139.8Other 9.9 6.1 10.4 Total deferred tax liabilities 297.4 222.5 277.6 11. DEFERRED INCOME 30 June 30 June 31 December 2007 2006 2006 £' Million £' Million £' Million Life business 228.3 201.6 216.9Unit trust business 90.6 66.9 75.0 Total deferred income 318.9 268.5 291.9 12. SHARE CAPITAL Number Nominal value £' Million At 31 December 2006 463,858,948 69.6Issue of shares 10,680,943 1.6 At 30 June 2007 474,539,891 71.2 13. STATUTORY ACCOUNTS The financial information shown in this publication is unaudited and does notconstitute statutory accounts. The comparative figures for the financial yearended 31 December 2006 are not the Company's statutory accounts for thefinancial year. Those accounts have been reported on by the Company's auditorsand delivered to the Registrar of Companies. The report of the auditors was unqualified and did not include a reference toany matter to which the auditors drew attention to, by way of emphasis withoutqualifying their report, and did not contain a statement under section 237 (2)or (3) of the Companies Act 1985. 15. APPROVAL OF INTERIM REPORT This interim report was approved by the Board of Directors on 30 July 2007. This information is provided by RNS The company news service from the London Stock Exchange