St. James's Place plc Annual Report 2018

FY2018 Annual Report · St. James's Place plc

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S T. J A M E S ’ S
P L AC E

AN NUAL REP ORT & ACC OUNTS 2018

We are a leading wealth manager focused
on delivering value for all stakeholders.
The success of St. James’s Place is built
on establishing and maintaining long lasting,
highly personal relationships with, and between,
our Partners and clients. We seek to achieve
the best possible outcome for our clients
through sound financial planning advice
provided by our highly skilled advisers,
together with our distinctive investment
management approach.

ANDREW CROFT, Chief Executive
andrew.croft@sjp.co.uk

I N T H I S R E P O R T

STRATEGIC REPORT

Overview
We are St. James’s Place .................... 2

2018 Performance Highlights ............ 3

We are a Sound Investment ................ 4

Strategic Report
Chief Executive’s Report ...................... 8

Market Overview ...................................12

Our Business Model ............................14

Our Strategy ...........................................16

Clients ..................................................18

The Partnership ................................20

Funds ...................................................22

Financials ...........................................24

People ..................................................26

Chief Financial Officer’s Report .......28

Financial Review ...................................30

Risk and Risk Management ..............47

Corporate Responsibility Report .....56

Approval of the Strategic Report .....70

St. James’s Place
Charitable Foundation ............71

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GOVERNANCE

Board of Directors ................................78

Chair’s Report .......................................80

Corporate Governance Report ........82

Report of the Audit Committee .......94

Report of the Risk Committee .......106

Report of the
Nomination Committee ...................111

Remuneration at a Glance ...............116

Report of the
Remuneration Committee ..............117

Directors’ Report ................................142

Statement of Directors’
Responsibilities ..................................145

FINANCIAL STATEMENTS

OTHER INFORMATION

Shareholder Information ................. 222

How to Contact us
and Advisers ....................................... 223

St. James’s Place
Partnership Locations ..................... 224

Glossary of Key Performance
Indicators (KPIs) ................................ 226

Glossary of Alternative
Performance Measures .................. 227

Glossary of Terms ............................. 230

Independent Auditors’
Report to the Members
of St. James’s Place plc ...................148

Consolidated Financial
Statements under International
Financial Reporting Standards ......154

Parent Company Financial
Statements under Financial
Reporting Standard 101 .................. 206

Supplementary Information:
Consolidated Financial
Statements on a Cash
Result Basis (Unaudited) .................213

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
2

OVERVIEW

W E A R E S T. J A M E S ’ S P L A C E

St. James’s Place plc is a FTSE 100 financial services group that
provides high-quality wealth management services to businesses
and individuals across the UK. St. James’s Place is well established
as one of the UK’s leading wealth managers.

The strength of the Group’s adviser-led approach to wealth
management, twinned with a proven investment management
proposition, leaves St. James’s Place uniquely positioned to benefit
from favourable long-term demographic and market opportunities
in wealth management.

682,000

CLIENTS

96%

CLIENT
RETENTION
R ATE

94%

CLIENT
ADVOCACY
SCORE

3,954

TOTAL ST. JAMES’S PL ACE ADVISERS
(UP 8%), SUPPORTED BY 5,540 PARTNER
SUPPORT STAFF, AND 2,484 EMPLOYEES

2,489

PARTNER PR ACTICES

39INVESTMENT

FUNDS

9INVESTMENT

PORTFOLIOS

£81.0m

TOTAL AMOUNT R AISED AND
DISTRIBUTED TO GOOD CAUSES
THROUGH THE ST. JAMES’S PL ACE
CHARITABLE FOUNDATION SINCE 1992

14%

81.0

71.0

54.0

46.4

39.4

2014

2015

2016

2017

2018

ST. JAMES’S PLACE PLC
3

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2 0 1 8 P E R F O R M A N C E H I G H L I G H T S

St. James’s Place performed
well in 2018, reporting a good
set of results that delivered
growth in all of our key business
and financial metrics. These
outcomes demonstrate the
resilience of our business
in what was a more
challenging year.

£15.7bn

GROSS INFLOWS, UP 8%
2017: £14.6 billion

£10.3bn

NET INFLOWS, UP 8%
2017: £9.5 billion

£95.6bn

FUNDS UNDER MANAGEMENT, UP 5%
2017: £90.7 billion

Find out more on page 8

£309.0m

UNDERLYING CASH RESULT, UP 10%
2017: £281.2 million

95.6

90.7

75.3

58.6

52.0

2014

2015

2016

2017

2018

10%

309.0

281.2

173.8

182.1

199.5

2014

2015

2016

2017

2018

48.22p

DIVIDENDS PER SHARE, UP 12.5%
2017: 42.86 pence

Find out more on page 9

£1,002.0m

EUROPEAN EMBEDDED VALUE
(EEV) OPERATING PROFIT, UP 9%
2017: £918.5 million

ANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk

OVERVIEW

W E A R E A S O U N D I N V E S T M E N T

We are a
leading wealth
manager
focused on
delivering
value for all
stakeholders.

Already established as a leading wealth
manager in our chosen markets, the
strength of our adviser-led approach
to wealth management and our proven
investment management proposition,
means we are well positioned to benefit
from favourable long-term demographic
and market opportunities in wealth
management.

We are
strong.

We are
distinctive.

We are a financially strong,
FTSE 100 Group driving
growth underpinned by a
resilient balance sheet.

We are an advice-led wealth management
business that strives to deliver positive
outcomes for clients. Achieving this
contributes to strong client retention
and helps attract new client assets. Our
principal source of income is the receipt of
fees on client funds under management.
This results in a cash generative
financial model with relatively low capital
requirements. This means we are able to
deploy capital to invest in the future growth
of the business and the development of
our client proposition, while also providing
stable and growing returns to shareholders.

See page 24 for further information

We are a vertically
integrated wealth
management business,
offering clients an end-to-
end wealth management
proposition.

We offer clients access to our full range
of wealth management products and
services exclusively via the Partnership, our
own 3,954-strong force of self-employed
advisers. Client funds are managed using
our distinctive Investment Management
Approach (IMA) whereby we use our scale
and expertise to carefully select a number
of external managers from across the
globe to manage our range of funds.

See page 22 for further information

ST. JAMES’S PLACE PLC

W E A R E A S O U N D I N V E S T M E N T

S
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We are
growing.

We are
investing.

We are
responsible.

We have a clear growth
strategy to enable us to
capitalise on the long-
term market opportunity
in advice-led UK wealth
management and drive
growth in funds under
management.

We aim to grow gross client inflows by
15-20% per annum over the medium term
through a focus on growing the size of the
Partnership, improving adviser efficiency,
and broadening and enriching our client
proposition. In addition, we focus on
ensuring strong client retention through
delivering a high-quality service to advisers
and clients, driving good investment
performance, and ensuring we remain a
robust and resilient business that clients
trust and recommend.

See page 16 for further information

We continue to invest
in our capacity and
infrastructure so we are
well placed to capitalise
on growth opportunities
ahead.

We are a business built on
trust. That means we invest
and behave in a responsible
manner with a focus on
‘doing the right thing’
for all our stakeholders.

We have a programme of investment that
is supporting our ambition to double our
funds under management over the next
five years. This includes our investment
into the St. James’s Place Academy and
Next Generation Academy programmes;
widening our geographic presence via
St. James’s Place Asia; our expansion of
Rowan Dartington, our discretionary fund
management business, across the UK and
into Asia; and Bluedoor, our new back-
office administration system.

See page 28 for further information

We protect our reputation by ensuring all
our people and the Partnership embrace
the core culture and values that underpin
our business. This means putting client
interests first, and emphasising quality,
service and relationships above everything
else. We also aspire to be a good corporate
citizen through enhancing our stewardship
of client funds and making clear our
commitment to our communities and
good causes through our Corporate
Responsibility programme and the
St. James’s Place Charitable Foundation.

See page 56 for further information

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk

STRATEGIC
REPORT

Chief Executive’s Report .................. 8

Market Overview .............................. 12

Our Business Model ........................ 14

Our Strategy ..................................... 16
Clients ............................................ 18
The Partnership ............................ 20
Funds .............................................22
Financials ...................................... 24
People ............................................ 26

Chief Financial Officer’s Report ....28

Financial Review .............................. 30

Risk and Risk Management ........... 47

Corporate Responsibility Report ....56

Approval of the Strategic Report .... 70

STRATEGIC REPORTST. JAMES’S PLACE PLC 7

W E S E E T H I N G S

DIF F E R E N T LY

Already established as a leading wealth manager in our chosen markets,
the strength of our adviser-led approach to wealth management and
our proven investment management proposition, means we are well
positioned to benefit from favourable long-term demographic and
market opportunities in wealth management.

682,000

CLIENTS

3,954

TOTAL ST. JAMES’S PLACE
ADVISERS

£95.6bn

FUNDS UNDER MANAGEMENT
AT 31 DECEMBER 2018 – A 5%
INCREASE ON 2017

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
8

C H I E F E X E C U T I V E ’ S R E P O R T

“The business has performed well during
the year, building on an exceptional
outcome in 2017 and despite a difficult
external environment in the last quarter
of the year.”

ANDREW CROFT, Chief Executive
andrew.croft@sjp.co.uk

£95.6bn

FUNDS UNDER MANAGEMENT
(2017: £90.7bn)

£15.7bn

GROSS INFLOWS
(2017: £14.6bn)

£10.3bn

NET INFLOWS
(2017: £9.5bn)

Introduction
This is my second report to shareholders as
Chief Executive and I am pleased to say the
business has performed well during the year,
building on an exceptional outcome in 2017
and despite a difficult external environment
in the last quarter of the year.

All of our key financial metrics have grown,
the Partnership is stronger and larger, and
we have made good progress with our multi-
year back-office infrastructure project.

Business performance
and dividend
I am pleased to report another good set
of results that once again demonstrate
the resilience of our business. In 2018 we
achieved full-year gross inflows of
£15.7 billion, which represents growth of
8% over 2017, while net inflows were also
8% higher at £10.3 billion. We have now
achieved compound growth in gross inflows
of 18% p.a. over 2, 5 and 10 years whilst over
the same periods compound growth in net
inflows has been some 20% p.a.

Those net inflows, partially offset by weaker
investment markets, provided for funds
under management at the end of 2018 of
£95.6 billion, growth of 5.4%.

The financial performance of the business
reflects the progression of funds under
management together with the contribution
of new inflows, resulting in good growth
across all the key metrics measured by the
Board. The Chief Financial Officer’s Report
and Financial Review on pages 28 to 46
provide a comprehensive analysis of the
financial performance for the year.

STRATEGIC REPORTST. JAMES’S PLACE PLC 9

Shareholders will recall that the Board
considers the underlying cash result to
be a key measure the Board considers
when determining the dividend. Indeed, we
announced a year ago that we would expect
dividends to be set using a c.80% pay-out
ratio to the Underlying cash result.

With this in mind, the Board proposes a final
dividend of 29.73 pence per share, making
for a full year dividend of 48.22 pence per
share, growth of 12.5%, marginally above
the growth of the Underlying cash result
in recognition of the very strong strategic
progress during the year.

The final dividend, subject to approval of
shareholders at our AGM, will be paid on
24 May 2019 to shareholders on the register
at the close of business on 5 April 2019. A
Dividend Reinvestment Plan continues to be
available for shareholders.

Clients
The success of St. James’s Place continues
to be built on establishing and maintaining
long lasting, highly personal relationships
with, and between, our Partners and clients
and serving them well.

At its core, this means we seek to achieve
the best possible outcome for our clients
through sound financial planning advice
provided by our highly skilled advisers,
together with our distinctive investment
management approach. Thus helping
our clients to fulfil their ambitions and
aspirations.

It is pleasing then that clients of
St. James’s Place see real value in their
relationship with the business, as highlighted
in the results of our biennial Wealth Account
Survey. Our survey, which was carried out
following receipt of Annual Wealth Account
Statements in early 2019, has so far received
some 34,000 responses and it indicates that
overall client satisfaction remains high. 89%
of clients tell us that they are either satisfied
or very satisfied with the overall relationship
and encouragingly, more than 94% of
clients said that they would recommend
St. James’s Place to others with 55%
suggesting that they had already done so.
When asked to describe our proposition in
terms of value for money, 96% of the clients
who responded, said reasonable, good or
excellent. We will build upon these excellent
results by seeking further improvements to
our standards of service and proposition,
ensuring clients continue to receive high
quality, face-to-face advice they can trust and
demonstrable value creation for their wealth.

142

ACADEMY AND NEXT GENERATION
ACADEMY GRADUATES IN 2018
(2017: 124)

The St. James’s Place
Partnership
The St. James’s Place Partnership now
numbers 3,954 advisers, an 8% increase
over the year as we welcomed a net 293
new advisers through a combination
of our experienced adviser recruitment
channels and our Academy initiatives. In
2018 we invested some £10 million in our
Academy and Next Generation Academy –
an investment that will play an important
and growing role in developing our next
generation of financial advisers. Last
year 142 people graduated from these
academies and at the end of the year there
were 379 individuals in the programme. We
are also pleased that 50 Partner Support
Staff became fully diploma qualified having
passed through our Paraplanning Academy
in 2018.

Looking ahead, we will continue to seek to
attract high-quality, experienced advisers to
the Partnership as we cement our position
as a ‘go to’ place for successful financial
advisers through the commitment we
make to supporting their clients and their
businesses. In addition, we will further
expand the capacity of our Academy
programmes with the ambition of enrolling
14 new cohorts and graduating around 170
advisers into the Partnership in 2019.

The Partnership is a key differentiator for
St. James’s Place and we will continue
to ensure we provide the support for our
advisers so that they can, in turn, support
clients.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
10

C H I E F E X E C U T I V E ’ S R E P O R T C O N T I N U E D

Investment Management Approach (IMA)

Red lines indicate fund managers from whom all the
strategies we offer are exclusive to St. James’s Place
clients in the UK retail space.

Investment markets
and our Investment
Management Approach
2018 proved to be a challenging one for
investors. The market started weakly,
recovered in the second quarter, held steady
in the third, before seeing a sharp correction
in the final quarter, resulting in investment
returns for the year as a whole being
negative across almost all asset classes.

A number of factors lay behind the sell-off:
Brexit concerns; US-China trade tensions;
slowing growth in China and potentially, in the
US; the end of the Trump tax-cuts stimulus to
corporate earnings; and, perhaps above all,
worries over the tightening monetary policy
with the US Federal Reserve raising interest
rates four times during the course of the year.

complementary managers in GMO and
Jennison have been appointed as co-
managers of the Balanced Managed fund.
These two bring increased diversity and
flexibility, as well as scalability in the case
of GMO, to our range of managers.

After the downturn of late 2018, markets
posted a strong first month in 2019, a
recovery that has been reflected across all
our Portfolios, reflecting a growing belief
that initial global growth fears had been
overdone. Irrespective of any future short-
term volatility, we remain confident that our
investment approach will continue to support
clients in realising their long-term goals.

Against this backdrop our Portfolios pared
back in line with equity markets in the
last three months of the year, taking them
negative for the year albeit they protected
clients from the worst of the market fall.

Towards the end of the year, we launched
the Diversified Assets fund, managed by
Kohlberg Kravis Roberts & Co. L.P. (KKR) in
New York. This strategy offers our clients the
opportunity to access private market assets
that are typically only available to institutional
investors. We also further improved our
approach to responsible investing with
a change of strategy and subsequent
refocusing and renaming of the Ethical fund
as the Sustainable & Responsible Equity
fund, now managed by Kirsteen Morrison
and David Winborne of Impax Asset
Management. The other changes made
last year saw us add Wellington, who bring
a more diverse approach to the Alternative
Assets fund, and two very different but

STRATEGIC REPORTST. JAMES’S PLACE PLC 11

Investment for growth
We continue to look to the future through our
continued investment into St. James’s Place
Asia and Rowan Dartington, both of which
are performing well and complementing
our business. In 2018, we grew adviser
headcount in Asia to 133 and increased
St. James’s Place funds under management
to some £625 million and total funds under
administration to over £1 billion.

Rowan Dartington is also growing in
scale, with funds under management now
totalling £2.3 billion, and its proposition
is expanding both geographically – it is
now present in Hong Kong with entry into
Singapore planned for 2019 – and in terms
of capability as the business explores new
opportunities, including international multi-
currency portfolios and portfolio lending
services. We will also continue to explore
‘bolt on’ acquisitions where we see both
complementary fit and value.

Back-office infrastructure
2018 was a year of significant progress in
our programme to transform our back-office
administration onto Bluedoor. During the year
we successfully migrated a £24 billion tranche
of our accumulation-stage pensions business
as well as all of our £5 billion pensions
drawdown book. This means that we now
administer around 77% of all new business
on Bluedoor, and 63% of total funds under
management. Such migration programmes
are complex and the progress in 2018 was
the result of considerable work from our
third-party suppliers, our own administration
centres, and our Field and Cirencester teams.
Last week we launched a new investment
bond on the platform. I would like to thank
everyone involved in these migrations for their
hard work and for giving up many weekends.

2019 will be another year of intense activity
as we focus first on migrating the remaining
tranches of our pensions business before
migrating our existing investment bond
business.

From the outset, our priority has been to
manage this transformation safely, ensuring
that clients, the Partnership, and our
business suffer minimal disruption as we
execute this multi-phase process. That will
remain our overriding priority as we continue
through the latter phases of this project.

Once we have completed the project our
business processing will be on a modern
21st century platform which will provide us
with the scalability to accommodate our
growing business needs as well as enable us
to improve service to clients.

The St. James’s Place
Charitable Foundation and
community engagement
Helping people in need is a very important
part of the St. James’s Place culture, with our
whole community committed to supporting
charitable causes and making a positive
and lasting difference to the lives of those in
need. In 2018, some £10 million was raised
for the Foundation, a sum which includes the
Company matching every £1 raised. Since
1992, we have now raised and distributed
over £80 million in support of thousands
of charities. We are proud of the fact that
some 80% of advisers and employees of
St. James’s Place now give to the Charitable
Foundation through their pay or earnings,
complementing the additional fundraising
activities undertaken by staff and advisers.

Our desire to achieve a positive social
impact extends beyond our commitment
to the Charitable Foundation and includes
engaging with the communities in which our
business operates and those communities
that need a helping hand. As a wealth
management business we are particularly
well placed to contribute positively to
financial education across the UK and we
support the efforts of the Partnership and
our employees to allow them to commit
their time and expertise to such activities.

Further details of our CR activities are set
out on pages 56 to 69.

Board changes
As previously announced David Lamb
has recently retired after 27 years with
the Company and the last 12 as a Board
Director. I would personally like to thank
David for his 27 years of invaluable service
to the Company.

I am also delighted that David has agreed to
continue to chair our Investment Committee
in a non-executive capacity.

I also thank Sarah Bates who stepped down
from the Board after 14 years as a director
and the last four as Chair, and I look forward
to working with Iain Cornish who has
succeeded Sarah as Chair.

Our community
The strength and continued growth of
the business is due to the hard work and
dedication of The Partnership, their teams, our
management teams and all our employees
and administration support teams.

On behalf of the Board and shareholders I
once again thank everyone connected with
St. James’s Place for their contribution
to these results and for their continued
enthusiasm, dedication and commitment.

Outlook
It is pleasing to see a recovery in the
global stock markets at the start of 2019
which, together with on-going net inflows
during January and February have, at the
time of writing, taken our funds under
management to some £102 billion. The
business continues to perform well relative
to the industry. However, challenging
external factors, like those currently being
experienced, are not in our control and
the pace of fund flows has moderated
compared with last year. I would note though
that the inflows for the same period last year
represent a very strong comparative and
March typically accounts for around 50% of
the first quarter’s flows.

Irrespective of these external factors,
the fundamentals of our clients’ financial
planning requirements remain unchanged.
With a continued focus on achieving the
best possible outcomes for our clients
through the provision of trusted face-to-
face financial advice and our distinctive
investment management approach,
together with the continued growth in the
size of the St. James’s Place Partnership,
we remain extremely well placed to
continue to grow our business.

ANDREW CROFT
Chief Executive
26 February 2019

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
12

M A R K E T O V E R V I E W

The UK wealth market.

Rising affluent wealth
Total UK retail wealth is large and growing,
with third-party data suggesting that retail
liquid assets alone account for some
£3.2 trillion (as at the end of 2018), of which
around 70% is controlled by those individuals
with £50,000 to £5 million of liquid assets.

The Office for National Statistics (ONS)
suggests that 50% of total UK personal
wealth is concentrated in the hands of
savers between the ages of 45 and 64, with
an additional 37% controlled by those aged
65 and above (as at 2016). This illustrates
the extent of asset decumulation ahead
and the potential scale of intergenerational
wealth transfer to come. This presents
a significant opportunity for skilled and
experienced financial advisers able to build
long-term, trusted relationships across client
generations.

Increasing demand
for financial advice
While there has been a proliferation of new
direct-to-consumer and ‘robo’ propositions
in recent years, we see growing demand
for personal, face-to-face advice from
individuals with neither the time, inclination
or ability to manage their financial affairs,
or those with more complex finances.

Factors driving this continued demand
for advice include:

• the decline of defined benefit pension

schemes;

• the flexibilities and complexities afforded
to individuals via ‘pensions freedoms’;

• the scale and projected growth of the UK

savings gap;

• the complexity of personal taxation; and

• the desire to transfer wealth across

generations.

Despite growing demand for advice, the
population of financial advisers across the
UK has only modestly increased in recent
years. As a result, an ‘advice gap’ persists.

Against this backdrop, St. James’s Place is
established as the leading advice-led wealth
management business in the UK with 3,954
qualified advisers at the end of 2018.

Based on the 2018 Private Asset and Wealth
Managers (PAM) Directory, we ranked first
by assets under management for the fourth
year in succession, as well as the fastest
growing asset manager, in absolute terms,
for both assets under management and client
accounts, over one, three and five years.

Our core market

UK aggregate wealth distribution by age

50%

28%

22%

24%

37%

10%

16-24 25-34 35-44 45-54 55-64 65-74 75-84

85+

Source: ONS

Active membership of private sector occupational
pension schemes by benefit structure

Defined benefit

Defined Contribution

Million
8

Source: ONS

Number of retail investment advisers

Bank & Building Society

Financial Advisor

Other

Thousand

12/10 12/11 06/12 12/12 07/13 01/14 10/14 11/15 12/16 11/17

Source: FCA

St. James’s Place’s core target market
is UK individuals with between £50,000
and £5 million in investable assets.
There were estimated to be 11.0 million
such individuals at the end of 2018,
and this number is projected to grow
to 12.8 million by 2022. The liquid
assets of this group are projected to
increase from £2.2 trillion to £2.6 trillion
in this time. While there are no typical
St. James’s Place clients, what all share
is a desire for trusted, face-to-face
financial advice.

UK individuals with between £50,000
and £5 million of investable wealth

SJP clients by FUM value band
31 December 2018

Million

>£1 million
19%

£500,000 –
£1 million
19%

<£50,000
6%

£50,000 –
£250,000
34%

Source: GlobalData

FORECAST

£250,000 –
£500,000
22%

STRATEGIC REPORTST. JAMES’S PLACE PLC

Market trends

The UK wealth management market is constantly evolving, providing both opportunities and challenges to market participants.
Below are five key trends that are shaping the UK wealth management landscape of tomorrow:

1. EVOLVING COMPETITIVE
LANDSCAPE

From direct-to-consumer platforms,
to ‘robo-advisers’, life insurance
companies and traditional advice
firms, market participants are seeking
to build both advice and online
service propositions. Much of this
advice growth is currently centred
on telephone-based, transactional
advice, to support clients who are
uncomfortable with a wholly online
process. Whilst this may appear to help
address the advice gap for a segment
of the market, few large businesses are
committed to building long-term, face-
to-face, adviser-client relationships.

2. REGULATORY DEVELOPMENTS

The Financial Conduct Authority (FCA)
recognises that there remains an advice
gap, and has focused on creating an
environment that allows firms to deliver
affordable and accessible advice
and guidance, including automated
solutions developed through the
‘Regulatory Sandbox’. Such innovation
is welcome and can support advisers’
engagement with clients and efficiency,
but there is a danger that standalone
automated solutions fail to take account
of clients’ wider financial planning
needs.

Much regulatory focus has been on
disclosure of costs and charges. This
has put more information in the hands of
clients and is a welcome drive to disclose
the total cost of investing.

3. TECHNOLOGY AND INNOVATION

Across the industry, the deployment of
technology to deliver operational and
administrative efficiency and scalability, to
cater for clients’ preferred communication
channels and to improve their experience,
continues apace. Client expectations are
rising, based on the user experience they
receive from leading online businesses
such as Amazon. This experience is based
not only on ease of interaction, but also
the tailoring of content to the individual.
Industry initiatives such as Open Banking
offer the opportunity for providers to
make strides in this area in the coming
years, but establishing client trust remains
a clear barrier for pure technology-driven
investment services.

4. PENSIONS ENVIRONMENT

The industry volume of defined benefit
pension transfers has increased over the
medium term as scheme trustees and
sponsoring companies have sought to
reduce onerous scheme liabilities, while
some scheme members have sought to
benefit from additional flexibilities afforded
by pensions freedoms.

It is anticipated that defined benefit
transfer activity will continue across the
market in the years ahead but, given the
complexities and risks associated with
providing advice in such an area, we
welcome regulatory efforts to ensure
that all industry participants deliver
suitable advice, that client interests
are best served, and that the industry’s
reputation is protected.

5. INTERGENERATIONAL
PLANNING

Pension freedoms, increasing life
expectancy and complex tax rules
continue to drive individuals at or
approaching retirement to seek financial
advice, both to put in place a plan for
the future and to manage that plan over
the coming years. A 65-year-old today
requires a long-term relationship with
an adviser who can not only advise
‘at retirement’, but also advise them
and their families on drawdown and
investment risk, planning for long-term
care, tax-efficient wealth transfer, estate
administration, legal services and
possibly equity release and annuities.
Research suggests that £2.8 trillion of
the wealth of those aged 55 or more,
with more than £50,000 of investable
assets, will be available to be transferred
in the next 30 years.

Opportunities for
St. James’s Place
The UK wealth management landscape
is evolving so we will focus on adapting
and enhancing our business to better
serve our clients and advisers in the
years ahead. This means, for example,
that we will need to continue to embrace

technology and develop our proposition so
that we and our advisers are even better at
forging strong relationships with the next
generation of St. James’s Place clients.

However, ours is an advice-led wealth
management business, built on the
foundation of long-term, trusted adviser-
client relationships. As the landscape
evolves further, we believe that demand

for personal, face-to-face advice will
increase, not diminish, so we will remain
committed to our approach while
adapting so that we can capture the
market opportunities ahead.

Find out more about risks
on page 47

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk14

O U R B U S I N E S S M O D E L

What makes us different

We are a vertically integrated wealth
management business, offering holistic
wealth management and financial
planning services, delivered
exclusively through the
St. James’s Place
Partnership.

OUR
CLIEN TS
We place our clients at the
centre of everything we do.
This is core to our culture.

682,000

CLIENTS

THE PA RT NERSHIP
We promote our trusted face-to-face approach
to financial advice exclusively through the
St. James’s Place Partnership, with whom we enjoy
a close and symbiotic relationship.

3,954

ADVISERS

ST. JA ME S’ S PL ACE
We offer clients a comprehensive suite of wealth management products and
services, and a distinct investment management approach. We provide
the Partnership with the tools and support for them to build their
businesses and develop long-term client relationships.

£95.6bn

FUNDS UNDER MANAGEMENT

OUR COMPETITIVE
ADVANTAGES

OUR
BRAND

OUR
EMPLOYEES
AND THE
PARTNERSHIP

STRATEGIC REPORTST. JAMES’S PLACE PLC 15

We generate

We enhance

We deliver

We operate a fee-based income model
where we receive fees based on the level
of client funds under management.

CLIENT
WEALTH

FINANCIAL
ADVICE

ASSETS
INVESTED

ASSETS
MANAGED

Annual
management fee
based on client
funds under
management

WE ATTRACT

We offer a comprehensive
investment, product and service
proposition that is exclusive to the
St. James’s Place Partnership and
clients, and a support proposition
that allows Partner businesses
to thrive.

WE RETAIN

We forge close, trusted relationships
with our advisers and make their
relationships with clients our priority.
We evolve and adapt our Investment
Management Approach to reinforce
client outcomes, and improve the
adviser and client experience.

WE IMPROVE

We engage with stakeholders to
better understand the strength of
our proposition as well as areas
for improvement. We develop our
back-office infrastructure and
embrace technology. We provide
Partner-specific support to underpin
business ambitions.

WE INVEST

We sow the seeds for long-term
growth through targeted investment.
We continue to expand our Academy
initiatives, build out our new back-
office administration system, and
invest in St. James’s Place Asia
and Rowan Dartington.

OUR
PRODUCTS
AND
APPROACH

OUR UNIQUE
CULTURE

OUR STRONG
FINANCIAL
POSITION

94%

2018 CLIENT ADVOCACY SCORE
2017: 97%

Find out more on page 18

2018 GROWTH IN ADVISERS
2017: +7%

Find out more on page 20

82%

2018 EMPLOYEE
ENGAGEMENT SCORE
2016: 86%

Find out more on page 20

12.5%

2018 DIVIDEND GROWTH
2017: +30%

Find out more on page 9

£81.0m

AMOUNT RAISED FOR THE
ST. JAMES’S PLACE CHARITABLE
FOUNDATION SINCE INCEPTION

Find out more on page 71

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk

O U R S T R A T E G Y

Our key business aim

How we achieve this

Our key aim is to attract, retain and grow client funds under
management (FUM) through offering a high-quality service
to the Partnership and clients. We therefore pursue a simple
growth and support strategy, underpinned by a series of clear
and focused strategic objectives.

Our
key aim
is to grow
funds under
management

2018 GROWTH IN
GROSS INFLOWS

Our growth strategy

Our growth strategy for delivering increasing
Gross Inflows involves:

• Growing the size of the Partnership.

• Improving adviser efficiency.

• Broadening our client proposition.

96%

2018 RETENTION
RATE OF CLIENT FUM

Our support strategy

Our support strategy for delivering
sustained retention of FUM involves:

• Delivering high quality service to advisers and clients.

• Driving consistently good investment performance.

• Ensuring we remain a robust and resilient business

that clients trust.

STRATEGIC REPORTST. JAMES’S PLACE PLC

Our strategic objectives

CLIEN TS
Deliver
positive outcomes
to clients.
More on page 18

PEOPLE
Attract, retain
and develop
talent.
More on page 26

THE PA RT NERSHIP
Grow and develop
the Partnership.
More on page 20

FINA NCIALS
Achieve
sustainable
growth in
profits.
More on page 24

FU NDS
Increase funds under
management.
More on page 22

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk

C L I E N T S

We are delivering positive
outcomes to clients.

Our approach
Putting clients at the heart of everything we
do is core to our culture and enables us to
work together to run a genuinely client-
focused business. We focus on building
long-term relationships anchored in trust
and mutual respect, where advice is tailored
to our clients’ individual circumstances.

If we and our advisers do this well,
our clients will not only remain with
St. James’s Place, but they will typically
become advocates. Indeed, our clients
frequently continue their relationship with
their adviser over many years, appreciating
a source of trusted advice as their financial
needs evolve over time.

Through the Partnership, clients of
St. James’s Place have access to a wealth
of financial solutions, including the provision
of funds and investment portfolios, and
expert advice around retirement planning,
intergenerational wealth and protection.

To complement our own range of solutions,
clients also have access to carefully selected
external providers for other services such as
protection, general insurance or investment
into venture capital trusts.

Clients benefit from the security of investing
with a business of St. James’s Place’s scale.
We have the capacity to perform in-depth
due diligence as part of our Investment
Management Approach as well as undertake
rigorous quality assurance on the advice
delivered by the Partnership. This gives us
the confidence to guarantee the suitability of
advice delivered by the Partnership, thereby
providing clients with additional peace of
mind.

Our focus on high-quality, advice-led wealth
management, means that St. James’s Place
now has more than 682,000 clients, based
in all corners of the UK as well as in Hong
Kong, Shanghai and Singapore. There is no
such thing as a ‘typical’ St. James’s Place
client. All are unique. Yet common to them
all is the desire to have a trusted, skilled and
experienced professional adviser to look
after them and their families.

Delivering value for clients
In recent times there has been much
attention on costs and charges across the
UK wealth management industry, and we
remain confident that our charges are below
our peer average when assessed on a true
like-for-like basis. With new disclosures
required as a result of the Markets in
Financial Instruments Directive (MiFID II)
and the Insurance Distribution Directive
(IDD), we will need to remain focused on
continuing to deliver, and indeed articulate,
the value that we deliver for clients of
St. James’s Place.

That means that as a minimum we need
not only to continue to deliver good, long-
term investment performance, but we
must deliver exceptional client service,
help clients maximise their outcomes
through effective financial planning, and
ensure that clients experience the benefits
of having a personal relationship with an
adviser that they can trust.

2018 development
In 2018, we launched our Diversified
Assets Fund of Alternative Investment
Funds (FAIF), managed by KKR, to enrich
our IMA. We also added several providers
to our protection panel including
Guardian and The Exeter, as well as
Medicash to our healthcare panel.

We have also improved our client
administration and service standards,
not least through further progress in
our transition onto Bluedoor, our new
back-office administration system, as
well as enhanced the functionality of our
digital wealth portal – the Online Wealth
Account.

Our focus for 2019
• Employ technology to enhance our
Online Wealth Account, including
facilities such as online payments
and document sharing.

• Optimise our back-office

administration systems to achieve
service excellence.

• Expand the services provided by

third-party providers for our clients,
supporting the provision of holistic
financial advice.

• Explore the development of

complementary products and tools to
support advice on asset decumulation.

How we engage
It is imperative that we continue to
achieve positive client outcomes
and deliver client experiences
that exceed expectations. To do
so we monitor all areas of the
business that can affect the client
experience, including the suitability
of advice, administration, investment
experience, client feedback and
client complaints. We also conduct
a client Wealth Account survey,
commission independent client
research, and monitor our Net
Promoter Score.

STRATEGIC REPORTST. JAMES’S PLACE PLC Enhancing the Online
Wealth Account

It is important that we are flexible in the way we service
clients of St. James’s Place, providing them with the ability
to receive and analyse information about their investments
in a format that suits them.

Complementing our paper-based reporting, we have
focused in recent years on upgrading our digital client-facing
reporting via our Online Wealth Account (OLWA). A secure
online portal, the OLWA enables clients to monitor all of
their St. James’s Place investments; providing information
on, among other things, plan details, investment allocation
by fund and asset class, and client-specific investment
performance. It also provides functionality for multi-currency
reporting and serves as a digital document library.

We have plans to develop the OLWA further, with innovation
focused on enhancing client communication, and facilitating
electronic payments online.

KEY PERFORMANCE INDICATORS

Objective: Deliver positive
outcomes to an increasing
population of clients

PROGRESS DURING 2018
2018 was another successful year as the business continued
to grow. Client numbers grew by 8% contributing to the
increase in investment of new funds. The quality of client
outcomes, as reflected in client retention and feedback,
continued to be very strong.

The graphs below set out St. James’s Place (SJP) client
related KPIs. Further information about why these KPIs are
important can be found in the Glossary of Key Performance
Indicators on page 226.

INCREASE IN CLIENT
NUMBERS FOR 2018

Client numbers (thousands)

682.0

11%

633.0

571.8

525.8

484.8

2014

2015

2016

2017

2018

Client retention (percentage)

96.3

96.2

96.4

96.3

96.4

96%

CLIENT RETENTION
FOR 2018

94%

OF CLIENTS WOULD
RECOMMEND
ST. JAMES’S PLACE

2014

2015

2016

2017

2018

Client advocacy 1
( % that would recommend SJP
to someone else)

97.0

95.0

97.0

N/A

94.0

2014

2015

2016

2017

2018

1 Client advocacy data is unavailable for 2017 as, from 2017 onwards,

the Wealth Account survey is undertaken biennially.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk20

T H E PA R T N E R S H I P

We are growing and
developing the Partnership.

Our Partnership approach
We have chosen to promote our services
exclusively through the Partnership,
reflecting the confidence we have in our
advisers’ ability to build and maintain long-
term working relationships with their clients,
and so be able to provide sound financial
advice. The exclusive arrangement also
provides clients with clarity of responsibility
in relation to their financial dealings.
St. James’s Place works hard to support
these client-adviser relationships, placing
them at the heart of all we do.

We give Partner practices the freedom to
organise their businesses in a way that
suits them, but we provide support to
them in areas such as advice and technical
guidance, marketing and client literature,
professional development, investment and
product solutions, business processing,
risk, and technology. In addition, Partner
practices benefit from our distinctive
Investment Management Approach
and their association with a strong
and recognised brand that guarantees
the suitability of the advice they give

when recommending any of the wealth
management products and services
provided by companies in the Group.

Today, the St. James’s Place Partnership
comprises 3,954 advisers across 2,489
Partner practices, reflecting growth in
multi-adviser practices, and our traditional
strength in the UK is now complemented
by a growing capability in Asia. Importantly,
the Partnership is becoming more diverse,
better reflecting the communities in which it
operates.

Growing the Partnership
Increasing the number of advisers within
the St. James’s Place Partnership is core
to our growth plans and we have three
principal routes to achieving this. We have
a dedicated central recruitment team that
seeks to identify experienced financial
advisers across the UK with the right skills,
experience and cultural fit to complement
the Partnership. In recent years we have also
seen applications increase from individuals
referred from Partner practices that are
seeking to grow their own businesses.

Finally, we have our Academy and Next
Generation Academy initiatives where we
provide an opportunity for second-careerists
or younger potential advisers, respectively, to
develop as wealth professionals and join the
Partnership with us. Currently we have four
UK centres for our Academies: in Edinburgh,
London, Manchester and Solihull.

Developing the Partnership
Reflecting our shared objectives, we commit
to providing ongoing support so that
advisers and Partner practices can grow
and develop over time. At its simplest, this
can include providing online, workplace, or
classroom-based professional development
and coaching opportunities to ensure our
advisers remain appropriately qualified,
technically able and equipped to deliver a
first-class service. We also encourage and
provide support for advisers who choose
to pursue further qualifications, with many
having already progressed to Chartered
status, while others have gained an MSc
degree in Wealth Management as part of
our collaboration with the University of
Loughborough Business School.

2018 development
In 2018 we welcomed a net 293 new
advisers to St. James’s Place. Around
170 were as a result of experienced
adviser recruitment, while 142 in total
graduated from our St. James’s Place
Academy and Next Generation Academy
programmes during the year. In addition,
50 Partner support staff became
fully diploma-qualified having passed
through our Paraplanning Academy.

We enrolled 230 new students into
our Academy and Next Generation
Academy in 2018, helping to underpin
our future growth ambitions.

Our focus for 2019
• Continue to attract high-quality,
experienced advisers to join the
Partnership.

• Expand our Academy programme to
14 annual intakes and graduate 170
advisers (including Next Generation
advisers).

• Improve adviser retention, particularly

new joiners to the Partnership.

• Expand our regional hubs, bringing
together specialist support from
our head office in Cirencester
and our field management team
to deliver enhanced support for
Partner practices.

How we engage
Our communication and
engagement approach with the
Partnership has two dimensions:
information that is delivered
directly to them via our electronic
weekly bulletin, special bulletins
on key topics, and our intranet
site; and face-to-face engagement
activity led by St. James’s Place
management. The latter can
range from individual meetings
to regional conferences and our
Annual Company Meeting. We also
host regular Partner Consultation
Meetings where we seek the views
of the Partnership on key topics.

STRATEGIC REPORTST. JAMES’S PLACE PLC 21

Building a multi-adviser
Partner practice

Based in Wrexham, Hadlow Edwards was formed in 2006
when Warren Hadlow and Medwyn Edwards merged their
single Partner practices. Since then, Hadlow Edwards has
expanded rapidly with the support of St. James’s Place. The
original directors have been joined by James Parry, who is
also a shareholder having acquired an equity stake using
bank funding facilitated by St. James’s Place. The advisory
team has grown significantly too, with a further six advisers
joining the business. Three of these advisers graduated
from our Next Generation Academy and another is a former
Partner who, with our help, was able to sell his business to
Hadlow Edwards and focus his efforts on advising clients.

This nine-strong adviser team is now also supported by
nine paraplanners, a further nine operational staff, and an
Operations Director.

In just 12 years, Hadlow Edwards has built a business
delivering trusted, personal advice and high standards of
service to some 2,900 clients with c.£370 million of funds
under management.

KEY PERFORMANCE INDICATORS

Objective: Continue to
grow and develop the
Partnership

PROGRESS DURING 2018
Our proposition continued to be attractive to advisers in the
year. The Partnership also welcomed graduates from our
Academy initiatives and new recruits in Asia.

The graphs below set out St. James’s Place Partnership-
related KPIs. Further information about why these KPIs are
important can be found in the Glossary of Key Performance
Indicators on page 226.

INCREASE IN ADVISER
NUMBERS FOR 2018

Number of advisers

3,954

7 %

3,661

10%

3,415

10%

3,113

10%

2,835

93%

ADVISER RETENTION
FOR 2018

2014

2015

2016

2017

2018

Adviser retention (percentage)

92.3

93.4

93.7

92.4

93.4

£4.0m

GROSS INFLOWS PER
ADVISER FOR 2018

2014

2015

2016

2017

2018

Gross inflows per adviser

(£’ Million)

19%

4.0

3.4

3.1

2.9

2014

2015

2016

2017

2018

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk22

F U N D S

We are increasing funds
under management.

Our core Investment
Management Approach
Successful investment is critical to the
future financial wellbeing of our clients, but
it is a field which presents a unique problem:
future performance is unpredictable. Clearly,
the best investment talent is not confined to
one firm or location. We want the freedom
and flexibility to access the skills of the best
investment managers around the globe to
help our clients achieve their financial goals.
For that reason, we do not employ in-house
investment managers. Instead, we carefully
select and contract a number of external
managers to manage our range of funds.

In doing so, we are able to provide our clients
with unique access to fund management
expertise that is often only available to large
institutional investors or overseas retail
investors. These exclusive relationships
are what help sets our approach apart,
providing clients with diversification and
expertise on a global scale that is beyond
many wealth managers.

The St. James’s Place Investment
Committee ‘manages the fund managers’
on behalf of our clients. The Committee
comprises three senior members of the
St. James’s Place Investment Division and
four independent members, who bring a
broad range of knowledge and experience.
The Committee is further supported
by specialist investment consultancy
firms – including Stamford Associates
and Redington – each contracted for their
expertise in particular investment markets.

Complementary Rowan
Dartington offering
In addition to our core Investment
Management Approach, a range of
complementary investment planning
solutions is available through Rowan
Dartington, the discretionary fund
management and stockbroking arm
of St. James’s Place. Working together
with St. James’s Place advisers, Rowan
Dartington can create and manage bespoke
share portfolios designed to match client

2018 development
After identifying an opportunity to
provide clients with exposure to private
assets, a key addition to our fund
range in 2018 was the launch of our
Diversified Assets (FAIF) managed by
KKR in New York. We also improved our
Environmental, Social and Governance
(ESG) proposition by relaunching our
Ethical fund as the Sustainable and
Responsible Equity fund, now managed
by Impax Asset Management in
London. This fund replaces a traditional
‘negative screening’ process with an
‘ESG for alpha’ process in the belief that
ESG factors are additive to potential
investment returns.

Our focus for 2019
• Refine our IMA including our ‘select,
monitor and change’ processes, to
achieve better client outcomes.

• Explore opportunities to broaden the
investment proposition and increase
fund capacity.

• Further enhance our Responsible

Investing capabilities and credentials.

• Continue to grow Rowan Dartington,

both organically and through
consideration of small, bolt-on
acquisitions.

risk profiles and meet specific investment
needs or preferences, thereby enriching
the proposition available to our clients.

Research, analysis
and monitoring
The data below illustrates the breadth
of the research, analysis and monitoring
conducted during 2018 by the various
functions that support the Investment
Committee, which includes the teams
at Stamford Associates, Redington
and at our head office in Cirencester.

Fund manager
monitoring meetings
conducted in the
UK and overseas
Investment Committee
meetings held during
2018
Investment
professionals working
exclusively on behalf
of St. James’s Place
clients
Years of industry
experience
of Investment
Committee members

2018

2017

492

363

240+ 240+

How we engage
Core to our Investment Management
Approach is the ongoing monitoring
of our fund managers to ensure they
continue to meet our expectations,
especially on risk and performance.
We interact with our managers
primarily through a programme of
regular, scheduled engagement
meetings with key investment
management personnel. These
meetings, which are conducted
across the world, involve experts
from our Investment Committee, the
St. James’s Place investment analyst
team, and our external investment
consultants.

STRATEGIC REPORTST. JAMES’S PLACE PLC Launch of the Diversified
Assets (FAIF)

For many years, investment solutions available to retail
investors have focused on traditional equity and bond asset
classes. Broadening our investment proposition to provide
clients with exposure to private assets was the vision behind
our Diversified Assets (FAIF).

This project began in June 2016 with the team at Redington
conducting a global search to identify managers with
four characteristics: expertise across infrastructure, real
estate, private equity, private credit and high-yield credit;
a corporate structure facilitating effective management
across these asset classes; the desire to adopt a partnership
approach with St. James’s Place to ensure alignment
and transparency; and an ability to offer a competitive
fee. The initial research saw Redington engage with ten
managers before presenting four potential candidates to
St. James’s Place.

Further extensive investment and operational due diligence
was then undertaken on the shortlisted managers by both
St. James’s Place and Redington, finally resulting in KKR
being formally appointed as the manager of the fund, which
was successfully launched in October.

KEY PERFORMANCE INDICATORS

Objective: Increase Funds
Under Management (FUM)

PROGRESS DURING 2018
In another successful year, new business from clients,
combined with the impact of investment market returns,
resulted in an increase in total FUM of £4.8 billion, growth of
5% over the year. This growth feeds directly through to the
financial performance in the year.

The graphs below set out St. James’s Place fund-related
KPIs. Further information about why these KPIs are
important can be found in the Glossary of Key Performance
Indicators on page 226.

INCREASE IN GROSS
INFLOWS IN 2018

INCREASE IN NET
INFLOWS IN 2018

INCREASE IN FUNDS
UNDER MANAGEMENT
IN 2018

Gross inflows (£’ Billion)

15.7

29%

14.6

23%

17%

11.4

16%

7.9

9.2

2014

2015

2016

2017

2018

Net inflows (£’ Billion)

10.3

40%

9.5

17%

6.8

14%

5.8

20%

5.1

2014

2015

2016

2017

2018

Funds Under Management
(£’ Billion)

20%

28%

90.7

95.6

13%

75.3

17%

52.0

58.6

2014

2015

2016

2017

2018

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk24

F I N A N C I A L S

We are driving
profitable growth.

Our approach
Our financial business model is
straightforward. We attract and then retain
funds under management (FUM) on which
we receive an annual management fee. This
is the principal source of income for the
Group, out of which we meet the overheads
of the business and invest in growing the
Partnership and acquiring new FUM.

The level of income we receive is dependent
on the value of our FUM. As a result, growth
in FUM is a strong positive indicator of
future growth in profits. Due to the structure
of some of our products, approximately half
of our new business does not generate net
Cash result profits in the first six years after
it is written. This means that the benefit of
these gross inflows into FUM for a given
year will not be seen until six years later, as
the business becomes cash generative.

The deferral of cash generation on these
products means the business always has
six years’ worth of funds in the ‘gestation’
period. More information about our fees
on FUM can be found in Section 1 of the
Financial Review on page 31.

Group expenditure is carefully managed with
clear targets set for growth in the core costs
of running the Group’s infrastructure, which
are known as ‘Establishment expenses’.
Many other expenses increase with
business levels and are met from margins
in the products. The Group also invests in
order to:

• continue building adviser capacity and

attracting new funds;

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

• develop administration systems and

processes that will accommodate growth,
contribute to future improvements in
Partner and client experience, and reduce
the cost of business processing. Our most
significant investment in this area is our
new Bluedoor administration platform;
further details on the progress we have
made migrating to Bluedoor is set out
overleaf.

Performance measurement
Whilst our financial business model is
straightforward, the impact of having a life
insurance company at the heart of the Group
results in accounting complexity under our
International Financial Reporting Standards
(IFRS) statutory reporting framework. For
this reason, we continue, in our Financial
Review on pages 30 to 46, to supplement
IFRS information with the disclosure of
alternative performance measures (APMs).
A full Glossary of APMs is provided on page
227, in which we define each APM, explain
its use and, if applicable, explain how the
measure can be reconciled to the IFRS
financial statements. The key APMs used
by the Group are set out below.

1. Operating, Underlying
and Cash results 1
The Cash results are used by the Board
to monitor the annual level of cash
profit generated by the business, as
they exclude certain non-cash items
that are included under IFRS, such
as deferred tax and non-cash-settled
share option costs. Operating cash
shows the emergence of cash from
business operations. Underlying cash
additionally reflects the cash impact of
strategic investments such as Asia.
The Cash result includes all other cash
items, along with the short-term costs
associated with our Bluedoor project.

2. European Embedded
Value (EEV)
Both the IFRS and Cash results report
the financial performance for the year.
However, as our business is long term,
we supplement these metrics with EEV.
Under EEV methodology, the future cash
flows expected to arise from the in-force
business are modelled and discounted
back to present value. This provides
the long-term economic value of the
business in-force.

1 The Cash result should not be confused with
the IAS 7 consolidated statement of cash-
flows, which is presented on page 157.

How we engage
We maintain close relationships with
institutional shareholders and sell-
side analysts primarily through direct
dialogue and frequent meetings
throughout the year. We receive
routine feedback from corporate
brokers on the views of institutional
shareholders, and in 2018 we also
commissioned Makinson Cowell,
a leading capital markets advisory
business, to undertake independent
research into shareholder
perspectives of the Group and
present the findings to the Board.

STRATEGIC REPORTST. JAMES’S PLACE PLC Bluedoor

Development of the Bluedoor administration platform has
been part of a multi-year investment programme to ensure
our future systems and processes can support our overall
business objectives. In 2018, we made further significant
progress in our programme. During the year we successfully
migrated a £24 billion tranche of our accumulation-stage
pensions business as well as all of our £5 billion pensions
drawdown book. As a result, we now administer around
77% of all new business on Bluedoor, and 63% of total FUM,
meaning that we are already benefitting from our investment
into this new system.

Looking ahead, 2019 will be another year of intense activity
as we focus first on launching new investment bonds on
the platform, then on migrating the remaining tranches of
our accumulation-stage pensions business, and, finally,
migrating our existing investment bond business.

KEY PERFORMANCE INDICATORS

Objective: Achieve
sustainable growth in
reported profit on all
measures

PROGRESS DURING 2018
Our business model is simple and is aligned with the needs
of both our clients and the Partnership. We have continued
to grow FUM through attracting new client assets to the
business and maintaining high retention levels, partially
offset by weaker investment markets. Growth in FUM is the
principal driver of the financial results, and so we are pleased
to report a continuation of the trend of recent years.

The graphs below set out St. James’s Place financial KPIs.
Further information about why these KPIs are important can
be found in the Glossary of Key Performance Indicators on
page 226.

INCREASE IN EEV
OPERATING PROFIT
BEFORE TAX IN 2018

EEV operating profit before tax
(£’ Million)

1,002.0

36%

918.5

11%

660.2

673.6

29%

596.4

10%

INCREASE IN
UNDERLYING CASH
RESULT IN 2018

12.5%

INCREASE IN FULL YEAR
DIVIDEND IN 2018

2014

2015

2016

2017

2018

Underlying cash result (£’ Million)

10%

309.0

41%

281.2

24%

173.8

182.1

10%

199.5

2014

2015

2016

2017

2018

Dividends
(Pence per share)

18.0%

33.00

20.0%

27.96

46.0%

23.30

12.5%

29.9%

48.22

42.86

2014

2015

2016

2017

2018

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk26

P E O P L E

We are attracting, retaining
and developing talent.

Our employees
Our ability to attract and retain talent is
critical to ensuring we can meet both our
existing and future business needs and
continue delivering exceptional service to the
Partnership and their clients. We now have
approximately 2,500 employees throughout
the Group, working in collaboration with
our outsourced providers, the Partnership
and their 5,540 support staff. We believe
our employees are a key competitive
advantage. Therefore, it is important that
we create an environment where staff feel
valued, have clarity of purpose, believe they
can have a fulfilling career full of challenge
and opportunity, and where we champion
diversity and inclusivity. This environment
has contributed to creating a highly engaged
workforce where staff turnover is low,
underpinning the quality and sustainability of
our proposition to advisers and clients alike.

Our Partnership
Delivering an excellent service to our
clients depends on all stakeholders within
our community working together with the
common purpose of delivering the best
outcomes for our clients. We therefore
extend our support, culture and values to
individuals beyond our employee base and
into our Partner practices. An example
of this in action is our launch in 2018 of a
new development programme for Partner
support staff, which was given Chartered
Insurance Institute accreditation. The
programme involves providing face-to-
face coaching, e-learning, webinars, audio
presentations and reading packages. This
helps to upskill Partner practice back-office
teams, while at the same time instilling
our unique St. James’s Place culture more
deeply into the Partnership.

Our culture and values
St. James’s Place is a relationship-focused
business and the recognition that people
are our most important asset is key to

our culture and a fundamental element of
our success. Members of our community
tend to share core values that are highly
compatible with the values that are central
to the business and established at the
outset – expertise, integrity and discretion.
They are passionate about our business and
believe in hard work and dedication. Age,
race, colour, creed, sexuality, disability and
gender are irrelevant: merit and experience
are of greatest importance. They treat each
other with mutual respect, openness and
fairness, and are driven by a desire to ‘do
the right thing’ by all our stakeholders. We
also have a shared commitment to the
St. James’s Place Charitable Foundation.

As our business grows it is essential that
we protect our culture while ensuring
that it maintains its relevance. The
Board is committed to being consistent
and clear-sighted in its leadership and
support of the culture, and in particular
the principle that ‘St. James’s Place will
seek to do the right thing for its clients and
all its stakeholders’. In a world where the
reputation of the financial services industry
is constantly under pressure, we aspire to
create an authentic alternative that clients
and suppliers can trust, and which the
communities we are part of can appreciate
and respect.

2018 development
Recognising that we are in a privileged
position to be able to support our
employees’ overall wellbeing, in 2018
we enhanced the support we offer on
mental health, including the provision
of counselling through our Employee
Assistance Programme and mental
health first aid training for a group of
employees who have now become
‘Mental Health Allies’. We have also
made progress in our commitment to
improve diversity and inclusion. We
established a Diversity and Inclusion
Steering Group that has driven much
activity, including our becoming
signatories to the Women in Finance
Charter and the 30% Club.

Our focus for 2019
• Build on our work focusing on

employee wellbeing and mental health
at work.

• Further develop our employee value

proposition and achieve greater
diversity in our applicants and hires.

• Invest further in management and
leadership training and establish
renewed focus on employee career
development.

• Improve our reward offering by
ensuring alignment with our
meritocratic culture and expand our
flexible benefits proposition.

• Develop a rolling three-year diversity
and inclusion implementation plan.

How we engage
We utilise a variety of physical and
digital channels to communicate
with employees, from our Annual
Company Meeting to Directors’
lunches, or social media site Yammer
and our intranet portal. Our biennial
employee survey measures the
success of these engagement
activities and highlights what
our staff value most about being
a St. James’s Place employee. We
are proud of our 2018 results, which
saw a 90% response rate and overall
engagement score for the Group of
82%.

STRATEGIC REPORTST. JAMES’S PLACE PLC Early Careers and
Engagement

We have placed significant emphasis during 2018 on
investing in our talent of tomorrow with the establishment
of our Early Careers programmes, covering our Graduate,
Apprentice and Internship schemes which have run
alongside Early Engagement activities within schools,
colleges and universities. This year we provided 50 paid
internship opportunities to students who are still in full-time
education, employed 21 new apprentices and eight new
rotational graduates. After four years we are proud to have
retained 100% of our graduates and after seven years we
have retained 91% of our apprentices.

Through our programme of Career Insight days at our head
office and our Early Engagement outreach programme within
schools, colleges and other organisations which focus on
youth employability and social mobility, we have reached in
excess of 3,000 pupils and shared with them the exciting
opportunities that a career at St. James’s Place can offer.

KEY METRICS

Objective: Attract, retain
and develop talent
88%

85%

OF OUR EMPLOYEES FEEL
PROUD TO WORK FOR
ST. JAMES’S PLACE
versus the 81% financial
services (FS) average.

OF OUR EMPLOYEES
SAY THAT WORKING
AT ST. JAMES’S PLACE
MAKES THEM WANT TO
DO THE BEST THEY CAN
versus the 83% FS average.

83%

OF OUR EMPLOYEES
WOULD RECOMMEND
ST. JAMES’S PLACE AS A
GREAT PLACE TO WORK
versus the 78% FS average.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk28

C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T

“During a year of increasing market
and political uncertainty the business
has delivered resilient growth in
financials, and built the Partnership
strongly.”

As already stated in the Chief Executive’s
Report, Gross and Net Inflows in 2018 both
grew by 8% and we completed the year with
£95.6 billion of funds under management.
This represents growth of 5.4% compared
to 31 December 2017, despite the impact of
reductions in values on global markets in the
final quarter of 2018.

Our financial business model remains
straightforward and unchanged. We attract
and then retain funds under management
on which we receive an annual management
fee. The continued strong growth in
funds under management is therefore
a significant positive indicator, particularly in
combination with surrender rates under 5%.

During the year, as in previous years, we
have also continued to invest in the future
of the business. This investment is reflected
in our results and is expected to result in
additional medium and long-term growth
together with more efficient administration
systems and processes.

Financial results
Whilst our financial business model remains
straightforward, the impact of having a
significant life insurance company at the
heart of the Group results in accounting
complexity under IFRS. For this reason, in
our Financial Review on pages 30 to 46, we
continue to supplement IFRS information
with EEV information as well as further detail
on the way in which cash emerges within the
business.

The detailed results are presented in the
Financial Review which shows strong results
on every measure, but there are a number of
factors that merit emphasis:

1. Our contribution to the Financial Services
Compensation Scheme for 2018 pre-tax
was £15.7 million (2017: £21.2 million).
This negatively impacted post-tax results
for the Group by £12.8 million in 2018
(2017: £17.1 million).

2. We continue to invest in growing the

Partnership and the number of advisers
within it. In particular we invested
£8.4 million post-tax in our Academy and
Next Generation Academy (2017:
£6.6 million) and saw 142 qualified
advisers graduate during the year.

3. Our Asia and DFM operations are

medium to long-term investments and
progressing in line with our expectations.
During the year, investment in these
areas of future growth amounted to
£26.8 million post-tax (2017:
£22.0 million). We now have 133 advisers
in Asia, and DFM investment managers
in all of our key Group Locations. Our
DFM business is already contributing
positively to EEV profit and Asia is
expected to do so shortly.

4. Our back-office infrastructure initiative

has been a multi-year project and in 2018
we had progressed to the point where
approximately 77% new business was
written using the new Bluedoor system.
By 31 December 2018, 63% of all funds
under management were recorded on
the new platform (2017: 31%). Costs in
2018 were £35.8 million post-tax (2017:
£21.7 million). This reflects the significant
activity levels during the year which
resulted in the successful migration of
the majority of our pensions business
onto the Bluedoor system.

CRAIG GENTLE, Chief Financial Officer
craig.gentle@sjp.co.uk

£309.0m

UNDERLYING CASH RESULT
(2017: £281.2m)

£1,002.0m

EEV OPERATING PROFIT
(2017: £918.5m)

48.22

FULL YEAR DIVIDEND
(2017: 42.86 pence per share)

pence
per share

STRATEGIC REPORTST. JAMES’S PLACE PLC 29

Key financial information

Page
reference

Year ended
31 December
2018

Year ended
31 December
2017

FUM-based metrics
Gross inflows (£’Billion)
Net inflows (£’Billion)
Total FUM (£’Billion)
Total FUM in gestation (£’Billion)

IFRS-based metrics
IFRS profit before shareholder tax (£’Million)
IFRS profit after tax (£’Million)
Underlying profit before shareholder tax (£’Million)
IFRS basic earnings per share (EPS) (Pence)
IFRS diluted EPS (Pence)
IFRS net asset value per share (Pence)
Dividend per share (Pence)

Cash result-based metrics
Operating cash result (£’Million)
Underlying cash result (£’Million)
Cash result (£’Million)
Underlying cash result basic EPS (Pence)
Underlying cash result diluted EPS (Pence)

EEV-based metrics
EEV operating profit (£’Million)
EEV operating profit after tax basic EPS (Pence)
EEV operating profit after tax diluted EPS (Pence)
EEV net asset value per share (Pence)

Solvency-based metrics
Solvency II net assets (£’Million)
Management solvency buffer (£’Million)
Solvency II free assets (£’Million)
Solvency ratio (Percentage)

31
31
31
32

33
34
34

36
36
36

45
45
45
45

15.7
10.3
95.6
33.5

211.9
173.5
278.6
33.0
32.4
192.5
48.22

342.8
309.0
268.7
58.7
57.8

1,002.0
158.0
155.4
1,109.0

1,108.0
491.0
1,060.1
143%

14.6
9.5
90.7
30.6

186.1
145.8
245.1
27.8
27.4
200.0
42.86

308.6
281.2
252.6
53.6
52.7

918.5
143.9
141.5
1,067.5

1,095.1
461.9
944.1
139%

The Cash result should not be confused with the IFRS consolidated statement of cash
flows which is prepared in accordance with IAS 7.

Dividend
The Board has recommended a final
dividend of 29.73 pence per share,
an increase of 8% which will consume
£157.4 million. This will provide for a full year
dividend of 48.22 pence per share, growth
of 12.5%.

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

We assess our solvency against a
management solvency buffer (MSB). For the
year ended 31 December 2018 we reviewed
the level of our MSB, and concluded that it
was appropriate to maintain the MSB for the
Life businesses at £355.0 million. This gives
a total Group MSB of £491.0 million when
combined with the MSB held for our other
regulated entities. Solvency II net assets
are £1,108.0 million at 31 December 2018
(31 December 2017: £1,095.1 million), well
in excess of the Group MSB.

We provide information on our Solvency II
position on page 45. Our solvency
ratio at 31 December 2018, prior to the
payment of the proposed final dividend,
is 137% (31 December 2017: 139%) which
demonstrates the financial strength of the
business.

Concluding remarks
The business fundamentals and financials
are in very good shape. 2018 was a
challenging year but the business showed
itself to be very resilient and continued
to grow. The growth in our Partnership,
combined with increasing demand for
advice and only a modest increase in the
number of advisers in the marketplace, are
all factors that result in a positive long-term
environment for the Group even if other
challenging external factors slow the pace of
growth in the short term.

CRAIG GENTLE
Chief Financial Officer
26 February 2019

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
30

F I N A N C I A L R E V I E W

THIS FINANCIAL REVIEW PROVIDES ANALYSIS OF THE GROUP’S FINANCIAL POSITION AND PERFORMANCE.

The Review is split into the following sections:

Section 1: Funds under Management
(FUM)
1.1 FUM analysis

1.2 Gestation

As set out on page 24, Funds under
Management (FUM) is a key driver of
ongoing profitability on all measures,
and so information on growth in FUM is
provided in Section 1.

Find out more on pages 31 to 33

Section 2: Performance measurement
2.1 International Financial Reporting

Standards (IFRS)

2.2 Cash result

2.3 European Embedded Value (EEV)

Section 2 analyses the performance
of the business using three different
bases: International Financial Reporting
Standards (IFRS), the Cash result, and
European Embedded Value (EEV).

Find out more on pages 33 to 44

Section 3: Solvency
Section 3 addresses Solvency, which
is an important area given the multiple
regulated activities carried out within the
Group.

Find out more on pages 44 to 46

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 clients remain invested. 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 FUM. The Group also
generates income through an initial margin on new business.

The level of net annual management fee income depends on
the level of client funds and the level of asset values. In addition,
around half of our business does not generate net Cash result
in the first six years, which we describe as funds in ‘gestation’.
This deferral of cash generation means that the level of Group
income will increase as a result of new business six years ago
maturing from gestation to become cash generative.

Group expenditure is carefully managed with clear targets set
for growth in Establishment and Operational Development
expenses during the year. Many other expenses increase with
business levels and are met from margins in the products,
thereby having no net impact on the cash result. The Group
is also investing to support long-term growth through
St. James’s Place Asia, Rowan Dartington, our back-office
infrastructure programme, and other strategic initiatives.

STRATEGIC REPORTST. JAMES’S PLACE PLC 31

Section 1: Funds Under Management
1.1 FUM analysis
Our financial business model is to attract and retain FUM on which we receive an annual management fee. As a result, the level of income we
receive is ultimately dependent on the value of our FUM, and so its growth is a clear driver of future growth in profits. The key drivers for FUM are:

• Our ability to attract new funds in the form of Gross Inflows;

• Our ability to retain FUM by keeping unplanned withdrawals at a low level; and

• Net investment returns.

The following table shows how FUM evolved during 2018 and 2017:

Opening FUM
Gross inflows
Net investment return
Regular income withdrawals and maturities
Surrenders and part surrenders
Matching strategy disinvestment
Closing FUM
Net inflows
Implied surrender rate as a percentage of average FUM

2018

2017

Investment
£’Billion
28.31
2.41
(1.60)
(0.51)
(0.99)
–
27.62
0.91
3.5%

Pension
£’Billion
36.15
8.76
(1.98)
(1.12)
(1.09)
–
40.72
6.55
2.8%

UT/ISA & DFM 1
£’Billion
26.29
4.53
(1.90)
–
(1.71)
–
27.21
2.82
6.4%

Total
£’Billion
90.75
15.70
(5.48)
(1.63)
(3.79)
–
95.55
10.28
4.1%

Total
£’Billion
75.31
14.60
6.20
(1.52)
(3.57)
(0.27)
90.75
9.51
4.3%

1 Rowan Dartington Group FUM is included within ‘UT/ISA & DFM’. It had closing FUM of £2.31 billion at 31 December 2018 (31 December 2017: £2.11 billion),

gross inflows of £0.54 billion for the year (2017: £0.49 billion) and outflows of £0.10 billion (2017: £0.10 billion).

The following table shows the robust growth in Net Inflows over the past six years, which combined with strong retention has resulted in
consistent growth in FUM. FUM has more than doubled over a five-year period:

Year
2018
2017
2016
2015
2014
2013

FUM as at
1 January
£’Billion
90.7
75.3
58.6
52.0
44.3
34.8

Net
inflows
£’Billion
10.3
9.5
6.8
5.8
5.1
4.3

Investment
return
£’Billion
(5.4)
6.2
8.7
0.8
2.6
5.2

Other
movements 1
£’Billion
–
(0.3)
1.2
–
–
–

FUM as at
31 December
£’Billion
95.6
90.7
75.3
58.6
52.0
44.3

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

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
32

F I N A N C I A L R E V I E W C O N T I N U E D

1.1 FUM analysis continued
The table below provides a geographical and segmental analysis of funds under management at 31 December:

North American Equities
Fixed Income Securities
UK Equities
Asia and Pacific Equities
European Equities
Cash
Alternative Investments
Property
Other
Total

31 December 2018
£’Billion
20.7
18.6
17.7
10.2
10.1
6.7
4.6
3.0
4.0
95.6

% of total
22%
19%
18%
11%
11%
7%
5%
3%
4%
100%

31 December 2017
£’Billion
20.0
16.7
19.3
8.5
10.5
6.6
2.6
2.9
3.6
90.7

% of total
22%
19%
21%
9%
12%
7%
3%
3%
4%
100%

1.2 Gestation
Due to our product structure, at any given time there is a significant amount of FUM that has not yet started to contribute to the Cash result.

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

Once the new business margin has been recognised the pattern of future emergence of cash from ongoing annual management fees differs
by product. Broadly, annual management fees from unit trust and ISA business begin contributing positively to the Cash result from day 1,
whilst investment and pensions business enter a six-year gestation period during which no net income from FUM is included in the Cash
result. Once this business has reached its six-year maturity point, it starts contributing positively to the Cash result, and will continue to do
so in each year that it remains with the Group.

The following table shows an analysis of FUM, split between mature FUM that is contributing net income to the Cash result and FUM in
gestation which is not yet contributing, as at the year-end for the past five years:

Position as at:
31 December 2018
31 December 2017
31 December 2016
31 December 2015
31 December 2014

Mature FUM
contributing to
the Cash result
£’Billion
62.1
60.1
50.2
39.4
35.9

Gestation FUM that
will contribute to the
Cash result in
the future
£’Billion
33.5
30.6
25.1
19.2
16.1

Total FUM
£’Billion
95.6
90.7
75.3
58.6
52.0

The proportion of new business that moves into gestation has increased over the past five years as follows:

2018
2017
2016
2015
2014

Proportion of gross
inflows into gestation
%
59.4
56.5
53.8
53.5
51.5

STRATEGIC REPORTST. JAMES’S PLACE PLC 33

The increasing proportion of Gross Inflows moving into gestation FUM is attributable to the strength of pensions inflows in recent years, in part
reflecting the positive impact to our business from pensions freedom. The long-term nature of this type of investment results in a long post-
gestation period of Cash result emergence.

The following table gives an indication, for illustrative purposes, of the way in which the gestation balance of £33.5 billion at 31 December 2018
may start to contribute to the Cash result over the next six years and beyond. It assumes a composite margin of 0.77% and that gestation FUM
values at 31 December 2018 remain unchanged. It does not factor in surrenders.

2019
2020
2021
2022
2023
2024 onwards

Gestation FUM future
contribution to the Cash result
£’Million
27.9
58.7
96.3
140.5
194.6
258.1

Section 2: Performance measurement

In line with statutory reporting requirements we report profits assessed on an IFRS basis. However, given the long-term nature of the business,
the significant difference between IFRS profit and the way cash emerges from the business, and the complications of including policyholder
tax, we believe the IFRS result does not provide an easy guide to performance. We therefore present our financial performance and position
under three different bases, using a range of alternative performance measures (APMs) to supplement our IFRS reporting. The three different
bases, which are consistent with those presented last year, are:

• International Financial Reporting Standards (IFRS);

• Cash result; and

• European Embedded Value (EEV).

APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater insight
to the financial performance, financial position and cash flows of the Group and the way it is managed. A complete Glossary of Alternative
Performance Measures is set out on pages 227 to 229, in which we define each APM used in our Financial Review, explain why it is used and,
if applicable, explain how the measure can be reconciled to the IFRS financial statements.

2.1 International Financial Reporting Standards (IFRS)
IFRS reporting is a statutory requirement, and so although the level of non-cash accounting adjustments is such that IFRS does not reflect
the pattern of cash emergence in the Group, there are two measures used that are based upon it. These are:

• Profit before shareholder tax; and

• Underlying profit.

Further information on these IFRS-based measures is set out below, on pages 33 to 35.

PROFIT BEFORE SHAREHOLDER TAX
This is a profit measure based on IFRS which removes the impact of policyholder tax.

As a Group with a UK life insurance company at its heart, the Group is required to account for policyholder tax as part of its own corporation
tax arrangements, despite it being unrelated to the performance of the business. The policyholder tax expense or credit is matched by
an equivalent deduction or credit from the relevant funds, which is recorded within fee and commission income in the IFRS statement of
comprehensive income. Policyholder tax does not therefore impact the Group’s overall profit after tax. As a result, profit before shareholder tax,
but after policyholder tax, is a useful metric.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
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F I N A N C I A L R E V I E W C O N T I N U E D

2.1 International Financial Reporting Standards (IFRS) continued
The following table demonstrates the way in which profit before shareholder tax is presented in the IFRS consolidated statement
of comprehensive income on page 154:

IFRS (loss)/profit before tax
Policyholder tax
IFRS profit before shareholder tax
Shareholder tax
IFRS profit after tax

Year ended
31 December
2018
£’Million
(84.6)
296.5
211.9
(38.4)
173.5

Year ended
31 December
2017
£’Million
342.1
(156.0)
186.1
(40.3)
145.8

Shareholder tax reflects the tax charge attributable to shareholders and is closely related to the performance of the business.

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

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

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

IFRS profit before shareholder tax
Remove the impact of movements in DAC/DIR/PVIF
Underlying profit before shareholder tax

The impact of movements in DAC, DIR and PVIF on IFRS profit before shareholder tax is further analysed as follows:

Amortisation of DAC
DAC on new business for the year
Net impact of DAC
Amortisation of DIR
DIR on new business for the year
Net impact of DIR
Amortisation of PVIF
Movement in year

Year ended
31 December
2018
£’Million
211.9
66.7
278.6

Year ended
31 December
2017
£’Million
186.1
59.0
245.1

Year ended
31 December
2018
£’Million
(98.2)
33.7
(64.5)
149.9
(148.9)
1.0
(3.2)
(66.7)

Year ended
31 December
2017
£’Million
(98.7)
36.9
(61.8)
150.4
(144.4)
6.0
(3.2)
(59.0)

STRATEGIC REPORTST. JAMES’S PLACE PLC 35

Net impact of DAC
The scale of the £64.5 million negative overall impact of DAC on the IFRS result is largely due to changes arising from the 2013 Retail
Distribution Review (RDR). After this change, the level of expenses that qualified for deferral reduced significantly, but the large balance
accrued previously is still being amortised. As deferred expenses are amortised over a 14-year period there is a significant transition period,
which could last for another six to seven years, over which the amortisation of pre-RDR expenses previously deferred will significantly
outweigh new post-RDR expenses deferred despite significant business growth, resulting in a net negative impact on IFRS profits.

Net impact of DIR
Similarly to DAC, in 2013 the RDR reduced the amount of income that qualified for deferral. This meant that amortisation of pre-RDR income
has exceeded the post-RDR income deferred in each year since 2013 despite significant business growth. However, as most of the deferred
income is amortised over a six-year period, this effect is now reversing with income deferred expected to exceed income amortised in 2019.
This is reflected in the small net impacts from DIR in recent years: the impact was a positive £1.0 million in 2018 (2017: positive £6.0 million).

2.2 Cash result
The Cash result is used by the Board to assess and monitor the level of cash profit (net of tax) generated by the business. It is based on IFRS
with adjustments made to exclude certain non-cash items, such as DAC, DIR, deferred tax and non-cash-settled share option costs. Further
details, including the full definition of the Cash result, can be found in the Glossary of Alternative Performance Measures on pages 227 to 229.
Although the Cash result should not be confused with the IAS 7 consolidated statement of cash-flows, it provides a helpful supplementary
view of the way in which cash is generated and emerges within the Group.

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

Underlying profit
Non-cash-settled share-based payments
Deferred tax impacts
Other
Cash result

Year ended
31 December 2018

Year ended
31 December 2017

Before
shareholder tax
£’Million
278.6
33.4
–
(24.8)
287.2

After tax
£’Million
227.9
33.4
31.8
(24.4)
268.7

Before
shareholder tax
£’Million
245.1
30.5
–
14.7
290.3

After tax
£’Million
193.9
30.5
15.0
13.2
252.6

The increase in non-cash-settled share-based payments reflects the recent strong performance of the Group, and more detail can
be found in Note 19 on pages 197 to 201.

The most significant deferred tax impact in 2018 and 2017 is recognition in the Cash result of the benefit from realising tax relief.
This has already been recognised under IFRS, and hence Underlying profit, through the establishment of deferred tax assets.
More information can be found in Note 7 on pages 171 to 173.

Other predominantly represents the change in tax charge discounting. This represents a timing difference between the tax liability due
to HMRC and tax deductions charged to clients. The size of the difference will increase as markets grow, and decrease as markets fall.
This timing difference is adjusted out of the Cash result, which therefore does not reflect the positive effect arising in the IFRS result as
a consequence of falls in markets during the year.

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

• Operating cash result

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

• Underlying cash result

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

• Cash result

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

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F I N A N C I A L R E V I E W C O N T I N U E D

2.2 Cash result continued
CONSOLIDATED CASH RESULT (PRESENTED POST-TAX)

Year ended
31 December 2018
New business
£’Million

In-force
£’Million

Note

Operational
Net annual management fee
Reduction in fees in gestation period
Net income from FUM

Margin arising from new business
Establishment expenses
Operational development expenses
Regulatory fees and FSCS levy
Academy 1
Shareholder interest
Tax relief from capital losses
Miscellaneous
Operating cash result

Asia
DFM
Strategic development costs

Underlying cash result

Back-office infrastructure development costs
Variance

Cash result

1
2

4
5
5
5

5
6
7
8

9
9
9

9
10

Year ended
31 December
2017

Total
£’Million

623.2
(266.1)
357.1

129.4
(150.4)
(15.6)
(23.9)
(6.6)
9.9
12.1
(3.4)
308.6

(15.1)
(6.9)
(5.4)

Total
£’Million

694.6
(306.5)
388.1

140.8
(170.6)
(20.1)
(20.9)
(8.4)
14.1
29.7
(9.9)
342.8

(16.7)
(10.1)
(7.0)

633.4
(306.5)
326.9

–
(17.3)
–
(2.1)
–
14.1
29.7
(9.9)
341.4

–
–
–

61.2
–
61.2

140.8
(153.3)
(20.1)
(18.8)
(8.4)
–
–
–
1.4

(16.7)
(10.1)
(7.0)

341.4

(32.4)

309.0

281.2

(35.8)
(4.5)

(21.7)
(6.9)

268.7

252.6

1 Academy costs have been reclassified in 2018 into the Operating cash result. Previously they were included as part of Investments, which are outside of the
Operating cash result. This reflects the fact that the Academy is now a core part of the Group’s adviser recruitment model and its graduates are contributing
strongly to FUM growth. To enable like-for-like comparison, the 2017 comparative has been restated accordingly.

STRATEGIC REPORTST. JAMES’S PLACE PLC
37

Notes to the Cash result
1. The net annual management fee is the net manufacturing margin that the Group retains from FUM after payment of the associated
costs (for example, investment advisory fees and Partner remuneration). Broadly speaking the Group receives an average net annual
management fee of 0.77% (post-tax) of FUM (2017: 0.77% (post-tax)).

2. As noted on page 32 however, our investment and pension business product structure means that these products do not generate net

Cash result (after the initial margin) during the first six years, (the gestation period). This is reflected in the reduction in fees in gestation
period line. Further information is provided on pages 32 and 33.

3. Net income from FUM reflects Cash result income from FUM that has reached maturity.

4. Margin arising from new business is the net positive Cash result impact of new business in the year, reflecting gross inflows and

production related expenses. The driver for this income line is gross inflows and the result is expected to move broadly in line with the
pattern of gross inflows attracted.

5. Establishment expenses, operational development expenses, regulatory fees and FSCS levy represent the expenses of running the
Group. Academy expenses represent the cost of running our Academy and Next Generation Academy. More detail is provided in
Section 2.2.2.

6. Shareholder interest is the income accruing on the investments and cash held for regulatory purposes together with the interest received

on the surplus capital held by the Group.

7. In recent years, a deferred tax asset has been established in IFRS for historic capital losses which are regarded as being capable of utilisation
over the medium-term. The tax asset is ignored for Cash result purposes as it is not fungible, but instead the cash benefit realised when
losses are utilised is shown in the tax relief from capital losses line. Utilisation during the year of £29.7 million tax value (2017: £12.1
million) was ahead of our expected rate of c. £10-12 million benefit in a year, largely because investment market conditions have meant
that accelerated relief has been available.

8. Miscellaneous represents the cash flow of the business not covered in any of the other categories. It includes ongoing administration

expenses and associated policy charges, utilisation of the deferred tax asset in respect of prior years’ unrelieved expenses (due to structural
timing differences in the life company tax computation) and movements in the fair value of renewal income assets.

9. Asia, DFM, strategic development costs and back-office infrastructure costs reflect significant investments in developing our business
for the future. Each of these investments are expected to result in either additional funds (Asia and DFM) or operational improvements
(back-office infrastructure) in the future. Advice margin and fund management fees generated in Asia, and all fees generated by DFM,
are also reflected in these lines.

10. Variance reflects a number of small non-recurring items incurred during the year. In 2017 this specifically included 25th anniversary costs,

such as the impact of double matching for the Charitable Foundation.

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F I N A N C I A L R E V I E W C O N T I N U E D

2.2 Cash result continued
2.2.1 DERIVATION OF THE CASH RESULT
The Cash result is derived from the IFRS consolidated statement of financial position in a two-stage process:

Stage 1: Solvency II Net Assets Balance Sheet
Firstly, the IFRS consolidated statement of financial position is adjusted for a number of material balances that reflect policyholder interests
in unit-linked liabilities together with the underlying assets that are held to match them. Secondly, it is adjusted for a number of non-cash
‘accounting’ balances such as DIR, DAC and associated deferred tax. The result of these adjustments is the Solvency II Net Assets Balance
Sheet and the following table shows the way in which it has been calculated for 2018.

31 December 2018
Assets
Goodwill
Deferred acquisition costs
Purchased value of in-force business
Computer software
Property and equipment
Deferred tax assets
Reinsurance assets
Other receivables
Income tax assets
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total assets

Liabilities
Borrowings
Deferred tax liabilities
Insurance contract liabilities
Deferred income
Other provisions
Other payables
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Income tax liabilities
Preference shares
Total liabilities

IFRS Balance
Sheet
£’Million

Adjustment 1
£’Million

Adjustment 2
£’Million

Solvency II
Net Assets
Balance Sheet
£’Million

Solvency II
Net Assets
Balance Sheet:
2017
£’Million

15.6
558.5
24.0
1.4
28.5
147.1
82.8
1,952.3
9.7
1,820.7
56,077.9
21,966.0
4,756.1
508.8
6,877.6
94,827.0

348.6
172.9
508.1
648.3
22.7
1,290.8
67,796.1
517.4
22,502.9
–
0.1
93,807.9

–
–
–
–
–
–
–
(1,059.1)
–
(1,820.7)
(56,077.9)
(21,960.6)
(3,459.1)
(508.8)
(6,629.1)
(91,515.3)

–
–
(421.2)
–
–
(277.7)
(67,796.1)
(517.4)
(22,502.9)
–
–
(91,515.3)

(15.6)
(558.5)
(24.0)
(1.4)
–
(35.5)
(82.8)
(3.1)
–
–
–
–
–
–
–
(720.9)

–
(18.4)
(86.9)
(648.3)
–
(56.2)
–
–
–
–
–
(809.8)

–
–
–
–
28.5
111.6
–
890.1
9.7
–
–
5.4
1,297.0
–
248.5
2,590.8

348.6
154.5
–
–
22.7
956.9
–
–
–
–
0.1
1,482.8

–
–
–
–
26.4
144.1
–
1,122.4

–
–
46.1
1,416.8
–
274.7
3,030.5

279.9
430.4
–
–
20.0
1,079.7
–
–
–
125.3
0.1
1,935.4

Net assets

1,019.1

–

88.9

1,108.0

1,095.1

Adjustment 1 nets out the policyholder interest in unit-linked assets and liabilities.

Adjustment 2 comprises adjustment to the IFRS statement of financial position in line with Solvency II requirements, including removal of DAC,
DIR, PVIF and their associated deferred tax balances, goodwill and other intangibles.

STRATEGIC REPORTST. JAMES’S PLACE PLC

Stage 2: Movement in Solvency II Net Assets Balance Sheet
Secondly, there are a number of movements in Solvency II net assets that do not represent cash flows for inclusion within the Cash result.
The following table explains how the overall Cash result reconciles into the total movement:

Opening Solvency II net assets
Dividend paid
Issue of share capital and exercise of options
Consideration paid for own shares
Change in deferred tax
Change in tax discounting
Change in goodwill and intangibles
Cash result
Closing Solvency II net assets

Year ended
31 December
2018
£’Million
1,095.1
(242.7)
2.8
(6.0)
(31.8)
23.4
(1.5)
268.7
1,108.0

Year ended
31 December
2017
£’Million
1,070.0
(190.0)
7.5
(11.3)
(15.0)
(16.2)
(2.5)
252.6
1,095.1

2.2.2 EXPENSES
The table below provides a breakdown of the Group’s expenses as presented directly in the Cash result:

Establishment expenses
Operational development costs
Regulatory fees and FSCS levy
Academy
Strategic development costs
Back-office infrastructure costs
Total Cash result expenses

Year ended 31 December 2018

Year ended 31 December 2017

Before tax
£’Million
210.6
24.8
25.7
10.4
8.8
44.1
324.4

Tax rate
%
19.0
19.0
19.0
19.0
19.0
19.0

After tax
£’Million
170.6
20.1
20.9
8.4
7.0
35.8
262.8

Before tax
£’Million
186.3 1
19.3
29.5
8.2
6.7
26.8
276.8

Tax rate
%
19.3
19.3
19.3
19.3
19.3
19.3

After tax
£’Million
150.4
15.6
23.9
6.6
5.4
21.7
223.6

1 Certain 2017 expenses have been reclassified to better reflect the nature of the expense. This has resulted in a decrease of £5.5 million in Establishment expenses

and increases of £2.8 million in Asia expenses and £2.6 million in Other.

Establishment costs have increased year on year as additional expenses are incurred to support the growth in the Partnership.

Operational development costs have increased in 2018 due to further investment in our infrastructure, resulting in enhanced security and
improved remote access for advisers. There has also been investment in our online communication tools to improve collaboration.

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

FSCS levy
Regulatory fees
FSCS levy and regulatory fees

Year ended
31 December
2018
£’Million
12.8
8.1
20.9

Year ended
31 December
2017
£’Million
17.1
6.8
23.9

Our position as a market-leading provider of advice means we make a very substantial contribution to supporting the FSCS, thereby providing
protection for clients of other businesses in the sector that fail. Over the last few years, the levy has been at an elevated level but we remain
hopeful that it will return to a more normalised level in future.

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40

F I N A N C I A L R E V I E W C O N T I N U E D

2.2 Cash result continued
For the 2018/19 funding year the FSCS shortened the compensation levy period from 12 months to nine months, which aligns the
compensation levy period with the FSCS’s financial year. As a result, the post-tax levy expense of £12.8 million recognised in the year
to 31 December 2018 reflects the levy for a nine-month period, whereas the £17.1 million post-tax levy expense recognised in the year to
31 December 2017 was in respect of a 12 month period. From the 2019/20 funding year onwards, the compensation levy period will again
be 12 months.

Academy costs have increased in 2018 as a result of expansion of the programme both geographically and in terms of the number of
individuals recruited into the programme.

Costs associated with our Bluedoor back-office infrastructure programme have increased in 2018 due to increased levels of migrations taking
place during the year, alongside planning for the final key migration of bond business in 2019.

Reconciliation to IFRS expenses
There are a number of other expenses which are included within the Cash result but not directly referenced. This is because expense items
that vary with business volumes are matched against the relevant income source. For example, payments to Partners and other performance
related costs are matched against net annual management fees and new business margin.

In addition there are other IFRS expenses that are not included in the Cash result by definition, such as non-cash-settled share-based payment
expenses and DAC amortisation.

The following table reconciles the expenses presented explicitly in the Cash result to the IFRS expenses as set out in the statement of
comprehensive income on page 154:

Total Cash result expenses before tax
Asia expenses
DFM expenses
Other performance related costs
Payments to Partners
Investment expenses
Third-party administration
Amortisation of DAC and PVIF, net of additions
Share-based payments expenses
Other
Total IFRS Group expenses before tax

Year ended
31 December
2018
£’Million
324.4
21.3
24.5
137.2
781.9
106.1
100.4
67.7
34.1
43.9
1,641.5

Year ended
31 December
2017
£’Million
276.8
18.4 1
18.7
133.5
709.0
83.4
89.9
65.0
32.7
40.2 1
1,467.6

1 Certain 2017 expenses have been reclassified to better reflect the nature of the expense. This has resulted in a decrease of £5.5 million in Establishment expenses

and increases of £2.8 million in Asia expenses and £2.6 million in Other.

Asia expenses and DFM expenses have both increased during the year as investment is required to support their growth. Such investment will
continue going forwards.

Other performance related costs, for both Partners and employees, vary with the level of new business and the operating profit performance
of the business.

Payments to Partners, investment expenses and third-party administration costs are met by corresponding charges to clients, and so any
variation in them from changes in the volumes of new business or the level of the stock markets does not impact the profitability of the Group.

Other expenses include interest expense and bank charges, the operating costs of acquired independent financial advisers (IFAs)
and donations to the St. James’s Place Charitable Foundation.

STRATEGIC REPORTST. JAMES’S PLACE PLC 41

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

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

Many of the principles and practices underlying EEV are similar to the requirements of Solvency II. In the prior year, we had made a number of
small changes to our EEV methods and assumptions to align them as closely as possible to Solvency II. These changes were reflected in the
Economic assumption changes line.

The table below and accompanying notes summarise the profit before tax of the combined business:

Funds management business
Distribution business
Back-office infrastructure development
Other

EEV operating profit

Investment return variance
Economic assumption changes

EEV profit before tax

Tax

EEV profit after tax

Note
1
2

Year ended
31 December
2018
£’Million
1,151.6
(38.9)
(44.1)
(66.6)

Year ended
31 December
2017
£’Million
1,044.4
(31.9)
(26.8)
(67.2)

1,002.0

918.5

(460.9)
(15.1)

340.8
29.8

526.0

1,289.1

(89.7)

(229.2)

436.3

1,059.9

Notes to the EEV result
1. Funds management business EEV operating profit
The funds management business operating profit has increased to £1,151.6 million (2017: £1,044.4 million) and a full analysis of the result is
shown below:

New business contribution
Profit from existing business

– unwind of the discount rate
– experience variance
– operating assumption change

Investment income
Funds management EEV operating profit

Year ended
31 December
2018
£’Million
852.7

Year ended
31 December
2017
£’Million
779.8

242.3
24.5
25.9
6.2
1,151.6

209.5
3.8
44.0
7.3
1,044.4

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F I N A N C I A L R E V I E W C O N T I N U E D

2.3 European Embedded Value (EEV) continued
The new business contribution for the year at £852.7 million (2017: £779.8 million) was 9.3% higher than the prior year, reflecting both the
increase in new business and operational economies of scale achieved as fixed expenses are spread across more new business.

The unwind of the discount rate for the year increased to £242.3 million (2017: £209.5 million), reflecting the higher opening value of in-force
business. The experience variance during the year was £24.5 million (2017: £3.8 million), reflecting positive retention experience. The impact of
operating assumption changes in the year was a positive £25.9 million, reflecting economies of scale emerging from our administration tariff.
The more significant benefit of £44.0 million in 2017 also included a positive impact from higher retention assumptions.

2. Distribution business
The distribution loss includes the positive gross margin arising from advice income less payments to advisers offset by the costs
of investment in growing the Partnership, building the distribution capabilities in Asia and a charge of £11.3 million for the FSCS levy
(2017: £18.9 million).

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

The typical investment return on our funds during the period was negative 4.3% after charges, compared to the assumed investment return of
positive 1.8%. This resulted in a negative investment return variance of £460.9 million (2017: positive £340.8 million).

4. Economic assumption changes
The negative variance of £15.1 million arising in the year (2017: positive £29.8 million) reflects the negative effect from the increase in the long-
term inflation rate.

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

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

Life business
Investment
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Pension
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Unit Trust and DFM business
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Total business
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Post-tax margin (%)

Year ended
31 December
2018

Year ended
31 December
2017

129.0
2.41
5.4

454.2
8.76
5.2

269.5
4.53
6.0

852.7
15.70
5.4
4.5

130.2
2.49
5.2

363.5
7.26
5.0

286.1
4.85
5.9

779.8
14.60
5.3
4.4

The overall margin for the year was higher at 5.4% (2017: 5.3%) reflecting operational economies of scale achieved during the year.

STRATEGIC REPORTST. JAMES’S PLACE PLC 43

Year ended
31 December
2018
%
1.4
3.4
4.5

Year ended
31 December
2017
%
1.4
3.2
4.5

1.4
4.4
3.7
3.8

1.4
4.4
3.7
3.6

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

Risk-free rate
Inflation rate
Risk discount rate (net of tax)
Future investment returns:

– Gilts
– Equities
– Unit-linked funds

Expense inflation

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

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

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

Value at 31 December 2018
100bp reduction in risk-free rates, with corresponding
change in fixed interest asset values
10% increase in withdrawal rates
10% reduction in market value of equity assets
10% increase in expenses
100bp increase in assumed inflation

Change in new
business contribution

Change in European
Embedded Value

Note

1
2
3
4
5

Pre-tax
£’Million
852.7

Post-tax
£’Million
707.1

(23.4)
(60.3)
–
(20.6)
(25.3)

(19.5)
(50.0)
–
(17.2)
(21.1)

Post-tax
£’Million
5,871.5

(95.4)
(302.3)
(586.5)
(70.7)
(108.3)

Notes to the EEV sensitivities
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the

sensitivity assumes a corresponding change in all investment returns but no change in inflation.

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

to 8.8%.

3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in recent

years the proportion invested directly in UK and overseas equities has exceeded 70%.

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

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

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F I N A N C I A L R E V I E W C O N T I N U E D

2.3 European Embedded Value (EEV) continued

100bp reduction in risk discount rate

Change in new
business contribution

Change in European
Embedded Value

Pre-tax
£’Million
98.6

Post-tax
£’Million
81.7

Post-tax
£’Million
441.1

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

ANALYSIS OF THE EEV RESULT
The table below provides a summarised breakdown of the embedded value position at the reporting dates:

Value of in-force business
Solvency II net assets
Total embedded value

Net asset value per share

31 December
2018
£’Million
4,763.5
1,108.0
5,871.5

31 December
2017
£’Million
4,552.6
1,095.1
5,647.7

Pence
1,109.0

Pence
1,067.5

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

Our experience is that much of our Retirement Plan business converts into Drawdown business at retirement, but, in line with the EEV
guidelines, we are required to defer recognition of the additional value from the Drawdown Plan until it is crystallised. If instead we were
to assess the future value of Retirement Plan business (beyond the immediate contract boundary) in a more holistic fashion, in line with
Retirement Account business, this would result in an increase of approximately £350 million to our embedded value.

Section 3: Solvency

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

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

STRATEGIC REPORTST. JAMES’S PLACE PLC 45

For the year ended 31 December 2018 we reviewed the level of our MSB, and concluded that it was appropriate to maintain the MSB for the
Life businesses at £355.0 million.

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

31 December 2018
Solvency II net assets
MSB
Management solvency ratio

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

2 Before payment of the Group final dividend.

Life 1
£’Million
366.4
355.0
103%

Other
regulated
£’Million
200.6
136.0
147%

Other 2
£’Million
541.0
–

Total
£’Million
1,108.0
491.0

2017
Total
£’Million
1,095.1
461.9

Solvency II net assets reflect the assets of the Group in excess of those matching clients’ unit linked liabilities. It includes a £111.6 million
(2017: £144.1 million) deferred tax asset which is not immediately fungible, although we expect it will be utilised over the next ten years.
The actual rate of utilisation will depend on business growth and external factors, particularly investment market conditions.

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

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

31 December 2018
Solvency II net assets
Value of in-force (VIF)
Risk margin
Own funds (A)
Solvency capital requirement (B)
Solvency II free assets
Solvency ratio (A/B)

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

2 Before payment of the Group final dividend.

Life 1
£’Million
366.4
3,388.8
(989.4)
2,765.8
(2,364.7)
401.1
117%

Other
regulated
£’Million
200.6
–
–
200.6
(82.6)
118.0
243%

Other 2
£’Million
541.0
–
–
541.0
–
541.0

Total
£’Million
1,108.0
3,388.8
(989.4)
3,507.4
(2,447.3)
1,060.1
143%

2017
Total
£’Million
1,095.1
3,244.3
(946.1)
3,393.3
(2,449.2)
944.1
139%

The solvency ratio after payment of the proposed Group final dividend is 137% at the year end (2017:133%).

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F I N A N C I A L R E V I E W C O N T I N U E D

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

The solvency ratio is not very sensitive to changes in experience or assumptions, and can move counter-intuitively depending on
circumstances, as demonstrated by the sensitivity analysis presented below:

Value at 31 December 2018
100bp reduction in risk free rates, with corresponding change in fixed interest asset values
10% increase in withdrawal rates
10% reduction in market value of equity assets
10% increase in expenses
100bp increase in assumed inflation

Solvency II
free assets
£’Million
1,060.1
959.1
1,091.4
983.6
1,004.1
977.5

Solvency II
capital
requirement
£’Million
2,447.3
2,452.2
2,298.3
2,202.1
2,449.0
2,454.5

Solvency ratio
%
143%
139%
147%
145%
141%
140%

Note

1
2
3
4
5

Notes to the Solvency II sensitivities
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the

sensitivity assumes a corresponding change in all investment returns but no change in inflation.

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

3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in recent

years the proportion invested directly in UK and overseas equities has exceeded 70%.

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

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

STRATEGIC REPORTST. JAMES’S PLACE PLC 47

R I S K A N D R I S K M A N A G E M E N T

Risk management is embedded within
our culture and therefore is a core aspect
of decision-making.

Overview and culture
The St. James’s Place Group is exposed to a wide variety of risks
due to its business activities and the industry in which it operates.
In addition, the Group is also exposed to a number of external
factors and threats. Under the leadership, direction and oversight
of our Board, these risks are carefully managed, contributing to our
competitive advantage and helping us to achieve our client and
business objectives (as set out on pages 18 to 25).

We do not, and cannot, seek to eliminate risk entirely, rather we seek
to understand our risks fully and manage them appropriately. The
emphasis is on applying effective risk management strategies, so all
material risks are identified, and managed or mitigated within agreed
risk appetite. Risk management is embedded within our culture and
therefore is a core aspect of decision-making. Our Risk Management
Framework is specifically designed to manage risks important
to our clients, shareholders, advisers, regulators and employees,
whilst providing reasonable assurance against material financial
misstatement or loss.

Risk management, solvency projections and stress and scenario
testing form a key part of the business planning process, including
decisions on strategic developments, pricing and dividend payments.

Risk appetite
The Board chooses carefully the risks it accepts and those it seeks
to limit or avoid. These choices are set out in detail in our Group
Risk Appetite Statement, which is reviewed at least annually by the
risk committees of the Board (the ‘Risk Committee’) and Executive
Board (‘Group Risk Executive Committee’) and ultimately agreed by
the Board. The Risk Appetite Statement aligns the Group’s strategic
objectives with the outcomes-based approach and the overarching
Risk Management Framework.

In particular, it articulates risks that are:

• sought (where we are receptive to that risk);

• minimised (where we are highly averse to that risk and aim to

reduce the exposure as far as possible); or

• managed (where we accept that some risk is unavoidable or

uneconomic to mitigate entirely and where we therefore aim to
manage exposure through prudent and pragmatic controls).

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

The Risk Appetite Statement includes a risk appetite scale. This
scale has several risk acceptance levels, ranging from no appetite
for taking risk at all, through to acceptance of a risk. The level of risk
we are willing to accommodate will vary dependent on individual
risk scenarios. The decisions the Board takes when setting appetite
will be based on understanding the likelihood and impact of a risk
materialising.

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R I S K A N D R I S K M A N A G E M E N T C O N T I N U E D

Risk Management Framework
The Board, through the Risk Committee, takes an active role in overseeing the Risk Management Framework, for which it is responsible.
This framework is the combined processes by which the Group identifies, assesses, measures, manages and monitors the risks that
may impact on the successful delivery of its objectives.

The Group’s Own Risk and Solvency Assessment (ORSA) is a central part of this framework, the main elements of which are shown in
the following diagram.

STRATEGY – KEY OUTCOMES

RISK APPETITE

RISK CAPITAL

RISK GOVERNANCE

MONITOR

IDENTIFY

BOARD

RISK COMMITTEE

STANDARD FORMULA

EXECUTIVE BOARD

OWN ASSESSMENT

RISK
MANAGEMENT
PROCESS

SUBSIDIARY BOARDS

MANAGE

ASSESS

GROUP RISK EXCO

OTHER EXCOS

RISK ESCALATION

RISK CULTURE AND POLICIES

STRATEGIC REPORTST. JAMES’S PLACE PLC 49

The Risk Committee comprises Independent Non-executive Board
members and is responsible for ensuring a risk culture (of effective
risk identification and management) is fostered across the Group.
The Risk Committee report on pages 106 to 110 provides further
detail. A report of its activity during the year can be found on pages
108 and 109.

The Risk Committee is supported by the Executive Board, Group
Risk Executive Committee and Risk and Compliance functions at
Group and local levels. It is these supporting functions which take
the lead in ensuring an appropriate framework is in place, ensuring
on-going development and co-ordination of risk management within
the Group. The Committees provide an escalation route to the Board
for any risks which have or which are likely to materialise, and which
may pose a threat to us being able to remain within our risk appetite.
Executive sub-committees of the Executive Board also provide
support for the management of risks in their areas of responsibility.

The Risk Management Framework is built around the
outcomes which are key to our organisation. These are:

CLIENTS
That we deliver positive outcomes for our increasing
population of clients.

PARTNERSHIP
That we continue to grow and develop the Partnership.

PEOPLE
That we treat all of our stakeholders well.

REGULATORS
That we are compliant, have an open and honest
relationship with our regulators and protect our reputation.

FINANCIALS AND SHAREHOLDERS
That we deliver sustainable growth in reported profits on
all measures.

Whilst the diagram on the left hand side is a simplification of the
business model, these outcomes focus attention on those things
that are of greatest importance, and hence indicate where risk
management activity should be focused. When doing this, current
risk priorities as well as emerging risks are considered across all
objectives. The Risk Management Framework also provides clarity of
ownership, enabling us to identify the key individuals within the Group
who have responsibility for managing these risks.

Within these outcomes, indicators are used to monitor performance
against risk appetite. An Executive Board member is assigned to own
each of the risk appetite statements and related indicators. They are
accountable for managing the associated risks within agreed
thresholds and regularly reporting to the Executive Board. This
enables the Board to maintain effective oversight of all outcomes,
and to manage any conflicts of interest that arise between them.
With regards to emerging risks, these are monitored regularly by the
Group Risk and Compliance function and assessed as to whether
they are increasing, decreasing or static in terms of their impact
on the Group and/or our stakeholders. It will be a combination of
these indicators and the perceived future risks to the Group that
will determine the principal risks at any point in time.

‘Three lines of defence’ model
Complementary to the above, there is also a ‘bottom-up’ element to
our framework. This means each division of the Group is responsible
for the identification, management and quarterly reporting of its own
risks (first line of defence).

The divisions are responsible for ensuring each risk is assessed by
considering its potential impact and the likelihood of its occurrence
(impact assessments are completed against financial and non-
financial metrics). The divisions are also responsible for establishing
appropriate controls as a core part of the risk management process.

The Group Risk and Compliance function provides independent
oversight, through support, challenge and monitoring activity of the
divisional risk management processes (second line of defence).

Our Group Internal Audit function provides more holistic assurance,
via reviews and assessments (third line of defence).

Underpinning the three lines of defence and to ensure effective
risk management, the Group maintains a comprehensive suite of
governance policies to support the Risk Management Framework.
These policies are reviewed at least annually to ensure they remain
appropriate and effective.

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R I S K A N D R I S K M A N A G E M E N T C O N T I N U E D

Own Risk and Solvency Assessment (ORSA)
We provide financial advice and also manufacture and distribute
products in different jurisdictions, and therefore we are governed
by a range of financial services regulations. As such, we have
relationships with regulators in the UK, Ireland, Singapore and Hong
Kong. At Group level we are classified as an insurance group and
are subject to the Solvency II insurance regulation. A key part of
this regulation requires a consistent approach to risk management
across the Group supported by an annual ORSA (considering both
the Group and the individual insurance entities).

The ORSA process is grounded within the business strategy and
activities contributing to this operate as an annual cycle. As directed
by the boards of the EU insurance entities (SJPUK and SJPI) and the
Board of the Company, the cycle comprises:

• comprehensive risk assessments, providing understanding of the
risks each business unit faces, how they are managed and how
they might change (in the context of the strategic plan); and

• quantitative analysis of the capital required to protect the

sustainability of the Company (projecting how this may develop
over our planning period of five years).

Similar risk-based capital adequacy assessments are performed for
the other regulated non-insurance entities. The assessment activities
range from stress and scenario testing, through loss event recording
and analysis, to recovery and resolution planning. Stress testing is
undertaken across a broad range of scenarios, including market
shocks, mass lapse events, new business growth scenarios and,
particularly, operational risk events.

The regulatory solvency capital requirements allow for at least a
‘1 in 200-year’ risk event, so we focus on reasonably foreseeable
scenarios for the insights they can provide about how the business
might react to stress conditions, as well as considering other, more
extreme scenarios.

Our results show that the Group maintains strong levels of free
assets, even under extreme but plausible scenarios, which
demonstrates its resilience to adverse conditions. For example,
previous analysis of more severe ‘stress tests’ investigating liquidity,
which could be a key risk in stressed conditions, indicated the Group
can reasonably expect to have sufficient liquid funds to be able to
meet its liabilities over the planning period. This is supported by our
liquidity risk policy which outlines the approach and controls in place
to manage liquidity risk, the primary control being to hold corporate
and surplus assets in deep and liquid markets.

The outcome of these activities assists us when considering
the calculation and allocation of risk capital to all the major risks
in the Group (in the insurance companies in particular), and the
adequacy of the capital position. This process ensures our continued
confidence that the regulated entities remain strongly capitalised.

The ORSA has proved to be a useful process for making
consideration of risk appetite more prominent in decisions by
management, including those reviewed by the Risk Committee.
The ORSA continues to evolve and further strengthen risk
management processes throughout the Group.

Internal control
The internal control environment is built upon a strong control
culture, underpinned by our Code of Ethics and organisational
delegation of responsibility using the ‘three lines of defence’ model,
as described above. The purpose of this method of internal control
is to provide reasonable assurance regarding the achievement of
objectives relating to operations, reporting, and compliance.

There is delegated responsibility to implement and maintain effective
controls, such that the Group operates within the risk appetite
agreed by the Board. The Audit Committee, on behalf of the Board,
monitors the effectiveness of internal controls across all business
areas, primarily through the outcomes of the independent assurance
assignments undertaken by Internal Audit.

CONTROL SELF-ASSESSMENT (CSA)
In addition to the risk impact assessments, the CSA is a core element
of our governance process. Assessments are a continuous activity,
through which business areas review their controls regularly, signing
off on their efficiency (against a standard set of control statements).

These are formally summarised annually and collectively these
control statements embody the elements for us to maintain a
control framework across five components (as laid down in the
internationally accepted COSO control standards):

• control environment;

• risk assessment;

• control activities;

• information and communication; and

• monitoring activities.

This annual summary contributes to the year-end Internal Control
Evaluation exercise (undertaken by Internal Audit as part of the
assurance provision to the Audit Committee).

The controls activity is valued in the organisation, as it provides
confidence that business areas can meet their objectives, clarity
to support decision making, and agility in adapting to change and
complexity.

STRATEGIC REPORTST. JAMES’S PLACE PLC 51

FINANCIAL REPORTING PROCESSES
Specifically, in relation to the financial reporting processes, the main
features of the internal control systems include:

• extensive documentation, operation and assessment of controls

in key risk areas;

• monthly review and approval of all financial accounting data
including data generated by our outsource providers; and

• formal review of financial statements by senior management,
for both individual companies and the consolidated Group.

Principal risks and uncertainties
The following tables summarise the principal risks and uncertainties
that are inherent within both the Group’s business model and the
market in which we operate. These are the risks which could have a
material impact on the key strategic outcomes in the five areas set
out on page 49. The Board and the boards of the insurance entities
have responsibility for assessing their main risks and these are
monitored on a regular basis by the Risk Committee, the Executive
Board, the SJPUK and SJPI boards, the SJPI Risk and Compliance
Committee, the SJPI Singapore Branch Executive Management
Committee and the Board of SJPI (Hong Kong) Limited.

Against each of the principal risks, consideration is given to the level
of exposure and the extent to which the risk can be mitigated, with
the risk being assigned a weighting (and a justification for this). For
example, the Group believes that the accumulation of reputational
issues through the risks set out below presents a significant
exposure yet is difficult to further mitigate beyond the processes
currently in place across the business. Conversely, the risk of
regulatory breaches may pose higher exposure (i.e. fines may directly
correlate to the Funds under Management), but can be directly
mitigated through processes, controls and systems.

In addition to the above, the political environment, including Brexit,
is an area of increasing uncertainty and therefore a principal risk to
our business through investor sentiment and the wider economy.
We believe that the direct impact on our operations will be limited
due to our business model. In particular we have minimal exposure
to market risk through our matching strategy, in addition, investments
are also globally diverse. We have considered and made appropriate
arrangements where potential operational issues following a no-deal
Brexit could occur, although the business has a very minimal
operational exposure.

The indirect impact on the economy, and therefore investor
sentiment, cannot be determined with any precision because of
the current uncertainties both around Brexit and the wider political
environment. It is these indirect outcomes which could impact upon
our business. Stress and scenario testing has been performed which
demonstrates that the businesses is highly resilient to changes in the
domestic economy.

We are focused on understanding the degree to which the various
outcomes might impact the business. For instance, understanding
how market uncertainty and volatility could impact client decisions
and behaviours. This allows us to consider how they might be
mitigated. We continually monitor the changing environment, to
ensure our analysis and scenario testing remains current. However,
we also consider worst case scenarios to facilitate planning for all
eventualities. Although scenarios of political change, including Brexit,
can drive changes in risk, the potential impacts on our business
would manifest in ways which we are familiar with, notably market
risk, persistency risk, changes in new business levels and operational
risks. We cover these risks more specifically in the tables in the
following pages.

The principal risks and uncertainties, the business outcomes on
which they impact, and the high-level controls and processes
through which we aim to mitigate them, are set out in the following
tables. Although all of the risks identified in the previous year’s report
are still applicable to our business, we have sought to rationalise and
focus our reporting on our principal risks this year. Within all of the
risks below, reputational and investor relations impact is considered
(so these have not been individually drawn out overleaf);

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Non-financial risks

Risk

Description

Outcome

Management and controls

Systemic advice
failure

Clients rely on their SJP advisers for the
provision of initial and ongoing advice.
Failures in the quality of advice or
documentation of advice could lead to
redress costs, reputational damage and
regulatory intervention.

Clients

Outsourcing
failure

The Group’s business model involves the
outsourcing of administration and custodial
services to third parties. Poor service from,
or failure of, one of these third parties could
lead to disruption of services to clients,
reputational damage and profit impacts.

Clients,
Financials and
Shareholders

Cyber risk and
information
security

Cyber risk, which could include loss of
data, system control or system availability,
continues to be one of the top risks facing
individuals and organisations. A successful
cyber-attack could result in disruption or
distress for clients, advisers, and employees,
as well as resulting in reputational damage
and regulatory censure.

Clients,
Advisers,
Financials and
Shareholders

There are many processes in place to mitigate this risk,
including detailed advice guidance with appropriate
governance around changes and updates, appropriate
incentive structures, adviser training and accreditation,
compliance procedures, monitoring processes and
quality checking. The Group guarantees the suitability
of advice given by advisers and also has appropriate
professional indemnity insurance in place.

We maintain close working relationships with our
outsourcing partners, who are central to our business
model. This enables us to work effectively and efficiently
together. Service level agreements are in place and
performance is monitored against these.

With any significant migration programme such as
the Bluedoor administration system, implementation
is backed up with a project focus on outcomes and an
understanding of associated operational risks. Group
Risk and Internal Audit work closely with the programme
teams, with the Executive Board overseeing project
readiness risk assessments and audits along with
contingency plans.

We also work closely with our outsourcing business
partners to understand any material changes to their
businesses which may impact us, with regular reviews
including monitoring of the outsourced company’s
financial strength. In the case of an extreme event, all our
relationships are governed by formal agreements with
notice periods. The business continuity arrangements of
each outsourcer are also regularly tested and improved,
and scenario analysis is carried out.

The leading cause of information security incidents are
individuals unknowingly or inadvertently enabling the
attack, so awareness is the most effective defence. We
maintain an active and on-going awareness programme
on information security threats and how to prevent
or respond to them for employees and advisers. This
is supported by system maintenance, data leakage
(prevention and detection) technologies and vulnerability
testing. In addition an incident reporting system ensures
a rapid response if an incident does occur. We also
ensure our outsourcing partners have robust information
security programmes in place and use secure means
for transmitting data to and from these organisations.

STRATEGIC REPORTST. JAMES’S PLACE PLC 53

Risk

Description

Outcome

Management and controls

Investment
performance
fails to
meet client
expectations

Our approach to investment management
may fail to deliver expected returns to clients
of the Group or the range of products and
services offered may become inappropriate
for client needs.

Clients

Adviser
proposition,
recruitment
and retention

Advisers

Group products are distributed, and ongoing
advice is provided, exclusively through
the SJP Partnership. Inadequacies in the
adviser proposition, range of products,
technology or services offered to the
Partnership may result in inefficiencies and
frustration, with consequent loss of advisers
and client impact, or inability to recruit
sufficient, high-quality new advisers or field
management.

Regulatory,
legislative and
tax environment

Competition and
charge pressure

Regulators

Financials and
Shareholders

The nature of the Group is such that it
falls under the influence of regulators
and legislators in multiple jurisdictions.
Transformative regulatory, or indeed
political changes, could impact adversely
on our current business model.

The Group could face a fine or regulatory
censure from failure to comply with current
and/or future regulations, with increased
supervisory intrusion, disruption to business
and potential for changes to the business
model.

The competitive environment in which we
operate continues to evolve with the need
for dependable wealth management advice
increasing whilst regulation and technology
are changing the nature and accessibility of
available information. Competitor activity
in the adviser-based wealth management
market may result in a reduction in new
business volumes, reduced retention of
existing business with the resulting impact
on ongoing advice fees, pressure on margins
for both new and existing business, and the
potential loss of advisers and key employees.

We offer a broad range of funds and portfolios, which
allows client diversification and mitigates our new
business, persistency and market risks. We actively
manage and monitor the performance of our investment
managers through the Investment Committee (which is
supported by respected independent investment research
consultancies) and review the ongoing suitability of
portfolio asset allocation through the Portfolio Committee.
We perform ongoing due diligence and appropriateness
reviews on third-party products at least annually.

The adviser proposition is an area of continual focus,
with outputs from regular adviser surveys and other
adviser feedback being reflected on an ongoing basis.
We employ a number of specialist managers specifically
to manage the recruitment and retention of high-
quality advisers, and a dedicated senior management
team oversees the SJP Academy, which broadens our
recruitment streams. Formal retention strategies are in
place to ensure that, wherever possible, we retain good
quality and experienced advisers. All recruitment and
retention activity is closely monitored. Business Sale
and Purchase Agreements incentivise Partners to build
up high-quality sustainable practices and enable the
Company to manage succession of the Partnership,
thereby ensuring continuity of service to clients and
funds under management.

Regulatory and legislative change is largely a risk which
cannot be mitigated, although the Group seeks to
engage with regulators and policy makers in an open
and constructive manner, with the aim that key issues
impacting the Group are taken into consideration in
the drafting of changes. Our governance structures,
management committees and compliance monitoring
activities seek to ensure we remain compliant with
regulation.

This risk is mitigated through ensuring our business is run
efficiently, being responsive to the needs of our clients
and advisers and seeking continual improvements to
processes. Charges are benchmarked against competitors
and competitor activity is monitored allowing action to
be taken in a timely manner if required. The Group offers
a diversified product range, including manufactured and
third-party products. We have a proven track record in
adviser and employee acquisition and retention. Our
more established advisers often have significant equity
stakes in their practices and their ability to access these is
structured to aid retention. Similarly, variable remuneration
of key employees is structured to aid retention.

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R I S K A N D R I S K M A N A G E M E N T C O N T I N U E D

Non-financial risks continued
Risk

Description

Outcome

Management and controls

Funding
availability

Pressure on funding availability may limit
the Group’s ability to provide business loans
to Partners to make strategic investments.

Financials and
Shareholders

People and
culture

People

People and the distinctive culture of the
Group play an important part in its success.
Poorly managed recruitment, expansion,
succession, culture and resourcing may
lead to loss of valued individuals, lack of
diversity, increased risk of errors, and failure
to deliver on the business plan.

A debt funding policy is in place, with committed
funds available through the revolving credit facility
and securitisation. Credit approved bank lending
facilities are available to support business loans
to Partners. Further corporate borrowing requires
approval at Board level.

This risk is mitigated through effective recruitment
processes, leadership, succession planning, the
implementation of executive and management
development initiatives and regular surveys and
consultation groups. The latter enable us to monitor
the sentiment of our staff and advisers and identify
any potential adverse impacts upon, or trends within,
our culture, and respond appropriately.

Financial risks
Financial risks relating to credit, liquidity, market and currency risk are explored in Note 16 on pages 183 and 184.

However, should some of the non-financial risks materialise or environmental factors influence our business, it may give rise to a further
financial risk, as set out below:

Risk

Description

Outcome

Management and controls

Insurance risk

Financials and
Shareholders

A reduction in funds under management
owing to poor retention would reduce
future Annual Management Charge
income. This may arise from factors such
as changes in the economic climate, poor
investment performance, competitor
activity, or reputational damage to the
Group.

Adverse mortality or disability experience,
in particular higher death claims following
an incident or widespread illness, or longer-
term increases in mortality rates, would
reduce future profits.

Retention risk is managed through the long-term
relationships between advisers and clients. In
particular, advisers keep clients informed during
periods of market volatility, and lower risk funds
and portfolios are available, with no charges for
switching. The Investment Management Approach
involves monitoring of fund manager performance,
and changes are made where appropriate.

Mortality and disability risk is substantially reduced
through the use of reassurance with low retention.
Mortality risk benefit on investment products are
generally limited to 1% of invested assets. Most
risk deductions are reviewable and an increase in
reassurance rates would be passed on to clients
through increases to charges and/or premiums on
a regular basis. Experience analysis is performed.

STRATEGIC REPORTST. JAMES’S PLACE PLC 55

Viability Statement
In accordance with provision C.2.2. of the UK Corporate Governance
Code, the Directors have assessed the Group’s current financial
position and future prospects over a five-year period and have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of
this assessment.

In reaching this conclusion the Directors have considered several
different strands of work, including:

• the Business Plan and associated strategy documents and the

Group’s capacity and capability to deliver the plan;

• an assessment of the economic, regulatory, competitive and risk

environment which was carried out as part of the Board’s strategy
review process;

• the Group’s ORSA process, which is summarised in the section

above; and

• operational risks, mitigating actions and the control environment.

A planning period of five years is used both in medium-term business
planning and for the ORSA, as it reflects the horizon over which the
Board sets medium-term strategy. Due to our product structure,
investment and pension business does not generate net cash in the
first six years. By using a planning horizon of five years, we assess
our viability based on revenues generated on business we have today
rather than relying on assumed growth.

The ORSA was particularly useful in assessing viability as it has a
similar purpose and requires a comprehensive assessment of risk
management and risk capital requirements of the business in excess
of a 1 in 200-year risk calibration.

From the principal risks on pages 52 to 54 for the purposes of
assessing the resilience of the Group’s business model, the key
risks have been identified. The assessment indicated that none of
the identified individual key risks in isolation would compromise the
Group’s viability financially but could indirectly impact areas such as
client satisfaction or reputation.

However, severe but plausible scenarios are also used to assess
the impact of the risks. This informs business planning in the longer
term, whether that is in the development of new controls, processes
or systems or influencing corporate strategy for proposition or
financial safeguarding.

This programme of stress testing allows the Group to model the
potential impact of a variety of external and internal events. For
instance, some of the stress scenarios explore the impact of a
‘combination’ of plausible events, adding further weight to the
assessments.

Consideration is given to factors or events that impact on our funds
under management, investment growth, retention of clients and
ability to attract new clients in addition to the effects of a market
downturn. A combination of these factors will be used to form
scenarios which will then be tested, providing for more extreme
combinations of events. Therefore, assumptions are robustly
analysed to predict both the immediate impact of an event along
with the impact over the longer term (in the wake of the event).

In addition to these more extreme ‘combination’ scenarios,
assessments are also completed based on more current/topical or
emerging risk exposures affecting the Group or financial services
more generally, including: a significant data loss through a cyber-
attack; a prolonged outsourcer failure; a substantial increase in
expenses, without an equivalent increase in income; significant and
prolonged stock market falls; and extreme and unprecedented mass
lapses.

Activities in the risk management framework (stress testing,
controls management and Key Risk Indicator monitoring), ORSA,
capital adequacy assessments along with strategic planning by the
Board, contribute to a robust assessment of the principal risks facing
the Group.

The Board considers that the Group’s risk culture is well embedded
(as demonstrated in the risk management processes) and having
considered both the current and future market environment and
assessed the results of ongoing comprehensive operational risk
scenario testing and financial stress testing, the Board believes that
the business model remains appropriate and that the Group will be
able to remain in operation and meet its liabilities as they fall due
over the five year assessment period. The Board will ensure that
the Group maintains a robust risk management process, including
business continuity planning and considers that it will continue to
meet its liabilities over the planning period. This is further supported
by the resilience that the Group has demonstrated over recent years
in a variety of different external conditions. We plan for ‘severe but
plausible’ events, exploring (but not limited to) the following areas:
the market (understanding the effects on asset value and investment
growth); persistency (understanding the effects of varying lapse
volumes and withdrawals); new business (exploring the effects of
slowed or increased volumes); and expenses (focusing on the impact
of increased costs). The Directors believe that the risk planning and
management processes and culture, allow for a robust and effective
risk management environment, providing the assurance needed for
the Directors to remain confident in the Group’s outlook.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
56

C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T

7.0

HOURS
Average number of hours our
employees gave during working
hours in support of our CR
activities and the Charitable
Foundation.

2017: 5.5 hours

£853,194

TOTAL VALUE
Total value of the time our employees gave during working hours.

2017: £672,000

Find out more in our Corporate Responsibility report at
www.sjp.co.uk/cr2018

5.1

HOURS
Average number of hours
our employees gave of
their own time in support
of our CR activities and
the Charitable Foundation.

2017: 7.0 hours

17,330

HOURS
Total number of hours our employees gave of during
working hours in support of our CR activities and the
Charitable Foundation.

HOURS
Number of hours our employees
receive per year for community
support in working hours.

2017: 12,148 hours

2017: 14 hours

£7.1m

INVESTED IN
COMMUNITIES
Total cash value we invested this year in
supporting our communities and good
causes through our corporate responsibility
programmes and the Charitable Foundation.1

2017: £13.1 million

PROUD TO BE MEMBERS OF

97.5%

INVOLVEMENT
Percentage of Group employees
involved in supporting our
communities and good causes

75%

67%

3.3%

INVESTED

Percentage of profit
before tax invested
in supporting
our communities
and good causes 1

2017: 7.1%

2017: 97.0%

Staff who give monthly
through payroll

Staff who give through
one-off donations

11%

38%

35%

1 In 2017, the amount invested benefitted from the Group double

matching all funds raised by the St. James’s Place community for
the Charitable Foundation, to mark the Group’s 25th anniversary year.

Staff who organise
Charitable
Foundation
activities

Staff who participate
in Charitable
Foundation
fundraising events

Staff who participate
in corporate
responsibility activities
in working hours

Staff who participate
in corporate
responsibility activities
in their own time

STRATEGIC REPORTST. JAMES’S PLACE PLC 57

“ Are we changing
lives? Are we
having a lasting
impact? For us it
is not about how
many people we
reach or how
many people know
about it, but rather
considering the
depth of change
we can create for
those we support.”

ANDREW CROFT
Chief Executive

Having a lasting impact.

Our approach
Corporate Responsibility (CR) is at the core
of our culture. As a business that seeks to
do the right thing for all its stakeholders,
St. James’s Place is committed to acting
in a way that considers the long-term
economic, social and environmental
impacts of what we do. Acting responsibly
is also important to all our stakeholders
– shareholders, clients, the Partnership,
employees, suppliers and the communities
in which we operate. As a result, our people
demonstrate extremely high levels of CR
engagement, both in their work and their
own wider community engagement.

Our commitment to CR was established
in the founding principles of the Company
and is expressed in both the ‘Our approach’
document, shared with all members of
our community, and the ‘What it means
to be a member’ brochure, setting out
expectations for Partnership advisers.
We actively encourage our people to
live by this philosophy through regular
Company meetings, newsletters, internal
publications and a wide range of prominent
fundraising and volunteering events.

All new employees complete a two-
day induction programme including
learning about the history and culture
of our Company, our CR strategy, the
St. James’s Place Charitable Foundation
and how employees can contribute.

Our continued inclusion in the FTSE4Good
Index recognises our positive culture and
ongoing commitment to CR, and we remain
members of Business in the Community,
which recognises our support in promoting
CR excellence.

Non-financial information
statement
We set out in this Annual Report detail of
the approach we take to employees, social
matters, respect for human rights, anti-
corruption and bribery and the environment,
demonstrating our commitment in these
areas. To the extent that it is necessary for
readers to form an understanding of the
development, performance or position of
the Company’s business activities, we have
included further details in this Corporate
Responsibility Report on policies pursued
and risks that arise from the Company’s
operations.

Governance
Responsibility for maintaining our culture, including our CR strategy, is a key focus of the Executive Board, with oversight by the full
Board. The Executive Board is supported in this objective (as in all of its work) by a number of sub-committees:

Responsibility

Managing Committee

Executive Board member

Remit

Culture and
Employee Wellbeing

EXECUTIVE
BOARD

Corporate Responsibility
Management and Oversight

Responsible Investment

St. James’s Place
Charitable Foundation 1

CORPORATE
RESPONSIBILITY
COMMITTEE

INVESTMENT
COMMITTEE

CHARITABLE
FOUNDATION
TRUSTEES

Andrew Croft

To ensure the strength and maintenance of the unique
culture throughout our community, and to lead and
manage our employees.

To co-ordinate the Group’s approach to CR strategy,
with particular focus on promoting support for our
communities and environmental matters.

David Lamb
(Robert Gardner
from 1 March 2019)

To manage our Investment Management Approach and
oversee our fund managers, including our approach to
responsible investing.

To manage the St. James’s Place Charitable Foundation,
including overseeing grant-making and compliance with
the charity’s objectives.

1 St. James’s Place Charitable Foundation is an independent charity, managed by its Trustees.

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58

C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Our desire to do the right thing
by all our stakeholders.

Our CR strategy encompasses the following areas:

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Supporting our
communities,
living our values

Relationship s w i
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More on pag e 6 4

Our focus for 2019
• To develop a new long-term plan for the future of CR excellence at

St. James’s Place.

• To establish a volunteering programme for the Partnership based on financial
awareness and education – direct to schools, and to people in need through
national charities.

• To also support the charities the St. James’s Place Charitable Foundation gives

funds to, through volunteering the skills and experience of our people.

• To achieve the Business in the Community (BITC) Community Mark as a standard

for excellence in community investment.

• To continue to progress our ESG and responsible investment activities.

Our strategy
Our CR strategy and approach is integral
to St. James’s Place’s culture and way of
working. We look to employ good practice
in all areas, understanding that this is an
ever-changing target that drives us to always
push our ambitions.

St. James’s Place is a relationship-focused
business and the recognition that our people
are our most important asset is both a core
cultural belief and a fundamental driver of
the success for our Group. Much of our CR
strategy is designed to support them as a
responsible employer and utilise their skills
and passion for community support.

Each of our strategic areas is explored in
more detail in this report. However, there
are some core strategic principles we apply
to all our CR activities:

• To identify specific groups of people
in need through our work with local
communities, and to change or transform
their lives for the better. We strive to have
a high impact.

• To place our employees and advisers at
the heart of what we do, leveraging their
skills and experience to change lives
for the better. We look to involve all our
employees and all within the Partnership.

• To act in a way that makes our employees
proud to work at St. James’s Place and
inspires them to do more, maintaining our
culture of community support.

• To do the right thing using best CR industry
practice to support our effectiveness. We
do not seek brand awareness, awards or
commercial gain from our CR activities.

• To take a long-term sustainable view and
measure and evidence the value of what
we do, always looking to continuously
improve.

STRATEGIC REPORTST. JAMES’S PLACE PLC

United Nations Sustainable Development Goals (UNSDGs)

The UNSDGs provide a blueprint to achieve a better and more sustainable future for all. We seek to align ourselves with the UNSDGs
through our CR strategy. We take a strategic approach to CR, using focused work to maximise our impact in the areas most relevant
to our business. Through this approach, we look to contribute towards the UNSDGs highlighted below locally, nationally and around
the world.

Sustainable
Development Goal

The global
challenge

Our role

St. James’s Place in action

Obtaining a
quality education
is the foundation
to creating
sustainable
development.

To support schools delivering financial
education programmes to year 9 and
sixth-form students, with tailored
programmes to meet students’ needs.
These programmes are delivered by
our employees, advisers and teachers,
following training.

Promote sustained,
inclusive and
sustainable
economic growth,
full and productive
employment and
decent work for all.

To reduce
inequalities,
policies should
be universal in
principle, paying
attention to
the needs of
disadvantaged
and marginalised
populations.

We invest in the personal and
professional development of our
employees and are committed
to supporting early careers by
providing work experience, internship,
apprentice and graduate programmes.

We raise and donate funds to
the St. James’s Place Charitable
Foundation, which enables it to
support those in need, making a
positive and lasting difference to
people’s lives. The main focus of
grant giving is for children and young
people who have additional needs
through illness or disability or are
disadvantaged in other ways, people
affected by cancer or mental health
issues, and the hospice movement.

In the past three years we have
reached 9,500 young people in 90
school sessions, with over 450
employee volunteers giving 2,800
hours in work time to support the
schools and colleges local to our
offices. Over 120 advisers also
gave over 450 hours of their own
time in support.

Our employability programme
supports individuals in the wider
community, before they embark
on their careers. We also provide
mentor support to local schools
and colleges, including National
Star College placement students.

The Charitable Foundation is
keen to support small to medium-
sized charities that can benefit
substantially from relatively small
grants. Since 1992 the Charitable
Foundation has raised and
distributed over £81 million to
thousands of these charities. Refer
to pages 71 to 75 for details.

Climate change
is a global
challenge that
affects everyone,
everywhere.

Although we are a relatively low-
impact business, we recognise that
even our business can influence
climate change and we manage our
business activities to reduce this
impact where possible.

Our emissions are calculated in line
with the Greenhouse Gas Protocol.
We continue to purchase renewable
electricity in the UK. We remain
rated as ‘Grade B, Management’
by the CDP.

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C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Our employees are at
the heart of what we do.

Leadership and people
development
Building on our long-standing culture
of providing a great place for people to
develop their careers, in 2018 we have
invested in more structured development
programmes to accelerate the progression
of our most talented employees at all
levels. We now have a sequence of four
levels of programme, from ‘Emerging
Talent’ through to our Senior Leadership
Programme for those aspiring to Executive
Board appointments. All programmes
follow similar design principles, providing a
diverse talent pipeline with the opportunity
for participants to develop their individual
leadership capability as well as enhance
their internal networks. These talent
programmes complement the Early Career
programmes offered for school leavers and
graduates.

We also offer a broad range of development
opportunities for all employees covering
personal and team development through
a range of delivery methods including

a mentoring scheme. In addition, we
provide support for employees studying
for professional qualifications, and a range
of bespoke technical programmes exist
across all areas of our business. Employees
are supported in developing their careers
by their line managers, through regular
meetings as well as an annual Personal
Development Review process.

We believe our commitment to employee
development and providing opportunities
for career progression contribute to our low
turnover rate (8.5% in 2018).

Human rights
We are committed to managing our
business in an ethical manner and recognise
that responsible management is important
to all our stakeholders – shareholders,
clients, Partners, employees, suppliers and
the communities in which we operate. We
will not tolerate or condone abuse of human
rights (including modern slavery) in any
part of our business, and we are committed
to minimising the risk of slavery or human
trafficking in any part of our supply chain.

All employees receive a copy of our Code
of Ethics and our equal opportunities
policy, which makes it clear that we
oppose all forms of unfair discrimination or
victimisation. Our bullying and harassment
policy sets out our approach in relation to
allegations of harassment and/or bullying.
Harassment, in general terms, is defined
as unwanted conduct affecting the dignity
of people in the workplace. It may be
related to age, sex, race, disability, religion,
nationality or any personal characteristics
of the individual and may be persistent or an
isolated incident.

Anti-bribery and
corruption
St. James’s Place has a zero-tolerance
approach to bribery and corruption. The
Board has responsibility for oversight of the
Group’s anti-bribery and corruption policy
and procedures and annually carries out a
review of their adequacy. Employees and
Partners are provided with training with
regards to money laundering, financial
crime, fraud, bribery and corruption via
online training programmes, the completion
of which is compulsory. The anti-bribery and
corruption Policy is available on our website,
www.sjp.co.uk.

Why this is important
Our people are our most valuable asset and a core reason for
our continued success, and this is reflected in the identification
of ‘People and Culture’ as one of our principal risks (see page
54). We look to support them in their professional development
and their wellbeing in the workplace. We look to retain our
talent for the long term and have a supportive and inclusive
culture. We believe that a diverse and inclusive culture is
important to the success of our business. Having a diverse
community of people from a wide variety of backgrounds, and
with a range of experiences, skills and approaches, will help us
better understand and meet the needs of clients and advisers,
making our business stronger and driving continued growth
and innovation.

Our focus for 2019
• Extend our focus beyond gender diversity by rolling out
an internal diversity workshop across our business, to
complement the Inclusive Leadership training we run for
our Directors and the diversity and inclusion awareness
which is built into our high-potential leadership programmes.

• Continue to promote our new approach to flexible working
and rolling out training to enable managers to operate in a
more agile environment, helping us attract and retain greater
diversity.

• Further enhance our employee development proposition for
all employees through greater and more flexible access to
development.

• Continue to provide a comprehensive range of development

programmes to our Partnership businesses, including
developing a version of our Senior Leadership Programme
for leaders in some of our Partner practices, and providing
a professional qualifications framework.

STRATEGIC REPORTST. JAMES’S PLACE PLC 61

‘A Great Place to Work’

In October 2018 our Investment Division organised ‘A Great
Place to Work’ week, which focused on staff wellbeing and
personal development and kick started the division’s 2019
commitment to completing 1,000 hours of community
giving. This ‘journey’ will be mapped against the 1,000 hours
walking distance to travel to Gunjur, in The Gambia, the
destination of our international community programme.

During the week, 30 people from the division donated
at least an hour of their time at the local food bank and
contributed some 250kg of food donations, equivalent to
225 food parcels for people in need. In addition, employees
were encouraged to go outside or to the local leisure centre
during their lunch break, and to arrange walking one-to-one
meetings with managers and teams to support both their
physical and mental wellbeing.

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C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Our employees are at the heart of what we do continued

Diversity and inclusion
We have made progress in our approach and culture with our Diversity and Inclusion Steering
Group. With an initial focus on gender, we have signed up to the Women in Finance Charter
and joined the ‘30% Club’. We have made a commitment to an improved representation of
women on shortlists when recruiting for senior roles. As a result, our proportion of female
external appointments into senior roles has increased from to 13% in 2017 to 53% in 2018.
We have also extended the range of development programmes we offer specifically to
support the development of women both in SJP and, externally, as part of the 30% Club
mentoring scheme.

More generally, we are committed to equal opportunities for all. We strive to give full and
fair consideration to applications from and promotions of disabled people, having regard to
their aptitudes and abilities. Where appropriate, we will consider modifications to the working
environment so they can take up opportunities or enhance their role, and we aim to assist
employees who become ill or disabled, for example, by arranging appropriate training or
making adjustments to their role and/or working environment.

As at 31 December 2018 we employed 2,484 people across the world (2,263 in the UK) and
the breakdown of our workforce by gender was:

Board Directors
Managers and decision-makers
Total employees

Employee wellbeing
We provide a comprehensive formal and
informal support structure for employees,
including private medical, permanent health
insurance, critical illness and life cover for
all employees. We also provide an employee
assistance programme, access to a second
opinion referral service and counselling.
In 2018, we trained our first cohort of
employees on how to identify signs of
mental health issues amongst our staff and
to sign post where to find support through
the national recognised mental health first
aid training programme. In addition, through
our development we also provide workshops
on building resilience and dealing with
stress, and we are looking to develop these
further.

Underpinning all of this is our belief in a
healthy, supportive working culture, where
everyone is comfortable to raise issues and
problems.

Female

Male

2018
1
166
1,255

2017
2
119
1,021

2018
7
535
1,229

2017
7
478
1,134

Employee engagement
The Group has a calendar of regular
communication with employees which
includes weekly electronic newsletters,
weekly conference call meetings for
Managers, and monthly ‘Directors Lunches’.
Significant business performance
communications are managed through
a mixture of face-to-face and written
channels. In addition, different parts
of the business adopt their own local
engagement events throughout the year
to supplement the corporate messages
and reflect the nature of the community;
these give all employees the opportunity to
give their views on relevant matters. This
is over and above our biennial employment
engagement survey, which captures the
views of our employees across a range of
themes and seeks their views on how they
feel about working for St. James’s Place.
The engagement results are shared openly
across the business and business leaders
work with their teams to discuss the results
and together create and implement action
plans to address their teams’ feedback.

Employees are encouraged to raise issues
with their managers or through HR, and we
are developing direct means of involvement
through company-wide social media. The
right to collective bargaining has not been
exercised by any of the Group’s employees,
however were they to do so the Group
would look to comply with due process.
For further detail refer to the Relations with
Stakeholders section of the Corporate
Governance Report on page 84.

Reward and benefits
Reward is a critical element of our
employment proposition for driving delivery
of business objectives. We provide market
competitive rewards and benefits, that are
regularly benchmarked and reviewed. We
provide competitive levels of pay and are
committed to meeting the living wage for
all our employees in the UK (and equivalent
initiatives overseas, where relevant). Our
bonus arrangements, which all of our
employees participate in, recognise and
reward contribution to the growth of the
business and help drive performance
through stretching targets, with clear
checks and balances in place to ensure
that business goals are only achieved in
line with our values, and do not encourage
inappropriate behaviour or risk taking.

We provide meaningful protection and
wellbeing benefits, including generous
pension arrangements, which we regularly
review and improve. In 2018, the Company
introduced a new flexible benefits scheme,
providing our staff with the ability to tailor
their benefits package to suit their needs,
delivered through a new technology platform
which provides access to a wide range of
discounts from a number of retailers and
also Total Reward illustrations so our staff
can see the overall value of their reward
package. Over 2,000 employees registered
on our flexible benefits platform and over
£180,000 was spent by employees on
benefits since launching in September.

We also believe it is important that our
staff build a sense of ownership as well as
sharing in the success of the business and
we do this by encouraging employee equity
participation through our SAYE and SIP
schemes. In fact, it is so popular that over
80% of employees participate.

STRATEGIC REPORTST. JAMES’S PLACE PLC 63

Investing responsibly.

Our approach
The growth in responsible investing
strategies – those which include the
integration of environmental, social and
governance (ESG) factors into investment
processes and decision-making – has been
one of the most important recent trends in
the investment industry and now accounts
for $20 trillion – around a quarter of all
professionally-managed assets.

We will be continuing to promote responsible
investment principles as a core pillar of
our Investment Management Approach.
There is good evidence that supporting
ESG and responsible investment practices
has positive implications, both through the
provision of enhanced risk management
and, for those investors that have skill, the
generation of attractive long-term returns.
In addition, awareness of and alignment with
ESG and responsible investment principles
can be a source of additional, non-financial
benefits: helping us to build a better future.

Governance
Our Responsible Investment Committee is
committed to promoting the principles of
responsible investing through discussions

with our range of external fund managers
and investment consultants. This is
evidenced through a programme of
engagement and monitoring, such as
our annual Responsible Investing and
ESG due diligence questionnaires and
ESG specific meetings. We have also
introduced minimum standards across all
of our managers. These standards include
the requirement for a robust responsible
investing policy statement or document, a
named senior individual with responsibility
for policy implementation and continuous
improvement of ESG practice over time.

Another key step this year has been our
active engagement with industry bodies.
In February 2018, St. James’s Place
became a signatory to both the United
Nations Principles for Responsible
Investment and the Financial Reporting
Council’s UK Stewardship Code. We were
awarded the highest assessment ratings by
both organisations based on the quality of our
disclosure and activities. In addition to this,
we have become members of the Investment
Association’s Sustainability and Responsible
Investing Committee, which involves working
with our peers to further promote sustainable
investing within the industry.

Why this is important
The way in which corporations respond
to risks (such as climate change), create
sustainable business models, or ensure
that all shareholders are fairly treated,
are instructive means of assessing the
likelihood of continued performance.
Incorporating these factors can also
lead to a better experience for clients,
enabling them to understand how the
company’s investment strategies may
impact the environment, the economy,
and their communities.

Our focus for 2019
Whilst we have made progress over the
past 12 months, our activities in this
area will continue to expand as we add
resources and experience to the team.

Further success will be achieved with
the principles of responsible investing
at the core of our investment approach.
In 2019 we will:

• further integrate the work of the

Responsible Investment Committee
alongside our Investment
Management Approach, with
a particular focus on manager
assessment and monitoring, portfolio
construction and reporting activities;

• continue to engage with key

investment stakeholders, notably our
external fund managers, but also wider
industry players; and

• highlight the importance of our work

in this area through better engagement
with the Partnership, our clients, and
the broader investment community.

Impax

A tangible example of how
responsible investing considerations
are reflected in our fund range is
the appointment of Impax Asset
Management to run our recently
renamed Sustainable & Responsible
Equity fund. The fund’s strategy will
explicitly incorporate ESG factors
into its investment process as it
looks to invest in a portfolio of
around 50 companies which are
well-positioned for the transition to
a globalised sustainable economy.

Kirsteen Morrison, co-manager
of the fund, describes how their
approach can provide ‘an insight
into the ‘character’ of a company
and a flavour of how their business
model can manage ESG risks and
plan for the future’. A thorough
analysis of a company’s ability
to combat emergent threats
and establish well-formulated
competitive advantages can help
make reasoned assessments about
the opportunities it presents for
sustainable growth.

$20 trillion

TOTAL ASSETS SUBJECT TO
RESPONSIBLE INVESTING STRATEGIES
ACROSS THE INDUSTRY

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
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C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Building relationships
with our suppliers.

We are particularly pleased that many of our
suppliers share our desire to make a positive
and lasting difference to the lives of those
less fortunate than ourselves, and we are
very grateful to all those who have provided
support to the St. James’s Place Charitable
Foundation, both through donations
and through active participation in many
fundraising events.

St. James’s Place has always placed
great reliance on the support of third-
party suppliers. We are pleased to remain
signatories of the Prompt Payment Code,
which is encouraged by the Department for
Business, Energy and Industrial Strategy
(BEIS), and demonstrates a commitment to
good payment practices between ourselves
and our suppliers, as well as providing a
defined route for any escalations should the
need arise.

During 2019 we will be looking to review
opportunities to use social enterprise
suppliers, in keeping with our CR approach
of doing the right thing.

At St. James’s Place, we believe in treating
all our stakeholders fairly. We also believe in
the benefits to be gained from building long-
term relationships based on mutual trust.
As a result, many of our suppliers have been
associated with the Group for a number of
years and we have been able to cultivate very
strong and mutually beneficial relationships.

We are committed to managing our
business in an ethical manner and
recognise that responsible management
is important to all our stakeholders. We
have implemented procurement policies
which not only support us in meeting our
regulatory obligations, but also create and
promote an internal awareness of how
our suppliers should be managed and the
legislation which should be complied with.

Our procurement policy requires due
diligence to be conducted on new supplier
relationships, using a risk-based approach,
and ongoing due diligence on an annual
basis for critical/key suppliers. We look to
work with our suppliers to support good
practice. For example, we have been a
member of the Real Living Wage Foundation
since 2014 and encourage our suppliers
to adopt the same approach or, where
applicable, an overseas equivalent,
(www.livingwage.org.uk).

“We both believe in giving something back
through social enterprise, whether via
our Foundation’s No Limits programme,
or the Young Gloucestershire charity,
through which we both support local
disadvantaged young people.”

SIMONE HINDMARCH
Co-founder and Managing Director, Commercial Ltd.

Commercial Ltd

St. James’s Place have sourced
office supplies through Commercial
for over 15 years. Where possible,
supplies are sourced through the
Commercial Foundation, a social
enterprise founded by Commercial
in 2015 to support disadvantaged
young people, helping them to
improve their lives and get into work.

“Our two businesses are very aligned
in terms of values, especially in
relation to sustainability and social
value,” says Simone Hindmarch,
co-founder and managing director
of Commercial. “We share joint
cultural values, and the belief that
‘good business’ is a vital part of
doing business. We have inspired
each other on our journey, and
St. James’s Place were part of
the conversation before we set
up the Commercial Foundation.”

STRATEGIC REPORTST. JAMES’S PLACE PLC 65

‘Print less’
August

In August, we launched a month-long
challenge across our UK locations to
encourage our employees to reduce
the amount they print. This involved
challenging employees to be as
paperless as possible, encouraging
them to utilise technology to share
or retain information rather than
through hard copies. Through
this initiative we were able reduce
printing by 30% on average across
all our UK locations over the month.
The location which achieved the
highest level of reduction was our
City office, which reduced its printing
by 87% over the month. To recognise
this achievement, the City office
will complete a tree planting team
challenge in 2019.

Managing our
environmental impact.

Our approach
St. James’s Place and our employees are
committed to managing our environmental
impact through effective monitoring of
energy systems, travel, water usage, waste
reduction and waste recycling. We remain
rated as ‘Grade B, Management’ by the CDP
(formerly Carbon Disclosure Project).

Oversight of our environmental strategy
is through a Corporate Responsibility
Committee, with ultimate responsibility
resting with St. James’s Place Chief
Executive, Andrew Croft. The Committee
regularly reviews environmental
performance and is supported by an
operational Environmental Committee.

Our impact
We collect and report our environmental
data from October to September. The
tables on the following page summarise our
targets and progress, expressed in terms
of both absolute and normalised carbon
dioxide equivalent (CO2e) emissions for our
core business activities in recent years. Core
business activities are defined as those
within ‘operational control’. Our emissions
are calculated in line with the Greenhouse
Gas Protocol using the 2018 emission
factors provided by the Department for
Education, Food and Rural Affairs (DEFRA).

The emissions were calculated by our
external sustainability partner, EcoAct.

As our business continues to grow, we have
worked to integrate our acquired entities and
our offices in Asia into the Company-wide
environmental reporting. We are committed
to recycling, with furniture recycled from our
Solent and Witham offices saving 12,457kg/
CO2e from going to landfill during the year.
During 2018 we have initiated several
employee engagement activities, including
removing most plastic from our head office
canteens, with any remaining plastic being
either compostable or both recycled and
recyclable, replacing paper towels with
energy-efficient hand dryers, and appointing
environmental champions in each of our
locations.

We continue to purchase our electricity in
the UK from renewable sources, reflecting
best practice and driving demand in the
renewable energy market.

12,457kg

AMOUNT OF CARBON DIOXIDE
EQUIVALENT SAVED FROM GOING
TO LANDFILL THROUGH FURNITURE
RECYCLING

Why this is important
Although a relatively low-impact business, we recognise that
we still have an effect on climate change and recognise it to be
one of the major challenges facing the world. As a company
that looks to support its clients for the long-term and across
generations, we manage our business activities to reduce our
carbon impact using good practice where possible.

Our focus for 2019
• Continue to explore carbon reduction opportunities in our

Scope 3 operations.

• Grow our employee engagement and awareness, and

initiatives on reducing, reusing and recycling.

• Maintain our CDP ‘Grade B, Management’ score.

• Identify and review recommendations from the Energy Savings

Opportunity Scheme (ESOS) Phase 2.

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C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Managing our environmental impact continued

1. Targets
ABSOLUTE EMISSIONS TARGETS

ID
Abs1

Scope
1 & 2 (Market based)

Description
Gas, owned vehicles
and electricity

2. Progress
ABSOLUTE EMISSIONS PROGRESS

ID
Abs1

Scope
1 & 2 (Market based)

Actual emissions
in year
(tonnes CO2e)
1,002

% of emissions
in scope
100%

% decrease
from base year
50%

Base
year
2016

Base year
emissions
2,809

Target
year
2020

% variance
from target

Comment

-29% In 2016, we set an ambitious target to reduce our Scope 1 & 2

emissions by 50% by 2020 based on our 2016 emissions. In 2018,
we purchased 100% renewable electricity for our UK operations,
exceeding our target. We will continue to purchase renewable
electricity in the UK, reflecting best practice and driving demand
in the renewable energy market.

The table below illustrates the changes in our absolute emissions over the past three years. During this time, we have taken steps to
improve our data quality and calculation methodology. This has enabled us to gain a more accurate understanding of our environmental
impact and take appropriate mitigating actions.

3. Gross emissions

Scope
1
2 (Market Based)
3

3
Total

Activity
Gas and owned vehicles
Electricity
Business travel, waste, hotel stays, electricity transmission
and distribution
Property trust and WTT

Gross emissions (tonnes CO2e)
2016
683
2,126
4,847

2017
876
130
8,875

2018
835
167
8,830

12,130
19,786

15,101
24,982

13,019
22,851

NORMALISED EMISSIONS

Normalised
emissions
in prior year
(tonnes CO2e
per ‘000 sq ft)
2.14
0.32
21.64

Scope
1
2 (Market based)
3

Normalised
emissions
in year
(tonnes CO2e
per ‘000 sq ft) Comment

2.04 Our Scope 1 intensity has decreased, largely driven by a reduction in the amount of
0.41
21.59

fuel used in Company vehicles. Despite being 100% renewable in the UK, Scope 2
intensity has increased due to increased activity in our Asia offices. Trends in Scope
3 emissions are difficult to predict due to high variability in emissions from business
travel and conferences. This year, our intensity has marginally decreased due to a
slight reduction in conference emissions.

STRATEGIC REPORTST. JAMES’S PLACE PLC 67

Supporting our
communities.

Our approach to engagement
We are proud to be a leading company when
it comes to employee engagement with
our communities; 97.5% of our employees
engaged in our community programmes
during 2018. Our activities are separated into
the distribution of funds and grants through
our Charitable Foundation and support
for active engagement and skills-based
volunteering by our people through our
Community Engagement and Volunteering
department. We look to offer a wide range
of opportunities with something to suit
everyone, and to support them, whether to
volunteer for the first time or to become a
regular giver of their time and skills.

All our employees are entitled to two
volunteering days a year in work time.
These days can be used to support the
Charitable Foundation, to get involved
in our own CR activities or to give their
skills directly to a charity or community
organisation of their choice. During 2018
30.2% of employees used one of their days,
with 13.7% using both or more of their
two days.

In addition to these two days, we offer team
challenges located in the local community.
As these are typically low-skill activities, we
do not set targets, but rather look to only
set up challenges that meet a genuine need
so are often one-off projects. We also link
with charities supported by our Charitable
Foundation to give employees and Partners
across the Group the chance to see
their money in action. We also recognise
employees’ personal volunteering with £300
grants for the charities they support in their
own time: 129 grants were given in 2018.

Separately, we have entered the third year of
our holistic charity partnership programme,
working with a range of charities around
our head office in Cirencester to support
people in need. We have set up five-year
relationships with these charities, giving both
unrestricted funds and business expertise
aimed to support the charities to become
more sustainable and impactful. This year
we added a range of cultural grants to our
offer, aiming to reduce cultural isolation.

97.5%

OF OUR EMPLOYEES ENGAGED IN
OUR COMMUNITY PROGRAMMES
DURING 2018

Employability and
financial education
As one of the leading providers of financial
advice to individuals and business owners
in the UK, we recognise the importance and
value of financial education and this remains
a core focus of our CR programme. During
2018 we again significantly increased the
resourcing and delivery of our year 9 and
sixth-form financial education courses with
schools. Offering a mix of full day, half day
and flexible modular programmes we have
built a new range of one-hour courses to
tailor delivery to meet different schools’
needs. We now also offer support for the
Partnership to deliver to schools local to
them, and in this pilot year reached 1,313
students through 39 of our advisers. We
additionally now offer a primary school half
day programme in partnership with the
charity RedSTART.

We know that our employees cannot
volunteer in every school, so through grants
we support charities including Young
Enterprise, The Money Charity, Career Ready,
Urban Stars and The Duke of Edinburgh’s
Award to reach disadvantaged young people
to bridge the gap between education and
work. We also look to bring young people
into our offices to raise their aspirations and
give them experience and skills in finance.

Why this is important
We are proud of our deeply rooted culture of giving and
volunteering, and feel a responsibility to ensure that this effort
is used for the biggest impacts. As set out in ‘Our approach’
on page 57, we look to change the people’s lives and use the
skills of our highly trained people. The quality of our community
investment is a source of pride for people, a regular part of their
working time and a reason to work at St. James’s Place.

Our focus for 2019
• Support 35% of our employees to give one day of volunteering

in work time.

• Extend our network of CR champions to all our office locations.

• Maintain our exceptionally high levels of employee

engagement.

• Expand our head office holistic charity partnership

programme to our office locations.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
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C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T C O N T I N U E D

Supporting our communities continued

The St. James’s Place
Charitable Foundation
Giving is a strong part of our culture with
over 75% of our employees donating each
month through their wages to our Charitable
Foundation. We are proud to match, pound
for pound, donations to the Charitable
Foundation and, as a result, in 2018
St. James’s Place gave £4.5 million.

The Charitable Foundation has been
supporting those in need since 1992,
making a positive and lasting difference to
the lives of children and young people who
are disadvantaged economically, socially or
through disability, people affected by cancer
or poor mental health, and the hospice
movement. The Charitable Foundation
specialises in funding and developing small
grass-roots charities. Further information
is provided on pages 71 to 75.

In 2018, research was commissioned on
the Charitable Foundation’s 2016 grants.
The research evidenced the effectiveness
of our ambition to reach out to those most in
need and change their lives: in 2016 we gave
grants to 686 different organisations, 60% of
which have fewer than ten employees, in all
reaching nearly 350,000 direct beneficiaries
and 1.2 million indirect beneficiaries.
Importantly, 28% of beneficiaries reported
some substantive improvement in their lives
with another 56% reporting they had made
a transformation. For every 100 people
supported, 28 developed a positive change
in behaviour or attitude and another 28
developed new skills; overall, 97 reported
an positive impact on the quality of life.

£4.5m

IN DONATIONS TO THE CHARITABLE
FOUNDATION MATCHED POUND FOR
POUND BY ST. JAMES’S PLACE

KEY PROGRAMME STATISTICS

We have had another impressive year with significant growth in our volunteering
programmes across the Group. In measuring our CR community investment and
support activities we use the LBG measurement methodology.

Team challenges
During 2018, 24.6% of employees took
part in a team challenge.

We look to work with local charities
which need help with a specific
activity that a team of our employees
can support. As this is not skills-
based volunteering, we use these
challenges to give people a taste for
volunteering and inspire them to do
more in the community, both with us
and in their own time.

Employee financial education
During 2018, 2,952 students were
reached.

Employees from our head office
work in local schools with year 9 and
sixth-form students to develop young
people’s financial confidence and
awareness. By working alongside
teachers in the classroom, our
employees bring a range of financial
experiences to the day and can also
talk about their own journey from
school into the world of work.

Volunteering
During 2018, 30.2% of employees gave
at least one day.

We aim to be supporting at least
35% of our employees to volunteer
for at least one day a year by 2020.
We give all our employees two days
a year for volunteering, in addition
to team challenge days, and actively
encourage employees to use them
both, if not more.

Team challenges 2016–18 plus 2019 target

s
r
e
e
t
n
u
o
v
e
e
y
o
p
m
e
f
o
r
e
b
m
u
N

900

700

500

300

100

800

600

400

200

s
y
a
d
e
e
y
o
p
m
e
f
o
r
e
b
m
u
N

2016

2017

2018

2019

Employee Volunteers

Employee Days

Employee led financial education 2016–18
plus 2019 target

3,500

2,500

1,500

500

s
t
n
e
d
u
t
s
f
o
r
e
b
m
u
N

300

200

100

s
y
a
d
e
e
y
o
p
m
e
f
o
r
e
b
m
u
N

2016

2017

2018

2019

Number of students

Employee Days

Percentage of employees volunteering during
working hours 2016–18

Percent

2016

2017

2018

Over two days
Half a day

Two days
Less than half a day

One day

STRATEGIC REPORTST. JAMES’S PLACE PLC

The Gambia

Three charity teams of ten employees went to live and work
for a week in the fishing town of Gunjur in The Gambia.
In partnership with The Marlborough Brandt Group (MBG),
which has operated in this one community for 37 years,
the teams worked on a sustainable women’s livelihoods
allotment which aims to provide an independent income and
improved diet for 200 women and their families. They worked
alongside local builders and volunteers on the project and
stayed with local families during the trip. To make the trips
fully accessible, they were run in work time and fully funded
by the Group, with participants challenged to raise money for
our Charitable Foundation.

In addition, we are working with MBG, Disability Africa,
United Purpose, and a local non-governmental organisation
(NGO) called TARUD to deliver a holistic range of long-term
programmes in Gunjur, including micro-finance, education
and a disability centre, to mirror our work in UK communities.

GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONSTRATEGIC REPORTANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk70

A P P R O VA L O F T H E S T R A T E G I C R E P O R T

As part of the Annual Report by the Directors it is a statutory
requirement to produce a Strategic Report.

The purpose of the report is:

‘to inform members of the Company and help them assess how
the Directors have performed their duty under section 172 of the
Companies Act 2006 (duty to promote the success of the Company).’

The objective of the report is to provide shareholders with an
analysis of the Company’s past performance, to impart insight into
its business model, strategies, objectives and principal risks and to
provide context for the financial statements in the Annual Report.

The Directors consider that the report, comprising pages 2 to 69
of this document, meets the statutory purpose and objectives of the
Strategic Report.

On behalf of the Board:

ANDREW CROFT
Chief Executive
26 February 2019

CRAIG GENTLE
Chief Financial Officer

STRATEGIC REPORTST. JAMES’S PLACE PLC 71

S T. J A M E S ’ S P L A C E
C H A R I T A B L E F O U N D A T I O N

5,546

HOURS OF TIME DONATED BY
EMPLOYEES IN WORK TIME
(2017: 6,000)

£81.0m

TOTAL AMOUNT R AISED AND DISTRIBUTED
TO GOOD CAUSES SINCE INCEPTION
(2017: £71.0m)

80%

PERCENTAGE OF
ADVISERS AND
EMPLOYEES WHO
DONATE E ACH MONTH
(2017: 79%)

£10.0m

AMOUNT R AISED IN 2018
(2017: £16.8m)1

26YE ARS OF

GIVING
(2017: 25)

1,011

TOTAL GR ANTS MADE DURING 2018
(2017: 962)

The Charitable Foundation makes individual grants to carefully chosen
charities and organisations committed to making a real difference to
the lives of children and young people in the UK and abroad. Here are
just some of the recipients of grants made during the year:

780,000

LIVES DIRECTLY BENEFITED
SINCE INCEPTION
(2017: 500,000)

1 In 2017, the amount raised benefitted from the Group double matching all funds raised by the St. James’s Place community, to mark the Group’s 25th

anniversary year.

w ww.s j pf oundatio n.co.u k

ANNUAL REPORT & ACCOUNTS 201872

ST. JAMES’S PLACE CHARITABLE FOUNDATI O N

S T J A M E S ’ S P L A C E C H A R I T A B L E F O U N D A T I O N C O N T I N U E D

A grant-making charity with a difference.

The Charitable Foundation
is a fundamental part of
the Group’s culture.
The Charitable Foundation’s funds
are raised and donated by the
St. James’s Place community. There
are three primary sources of funding:

1. regular monthly donations from
St. James’s Place advisers and
employees;

2. fundraising events or challenges run
by the St. James’s Place community;
and

3. pound-for-pound matching by

the Group.

Since 1992, the Charitable Foundation
has raised over £80 million in support
of thousands of charities. Some 80%
of advisers and employees of
St. James’s Place now give to the
Charitable Foundation through their
pay or earnings.

In addition, many advisers and employees
become involved in a diverse range of
fundraising activities, whether that’s a
charity golf day or cake bake, to cycling,
running or trekking or the annual triathlon

event. Some key events in 2018 were a cycle
ride from London to Amsterdam which saw
over 100 of the St. James’s Place community
take part; our annual Big Walk in the Peak
District, where over 200 people took part; a
successful charity Golf Day in Hong Kong and
a Harvest Moon Charity Ball in the South East.
The monies raised from these activities are
then matched by St. James’s Place Group,
resulting in £10.0 million being raised in 2018
to support the grant making programmes.
The Group also support the day to day
running costs of the Charitable Foundation.

Firmly established as one of the most
successful corporate charities in the UK, the
Charitable Foundation is now in the Top 10
of Corporate Foundations. 2 Over the last 26
years the Charitable Foundation has been
committed to fostering a culture of ‘giving
back’ to those who need it most, by donating
to small grass-root charities operating
across four core themes:

1. supporting children and young people
who are disadvantaged economically,
socially, or through disability;

2. supporting people affected by cancer;

3. supporting the hospice movement; and

4. supporting those affected by poor

mental health.

2 Association of Charitable Foundations – Foundation Giving Trends 2018 report.

Some of our grants also extend overseas,
including Asia, Eastern Europe, Africa
and Central America, supporting projects
under the same core themes as in our UK
grant making programmes.

Our grants support charities in a number
of different ways. For example, they can
provide funding for:

1. individuals working directly with

beneficiaries, such as by covering
the salary costs for a particular
role. This is how we have supported
Jamie’s Farm and Maggie’s
Merseyside, charities aimed at helping
disadvantaged young people and
those affected by cancer respectively.
Further details are provided on the
following pages;

2. specific development projects

aimed at increasing the quality of
life of beneficiaries in the future. For
example, during 2018 we made grants
to projects aimed at helping family
carers via the Hospice UK network.
Further details are provided on the
following pages; and

3. the purchase of capital items which

provide immediate benefit.

The impact we make
Research carried out during 2018 has shown the enormous
impact our grant-giving has had on the lives of hundreds of
thousands of people over the last 26 years. Over 780,000
lives have been changed for the better and the ripple
effect is even bigger, with an estimated 2.6 million indirect
beneficiaries. 3

Our focus on small grass-roots charities means that we
have made a transformational difference to so many
organisations, offering support where it is needed most by
strengthening grantees’ organisational confidence, security,
innovation and growth.

3 Bean Research – Impact Evaluation of 2016 Grants made by the

Charitable Foundation received in August 2018.

Our focus for 2019
Looking ahead to 2019 we will:

• Continue to support charities operating across our four core
themes both in the UK and overseas who can deliver real
impact and a transformational difference to the people they
support.

• Continue to grow and develop our fundraising activities

across the St. James’s Place community, providing new and
exciting ways for them to get involved.

• Add value and help to make a lasting difference to the

thousands of charitable organisations by building strong
partnerships through our donations and volunteering
support, helping them to reach their goals.

ST. JAMES’S PLACE PLC 73

We are supporting children
and young people.

We work with charities which support disadvantaged and
disabled young people under the age of 25 in a number of areas,
including those with physical or mental health difficulties, life
threatening or degenerative conditions, young carers, and those
who are socially or economically disadvantaged.

Jamie’s Farm – Empowering
disadvantaged young people
The Charitable Foundation first started supporting Jamie’s Farm
in 2012 with a grant of £10,000. Since then a strong relationship
has built between the two organisations, and recently we awarded
a further £150,000 to this unique and inspiring charity. Jamie’s
Farm acts as a catalyst for change by enabling disadvantaged
young people aged 10–16 who are at risk of social and academic
exclusion to engage with education. They achieve this through
a unique one-week residential experience and follow-up
programme which combines ‘Farming, Family and Therapy’.

Jamie’s Farm had three farms across the south of England
and, to meet increasing demand for their services, in 2017 they
acquired a fourth farm in Monmouthshire which opened its doors
in January 2018. The grant awarded by the Charitable Foundation
funded an Education Manager to lead the team and programme
at this new farm over the next three years.

Education Managers at each of the farms play a crucial role in
upholding high standards of practice and ensuring outcomes
for children remain high.

£10,000

INITIAL GRANT IN 2012

£150,000

GRANT PROVIDED IN 2018

“ Education Managers are vital to the success of
each of our farms. They set the culture, manage
a team of around six full time staff who ensure
the safety and progression of all visiting staff
and children, and oversee all the visits. It is a
challenging and wide-reaching role. Education
Managers are rigorously held to account over
a number of KPIs which include the impact we
achieve with young people, school retention
rates and meeting budgets. We are so grateful
to the St. James’s Place Charitable Foundation
for supporting this post and allowing
transformational opportunities for around
450 disadvantaged young people per year
at Jamie’s Farm Monmouth.”

JAMIE FEILDEN
CEO, Jamie’s Farm

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ANNUAL REPORT & ACCOUNTS 201874

ST. JAMES’S PLACE CHARITABLE FOUNDATI O N

S T J A M E S ’ S P L A C E C H A R I T A B L E F O U N D A T I O N C O N T I N U E D

“ The generosity of the
St. James’s Place community
goes from strength to strength
and as such we continue to
make a transformational
difference to thousands of
peoples’ lives across the UK
and overseas.”

CATHERINE IND
Head of the St. James’s Place Charitable Foundation

We are working to support
people affected by cancer.

The Charitable Foundation supports local charities which provide
help and support to those living with or affected by cancer.

Maggie’s Merseyside – Supporting
people with cancer
Every year, over 300,000 people are diagnosed with cancer in
the UK. They face tough questions, exhausting treatment and
difficult emotions. These challenges affect not only those with
cancer, but their family and friends too. Built in the grounds
of NHS cancer hospitals, Maggie’s Centres are places with
professional staff on hand to offer the support people need.

One of the additional stresses for anyone suffering from cancer
is the impact it has on their finances. Patients often face a
dramatically reduced income coupled with an increase in bills
as a direct result of their illness.

The Charitable Foundation provided a grant of £80,495
to fund the position of a Benefits Adviser for a three-year
period commencing in 2018. The Benefit Adviser will guide
patients, their friends and families on all aspects of their
financial wellbeing, including accessing and helping to apply
for benefits they may be entitled to, support with managing
bills and many other financial demands that they have to deal
with as a result of their illness.

This bespoke service allows some of the pressure of having
cancer to be lifted from the individual, as well as from family
and friends.

“ The practical support to help with the financial
issues from not being able to work is a lifeline.
You are really not equipped to deal with
this when you are going through the overall
upheaval and treatment of life with cancer.”

Beneficiary

ST. JAMES’S PLACE PLC 75

We are helping hospices.

We are proud to support hospices through Hospice UK
(formerly known as Help for Hospices), the umbrella
organisation supporting independent hospices in the UK,
which distributes funds to hospices on our behalf.

We are supporting people
affected by mental health
issues.

Hospice UK – Supporting and
transforming care for children
and adults
The Charitable Foundation is proud to have been working
in partnership with Hospice UK for over ten years.

For the last five years the Foundation has committed
£500,000 a year to support development projects within the
hospice network. Each year representatives from the Hospice
UK team and the Charitable Foundation discuss and agree a
‘theme’ for the funding. For 2018 the chosen funding theme
was ‘family carers’ to recognise the often-hidden support and
responsibility of the thousands of family carers supporting a
person through their illness.

The development projects under this theme were chosen
because they demonstrated the strongest impact in terms of
innovation in their field, and were wide-reaching in terms of the
numbers of people that would benefit.

The Charitable Foundation is proud to support mental health
charities across the UK. We are working with selected charities
to help people of all ages affected by mental health issues.

In 2018 the St. James’s Place Charitable Foundation
committed £1.1 million to charities working in this field. The
projects the Charitable Foundation will be supporting include:

• BEAT which will provide training and ongoing support to ‘first
responder’ professionals in Yorkshire and Humber, helping
them to build their knowledge of eating disorders;

• Young Minds which will be developing a new programme
using innovative technology to better reach parents and
carers, and give them greater understanding and guidance
in supporting a child with mental health issues;

• The Anna Freud National Centre for Children and Families
which will be developing a new National Trauma Centre to
build an effective response to mental health and emotional
issues in children and young people connected to a
largescale traumatic event, such as a terror related atrocity;

• The Mix, which provides free counselling services to children
and young people presenting all mental health conditions
nationally. The services are developing to use trusted
technology to help those in need reach relevant information,
and to enable counselling sessions to be booked online; and

• CALM (Campaign Against Living Miserably) which will
be expanding its direct engagement team by recruiting
an Outreach Manager to reach young men at high risk of
suicide, offering targeted and timely support and helping
to reduce the growing incidence of suicide in the UK.

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ANNUAL REPORT & ACCOUNTS 201876

GOVERNANCE

Board of Directors ........................... 78

Chair’s Report ..................................80

Corporate Governance Report ......82

Report of the Audit Committee .....94

Report of the Risk Committee .....106

Report of the
Nomination Committee ................ 111

Remuneration at a Glance ........... 116

Report of the Remuneration
Committee ...................................... 117

Directors’ Report ........................... 142

Statement of Directors’
Responsibilities .............................145

ST. JAMES’S PL AC E PL C

W E P R O V I D E

SU PP ORT

Effective and sustainable governance underpins our
business model and ongoing review and refinement
of our governance framework ensures we are best placed
as a Board to oversee the delivery of our strategy.

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AN N UA L R EPO RT & ACCOUNTS 2018

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B O A R D O F D I R E C T O R S

Iain Cornish
Chair

Date of appointment
Chair
October 2018.

Non-executive Director
October 2011.

Andrew Croft
Chief Executive

Date of appointment
Chief Executive
January 2018.

Joined St. James’s
Place 1993 and
appointed to the Board
September 2004.

Ian Gascoigne
Managing Director

Date of appointment
Executive Director
January 2003.

Joined St. James’s
Place 1991 and
appointed to the Board
January 2003.

Craig Gentle
Chief Financial Officer

Date of appointment
Chief Financial Officer
January 2018.

Joined St. James’s
Place 2016 and
appointed to the Board
January 2018.

Experience
Iain brings experience from both the financial and regulatory environments.
He was a senior consultant at KPMG, specialising in the banking and finance
sector, and then served as Chief Executive of the Yorkshire Building Society.
In recent years he has been chair of Shawbrook Group plc and an independent
director of the Prudential Regulation Authority.

External appointments
Non-executive director of Leeds Building Society and Arrow Global Group plc
and Treasurer of Macmillan Cancer Support.

Experience
Andrew joined the Company in 1993 and was Chief Financial Officer from
2004 to 2017. Having trained as an Accountant with Deloitte Haskins and
Sells (now part of PricewaterhouseCoopers) he then worked in the financial
services sector. Since joining St. James’s Place he has held a number of roles
within the Finance department, assuming the role of Finance Director in 2002
and being appointed as the Chief Executive in January 2018. He is a Trustee
of the St. James’s Place Charitable Foundation.

External appointments
Lay member of the Audit and Risk Committee and Finance and Investment
Committee of the Royal College of Surgeons of England.

Experience
Ian is Managing Director responsible for the management and development
of the Partnership. He has worked in the financial services industry since
1986 and has considerable experience in the financial advisory space. Ian
is a Trustee of the St. James’s Place Charitable Foundation.

External appointments
Member of the Strategic Advisory Board of Loughborough University School
of Business and Economics.

Experience
Craig joined the Company in 2016 as the Chief Risk Officer. Prior to this,
Craig spent 22 years at PricewaterhouseCoopers, 12 of which were as a
Partner. During his time at PricewaterhouseCoopers, Craig held a number
of roles, including as a senior audit partner.

Craig qualified as a Chartered Accountant in 1993.

External appointments
Member of the Board, Trustee and Honorary Treasurer for the Bristol Music
Trust.

GOVERNANCEST. JAMES’S PLACE PLC
79

Committee key:

AC Member of Audit Committee

NC Member of Nomination Committee

RK Member of Risk Committee

RM Member of Remuneration Committee

Denotes Chair of Committee

Simon Jeffreys
Independent
Non-executive Director

Date of appointment
Non-executive Director
January 2014.

Experience
Simon brings experience of the auditing world and financial services. He was
a senior audit partner with PricewaterhouseCoopers LLP from 1986 to 2006
where he also led their Global Investment Management practice. Between
2006 and 2014, Simon was CFO and Chief Administrative Officer at Fidelity
International and then CFO and Chief Operating Officer at the Wellcome Trust.

External appointments
Chair of Aon UK Limited and Henderson International Income Trust plc and
a non-executive director and chair of the Audit Committees of Templeton
Emerging Markets Investment Trust plc and SimCorp A/S, a listed Danish
financial services software company. Simon is also a non-executive director
and chair of the Audit and Risk Committee of the Crown Prosecution Service.

Baroness
Wheatcroft
Independent
Non-executive Director

Date of appointment
Non-executive Director
April 2012.

Experience
Baroness Wheatcroft brings experience of the media and also the legislature.
Her career has included editorial roles at both the Sunday Telegraph and The
Times, as well as being Editor-in-Chief at the Wall Street Journal, Europe. She
is a member of the House of Lords. Her financial services experience includes
previous appointments as a non-executive director of Barclays Group plc and
Shaftesbury plc.

External appointments
Non-executive director of Fiat Chrysler Automobiles. Chair of the Financial
Times Appointments and Oversight Committee. Member of the House of Lords.

Experience
Roger brings over 30 years of investment management experience. He started
his career with GT Management Limited in 1981 and has subsequently held
positions at Morgan Grenfell, Invesco and Henderson Group plc, where he
was Chief Executive Officer. Most recently, he was chair of Electra Private
Equity plc and a non-executive director of IG Holdings plc.

External appointments
Senior Independent non-executive director (SID) of Mitie Group plc and non-
executive director of Jupiter Fund Management PLC and J.P. Morgan Elect plc.

Roger Yates
Senior Independent
Non-executive Director
(SID)

Date of appointment
Senior Independent
Non-executive Director
October 2018.

Non-executive Director
January 2014.

Full biographical details of each Director can be found on the corporate website at www.sjp.co.uk

STRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONGOVERNANCEANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
80

C H A I R ’ S R E P O R T

“Our business model
remains adaptable
and robust.”

IAIN CORNISH, Chair
chair@sjp.co.uk

48.22

FULL YEAR DIVIDEND
(2017: 42.86 pence per share)

pence
per share

£10.0m

RAISED FOR THE ST. JAMES’S
PLACE CLIENT FOUNDATION BY THE
ST. JAMES’S PLACE COMMUNITY,
INCLUDING MATCHING
(2017: £16.8 million)

2018 was a year of robust performance
during which St. James’s Place built
further on its strong momentum of recent
years. The fact that this was achieved
during a year of mounting political and
economic uncertainty for the UK, coupled
with volatile global investment markets, is
further testament to the resilience of the
St. James’s Place business model.

An ageing population, an increasing need
for individuals to take responsibility for their
own pension, care and protection planning,
and the complexity of the choices which
face them in doing so, continue to underpin
the growth in demand for trusted face-to-
face financial advice.

St. James’s Place has continued to focus
on supporting the Partnership in building
trusted and durable relationships with clients
to help them achieve their financial goals. It
is during uncertain and changing times that
guidance, assurance and advice become
even more important. Client value is about
far more than price. Our clients recognise
this and we must continue to demonstrate
the value that we are delivering to them.

The business model has remained
adaptable and robust for over 26 years but
that is only because we have consistently
invested in it and continue to do so. During
2018, good progress was made in the
longer term development of the business,
with further growth in the Academy, Rowan
Dartington and our ventures in Hong Kong,
Singapore and Shanghai, and we achieved
some important milestones in the migration
to a new back-office administration
platform. We also invested significantly in
adviser and staff training and development
and in wider technology supporting the
Partnership in the delivery of client service.

Based on this strong business performance,
continued high levels of client retention
and our confidence in the Group’s future
prospects, the Board is pleased to propose
a final dividend of 29.73 pence per share,
an increase of 8%. This makes a full year
dividend of 48.22 pence per share, an
increase of 12.5%, representing 82.6%
of the Underlying cash result.

GOVERNANCEST. JAMES’S PLACE PLC 81

Towards the end of the year we undertook
an externally facilitated Board effectiveness
review. This highlighted some helpful
recommendations that we intend to
implement in full, while confirming the
strong overall performance of the Board.

I report more fully on Corporate Governance
on pages 82 to 93.

Concluding remarks
I believe we have continued to perform well
and deliver for stakeholders in what has
been a more volatile and uncertain external
environment. Whilst we are not complacent
and recognise that we will face periods
of uncertainty from time to time, we have
confidence that ours is a business that will
continue to thrive and make the most of the
long-term structural opportunities that are
available to us, and continue to adapt and
evolve to meet the challenges of the future,
much as we have done in the past.

I would like to finish by offering on behalf
of the Board, my sincere thanks and
appreciation to the whole St. James’s Place
community.

IAIN CORNISH
Chair
26 February 2019

If you would like to discuss any aspect of
my report or the Corporate Governance
Report please feel free to email me on:
chair@sjp.co.uk

Succession
There were a number of significant changes
to the composition of the Board last year.

In January 2018, Andrew Croft took over as
CEO from David Bellamy who retired from
the Board, and Craig Gentle succeeded
Andrew as CFO. The business has
adapted seamlessly to this long-planned
management transition.

In October, my predecessor Sarah Bates
also stood down after 14 years on the Board,
the last four of which were as Chair.

We also announced last year that
David Lamb would be retiring from the
Board and from his executive responsibilities
in February 2019, although I am pleased
to report his continuing involvement as
Non-executive Chair of the Investment
Committee. I am also delighted to report
that Robert Gardner has joined the business
as Director of Investment Management and
a member of the Executive Board. Robert is
well known to the business, joining us from
Redington where he was a co-founder and
remains a non-executive director.

I welcome Robert to the business and on
behalf of the shareholders, the Board and
other colleagues, thank Sarah and David for
their immense contributions to the success
of St. James’s Place over many years.

Continuity and the maintenance of a strong
and distinctive culture are key elements
of our strategy, and long-term succession
planning for both the Executive and Non-
executive members of the Board and senior
management team will remain a key priority.

Corporate Governance
and our wider corporate
responsibilities
The Board has long recognised the Group’s
responsibilities to all its stakeholders,
including shareholders, clients, the
Partnership, colleagues, third-party
suppliers, the environment and of course
wider society. We have always viewed the
St. James’s Place Charitable Foundation
as a core component of our strategy and
a key vehicle through which we make
a contribution to wider communities.
Members of the St. James’s Place
community raised £10.0 million in 2018,
including Group matching. We have also
continued to broaden our corporate
responsibility activities and these are
reported on pages 56 to 69.

I am also pleased that we have further
advanced our environmental, social and
governance credentials, with a particular
highlight being the work we have undertaken
around Responsible Investment where we
became signatories to the United Nations
Principles for Responsible Investment
and the Financial Reporting Council’s UK
Stewardship Code. We also joined the
Investment Association’s Sustainability and
Responsible Investing Committee.

We made some positive progress on
increasing the diversity of our workforce
last year as a number of the programmes
we have put in place begin to bear fruit.
Focusing initially on gender diversity, in 2018
we became signatories to the Women in
Finance Charter and we joined the 30% Club,
while almost half of external appointments
to senior roles last year were female. This is
not a box-ticking exercise, and we appreciate
fully the importance of attracting and
developing a diverse range of talent if we
are to continue to thrive in the long term.
There is still a lot more to do, particularly at
senior level, and this remains a priority for
the Board.

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82

C O R P O R A T E G O V E R N A N C E R E P O R T

This report explains how your Board leads the
Company’s approach to corporate governance
and explains how the principles of the Financial
Reporting Council’s UK Corporate Governance
Code have been applied in practice.

On 8 October 2018 Sarah Bates retired as a Director and Chair of the Board
and Iain Cornish was elected as her successor. As a consequence, the
Non-executive Directors (NEDs), excluding the Chair, accounted for
less than half the Board, meaning that the Company did not comply
with Provision B.1.2 throughout 2018. However, following David Lamb’s
retirement as a Director on 26 February 2019, the Non-executive Directors
now account for half of the Board, excluding the Chair. Further details
on the Board’s succession planning can be found in the Nomination
Committee Report on page 113.

Other than as stated above, the Board considers that the Company has
complied with all of the other provisions of the UK Corporate Governance
Code (the ‘Code’, available at: www.frc.co.uk) during 2018. Detailed
reporting on remuneration, as required by the Code, can be found in
the Directors’ Remuneration Report.

IAIN CORNISH, Chair
chair@sjp.co.uk

Leadership and culture
Safeguarding our culture and setting
the tone from the top
The Board is collectively responsible for the long-term success of the
Company and the Group by:

• providing entrepreneurial leadership and direction to the Group in
setting out its strategic aims, visions and values and overseeing
delivery against these;

• monitoring financial performance and reporting and approving/

recommending payments of dividends;

• setting the Company’s risk appetite, assessing the principal risks
facing the Company and ensuring that adequate controls are in
place to manage risk effectively;

• ensuring that appropriate and effective succession planning

arrangements and remuneration policies are in place;

• implementing appropriate corporate governance procedures;

• reviewing and approving major transactions or initiatives proposed

by the Executives; and

• determining the Company’s policy on charitable and political

donations.

Our unique culture (as described on page 26) has been central
to the success of the Group since its formation, and the Board
recognises its continued importance if the Group is to continue this
success in the long-term. Culture has always been viewed as a core
element of the Group’s strategy. As such the Board recognises its
essential role in setting the tone from the top in the way it behaves
and the decisions which it makes, and it regularly considers how
the commitment to culture is maintained across colleagues, the
Partnership and key third parties. Inevitably as the Group expands
our approach to retaining our culture has to evolve, and in 2019
the Board intends to lead further work in refreshing its approach
to the assessment of culture and ensuring continuity across the
St. James’s Place community. Further details of how we approach
the safeguarding of our culture and monitor the views and adherence
by those within the St. James’s Place community can be found in
the Corporate Responsibility Report on pages 56 to 69 and under
Principal Risks and Uncertainties on pages 51 to 54.

GOVERNANCEST. JAMES’S PLACE PLC 83

Division of responsibility
The job descriptions of each Director, including the Chair and Chief Executive, and the division of responsibilities between them are clearly
defined and agreed by the Board. The responsibilities of each of the Directors and the role of Secretary are summarised below.

THE BOARD

CHIEF FINANCIAL OFFICER

Responsible for providing
leadership and direction for,
and oversight of, the financial,
accounting, tax, capital, liquidity
and unit pricing activities of
the Group, and for maintaining
effective investor relations.

Leadership

CHAIR

Responsible for the leadership
of the Board and its continuing
effectiveness, ensuring that
the Board is satisfied that the
Group’s purpose, values and
strategy align with its culture
and that communication
between the Executive and
Non-executive Directors, as well
as with shareholders generally,
is effective.

CHIEF EXECUTIVE

MANAGING DIRECTOR

Responsible for leading the
growth and development of the
Partnership, ensuring that all
members of the Partnership
receive appropriate supervision,
oversight, development and
support, and provide high quality,
suitable advice to clients.

Responsible for the development
and communication of the
Group’s strategy, developing
and achieving the business
objectives, leading and
motivating an effective senior
management team, and ensuring
an appropriate culture is adopted
in the day-to-day management of
the Group.

COMPANY SECRETARIAT

Independent oversight

SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR

Responsible for providing a sounding board for
the Chair and to serve as an intermediary for
the other Directors, when necessary, to lead
the appraisal of the performance of the Chair
and to be available to shareholders as a point
of contact if they have concerns which contact
through normal channels has failed to resolve
or for which such contact is inappropriate.

INDEPENDENT
NON-EXECUTIVE DIRECTORS

Responsible for contributing to the
entrepreneurial leadership of the Group, within
a framework of prudent and effective controls.
Non-executive Directors provide independence,
impartiality, experience, specialist knowledge
and other diverse personal skills and capabilities.

Responsible for guiding the Board in meeting the requirements of relevant legislation and regulation and ensuring that board
procedures are both followed and regularly reviewed.

Directors have access to the advice of the Company Secretary at all times, as well as independent professional advice, where
needed, in order to assist them in carrying out their duties.

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84

C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D

Relations with stakeholders
The Board recognises that the business has a broad range of
stakeholders, and its duties to them are reflected in our strategy
which has a fundamental and clear focus on each stakeholder,
including our workforce, the Partnership, our clients, shareholders,
third-party suppliers, regulators and wider society. This is not an
exhaustive list and the Board ensures that its activity extends to
engagement with a broad range of stakeholders when planning
the year ahead. More detail on how we engage with specific
stakeholders can be found in the Strategic Report, in particular
in the ‘How we engage’ sections on pages 18 to 26.

Regular dialogue is an important way of staying abreast of the
views of investors and periodic meetings with investors will provide
an insight into the considerations that drive their views on us an
organisation. The Board is actively considering if additional channels
would enhance shareholder engagement, and would welcome the
views of shareholders.

The Chair, SID and other Non-executive Directors are available for
consultation with shareholders on request and will be available
after the Company’s Annual General Meeting which will be held
on Tuesday 14 May 2019, further details of which are set out in
the Notice of Annual General Meeting.

People have been at the core of our business model since our
formation and this has been reflected in the high level of engagement
with our workforce. The requirement of the new Code in 2019
for a formal workforce engagement method has provided us an
opportunity to revisit how we can build on how we engage directly
with our people, and responsibility for oversight of our workforce
engagement framework is to be vested in a senior individual
who reports directly to the Chief Executive. That person will take
responsibility for establishing and managing the engagement with
the Board, under the supervision of the Non-executive Directors,
led by Baroness Wheatcroft, whom the Board intends to appoint
as its nominated Non-executive Director for workforce engagement.
We will continue to refine our approach to engagement with
colleagues into the future.

We continue to maintain close relationships with institutional
shareholders through direct dialogue and frequent meetings, and we
also meet regularly with the Group’s brokers who facilitate meetings
with investors and their representatives. During 2018, shareholder
interaction has included holding shareholder roadshows, where
the Chief Executive and the Chief Financial Officer presented the
Company’s full year and half year results to investors, attending
investor conferences, holding Capital Markets days for investors and
analysts addressing a wide range of strategic and operational topics,
investor meetings and conference calls.

During the year, the Board commissioned an investor study which
provided an opportunity to assess in more detail its investor base,
investor behaviour, drivers of share price performance and investors’
perception of a number of key aspects of our business model. In
addition, following his appointment in October, the Chair invited
the Group’s largest institutional investors to meet with him. The
outcomes of the investor study and the Chair’s investor meetings,
combined with attendance at engagement events and updates from
all other activity, have provided valuable assistance to the Board in
understanding the views and expectations of investors.

How the Board operates
Powers of Directors
The powers of the Directors are set out in the Company’s Articles
of Association (the ‘Articles’), prescribed by Special Resolutions of
the Company and codified in UK company law. The Articles contain,
for example, specific provisions and restrictions concerning the
Company’s power to borrow money. They also provide Directors
with authority to allot unissued shares, up to pre-determined levels
set and approved by shareholders in general meetings. The Articles
can be amended by a special resolution of the members of the
Company, and a copy can be found on the Company’s website. Our
shareholders have granted the Directors authority to make charitable
donations, and further details on the donations made can be found
on page 144.

At the 2018 AGM, shareholders granted authority to the Directors for
the purchase by the Company of its own shares, with such authority
expiring at the end of the 2019 AGM, or 30 June 2019, whichever is
the earlier. The Directors will propose the renewal of this authority
at the 2019 AGM. During the year, the Company did not purchase
any of its own shares.

Further to the powers granted above, the Board maintains a
full schedule of matters reserved to it together with a Group
Management Responsibilities Map which sets out the senior
manager functions, prescribed responsibilities and control
functions within each subsidiary of the Group (as applicable).
The Group Management Responsibilities Map includes, inter alia,
terms of reference for the various Board Committees, a schedule
of the Company’s policies and detailed job descriptions for each
of the Executive Directors and Non-executive Directors.

GOVERNANCEST. JAMES’S PLACE PLC 85

Planning and preparing
The Chair is responsible for setting the Board agenda together with the Chief Executive and the Company Secretary. Each year, the Chair and
CEO discuss the forward Board agenda for the year, based on themes from the Business Plan and the Group’s strategy, and potential topics
are identified for strategy sessions and discussions on specific topics. The Board’s forward agenda is also co-ordinated with those of its
Committees to ensure that topics are given sufficient coverage in the most appropriate forums. The Chairs of the various Committees report
on their activity at Board meetings and liaise with the Chair to ensure items escalated from the Committees get sufficient time and focus in
Board meeting agendas. The Board and other key Directors forums are explained in more detail below:

SCHEDULED BOARD
MEETINGS

Scheduled Board meetings follow an agreed format with the final agenda being set by the
Chair, Chief Executive and Company Secretary by reference to the forward agenda and having
considered key developments since the previous meeting. This approach ensures coverage of the
Board’s key responsibilities and strategic priorities, whilst also providing the flexibility to address
topical matters.

The papers for each meeting, which include an Executive Report covering key developments and
performance indicators, are sent to the Board a week ahead of the meeting. This ensures that the
information is timely and that the Directors have sufficient time to prepare for the meetings.

BOARD DINNERS

Throughout the year, Board dinners are held on the nights before Board meetings allowing the
Directors greater time to discuss matters of a material or more discursive nature with additional
internal and external participants.

STRATEGY
MEETINGS

Focused strategy meetings are held to enable the Board and management to reflect, debate, refine
and agree on the Group’s strategy.

NED MEETINGS

The independent Non-executive Directors meet privately with the Chair four times during the year,
to consider matters arising from Board meetings and also meet once without the Chair.

DEVELOPMENT
SESSIONS

Directors are provided with development sessions on specific topics during the year. Further
details can be found in the Effectiveness of the Board section on pages 92 and 93.

OTHER MEETINGS

In 2018 the Board also participated in a ‘red team’ simulation which afforded them the opportunity
to test the controls and procedures in place to respond in the event of a focused cyber security
attack. The Board also appoints ad hoc committees from time to time to manage procedural
matters relating to decisions it has made.

The Board’s activity during 2018 is set out in more detail on the following pages, and the work undertaken by the Board Committees is provided
in their individual committee reports.

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C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D

The Board and its Committees
Composition
The Board currently comprises three Executive Directors, three
independent Non-executive Directors and the Chair (who was
independent on appointment). Sarah Bates and David Lamb retired
from the Board on 8 October 2018 and 26 February 2019 respectively.
All of the other Directors were in office throughout the financial year
and up to the date of the report, and their biographical details, including
their membership of Board Committees, are set out on pages 78 to
79. During the limited period between Sarah and David’s retirements
the number of independent Non-executive Directors fell to three, below
the number of Executive Directors. This situation arose because of
an unforeseen delay in the appointment of a new Non-executive
Director who would also serve as chair of the Risk Committee. During
this period the Chair of the Board also remained as chair of the Risk
Committee and will continue to do so pending the finalisation of a
further appointment. As part of the long-term succession planning
to ensure that the Board has the right depth and diversity of skills to
oversee the business into the future, the Board expects to increase
the number of independent Non-executive Directors.

Independence
When determining whether a Non-executive Director is independent,
the Board considers each individual against the criteria set out in
the Code and also considers how they conduct themselves in Board
meetings, including how they exercise judgement and independent
thinking. Taking these factors into account, the Board believes
that all the Non-executive Directors continue to demonstrate their
independence.

As previously reported, the Board remains satisfied that
Simon Jeffreys’ role as chair of Aon UK Ltd has no bearing on his
independence or that of New Bridge Street or Aon Consulting
(advisers to the Remuneration and Investment Committees). Aon UK
Ltd, Aon Consulting and New Bridge Street are part of the Aon group
of companies. When considering their relationships to the Aon Group,
the Board took into account the fact that Aon UK Ltd, Aon Consulting
and New Bridge Street operate in different divisions of a large group
and their reporting and ownership lines to the Aon Group board are
entirely segregated.

There are four wholly Non-executive
Committees of the Board. The Chair of the
Board is a member of, and Chairs, the Risk
and Nomination Committees. All of the
other members of these Committees are
independent Non-executive Directors. Further
information on these Committees can be found
in their separate reports on pages 94 to 141.

OUR NON-EXECUTIVE BOARD COMMITTEES

AUDIT
COMMITTEE

RISK
COMMITTEE

NOMINATION
COMMITTEE

REMUNERATION
COMMITTEE

Report on
page 94

Report on
page 106

Report on
page 111

Report on
page 117

Director

Board

Iain Cornish (Chair)

Andrew Croft (CEO)

Ian Gascoigne

Craig Gentle

Simon Jeffreys

Baroness Wheatcroft

Roger Yates (SID)

A
T
T
E
N
D
A
N
C
E

N
2
0
1
8

Past Directors

Sarah Bates (stepped
down on 8 October 2018)
David Lamb (stepped
down on 26 February 2019)

6/6

Audit

4/4

–

6/6

2/2

6/6

–

Risk

5/5

–

5/5

–

Nomination

Remuneration

6/6

–

6/6

1/1

–

5/5

–

This table provides details of scheduled meetings held in the 2018 financial year and the attendance at each meeting of the members of each Board/
Committee. The Directors also attended meetings of Committees that they were not members of, when invited by the chairs of the respective Committees.

GOVERNANCEST. JAMES’S PLACE PLC

DISCLOSURE COMMITTEE

Comprises the Chief Executive
and Chief Financial Officer and
is responsible for identifying
and determining matters to
be disclosed to the market.

SHARE SCHEME
COMMITTEE

Comprises the Executive
Directors and its purpose is to
assist the Board in fulfilling its
responsibilities for operating
and administering Executive,
Employee, Partner and
Restricted share plans.

Other committees

Executive Committees reporting to the Board

In addition to the wholly
Non-executive Committees,
the Board has also delegated
specific responsibilities to
three further Committees,
the members of which
are Executive Directors.
The terms of reference
of the Committees are
regularly reviewed and are
included in the Management
Responsibilities Map.

EXECUTIVE
BOARD

Comprises the Executive Directors of the Board
and other members of senior management. It is
via the Executive Board that operational matters
are delegated to management. The Executive
Board is responsible for communicating
and implementing the Group’s business
plan objectives, ensuring that the necessary
resources are in place in order to achieve
those objectives, and managing the day-to-day
operational activities of the Group.

Other Executive Committees

A number of Committees have
also been established by the
main Executive Board assisting
it in executing its responsibilities.
They each have Terms of
Reference which set out clearly
their delegated authorities
and a right of escalation of
matters outside that remit
to the Executive Board.

ASIA EXCO

DISTRIBUTION
EXCO

FINANCE EXCO

GROUP RISK
EXCO

INVESTMENT
EXCO

OPERATIONS
EXCO

PRODUCT EXCO

ROWAN
DARTINGTON

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C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D

Highlights of activities at 2018 Board meetings

FEBRUARY

APRIL

MAY

• Approval of the 2018 Business Plan

• Administration platform strategy

• The Company’s Annual General Meeting

• 2017 Annual Results, Annual Report
and Accounts and regulatory returns

• The notice for the Company’s 2018

Annual General Meeting

• Progress with pilot initiatives focusing

on enhancing oversight of, and support
to, the Partnership

• Central London Property strategy

• Executive succession planning

• 2025 strategy

• Investment performance in the year to date

• Succession planning for leadership of the

Investment Division

• Refining the senior leadership team’s

structure

• Strategic growth initiatives

• Board succession, in particular the

Chair’s successor

• Plans to utilise securitisation to support

Partner lending

• The implications of the change in

ownership of DST

• Annual Whistleblowing Report

• The Group’s Slavery and Human

Trafficking Statement

JULY

SEPTEMBER

DECEMBER

• Board Development and Board focus

• Growing the Partnership and the Market

• Board Effectiveness Review

• Half year results and the declaration of

Environment

• Progress with the migration of the

an interim dividend

• Purpose, Business Model and 2025

Administration Platform

• Investment management monitoring

• Investor study and investor perceptions

• Administration Service Provider

Strategy

• Investment Consultant Strategy

strategy

• 2025 strategy, including the approach

• Administration platform migration

to operational excellence

progress and future plans

• Securitisation of Partner loans

• Employee survey results

• 2019 Business plan framework

• Strategic growth initiatives

• Corporate governance reform and

• Approval of the ORSA and Risk appetite

workforce engagement

statements

• Group governance model

GOVERNANCEST. JAMES’S PLACE PLC
89

Key strategic considerations during the year included:

The strategy and performance against the strategy are discussed in the Chief Executive’s Report, the Chair’s Report and the
Strategic Report, but a summary of significant topics considered by the Board during 2018 are set out below:

1. ADMINISTRATION

During 2018, the Group successfully
completed the migration of a
significant proportion of business
that remained on legacy systems onto
the Bluedoor platform. The Directors
closely monitored each project and,
as the migration of all the core books
of business onto Bluedoor nears
completion, reflected on the progress
to date and considered the medium
to long-term administration platform
strategy. During the year DST, the
outsourced provider for the Group’s
administration functions of its UK
life insurance company, unit trust
manager, and investment administration
company, was acquired by SS&C.
Given the significance of the service
DST provides to the Group, the Board
focused on the implications of this
change in ownership for the Group.

2. CLIENTS

Ensuring our client proposition remains
relevant and appropriate is fundamental
to our business model. In 2018, the
Board oversaw the launch of the Group’s
new Diversified Assets (FAIF). Further
information can be found on page 23.

3. PARTNERSHIP

As reported last year, a number of pilot
initiatives were established with the
principal aims of preserving the existing
relationship-based culture, keeping the
business safe and helping Partners
to operate as business people with
professionalism. The Board has closely
monitored the progress of these initiatives
and considered the changing needs of the
Partnership and the market environment
so as to adapt the strategy to support the
growth of the Partnership.

4. BORROWING/SECURITISATION

In September, we successfully completed
our first securitisation of Partner loans.
Supporting our Partners to grow their
own businesses is essential if we are to
continue to grow the Group and the Board
is confident that, subject to the appetite of
external lenders, the high quality of Partner
loans will provide a highly scalable funding
mechanism that will grow with the Group.

5. PEOPLE AND DIVERSITY

We carried out our biennial employee
survey in 2018 and were pleased to see a
strong response rate of 90% and an overall
engagement score of 82%, which was
significantly higher than our benchmark.
Whilst the Board is very happy with the
high response rate and overall level of
engagement, we were keen to focus on the
areas where we could make improvements.
Our first Gender Pay Gap Report was
published in 2018 and our results served to
emphasise the importance of the diversity
initiatives we reported upon last year.
More detail on the progress made during
the year can be found in the Nomination
Committee’s Report on pages 111 to 115.

6. BOARD AND MANAGEMENT

SUCCESSION

The Board announced the retirements of
Sarah Bates and David Lamb during the
year and succession has been a central
theme. At Board level, the focus has
been on establishing a clear succession
plan for all of the NEDs, particularly in
light of the revisions to the Code. At the
management level we have overseen
the appointment of Robert Gardner,
who will take over many of David Lamb’s
executive responsibilities, and have
concentrated on developing a diverse
pipeline of talented future leaders,
providing options for the Board and
future boards when selecting successors
to the existing management team.

7. CYBER RISK AND

INFORMATION SECURITY

Cyber and information security
continues to be high on the agenda for
both the Board and the Risk Committee.
We have made significant investments
into our systems and into raising the
awareness and understanding of
our employees and have supported
our Partners to increase their own
knowledge and systems capabilities.
During 2018 we achieved the UK
Government’s Cyber Essentials Plus
accreditation. Although the vast
majority of our attention is on preventing
incidents, the Board recognise that we
should not ignore the importance of
being prepared to deal with an incident
should one occur. Consequently, we
undertook a ‘red team’ simulation to
help identify areas where we could
strengthen our existing procedures.

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C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D

12. BREXIT

Although it is anticipated that Brexit will
not have a material direct impact on
the Group, the Board has been careful
to ensure that the business is prepared
for all eventualities and has considered
all potential areas of impact. For further
information, refer to the Risk and Risk
Management section on pages 47 to 55.

Key strategic considerations during the year continued
8. REGULATION

10. 2025 STRATEGY

The pace of regulatory change
remains intense and the Board
and its Committees continue to
spend considerable time assessing
developments, in particular their
impact upon the business. During
2018, the Board has overseen the
Group’s response to the introduction
of GDPR and continues to monitor the
implications of MiFID II, IDD and PRIIPs.
The extension of the Senior Managers
and Certification Regime to financial
services organisations other than banks
will impact a number of our Group
companies, and the Board directly,
and has been another area of focus,
particularly in the latter half of the year.

9. RISK MANAGEMENT

In conjunction with the work of the
Risk Committee, the Board undertook
a robust assessment of the principal
risks facing the Group, including
those that would threaten its business
model, future performance, solvency
or liquidity.

With management, the Board devoted
considerable time to reviewing the medium
term strategic direction of the Group
to 2025, and more generally the overall
strategic appetite of the Group.

11. CORPORATE GOVERNANCE

AND WORKFORCE
ENGAGEMENT

Following the publication of the revised
Code and the introduction of the
Companies (Miscellaneous Reporting)
Regulations 2018, the Board agreed key
actions that would ensure that the Board
continued to meet, both the letter and the
spirit of the Code. A key focus was the
establishment of a formalised workforce
engagement mechanism, to support
our existing employee engagement
programme. The Board considered
proposals and will oversee the introduction
of the final agreed mechanism in 2019.

GOVERNANCEST. JAMES’S PLACE PLC 91

Effectiveness of the Board
Appointment, replacement and
re-election of Directors
The Articles permit Directors to appoint additional Directors and to
fill casual vacancies and any Directors appointed must stand for
election at the first Annual General Meeting (‘AGM’) following their
appointment. All other Directors will stand for re-election at each
AGM. Directors can be removed from office by an ordinary resolution
of shareholders or in certain other circumstances as set out in the
Articles.

Before a Director is proposed for re-election by shareholders, the
Chair considers whether his or her performance continues to be
effective and whether they demonstrate commitment to the role.
After careful consideration, the Chair is pleased to support the
re-election of all Directors at the forthcoming AGM. Each Director
brings significant skills to the Board as a result of their varied careers
and we believe that this diversity is essential to contributing to the
appropriate mix of skills and experience needed by the Board and
its Committees in order to protect the interests of the Company’s
shareholders. As in previous years, the Board is recommending to
shareholders that all the Directors retiring at the forthcoming Annual
General Meeting be re-elected.

Duration of appointments
Non-executive Directors, other than the Chair, are appointed for a
specified term and the Executive Directors have service contracts
(copies of the terms and conditions of appointment of all Directors
are available for inspection at the registered office address and will
be available for inspection at the Company’s AGM).

Executive Directors’ service agreements
The Executive Directors all have service contracts with the Company
that provide for termination on 12 months’ notice from either the
Company or the Director (except in certain exceptional recruitment
situations where a longer notice period from the Company may
be set, provided it reduces to a maximum of 12 months within a
specified time limit). Service contracts do not contain a fixed end
date. The Company does not have agreements with any Director
or employee that would provide compensation for loss of office or
employment resulting from a takeover, except that provisions in the
Company’s share schemes may, in certain circumstances, cause
share awards granted to employees under such schemes to vest on
a takeover.

Directors’ and officers’ indemnity
and insurance
The Company has taken out insurance covering Directors and
officers against liabilities they may incur in their capacity as
Directors or officers of the Company and its subsidiaries. The
Company has granted indemnities to all of its Directors in their
capacities as Directors of the Company and, where applicable,
subsidiary companies on terms consistent with the applicable
statutory provisions. Qualifying third-party indemnity provisions
for the purposes of section 234 of the Companies Act 2006 were
accordingly in force during the course of the financial year ended
31 December 2018, and remain in force at the date of this Report.

Time commitments
Non-executive Directors are expected to commit sufficient time to
enable them to undertake their responsibilities and, as explained in
the Report of the Nomination Committee, their capacity to fulfil their
responsibilities is reviewed on an ongoing basis so that the Board
can be satisfied that each Non-executive Director commits sufficient
time to the business of the Company.

Iain Cornish was appointed as Chair in October 2018 and devotes
a significant proportion of his time to the role. In conjunction with
the SID, he regularly assesses his commitments and continues
to manage his portfolio of other activities to ensure that he has
sufficient time to meet the requirements of the position. He currently
holds non-executive roles in Arrow Global Group PLC and Leeds
Building Society. He has a full attendance record at the Company’s
Board meetings in 2018 and has also attended 22 Board Committee
meetings in addition to spending a substantial amount of time
engaging with the business outside formal Board and Committee
meetings. The Board is satisfied that he commits sufficient time to
the business of the Company.

Conflicts of interest
The Board has in place procedures for the management of conflicts
of interest. In the event a Director was to become aware that they
had an actual or potential conflict of interest, they must disclose this
to the Board immediately. The Board then considers the potential
conflict of interest based on its particular facts, and decides whether
to authorise the existence of the potential conflict and/or impose
conditions on such authority if it believes this to be in the best
interests of the Company. Internal controls also exist whereby regular
checks are conducted to ensure that the Directors have disclosed
material interests appropriately.

Except as stated in the Directors’ Remuneration Report, no Director
has, or has had during the year under review, any material interest
in any contract or arrangement with the Company or any of its
subsidiaries.

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C O R P O R A T E G O V E R N A N C E R E P O R T C O N T I N U E D

Succession planning and diversity
The Board has a responsibility to ensure that appropriate succession
plans are in place for the Board, the Executive Board and senior
management. Details of progress made in the year can be found
in the Report of the Nomination Committee.

Inductions for new Directors
An appropriate induction programme is designed to enable all new
Directors to meet senior management, understand the business and
future strategy, visit various office locations and speak directly to
Partners and staff around the country as well as being introduced
to other key stakeholders. Induction plans are tailored to meet
the specific requirements of incoming Directors. To support his
transition when taking on the role of Chair, a programme of activities
was also established for Iain Cornish.

Continuing professional development
The Chair and Company Secretary ensure the continuing professional
development for all Directors, based on their individual requirements.

Training attended by Directors includes presentations on topical
issues, specific teach-ins, visits to head office and other locations
to meet with staff and members of the Partnership and attending
seminars or other events taking place throughout the year. Ad hoc
training is also set up to deal with individual requests, external advisers
are invited to deliver presentations, and the Non-executive Directors
are able to attend seminars or conferences which they consider will
assist them in carrying out their duties. A list of training received
during the year is maintained by the Company Secretary. Specific
NED Development sessions are held four times a year and the Audit
Committee also receives scheduled development sessions addressing
complex and topical areas within its remit. NED Development sessions
held in 2018 covered topics that included the new Diversified Assets
(FAIF), the extension of the Senior Managers and Certification Regime
and developments in the cyber threat environment.

During the year all the Directors identified and undertook relevant
training based on their individual requirements. Where relevant
individual and group sessions are also held with third-party advisers,
Partners and employees, and Directors attend externally facilitated
events that are relevant to their own circumstances.

2018 Board Effectiveness Review
Scoping the Review
The Board carries out an evaluation of its performance and that of its Committees every year, with an externally facilitated evaluation being
carried out at least every three years. In 2018, following a market review, the Board, led by Iain Cornish (in his roles as Senior Independent
Director and latterly as Chair), selected Dr Tracy Long of Boardroom Review Limited (Boardroom Review) to independently facilitate the
evaluation. In a year that has seen the appointment of a new Chair and Chief Executive, an externally facilitated review provided an ideal
opportunity to evaluate the Board’s effectiveness and establish a clear plan of how it should develop in the coming years. The review also
helped identify key considerations for the Board and the Nomination Committee when planning for succession by assisting the Board’s
identification of the skills, knowledge and experience that it was important to retain and attract when recruiting future Directors.

Completing the Review
Having chosen Boardroom Review, the Chair met with Dr Long and agreed a comprehensive scope
and established a timetable for the various activities:

INTERVIEWS

OBSERVATIONS

BRIEFING

One-to-one confidential
interviews were held
with all Board members
and certain executives.

Dr Long attended and
observed meetings
of the Board and its
principal Committees,
including private
sessions.

A detailed discussion
document containing
the key findings
from the review
and identifying
areas for focus and
recommendations was
issued to the Board in
December.

FOLLOW UP

Within 6-12 months
of the delivery of
the briefing, Dr Long
will follow up with
the Chair to assess
implementation of
the actions agreed.

FEEDBACK AND
DISCUSSION

The Board met
collectively and
individually with Dr Long
following the issuance
of the briefing to reflect
upon on the findings
and agree priorities
and actions. From this
meeting the Board
agreed a detailed action
plan for 2019.

The Feedback and Discussion session held in December 2018 provided an opportunity for Dr Long to highlight her findings and for the Board
to agree actions to focus on in 2019, both of which are summarised overleaf.

GOVERNANCEST. JAMES’S PLACE PLC 93

Observations from the Review
Board dynamics – The Review recognised that the foundations of an
effective Board are in place, providing a basis from which to provide
strong leadership of the Group in the coming years. A positive
corporate culture is evident in the boardroom where debate is open,
supportive and of high quality, supported by good information, the
quality of which is receiving increasing focus.

The work of the Board – Each of the Directors is fully engaged
with the strategic focus and there is a shared perspective of the
current external landscape. The Board pays attention to the risk and
control framework, and has good visibility of and access to the lines
of defence. Relationships with external stakeholders are strong,
underpinned by open communication channels and mutual respect.

Effective use of time – The Board’s Committees are effectively
chaired by experienced Non-executive Directors, with a focus
on: their priorities; making the most of the time available; and
maintaining a high quality of information. A balanced agenda exists
between the Audit and Risk Committees, and the Remuneration
Committee pays proper attention to the alignment of expectation
and reward.

Actions agreed by the Board
The review also identified challenges and recommended areas of
focus which helped the Board shape a Board effectiveness action
plan. The actions the Board has set itself for 2019 have been
summarised below:

Improving the Board’s preparation for the future – Recognising
the importance of providing the Board with a solid base from which
to deliver value, we will focus on: ensuring the Board has visibility
and can understand the external landscape; continuing to make
improvements to the quality of reporting to the Board; broadening
the range of presenters to the Board (including external parties); and
keeping the Board’s focus in this respect under continuous review.

Improving the composition and development of the Board –
Focusing on the Board’s continuous development we will look
to improve the Board’s relevancy; ensure diversity of perspective
and experience; and develop the role of the Nomination Committee.

Improving the Board’s input into leadership transition – In order
to maintain an organisation which is sustainable for the future we
will focus on: the management of future leadership transitions;
enhancing the Board’s visibility of the make-up of the workforce; and
formalising the Board’s monitoring of culture and its engagement
with the workforce.

The Board is not expecting to carry out an externally facilitated
review in 2019, but recognises the value that the process delivers
and is keen to ensure that the structure of the 2019 internally
facilitated review will highlight progress against the above actions,
as well as identifying further areas for improvement.

By order of the Board:

IAIN CORNISH
Chair
26 February 2019

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Last year I provided an update on the progress made by the Committee
in determining the likely impact of new reporting standards on our
financial statements, and 2018 has seen the first of those standards
come into force. Whilst neither IFRS 9 Financial Instruments nor IFRS
15 Revenue from Contracts with Customers has had a material impact
on our consolidated financial statements we have focused on ensuring
the presentational changes to the Notes to the financial statements
are clear and concise. IFRS 16 Leases will come into force for the next
financial year and we have set out in Note 1 the expected impact on our
financial statements. IFRS 17 Insurance Contracts will not be adopted
until 2021 and we will continue to assess the implications for the Group,
although we expect the impact to be small.

Whilst our business is in many ways straightforward, we comply
with a vast array of reporting requirements which have the potential
to make our Annual Report and Accounts a challenge to read. The
Committee has tasked itself and management to continue to focus
on simplifying the messaging where possible, as well as responding to
investor feedback on areas that could be improved. In this year’s report
we have sought to improve our explanatory narrative and use other
tools, including diagrams and schematics to explain some of the more
complex aspects of the business. For an example of this, refer to Our
Business Model on pages 14 and 14.

Key projects that the Committee has overseen during the year
included the successful migrations to Bluedoor, where the Committee
continues to monitor the costs and the savings being realised as we
head towards the conclusion of the project. Following the completion
of our first securitisation transaction we dedicated time outside our
formal meetings to understand the transaction and its impact upon
our financial statements ahead of approving the disclosures.

Jared Whitehouse took over as Head of Internal Audit in 2018 and
has worked with his team to enhance the internal audit planning and
delivery framework. This has included making improvements to the
reporting to the Committee. To ensure we have access to sufficient
resource and expertise to deliver a robust internal audit programme,
our in-house team has worked with providers of co-sourced services.
During 2018 the Company reviewed the basis of the arrangement
and the incumbent providers. A competitive tender process was
subsequently held and we agreed to re-appoint Deloitte as our co-
source partner and look forward to strengthening the depth of the
relationship in the coming years.

In 2017 we approved changes to the Group’s control frameworks
which included the introduction of a rolling programme of control
effectiveness reviews which now supplement the control self
assessments completed by management. Regular reporting covering
the outcome of these reviews throughout 2018 has provided the
Committee with further evidence of the alignment of controls with key
risks and the overall effectiveness of those controls. Enhancements
to our control self assessment programme have also contributed to
our overall review of the control environment. Further details on these
developments can be found in the case study on page 105.

SIMON JEFFREYS
On behalf of the Audit Committee
26 February 2019

SIMON JEFFREYS, Chair of the Audit Committee

Key objective of the Committee
The Committee’s primary purpose is to provide oversight
of the financial reporting process, the internal and
external audit processes and the Group’s systems
of internal controls.

Role of the Committee in summary
• To be responsible for the accuracy and integrity of the

Group’s financial statements.

• To oversee the appointment and monitor the

independence and objectivity of the external auditor.

• To receive and act upon the reports of the external

auditor.

• To monitor the work of the Internal Audit function and

ensure its effectiveness.

• To monitor the effectiveness of the systems of internal

control and risk management.

• To review, and where relevant refer to the Board,

significant control weaknesses or failures.

• To monitor arrangements whereby employees and
others, may in confidence, raise matters of concern
(whistleblowing), and ensure appropriate follow up
action occurs.

Priorities for 2019
• Reporting relating to IFRS 16 Leases.

• Monitoring financial controls relating to platform

migrations.

• Further enhancing the clarity of reporting.

• Maintaining the Internal Audit framework.

• Further enhancing the internal controls framework.

• Ensuring compliance with the new UK Corporate

Governance Code.

GOVERNANCEST. JAMES’S PLACE PLC 95

Committee membership
Member

Joined

SJ Simon Jeffreys (Chair)

1 January 2014

At each scheduled meeting the Committee receives reporting and
information that provides valuable reference points that support its
exercising of governance responsibilities and inform the Committee’s
plans for future periods. This includes:

• receiving updates from the external auditor on progress with

BW Baroness Wheatcroft

8 October 2018

ongoing activities;

RY Roger Yates (SID)

1 July 2014

• receiving updates on progress with the internal audit plan, including

the findings from individual audits;

• receiving summaries of control effectiveness reviews completed

Other members serving during 2018

Stepped down

since the last meeting;

IC Iain Cornish

8 October 2018

The Committee’s terms of reference set out the Committee’s role
and authority as Audit Committee for the Company and certain
subsidiaries. They can be found on the corporate website at
www.sjp.co.uk.

Operation and performance
of the Committee
The Committee comprises three independent Non-executive
Directors. Following his appointment as Chair of the Board on
8 October 2018, Iain Cornish stepped down as a member of
the Committee and was replaced by Baroness Wheatcroft. The
Committee’s effectiveness has been reviewed by the Board as part
of its overall assessment of its effectiveness (see pages 92 and
93) and it remains satisfied that the Committee as a whole has the
experience and qualifications necessary to successfully perform its
role, noting in particular that the Chair of the Committee is a qualified
accountant and former auditor, and other members also have recent
and relevant experience and expertise in the financial services sector.

Regular attendees at Committee meetings during the year included
the: Chair; Chief Financial Officer; Director – Internal Audit; Executive
Director – Finance (Chief Actuary); and Senior Statutory Auditor.
The Committee also invited the following to attend meetings where
appropriate: the Chief Executive; the Chief Risk Officer; members of
the Finance, Internal Audit and Controls teams; and representatives
from the external auditors. Private sessions are held with the
Executive Director, Internal Audit and the external auditor after all
relevant meetings, providing a channel for them to raise concerns
in the absence of management and enabling the Senior Statutory
Auditor to feed privately into the work of the Committee.

• being provided with an update from the Finance department,

including details of audit and non-audit services undertaken by
PricewaterhouseCoopers (PwC) in the year to date, a summary
of developments in financial reporting, a summary of capital
management in the Group, and details of any financial controls
breaches since the last meeting;

• receiving an update on any fraud activity since the last meeting;

• being provided with a report on any whistleblowing activity; and

• reviewing proposed changes to relevant policies for the Committee

to recommend to the Board for adoption.

In addition to receiving updates from management, members of
the Committee attend and contribute in industry briefings and
workshops to ensure they stay abreast of topical subjects for audit
committees. One such example is Simon Jeffreys’ membership
of the FRC’s Technical Advisory Group. Separate development
sessions, focusing on complex and topical items, are held for
Committee members at least twice per year to support them in
maintaining their knowledge. The Chair liaised with Baroness
Wheatcroft prior to her joining the Committee regarding topics
that would support her induction. As a result, topics were added to
planned development sessions.

The Committee maintains a forward agenda which aims to ensure
that the Committee’s workload is balanced across the year and that
key areas of focus are considered at appropriate times.

The Audit Committee was responsible for carrying out the function
required under the FCA’s Disclosure and Transparency Rule DTR7.1.3R
(Audit committees) and complied with The Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014 throughout the year ended 31 December 2018.

Whistleblowing
The Chair of the Committee is a key contact in the whistleblowing
policy and is the whistleblowers’ champion. The Committee reviewed
whistleblowing arrangements during the year and concluded that
the arrangements were appropriate and consistently in force across
the entire Group.

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Committee activities during 2018
The Committee held six scheduled meetings during the year and the key topics considered at those meetings are summarised below:

JANUARY

FEBRUARY

APRIL

• Year-end preparation – Reviewed and
approved accounting judgements and
actuarial assumptions, and received an
update on progress with the 2017 year-
end external audit.

• Corporate reporting – Reviewed draft
statutory and regulatory reports for the
Group and St. James’s Place UK plc
and confirmed to management support
for the approach to be taken.

• Asset valuation – Considered a review
of the external audit of the SJP Unit
Trusts and the half-yearly review of
the oversight and monitoring of the
activities of service providers, probing
the robustness of the framework
upon which valuations included in the
consolidated Group accounts were
based.

• Internal Audit Plan – Approved the final

2018 Internal Audit Plan.

• Final Results – Reviewed and

recommended to the Board the draft Final
Results announcement and draft Group,
Company and SJPUK Annual Report and
Accounts for 2017, including the viability
statement.

• External Audit – Received the report of

the external auditor on the results of their
audit and concurred with management’s
response to the recommendations
identified.

• Internal controls – As part of its ongoing
monitoring of the effectiveness of internal
controls, reviewed output from the Control
Self Assessment Process and the annual
Internal Controls Evaluation carried out by
Internal Audit.

• Solvency II – Reviewed compliance with
the Solvency Directive, and approved the
publication of the 2017 Year End Solvency
and Financial Condition Report (SFCR)
and the submission of the 2017 Regular
Supervisory Reporting (RSR) to the
Regulator.

• Year-end review – Undertook a review of
the 2017 year-end process, recognising
improvements made and highlighting
areas for further enhancement. Evaluated
the performance of the external auditor
and carried out an annual review of the
Committee’s terms of reference, agreeing
changes that clarified the Committee’s role
in relation to SJPUK.

• Internal Audit – Reviewed the

performance of the Internal Audit function
during 2017 and agreed refinements to the
audit planning process, grading structure
and reporting.

• Bribery and fraud review – Received an

annual review of the Group’s systems and
controls for bribery and fraud.

• Annual Whistleblowing Report –

Approved the Annual Whistleblowing
Report to be presented to the Board.

MEMBERS PRESENT

GOVERNANCEST. JAMES’S PLACE PLC
97

JULY

OCTOBER

NOVEMBER

• Half-year results – Reviewed and

recommended to the Board the draft 2018
Half-year Results announcement.

• External Audit – Received and considered
the external auditor’s review for the half
year to 30 June 2018.

• Asset valuation – Received the half-yearly
review of the oversight and monitoring of
the activities of service providers working
on the SJP Unit Trusts, considering the
valuation methodologies adopted and
examining the approach to be adopted for
valuing the new Diversified Assets (FAIF).

• Internal Audit performance – Reviewed

the impact of the new grading and
reporting, and assessed the adequacy of
the skills and resource within the Internal
Audit Department against current and
future demands.

• Internal Audit Plan – Considered the
proposed 2019 internal audit plan and
recommended additional areas of
coverage.

• Year-end preparation – Received
an outline of the planning and key
considerations for the 2018 year end
(a development session covering key
changes arising from the securitisation
programme and new Financial Reporting
Standards was held following the meeting).

• External Audit Plan – Received and

agreed the external auditor’s plan for the
audit of the 2018 year-end.

• Year-end preparation – Considered

key developments, material accounting
judgements and actuarial basis
proposals, agreeing in principle the
key assumptions to be adopted when
preparing the 2018 year-end Annual
Report and Accounts.

• External Audit – received an update

from the external auditors on progress
with the 2018 year-end audit.

• Controls – evaluated with

management and the external auditor
the implications of GDPR on the year
end process and the adequacy of
controls relating to the opening of bank
accounts.

• Internal Audit Plan – Approved the final

2019 Internal Audit Plan.

MEMBERS PRESENT

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R E P O R T O F T H E A U D I T C O M M I T T E E C O N T I N U E D

Significant issues considered relating to the Group’s financial reporting
The Committee’s deliberations during the year have included taking account of the following areas of focus, paying particular attention to the
implications for the Group’s financial reporting, the risk of mis-statement of the financial statements, and also by assessing the scale of risk in
the business:

Area of focus

Activity

Fraud in revenue recognition

During the course of its regular work, the Committee continued to review the relevant policies and
receive regular reports from management and internal/external audit on the controls. This enabled
the Committee to continue to scrutinise the controls in place and gain assurance of their adequacy.

Financial controls

Asset valuation

Regular reports assessing the adequacy and performance of the financial controls were received
during the year end, providing the Committee with assurance and enabling them to identify and
address areas of potential weakness.

The Committee received half-yearly reports on the oversight and monitoring of the activities of
service providers working on the SJP Unit Trusts, and was able to challenge management on the
valuation framework and methodologies adopted. A key area of the Committee’s focus during the
year was the valuation methodology that would be adopted for the new Diversified Assets (FAIF).

Accounting judgements and
actuarial assumptions

As part of reviewing the half-year and year-end reporting the Committee required management
to identify and explain the key judgements and assumptions, and in particular any significant
changes. During the year, key accounting judgements agreed by the Committee included the value
of the provision held against business loans to Partners, and the deferred tax assets recognised.
The valuation of the operational readiness prepayment continued to be a key area of focus.

APMs – Underlying profit, EEV
and Cash result

IFRS developments and
accounting policies

Recognising the FRC’s ongoing focus on alternative performance measures (APMs), the
Committee reassessed with management the appropriateness of the APMs presented in the
accounts. The Committee noted the consistency of reporting from year to year and management
confirmed that analysts and other market participants continue to place strong value on the
Company’s use of the Cash result and EEV. The Committee reviewed the use of APMs in the
revised presentation of the CFO’s report and Financial Review, and was reassured that these
were not given undue prominence by comparison with IFRS measures.

The Committee requested and received regular updates on developments in financial reporting,
with particular focus during the year on IFRS 9, IFRS 15, IFRS 16 and IFRS 17. The Committee
members received a focused development session enabling them to challenge the approach to
be taken to reporting against standards coming into force in 2018 (IFRS 9 and IFRS 15) and to
enable them to evaluate the potential impact of those yet to come into force (IFRS 16 and IFRS 17).
The disclosures made in this year’s financial statements can be found on pages 158 to 160.

GOVERNANCEST. JAMES’S PLACE PLC 99

‘Fair, balanced and understandable’ opinion
The UK Corporate Governance Code requires the Board to give its opinion as to whether it considers the Company’s Annual Report and
Accounts, taken as a whole are fair, balanced and understandable, and provide the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.

To aid the Board, the Audit Committee carried out a formal review of the Annual Report and Accounts in relation to this requirement, including
a consideration of the results of activities and information described above. The Committee took account of investor feedback, commentary
from the FRC’s annual review of corporate reporting and received a detailed review of management’s assessment, concentrating on key
questions, the conclusions from which have been summarised below.

Following this review, the Committee was able to advise the Board that the Company’s Annual Report and Accounts for the year ended
31 December 2018 are fair, balanced and understandable.

Fair, balanced
and understandable

Questions

FAIR

Does the report present the whole story,
including challenges and issues faced as well
as Company achievements?

BALANCED

Does the report achieve consistency between
the financial statements and the narrative
sections?

Are appropriate performance measures
included and clearly explained? Is there
balance between statutory and alternative
performance measures with appropriate
explanation of any adjustments?

Are key judgements and estimation
uncertainties in the financial statements
appropriately explained and are they
consistent with the Audit Committee report
and the risks the external auditor addresses in
its report?

Committee’s conclusions

The Annual Report and Accounts, reflect the
positive growth in gross and net new business. The
Strategic Objectives, detail developments in 2018
and areas of focus for 2019. The combination of
disclosures presents a fair reflection of the position
and performance of St. James’s Place.

The Annual Report and Accounts is consistent
between the financial statements and narrative
sections. Where Alternative Performance Measures
are included, explanation of their purpose and
benefit is included along with a reconciliation
to IFRS. There is consistency, or rationale for
differences, in the identification of areas of Audit
Committee and / or External Audit focus.

UNDERSTANDABLE

Does the overall document have a clear and
cohesive structure?

Is the report readable and are the important
messages highlighted appropriately?

Are explanations of business models,
strategies and accounting policies clear?

Revisions made in the year to the Annual Report
and Accounts have increased its clarity with clear
referencing between relevant sections. Explanation
of the Business model, strategies and accounting
policies is given along with several Glossaries to
aid the understanding of the Annual Report and
Accounts.

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EFFECTIVENESS
A tender process was carried out in 2016 and PwC were reappointed
as the Group’s external auditor. This ensured that we continued
to meet the relevant requirements and recommendations relating
to the tenure of appointment set out in The Statutory Audit
Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 (the ‘Order’), Regulation (EU)
No 537/2014 and the FRC’s revised Ethical Standard June 2016.

PwC has served as the Company’s external auditor since 2009 and
regulations require that we change our audit firm by no later than
the 2027 audit, although Jeremy Jensen, steps down as our Senior
Statutory Auditor in 2019 after five years in the role. The Chair of
the Committee met with PwC during the year to consider Jeremy’s
replacement, and the Committee has confirmed that from 2019
Andy Moore will take on the role.

The slightly different rules in Dublin, which limit auditors’ tenure to a
maximum of ten years mean that we have to change our auditor in
Dublin for the 2019 audit. The Committee liaised with SJPI’s audit
committee on agreeing the selection criteria for a tender for a new
auditor, including focusing on ensuring a strong working relationship
with the Group auditor and the operational resilience, and technical
capability, of the short-listed firms. At the conclusion of the tender,
SJPI’s audit committee recommended the appointment of Grant
Thornton Ireland. The Committee received regular updates
throughout the tender and concurred with the decision to appoint
Grant Thornton Ireland.

The Committee’s annual review of the external auditor concluded
that the audit service of PwC was fit for purpose and provided a
robust evaluation of the risks underlying the Company’s financial
statements. PwC have indicated their willingness to continue in
office and the Board have agreed that a Resolution that they be re-
appointed until the end of the 2020 Annual General Meeting will be
put to shareholders at the forthcoming Annual General Meeting.

External Auditor
ACTIVITY DURING THE YEAR
As in previous years, the external auditor attended all Committee
meetings and met privately with the Committee regularly. The Chair
of the Committee met regularly with the Senior Statutory Auditor
both to receive updates on progress and also to discuss any private
matters. The external auditor was also able to provide insight on
topical issues as appropriate during the year.

The Committee received and discussed the findings of the year end
audit and the review of the half year results. These were considered
under the headings of the major risks as set out in the original audit
plan and Committee members applied their understanding of the
scope of work, findings, judgements and conclusions of the external
audit in their evaluation that the financial statements had been
properly prepared. Particular areas of the work of the external auditor
that the Audit Committee focused on during the early part of 2018
included:

• new disclosures arising from the introduction of new Financial

Reporting Standards;

• the prominence of non-GAAP measures in the Annual Report and

Accounts;

• the Client Assets (‘CASS’) Audit, particularly the processes of the

third-party administration outsource providers; and

• the risk of misstatement of the operational readiness prepayment

asset.

INDEPENDENCE AND NON-AUDIT SERVICES
The Committee carried out its annual review of the Policy on Auditor
Independence during the year and remained committed to ensuring
that the policy only permits our auditor to carry out limited non-audit
work, where there is no risk of compromising independence, and the
external auditor is the only supplier who could reasonably carry out
the engagement. The Committee considers proposals for non-audit
services as they arise and receives updates at each meeting on fees
incurred with PwC for all services, along with details of ‘trivial’ non-
audit services which the Committee has authorised management
to approve. In their Audit Report to the Committee, PwC confirmed
that they remain independent of the Group and, having carried out
its own assessment, the Committee concluded that PwC remained
independent and objective. The Policy on Auditor Independence
is available on the Company’s website and details of the non-audit
services provided by PwC during the year can be found on page 169.

GOVERNANCEST. JAMES’S PLACE PLC 101

Key considerations during the year that enabled the Committee to satisfy itself that the audit was effective and that the external auditors
remain independent and objective are set out in the table below:

Area of focus

Auditor
effectiveness
and quality

Activity

• The findings of the annual review by the FRC of the main auditing firms, which did not highlight any adverse

findings that were relevant to the Group or required follow up.

• The Audit Quality Review report specifically on PricewaterhouseCoopers LLP.

• The experience and knowledge of the team (with due regard to the requirement for regular rotation

of audit team members).

• The professional scepticism demonstrated by the external auditor.

• The results of an internal review of auditor performance.

• The findings of the external auditor’s own internal reviews of both the firm and our audit.

Auditor
independence and
objectivity

• Review of the nature and extent of other ‘non-audit’ work undertaken to confirm compliance with our policy.

• Review by St. James’s Place to confirm no links or investments with the Company by the audit team.

• The robustness and appropriateness of PwC’s challenging of management when considering significant

issues.

• PwC’s willingness to raise issues (and the nature thereof) with the Committee, including in Committee

meetings and private sessions held in the absence of management.

• Regular rotation of the audit team.

Level of fees

Detailed information on the break-down of fees paid to our external audit firm (see Note 5 on page 169).

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Internal Audit
The annual Internal Audit Plan was approved by the Audit Committee at the start of the year and was determined using a two-part planning
process. The first was a bottom-up risk assessment of the Group’s Audit Universe which methodically assessed the risks faced by each
area of the business. The second was a top-down assessment which identified the key current risks to the Group’s operating environment.
The resulting Audit Plan of 45 audits was a blend reflecting both of these assessments.

In addition to identified risks, the Audit Plan addressed three key themes throughout:

Theme

Description

Client and Partner

Operational
integrity

This theme focused on the Group’s process for
ensuring appropriate client outcomes, overseeing the
continued growth and expansion of the Partnership
and its compliance with the Group’s advice standards,
and recognised the importance of the field management
team in delivering the required control solutions.

This theme looked at the robustness and effectiveness
of the Group’s core operational processes, the impact
of continued growth and increased complexity and
the impact of major change initiatives. This theme
accounted for the largest number of audits in the
Audit Plan.

Regulation and
compliance

This theme recognised the changing regulatory
environment, the importance of compliance across
the Group’s increasingly complex operations and the
emphasis on the role of second line monitoring.

Example audits undertaken

• Partnership Recruitment and Regulatory

Authorisation

• Partnership Accreditation and Development

• Partnership Support Specialists

• Proposition Governance Framework

• Retirement Account Operations

• Partner Lending

• IT Incident Management

• Unit Pricing

• Alternative Investment Governance

• Business Continuity Management and IT Disaster

Recovery

• Management Accountability Regimes

• MiFID II and IDD Implementation

• GDPR

• Client Money

The delivery of the Audit Plan is the responsibility of the Director of Internal Audit, who is accountable to the Audit Committee and has one-
to-one meetings with the Chair of the Audit Committee and the Chair of the Board. Progress of plan delivery was monitored by the Audit
Committee through regular Internal Audit Progress Reports submitted to each meeting. These reports inform the Committee of the overall
status of the Audit Plan, summaries of audits issued in the period and updates on the position of remedial actions allocated to management.
In addition, points arising under each of the above themes are included in these reports each quarter, which are also collated together as a key
part of the annual Internal Control Effectiveness attestation.

The effectiveness of the Internal Audit function is externally assessed every five years as a minimum, with the latest assessment completed
by Protiviti in 2015. In intervening years, the output of the function’s ongoing Quality Assurance process is reported to the Committee for their
consideration. This is supplemented with six monthly reporting to the Committee of the skills and experience of the function’s members, and
resourcing levels. Internal Audit have also continued their co-sourcing agreement with Deloitte LLP following a competitive tender process
completed in the year. The Chair of the Committee represented the Committee throughout the process and attended the tender presentations.
This co-sourcing agreement provides specialist expertise and additional resources to maintain and enhance the level of assurance provided to
the Audit Committee.

GOVERNANCEST. JAMES’S PLACE PLC 103

Refresh of the
Audit Universe

The Audit Universe maps out the organisational structure
and breaks the Group down into individual components,
each of which is individually risk assessed. For the 2019
Audit Plan, the universe has been refreshed to align with the
latest Group structure, and to explicitly include key stages
of the client service and product life cycles as individual
components and also to re-size all components so that each
can be a single audit. This significantly simplified the number
of components, allowing for the development of a regular
cycle of risk-focused core assurance activity.

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R E P O R T O F T H E A U D I T C O M M I T T E E C O N T I N U E D

Systems of internal control
The Board has overall responsibility for ensuring that management maintains comprehensive systems of internal control and for
assessing their effectiveness. Such systems are designed to identify, evaluate and manage within appetite, rather than eliminate, the risk
of failure to achieve business objectives and hence provide reasonable but not absolute assurance against material misstatement or loss.
St. James’s Place is committed to operating within strong systems of internal control that enable business to be executed and risk taken
without exposing itself to unacceptable potential losses or reputational damage.

The most significant internal control assurance activities considered by the Committee during 2018 are outlined below:

Area

Activity

Matters addressed

Role of the Committee

Operations

• Management
Control Self-
Assessment
(CSA) Attestation.

• CEO attestation

to the Committee
on the integrity
of first line
operations.

The effectiveness of
the overall control
environment, including
the status of any
material control issues
and the progress of
specific remediation
plans.

Risk
management
and
compliance

Internal
controls

• Reports from the
Risk Committee.

• CEO attestation

to the Committee
on the second line,
risk management
functions.

• Control

Effectiveness
reviews.

• Review of the CSA
system led by the
Head of Internal
Controls.

The effectiveness of
the control environment
in respect of design
and effectiveness of
St. James’s Place risk
management systems.

The effectiveness
of the design and
operation of key control
activities in respect
of the most pervasive
business risks.

• Monitored the status of control issues identified by

management through regular reports from the Head of Internal
Controls.

• Assessed the progress of the enhancements being made to the

CSA process.

The Committee has continued to use the output from the CSA
process in its review of the control environment. While the
Committee welcomed the improvements made in the year to give
a reasonable overview of the control environment, the Committee
reviewed plans to introduce increased regularity and rigour
which should provide more timely visibility on controls requiring
remediation and associated risks.

• Evaluated reports from the Risk Committee on the internal

control environment.

• Considered the role of the second line of defence in the

oversight of operational risk controls.

The Committee received reports from the Risk Committee with
its conclusions on the design and effectiveness of SJP’s risk
management systems.

• Monitored issues arising from Control Effectiveness reviews to

identify pervasive themes.

• Evaluated reports on the internal control environment from the

Head of Internal Controls.

The Committee received summary reports on the conclusions
of Control Effectiveness reviews carried out by Internal Controls,
which provided an additional layer of independent assurance.
The Committee will continue to monitor the outputs from this
assurance programme in 2019.

Internal Audit

• Internal Control

Annual Evaluation.

The effectiveness of
the overall control
environment, including
the status of any
material control issues.

• Discussed the opinion provided by Internal Audit on the

effectiveness of St. James’s Place internal control framework
in 2018.

The Committee received and discussed the annual evaluation
of the internal control environment from Internal Audit.

External Audit acts as a further check on the Company’s processes.

These sources of assurance assist the Committee in completing its annual review and enable the Committee to attest on behalf of the Board
that it has been able to properly review the effectiveness of St. James’s Place’s system of internal control in accordance with the 2014 FRC
Guidance on risk management, internal control and related financial and business reporting. The Committee did not identify any ‘significant
failings or weaknesses’ and it has ensured that corrective action is being taken on matters arising from the review.

GOVERNANCEST. JAMES’S PLACE PLC 105

Enhancement of
Controls Assurance

Improvement of the Internal Control System
assessment continued to be a theme in 2018.
The management Control Self-Assessment
(CSA) process has been redeveloped from
the ground up to provide a greater level of
granularity and robustness. This enhancement
has been achieved by underpinning the SJP CSA
Framework with the 2013 COSO Framework and
developing a greater alignment between the
CSA Universe, the Audit Universe and the Risk
Management Framework. These improvements
have been dovetailed with independent, objective
Control Effectiveness reviews by Internal
Controls to offer a greater level of rigour and
challenge to management. This combination of
activities proactively assists the identification
of controls that require remediation in a timelier
manner.

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R E P O R T O F T H E R I S K C O M M I T T E E

Mark Sutton took over from Craig Gentle as Chief Risk Officer on
1 January 2018 and has overseen a continuation of the development
of the Group’s Risk Management framework and Risk and Compliance
function. Through his regular Chief Risk Officer’s Report and specific
reporting from the Risk and Compliance function, the Committee is
provided with comprehensive reporting on key risk developments
and activity across the Group. The relevance and quality of the
reporting during the year has supported the Committee in:

• reviewing and interrogating the principal risks and uncertainties

affecting the Group in the context of the Group’s strategy;

• considering risk appetite;

• monitoring and reviewing the effectiveness of the Group’s risk

management framework and its implementation across the Group;

• assessing the adequacy of management’s responses to risk

management actions;

• monitoring ongoing interactions with the Group’s regulators and
the implementation of new regulations, including GDPR, MiFID II,
PRIIPs and IDD;

• examining with members of senior management their business

areas’ management of the associated risks; and

• overseeing and challenging the activities underpinning the ORSA
and risk and capital assessments of Group companies, together
with other documents aligned with those processes.

In addition, focused reports from senior executives on specific
topics impacting the Group support the Committee’s assessment
of its principal risks. Attendance by senior management during
the consideration of these reports provides the Committee with
opportunities to explore the management of the associated risks and
challenge the executives responsible.

During the year, further enhancements have been made to the
reporting of key risks, in particular bringing first line commentary on
risks alongside key risk indicators and comments/conclusions of the
second line. Our monitoring of risk priorities and emerging risks have
also developed further, which will assist the Committee in ensuring
appropriate coverage is given to each of these risks at future meetings.

To ensure continuity, I have agreed that I will continue to chair the
Committee during the process to appoint a new independent Non-
executive Director. When the new Director is appointed, it is intended
that at an appropriate point in time, that Director will chair the
Committee and I will step down as a member.

IAIN CORNISH
On behalf of the Risk Committee
26 February 2019

IAIN CORNISH, Chair of the Risk Committee

Key objective of the Committee
The Committee’s primary role is to provide guidance and
advice to the Board (and where appropriate other boards
and committees in the Group) in relation to the Group’s
risk appetite, attitude to risk and to provide oversight of
its risk management framework.

Role of the Committee in summary
• To foster a culture of effective risk identification

and management throughout the Group.

• To provide leadership, direction and oversight of

the Group’s management of risk.

• To review the principal and emerging risks affecting

the Group and the ways in which the risks are
controlled, managed and/or mitigated.

• To direct and oversee the Own Risk and Solvency

Assessment (‘ORSA’) process and the Group’s approach
to capital adequacy and capital management.

• To report any material areas of concern to the Board
and the boards of the Group’s subsidiary companies.

Priorities for 2019
• Continue to oversee migration to Bluedoor.

• Data security and cyber threat resilience.

• Strategic risks, including growth and technology.

• Operational resilience (including outsourcing).

• Assurance reporting and coverage.

• Responding to political and economic uncertainty,

including any Brexit impacts.

• Conduct risks.

• Capital adequacy.

• Consideration of regulatory changes.

GOVERNANCEST. JAMES’S PLACE PLC 107

Committee membership
Member

Joined

At each scheduled meeting the Committee receives a formal report
from the Chief Risk Officer that includes:

• updates on material risks that have been prominent in the period

IC Iain Cornish (Chair)

1 October 2011

since the previous meeting;

SJ Simon Jeffreys

1 January 2014

BW Baroness Wheatcroft

2 April 2012

• interactions with Regulators during the period;

• updates on the impact and implementation of new regulations,

political developments (e.g. Brexit) and significant changes in the
risk environment;

• updates on the operation, performance and planning of the Risk

RY Roger Yates

1 January 2014

and Compliance function;

• key risk metrics (including conduct risk management information);

and

• summaries of thematic reviews carried out by the Group’s first and

second line assurance functions.

The Committee maintains a rolling forward agenda which ensures
that the key responsibilities of the Committee are carried out across
the year and that significant and emerging risks are considered at
appropriate times. Key risk policies are reviewed throughout the year
and there is a standing item at each meeting to allow the Committee
to recommend relevant policies to the Board for adoption.

The Chair of the Committee meets regularly with the Chief Risk
Officer, Chief Executive and Chief Financial Officer, individually and
together to discuss key risk topics.

The Committee’s terms of reference set out the Committee’s role
and authority and can be found on the corporate website at
www.sjp.co.uk.

Operation and performance
of the Committee
The Committee comprises the Chair of the Board and three
independent Non-executive Directors and membership has remained
unchanged during the year. The Committee’s effectiveness has
been reviewed by the Board as part of its overall assessment of its
effectiveness (see pages 92 and 93) and it remains satisfied that
all members have appropriate financial, risk and/or other relevant
experience and as a whole the Committee has the experience and
qualifications necessary to successfully perform its role.

Regular attendees at Committee meetings during the year included
the Chair, Chief Executive, Chief Financial Officer, Managing Director
(Distribution) and Chief Risk Officer. Subject matter experts and other
members of senior management are invited to attend and present on
specific topics throughout the year.

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R E P O R T O F T H E R I S K C O M M I T T E E C O N T I N U E D

Committee activities during 2018
The Committee held five scheduled meetings during the year and a summary of some of the key topics considered is set out below:

FEBRUARY

APRIL

JULY

• Partner and adviser recruitment – The
Committee received a presentation on
the existing recruitment model and,
having noted the main risks, evaluated
opportunities for reinforcing the acquisition
processes and retaining key recruiters.

• Discretionary Fund Management – The
Risk and Compliance Director of Rowan
Dartington presented an assessment
of Rowan Dartington’s top risks and the
Committee assessed progress made in
embedding enhanced first and second line
assurance processes.

• Risk Appetite Statement – The Committee

reviewed and agreed to recommend an
updated Group Risk Appetite Statement
to the Board.

• ORSA 2018 – The Committee considered

the draft ORSA Summary Report, including
underlying operational risk assessments
and stress tests carried out alongside
financial projections.

• Client Money and Client Assets

• Defined benefit transfers – Following

(CASS) – The Committee received
a report from the Head of the
CASS Oversight Operation function
addressing the key management of
risks associated with CASS and the
oversight of third-party administrators’
compliance with the FCA’s CASS rules.

• Complaints handling – The Committee
considered a deep dive review of the
Group’s complaints handling processes
which outlined the operation of those
processes and evaluated the impacts
of particular patterns and trends
thereon.

• ORSA – The Committee approved the

proposed ORSA strategy for 2018.

• Defined benefit transfers – The

Committee received an update on
business volumes and considered the
businesses’ proposals for ensuring
future defined benefit transfer cases
continued to remain within the Group’s
risk appetite.

• The Partnership – The Committee

received presentations from the Head
of Field Risk and the Head of a field
office in relation to the principal risks
associated with the Partnership and
potential enhancements being piloted
for Partner training and competency
supervision.

up on discussions at the previous
meeting, the Committee endorsed
acceptance criteria for new defined
benefit transfer applications.

• Vulnerable clients – An update on the

measures taken to safeguard vulnerable
clients provided the Committee with
an overview of the initiatives being
considered to further enhance the Group’s
existing approach.

• Business Assurance – The Committee

considered the performance of the
Business Assurance function, which is
responsible for risk-based checking of
advice suitability. This included the risks
impacting the function in its day-to-day
engagement with the Partnership and
planned future developments.

• Investment Risk – The Committee
received an update on the activity of
the Investment Risk Committee and the
performance of the custodian and trustee
of the Group’s funds. The Committee
also examined the monitoring of fund
composition and performance.

• Diversified Assets (FAIF) – The Committee
considered a risk assessment carried out on
the fund and highlighted risks that required
further investigation prior to its launch.

• Cyber security – The Committee received
an update on the maturity of the Group’s
cyber resilience and noted that emphasis
in future planning was centred around
increasing the awareness of employees
and the Partnership.

• Anti-money laundering – The Group’s Money
Laundering Reporting Officer presented her
annual report to the Committee.

• ORSA – The Committee assessed the
results of stress and scenario testing
carried out as part of the ORSA process.

MEMBERS PRESENT

GOVERNANCEST. JAMES’S PLACE PLC
109

SEPTEMBER

NOVEMBER

• Partner remuneration risks – The

Committee reviewed the structure of
Partner remuneration and considered an
annual assessment of associated risks.

• Brexit – The Chief Risk Officer provided

an update on management’s assessment
of the potential impact of Brexit on the
business and the Committee explored
the timeline for engaging with clients
and Partners.

• Capital Adequacy reviews – The
Committee reviewed the output of
reviews undertaken on certain regulated
subsidiaries and endorsed the basis of
preparation of the reviews.

• ORSA – The Committee approved the

proposed stress and scenario testing and
operational risk assessments for the 2018
ORSA cycle.

• The Group’s Investment Management
Approach – The Committee considered
the key risks relating to the Group’s
investment management approach
focusing on the evolution of the investment
strategy and the potential impact of Brexit.

• Diversified Assets (FAIF) – The Committee

received an update on progress with the
launch of the fund and the Committee
satisfied itself that the risks that had
been highlighted at the April meeting had
been addressed.

• Client service – The Committee received
a presentation on risks associated with
ensuring the Partnership was servicing all
clients appropriately and discussed the
activity being undertaken by the Group to
safeguard client service levels.

• Employee remuneration risks – The
Committee considered and agreed
an annual assessment of the Group’s
remuneration risks and discussed the
strategic initiatives being adopted to help
tackle the Group’s gender pay gap.

• 2018 ORSA – The Committee approved
the revised ORSA Policy and considered
the final draft of the 2018 ORSA document,
before agreeing to recommend it to the
Board for approval.

• Capital Adequacy – The Committee
reviewed the summary output from
the draft Internal Capital Adequacy
Assessment Process carried out
for St. James’s Place Investment
Administration Limited (SJPIA) and
recommended it to the board of SJPIA
for approval.

MEMBERS PRESENT

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ORSA
One of the key areas of focus for the Committee continues to be
the Own Risk and Solvency Assessment (ORSA). Although the ORSA
was born of a regulatory requirement, it has become embedded
within the Group and has proved to be a useful tool to support the
Board and its Committees in the consideration of specific risks.
The Committee remains responsible for setting the strategy for
the performance of a single, Group-wide, ORSA and has continued
involvement in this process throughout the year, with the timetable
geared around engagement on key elements at each meeting. It is
responsible for agreeing and proposing the ORSA Policy, and all other
key risk management policies, to the boards of Group companies,
and for challenging the underlying bases and assumptions and
determining the extent of stress and scenario testing to be applied.
Management presents the results of stress and scenario tests
and the assessments of operational risks and then works with
the Committee to finalise the content of the ORSA report which is
recommended to the Board for approval.

Oversight of risk
Oversight of the risk management framework is key to delivery of the
responsibilities of the Committee and further information on this can
be found on pages 48 and 49. The risk management framework and
associated documents are subject to annual review. During 2018 the
presentation of the Group’s principal risks has continued to develop,
although these risks remain largely unchanged. The risks are
mapped to the Basel framework and a ‘bottom-up’ risk assessment
process, to provide assurance that the list provides comprehensive
coverage. This list, and the set of indicators used by the Committee
to regularly monitor performance against risk appetite, have both
been regularly reviewed by the Committee during the year and will
continue to develop during 2019.

The Committee is supported in its oversight of the risk management
framework by the Group Risk and Compliance function and teams
at Group and local levels. The Committee spends a significant
proportion of its time receiving updates from the Chief Risk Officer
and senior members of the Risk and Compliance function, who
have direct access to the Chair of the Risk Committee should the
need arise. The Committee also considers on a regular basis the
risk and compliance plan and the adequacy of resources committed
to its delivery.

The Committee is also able to review and provide challenge on the
implementation of risk mitigation in the business. When certain risks
have crystallised during the year the Committee has reviewed the
circumstances, confirmed the causes and assessed the response of
management. None of the risks that have crystallised during the year
have had a material adverse impact. During the year, the Committee
continued to receive and review reports from a number of Executive
Committees and other functions in the Group including:

• reports relating to relevant topics discussed at Group Risk

Executive and Finance Executive Committee meetings, where
executive oversight is given to the appropriateness and observance
of the Group’s Risk Appetite;

• reports produced by second line (Compliance Assurance) and first
line (Business Assurance) functions in respect of thematic reviews
carried out into specific areas of the Group’s business;

• reports from the Chief Risk Officer on the effectiveness of the

Group’s risk management systems and the structure and operation
of the Risk and Compliance function; and

• an annual report from the Group’s Money Laundering Reporting
Officer on the anti-money laundering, bribery and fraud activities
taking place within the Group.

As noted above, since most of the activity within the Group is
regulated, the Committee also receives regular updates on regulatory
developments and the Group’s ongoing interactions with regulators,
which provides further context from which it can interrogate and
challenge the performance of the Group’s first and second line risk
functions. The Group’s interaction is principally with the Prudential
Regulation Authority, Financial Conduct Authority, Information
Commissioner’s Office, Central Bank of Ireland, Monetary Authority of
Singapore, Hong Kong Securities and Futures Commission and Office
of the Commissioner of Insurance in Hong Kong. Wider regulatory
interactions also take place with firms in the financial services
marketplace, and collectively these updates assist the Committee
in monitoring the Group’s ongoing compliance with regulation.

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R E P O R T O F T H E N O M I N A T I O N C O M M I T T E E

I was privileged to take over as Chair from Sarah Bates in October
and I am personally grateful to her for the support which she gave
me during the transition, and for the very strong legacy which she
has left me. Following the appointment of Andrew Croft as Chief
Executive at the start of 2018, the Committee’s primary focus
during the year was appointing successors to: Sarah Bates as Chair;
David Lamb as Head of the Investment Division and myself as Chair
of the Risk Committee. The latter has taken longer than anticipated,
and it is an important priority for the Committee.

In this regard, the timing of the introduction of a new nine-year tenure
rule for Chairs in the revised Code, albeit on a ‘comply or explain’
basis, was not ideal and the Board recognises that my term as Chair
is likely to be shorter than had been anticipated when selecting me.
However, it has served as a further catalyst to establish a medium-
term pipeline of succession for all of the Non-executive roles on
the Board.

During the year, the Committee also oversaw the appointment of
Robert Gardner to our Executive Board (with effect from 1 March
2019). Robert brings a wealth of experience from outside the
organisation and his close working relationship with St. James’s
Place over the years means he is already familiar with the business
and its unique culture.

Having successfully managed changes to the Chair, Chief Executive
and Chief Financial Officer in the last two years, the Committee is
very clear that a key objective over the next couple of years will be to
continue to focus on the succession plans for the Board and senior
management. Key to this will be ensuring that individuals with the
skills and attributes necessary at those levels are identified and
developed, providing a strong and diverse pipeline that gives us

options when it comes to selecting the next generation of leaders for
the business.

The opportune timing of the external Board effectiveness review
carried out in 2018 provided the Committee with an independent
view of what the Board does well and could do better. This will
be invaluable information when considering what key skills and
experience need to be factored into succession plans.

A central theme of our current and future activity is our focus on
diversity. The Committee is acutely aware of the importance of
ensuring greater diversity of talent, particularly at senior levels, and
the subject has been high on the agenda of both the Committee and
the Board throughout the year. We are making progress but there
remains a significant amount still to do on the initiatives we reported
on last year, as described in more detail in this Report.

IAIN CORNISH
On behalf of the Nomination Committee
26 February 2019

IAIN CORNISH, Chair of the Nomination Committee

Key objective of the Committee
The Committee has overall responsibility for planning
Board and senior management succession, leading
the process for new appointments and ensuring that
these appointments bring the required skills, experience
and diversity to the organisation. As part of this, the
Committee reviews the governance framework, including
the structure, size and composition of the Board and
its Committees to ensure they are made up of the right
people with the necessary skills and experience to direct
the Company in the successful execution of its strategy.

Role of the Committee in summary
• To review regularly Board and Committee composition

and structure.

• To identify, report on and recommend for Board approval

suitable candidates for appointment to the Board.

• To review the Group’s approach to diversity and

inclusion and oversee the governance structures
of the Group and the Board evaluation process.

• To consider and review succession planning for
Directors and senior management, ensuring that
a diverse pipeline exists.

• To report to the Board on the work of the Committee.

Priorities for 2019
• Recruitment of a Non-executive Director/Chair of

Risk Committee.

• Medium-term succession planning for the Chair

and NEDs.

• Diversity.

• Executive succession.

• Group governance framework.

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Committee membership
Member

Joined

IC Iain Cornish (Chair)

1 October 2011

SJ Simon Jeffreys

4 December 2018

BW Baroness Wheatcroft

1 January 2014

RY Roger Yates

8 October 2018

Other members serving during 2018

Stepped down

SB Sarah Bates

8 October 2018

The Committee’s terms of reference set out the Committee’s role
and authority and can be found on the corporate website at
www.sjp.co.uk.

Operation and performance
of the Committee
The Committee comprises the Chair of the Board and all the
independent Non-executive Directors. Following Sarah Bates’
retirement in October, Iain Cornish was appointed as Chair of the
Committee, and Roger Yates joined the Committee. In light of the
changes to the Code and the heightened focus on NED succession,
the Board agreed that all of the Non-executive Directors should
be members of the Committee, and Simon Jeffreys was added to
its membership in December. The Committee’s effectiveness has
been reviewed by the Board as part of its overall assessment of its
effectiveness (see pages 92 and 93) and it remains satisfied that,
as a whole, the Committee has the experience and qualification
necessary to perform its role.

Given the topics discussed, the Committee invited the Non-executive
Directors who were not members of the Committee earlier in the
year, to join all or part of Committee meetings held in the year. In
addition, the following people attended to present on relevant topics
during the year: the Chief Executive, Chief Financial Officer and Chief
Risk Officer.

Chair succession
As part of its medium-term Board succession planning, the
Committee selected Korn Ferry, a signatory to the Voluntary Code
of Conduct for Executive Search Firms with regard to Board diversity,
to facilitate a search for an additional Non-executive Director with
one of the criteria being a potential Chair successor. The Committee
was provided with a long-list of candidates and, following a detailed
review, concluded that there were no outstanding external candidates
for the role of Chair of the Board. Shortly thereafter, Sarah Bates
informed the Board of her intention to retire, having served on the
Board since 2004, and invited the existing Non-executive Directors to
be considered for the role.

Following this, a sub-committee of the Committee, made up of
non-conflicted Non-executive Directors, was formed and chaired
by Baroness Wheatcroft. This sub-committee approved a job
description for the Chair of the Board and reviewed whether external
candidates should be considered and evaluated potential internal
candidates. The sub-committee concluded that the new Chair of the
Board should be appointed exclusively from internal candidates given
the appropriateness of their fit and experience. The sub-committee
then met with the internal candidates, focusing on their suitability
and their capacity to meet the time commitments, before ultimately
concluding and recommending to the Board that Iain Cornish should
be appointed as Chair of the Board when Sarah Bates retired.

Committee activities during 2018
The Committee held six meetings during the year and the key topics considered at those meetings are summarised below.

MARCH

APRIL

JUNE

• Board and senior management

• Board composition and succession

• Selection of Board effectiveness review

succession planning

• Diversity

• Director training and development

provider

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113

Board and Executive succession
Continuity and stability of leadership has been a significant factor
in St. James’s Place’s success, but the Board is also mindful of the
importance of our Non-executives maintaining their independence.
Over the next four years, all of the Non-executive members of
the Board will reach nine years’ tenure, a threshold seen by many
as a limit beyond which independence is difficult to maintain.
With this in mind the Committee is focused on establishing clear
plans to manage the significant transition in Non-executive Board
membership over the next few years.

As stated above, we value continuity and stability, so in order to
ensure we maximise knowledge transfer and avoid disrupting the
effectiveness of the Board’s performance, the existing Non-executive
Directors are likely to continue on the Board alongside their successors
for short periods. The overlap will also ensure that incoming directors
are able to seek counsel from long-standing colleagues who are
more familiar with the nuances and unique elements of our culture.
Increasing diversity, in general, at Board level will be an important
factor in the Committee’s planning, and the recruitment process will
only employ the services of search firms which have signed up to the
Voluntary Code of Conduct on gender diversity, with at least 50% of
candidates on the recruitment long lists being women.

During 2018, in addition to selecting the new Chair of the Board, the
Committee also recommended to the Board the appointment of
Roger Yates as Senior Independent Director, and a number of changes
to the membership of the Board’s principal Committees, detail of
which are set out in the individual reports of those Committees.

In the last couple of years the Committee has overseen the selection
of a new Chief Executive, a new Chief Financial Officer , a new
Chief Risk Officer and a new Head of the Investment Division, and
remains focused on the development of a diverse pipeline of talent
that will provide a broad range of options when selecting new senior
managers and Executive Directors. When planning for succession
the Committee recognises the importance of introducing external

experience and perspectives in avoiding ‘group think’. However,
where possible we want to promote from within, enabling our
people to grow with the organisation and contributing to the Board’s
aim to safeguard our unique culture. To support this, leadership
programmes have been established at all levels to enable the
organisation to identify and nurture our senior management and
Executive Directors of the future.

The Committee aims to establish clear succession plans for each
Executive Board member, with the plans for each taking account of
the specific needs of the role. When making appointments to those
roles, our selection processes will take account of the specific role
and the diversity and inclusion policy we have set, more details of
which can be found below.

Group governance
Recognising the rapid growth of the business and the evolving
regulatory environment, the Committee is keen to ensure that
St. James’s Place continues to have a sustainable and effective
governance framework to underpin its business model. During the
year, the Committee, working with the Executive Board, considered
the Group’s governance framework with the aim of clearly
articulating a scalable model that would apply across the Group
whilst preserving the fundamental aspects of our vertically integrated
model, which has been a key component of our success.

The Committee considered a proposed governance model, based
upon a number of high-level principles which took account of best
practice and requirements introduced by the Senior Managers and
Certification Regime and the Asset Management Market Study.
Going forward, the Committee will continue to closely monitor the
governance model and oversee the relationships between the Board’s
Committees and the boards and committees of Group subsidiaries.

JULY

• Board succession

OCTOBER

• Chair succession

• Board succession

• Board and Committee composition

NOVEMBER

• Board and senior management

succession

• Non-executive Directors’ independence

and time commitments

• Diversity

• Governance framework

MEMBERS PRESENT

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Diversity and inclusion
2018 saw the publication of the first gender pay gap reports and, as
many commentators expected, the financial services sector posted
figures significantly above the national average, with the average
gender pay gap of 22% lagging the national average of 9.7%. Our
own gender pay gap report highlighted a greater disparity, which has
underlined to the Board the scale of the effort that will be required
in the coming years. As stated previously, the Board is clear that a
diverse and inclusive community will make our business stronger
and drive continued growth and innovation and, unless we take
action, we risk not attracting and retaining the high-calibre people
we want and need to deliver our strategy.

As mentioned above, the Committee is establishing a clear plan for
the succession of Non-executive Directors, including the Chair, over
the coming years, and this provides an ideal opportunity to address
the Board’s own gender balance and to increase its overall diversity.
In respect of Non-executive Director and senior management
appointments, we have set out a number of targets and
commitments to ensure that we promote diversity of gender, social
and ethnic backgrounds, cognitive thought and personal strengths:

• new Directors only to be recruited through search firms which have
signed up to the Voluntary Code of Conduct on gender diversity;

• at least 50% women on NED recruitment long lists;

• signing up to HM Treasury’s Women in Finance Charter

(achieved in 2018);

• 30% of senior positions held by women by 2023;

• at least 33% women on senior recruitment shortlists;

• training and workshops;

• 90% maternity return rate; and

• wellbeing and flexible working.

The Committee has been closely monitoring our performance
against these targets which have been factored into Executive
team bonus performance criteria and Board KPIs, and in 2018
we began to see progress against them. However, the Board, the
Executive Board and the Committee recognise that more can be
done to help the initiatives gather momentum and to broaden the
focus to diversity in its widest sense. This has been reflected in the
Diversity Policy approved by the Board in 2018 and the adoption of
a Strategic Approach and a set of priorities for 2019, as proposed by
the Diversity and Inclusion Steering Group (the ‘DISG’) which is led by
Ian Gascoigne.

The 2019 priorities have been brought together in a proposed action
plan under the following themes:

Theme

Leadership

Talent development

Actions include

Recognising the importance of this
agenda, Andrew Croft will join the
DISG and the Exective Board will
have specific objectives in relation
to diversity and inclusion.

Introducing development support
for women at an earlier stage in their
careers to ensure we build a more
diverse pipeline for senior roles.

Communication and
development

Building an internal communications
strategy to enable collaboration
across diversity channels.

Embedding in our
employee life cycle
policies and practices

Extending our focus on diverse
shortlists for recruitment to include
more junior pipeline roles.

External accreditation Building on the progress made

in relation to gender diversity,
introducing benchmarks and
establishing targets through
the LGBT Great framework.

The DISG leads and drives the diversity programme throughout
the Group and the Partnership, implementing initiatives and
monitoring progress against agreed measures. The DISG reports to
the Executive Board and ultimately to the St. James’s Place Board,
through the Nomination Committee. Progress against each of
the diversity objectives and initiatives set by the Board is regularly
reviewed by the Executive Board, the Nomination Committee and
the Board. Clear sponsorship and accountability at Board and
Executive Board level, underpinned by the alignment of specific
performance targets via personal and strategic objectives, ensures
that there is a clear link between diversity and inclusion and our
strategy. Diversity and inclusion are also key themes in the 2025
strategy the Board has been developing.

GOVERNANCEST. JAMES’S PLACE PLC 115

Board effectiveness
The Committee has reviewed detailed analysis as to the significant
other commitments of the Non-executive Directors and how much
time they were spending on the Company’s business and affairs.
The Committee and the Board are satisfied that the Non-executive
Directors are able to, and do, commit sufficient time and attention
to the Company’s business. In addition, the Committee reviewed
and approved an assessment of the independence of each of the
Non-executive Directors, concluding that each of the Non-executive
Directors demonstrated that they remained independent in character
and judgement.

During the year, Boardroom Review were selected to undertake
an independent evaluation of the Board’s (and it’s Committees’)
effectiveness. More detail on the process followed and output from
the review can be found on pages 92 and 93. As well as providing
a comprehensive assessment of the Board’s effectiveness, the review
carried out by Boardroom Review has provided the Committee with
a clear indication of strengths and weaknesses, including desirable
skills, attributes and experience that will form the basis of future
succession plans.

Engaging the workforce

In early 2018 we developed an interactive workshop to help
educate our employees on the business case for diversity
and inclusion, as well as develop their awareness of
unconscious bias. The workshops begin with a structured
introduction to set out our strategic approach to diversity and
inclusion before opening up into a series of open discussions
based around specific topics. The topics are introduced
through questions that aim to explore the regulatory
framework for equality, and employees are presented with
case studies that encourage them to appreciate and share
their individual perspectives. The workshop is delivered to
teams who can later reflect and consider actions pertinent
to their own area, enabling all employees to contribute to
improvements in our inclusiveness.

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R E M U N E R A T I O N A T A G L A N C E

How did we perform in the year?

EE V OPER ATING PROFIT

£1,002.0m
+8%

633,000

682,000

2018

2017

NUMBER OF CLIENTS

+5%

FUNDS UNDER MANAGEMENT

2017

2018

£90.7bn

£95.6bn

+8%

NUMBER OF ADVISERS

2017

2018

3,661

3,954

+12.5%

CHANGE IN TOTAL DIVIDEND FROM 2017 TO 2018

2017

2018

42.86p

48.22p

How were our Executive Directors rewarded?

Andrew Croft

Ian Gascoigne

Craig Gentle

David Lamb

£1,901,184

£1,652,301

£1,578,451

£1,324,912

Base salary Benefits Pension Annual bonus Long-term incentives Other

For more information, see page 122

How Executive Director pay supports alignment with shareholders

50%

OF BONUS DEFERRED AND
HELD IN THE COMPANY’S
SHARES FOR THREE YEARS

100%

PSP AWARDS HAVE TO
BE HELD FOR AN EXTRA
2 YEARS POST VESTING 1
1 and cannot be sold other than to
settle tax on vesting or exercise

200%

SHAREHOLDING
REQUIREMENT
(% OF SALARY)

50%

OF ALL VESTED
SHARES FROM PSP ARE
REQUIRED TO BE HELD
UNTIL SHAREHOLDING
REQUIREMENT IS MET

For more information, see pages 138 to 141

GOVERNANCEST. JAMES’S PLACE PLC 117

R E P O R T O F T H E
R E M U N E R A T I O N C O M M I T T E E

CON T E N T S

Section 1 ....................................................................................................................................117
Remuneration overview

Section 2 ................................................................................................................................... 120
Directors’ Remuneration Report

Section 3 ...................................................................................................................................138
Summary of the Policy for Directors

1. Remuneration overview
Introduction
On behalf of the Remuneration Committee (the Committee) and the
Board, I am pleased to present the Directors’ Remuneration Report
for 2018 (the Report).

At the AGM held on 4 May 2017, shareholders approved the
Remuneration Policy (the Policy) with 99.6% of votes cast in favour.
No changes are proposed to the Policy for 2019 and therefore there
will only be a single advisory vote at the 2019 AGM to cover this
annual statement together with the Annual Report. The full Policy
can be found on our website at www.sjp.co.uk and a summary is
set out on pages 138 to 141 together with details as to how each
element of the Policy supports the Group’s strategy.

Review of 2018
This Report includes disclosure of performance targets and the
outcome for the annual bonus for 2018. The Committee determined
that 62% of the maximum annual bonus should be payable for 2018,
reflecting the good financial results for 2018 and excellent progress
against strategic objectives set by the Committee at the start of
the year, which are fully explained in the Report. Fifty percent of
the bonus is deferred into shares for three years.

2018 has been another year of good performance and our
Executives’ remuneration for 2018 reflects this. Based on the
three-year performance to the end of 2018, 85.3% of the Executive
Directors’ Performance Share Plan awards granted in 2016 will vest
in March 2019, as a result of relative Total Shareholder Return (TSR)
being between median and upper quartile and Earnings Per Share
(EPS) growth being above the upper end of the performance range
set by the Committee.

ROGER YATES, Chair of the Remuneration Committee

Key objective of the Committee
To ensure that remuneration arrangements support the
strategic aims of the business as well as the recruitment,
motivation and retention of senior executives whilst also
complying with regulatory requirements.

Role of the Committee in summary
• Determine and review the Policy for the Executives

(including Code Staff).

• Review and approve the implementation and operation

of the Policy.

• Determine the discretionary bonus schemes for

Executives for each year and review performance
against these.

• Determine the design and targets for any performance-

related plans and the grant of awards made under
these plans.

• Set termination arrangements for Executives.

• Monitor and review the remuneration policies
and trends for employees across the Group.

• Appoint, set the terms of engagement for, and review

the performance of, remuneration advisers.

Priorities for 2019
• Review the Policy in preparation for the triennial review

in 2020.

• As part of the above review, consider the relevant

aspects of the new UK Corporate Governance Code and
other appropriate regulatory and other requirements.

• Review the remuneration structure for employees.

• With the Board Risk Committee, continue to monitor

and review any risks and mitigants in relation to
remuneration.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

“ Our remuneration policy
supports and is aligned to
the business strategy, and
the remuneration outcomes
for 2018 reflect the good
performance of the business.”

Remuneration for 2019
The Committee considered the overall remuneration arrangements
for the Executive Directors in 2019 in accordance with the Policy and
has decided to award an increase of 3% in the base salaries of the
Executive Directors for 2019, which is in line with the overall increase
of base salaries for the workforce. Despite this increase, the base
salaries remain below market median for a company of our size both
in Financial Services and General Industry.

The maximum annual bonus opportunity and maximum
performance share awards for 2019 will remain at the same levels
as 2018. No discretion to override variable pay outcomes has been
exercised during the year.

Following a review of the fee levels for our Non-executive Directors,
the fees of the Chair for 2019 will increase to £215,250 (5% increase),
the base fees of the Non-executive Directors will increase to £66,950
(3% increase), the Committee Chair fees will increase to £22,403
(3% increase) and the Senior Independent Director fees will increase
to £6,031 (3% increase). Recognising the increased workload,
regulatory responsibilities and the size of the Group as well as a
benchmarking review which revealed that the fee is below median
level for companies of our size, the Committee has decided that the
Chair’s fee will be increased over the next few years to the extent
necessary to bring this fee in line with the relevant benchmarks.

Malus and clawback, shareholding
requirements and pension allowance –
changes to practice
To ensure malus and clawback provisions remain aligned with best
practice, the Committee reviewed our approach in 2018. Following
this review, the triggers for which malus and clawback may be
applied have been extended to include wider range of scenarios.
The new malus and clawback policy will apply to variable pay in
relation to awards made from 1 March 2019 for all participants and
also, for Executive Directors and the senior leadership team, to the
cash element of the annual bonus. Further details are set out on
page 136.

As mentioned last year, the Committee decided, (with effect
from 2018), to change the practice in relation to the shareholding
requirement for Executive Directors so that 200% of salary has to be
held in the Company’s shares (rather than 150% in the Company’s
shares and the remaining 50% in the Company’s shares and/or one
or more St. James’s Place fund portfolios). Further details are set out
on page 133.

The practice in relation to the pension contribution for Executive
Directors has also been changed so that, for any new Executive
Director joining the Board with effect from the 2018 AGM, the
pension contribution shall be aligned to that of the workforce, which
is 10% of salary on joining. Please see page 136 for further details.

GOVERNANCEST. JAMES’S PLACE PLC 119

Committee membership
Member

Joined

RY Roger Yates

1 January 2014

SJ Simon Jeffreys

1 January 2014

BW Baroness Wheatcroft

3 May 2012

Changes to the Board
As announced in May and October 2018, Sarah Bates retired as Chair
of the Board of Directors and has been succeeded by Iain Cornish
with effect from 8 October 2018. On the same date, we confirmed
that David Lamb was stepping down from the Board of Directors
on 26 February 2019 and further details of his new role with the
Company are set out on page 123 of this Report.

Engagement with shareholders
and best practice
The Committee is regularly updated on the latest views of major
shareholders and investor representative bodies and best practice.
Any views expressed by shareholders at general meetings of
the Company or otherwise will be considered by the Committee
as part of any review of the Policy. The Committee understands
the important and increasing focus on clear and transparent
disclosure of remuneration outcomes demonstrating the alignment
of remuneration and performance, and the Committee believes
it provides complete disclosure in this Report.

Corporate developments and
regulatory change
The Committee is closely monitoring developments in remuneration
regulations from European and UK authorities (including the
recent changes to the UK Corporate Governance Code) and will be
considering any necessary changes to the Policy in light of these
changes. The Report includes details of our CEO Pay Ratio to other
employees, which the Committee decided to include for the first
time this year rather than in next year’s report when it becomes
a regulatory requirement.

Summary
We are confident that the Policy supports our corporate objectives
and the remuneration awards reflect the good performance of the
Company and management.

I encourage you to support the remuneration resolution to be
proposed at the next AGM and if, in the meantime, you have any
questions regarding remuneration then my colleagues on the
Committee and I will be pleased to address them.

ROGER YATES
On behalf of the Remuneration Committee
26 February 2019

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

2. Directors’ Remuneration Report

This Annual Report on Remuneration will be put to an advisory shareholder vote at the 2019 AGM. This part of the Report explains the work
of the Remuneration Committee, how we implemented our Policy during 2018 and how we intend to implement our Policy in 2019. The
information on pages 120 to 137 has been audited where indicated.

Remuneration Committee
ROLE, ACTIVITIES AND PERFORMANCE OF THE COMMITTEE
The Committee’s primary purpose is to ensure that there is a clear link between reward and performance and that the Policy structure and
levels of remuneration for both Executive Directors, FCA Remuneration Code Staff and Solvency II Staff (the latter two are referred to as
‘Code Staff’) are appropriate. In particular, the Committee reviews the list of those employees who are considered to be Code Staff and
monitors compliance with the Remuneration Codes in relation to that population. The key responsibilities of the Committee are set out
on page 117. The full terms of reference for the Committee can be found on the Company’s website www.sjp.co.uk.

Committee activities during 2018
The key topics that were discussed by the Committee during 2018 were:

JANUARY

FEBRUARY

OCTOBER

DECEMBER

• Performance of Executives

• Approving the following in

against 2017 objectives

relation to Executives:

- 2017 annual bonus

- 2018 financial and strategic

objectives

- The total vesting amount in
relation to 2015 PSP awards

- The conditions to be met in
relation to 2018 PSP awards

- 2018 base salaries

• Reviewing and approving the
2017 Directors’ Remuneration
Report

• Initial proposals for

2018 annual bonus for
Executives

• Final Total Shareholder
Return results, Earnings
Per Share results and
proposed 2015 PSP Award
for Executives

• 2018 salary reviews for
Executives and other
employees

• 2018 Remuneration

Policies

• Update on regulatory

developments

• Risks and mitigants in

relation to Remuneration
Policies and their
implementation

• Review of the Chair’s fee

• Update on performance by
Executives against 2018
objectives

• Considering 2019 annual
bonus and PSP awards
structure

• Reviewing 2019 Executive

salaries

• Approving the new malus
and clawback policy and
operating manual

• Approving the Policy for

2019 for recommendation
to the Board

• Reviewing and setting the

Chair’s fee for 2019

• Update on performance by
Executives against 2018
objectives

• Update on performance against

2016 PSP award metrics

• Reviewing employee

remuneration structures with
potential risks arising and
mitigants

• Approving changes to senior

executive remuneration

• Discussing proposed malus and
clawback policy and operation

• Considering trends and practice
in UK executive remuneration

• Approving the remuneration

package for a senior executive

• Reviewing the performance of
the Committee’s advisers and
appointing advisers for 2019

• Reviewing the Committee’s

terms of reference and
coverage of these during 2018

MEMBERS PRESENT:

Note: ‘Executives’ includes Executive Directors and Code Staff

GOVERNANCEST. JAMES’S PLACE PLC

121

VOTING AT THE 2018 ANNUAL GENERAL MEETING
The votes cast at the 2018 Annual General Meeting in respect
of the resolution on the Report of Directors’ Remuneration and
the votes cast at the 2017 Annual General Meeting in respect
of the resolution on the Policy are summarised below.

Annual
remuneration
votes (2018 AGM)

Policy votes
(2017 AGM)

Votes for:

415,662,589 1

405,277,386 1

% of votes cast

99.62%

99.61%

Votes against:

1,565,604

1,591,694

% of votes cast

0.38%

0.39%

Total votes cast: 417,228,193

406,869,080

Total votes
withheld:

15,118,178

5,529,114

1 Including ‘for’ discretionary votes lodged in favour of the Chair.

The Committee’s effectiveness was reviewed by the Board as part of
its overall assessment of its effectiveness (see pages 92 and 93) and
the Board remains satisfied that, as a whole, the Committee has the
experience and qualifications necessary to successfully perform
its role.

COMMITTEE MEMBERSHIP AND ATTENDANCE IN 2018
This is set out on page 86. The Chair of the Board also attended all
the Committee meetings during the year and the CEO and CFO were
invited to attend appropriate agenda items. No Director was present
when their own remuneration was considered or agreed.

ADVISERS TO THE COMMITTEE
The Committee appointed independent remuneration consultants
from the Executive Compensation Practice of Aon plc (Aon), to
advise on remuneration matters generally. Aon is a signatory to
the Remuneration Consultants’ Code of Conduct which requires its
advice to be impartial and Aon has confirmed its compliance with the
Code to the Committee.

The total fees paid to Aon for the advice provided to the Committee
during the year were £83,558 (excluding VAT). Fees are charged on a
‘time spent’ basis.

Certain subsidiaries of Aon have provided some investment advisory
services to certain subsidiaries in the Group during 2018 for which
the fees were £50,000 (excluding VAT). The Committee has been
advised of the basis on which Aon’s Executive Compensation
Practice is organised and managed as part of the wider Aon
organisation and the basis on which its staff are remunerated and
is satisfied that the additional services provided by other Aon group
companies did not in any way compromise the independence of
advice provided to the Committee.

Towards the end of 2018 the Committee reviewed its advisers,
following which Aon was re-appointed as the advisers to the
Committee for 2019, with the Committee noting that Aon has
confirmed its compliance with the Remuneration Consultants’ Code
of Conduct and therefore remaining satisfied that Aon’s advice was,
and is, objective and independent. Given his connection with Aon,
Simon Jeffreys excluded himself from the review process and the
decision to re-appoint Aon.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

How the Policy was applied in 2018
REMUNERATION PAYABLE IN RESPECT OF PERFORMANCE IN 2018 (AUDITED)
Summary of total remuneration
The remuneration received by Executive Directors in respect of the years ended 31 December 2017 (except for Craig Gentle who was not an
Executive Director during 2017) and 2018 is set out below.

Elements of remuneration
Basic salary
Benefits
Pension
Annual Bonus
Long-term incentives
Other
Total

Notes:

Andrew Croft
2018
£
533,000
47,655
106,600
498,108
710,619
5,202
1,901,184

2017
£
374,125
38,614
74,825
545,200
709,376
179
1,742,319

Ian Gascoigne
2018
£
385,392
115,232
77,078
360,170
710,619
3,810
1,652,301

2017
£
374,125
83,112
74,825
545,200
709,376
179
1,786,817

David Lamb
2018
£
385,392
41,556
77,078
360,170
710,619
3,636
1,578,451

2017
£
374,125
40,704
74,825
545,200
709,376
–
1,744,230

Craig Gentle

2018
£
385,392
39,990
77,078
360,170
462,282
–
1,324,912

Benefits
Benefits for the Executive Directors comprise the entitlement to a company car or cash equivalent, fuel, private health care, life and critical illness cover,
permanent health insurance, health screening and travel costs where deemed taxable and, for Ian Gascoigne, a housing allowance to facilitate working
across multiple locations, and are generally the amounts which are returned for taxation purposes.

Pension contributions
Pension contributions, being 20% of base salary were capped by legislation and so a non-pensionable salary supplement was paid to the Executive Directors
in full for Andrew Croft, David Lamb and Ian Gascoigne and for the balance for Craig Gentle, who had a £10,000 contribution to the money purchase group
pension scheme. All Executive Directors appointed after the 2018 AGM will receive a pension contribution of 10% of salary on joining increasing to 12.5%
after five years and 15% after 10 years of service.

Annual bonus
As explained on page 139, half of the annual bonus is paid in cash, with the other half in the form of a conditional award of Company’s shares which are
subject to forfeiture for three years under the terms of the Deferred Bonus Scheme (DBS).

Long-term incentives
The value of the long-term incentives is the value of shares for the award where the performance period ends in the year together with the value of the
dividends that would have been received during the three-year performance period. The gross value of those dividends is £70,372 for Andrew Croft,
Ian Gascoigne and David Lamb and £39,308 for Craig Gentle. The long-term incentive figures for 2018 have been calculated using the average of the
Company’s share price in the three-month period to 31 December 2018, being £10.15, as the actual vesting date of the PSP award is on 24 March 2019
and 26 September 2019 for Craig Gentle’s award. The figures for 2017 have been updated from the three-month average figures used in last year’s report
(being £764,842 for Andrew Croft, Ian Gascoigne and David Lamb) to take into account the Company’s share price on the date of vesting on 26 March 2018,
being £10.80. These awards are subject to a two-year post-vesting holding period.

Other
These amounts relate to (i) the gain of the SAYE options exercised by Andrew Croft (exercised on 1 May 2018 when the mid-market price of the Company’s
shares was £11.51), and Ian Gascoigne and David Lamb (who both exercised on 1 November 2018 when the mid-market price of the Company’s shares
was £10.17) and (ii) the value of the Matching shares (one for every ten Partnership shares) under the Share Incentive Plan (SIP) for Andrew Croft and
Ian Gascoigne, whereby 16 shares were purchased on 29 March 2018 at £10.87 and 17 shares were purchased on 24 March 2017 at £10.51.

David Lamb was a non-executive director of The Henderson Smaller Companies Investment Trust plc during the year and was paid and retained a fee of
£23,000 in connection with that role (2017: £23,000). As this is not remuneration from St. James’s Place, this is not included in the remuneration above.

GOVERNANCEST. JAMES’S PLACE PLC 123

Payments to retiring Director
As we announced in August and October 2018, David Lamb has decided to step down from the Board effective 26 February 2019.

Following his retirement from the Board, Mr Lamb is continuing as an employee of the Company. He will Chair the Investment Committee,
the Manager Monitoring Committee and the Investment Consultants Committee. Further he will continue to undertake Manager visits and
support Robert Gardner’s transition into the Director of Investments role. This will enable the Company to continue to benefit from Mr Lamb’s
considerable experience in financial services including 27 years as an Executive with the Group.

In this new role, Mr Lamb will receive a total remuneration package of £200,000 per annum (which includes basic salary and the monetary
value of any Company fringe benefits). He will cease to be eligible for annual bonus, long-term incentive (Performance Share Plan (PSP))
awards or pension allowance.

Mr Lamb remains eligible for an annual bonus in respect of the 2018 financial year, subject to the usual performance conditions under the
bonus plan; half of the bonus will be deferred into shares, in accordance with the Policy. He will not receive a PSP grant in 2019.

In accordance with the relevant plan rules, he will retain the deferred bonuses he holds which are 27,294 shares (in respect of the 2015
Deferred Bonus Scheme Award), 24,344 shares (in respect of the 2016 Deferred Bonus Scheme Award), 23,930 shares (in respect of the 2017
Deferred Bonus Scheme Award) and a number of shares to be determined (in respect of the 2018 Deferred Bonus Scheme Award). He will also
retain (in accordance with the plan rules) the PSP awards he holds which are 73,874 shares (in respect of the 2016 PSP Award), 71,405 shares
(in respect of the 2017 PSP Award) and 69,890 shares (in respect of the 2018 PSP Award). These awards remain subject to existing vesting
dates, performance conditions (PSP) and post-vesting holding requirements (PSP).

Details of variable pay earned in the year
Summary of total annual bonus for 2018 performance
The performance conditions and weightings which applied to the annual bonus and the resulting payout were as follows:

Weighting
(% of salary)

Weighting
(% of maximum)

75%

50%

75%

50%

Measure
Financial

Strategic

Total payout

Threshold
(EEV operating
profit)
(20% payable)
£990m

Maximum value
(100% payable)
£1,080m

Actual
£1,002m

Payout
(% of salary)
23%

Payout
(% of maximum
total bonus)
15.33%

Assessment by the Committee of the
performance of the Executive Directors

70%

46.67%

93%

62%

1 The Committee has the discretion to scale back the annual bonus payable in respect of the strategic measures if it considers it inappropriate in the context

of the overall financial results of the Group. The Committee reviewed the Group’s performance and agreed that no scale-back was appropriate.

2 The Committee retains the discretion to amend each element of the bonus, up or down, within the overall cap of 150% of salary, to take into account other
relevant factors such as the Group’s performance compared to competitor organisations or, for instance, an exceptional positive or negative event which
impacts the Group. The Committee reviewed the Group’s performance as well as competitors and the external market at the end of the performance period
and agreed that no adjustment was required.

3 Half of the bonus is paid in cash, with the remainder being invested in the Company’s shares and deferred for three years, under the Group’s deferred

bonus plan.

In setting the operating profit target for the year it was assumed that the combined operating experience variance and operating assumption
changes would have a neutral impact on the outcome for the year. The actual outcome for the year included a combined positive impact of
£50.4 million to the operating profit and therefore had a positive effect on the base figure on which bonuses are calculated. The Committee
concluded that this positive outcome was as a result of management action during the year and should therefore be included when assessing
the bonus payout for the year.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Summary of payout for Executive Directors

Executive Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb

Payout
(% of salary)
93
93
93
93

Payout
(% of maximum)
62
62
62
62

Final payment
(Cash)

Final payment
(Deferred)

£
249,054
180,085
180,085
180,085

Annual bonus strategic targets performance assessment
As described in other parts of the Annual Report and Accounts, the Company delivered good performance in 2018 for our clients,
shareholders and other stakeholders. The Committee considered these three groups when setting the strategic targets for 2018, together
with other objectives set out in the 2018 business plan. In serving our clients well, developing our employees and the Partnership for the
future and striving to improve the effectiveness of our organisation, the Company will be best placed to meet our long-term business
objectives, and create additional value for our shareholders. The Company also focuses on the importance of safe and sustainable growth
through prudent management of risk and the highest standards of regulatory compliance.

The Committee assessed how well the Executive team had performed in relation to the objectives set at the start of the year. The Committee
did not place fixed weightings on the factors assessed, but made a judgement based on the Committee’s view of the relative importance
and impact of those factors over the course of the year. For some factors, the Committee put in place quantitative metrics, and for others
qualitative judgements were made, depending on the nature of the strategic objective.

GOVERNANCEST. JAMES’S PLACE PLC The Committee took into account the following:

1. CLIENTS

• An on-line survey was undertaken and,
although the response rate was lower
than a full survey, it was consistent with
the results of the previous full survey in
that 91% of clients said that they would
recommend SJP;

• Clients continued to benefit from

above average performance across the
majority of funds and portfolios over a
range of time periods. Across all ten-
year periods, the equity fund managers
outperformed their benchmark, on
average, 85% of the time. Over the three
and five-year periods, the equivalent
average outperformance rate was 56%
and 71% respectively. For the range of
eight Growth and Income portfolios
available to clients, outperformance
(compared to the relevant Asset Risk
Consultants (ARC) Private Client Index
peer group) occurred in 81% of all three-
year periods on average;

• As part of continued enhancements
and refreshment of the Investment
Management Approach, five fund
manager changes were made during
the year and the Diversified Assets
(FAIF) was successfully launched;

• Continued focus on customer

outcomes with very encouraging
results against measures in relation
to disclosures and quality of
documentation and in particular good
results in relation to suitability of
defined benefit pension transfers;

• The number of advice-related

complaints remained very low relative
to our overall scale;

• The Group won a number of industry
awards; many of these were voted on
by clients; and

• The above factors, together with good
service levels, generally contributed
to excellent retention of funds under
management, with 96% of existing
funds being retained (excluding
regular income withdrawals) and
client numbers increasing by 8% (see
pages 31, and 18 and 19 respectively
for further details on Funds Under
Management and clients).

2. RISK MANAGEMENT

• Continuing positive and constructive

engagement with the Group’s regulators
and responding effectively to key
regulatory initiatives including the
Insurance Distribution Directive and MiFID
II with significant preparation for the new
annual cost and charge disclosure being
implemented from January 2019;

• Completing various objectives designed

to continue to enhance and strengthen the
monitoring and mitigation of key regulatory
risks impacting the Group particularly in
relation to systems and processes.

OBJECTIVES
AND
PERFORMANCE

4. OTHER OBJECTIVES

• Continuing to support Partners in building
sustainable businesses (particularly in
relation to IT and systems) and significant
progress made in relation to Partners
achieving chartered status;

• Dealing effectively with the significant
change agenda and the associated
complexities;

• Evolution of the Group’s range of funds,
the range of fund managers available to
clients and the effective operation of the
Investment Committee; and

• The ongoing success of the Group’s
Corporate Responsibility objectives,
including raising more than £10 million
(including matching) for the Charitable
Foundation and expanding the volunteering
opportunities available to employees.

125

3. LONG-TERM SUCCESS

• The growth in the size of the Partnership
(including Partners and Advisers in the
UK and Asia) of more than 8%;

• The success of the Academy in

attracting suitable candidates to the
courses run in 2018 with more than
379 active students in the Academy
programme. 142 students graduated
from the Academy during the year;

• Successfully completing three major

migrations involving a total of 400,000
plans for 209,000 clients and £29.5
billion Funds Under Management.
Following these migrations
approximately £62 billion of Funds
Under Management is held on Bluedoor
with 77% of new business and 66% of
existing business now processed on
Bluedoor;

• Continuing to develop the Asia and

Rowan Dartington operations;

• Good progress on building a productive
relationship with SS&C following their
acquisition of DST;

• Successfully executing the first tranche
of securitisation of a portfolio of Partner
loans with Santander;

• Delivering some significant actions in

relation to our people strategy, including
launching our senior leadership
programme and additional training and
development opportunities for the senior
management team, the Partnership and
the workforce generally;

• Positive results from our biennual
Employee Survey with 90% of
employees responding and an overall
engagement score of 82%;

• High levels of retention for both
employees and members of the
Partnership;

• Appointment of a highly experienced
Director of Investment Management
to succeed David Lamb;

• Committing to the Her Majesty’s

Treasury (HMT) Women in Finance
Charter with some clear objectives
to be achieved in relation to diversity,
continuing to build the necessary
foundations to deliver these objectives
and making progress in relation to areas
such as an increased number of senior
female appointments; and

• Continuing to maintain and reinforce the

Group’s distinctive culture.

Taking all the above strategic objectives into account, the Committee awarded a bonus of 70% of salary (46.7% of the maximum) in
relation to the strategic element of the annual bonus scheme, recognising that a high proportion of the strategic objectives were graded
as ‘outstanding’ or ‘above stretch’ and that nearly all of the major business plan objectives had been satisfactorily completed.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Long-term incentive awards
Vesting of Performance Share Plan (PSP) awards (audited)
On 31 December 2018, the awards made on 24 March 2016 under the PSP reached the end of their three-year performance period. These
will vest on 24 March 2019, being the third anniversary of the date of grant. The vested shares for Executive Directors are subject to a two-year
post-vesting holding period other than to sell shares to settle tax on vesting or exercise. The performance conditions which applied to the 2016
PSP awards, and the actual performance achieved against these conditions, are set out in the tables below:

Performance level hurdle
Below threshold
Threshold
Stretch or above
Actual Achieved

TSR relative to the FTSE 51 to 1501
Performance
required
Below Median
Median
Upper Quartile or above
33 out of 82 companies

% of one third
of award vesting
0%
25%
100%
56.1%

Average annual adjusted EPS growth
(including the unwind of the discount
rate) in excess of RPI2
Performance
required
Below 5%
At least 5%
16% or above
25.1%

% of one third
of award vesting
0%
25%
100%
100%

Average annual adjusted EPS growth
(excluding the unwind of the discount
rate) in excess of RPI3
Performance
required
Below 5%
At least 5%
16% or above
32.1%

% of one third
of award vesting
0%
25%
100%
100%

1 FTSE 51-150 index excluding investment trusts and companies in the FTSE oil, gas and mining sectors.

2 The first EPS performance condition is calculated by reference to the post-tax EEV operating profit (on a fully diluted basis). This measure excludes the

direct impact of the stock market fluctuations and changes in economic assumptions on the final year’s performance.

3 The second EPS performance condition is calculated by reference to an adjusted post-tax EEV operating profit, which strips out the unwind of the discount
rate. The adjustment is intended to remove indirect impacts of stock market fluctuations and economic assumptions from all years, thus removing any
impact from the opening value of in-force and the risk-free rate in the final year’s performance.

4 Straight line vesting occurs in between threshold and maximum vesting.

5 No discretion was exercised by the Committee to override the outcome referred to above.

Therefore, the total percentage of the 2016 PSP awards vesting was 85.3%, which resulted in the following awards to the Executive Directors:

Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb

Total number of
shares granted
73,874
73,874
48,805
73,874

Percentage of
awards vesting
%
85.3
85.3
85.3
85.3

Number of
shares
vesting
63,063
63,063
41,662
63,063

Value of
shares vesting
£000 1
640
640
423
640

1 As these awards will not actually vest until 24 March 2019, a deemed share price is used to calculate the value of shares vesting for the purposes of this

Report. This is taken as the three month average to 31 December 2018 being £10.15.

GOVERNANCEST. JAMES’S PLACE PLC 127

Granting of PSP awards in 2018
Details of PSP awards (at nil cost option) granted to the Executive Directors in 2018 is set out in the table below.

Director
Andrew Croft

Ian Gascoigne

Craig Gentle

David Lamb

Type of award

Basis of award
granted
Nil cost option 200% of salary
of £535,600
Nil cost option 200% of salary
of £387,280
Nil cost option 200% of salary
of £387,280
Nil cost option 200% of salary
of £387,280

Average share
price at date
of grant
£11.08

Number of SJP
shares over
which award
was granted 1
96,656

Face value
of award
£’000
£1,071

% of face value
that would vest
at threshold
performance
25%

£11.08

69,890

£775

£11.08

69,890

£775

£11.08

69,890

£775

25%

1 The number of shares awarded was calculated based on the average share price over a period of three days prior to the date of grant on 26 March 2018,
being £11.08 per share. The face value of the award figure is calculated by multiplying the number of shares awarded by the average share price figure of
£11.08.

2 PSP awards are structured as nil cost options and there is therefore no exercise price payable on exercise. Dividend equivalents accrue to the Executive
Directors between the date of grant and exercise of the award (up to a maximum of six years from date of grant), but are released only to the extent that
awards vest. Further details of the performance conditions which apply to the awards are set out in Notes 1, 2 and 3 to the table on page 126 and in the
Policy. These awards also have a post-vesting holding period of two years from the vesting date. During this period, the vested shares cannot normally
be sold, other than to the extent necessary to settle tax on vesting or exercise.

Total shareholder return performance and CEO pay over the same period
The graph below shows a comparison of the Company’s TSR performance against the FTSE All-Share index over the last ten financial years.
The Company considers this to be the most appropriate comparative index, given the broad nature of the index and the companies within it.

Total shareholder return
Source: FactSet

1,000

)
d
e
s
a
b
e
r
(
£
e
u
a
V

900

800

700

600

500

400

300

200

100

St. James’s Place

FTSE All Share

31/12/08 31/12/09 31/12/10 31/12/11 31/12/12 31/12/13 31/12/14 31/12/15 31/12/16 31/12/17 31/12/18

This graph shows the value, by 31 December 2018, of £100 invested in St. James’s Place on 31 December 2008, compared with the value
of £100 invested in the FTSE All Share Index on the same date. The other points plotted are the values at intervening financial year-ends.

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128

R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

The table below shows the total remuneration figure for the Chief Executive over the last ten financial years. The total remuneration figure
includes the annual bonus and long-term incentive awards which vested based on performance in those years (and ending in that year for PSP
scheme awards).

2009

2010

2011

2012

David Bellamy
2013

2014

2015

2016

2017

Andrew Croft
2018

Year ended 31 December

Total
remuneration £1,039,723 £1,495,600 £1,998,758 £2,410,380 £3,362,651 £3,646,514 £3,115,230 £2,631,667 £2,458,020 £1,901,184
Annual bonus
(% of maximum)
LTIP vesting
(% of maximum)

96.67%

87.94%

85.3%

93.3%

100%

57%

83%

63%

62%

92%

98%

87%

46%

95%

96%

1 The deemed value of the PSP award in the table above for 2018 is £710,619. Of this, £66,216 is due to increases in the Company’s share price over the

vesting period, being an increase of 12% (the share price of the PSP award on the date of grant was £9.10 and the deemed share price on the date of vesting
was £10.15 calculated as set out in Note 2 below).

2 As the actual vesting date for the PSP (performance period ending 31 December 2018) is not until 24 March 2019, a deemed value has been used. This is
the average of the Company’s share price in the three-month period to 31 December 2018, being £10.15. The 2017 figure for total remuneration has been
updated by substituting the three-month average figure used to calculate the value of long-term incentive awards in last year’s report by a revised figure
based on the Company’s share price on the date of vesting on 26 March 2018, being £10.80.

3 David Bellamy stepped down from the position of Chief Executive effective 31 December 2017. Andrew Croft was appointed as the new Chief Executive

on 1 January 2018.

Percentage change in CEO remuneration compared to average employee
The table below shows the percentage movement in the salary, benefits and annual bonus for the Chief Executive between the current and
previous financial year compared to that for the average Group employee.

Remuneration element
Salary
Benefits
Bonus

% change 2017 to 2018

CEO
3
-1.68 1
-33.93%

Average
employee
4.3 2
-0.94
-50.91

1 See the Benefits note on page 122 for further details.

2 This figure is higher than the average salary increase of the workforce set out on page 118 due to salary increases in respect of promotions and role

changes being taken into account.

GOVERNANCEST. JAMES’S PLACE PLC 129

CEO Pay Ratio

Year
2018

Salary
Total pay

Method
Option C

25th percentile
pay ratio
62:1

Median
pay ratio
42:1

75th percentile
pay ratio
21:1

CEO pay
£
533,000
1,901,184

P25 pay
£
26,000
30,871

P50 pay
£
37,734
45,559

P75 pay
£
58,750
88,830

Although the new reporting regulations do not come into force until the Annual Report for 2019, St James’ Place has elected to disclose the
CEO Pay Ratio for 2018 in line with our commitment to shareholders on clear and transparent disclosure.

To calculate the ratio in accordance with the regulations, we ranked all our UK employees by their annualised full-time equivalent salary
as at 31 December 2018. From this we identified the three individuals at the 25th, 50th and 75th percentiles (known as P25, P50 and P75,
respectively). We then calculated the total remuneration figure (known as Y25, Y50 and Y75, respectively) for each of these employees for the
year ending 31 December 2018, in line with the same reporting regulations that apply to our Executive Directors. This is known as Option C
under the regulations.

As very few companies have so far published a ratio, it is not possible to precisely compare this to our peers. However, we expect our median
ratio of 42:1 is relatively low by comparison with many companies in the FTSE 100, where disclosure to date indicates this is typically between
50:1 and 100:1.

The median ratio is consistent with our pay, reward and progression policies for employees which relate pay levels to performance and market
benchmarks. In 2018, 64% of our Chief Executive’s total remuneration was delivered through variable pay schemes (as shown in the bar chart
below). These are directly linked to the Company’s performance as well as share price movements over the longer-term. Whilst none of the
three employees identified at the 25th, 50th and 75th percentiles are eligible to receive PSP Awards, all three received a bonus within the year
and are invited to participate in the SIP and SAYE on the same terms as the Chief Executive.

P25

P50

P75

CEO

Fixed pay Bonus Share awards

95% fixed pay; 5% bonus

96% fixed pay; 4% bonus

86% fixed pay; 14% bonus

36% fixed pay; 26% bonus; 38% share awards

Relative importance of spend on pay
The following table sets out the percentage change in profit, dividends and overall spend on pay in the year ending 31 December 2018,
compared to the year ending 31 December 2017.

IFRS profit after tax1
EEV operating profit after tax1
Dividends
Employee remuneration costs

1 Both prior year comparatives include positive one-offs (see Financial Review).

2017

£’Million
145.8
754.4
226.4
183.9

2018

£’Million
173.5
831.0
255.1
184.4

Percentage
change

%
+19
+10
+13
0

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130

R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Share awards
The tables below set out details of share awards that have been granted to individuals who were Executive Directors during 2018 and which
had yet to vest or be exercised at some point during the year.

Performance Share Plan awards outstanding (audited)

Director
Andrew Croft

Ian Gascoigne

Craig Gentle

David Lamb

Date of grant
24 March 2016
27 March 2017
26 March 2018
26 March 2015
24 March 2016
27 March 2017
26 March 2018
26 September 2016
27 March 2017
26 March 2018
24 March 2016
27 March 2017
26 March 2018

Market price
at grant
£9.10
£10.57
£10.80
£9.45
£9.10
£10.57
£10.80
£9.53
£10.57
£10.80
£9.10
£10.57
£10.80

Share
originally
awarded
73,874
71,405
96,656
68,932
73,874
71,405
69,890
48,805
23,741
69,890
73,874
71,405
69,890

Face value
£ 1
672,253
754,751
1,043,402
651,407
672,253
754,751
754,463
465,112
250,942
754,463
672,253
754,751
754,463

Shares
Vesting date
vested
24 March 2019
–
27 March 2020
–
26 March 2021
–
26 March 2018
60,618
24 March 2019
–
27 March 2020
–
–
26 March 2021
– 26 September 2019
27 March 2020
–
26 March 2021
–
24 March 2019
–
27 March 2020
–
26 March 2021
–

Remaining
unexercised at
31 December
2018
73,874
71,405
96,656
60,618
73,874
71,405
69,890
48,805
23,741
69,890
73,874
71,405
69,890

1 The face value is calculated by using the market price of the shares at grant multiplied by the number of shares originally awarded.

2 In respect of the 2018 PSP Awards for all of the Directors (except Craig Gentle) up to 2,346 shares can be exercised via a linked award under an approved

share option scheme with an exercise price of £11.08.

Deferred Bonus Scheme – shares held during 2018 (audited)
The table below sets out details of the awards held by the Directors under the deferred element of the annual bonus scheme during 2018:

Director
Andrew Croft

Ian Gascoigne

Craig Gentle

David Lamb

Balance at
1 January
2018
26,955
27,294
24,344
–
26,955
27,294
24,344
–
9,431
–
26,955
27,294
24,344
–

Released
during year 1
26,955
–
–
–
26,955
–
–
–
–
–
26,955
–
–
–

Awarded
during year 2
–
–
–
23,930
–
–
–
23,930
–
23,930
–
–
–
23,930

Balance at
31 December
2018 3

Vesting date
– 26 March 2018
24 March 2019
27 March 2020
26 March 2021
– 26 March 2018
24 March 2019
27 March 2020
26 March 2021
27 March 2020
26 March 2021
– 26 March 2018
24 March 2019
27 March 2020
26 March 2021

27,294
24,344
23,930

27,294
24,344
23,930
9,431
23,930

27,294
24,344
23,930

1 These deferred share awards were awarded on 26 March 2015 equal in value to 50% of the Director’s 2014 total annual bonus. The Company’s share price

on the date of the award was £9.45 and the exercise price on 26 March 2018 was £10.80.

2 These deferred share awards were awarded on 26 March 2018, equal in value to 50% of the Director’s 2017 total annual bonus. These shares will be held for

a restricted period ending on 26 March 2021. The price used to calculate the award was the three-day average prior to the invitation (9, 12 and 13 March 2018)
which was £11.39.

3 Outstanding awards at the year-end relate to deferred share awards awarded in 2016, 2017 and 2018 (see (2) above). The share price used to calculate the

2016 award was £9.13 and the 2017 award was £10.87.

GOVERNANCEST. JAMES’S PLACE PLC 131

Value of
the award
£
272,564
272,564
272,564
272,564

% of salary 1
72.85
72.85
72.85
72.85

The table below sets out further details of the Executive Directors’ Deferred Share bonus award.

Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb

Date of grant
26 March 2018
26 March 2018
26 March 2018
26 March 2018

Award

Deferred Shares Conditional award
Deferred Shares Conditional award
Deferred Shares Conditional award
Deferred Shares Conditional award

Type 2 No. of shares
23,930
23,930
23,930
23,930

1 The percentage of salary is calculated using the salary as at 1 January 2018.

2 The awards are not subject to performance conditions but are subject to continued service.

Further details of the deferred element of the annual bonus scheme are set out on page 139. Dividends accrue to the Directors during the
three-year period while the shares are subject to forfeiture and details of these dividends are set out on page 139.

SAYE share option scheme – shares held during 2018 (audited)
Details of the options held by the Directors in 2018 under the SAYE scheme and any movements during the year are as follows:

Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb

Options held at
1 January
2018
1,219
1,243
1,066
1,243

Granted
in year
987
993
–
993

Lapsed
in year
–
–
–
–

Exercised
in year
1,219
1,243
–
1,243

Options held at
31 December
2018
987
993
1,066
993

Dates from which
Exercise
exercisable
price
£9.11
1 May 2021 to 31 October 2021
£9.06 1 November 2021 to 30 April 2021
£8.44
1 May 2020 to 31 October 2020
£9.06 1 November 2021 to 30 April 2021

At 31 December 2018 the mid-market price for the Company’s shares was £9.44. The range of prices between 1 January 2018 and 31 December 2018 was
between £12.71 and £9.14.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Share Incentive Plan – shares held during 2018 (audited)
The table below sets out details of the awards held by the Directors under the Share Incentive Plan during 2018:

Director
Andrew Croft

Ian Gascoigne

Craig Gentle

Balance at
1 January
2018
642
325
167
174
188
–
502
210
167
174
188
–
188

Partnership
shares
allocated
during year 1
–
–
–
–
–
165
–
–
–
–
–
165
–

Matching
shares
allocated
during year 2
–
–
–
–
–
16
–
–
–
–
–
16
–

Dividend
shares
allocated
during year 3
–
–
–
–
–
–
–
–
–
–
–
–
–

Balance at
31 December
2018
642
325
167
174
188
181
502
210
167
174
188
181
188

Holding period
(matching shares)
26 March 2010 to 26 March 2013
26 March 2013 to 26 March 2016
26 March 2015 to 26 March 2018
24 March 2016 to 24 March 2019
24 March 2017 to 24 March 2020
29 March 2018 to 29 March 2021
28 March 2011 to 28 March 2014
26 March 2014 to 26 March 2017
26 March 2015 to 26 March 2018
24 March 2016 to 24 March 2019
24 March 2017 to 24 March 2020
29 March 2018 to 29 March 2021
24 March 2017 to 24 March 2020

1 Partnership shares are shares awarded in return for an investment of between £10 and £1,800. Partnership shares were awarded for both Andrew Croft

and Ian Gascoigne on 29 March 2018 at a price of £10.87 per share, in return for £1,800 being deducted from pre-tax salary.

2 For every ten Partnership shares acquired, the Company awards one matching share. Matching shares were also awarded on 29 March 2018 in relation to

the Partnership shares mentioned above.

3 The Partnership, dividend and matching shares will be held by an employee benefit trust on behalf of the Director. The matching and dividend shares must

be held for a minimum period of three years from the date of the award.

Between 2 January 2019 and 27 February 2019 there were no exercises or other dealings in the Company’s share awards by the Directors.

GOVERNANCEST. JAMES’S PLACE PLC 133

Shareholding requirements and Directors’ share interests (audited)
Shareholding requirements
As from 2018, the Executive Directors are required to build up a shareholding equivalent to 200% of salary in Company shares. All of the
Executive Directors, except for Craig Gentle, have met the shareholding requirements (as shown in the table below). As Craig Gentle joined
the Board on the 1 January 2018, under the Policy, he has five years in which to build up his shareholding to meet the requirements. The
Committee are aware of the new requirement to develop a formal post-employment shareholding requirement for Executive Directors and this
will be considered as part of the review of the Policy during 2019.

Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb
Sarah Bates 2
Iain Cornish
Simon Jeffreys
Baroness Wheatcroft
Roger Yates

% of base salary held
in SJP shares as at
31 December 2018 1
1,288
1,882
82
1,260

Shares held at
1 January
2018
700,133
759,286
9,619
501,623
13,500
–
18,364
2,500
20,000

Shares held at
31 December
2018
730,564
771,939
33,549
516,897
N/A
6,500
18,364
2,500
20,000

1 Calculated using the mid-market price at 31 December 2018 of £9.44.

2 Sarah Bates retired from the Board on 8 October 2018.

3 The interests of the Executive Directors set out above include Deferred Bonus Scheme awards held in trust for the Directors, details of which are set out on
pages 130 and 131. The interests of the Executive Directors also include awards under the Share Incentive Plan, details of which are set out on page 132.

4 The Company’s register of Directors’ interests contains full details of Directors’ shareholdings and any share awards under the Company’s various share

schemes.

5 Disclosure of the Directors’ interests in share awards is given on pages 130 to 132 and also in Note 22 – Related Party Transactions.

Between 2 January 2019 and 27 February 2019 there were no transactions in the Company’s shares by the Directors.

Executive Directors’ shareholdings and outstanding share awards

Executive Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb

Beneficially
owned at
31 December
2018 1
730,564
771,939
33,549
516,897

Outstanding
PSP awards
(performance
conditions)2
241,935
275,787
142,436
215,169

SAYE options
(no performance
conditions)3

987
993
1,066
993

Outstanding
DBS awards
(no performance
conditions)4
75,568
75,568
33,361
75,568

SIP shares
(no performance
conditions)5
1,677
1,422
188
–

1 Beneficially owned shares include those DBS Awards and SIP Shares set out in columns (4) and (5) above.

2 Details of the PSP awards are set out on page 130.

3 Details of the SAYE options are set on page 131.

4 Details of DBS awards are set out on page 130 and 131.

5 Details of the SIP shares are set out on page 132.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Dilution
Dilution limits agreed by shareholders at the time of shareholder approval of the various long-term incentive schemes allow for up to 10% of
share capital in ten years to be used for grants to employees and members of the St. James’s Place Partnership under all share schemes
i.e. both the employee and Partner share schemes; and up to 5% of share capital in ten years to be used for grants to employees under
discretionary schemes.

The table below sets out, as at 31 December 2018, the number of new ordinary shares in the Company which have been issued, or are capable
of being issued (subject to the satisfaction of any applicable performance conditions), as a result of options or awards granted under the
various long-term incentive schemes operated by the Company in the ten years prior to 31 December 2018.

Share scheme
SAYE schemes
Executive share schemes
Partners’ share schemes
Total

Number of new
ordinary shares
of 15 pence each
4,943,601
9,587,378
15,173,778
29,704,757

% of total issued
share capital as at
31 December 2018
0.93%
1.81%
2.86%
5.60%

In addition, as at 31 December 2018, the Group’s Employee Share Trust held 3,068,778 shares in the Company which were acquired to meet
awards made under the PSP, Company Share Option Plan, the Deferred Bonus Scheme and the Restricted Share Plan. The number of shares
in the Company held in the Share Incentive Plan Trust as at 31 December 2018 was 435,148.

Chair and Non-executive Director remuneration
The remuneration paid to the Chair and Non-executive Directors in respect of the financial years ended 31 December 2017 and 31 December
2018 are as follows:

Element of
remuneration
Fees
Expenses
Total

Sarah Bates
2018
£
158,159
1,131
159,290

2017
£
195,700
3,271
198,971

Iain Cornish
2018
£
118,589
14,607
133,196

2017
£
87,905
8,801
96,706

Simon Jeffreys

Baroness Wheatcroft

2018
£
86,750
2,284
89,034

2017
£
82,345
2,948
85,293

2018
£
65,000
1,735
66,735

2017
£
61,745
1,635
63,380

Roger Yates
2018
£
88,104
–
88,104

2017
£
82,345
–
82,345

1 Expenses are for reimbursement of taxable travel expenses grossed up for the tax payable thereon.

2 Sarah Bates retired from the Board with effect from 8 October 2018. Iain Cornish was appointed as the new Chair of the Board with effect from that date

and Roger Yates was also appointed as the new Senior Independent Director with effect from the same date.

3 With effect from 8 October 2018 Iain Cornish waived his fee for chairing the Board Risk Committee.

GOVERNANCEST. JAMES’S PLACE PLC 135

Implementation of the Policy in 2019
2019 SALARY
The base salaries of the Executive Directors are being increased in 2019. The current salaries as at 1 March 2018 and from 1 March 2019 are
as follows. The increase is in line with the percentage increase for the wider workforce:

Executive Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb1

1 David Lamb retired from the Board on 26 February 2019.

Salary from
1 March
2018
£
535,600
387,280
387,280
387,280

Salary from
1 March
2019
£
551, 668
398,898
398,898
–

% increase

3
3
3
–

ANNUAL BONUS FOR 2019
The Executive Directors’ maximum bonus opportunity for 2019 will be the same as for 2018 being 150% of salary. Half of the annual bonus will
be determined by EEV operating profit and half by key strategic targets.

50% of the annual bonus earned for performance in 2019 will be paid in cash and the remaining 50% will be deferred in the Company’s shares
for a three-year period and subject to continued service.

The EEV operating profit target set by the Committee is based on a sliding scale to progressively reward incremental performance. The EEV
result is calculated based on ‘best estimate’ assumptions and any deviation or changes from these assumptions are reported as an experience
variance or an operating assumption change. In setting the operating profit target for the year it is assumed the combined operating experience
variance and operating assumption changes will have a neutral impact on the outcome for the year. In setting the 2019 EEV Operating Profit
target, the Committee maintained the new business and expense growth objectives at the same level as in previous years.

The Board considers that the performance targets for the annual bonus are commercially sensitive and is not disclosing them at this time.
The performance metrics and performance against them will be disclosed in the 2019 Remuneration Report to the extent that they do not
remain commercially sensitive at that time.

The strategic element of the 2019 annual bonus will be assessed by reference to key strategic targets based around the 2019 business plan,
including elements relating to clients, shareholders and other key stakeholders. Specific objectives include: the delivery of good service to
the Group’s clients as measured by surveys and other client feedback; continuing to enhance the range of investment funds and maintaining
strong investment performance; the successful recruitment and retention of high quality Partners and Advisers; successfully implementing
the next phase of the administration systems and transferring certain existing assets onto that system; successfully controlling and mitigating
the material risks that could impact the Group; and maintaining the Group’s good relations with its shareholders and regulators.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

PERFORMANCE SHARE PLAN AWARDS FOR 2019
The Executive Directors will each receive a PSP award in 2019 of 200% of salary. These awards will be subject to a relative TSR performance
condition for one-third of the award and earnings per share growth targets for two-thirds of the award as follows:

TSR relative to the FTSE 51 to 1501

Average annual adjusted EPS growth
(including the unwind of the discount rate)
in excess of RPI2

Average annual adjusted EPS growth
(excluding the unwind of the discount rate)
in excess of RPI3

Performance
level hurdle
Below threshold
Threshold
Stretch or above

Performance
required
Below Median
Median
Upper Quartile
or above

% of one third
of award vesting
0%
25%
100%

Performance
required
Below 5%
At least 5%
16% or above

% of one third
of award vesting
0%
25%
100%

Performance
required
Below 5%
At least 5%
16% or above

% of one third
of award vesting
0%
25%
100%

1 FTSE 51 to 150, excluding investment trusts and companies in the FTSE oil, gas producers and mining sectors.

2 The first EPS performance condition is calculated by reference to the post-tax EEV operating profit (on a fully diluted basis). This measure excludes the

direct impact of the stock market fluctuations and changes in economic assumptions on the final year’s performance.

4 Straight-line vesting occurs in between threshold and maximum vesting.

5 Awards are subject to a three-year performance period. Vested shares cannot normally be sold other than to the extent necessary to settle tax on vesting

or exercise.

MALUS AND CLAWBACK
All PSP awards and deferred bonus awards are subject to malus and clawback provisions to facilitate recoupment in exceptional
circumstances such as material misstatement, error or misconduct. In addition to these existing triggers, additional events have been applied
in respect of PSP awards and deferred bonus awards made from 1 March 2019 onwards including material failure of risk management, failure
to meet appropriate standards of fitness and propriety or material breach of contract. Furthermore, these malus and clawback provisions
also apply to the cash element of the annual bonus with effect from 1 March 2019 for all Executive Directors and other members of the senior
leadership team.

SHAREHOLDING REQUIREMENT
As for 2018, during 2019 the Executive Directors will be required to build and maintain a shareholding equivalent to 200% of salary in the
Company’s shares. The ability for 50% of this shareholding to be held in one or more St. James’s Place fund portfolios was removed with
effect from 2018.

PENSION CONTRIBUTION
For any new Executive Director joining the Board after the 2018 AGM, the pension contribution will be 10% of salary on joining increasing to
12.5% after 5 years’ service and 15% after 10 years’ service. This aligns to the pension contribution for the wider workforce.

GOVERNANCEST. JAMES’S PLACE PLC 137

FEES FOR THE CHAIR AND NON-EXECUTIVE DIRECTORS FOR 2019
The fees for the Chair and Non-executive Directors for 2019 and 2018 are as set out below. For 2019, in recognition of their increased workload,
regulatory responsibilities and the size of the Group as well as a benchmarking review which revealed that fees are below the median level for
companies of our size, the fees of the Chair have been increased by 5%, the Non-executive Directors’ base fee has been increased by 3%, the
Committee Chairs’ fee has been increased by 3% and the Senior Independent Director fee has been increased by 3%. In light of the fact that
the Chair’s fee remains significantly below the benchmarks, the Committee has decided that the Chair’s fee will be increased over the next few
years to the extent necessary to bring this fee in line with the relevant benchmarks.

Chair 1
Base fee
Committee Chair 2
Senior Independent Director

1 No Committee membership fees are payable.

2 Iain Cornish has waived his fee for chairing the Board Risk Committee.

Fees from
1 January to
31 December
2018

Fees from
1 January to
31 December
2019

Percentage
increase
from 2018

£
205,000
65,000
21,750
5,855

£
215,250
66,950
22,403
6,031

%
5
3
3
3

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

3. Summary of the Policy for Directors

The following table summarises each element of the Policy, explaining how each element operates and links to corporate strategy.

Base salary

Purpose and link
to strategy

To provide the core reward for the role.

Sufficient level to recruit and retain individuals of the necessary calibre, taking into account the required skills, experience,
demands and complexity of the role.

Operation

Normally reviewed annually from 1 March. Influenced by:

• Role, experience and performance of the individual;

• Company performance;

• External economic conditions;

• Average changes in broader workforce salary; and

• Periodic benchmarking for each role against similar UK listed companies.

Maximum
opportunity

Percentage increases will normally be capped at the level of increases for the Company’s workforce generally. Increases may
be higher in exceptional circumstances, such as a change in role and/or a significant change in responsibility or role size.

Where new appointees have been given a starting salary below mid-market level, increases above those granted to the wider
workforce (in percentage terms) may be awarded, subject to individual performance and development in the role.

The base salaries for the Executive Directors from 1 March 2019 are set out in the Annual Report on Remuneration.

Performance
metrics

Whilst there are no targets attached to the payment of base salary performance alongside those factors outlined above is
considered in the annual salary review process.

GOVERNANCEST. JAMES’S PLACE PLC 139

Annual bonus

Purpose and
link to strategy
including choice
of performance
metrics

Rewards the achievements of annual financial and strategic business plan targets and delivery of key, non-financial
objectives.

Deferred element aids retention, encourages long-term shareholding, discourages excessive risk taking and aligns with
shareholders’ interests.

Performance metrics reflects the key performance drivers of the annual business plan, achievement of which will reflect
performance in the lines with the Group’s strategy.

Operation

Performance measures, targets and weightings are reviewed annually and set in line with the annual business plan. Bonus
payments are determined by the Committee after the year-end, based on performance against the targets set.

Performance below threshold results in zero payment. Payments are on a scale from 20% to 100% of the maximum
opportunity for performance between threshold and maximum.

50% of any bonus payable is paid in cash and the remaining 50% deferred into SJP shares, the vesting of which is normally
subject to a three-year continuous service requirement but no further performance targets.

Dividends that accrue on the deferred shares are paid to the Executive Directors during the three-year deferral period.

All bonus payments are at the discretion of the Committee.

The Committee has the overriding discretion to scale back payments under the non-financial performance scorecard if it
deems them to be inappropriate in the context of the overall financial results of the Company.

The Committee has the overriding discretion to adjust the bonus outcome up or down (subject to the overall 150% maximum)
to take account of factors such as an exceptional positive or negative event.

Malus and clawback provisions apply to bonus awards to facilitate recoupment in exceptional circumstances, such as a
material misstatement, error, or misconduct. In addition to the existing triggers, other events have been applied relating
to awards made from 1 March 2019 onwards including material failure of risk management, failure to meet appropriate
standards of fitness and propriety or material breach of contract. Further, these malus and clawback provisions also apply
to the cash element of the annual bonus with effect from 1 March 2019.

Maximum
opportunity

Performance
metrics

150% of base salary.

Performance is measured over one year.

At least half of the bonus is based on financial measures, reflecting the key priorities of the business for the
relevant year.

Up to half of the annual bonus can be based on the achievement of key non-financial objectives set at the start
of the year.

Actual measures and weightings may change from year to year to reflect the business priorities at that time.

Details of performance criteria and targets set for the year under review and performance against them are provided
in the Annual Report on Remuneration.

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R E P O R T O F T H E R E M U N E R A T I O N C O M M I T T E E C O N T I N U E D

Performance Share Plan

Purpose and
link to strategy
including choice
of performance
metrics

Operation

Supports long-term retention.

Focuses the Executives on longer-term corporate performance and performance objectives.

Aligns interests to those of shareholders.

Awards are normally granted annually. Vesting is usually on the third anniversary of the date of grant, dependent on the
achievement of stretching performance conditions measured over a period of three financial years.

Metrics, weighting and targets take account of the business plan and are reviewed annually to ensure they remain appropriate.

Awards granted from 2015 are made under the Performance Share Plan approved by shareholders at the AGM in 2014, and
have a post-vesting holding period of two years on the shares vesting. During this period the vested shares cannot normally
be sold, other than to the extent necessary to settle tax on vesting or exercise. Dividend equivalents may accrue on awards
made between the date of grant and the end of the two-year post-vesting holding period. These dividend equivalents will be
released only to the extent that awards vest.

Malus and clawback provisions apply to PSP awards to facilitate recoupment in exceptional circumstances, such as a
material misstatement, error, or misconduct. In addition to the existing triggers, additional events have been applied relating
to awards made from 1 March 2019 onwards including material failure of risk management, failure to meet appropriate
standards of fitness and propriety or material breach of contract.

The Committee has the discretion, in certain circumstances, to grant and/or settle an award in cash. In practice, this will only
be used in exceptional circumstances for Executive Directors.

Maximum
opportunity

The maximum annual award under the plan rules is 250% of salary as at date of grant, although the Committee will not make
awards above 200% of base salary without prior consultation with the Company’s major shareholders.

Performance
metrics

Awards will vest to extent of achievement of performance metrics as set out below. The Committee may choose alternative
measures and weightings between them if it deems it appropriate, taking into account the strategic objectives of the
Company.

Awards in 2019 will be based on the achievement of three equally weighted metrics below:

• EPS growth based on EEV adjusted profit;

• EPS growth as above but excluding the impact of the EEV unwind of the discount rate; and

• Relative TSR performance.

For each performance metric, a threshold and stretch level of performance is set. At threshold, 25% of the relevant element
vests rising on a straight-line basis to 100% for attainment of levels of performance between threshold and maximum targets.

Pension

Purpose and link
to strategy

Helps recruit and retain Executives.

Provides a discrete element of the package to contribute to retirement income.

Operation

Defined contribution to a pension scheme or an equivalent cash amount via non-pensionable allowance if the Executive is
affected by HMRC limits.

In response to changes in legislation or similar developments, the Company may amend the form of an Executive Director’s
pension arrangements.

Maximum
opportunity

20% of base salary. For any new Executive Director joining the Board after the 2018 Annual General Meeting, the pension
contribution shall be aligned to that of the wider workforce.

Performance
metrics

N/A

GOVERNANCEST. JAMES’S PLACE PLC 141

Other benefits

Purpose and
link to strategy
including choice
of performance
metrics

Operation

Operate competitive benefits to help recruit, retain and support the wellbeing of employees.

Including but not limited to: Company car (or salary supplement in lieu), private medical insurance, life, critical illness and
death in service cover, relocation assistance where necessary and the use of a driver for business purposes.

Executive Directors will be eligible to participate in any all-employee share plan (e.g. SIP and SAYE) operated by the Company
on the same terms as other eligible employees. The maximum level of participation is subject to limits imposed by HMRC (or
a lower cap set by the Company).

Any reasonable business expenses (including tax thereon) may be reimbursed.

Maximum
opportunity

Benefit costs are monitored and controlled and represent a small element of total remuneration costs.

Performance
metrics

N/A

Non-executive Directors’ fees

Purpose and link
to strategy

To attract high quality, experienced Non-executive Directors.

Operation

The Chair is paid an all-inclusive annual fee which is reviewed periodically by the Committee.

All Non-executive Directors receive a basic annual fee for carrying out their duties, together with additional fees being paid in
respect of Board Committees and other responsibilities, with fee levels reviewed periodically by the Board. They may also be
paid additional fees (calculated at an appropriate day rate) in the event of exceptional levels of additional time being required.

Any reasonable business expenses (including tax thereon) may be reimbursed.

There is no prescribed maximum individual fee level or annual increase. Reviews take into account market data for similar
non-executive roles in other companies of a similar size and/or business to St. James’s Place as well as the time commitment
of its Non-executive Directors. The policy is to pay up to the mid-market level based on similar time commitments of chair and
non-executives in comparable companies.

Neither the Chair nor the Non-executive Directors are eligible for any performance related remuneration.

Maximum
opportunity

Performance
metrics

This Report was approved by the Board of Directors and signed on its behalf by

ROGER YATES
Chair of the Remuneration Committee
26 February 2019

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142

D I R E C T O R S ’ R E P O R T

The Directors present their report together with the audited
consolidated financial statements of the Group for the year ended
31 December 2018. This report has been prepared in accordance
with requirements outlined within The Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008
and forms part of the management report as required under the UK
Financial Conduct Authority’s (‘FCA’) Disclosure and Transparency
Rule DTR4.1. Certain information that fulfils the requirements of the
Directors’ report can be found elsewhere in this document and is
referred to below. This information is incorporated into this Directors’
report by reference.

Information disclosed in accordance with the requirements of the
sections of the FCA’s Listing Rule LR9.8 (Annual Financial Report)
that are applicable can be found in the following sections:

Details of long-term incentive
schemes
Contracts of significance
Shareholder waivers of
dividends
Shareholder waivers of
future dividends
Directors’ interests in the
Company’s shares
Major shareholders’ interests
Authority to purchase
own shares

The Directors’ Remuneration
Report
This Directors’ Report

This Directors’ Report

This Directors’ Report
The Directors’ Remuneration
Report
This Directors’ Report
Corporate Governance
Statement

Status of Company
The Company is registered as a public limited company under the
Companies Act 2006. For details of the Company’s subsidiaries
and overseas branches, please see pages 201 to 204.

Going concern
In conjunction with its assessment of longer-term viability as set
out on page 55, the Board concluded that it remained appropriate
to adopt the going concern basis of accounting in preparing the
consolidated financial statements as it believes the Group will
continue to be in business, with neither the intention nor the necessity
of liquidation, ceasing trading or seeking protection from creditors
pursuant to laws or regulations for a period of at least 12 months
from the date of approval of the Group financial statements.

Share capital
STRUCTURE OF THE COMPANY’S CAPITAL
As at 31 December 2018, the Company’s issued and fully paid-up
share capital was 529,453,397 ordinary shares of 15 pence each. All
ordinary shares are quoted on the London Stock Exchange, and can
be held in uncertificated form via CREST. All shares have equal rights
to dividends and to participate in a distribution on winding up. Details
of the movement in the issued share capital during the year are
provided in Note 18 to the financial statements on page 196.

VOTING RIGHTS
At any General Meeting, on a show of hands, each member who is
present in person has one vote and every proxy present who has been
duly appointed by a member entitled to vote on a resolution has one
vote. On a poll, every member who is present in person or by proxy
shall have one vote for every share of which he or she is the holder.

RESTRICTIONS ON VOTING RIGHTS
If any shareholder has been sent a notice by the Company under
section 793 of the Companies Act 2006 and has failed to supply the
relevant information for a period of 14 days, then the shareholder
may not (for so long as the default continues) be entitled to attend
or vote either personally or by proxy at a shareholders’ meeting, or
to exercise any other right conferred by membership in relation to
shareholders’ meetings.

If those default shares represent at least 0.25% of their class, any
dividend payable in respect of the shares will be withheld by the
Company and (subject to certain limited exceptions) no transfer,
other than an excepted transfer, of any shares held by the member
in certificated form will be registered.

ARTICLES OF ASSOCIATION
The full rights and obligations attaching to the ordinary shares of
the Company are set out in the Articles. Holders of ordinary shares
are entitled to receive the Company’s Reports and Accounts; attend,
speak and exercise voting rights; and appoint proxies to attend
General Meetings.

GOVERNANCEST. JAMES’S PLACE PLC 143

RESTRICTIONS ON SHARE TRANSFERS
There are restrictions on share transfers, all of which are set out
in the Articles. Restrictions include transfers made in favour of
more than four joint holders and transfers held in certificated form.
Directors may decline to recognise a transfer, unless it is in respect
of only one class of share and lodged (and duly stamped) with the
Transfer Office. The Directors may also refuse to register any transfer
of shares held in certificated form which are not fully paid. Directors
may also choose to decline requests for share transfers from a US
Person (as defined under Regulation S of the United States Securities
Act 1933) that would cause the aggregate number of beneficial
owners of issued shares who are US Persons to exceed 70.

The registration of transfers may be suspended at such times and
for such periods (not exceeding 30 days in any year) as the Directors
may from time to time determine in respect of any class of shares.

The Company is not aware of any agreements between shareholders
that restrict the transfer of shares or voting rights attached to the
shares.

Substantial shareholders
As at 25 February 2019, the Company had been notified of the
following interests disclosed to the Company under Disclosure and
Transparency Rule 5:

Shareholder
BlackRock, Inc.
Prudential plc group
of companies
Ameriprise Financial,
Inc. and its group
Norges Bank

Holding at
31 Dec
2018
29,461,305

% held at
Holding at
31 Dec
25 Feb
2018 1
2019
5.56 29,461,305

% held at
25 Feb
2019 1
5.56

27,682,923

5.24 27,682,923

5.24

26,288,280
21,417,462

4.97 26,288,280
4.05 21,495,857

4.97
4.06

1 Percentage provided was correct at the date of notification.

The interests of the Directors, and any persons closely associated,
in the issued share capital of the Company are shown on page 133.

Results and dividends
The consolidated statement of comprehensive income is on
page 154 and IFRS profit after tax for the financial year increased
to £173.5 million from £145.8 million in the prior year, principally due
to increased funds under management, which are a long-term driver
of profit. In 2018 the Group made a loss before tax of £84.6 million
compared to a profit before tax of £342.1 million in 2017. This is
driven by decreases in charges deducted from life investment
business in respect of policyholder tax, which is subsequently due
to HMRC as explained on page 33. This movement was mainly driven
by relative investment performance in the year, reflecting the fact that
the investment return was negative in 2018 and positive in 2017. The
profit before tax was also impacted negatively by the £66.7 million
movement in DAC, DIR and PVIF balances, as explained on page 34.

An interim dividend of 18.49 pence per share, which equates to
£97.7 million, was paid on 28 September 2018 (2017: 15.41 pence
per share/£81.2 million). The Directors recommend that
shareholders approve a final dividend of 29.73 pence per share,
which equates to £157.4 million (2017: final dividend of 27.45 pence
per share/£145.0 million) to be paid on 24 May 2019 to shareholders
on the register at the close of business on 5 April 2019.

Details of the Dividend Reinvestment Plan (‘DRP’) are set out on page
222.

Our people
Details of the Company’s approach to maintaining an appropriately
skilled and diverse workforce, including recruitment practices,
development opportunities, employee engagement and equal
opportunities can be found in the Corporate Responsibility Report
on pages 56 to 69.

Greenhouse gas emissions
Disclosures in relation to the Group’s greenhouse gas emissions can
be found in the Corporate Responsibility Report on pages 56 to 69.

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D I R E C T O R S ’ R E P O R T C O N T I N U E D

Significant contracts and change of control
The Company has a number of contractual arrangements which
it considers essential to the business of the Company. Specifically,
these are committed loan facilities from a number of banks and
arrangements with third-party providers of administrative services.

A change of control of the Company may cause some agreements
to which the Company is a party to alter or terminate. These include
bank facility agreements and employee share plans.

The Group had committed facilities totalling £459.6 million as
at 22 February 2019 which contain clauses which require lender
consent for any change of control. In addition, the Group guarantees
the obligations of loans made to Partners in connection with facilities
agreed with various lenders totalling £191 million in aggregate.
Should consent not be given, a change of control would trigger
mandatory repayment of the said facilities.

All the Company’s employee share plans contain provisions relating
to a change of control. Outstanding awards and options may vest
and become exercisable on a change of control, subject where
appropriate to the satisfaction of any performance conditions at that
time and pro-rating of awards.

Financial instruments
An indication of the Group’s use of financial instruments can be
found in Note 16 to the financial statements on pages 183 to 193.

Directors and Directors’ indemnities
Details of the Directors of the Company at the date of this Report
and during the year ended 31 December 2018 can be found in the
Corporate Governance Report on pages 82 to 93. Details of the
indemnity provisions in place for the Directors, including qualifying
third-party indemnity provisions, can be found on page 91.

Political and charitable donations
It is the Group’s policy not to make any donations to political parties
within the meaning of the definitions set out in the Political Parties,
Elections and Referendums Act 2000 and sections 362 to 379 of the
Companies Act 2006. During the year we have donated £4.5 million
to the St. James’s Place Charitable Foundation, more details of
which can be found on pages 71 to 75.

Annual General Meeting
The Company’s Annual General Meeting will be held on Tuesday,
14 May 2019 at The Royal Aeronautical Society, 4 Hamilton Place,
London W1J 7BQ at 11.30am. Full details of the resolutions to be put
to shareholders at the meeting, are included in a separate Notice of
Annual General Meeting, which is available on our website.

Disclosure of information to auditors
Each of the Directors, at the date of approval of this report, confirms
that:

• so far as each Director is aware, there is no relevant audit

information of which the auditors are unaware; and

• each Director has taken all steps that he ought to have taken as a
Director to make himself aware of any relevant audit information
and to establish that the Company’s auditors are aware of such
information.

This confirmation is given and should be interpreted in accordance
with the provisions of section 418 of the Companies Act 2006.

On behalf of the Board

ANDREW CROFT
Chief Executive
26 February 2019

CRAIG GENTLE
Chief Financial Officer

GOVERNANCEST. JAMES’S PLACE PLC
145

S TAT E M E N T OF D I R EC TOR S’ R E S P ONS I B I L I T I E S

The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulation.

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union, and the Parent Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising
FRS 101 ‘Reduced Disclosure Framework’, and applicable law).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Parent Company
and of the profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:

• select suitable accounting policies and then apply them

consistently;

• state whether applicable IFRSs as adopted by the European Union
have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101, have been
followed for the Parent Company financial statements, subject to
any material departures disclosed and explained in the financial
statements;

• make judgements and accounting estimates that are reasonable

and prudent; and

• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group and Parent Company
will continue in business.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and Parent
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and the Parent Company
and enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.

The Directors are also responsible for safeguarding the assets
of the Group and the Parent Company and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.

The Directors are responsible for the maintenance and integrity of
the Group’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.

The Directors consider that the Annual Report and accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and
Parent Company’s performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the
Board of Directors section of the Annual Report confirm that, to the
best of their knowledge:

• the Parent Company financial statements, which have been

prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 ‘Reduced Disclosure Framework’, and
applicable law) give a true and fair view of the assets, liabilities,
financial position and profit of the Parent Company;

• the Group financial statements, which have been prepared in

accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of the
Group; and

• the Strategic Report includes a fair review of the development and
performance of the business and the position of the Group and
Parent Company, together with a description of the principal risks
and uncertainties that it faces.

By order of the Board

ELIZABETH KELLY
Company Secretary
26 February 2019

STRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONGOVERNANCEANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk146

FINANCIAL STATEMENTS

Independent Auditors’ Report
to the Members of
St. James’s Place plc ....................148

Parent Company Financial
Statements under Financial
Reporting Standard 101 ................206

Consolidated Financial
Statements under International
Financial Reporting Standards .....154

Consolidated Statement
of Comprehensive Income .......154

Consolidated Statement
of Changes in Equity ..................155

Consolidated Statement
of Financial Position ..................156

Consolidated Statement
of Cash Flows .............................. 157

Notes To The Consolidated
Financial Statements Under
International Financial
Reporting Standards .................. 158

Parent Company Statement
of Financial Position ..................207

Parent Company Statement
of Changes in Equity ..................207

Notes to the Parent Company
Financial Statements ................208

Supplementary Information:
Consolidated Financial
Statements on a Cash Result
Basis (unaudited) ..........................213

Consolidated Statement
of Comprehensive Income
on a Cash Result Basis
(unaudited) ..................................214

Consolidated Statement of
Changes in Equity on a Cash
Result Basis (unaudited) ........... 215

Consolidated Statement of
Financial Position on a Cash
Result Basis (unaudited) ........... 216

Notes to the Consolidated
Financial Statements
on a Cash Result Basis
(unaudited) .................................. 217

ST. JAMES’S PL AC E PL C

147

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W E A R E S E C U R I N G

GROW T H

The Group financial statements consolidate those of the Company
and its subsidiaries. The Group financial statements have been prepared
in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU. These statutory IFRS financial statements
have been supplemented with consolidated financial statements on
a Cash result basis, which are unaudited and have been prepared by
adjusting the financial statements prepared in accordance with IFRS
for items which do not reflect the cash emerging from the business.
In addition, financial statements for the Parent Company, St. James’s
Place plc, have been prepared in accordance with Financial Reporting
Standard 101 (FRS 101). The business has delivered resilient growth
in financials across each set of financial statements.

£211.9m

IFRS PROFIT BEFORE
SHAREHOLDER TAX

£173.5m

IFRS PROFIT AFTER TAX

33.0 pence

IFRS BASIC
EARNINGS PER SHARE

AN N UA L R EPO RT & ACCOUNTS 2018

w ww.sjp.co.uk

FINANCIAL STATEMENTS

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Report on the audit of the financial statements
OPINION
In our opinion:

• St. James’s Place plc’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true and
fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2018 and of the Group’s profit and cash flows
for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as

adopted by the European Union;

• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting

Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law); and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group

financial statements, Article 4 of the IAS Regulation.

We have audited the financial statements, included within the Annual Report and Accounts (the ‘Annual Report’), which comprise: the
consolidated and Parent Company statements of financial position as at 31 December 2018; the consolidated statement of comprehensive
income, the consolidated statement of cash flows, the consolidated and Parent Company statements of changes in equity for the year then
ended; and the notes to the financial statements, which include a description of the significant accounting policies.

Our opinion is consistent with our reporting to the Audit Committee.

BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the Parent Company.

Other than those disclosed in Note 5 to the financial statements, we have provided no non-audit services to the Group or the Parent Company
in the period from 1 January 2018 to 31 December 2018.

OUR AUDIT APPROACH
Overview
Materiality

• Overall Group materiality: £15.0 million (2017: £17.0 million), which represents 4.9% of underlying cash generated

Audit scope

Key audit matters

in the year.

• Overall Parent Company materiality: £13.0 million (2017: £10.1 million), based on 1% of total assets.
• The Group financial statements comprise the consolidation of approximately 60 individual components, each

of which represents an individual legal entity within the Group or consolidation adjustments.

• We assessed each component and considered the contribution it made to the Group’s performance in the year,

whether it displayed any significant risk characteristics and/or whether it contributed a significant amount to any
individual financial statement line item.

• The above assessment resulted in us identifying nine components that required audit procedures for the purpose

of the audit of the Group financial statements.

• Eight of the nine components are based in the UK and were audited by the PwC UK audit team. The remaining

component is based in the Republic of Ireland and was audited by PwC Republic of Ireland.

• By performing audit procedures on these nine components we achieved coverage greater than 85% of each

material financial statement line item within the Group’s financial statements.

• We performed a full scope audit of all material line items in the Parent Company’s financial statements.
• Valuation of investments with a judgemental valuation, being investment property and derivatives.
• Valuation of the prepayment asset in respect of the development of an administration platform at

an outsourced provider.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 149

The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.

Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and Parent Company and its industry, we identified that the principal risks of non-compliance with
laws and regulations related to breaches of UK and Irish regulatory principles, such as those governed by the Prudential Regulation Authority
and the Financial Conduct Authority and the Central Bank of Ireland, and we considered the extent to which non-compliance might have a
material effect on the financial statements of the Group and Parent Company. We also considered those laws and regulations that have a
direct impact on the financial statements of the Group and Parent Company such as the Companies Act 2006, the UK and Irish tax legislation.

We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce
expenditure, and management bias in accounting estimates specifically investments with a judgmental valuation, being investment property
and derivatives and the valuation of the prepayment asset in respect of the development of an administration platform at an outsourced
provider (see Key Audit Matters). The Group engagement team shared this risk assessment with the component auditors referred to in the
scoping section of our report below, so that they could include appropriate audit procedures in response to such risks in their work Audit
procedures performed by the Group engagement team and/or component auditors included:

• Enquiries of compliance, risk, internal audit, and the Group’s legal function, including consideration of known or suspected instances of

non-compliance with laws and regulation and fraud;

• Testing of the whistleblowing email address and discussion with the whistleblowing champion; and;

• Reading key correspondence with the Prudential Regulation Authority, the Financial Conduct Authority and the Central Bank of Ireland

in relation to compliance with laws and regulations;

• Reviewing relevant meeting minutes including those of the Board, Audit Committee and Risk Committee;

• Reviewing data regarding policyholder complaints, and the Group’s register of litigation and claims, in so far as they related to

non-compliance with laws and regulations and fraud;

• Procedures relating to the valuation of investments with a judgmental valuation, being investment property and derivatives and the valuation
of the prepayment asset in respect of the development of an administration platform at an outsourced provider described in the related key
audit matters below;

• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or posted by senior

management;

• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing; and

• Testing disclosure Note 17 affected by the regulatory solvency requirements of the Prudential Regulation Authority.

There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations, or through collusion.

Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

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Key audit matter
Valuation of investments with a judgemental valuation,
being investment property and derivatives
The Group financial statements include £84.6 billion of investments.
The investments are mostly straight forward instruments and do not
require significant judgement in calculating the valuation of
the holdings.

However £1.8 billion of the investments are in derivatives and
investment properties, which require management to use estimates
and judgements in order to calculate the year-end valuation. Due to
the magnitude of these balances and the level of judgement involved,
this was an area of focus for our audit.

SJP outsources investment valuation activities for financial assets,
including derivatives, to State Street. The investment property
portfolio is managed by Orchard Street, with title deeds held by
DLA Piper and regular valuations are performed by CBRE.

Valuation of the prepayment asset in respect of the development
of an administration platform at an outsourced provider

The Group is charged costs by DST Systems Limited (DST) in respect
of a new policy administration platform.

These costs are recognised as a prepayment to be unwound over
the duration of the related service agreement with DST. The balance
of the prepayment asset at 31 December 2018 was £236.4 million.

The maximum prepayment that can be recognised is capped at the
net present value of future cost savings.

Due to the nature and magnitude of the amount arising from the
contractual terms, the valuation of the prepayment asset was an
area of focus for our audit.

How our audit addressed the key audit matter
Financial assets including derivatives
Our audit procedures focused on the evidence available over the
processes outsourced to State Street.

We obtained and read the International Standard on Assurance
Engagements (ISAE) 3402 ‘Assurance Reports on Controls at a
Service Organisation’ for State Street’s Global Fund Accounting and
Custody operations, which provided a description of the systems and
controls in place and the results of testing of the operational
effectiveness of those controls.

We placed reliance on the controls described in the ISAE 3402 report
over the valuation of the financial investments within the portfolio.

We independently re-priced a sample of investments, including
derivatives, as at the year end. We compared our independent prices
to those provided by State Street.

Investment properties
We reconciled the listing of properties valued by CBRE to details
provided by Orchard Street and also agreed the total valuation to
that recorded by the Group.

We engaged our in house real estate valuation experts to review
the methodology and key assumptions used by CBRE in valuing the
property portfolio. We also agreed factual inputs to the calculations,
such as rental income, to tenancy agreements on a sample basis.

From the evidence obtained we found the valuation of investments
to be appropriate.
In testing whether the asset was valued appropriately and whether
an impairment was necessary we:

• agreed amounts capitalised in the year to the service agreement

and cash payments to DST; and

• assessed the reasonableness of the assumptions underlying
management’s discounted cash flow analysis calculating the
anticipated future cost savings that support the valuation of
the asset.

• agreed that the cost savings had been calculated using appropriate
service tariffs. We performed a sensitivity analysis on the inflation
and discount rate assumptions as well as business flow levels to
determine the potential impact of changes in these assumptions
to check whether they would affect the carrying value of the asset.

• considered the headroom available under what we considered to

be reasonably possible downside scenarios and whether additional
disclosure was necessary.

We determined that the accounting, recognition and disclosure of
the asset in the financial statements was supported by the evidence
obtained.

We determined that there were no key audit matters applicable to the Parent Company to communicate in our report.

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in
which they operate.

The Group is structured to reflect its vertically integrated wealth management business and operates predominantly within the United
Kingdom. Three of the components within the Group required an audit of their complete financial information. Of these, two components
(St. James’s Place UK plc and St. James’s Place Unit Trust Group Limited) were considered financially significant. The remaining component
(St. James’s Place International plc) had specific risk characteristics which led us to include in our scope an audit of its complete financial
information. St. James’s Place International plc is a regulated insurance company giving rise to complex accounting entries, such as the
calculation of insurance reserves and DAC and DIR balances.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 151

All components aside from St. James’s Place International plc were audited by PwC UK. St. James’s Place International plc is incorporated
and regulated in the Republic of Ireland and was audited by PwC Republic of Ireland. At the planning stage of the audit we provided written
instructions to PwC Republic of Ireland to confirm the work we required them to complete and the materiality level they should work to.
We held regular phone calls and meetings with the PwC Republic of Ireland engagement leader and senior manager through the planning,
execution and completion phases of the audit to inform them of developments at a Group level and to understand from them any local
developments that were relevant for our audit of the Group. During the execution phase, senior members of the UK engagement team visited
the Republic of Ireland and we obtained access to their electronic audit working papers and reviewed selected elements of their work, focusing
on their work to address the significant and elevated risks identified.

In addition to the full scope audit of the three components noted above, we also performed specific audit procedures on certain financial
statement line items within six other components. These financial statement line items were selected for testing to ensure that we had
sufficient coverage of each financial statement line item within the Group financial statements.

Together with additional procedures performed at a Group level on the consolidation, the result of the above scoping was that we achieved
greater than 85% coverage of each material financial statement line item within the Group financial statements, giving us the evidence we
needed for our audit opinion.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality
How we determined it
Rationale for benchmark applied

Group financial statements
£15.0 million (2017: £17.0 million).
4.9% of underlying cash generated in the year.
The engagement team concluded that
£15.0 million is the most appropriate figure
when setting an overall materiality on the 2018
engagement. The quantum of £15.0 million was
determined by considering the various benchmarks
available to us as auditors, our experience of
auditing the Group and the business performance
during 2018. £15.0 million represents 4.9% of
underlying cash generated in the year.

Parent Company financial statements
£13.0 million (2017: £10.1 million).
1% of total assets.
The purpose of the Parent Company is to hold
investments in other Group companies. As such
PwC considers it appropriate to use total assets
as the benchmark for overall materiality.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £5.0 million and £14.5 million. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.8 million (Group audit)
(2017: £0.8 million) and £0.7 million (Parent Company audit) (2017: £0.4 million) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.

In accordance with guidance on the audit of insurers issued in the United Kingdom issued by the Financial Reporting Council we have applied
a higher materiality of £515.0 million solely for the purpose of identifying and evaluating the effect of misstatements that are likely only to lead
to a reclassification between line items within assets and liabilities.

Going concern
In accordance with ISAs (UK) we report as follows:

Reporting obligation
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the financial
statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting in preparing the
financial statements and the directors’ identification of any material
uncertainties to the Group’s and the Parent Company’s ability to
continue as a going concern over a period of at least twelve months
from the date of approval of the financial statements.

We are required to report if the directors’ statement relating to
Going Concern in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.

Outcome
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s and Parent
Company’s ability to continue as a going concern. For example,
the terms on which the United Kingdom may withdraw from the
European Union, which is currently due to occur on 29 March 2019,
are not clear, and, in common with other companies, it is difficult to
evaluate all of the potential implications on the company’s business,
clients, suppliers and the wider economy, in general terms.
We have nothing to report.

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REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.

With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK)
and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).

Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)

In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)

Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement
(on pages 51 and 142) about internal controls and risk management systems in relation to financial reporting processes and about share
capital structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (‘DTR’)
is consistent with the financial statements and has been prepared in accordance with applicable legal requirements. (CA06)

In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement
(on pages 82 to 93) with respect to the Parent Company’s corporate governance code and practices and about its administrative,
management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)

We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the
Parent Company. (CA06)

The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:

The directors’ confirmation on page 90 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.

The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.

The directors’ explanation on page 55 of the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.

We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the ‘Code’); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Parent Company and their environment obtained in the
course of the audit. (Listing Rules)

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 153

Other Code Provisions
We have nothing to report in respect of our responsibility to report when:

The statement given by the directors, on page 99, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Parent Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Parent Company obtained in
the course of performing our audit.

The section of the Annual Report on page 94 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.

The directors’ statement relating to the Parent Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.

Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)

RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.

Other required reporting
COMPANIES ACT 2006 EXCEPTION REPORTING
Under the Companies Act 2006 we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from

branches not visited by us; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns.

We have no exceptions to report arising from this responsibility.

APPOINTMENT
Following the recommendation of the Audit Committee, we were appointed by the Directors on 7 December 2009 to audit the financial
statements for the year ended 31 December 2009 and subsequent financial periods. The period of total uninterrupted engagement is 10 years,
covering the years ended 31 December 2009 to 31 December 2018.

JEREMY JENSEN (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 February 2019

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk
154

C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E

Insurance premium income
Less premiums ceded to reinsurers
Net insurance premium income

Fee and commission income

Investment return
Net (expense)/income

Policy claims and benefits
– Gross amount
– Reinsurers’ share
Net policyholder claims and benefits incurred

Change in insurance contract liabilities
– Gross amount
– Reinsurers’ share
Net change in insurance contract liabilities

Movement in investment contract benefits

Expenses

(Loss)/profit before tax

Tax attributable to policyholders’ returns

Profit before tax attributable to shareholders’ returns

Total tax credit/(expense)
Less: tax attributable to policyholders’ returns
Tax attributable to shareholders’ returns
Profit and total comprehensive income for the year

Loss attributable to non-controlling interests
Profit attributable to equity shareholders
Profit and total comprehensive income for the year

Basic earnings per share
Diluted earnings per share

The results relate to continuing operations.

Note

Year ended
31 December
2018
£’Million
46.5
(29.6)
16.9

Year ended
31 December
2017
£’Million
49.9
(29.6)
20.3

7
7
7

18
18

1,523.7

1,779.8

(4,235.0)
(2,694.4)

7,282.5
9,082.6

(54.0)
19.6
(34.4)

36.5
–
36.5

(61.1)
23.3
(37.8)

(26.5)
2.3
(24.2)

4,249.2

(7,210.9)

(1,641.5)

(1,467.6)

(84.6)

342.1

296.5

(156.0)

211.9

186.1

258.1
(296.5)
(38.4)
173.5

–
173.5
173.5

Pence
33.0
32.4

(196.3)
156.0
(40.3)
145.8

(0.1)
145.9
145.8

Pence
27.8
27.4

The Notes and information below and on pages 158 to 205 form part of these consolidated financial statements.

As permitted by Section 408 of the Companies Act 2006, no statement of comprehensive income is presented for the Company.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y

155

At 1 January 2017
Profit/(loss) and total
comprehensive income/
(expense) for the year
Dividends
Issue of share capital
Exercise of options
Consideration paid for own shares
Shares sold during the year
Retained earnings credit in respect
of share option charges
At 31 December 2017
Profit and total comprehensive
income for the year
Dividends
Exercise of options
Consideration paid for own shares
Shares sold during the year
Retained earnings credit in respect
of share option charges
At 31 December 2018

Equity attributable owners of the Parent

Note

Share
capital
£’Million
79.1

Share
premium
£’Million
164.5

Shares in
trust
reserve
£’Million
(20.9)

Retained
earnings
£’Million
851.2

Misc
reserves
£’Million
2.5

Total
£’Million
1,076.4

Non-
controlling
interests
£’Million
(0.8)

Total equity
£’Million
1,075.6

18
18
18

18
18

–
–
0.1
0.2
–
–

–
–
4.1
3.1
–
–

–
79.4

–
171.7

–
–
–
–
–

–
–
2.8
–
–

–
–
–
–
(11.3)
5.5

–
(26.7)

–
–
–
(6.0)
9.0

145.9
(190.0)
–
–
–
(5.5)

30.5
832.1

173.5
(242.7)
–
–
(9.0)

–
–
–
–
–
–

145.9
(190.0)
4.2
3.3
(11.3)
–

–
2.5

30.5
1,059.0

–
–
–
–
–

173.5
(242.7)
2.8
(6.0)
–

(0.1)
–
–
–
–
–

–
(0.9)

–
–
–
–
–

145.8
(190.0)
4.2
3.3
(11.3)
–

30.5
1,058.1

173.5
(242.7)
2.8
(6.0)
–

–
79.4

–
174.5

–
(23.7)

33.4
787.3

–
2.5

33.4
1,020.0

–
(0.9)

33.4
1,019.1

The number of shares held in the shares in trust reserve is given in Note 18 Share capital, earnings per share and dividends on page 196.

Miscellaneous reserves represent other non-distributable reserves.

The Notes and information below and on pages 158 to 205 form part of these consolidated financial statements.

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C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N

Assets
Goodwill
Deferred acquisition costs
Intangible assets
– Purchased value of in-force business
– Computer software
Property and equipment
Deferred tax assets
Reinsurance assets
Other receivables
Income tax assets
Investments
– Investment property
– Equities
– Fixed income securities
– Investment in Collective Investment Schemes
– Derivative financial instruments
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Deferred tax liabilities
Insurance contract liabilities
Deferred income
Other provisions
Other payables
Investment contracts benefits
Derivative financial instruments
Net asset value attributable to unit holders
Income tax liabilities
Preference shares
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity

Net assets per share

As at
31 December
2018
£’Million

As at
31 December
2017
£’Million

Note

8
8

8
8
9
7
13
11

10
10
10
10
10
10

15
7
13
8
14
12
10
10
10
7

15.6
558.5

24.0
1.4
28.5
147.1
82.8
1,952.3
9.7

1,820.7
56,077.9
21,966.0
4,756.1
508.8
6,877.6
94,827.0

348.6
172.9
508.1
648.3
22.7
1,290.8
67,796.1
517.4
22,502.9
–
0.1
93,807.9
1,019.1

79.4
174.5
(23.7)
2.5
787.3
1,020.0
(0.9)
1,019.1

Pence
192.5

15.6
623.0

27.2
2.4
26.4
182.7
82.8
1,620.0
–

1,630.9
55,086.9
17,180.7
5,903.4
343.4
7,280.6
90,006.0

279.9
546.8
544.6
646.3
20.0
1,231.2
64,014.3
190.3
21,349.1
125.3
0.1
88,947.9
1,058.1

79.4
171.7
(26.7)
2.5
832.1
1,059.0
(0.9)
1,058.1

Pence
200.0

The financial statements on pages 154 to 205 were approved by the Board of Directors on 26 February 2019 and signed on its behalf by:

ANDREW CROFT
Chief Executive

CRAIG GENTLE
Chief Financial Officer

The Notes and information on pages 158 to 205 form part of these financial statements.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S

Cash flows from operating activities
(Loss)/profit before tax for the year
Adjustments for:
Amortisation of purchased value of in-force business
Amortisation of computer software
Depreciation
Share-based payment charge
Interest income
Interest expense
Increase in provisions
Exchange rate (gains)/losses
Changes in operating assets and liabilities
Decrease in deferred acquisition costs
Increase in investment property
Increase in other investments
Increase in reinsurance assets
Increase in other receivables
(Decrease)/increase in insurance contract liabilities
Increase in financial liabilities (excluding borrowings)
Increase/(decrease) in deferred income
Increase in other payables
Increase in net assets attributable to unit holders
Cash generated from operating activities
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property and equipment
Acquisition of intangible assets
Acquisition of subsidiaries and other business combinations, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Consideration paid for own shares
Additional borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at 31 December

The Notes and information on pages 158 to 205 form part of these financial statements.

157

Year ended
31 December
2018
£’Million

Year ended
31 December
2017
£’Million

Note

(84.6)

342.1

8
8
9
19

9
8

15
15
18

3.2
1.1
6.5
34.1
(35.1)
6.1
2.7
(0.3)

64.5
(189.8)
(4,794.4)
–
(330.3)
(36.5)
4,108.9
2.0
57.2
1,153.8
(30.9)
35.1
(6.1)
(213.2)
(215.1)

(8.6)
(0.1)
(4.1)
(12.8)

2.8
(6.0)
232.5
(162.2)
(242.7)
(175.6)
(403.5)
7,280.6
0.5
6,877.6

3.2
0.9
5.2
32.7
(23.7)
4.9
2.9
1.1

61.8
(168.5)
(14,876.2)
(2.3)
(146.0)
26.4
10,615.8
(1.3)
48.8
4,317.1
244.9
23.7
(4.9)
(181.3)
82.4

(8.6)
(0.3)
(5.0)
(13.9)

3.3
(11.3)
100.0
(101.0)
(190.0)
(199.0)
(130.5)
7,413.1
(2.0)
7,280.6

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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S

1. Accounting policies
St. James’s Place plc (the Company) is a company incorporated and domiciled in the United Kingdom, and registered in England and Wales.

I. STATEMENT OF COMPLIANCE
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group).

The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting
Standards as adopted by the EU (adopted IFRSs) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) and those parts
of the Companies Act 2006 that are applicable when reporting under IFRS.

As at 31 December 2018, the following amended standards, which the Group has adopted as of 1 January 2018, have not had any material
impact on the Group’s consolidated financial statements. New accounting standards which were adopted as of 1 January 2018 are covered in
the section below.

IFRS 2 Amendment – Classification and Measurement of Share-based Payment Transactions

IAS 40 Amendment – Transfers of Investment Property

Annual Improvements 2014-2016 Cycle

IFRIC 22 Foreign Currency Transactions and Advance Consideration (not endorsed at 30 June 2018)

II. ADOPTION OF NEW ACCOUNTING STANDARDS
The following new accounting standards were adopted as of 1 January 2018:

IFRS 9 Financial Instruments (and associated amendments to various other standards); and

IFRS 15 Revenue from Contracts with Customers (including subsequent IFRS 15 clarification and associated amendments to various other
standards)

The impact of these new accounting standards on the Group’s consolidated financial statements are set out below.

IFRS 9
On 1 January 2018, the Group adopted IFRS 9 Financial Instruments as issued in July 2014. IFRS 9 incorporates new classification and
measurement requirements for financial assets and liabilities, the introduction of an expected credit loss impairment model, new hedge
accounting requirements and enhanced disclosures in the financial statements. For the Group, adopting IFRS 9 has resulted in changes
to accounting policies, reclassification of certain financial assets, and changes to the impairment model applied. In accordance with the
transition provisions set out in IFRS 9, comparative figures have not been restated.

(a) Classification and measurement of financial instruments
On the date of initial application of IFRS 9, being 1 January 2018, the following financial assets were reclassified. There was no material
change to the underlying accounting treatment for the reclassified financial assets, and no change in the carrying amount upon
reclassification. No reclassifications were required for financial liabilities.

Renewal income assets
Shareholder other receivables
Shareholder cash and cash equivalents

Measurement category
IAS 39

IFRS 9
Available for sale Fair value through profit or loss
Amortised cost
Amortised cost

Loans and receivables
Loans and receivables

The total financial assets recognised under each IFRS 9 and IAS 39 measurement category at 1 January 2018, and reclassifications between
categories as required on adoption of IFRS 9, are set out below:

1 January 2018
Shareholder financial assets under IAS 39
Reclassify renewal income assets
Shareholder financial assets under IFRS 9

Fair value
through profit
or loss (FVTPL)
£’Million
1,462.9
71.6
1,534.5

Fair value
through other
comprehensive
income (FVOCI) 1 Amortised cost 2
£’Million
1,078.9
–
1,078.9

£’Million
71.6
(71.6)
–

Total financial
assets
£’Million
2,613.4
–
2,613.4

1 Fair value through other comprehensive income under IFRS 9 was known as available for sale under IAS 39.

2 All financial assets that are classified as amortised cost under IFRS 9 were classified as loans and receivables held at amortised cost under IAS 39.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 159

Reclassification of renewal income assets from ‘available-for-sale’
to FVTPL
Renewal income assets, which represent the present value of future
cash flows associated with books of business acquired by the Group,
are classified as FVTPL under IFRS 9. This is because the
contractual cash flows associated with the assets are fees rather
than payments of principal and interest. When contractual cash
flows are not solely payments of principal and interest, IFRS 9
requires the assets to be classified as FVTPL. There was no
difference between the previous carrying amount under IAS 39 and
the revised carrying amount under IFRS 9, and the reclassification
had no impact on the Group’s equity.

Reclassification from loans and receivables to amortised cost
Shareholder cash and cash equivalents, and shareholder other
receivables except for renewal income assets, were reclassified from
loans and receivables to amortised cost as at 1 January 2018. The
business model for these assets is hold to collect or sell, and the
contractual cash flows consist solely of payments of principal and
interest. There was no difference between the previous carrying
amount under IAS 39 and the revised carrying amount under IFRS 9,
and the reclassification had no impact on the Group’s equity.

(b) Expected loss impairment model
The implementation of IFRS 9 requires a three-stage model to be
applied in calculating the expected credit loss provision. Unless
purchased or originated credit-impaired, newly originated assets are
recognised within Stage 1: Performing. Assets remain in Stage 1 until
there is a significant increase in credit risk, in which case they move
to Stage 2: Underperforming. Assets move to Stage 3: Non-
performing when there is objective evidence of impairment. Assets
are accounted for differently depending on the stage they are
classified in.

The Group has applied the three-stage impairment model to the
business loans to Partners portfolio. Business loans to Partners are
interest-bearing (linked to the Bank of England base rate plus a margin),
either repayable on demand or in line with the repayment plan, and
secured against the future renewal income streams of the Partner.

No provision is held against the other financial assets of the Group
as these are either classified as FVTPL or are short-term trade
receivables with insignificant risk of credit loss.

Definition of underperforming
In line with the presumption set out in IFRS 9, the Group considers
that business loans to Partners experience a significant increase in
credit risk, and so move to Stage 2: Underperforming in the expected
credit loss model, when they are more than 30 days past due.

Definition of non-performing
Business loans to Partners are considered to be non-performing, in
the context of the definition prescribed within IFRS 9, if they are in
default. This is defined as a loan to either:

• a Partner who has left the St. James’s Place Partnership; or

• a Partner who management considers to be at significant risk of
leaving the Partnership where an orderly settlement of debt is
considered to be in question.

The IFRS 9 presumption that default occurs when a loan is more
than 90 days past due has been rebutted. Because of the quality
cash flows on which loans are secured together with the direct
control exercised over them from source, management have a
practice of granting flexible ongoing terms to Partners who are
investing in their own businesses. Past evidence supports the
assertion that the vast majority of loans to Partners who remain in
the Partnership are repaid in full, irrespective of the number of days
past due the loan may be.

Write-off
Business loans to Partners are written off where there is no
reasonable expectation of further recovery. Credit-related write-off
experience is considered when determining the Group’s definition of
underperforming and non-performing.

IFRS 15
The adoption of IFRS 15 had no impact on the Group, as the way that
the Group’s revenue from contracts with customers was recognised
under the previous accounting standard, IAS 18, satisfies the
requirements of IFRS 15 with no changes required to existing
accounting policies. This conclusion was reached following a
detailed assessment of revenue recognised by the Group in the
context of the IFRS 15 five-step revenue recognition model, covering
advice charges (post-RDR), third-party fee and commission income,
wealth management fees, investment management fees, fund tax
deductions and discretionary management fees. Further information
regarding the performance obligations for each of these revenue
streams is set out in Note 1 (b) Fee and Commission Income.

III. NEW AND AMENDED ACCOUNTING STANDARDS NOT
YET ADOPTED
As at 31 December 2018, the following new and amended standards,
which are relevant to the Group but have not been applied in the
financial statements, were in issue but have not yet been adopted:

IAS 28 Amendment – Long-term Interests in Associates and Joint
Ventures

IFRS 10 and IAS 28 Amendments – Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture

IFRS 16 Leases

IFRS 17 Insurance Contracts

IFRIC 23 Uncertainty over Income Tax Treatments

Annual Improvements 2015-2017 Cycle

The Group is currently assessing the impact that the adoption of the
above standards, amendments and clarifications will have on the
Group’s results reported within the financial statements. Further
detail regarding the standards that are expected to have the most
significant impact on the financial statements is given below.

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160

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S C O N T I N U E D

1. Accounting policies continued
IFRS 16 Leases
IFRS 16 was issued in January 2016 and is mandatory for financial
years commencing on or after 1 January 2019. It will result in almost
all leases being recognised on the statement of financial position, as
the distinction between operating and finance leases is removed for
lessees. Under the new standard, an asset (the right to use the leased
item) and a financial liability to pay rentals are recognised. The only
exceptions are for short-term or low-value leases. The accounting for
lessors will not significantly change. The standard will affect the
accounting for the Group’s operating leases.

The Group’s lease portfolio at 31 December 2018 will transition to
IFRS 16 on 1 January 2019, following the modified retrospective
approach. The Group will take advantage of the exemptions offered
by IFRS 16 for short-term and low-value leases. Upon transition, the
Group will recognise a right-of-use asset of £92.4 million and a lease
liability of £83.6 million, along with a dilapidations provision
recognised under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets of £8.8 million. The 2019 lease expense for the
transitioning lease portfolio, comprising the amortisation of the
right-of-use asset and interest expense on the lease liability, is
expected to be £4.4 million higher under IFRS 16 than it would have
been under the current lease standard, IAS 17.

The negative impact arises as the lease liability is accounted for
using the effective interest method, which means that the interest
expense on the lease liability reduces year on year, whereas under
the current lease accounting standard the operating lease rentals are
constant throughout the lease term. As the Group has a number of
significant leases which are in the early stages of their lease term, the
lease expense upon transition to IFRS 16 will be higher than under
the current leases standard. This negative impact will reverse over
time.

Note that the lease entered into on 1 January 2019, as referenced in
Note 23 Post Balance Sheet Events, does not form part of the
Group’s lease portfolio at 31 December 2018 which transitioned to
IFRS 16 on 1 January 2019. As a result, it is excluded from the
numbers stated above. Upon initial recognition, the right-of-use asset
for this property was £36.5 million, the lease liability was
£33.9 million and the dilapidations provision recognised under IAS 37
Provisions, Contingent Liabilities and Contingent Assets was
£1.4 million.

IFRS 17 Insurance Contracts
IFRS 17 incorporates revised principles for the recognition,
measurement, presentation and disclosure of insurance contracts.

The Group closed to new insurance business, as defined under
accounting standards, in 2011. At 31 December 2018, the Group has
£86.9 million of non-unit-linked insurance contract liabilities, which
are substantially reinsured, and £421.2 million of unit-linked
insurance contract liabilities. As a result, the Group’s net exposure on
this business is not material.

The vast majority of the business written by the Life companies
within the Group is defined as investment, rather than insurance,
business under accounting standards. Investment business is
outside the scope of IFRS 17: refer to Note 2 for further information
on the classification of contracts between insurance and investment
business.

Management are currently assessing the impacts of adopting the
new standard. The effective date of the standard is currently
1 January 2021, subject to EU endorsement, however in November
2018 the IASB started due process to amend the effective date to
1 January 2022.

The Group financial statements also comply with the revised
Statement of Recommended Practice issued by the Association of
British Insurers in December 2005 (as amended in December 2006),
to the extent that it is consistent with IFRS standards.

IV. BASIS OF PREPARATION
The going concern basis has been adopted in preparing these
financial statements.

The financial statements are presented in pounds Sterling, rounded
to the nearest one hundred thousand pounds. They are prepared on
a historical cost basis, except for assets classified as investment
property and assets and liabilities at fair value through profit and loss.

The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects only
that year, or in the year of the revision and future years, if the revision
affects both current and future years.

Judgements made by management in the application of IFRSs that
have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are
discussed in Note 2.

The financial statements are prepared in accordance with the
Companies Act 2006 as applicable to companies reporting under
IFRS and the accounting policies set out below have been applied
consistently to all years presented in these consolidated financial
statements.

V. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated financial information incorporates the assets,
liabilities and the results of the Company and of its subsidiaries.
Subsidiaries are those entities which the Group controls. Control
exists if the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity (including unit trusts
in which the Group holds more than 30% of the units). Further
information on how control is assessed, and the judgement taken
in consolidating SJP Partner Loans No.1 Limited, the Group’s
securitisation entity, is set out in Note 2.

Associates are all entities over which the Group has significant
influence but not control, and are accounted for at fair value through
the profit or loss. The Group uses the acquisition method of
accounting to account for business combinations and expenses all
acquisition costs as they are incurred. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with policies adopted by the Group.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be
an asset or liability is recognised in accordance with IFRS 9 in the
consolidated statement of comprehensive income.

The treatment of transactions with non-controlling interests depends
on whether, as a result of the transaction, the Group alters control
of the subsidiary. Changes in the Parent’s ownership interest in a
subsidiary that do not result in a loss of control are accounted for
as equity transactions; any difference between the amount by which
the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and
attributed to the owners of the Parent entity. Where the Group
loses control of the subsidiary, at the date when control is lost the
amount of any non-controlling interest in that former subsidiary is
derecognised and any investment retained in the former subsidiary
is re-measured to its fair value; the gain or loss that is recognised
in profit or loss on the partial disposal of the subsidiary includes
the gain or loss on the re-measurement of the retained interest.

Intra-group balances, and any income and expenses or unrealised
gains and losses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.

The St. James’s Place Charitable Foundation is not consolidated
within the financial information. This is because the Company does
not control the Charitable Foundation in accordance with IFRS 10.

(b) Fee and commission income
Fee and commission income comprises:

(i)

advice charges paid by clients who receive advice alongside their
investment in a St. James’s Place or third-party retail investment
product. Advice may be provided at initial investment, and on an
on-going basis;

(ii) third-party fee and commission income, due from third-party
product providers in respect of products sold on their behalf;

(iii) wealth management fees paid by clients for the ongoing

administration of their investment;

(iv) investment management fees paid by clients for all aspects

of investment management, including fees taken by the Group
to pay third-party investment advisers;

(v) fund tax deductions, which are fees charged to clients to match

the policyholder tax expense;

(vi) discretionary fund management fees generated through the

services provided by our DFM business; and

(vii) the unwinding of income that has been deferred. This relates

to initial product charges and dealing margins from unit trusts.

The provision of initial advice is a distinct performance obligation.
As a result, initial advice charges are recognised in full on acceptance
and inception of the associated policy by the relevant product provider,
which may be a Group company or a third party. On-going advice
charges are recognised as revenue on an on-going basis, consistent
with the nature of the performance obligation being discharged,
rather than at a single point in time.

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Third-party fee and commission income is recognised in full on
acceptance and inception of the associated policy by the relevant
third-party product provider. The performance obligation is the initial
advice provided to a client which leads to investment in a third-party
product, hence it is appropriate that this revenue stream is recognised
on the same basis as initial advice charges. Where the third-party
product provider retains the right to clawback of commission on
an indemnity basis, revenue on sale of these products is recognised
to the extent that it is highly probable the revenue will not be clawed
back. Separately, a provision is recognised for amounts received
by the Group which are expected to be clawed back.

Wealth management fees, investment management fees, fund
tax deductions and discretionary fund management fees relate to
services provided on an on-going basis, and revenue is recognised
on an on-going basis to reflect the nature of the performance
obligations being discharged.

When initial product charges and dealing margins do not relate to a
distinct performance obligation satisfied at inception of a contract,
the income is deferred and amortised over the anticipated period in
which the services will be provided.

(c) Insurance and reinsurance premiums
Unit-linked insurance contract premiums are recognised as revenue
when the liabilities arising from them are recognised. All other
premiums are accounted for when due for payment.

(d) Insurance claims and reinsurance recoveries
Insurance contracts death claims are accounted for on notification
of death. Critical illness claims are accounted for when admitted.
All other claims and surrenders are accounted for when payment
is due. Reinsurance recoveries, in respect of insurance claims,
are accounted for in the same period as the related claim.

(e) Investment return
Investment return comprises investment income and investment
gains and losses. Investment income includes dividends, interest
and rental income from investment properties under operating
leases. Dividends are accrued on an ex-dividend basis, and rental
income is recognised in the statement of comprehensive income
on a straight-line basis over the term of the lease. Interest, which
is generated on assets classified as fair value through profit or loss,
is accounted for using the effective interest method.

(f) Expenses
(i) Payments to Partners
Payments to Partners comprises initial commission and initial advice
fees (IAF) (paid for initial advice, at policy outset and within an initial
period for regular contribution), renewal commission and renewal
advice fees (payable on regular contributions) and fund fee
commission or ongoing advice fee (OAF) (based on funds under
management). Initial and renewal commission and advice fees are
recognised in line with the associated premium income, but initial
commission on insurance and investment contracts may be deferred
as set out in accounting policy (k). Fund fee commission and ongoing
advice fee are recognised on an accruals basis.

(ii) Operating lease payments
Leases where a significant proportion of the risks and rewards
of ownership is retained by the lessor are classified as operating
leases. Payments made under operating leases are recognised in
the statement of comprehensive income on a straight-line basis over
the term of the lease. Lease incentives received are recognised in the
statement of comprehensive income as an integral part of the total
lease expense and are spread over the life of the lease.

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1. Accounting policies continued
(g) Income taxes
Income tax on the profit or loss for the year comprises current and
deferred tax payable by the Group in respect of policyholders and
shareholders. Income tax is recognised in the statement of
comprehensive income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Tax liabilities are recognised when it is considered probable that
there will be a future outflow of funds to a taxing authority and are
measured using a best-estimate approach.

(i) Current tax
Current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous years.

(ii) Deferred tax
Deferred tax is provided using the liability method, providing for
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes. The following differences are not provided for: the
initial recognition of assets or liabilities that affect neither accounting
nor taxable profit, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on
the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or
substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reduced to the extent
that it is no longer probable that the related tax benefit will be
realised.

Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax
liabilities, and when the deferred tax assets and liabilities relate to
income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis.

(iii) Policyholder and shareholder tax
The total income tax charge is a separate adjustment within the
statement of comprehensive income based on the movement in
current and deferred income taxes in respect of income, gains and
expenses. The total charge reflects tax incurred on behalf of
policyholders as well as shareholders, and so it is useful to be able to
identify these separately.

Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the
profits attributable to shareholders. This is calculated by applying the
appropriate effective corporate tax rates to the shareholder profits.
The remainder of the tax charge represents tax on policyholders’
investment returns. This calculation method is consistent with the
legislation relating to the calculation of tax on shareholder profits.

(h) Dividends paid
Dividend distributions to the Company’s shareholders are recognised
in the period in which the dividends are declared, that is when they
are appropriately authorised and no longer at the discretion of the
Company. The final dividend for the financial year is disclosed but
unpaid and awaiting approval by the Company’s shareholders at the
Annual General Meeting.

(i) Investment contract deposits and withdrawals
Investment contract payments in and out are not included in the
statement of comprehensive income but are reported as deposits to
or deductions from investment contract benefits in the statement of
financial position. The movement in investment contract benefits
within the statement of comprehensive income principally represents
the investment return credited to policyholders.

Explicit advice charges are payable to St. James’s Place Wealth
Management plc by most clients who wish to receive advice with
their investment in a St. James’s Place retail investment product.
St. James’s Place facilitates the payment of these charges for the
client, by arranging withdrawals from the client’s policy, which are
then recognised as income to St. James’s Place Wealth
Management plc. A proportion of the charge is then paid to the
St. James’s Place adviser who provides the advice (see (f)(i)
Expenses).

(j) Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Group’s share of the identifiable net assets of the
acquired entity at the date of acquisition. Where the fair value of the
Group’s share of the identifiable net assets of the acquired entity is
greater than the cost of acquisition, the excess is recognised
immediately in the statement of comprehensive income.

Goodwill is recognised as an asset at cost and is reviewed at least
annually for impairment or when circumstances or events indicate
there may be uncertainty over this value. If an impairment is
identified, the carrying value of the goodwill is written down
immediately through the statement of comprehensive income and is
not subsequently reversed. At the date of disposal of a subsidiary, the
carrying value of attributable goodwill is included in the calculation of
the profit or loss on disposal except where it has been written off
directly to reserves in the past.

(k) Deferred acquisition costs
For insurance contracts, acquisition costs comprise direct costs
such as initial commission and the indirect costs of obtaining and
processing new business. Acquisition costs which are incurred
during a financial year, net of any impairment losses, are deferred
and then amortised to expenses in the statement of comprehensive
income on a straight-line basis over the period during which the
costs are expected to be recoverable and in accordance with the
incidence of future related margins.

For investment contracts, only directly attributable acquisition costs,
which vary with and are related to securing new contracts and
renewing existing contracts, are deferred, and only to the extent that
they are recoverable out of future revenue. These deferred
acquisition costs, which represent the contractual right to benefit
from providing investment management services, net of any
impairment losses, are amortised to expenses in the statement of
comprehensive income on a straight-line basis over the expected
lifetime of the Group’s investment contracts. All other costs are
recognised as expenses when incurred.

The periods over which costs are expected to be recoverable are
as follows:

Insurance contracts:

Investment contracts:

6 years

12–14 years

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 163

(l) Intangible assets
(i) Purchased value of in-force business
The purchased value of in-force business in respect of insurance
business represents the present value of profits that are expected to
emerge from insurance business acquired on business combinations.
It is calculated at the time of acquisition using best-estimate actuarial
assumptions for interest, mortality, persistency and expenses, net
of any impairment losses, and it is amortised on a straight-line basis
as profits emerge over the anticipated lives of the related contracts
in the portfolio. An intangible asset is also recognised in respect of
acquired investment management contracts, representing the fair
value of contractual rights acquired under those contracts. The
purchased value of in-force business is expressed as a gross
figure in the statement of financial position, with the associated tax
included within deferred tax liabilities. It is assessed for impairment
at each reporting date and any movement is charged to the
statement of comprehensive income.

The estimated useful economic life of acquired in-force business is
20 years.

(ii) Computer software
Computer software is stated at cost less accumulated amortisation
and any recognised impairment loss. The carrying value is reviewed
for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable.

Computer software is recognised as an intangible asset during
development with amortisation commencing when the software
is operational. Amortisation is charged to the statement of
comprehensive income to expenses on a straight-line basis over
four years, being the estimated useful life of the intangible asset.

(m) Property and equipment
Items of property and equipment are stated at cost less accumulated
depreciation. Cost includes the original purchase price of the asset
and the costs attributable to bringing the asset to its working
condition for its intended use. Land is shown at fair value, based on
valuations by external independent valuers. The carrying value is
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable and any
assets that may have suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.

Depreciation is charged to the statement of comprehensive income
to expenses on a straight-line basis over the estimated useful lives
of the property and equipment, which are as follows:

Fixtures, fittings and office equipment:

5–10 years

Computer equipment:

3 years

(n) Reinsurance assets
Reinsurance assets represent amounts recoverable from reinsurers
in respect of non-unit-linked insurance contract liabilities, net of any
future reinsurance premiums.

(o) Other receivables
Other receivables are initially recognised at fair value and
subsequently held at amortised cost less impairment losses, except
for renewal income assets which are classified as fair value through
profit and loss and are initially, and subsequently, recognised at fair
value. The value of any impairment recognised is the difference
between the asset’s carrying amount and the present value of the
estimated future cash flows, discounted at the original effective
interest rate. See accounting policy (ad) for information relating
to the treatment of impaired amounts.

Other receivables include prepayments, which are recognised where
services are paid for in advance of being received. The prepayment
reduces, and an expense is recognised in the statement of
comprehensive income, as the service is received.

Commission and advice fees in respect of some insurance and
investment business may be paid to Partners in advance on renewal
premiums and accelerated by up to five years. The unearned element
of this accelerated remuneration is recognised as advanced payments
to Partners within other receivables. Should the contributions reduce
or stop within the initial period, any unearned amount is recovered.

(p) Investment property
Investment properties, which are all held within the unit-linked funds,
are properties which are held to earn rental income and/or for capital
appreciation. They are stated at fair value. An external, independent
valuer, having an appropriate recognised professional qualification
and recent experience in the location and category of property being
valued, values the portfolio every month.

The fair values are based on open market values, being the estimated
amount for which a property could be exchanged on the date of
valuation between a willing buyer and a willing seller in an arm’s
length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion.

Any gain or loss arising from a change in fair value is recognised in
the statement of comprehensive income within investment income.
Rental return from investment property is accounted for as described
in accounting policy (e).

(q) Equities, fixed income securities and investment in collective
investment schemes
These financial assets are initially and subsequently recognised at
fair value through profit or loss, with all gains and losses recognised
within investment income in the statement of comprehensive
income. The vast majority of these financial assets are quoted,
and so the fair value is based on the value within the bid-ask spread
that is most representative of fair value. If the market for a financial
asset is not active, the Group establishes fair value by using valuation
techniques such as recent arm’s length transactions, reference to
similar listed investments, discounted cash flow models or option
pricing models.

Subsequent measurement of these financial assets at fair value
through profit or loss (FVTPL) is required by IFRS 9 for debt
instruments for which the objectives of the Group’s business model
are not met by either holding the instrument to collect contractual
cash flows or selling the instruments, or where the contractual
terms of the instrument do not give rise to cash flows which are
solely payments of principal and interest. Where both the ‘business
model’ and ‘solely payments of principal and interest’ tests are met,
management have made an irrevocable decision to designate the
debt instruments at FVTPL as doing so aligns the measurement
of the financial assets with the measurement of their associated
unit-linked liabilities.

Management have not made the irrevocable election to present
changes in the fair value of equity instruments in other comprehensive
income, and so all equity instruments are also designated at FVTPL.

The Group recognises purchases and sales of investments on
trade date. The costs associated with investment transactions are
included within expenses in the statement of comprehensive income.

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1. Accounting policies continued
(r) Derivative financial instruments
The Group uses derivative financial instruments within some
unit-linked funds, with each contract initially and subsequently
recognised at fair value, based on observable market prices. All
changes in value are recognised within investment income in
the statement of comprehensive income.

(s) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term highly liquid investments, and bank
overdrafts to the extent that they are an integral part of the Group’s
cash management.

Cash and cash equivalents held within unit-linked and unit trust funds
are classified at fair value through profit and loss (FVTPL), as
management have made an irrevocable decision to designate them
as such in order to align the measurement of these financial assets
with the measurement of their associated unit-linked liabilities.
Therefore, these cash and cash equivalents are initially and
subsequently recognised at FVTPL, with gains and losses
recognised within investment return in the statement of
comprehensive income.

All other cash and cash equivalents are classified as amortised cost.
They are initially recognised at fair value and subsequently measured
at amortised cost using the effective interest method, less
impairment losses.

(t) Insurance contract liabilities
Insurance contract liability provisions are determined following an
annual actuarial investigation of the long-term fund in accordance
with regulatory requirements. The provisions are calculated on the
basis of current information and using the gross premium valuation
method. The Group’s accounting policies for insurance contracts
meet the minimum specified requirements for liability adequacy
testing under IFRS 4, as they consider current estimates of all
contractual cash flows, and of related cash flow such as claims
handling costs.

Insurance contract liabilities can never be definitive as to their timing
nor the amount of claims and are, therefore, subject to subsequent
reassessment on a regular basis.

(u) Investment contract benefits
All of the Group’s investment contracts are unit-linked. Unit-linked
liabilities are measured at fair value by reference to the value of the
underlying net asset value of the Group’s unitised investment funds,
determined on a bid value, at the reporting date. An allowance for
deductions due to (or from) the Group in respect of policyholder
tax on capital gains (and losses) in the life assurance funds is also
reflected in the measurement of unit-linked liabilities. Investment
contract benefits are recognised when units are first allocated to
the policyholder; they are de-recognised when units allocated to
the policyholder have been cancelled.

The decision by the Group to designate its unit-linked liabilities as
fair value through profit and loss (FVTPL) reflects the fact that the
matching investment portfolio, which underpins the unit-linked
liabilities, is recognised at FVTPL.

(v) Deferred income
The initial margin on financial instruments (including dealing margins
from unit trusts) is deferred and recognised on a straight-line basis
over the expected lifetime of the financial instrument, which is
between six to 14 years.

(w) Net asset value attributable to unit holders
The Group consolidates unit trusts in which it holds more than 30%
of the units and exercises control. The third-party interests in these
unit trusts are termed the net asset value attributable to unit holders
and are presented in the statement of financial position. They are
classified as FVTPL, hence are initially and subsequently measured
at fair value. The decision by the Group to designate the net asset
value attributable to unit holds as FVTPL reflects the fact that the
underlying investment portfolios are recognised at FVTPL.

Income attributable to the third-party interests is accounted for
within investment return, offset by a corresponding change in
investment contract benefits.

(x) Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events such that it is
probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate of the amount of the
obligation can be made. Provisions are measured as the discounted
expected future cash flows taking account of the risks and
uncertainties associated with the specific liability where appropriate.

(y) Borrowings
Borrowings are measured initially at fair value, net of directly
attributable transaction costs, and subsequently stated at amortised
cost. The difference between the proceeds and the redemption value
is recognised in the statement of comprehensive income over the
borrowing period on an effective interest rate basis. Borrowings are
recognised on drawdown and derecognised on repayment.

(z) Other payables
Other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.

(aa) Employee benefits
(i) Pension obligations
The Group operates a defined contribution personal pension plan
for its employees. Contributions to this plan are recognised as an
expense in the statement of comprehensive income as incurred.
The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current
and prior periods.

(ii) Share-based payments
The Group operates a number of share-based payment plans for
employees, Partners and advisers. The fair value of share-based
payment awards granted is recognised as an expense spread over
the vesting period of the instrument which accords with the period
for which related services are provided, with a corresponding
increase in equity in the case of equity-settled plans and the
recognition of a liability for cash-settled plans.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC The total amount to be expensed is determined by reference to the
fair value of the awards, measured using standard option pricing
models as the fair value of the services provided by employees,
Partners and advisers cannot be reliably measured. For equity-
settled plans, the fair value is determined at grant date and not
subsequently remeasured. For cash-settled plans, the fair value
is remeasured at each reporting date and the date of settlement,
with any changes in fair value recognised in the statement of
comprehensive income for the period.

At each reporting date, the Group revises its estimate of the number
of awards that are expected to vest and it recognises the impact
of the revision of original estimates, if any, in the statement of
comprehensive income, such that the amount recognised for
employee, Partner and adviser services are based on the number
of awards that actually vest. The charge to the statement of
comprehensive income is not revised for any changes in market
vesting conditions.

(ab) Share capital
Ordinary shares are classified as equity. Where any Group entity
purchases the Company’s equity share capital (shares held in trust),
the consideration paid is deducted from equity attributable to
shareholders, as disclosed in the Shares in Trust reserve. Where
such shares are subsequently sold, reissued or otherwise disposed
of, any consideration received is included in equity attributable to
shareholders, net of any directly attributable incremental transaction
costs and the related income tax effects.

(ac) Product classification
The Group’s products are classified for accounting purposes as
either insurance contracts or investment contracts.

(i) Insurance contracts
Insurance contracts are contracts that transfer significant insurance
risk. The Group’s product range includes a variety of term assurance
and whole-of-life protection contracts involving significant insurance
risk transfer.

(ii) Investment contracts
Contracts that do not transfer significant insurance risk are treated
as investment contracts. The majority of the business written by the
Group is unit-linked investment business and is classified as
investment contracts.

(ad) Impairment
(i) Non-financial assets
Assets that are subject to amortisation are reviewed for impairment
when circumstances or events indicate there may be uncertainty
over this value. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. Refer to accounting policy (j) for the
Group’s impairment policy for goodwill.

165

(ii) Financial assets
Financial assets held at amortised cost are impaired using an
expected credit loss model. The model splits financial assets into
those which are performing, underperforming and non-performing
based on changes in credit quality since initial recognition. At initial
recognition financial assets are considered to be performing. They
become underperforming where there has been a significant
increase in credit risk since initial recognition, and non-performing
when there is objective evidence of impairment. 12 months of
expected credit losses are recognised within ‘Expenses’ in the
statement of comprehensive income and netted against the financial
asset in the statement of financial position for all performing
financial assets, with lifetime expected credit losses recognised
for underperforming and non-performing financial assets.

Expected credit losses are based on the historic levels of loss
experienced for the relevant financial assets, with due consideration
given to forward-looking information.

(ae) Foreign currency translation
The Group’s presentation and the Company’s functional currency is
pounds Sterling.

Foreign currency transactions are translated into Sterling using the
exchange rate prevailing at the date of the transactions. Monetary
assets and liabilities denominated in foreign currencies are translated
using the rate of exchange ruling at the reporting date and the gain or
losses on translation are recognised in the statement of
comprehensive income.

Non-monetary assets and liabilities which are held at historical cost
are translated using exchange rates prevailing at the date of
transaction; those held at fair value are translated using exchange
rates ruling at the date on which the fair value was determined.

(af) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker. The
chief operating decision maker, responsible for allocating resources
and assessing performance of the operating segments, has been
identified as the Executive Board.

(ag) Current and non-current disclosure
Assets which are expected to be recovered or settled no more than
12 months after the reporting date are disclosed as current within the
Notes to the financial statements. Those expected to be recovered or
settled more than 12 months after the reporting date are disclosed
as non-current.

Liabilities which are expected or due to be settled no more than
12 months after the reporting date are disclosed as current within
the Notes to the financial statements. Those liabilities which are
expected or due to be settled more than 12 months after the
reporting date are disclosed as non-current.

(ah) Alternative performance measures
Within the financial statements, a number of alternative performance
measures (APMs) are disclosed. An APM is a measure of financial
performance, financial position or cash flows which is not defined
by the relevant financial reporting framework, which for the Group
is International Financial Reporting Standards (IFRSs) as adopted
by the European Union. APMs are used to provide greater insight
into the performance of the Group and the way it is managed by
the Directors. The Glossary of Alternative Performance Measures
on pages 227 to 229 defines each APM, explains why it is used and,
where applicable, explains how the measure can be reconciled to
the IFRS financial statements.

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2. Critical accounting estimates and
judgements in applying accounting
policies
JUDGEMENTS
The primary areas in which the Group has applied judgement are
as follows:

Classification of contracts between insurance and investment
business
Contracts with a significant degree of insurance risk are treated as
insurance contracts. All other contracts are treated as investment
contracts. It is this classification that management considers to
be a critical judgement; however, due to the carrying value of the
insurance contract liabilities within the statement of financial
position, management does not consider insurance business to
be significant to the Group.

Consolidation
Entities are consolidated within the Group financial statements if they
are controlled by the Group. Control exists if the Group is exposed to,
or has rights to, variable returns from its involvement with the entity
and the Group has the ability to affect those returns through its
power over the entity. Significant judgement can be involved in
determining whether the Group controls an entity, such as in the
case of the structured entity set up for the Group’s securitisation
transaction, SJP Partner Loans No.1 Limited, and for the Group’s
unit trusts.

A structured entity is one that has been designed so that voting or
similar rights are not the dominant factor in deciding who controls
the entity. As a result, factors such as whether a Group entity is able
to direct the relevant activities of the entity and the extent to which
the Group is exposed to variability of returns are considered. In the
case of SJP Partner Loans No.1 Limited, it was determined that the
Group does control the entity and hence it is consolidated. This is
due to an entity in the Group holding the junior tranche of loan notes,
hence being subject to variability of returns, and the same entity
being able to direct the relevant activities of the structured entity
through its role of servicer to the securitised portfolio.

Unit trusts are consolidated when the Group holds more than 30% of
the units in that unit trust. This is the threshold at which the Group is
considered to achieve control, having regard for factors such as:

• the scope of decision making authority held by St. James’s Place

Unit Trust Limited, the unit trust manager;

• rights held by external parties to remove the unit trust manager;

and

• the Group’s exposure to variable returns through its holdings in the

unit trusts and the unit trust manager’s remuneration.

Determining non-performing business loans to Partners
As set out on page 159, business loans to Partners are considered to
be non-performing, in the context of the definition prescribed within
IFRS 9, if they are in default. This is defined as a loan to either:

• a Partner who has left the St. James’s Place Partnership; or

• a Partner who management considers to be at significant risk of
leaving the Partnership where an orderly settlement of debt is
considered to be in question.

The IFRS 9 presumption that default occurs when a loan is more
than 90 days past due has been rebutted. Because of the quality
of cash flows on which loans are secured together with the direct
control exercised over them from source, management have a
practice of granting flexible ongoing terms to Partners that are

investing in their own businesses. Past evidence supports the
assertion that the vast majority of loans to Partners who remain in
the Partnership are repaid in full, irrespective of the number of days
past due the loan may be.

ESTIMATES
Critical accounting estimates are those which give rise to a
significant risk of material adjustment to the balances recognised in
the financial statements within the next 12 months. The Group’s
critical accounting estimates are:

• determining the value of insurance contract liabilities; and

• determining the fair value of investment property.

Estimates are also applied in other assets of the financial statements,
including determining the value of deferred tax assets, investment
contract benefits, the operational readiness prepayment and other
provisions.

Measurement of insurance contract liabilities
The assumptions used in the calculation of insurance contract
liabilities that have an effect on the statement of comprehensive
income of the Group are:

• the lapse assumption, which is set prudently based on an

investigation of experience during the year;

• the level of expenses, which is based on actual expenses in 2018

and expected rates in 2019 and the long-term;

• the mortality and morbidity rates, which are based on the results of

an investigation of experience during the year; and

• the assumed rate of investment return, which is based on current

gilt yields.

Greater detail on the assumptions applied, and sensitivity analysis,
is shown in Note 13.

Whilst the measurement of insurance contract liabilities is
considered to be a critical accounting estimate for the Group, the
vast majority of non-unit-linked insurance business written is
reinsured. As a result, the impact of a change in estimate in
determining the value of insurance contract liabilities would be
mitigated to a significant degree by the impact of the change in
estimate in determining the value of reinsurance assets.

Determining the fair value of investment property
In accordance with IAS 40, the Group initially recognises investment
properties at cost, and subsequently re-measures its portfolio to fair
value in the statement of financial position. Fair value is determined
monthly by professional external valuers. It is based on anticipated
market values for the properties in accordance with the guidance
issued by The Royal Institution of Chartered Surveyors, being the
estimated amount that would be received from a sale of the assets
in an orderly transaction between market participants.

The valuation of investment property is inherently subjective as it
requires, among other factors, assumptions to be made regarding
the ability of existing tenants to meet their rental obligations over the
entire life of their leases, the estimation of the expected rental income
into the future, an assessment of a property’s potential to remain as
an attractive technical configuration to existing and prospective
tenants in a changing market and a judgement to be reached on the
attractiveness of a building, its location and the surrounding
environment. As such, investment properties are classified as Level 3
in the IFRS 13 fair value hierarchy because they are valued using
techniques which are not based on observable inputs. Further details
of the valuation of investment properties, including sensitivity
analysis, is set out in Note 16.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 167

3. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified, on the basis of internal reports about components of the Group that
are regularly reviewed by the Board, in order to allocate resources to each segment and assess its performance.

The Group’s only reportable segment under IFRS 8 is a ‘wealth management’ business – which is a vertically-integrated business providing
support to our clients through the provision of financial advice and assistance through our Partner network, and financial solutions including
(but not limited to) wealth management products manufactured in the Group, such as insurance bonds, pensions, unit trust and ISA
investments, and a DFM service.

Separate geographical segmental information is not presented since the Group does not segment its business geographically. Most of its
customers are based in the United Kingdom, as is management of the assets. In particular, the operation based in south-east Asia is not yet
sufficiently material for separate consideration.

SEGMENT REVENUE
Revenue received from fee and commission income is set out in Note 4, which details the different types of revenue received from our wealth
management business.

SEGMENT PROFIT
Two separate measures of profit are monitored on a monthly basis by the Board. These are the post-tax Underlying cash result and pre-tax
European Embedded Value (EEV).

Underlying cash result
The measure of cash profit monitored on a monthly basis by the Board is the post-tax Underlying cash result. This reflects emergence of cash
available for paying a dividend during the year. Underlying cash is based on the cashflows within the IFRS results, but with no allowance for
intangibles, principally DAC, DIR, PVIF, goodwill and deferred tax, or short-term costs associated with the back-office infrastructure project.
As the cost associated with non-cash-settled share options is reflected in changes in shareholder equity, they are also not included in the
Underlying cash result.

More detail is provided on pages 33 to 40 of the Financial Review.

The Cash result should not be confused with the IFRS consolidated statement of cash flows which is prepared in accordance with IAS 7.

Underlying cash result after tax
Non-cash-settled share-based payments
Deferred tax impacts
Back-office infrastructure
Impact in the year of DAC/DIR/PVIF
Other
IFRS profit after tax
Shareholder tax
Profit before tax attributable to shareholders’ returns
Tax attributable to policyholder returns
IFRS (loss)/profit before tax

Year ended
31 December
2018
£’Million
309.0
(33.4)
(31.8)
(35.8)
(54.4)
19.9
173.5
38.4
211.9
(296.5)
(84.6)

Year ended
31 December
2017
£’Million
281.2
(30.5)
(15.0)
(21.7)
(48.1)
(20.1)
145.8
40.3
186.1
156.0
342.1

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3. Segment reporting continued
EEV operating profit
EEV operating profit is monitored on a monthly basis by the Board. The components of the EEV operating profit are included in more detail in
the Financial Review section of the Annual Report and Accounts.

EEV operating profit before tax
Investment return variance
Economic assumption changes
EEV profit before tax
Adjustments to IFRS basis
Deduct: amortisation of purchased value of in-force
Movement of balance sheet life value of in-force (net of tax)
Movement of balance sheet unit trust and DFM value of in-force (net of tax)
Tax of movement in value of in-force
Profit before tax attributable to shareholders’ returns
Tax attributable to policyholder returns
IFRS (loss)/profit before tax

Year ended
31 December
2018
£’Million
1,002.0
(460.9)
(15.1)
526.0

Year ended
31 December
2017
£’Million
918.5
340.8
29.8
1,289.1

(3.2)
(243.7)
(16.5)
(50.7)
211.9
(296.5)
(84.6)

(3.2)
(586.2)
(325.4)
(188.2)
186.1
156.0
342.1

The movement in life, unit trust and DFM value of in-force is the difference between the opening and closing discounted value of the profits
that will emerge from the in-force book over time, after adjusting for DAC and DIR impacts which are already included under IFRS.

SEGMENT ASSETS
Funds Under Management (FUM)
FUM, as reported in Section 1 of the Financial Review on page 31, is the measure of segment assets which is monitored on a monthly basis
by the Board.

Investment
Pension
UT/ISA and DFM
Total FUM
Exclude client and third-party holdings in non-consolidated unit trusts and DFM
Other
Gross assets held to cover unit liabilities
IFRS intangible assets (see page 38 adjustment 2) including goodwill, DAC, PVIF, reinsurance and deferred tax
Shareholder gross assets (see page 38)
Total assets

31 December
2018
£’Million
27,620.0
40,720.0
27,210.0
95,550.0
(4,701.6)
666.9
91,515.3
720.9
2,590.8
94,827.0

31 December
2017
£’Million
28,310.0
36,150.0
26,290.0
90,750.0
(4,882.5)
296.7
86,164.2
811.3
3,030.5
90,006.0

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 4. Fee and commission income

Advice charges (post-RDR)
Third-party fee and commission income
Wealth management fees
Investment management fees
Fund tax deductions
Discretionary fund management fees
Fee and commission income before DIR amortisation
Amortisation of DIR
Total fee and commission income

169

Year ended
31 December
2018
£’Million
743.2
113.0
721.9
85.7
(296.5)
13.8
1,381.1
142.6
1,523.7

Year ended
31 December
2017
£’Million
656.5
114.3
638.3
62.4
156.2
9.4
1,637.1
142.7
1,779.8

Fund tax deductions represent amounts deducted from, or credited to, the underlying funds to match policyholder tax charges or credit. This
arises because the UK tax regime includes a policyholder tax element within the Group’s tax arrangements. The amount of tax attributable to
policyholders reflects investment return in the underlying funds. During 2018, market falls led to a significant policyholder tax credit, hence a
credit of £296.5 million to the funds. In contrast, during 2017 market gains led to a significant policyholder tax charge, hence £156.2 million of
deductions were made from the funds.

5. Expenses
The following items are included within the expenses disclosed in the statement of comprehensive income:

Payments to Partners
Payments under operating leases
Fees payable to the Company’s auditors and its associates
For the audit of the Company and consolidated financial statements
For other services:
– The audit of the Company’s subsidiaries (excluding unit trusts)
– Audit of the Company’s unit trusts
– Audit-related assurance services
– Other assurance services
Total fees payable to the Company’s auditors and its associates
Employee costs
Wages and salaries
Social security costs
Other pension costs
Cost of employee share awards and options
Total employee costs
Average monthly number of persons employed by the Group during the year

Year ended
31 December
2018
£’Million
781.9
20.8

Year ended
31 December
2017
£’Million
709.0
17.2

0.1

0.7
0.3
0.8
0.1
2.0

140.3
16.2
11.5
16.4
184.4
2,302

0.1

0.6
0.3
0.8
–
1.8

138.8
16.5
9.5
19.1
183.9
2,014

All pension costs related to defined contribution schemes and cash supplements in lieu of contributions to defined contribution pension
schemes. At 31 December 2018, the number of Directors to whom retirement benefits are accruing, including those receiving a cash
supplement in lieu of contributions to defined contribution pension schemes is 4 (2017: 4), including the highest paid Director. Retirement
benefits are accruing in defined contribution pension schemes for one (2017: zero) Director at the year end.

The above information includes Directors’ remuneration. The aggregate emoluments of the highest paid Director were £0.8 million
(2017: £0.9 million); cash supplement in lieu of their defined contribution pension scheme was £0.1 million (2017: £0.1 million); they exercised
61,837 share options during 2018 (2017: nil); and 26,955 shares were released to them in respect of the deferred bonus scheme (2017: 33,924).
Full details of the Directors’ remuneration, share options, pension entitlements and interests in shares are disclosed in the Directors’
Remuneration Report on pages 120 to 137.

The aggregate gains made by Directors on the exercise of share options during the year was £2.2 million (2017: £2.6 million).

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6. Investment return and movement in investment contract benefits
The majority of the business written by the Group is unit-linked investment business, and so investment contract benefits are measured by
reference to the underlying net asset value of the Group’s unitised investment funds. As a result, investment return on the unitised investment
funds and the movement in investment contract benefits are linked.

INVESTMENT RETURN

Investment return on net assets held to cover unit liabilities:
Rental income
(Loss)/gain on revaluation of investment properties
Net investment return on financial instruments classified as fair value through profit and loss

Attributable to unit-linked insurance contract liabilities
Attributable to unit-linked investment contract benefits

Income attributable to third-party holdings in unit trusts

Investment return on shareholder assets:
Net investment return on financial instruments classified as fair value through profit and loss 1
Interest income on financial instruments held at amortised cost

Total investment return

Year ended
31 December
2018
£’Million

Year ended
31 December
2017
£’Million

90.9
(22.8)
(3,046.0)
(2,977.9)
6.6
(2,984.5)
(2,977.9)
(1,264.7)
(4,242.6)

(4.5)
12.1
7.6
(4,235.0)

82.3
79.2
5,545.1
5,706.6
43.5
5,663.1
5,706.6
1,547.8
7,254.4

19.5
8.6
28.1
7,282.5

1 The net investment return on financial instruments classified as fair value through profit and loss in 2017 includes a £1.8 million loss which was disclosed as
net investment return on financial instruments classified as available for sale in prior year. The reclassification has occurred due to the adoption of IFRS 9 on
1 January 2018.

Included in the net investment return on financial instruments classified as fair value through profit and loss within investment return on net
assets held to cover unit liabilities is dividend income of £987.7 million (2017: £825.6 million).

MOVEMENT IN INVESTMENT CONTRACT BENEFITS

Balance at 1 January
Deposits
Withdrawals
Movement in unit-linked investment contract benefits
Less: fees and other adjustments for reassessment of unit liability
Balance at 31 December
Current
Non-current

Movement in unit liabilities
Unit-linked investment contract benefits
Third-party unit trust holdings
Movement in investment contract benefits in consolidated statement of comprehensive income

See accounting policy (ag) for further information on the current and non-current disclosure.

2018
£’Million
64,014.3
11,307.4
(4,168.5)
(2,984.5)
(372.6)
67,796.1
4,188.2
63,607.9
67,796.1

(2,984.5)
(1,264.7)
(4,249.2)

2017
£’Million
53,307.1
9,711.4
(3,924.5)
5,663.1
(742.8)
64,014.3
3,840.9
60,173.4
64,014.3

5,663.1
1,547.8
7,210.9

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 7. Income and deferred taxes
TAX FOR THE YEAR

Current tax
UK corporation tax
– Current year charge
– Adjustment in respect of prior year
Overseas taxes
– Current year charge
– Adjustment in respect of prior year

Deferred tax
Unrealised capital losses in unit-linked funds
Unrelieved expenses
– Additional expenses recognised in the year
– Utilisation in the year
Capital losses
– Revaluation in the year
– Utilisation in the year
– Adjustment in respect of prior year
DAC, DIR and PVIF
Other items
Overseas taxes on losses
Adjustments in respect of prior periods

Total tax (credit)/charge for the year
Attributable to:
– policyholders
– shareholders

171

Year ended
31 December
2018
£’Million

Year ended
31 December
2017
£’Million

79.1
(2.7)

4.9
0.1
81.4

245.7
(3.1)

6.8
0.1
249.5

(359.2)

(55.6)

(11.1)
15.0

(1.8)
29.7
2.4
(11.5)
(3.4)
(0.5)
0.9
(339.5)
(258.1)

(296.5)
38.4
(258.1)

(12.7)
17.2

–
12.1
0.9
(12.7)
(3.5)
(0.1)
1.2
(53.2)
196.3

156.0
40.3
196.3

The prior year adjustment in current tax above represents a charge of £0.9 million in respect of policyholder tax (2017: £3.8 million credit) and
a credit of £3.5 million in respect of shareholder tax (2017: £0.8 million charge).

Included within the deferred tax on ‘other items’ is a credit of £0.8 million (2017: £2.0 million charge) relating to share-based payments.
Details of share-based payments are disclosed in Note 19 Share-based Payments.

In arriving at the profit before tax attributable to shareholders’ return, it is necessary to estimate the analysis of the total tax charge between
that payable in respect of policyholders and that payable by shareholders. Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the profits attributable to shareholders. This is calculated by applying the
appropriate effective corporate tax rates to the shareholder profits. The remainder of the tax charge represents tax on policyholders’
investment returns. This calculation method is consistent with the legislation relating to the calculation of tax on shareholder profits.

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7. Income and deferred taxes continued
TAX PAID IN THE YEAR

Current tax charge for the year
Refunds due to be received/(payments to be made) in future years in respect of current year
Payments made in current year in respect of prior years
Other
Tax paid
Tax paid can be analysed as:
– Taxes paid in UK
– Taxes paid in overseas jurisdictions
– Withholding taxes suffered on investment income received
Tax paid

MOVEMENT IN NET DEFERRED TAX BALANCE

Deferred tax asset
Deferred tax liability
Net deferred tax balance at 1 January
Credit through the consolidated statement of comprehensive income
Arising on acquisitions during the year
Deferred tax asset
Deferred tax liability
Balance at 31 December

RECONCILIATION OF TAX CHARGE TO EXPECTED TAX

(Loss)/profit before tax
Tax attributable to policyholders’ returns 1
Profit before tax attributable to shareholders’ return
Shareholder tax charge at corporate tax rate of 19% (2017: 19.25%)
Adjustments:
Tax regime differences
Lower rates of corporation tax in overseas subsidiaries
Expected shareholder tax
Other
Non-taxable income
Revaluation of historic capital losses in the Group
Adjustment in respect of prior year
– Current tax
– Deferred tax
Differences in accounting and tax bases in relation to employee share schemes
Disallowable expenses
Tax losses not recognised or past losses now recognised

Shareholder tax charge
Policyholder tax (credit)/charge
Total tax (credit)/charge for the year

Year ended
31 December
2018
£’Million
81.4
9.7
124.7
0.7
216.5

Year ended
31 December
2017
£’Million
249.5
(125.3)
71.3
1.1
196.6

211.5
1.5
3.5
216.5

2018
£’Million
182.7
(546.8)
(364.1)
339.5
(1.2)
147.1
(172.9)
(25.8)

188.9
2.7
5.0
196.6

2017
£’Million
199.9
(614.8)
(414.9)
53.2
(2.4)
182.7
(546.8)
(364.1)

Year ended
31 December
2018
£’Million
(84.6)
296.5
211.9
40.3

19%

Year ended
31 December
2017
£’Million
342.1
(156.0)
186.1
35.8 19.3%

(0.3)
(0.1%)
40.0 18.9%

(0.3)
(0.2%)
35.5 19.1%

(0.2)
(1.8)

(1.2)
–

(3.5)
0.9
(1.1)
2.0
2.1
(1.6) (0.8%)
38.4 18.1%

(296.5)
(258.1)

0.8
0.8
(0.7)
2.0
3.1
4.8

2.6%
40.3 21.7%
156.0
196.3

1 Tax attributable to policyholder returns is equal to the policyholder tax charge and reflects fund tax deductions offset by policyholder tax effects on intangibles.

Tax calculated on (loss)/profit before tax at 19% (2017: 19.25%) would amount to £(16.1) million (2017: £65.9 million). The difference of
£(242.0) million (2017: £130.4 million) between this number and the total tax of £(258.1) million (2017: £196.3 million) is made up of the
reconciling items above which total £(1.9) million (2017: £4.5 million) and the effect of the apportionment methodology on tax applicable
to policyholder returns of £(240.1) million (2017: £126.0 million).

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC DEFERRED TAX ASSETS

Unrelieved expenses (life insurance business)
Deferred income (DIR)
Capital losses (available for future relief)
Employee share scheme costs
Future capital allowances
Other
Total deferred tax assets

173

Expected
utilisation
Years
6
14
6
3
6

31 December
2018
£’Million
42.5
35.6
55.7
8.0
4.0
1.3
147.1

31 December
2017
£’Million
46.4
37.9
86.0
7.5
3.7
1.2
182.7

Appropriate investment income, gains or profits are expected to arise against which the tax assets can be utilised. Whilst the actual rates of
utilisation will depend on business growth and external factors, particularly investment market conditions, they have been tested for sensitivity
to experience and are resilient to a range of reasonably foreseeable scenarios.

At the reporting date there were unrecognised deferred tax assets of £7.5 million (2017: £5.9 million) in respect of losses in companies where
appropriate profits are not considered probable in the forecast period. These losses primarily relate to our Asia-based businesses and can be
carried forward indefinitely.

DEFERRED TAX LIABILITIES

Unrealised capital gains on life insurance (BLAGAB) assets backing unit liabilities
Deferred acquisition costs (DAC)
Purchased value of in-force business (PVIF)
Renewal income assets
Other
Total deferred tax liabilities

Expected
utilisation
Years
6
14
9
20

31 December
2018
£’Million
86.3
70.9
4.1
10.4
1.2
172.9

31 December
2017
£’Million
445.5
84.0
4.8
10.6
1.9
546.8

FUTURE TAX CHANGES
Future tax rate changes, including the reduction in the corporation tax rate to 17% effective from 1 April 2020 which was enacted in the Finance
Act 2016, were incorporated into the deferred tax balances in 2016.

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8. Goodwill, intangible assets, deferred acquisition costs and deferred income

Cost
At 1 January 2017
Additions
At 31 December 2017
At 1 January 2018
Additions
At 31 December 2018

Accumulated amortisation
At 1 January 2017
Charge for the year
At 31 December 2017
At 1 January 2018
Charge for the year
At 31 December 2018

Carrying value
At 1 January 2017
At 31 December 2017
At 31 December 2018
Current
Non-current

Outstanding amortisation period
At 31 December 2017
At 31 December 2018

GOODWILL
The carrying value of goodwill split by acquisition is as follows:

SJP Asia companies
Technical Connection Limited
Rowan Dartington companies
Balance at 31 December

Purchased
value of
in-force
business
£’Million

Computer
software and
other specific
software
developments
£’Million

73.4
–
73.4
73.4
–
73.4

43.0
3.2
46.2
46.2
3.2
49.4

30.4
27.2
24.0
3.2
20.8
24.0

15.7
0.3
16.0
16.0
0.1
16.1

12.7
0.9
13.6
13.6
1.1
14.7

3.0
2.4
1.4
0.6
0.8
1.4

DAC
£’Million

1,649.8
36.9
1,686.7
1,686.7
33.7
1,720.4

965.0
98.7
1,063.7
1,063.7
98.2
1,161.9

684.8
623.0
558.5
96.2
462.3
558.5

DIR
£’Million

(1,528.0)
(141.4)
(1,669.4)
(1,669.4)
(144.6)
(1,814.0)

(880.4)
(142.7)
(1,023.1)
(1,023.1)
(142.6)
(1,165.7)

(647.6)
(646.3)
(648.3)
(154.5)
(493.8)
(648.3)

8 years
7 years

4 years
3 years

14 years
14 years

6–14 years
6–14 years

Goodwill
£’Million

13.8
1.8
15.6
15.6
–
15.6

–
–
–
–
–
–

13.8
15.6
15.6
–
15.6
15.6

n/a
n/a

31 December
2018
£’Million
10.1
3.7
1.8
15.6

31 December
2017
£’Million
10.1
3.7
1.8
15.6

Goodwill in relation to the Rowan Dartington companies, which were acquired on 8 March 2016, arose during 2017 due to a reassessment
of the value of the business acquired within the measurement period, which is defined as a period of up to one-year post acquisition.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 175

Goodwill is reviewed at least annually for impairment, or when circumstances or events indicate there may be uncertainty over this value.
The recoverable amount has been based on value-in-use calculations using pre-tax cash flows. Details of the assumptions made in these
calculations are provided below:

Key assumptions based on experience:

Value of new business

Projection period:

Five years of detailed forecasts extrapolated into perpetuity
using a long-term growth rate

Long-term growth rate based on economic forecasts:

Pre-tax discount rate based on a risk-free rate plus a risk margin:

1.3%

4.5%

It is considered that any reasonably possible levels of change in the key assumptions would not result in impairment of the goodwill.

PURCHASED VALUE OF IN-FORCE BUSINESS/DAC/COMPUTER SOFTWARE
Amortisation is charged to expenses in the statement of comprehensive income. Amortisation profiles are reassessed annually.

DIR
Amortisation is credited within fee and commission income in the statement of comprehensive income. Amortisation profiles are reassessed
annually.

9. Property and equipment

Cost
At 1 January 2017
Additions
Disposals
At 31 December 2017
At 1 January 2018
Additions
Disposals
At 31 December 2018

Accumulated depreciation
At 1 January 2017
Charge for the year
Eliminated on disposal
At 31 December 2017
At 1 January 2018
Charge for the year
Eliminated on disposal
At 31 December 2018

Net book value
At 1 January 2017
At 31 December 2017
At 31 December 2018

Fixtures, fittings
and office
equipment
£’Million

Computer
equipment
£’Million

Total
£’Million

39.7
7.1
(0.6)
46.2
46.2
6.6
(0.1)
52.7

19.5
3.7
(0.5)
22.7
22.7
4.7
(0.1)
27.3

20.2
23.5
25.4

4.4
1.5
(0.2)
5.7
5.7
2.0
–
7.7

1.5
1.5
(0.2)
2.8
2.8
1.8
–
4.6

2.9
2.9
3.1

44.1
8.6
(0.8)
51.9
51.9
8.6
(0.1)
60.4

21.0
5.2
(0.7)
25.5
25.5
6.5
(0.1)
31.9

23.1
26.4
28.5

Amortisation period (estimated useful life)

5–10 years

3 years

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10. Investments, investment property and cash and cash equivalents
NET ASSETS HELD TO COVER UNIT LIABILITIES
Included within the statement of financial position are the following assets and liabilities comprising the net assets held to cover unit liabilities.
The assets held to cover unit liabilities are set out in adjustment 1 of the IFRS to Solvency II Net Assets Balance Sheet reconciliation on
page 38.

Assets
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Cash and cash equivalents
Other receivables
Derivative financial instruments
– Currency forwards
– Interest rate swaps
– Index options
– Contracts for differences
– Equity rate swaps
– Foreign currency options
– Total return swaps
– Fixed income options
– Credit default swaps
– Other derivatives
Total derivative financial assets
Total assets
Liabilities
Other payables
Derivative financial instruments
– Currency forwards
– Interest rate swaps
– Index options
– Contracts for differences
– Equity rate swaps
– Foreign currency options
– Total return swaps
– Credit default swaps
– Fixed income options
– Other derivatives
Total derivative financial liabilities
Total liabilities
Net assets held to cover linked liabilities
Investment contract benefits
Net asset value attributable to unit holders
Unit-linked insurance contract liabilities
Net unit-linked liabilities

31 December
2018
£’Million

31 December
2017
£’Million

1,820.7
56,077.9
21,960.6
3,459.1
6,629.1
1,059.1

153.7
70.0
45.6
8.4
3.5
21.4
139.0
55.9
11.3
–
508.8
91,515.3

1,630.9
55,086.9
17,134.6
4,486.6
7,005.9
475.9

143.8
49.0
70.9
9.2
5.4
19.1
41.0
–
4.2
0.8
343.4
86,164.2

277.7

151.5

199.4
52.2
26.5
10.1
5.8
0.7
194.5
20.6
7.6
–
517.4
795.1
90,720.2
67,796.1
22,502.9
421.2
90,720.2

75.1
38.8
24.0
6.8
4.4
22.9
3.1
14.2
–
1.0
190.3
341.8
85,822.4
64,014.3
21,349.1
459.0
85,822.4

Net assets held to cover linked liabilities, and third-party holdings in unit trusts, are considered to have a maturity of up to one year since the
corresponding unit liabilities are repayable and transferable on demand. See accounting policy (ag) for further information on current and
non-current disclosure.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC INVESTMENT PROPERTY

Balance at 1 January
Additions
Capitalised expenditure on existing properties
Disposals
Changes in fair value
Balance at 31 December

177

31 December
2018
£’Million
1,630.9
274.0
3.3
(64.7)
(22.8)
1,820.7

31 December
2017
£’Million
1,462.4
88.5
7.0
(6.2)
79.2
1,630.9

Investment property is held within unit-linked funds and is considered current. However, since investment properties are not traded in an
organised public market they are relatively illiquid compared with many other asset classes. There are no restrictions on the realisability of the
Group’s individual properties, or on the remittance of income or proceeds of disposal.

Investment property is valued monthly by external chartered surveyors in accordance with the guidance issued by The Royal Institution of
Chartered Surveyors. The investment property valuation has been prepared using the ‘market approach’ valuation technique: that is, using
prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets.

The historical cost of investment properties held at 31 December 2018 is £1,706.6 million (2017: £1,480.6 million). This represents the price
paid for investment properties, prior to any subsequent revaluation.

The rental income and direct operating expenses recognised in the statement of comprehensive income in respect of investment properties
are set out below. All expenses relate to property generating rental income.

Rental income
Direct operating expenses

Year ended
31 December
2018
£’Million
90.9
7.6

Year ended
31 December
2017
£’Million
82.3
6.8

At the year end contractual obligations to purchase, construct or develop investment property amounted to £23.0 million (2017: £12.5 million).
The most significant contractual obligation is the funding of a hotel development on a freehold site owned by the Group. The funding
commitment for this development is £20.3 million, with building works scheduled to take place over the next two years. The development has
been pre-let to a hotel operator, with the lease completing upon delivery of the finished building. Contractual obligations to dispose of
investment property amounted to £nil (2017: £nil).

CASH AND CASH EQUIVALENTS

Cash and cash equivalents not held to cover unit liabilities
Balances held to cover unit liabilities
Total cash and cash equivalents

All cash and cash equivalents are considered current.

31 December
2018
£’Million
248.5
6,629.1
6,877.6

31 December
2017
£’Million
274.7
7,005.9
7,280.6

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11. Other receivables

Receivables in relation to unit liabilities
Other receivables in relation to insurance and unit trust business
Operational readiness prepayment
Advanced payments to Partners
Other prepayments
Business loans to Partners
Renewal income assets
Miscellaneous
Total other receivables
Current
Non-current

31 December
2018
£’Million
1,060.1
68.6
236.4
44.9
70.1
394.5
72.1
5.6
1,952.3
1,297.7
654.6
1,952.3

31 December
2017
£’Million
885.1
124.0
170.6
39.5
58.2
263.9
71.6
7.1
1,620.0
1,168.1
451.9
1,620.0

All items within other receivables meet the definition of financial assets with the exception of prepayments and advanced payments to Partners.
The fair value of those financial assets held at amortised cost is not materially different from amortised cost.

Receivables in relation to unit liabilities primarily relate to outstanding market trade settlements (sales) in the life unit-linked funds and the
consolidated unit trusts. Other receivables in relation to insurance and unit trust business primarily relate to outstanding policy-related
settlement timings. Both of these categories of receivables are short-term, typically settled within three days.

The operational readiness prepayment relates to the new administration platform being developed by our key outsourced back-office
administration provider. Management has assessed the recoverability of this prepayment against the expected cost saving benefit of lower
future tariff costs arising from the new platform. It is believed that any reasonably possible change in the assumptions applied within this
assessment, such as levels of future business, the anticipated future service tariffs and the discount rate, would have no impact on the
carrying value of the asset.

Renewal income assets represent the present value of future cash flows associated with books of business acquired by the Group.

BUSINESS LOANS TO PARTNERS
Business loans to Partners are interest-bearing (linked to Bank of England base rate plus a margin), repayable on demand and secured against
the future renewal income streams of the Partner.

Business loans to Partners include £99.0 million of loans that have been securitised. Legal ownership of the securitised assets has been
transferred to a structured entity, SJP Partner Loans No.1 Limited, which has issued £70.0 million of loan notes backed by these assets to a
third-party investor and £32.8 million to another entity within the Group. The securitised assets are ring fenced from the other assets of the
Group, which means that the cash flows associated with the assets can only be used to purchase new loans into the structure in the revolving
period, or repay the note holders in the amortisation period, plus associated issuance fees and costs. Holders of the loan notes have no
recourse to the Group’s other assets.

Despite being securitised, the business loans to Partners remain recognised in the Group statement of financial position. For further
information on the loan notes issued by the structured entity to third-party investors, see Note 15 Borrowings and Financial Commitments.

Reconciliation of the business loans to Partners opening and closing gross loan balances

Gross balance at 1 January 2018
Business loans to Partners classification changes:
– Transfer to underperforming
– Transfer to non-performing
– Transfer to performing
New Lending activity during the year
Repayments activity during the year
Gross balance at 31 December 2018

Stage 1
performing
£’Million
252.0

Stage 2
under-
performing
£’Million
8.3

Stage 3
non-
performing
£’Million
8.1

(5.0)
(0.2)
5.0
296.5
(165.3)
383.0

5.0
(0.1)
(5.0)
–
(0.6)
7.6

–
0.3
–
–
(1.4)
7.0

Total
£’Million
268.4

–
–
–
296.5
(167.3)
397.6

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 179

Business loans to Partners: provision
The expected loss impairment model for business loans to Partners has been built based on the levels of loss experienced in the portfolio,
with due consideration given to forward-looking information.

The provision held against business loans to Partners under the incurred loss model as required by the previous accounting standard, IAS 39,
was immaterial. The provision required by applying the expected loss model from 1 January 2018, as required by IFRS 9, is also immaterial.
At 31 December 2018, the provision held against the total book was £3.1 million (31 December 2017: £4.5 million). During the period, £0.6 million
of the provision was released (2017: £0.1 million) whilst new provisions and adjustments to existing provisions increased the total by
£1.4 million (2017: £1.3 million).

Business loans to Partners as recognised on the statement of financial position

Gross Business loans to Partners
Provision
Net Business loans to Partners

MOVEMENT IN RENEWAL INCOME ASSETS

At 1 January
Additions
Disposals
Revaluation
Total renewal income at 31 December

The key assumptions used for the assessment of the fair value of the renewal income are as follows:

Lapse rate – SJP Partner renewal income 1
Lapse rate – non-SJP renewal income 1
Discount rate

31 December
2018
£’Million
397.6
(3.1)
394.5

31 December
2017
£’Million
268.4
(4.5)
263.9

2018
£’Million
71.6
9.7
(0.2)
(9.0)
72.1

2017
£’Million
58.9
14.5
–
(1.8)
71.6

31 December
2018
5.0%–15.0%
15.0%–25.0%
5.0%–7.5%

31 December
2017
5.0%–15.0%
15.0%–25.0%
5.0%–7.5%

1 Future income streams are projected making use of persistency assumptions derived from the Group’s experience of the business or, where insufficient data

exists, from external industry experience. These assumptions are reviewed on an annual basis.

These assumptions have been used for the analysis of each business combination classified within renewal income.

12. Other payables

Payables in relation to unit liabilities
Other payables in relation to insurance and unit trust business
Accruals
Accruals to Partners
Miscellaneous
Total other payables
Current
Non-current

31 December
2018
£’Million
560.3
336.9
151.2
107.3
135.1
1,290.8
1,213.7
77.1
1,290.8

31 December
2017
£’Million
420.4
412.2
139.4 1
87.6
171.6 1
1,231.2
1,140.4
90.8
1,231.2

1 Payables of £12.9 million at 31 December 2017 have been reallocated from accruals to miscellaneous to better reflect the nature of the balance, given invoices had

been received for these amounts.

Payables in relation to unit liabilities primarily relate to outstanding market trade settlements (purchases) in the life unit-linked funds and the
consolidated unit trusts. Other payables in relation to insurance and unit trust business primarily relate to outstanding policy-related settlement
timings. Both of these categories of payables are short-term, typically settled within three days.

Included within miscellaneous is a contract payment of £85.3 million (2017: £92.5 million) which is non-interest bearing and repayable on a
straight-line basis over the life of a 12-year service agreement. The repayment period commenced on 1 January 2017.

The fair value of financial instruments held at amortised cost within other payables is not materially different from amortised cost.

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13. Insurance contract liabilities and reinsurance assets
RISK
Insurance risk arises from inherent uncertainties as to the occurrence, amount and timing of insurance liabilities. The Group assumes
insurance risk by issuing insurance contracts under which the Group agrees to compensate the client (or other beneficiary) if a specified
future event (the insured event) occurs. The Group insures mortality and morbidity risks but has no longevity risk as we have never written
any annuity business. The Group has a medium appetite for insurance risk, only actively pursuing it where financially beneficial, or in support
of strategic objectives.

Risk
Underwriting

Description
Failure to price appropriately for a risk, or the impact
of anti-selection.

Epidemic/disaster

Expense

An unusually large number of claims arising from
a single incident or event.
Administration costs exceed expense allowance.

Retention

Unexpected movement in future profit due to more
(or less) clients than anticipated withdrawing their funds.

INSURANCE CONTRACT LIABILITIES

Management
The Group ceased writing new protection business in
April 2011. Experience is monitored regularly. For most
business the premium or deduction rates can be re-set.
The Group has fully reinsured the UK insurance risk.
Protection is provided through reinsurance. The Group
has fully reinsured the UK insurance risk.
Administration is outsourced and a tariff of costs is agreed.
The contract is monitored regularly to rationalise costs
incurred. Internal overhead expenses are monitored and
closely managed.
Retention of insurance contracts is closely monitored
and unexpected experience is investigated. Retention
experience has continued in line with assumptions.

Balance at 1 January
Movement in unit-linked liabilities
Movement in liabilities
– New business
– Existing business
– Other assumption changes
– Experience variance
Total movement in liabilities
Balance at 31 December
Unit-linked
Non-unit-linked

Current
Non-current

2018
£’Million
544.6
(37.7)

0.1
(1.2)
(1.2)
3.5
1.2
508.1
421.2
86.9
508.1
83.2
424.9
508.1

2017
£’Million
518.2
23.6

0.1
(1.0)
1.1
2.6
2.8
544.6
459.0
85.6
544.6
86.2
458.4
544.6

See accounting policy (ag) for further information on the current and non-current disclosure.

As the Group closed to new insurance business in 2011, the movement in insurance contract liabilities in relation to new business represents
the change in insurance contract liabilities for incremental business written during the year for existing policies.

REINSURANCE ASSETS

Reconciliation of the movement in the net reinsurance balance:
Reinsurance assets at 1 January
Reinsurance component of change in insurance liabilities
Reinsurance assets at 31 December
Current
Non-current

2018
£’Million

2017
£’Million

82.8
–
82.8
13.6
69.2
82.8

80.5
2.3
82.8
13.1
69.7
82.8

The overall impact of reinsurance on the profit for the year was a net charge of £10.0 million (2017: charge of £4.0 million).

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 181

ASSUMPTIONS USED IN THE CALCULATION OF INSURANCE LIABILITIES AND REINSURANCE ASSETS
The principal assumptions used in the calculation of the liabilities are:

Assumption
Interest rate

Mortality

Morbidity – Critical Illness

Morbidity – Permanent Health
Insurance

Expenses

Persistency

Description
The valuation interest rate is calculated by reference to the long-term gilt yield at 31 December 2018.
The specific rates used are between 0.9% and 1.3% depending on the tax regime (0.9% and 1.3% at
31 December 2017).
Mortality is based on Group experience and is set at 72% of the TM/F92 tables with an additional
loading for smokers. There has been no change since 2006.
Morbidity is based on Group experience. There has been no change during 2018. Sample annual
rates per £ for a male non-smoker are:
Age

25
35
45
Morbidity is based on Group experience. There has been no change during 2018. Sample annual rates per
£ income benefit p.a. for a male non-smoker are:
Age

Rate – 2017 and 2018

Rate – 2017 and 2018
0.000760
0.001334
0.003189

25
35
45
Contract liabilities are calculated allowing for the actual costs of administration of the business.
The assumption has been amended to allow for changes to the underlying administration costs.

0.00366
0.00965
0.02092

Product

Annual cost

2018

2017

Protection business
Allowance is made for a prudent level of lapses within the calculation of the liabilities. The rates have not
changed in 2018. Sample annual lapse rates are:

£37.97

£37.49

2017 and 2018

Protection business

Year 1

Lapses

Year 5

Year 10

SENSITIVITY ANALYSIS
The table below sets out the sensitivity of the profit on insurance business and net assets to changes in key assumptions. The levels of
sensitivity tested are consistent with those proposed in the EEV principles and reflect reasonably possible levels of change in the assumptions.
The analysis reflects the change in the variable/assumption shown while all other variables/assumptions are left unchanged. In practice
variables/assumptions may change at the same time, as some may be correlated (for example, an increase in interest rates may also result
in an increase in expenses if the increase reflects higher inflation). It should also be noted that in some instances sensitivities are non-linear.
The sensitivity percentage has been applied in proportion to the assumption: for example, application of a 10% sensitivity to a withdrawal
assumption of 8% will reduce it to 7.2%.

Sensitivity analysis
Withdrawal rates
Expense assumptions
Mortality/morbidity

Change in
assumption
%
-10%
-10%
-5%

Change in
profit/(loss)
before tax
2018
£’Million
(0.9)
0.2
0.0

Change in
profit/(loss)
before tax
2017
£’Million
(1.0)
0.2
0.0

Change in net
assets
2018
£’Million
(0.9)
0.2
0.0

Change in net
assets
2017
£’Million
(1.0)
0.2
0.0

A change in interest rates will have no material impact on insurance profit or net assets.

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14. Other provisions and contingent liabilities

At 1 January 2017
Additional provisions
Utilised during the year
Release of provision
At 31 December 2017
At 1 January 2018
Additional provisions
Utilised during the year
Release of provision
At 31 December 2018
Current
Non-current

Total
provisions
£’Million
17.1
20.5
(16.2)
(1.4)
20.0
20.0
18.9
(16.1)
(0.1)
22.7
12.6
10.1
22.7

Total provisions relate to the cost of redress for complaints and clawback of indemnity commission. The provision for the cost of redress for
complaints is based on estimates of the total number of complaints expected to be upheld, the estimated cost of redress and the expected
timing of settlement. The clawback provision is based on estimates of the indemnity commission that may be repaid.

As more fully set out in the summary of principal risks and uncertainties on pages 51 to 54, the Group could in the course of its business be
subject to legal proceedings and/or regulatory activity. Should such an event arise, the Board would consider its best estimate of the amount
required to settle the obligation and, where appropriate and material, establish a provision. While there can be no assurances that circumstances
will not change, based upon information currently available to them, the Directors do not believe there is any possible activity or event that
could have a material adverse effect on the Group’s financial position.

During the normal course of business, the Group may from time to time provide guarantees to Partners, clients or other third parties. However,
based upon the information currently available to them the Directors do not believe there are any guarantees which would have a material
adverse effect on the Group’s financial position, and so the fair value of any guarantees has been assessed as £nil (2017: £nil).

15. Borrowings and financial commitments
BORROWINGS

Bank borrowings
Loan notes
Total borrowings
Current
Non-current

31 December
2018
£’Million
164.8
183.8
348.6
0.3
348.3
348.6

31 December
2017
£’Million
165.8
114.1
279.9
0.8
279.1
279.9

Borrowings are a liability arising from financing activities. The primary borrowings in the Group are:

• a £340 million revolving credit facility, which includes a £90 million extension agreed in 2017 to the original £250 million facility entered into

with a group of UK banks in 2015. The facility is repayable over five years to 2022 with a variable interest rate. At 31 December 2018 the
undrawn credit available under this facility was £179 million (31 December 2017: £179 million);

• a US Dollar $160 million private shelf facility, also entered into in 2015. The Group authorised the issue of £50 million of loan notes during

2015, and a further issue of £64 million of loans notes during 2017 in relation to this facility. Both note issues were denominated in Sterling,
eliminating any Group currency risk. The notes are repayable over ten years, ending in 2025 and 2027 respectively, with variable interest
rates; and

• £70.0 million of AAA-rated securitised loan notes issued during 2018, which are backed by a portfolio of business loans to Partners (for

further information refer to Note 11 Other receivables). Holders of these notes have no recourse to the Group’s other assets. The notes are
repayable over the expected life of the securitisation, which is estimated to be five years. This includes a two-year revolving period where
cash flows arising from the securitised portfolio are used to purchase new loans into the portfolio, rather than repay the notes. The notes
have variable interest rates.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC The movement in borrowings over the year are as follows:

Borrowings at 1 January
Additional borrowing during the year
Repayment of borrowings during the year
Costs on additional borrowings during the year
Unwind of borrowing costs (non-cash movement)
Borrowings at 31 December

183

2018
£’Million
279.9
232.5
(162.2)
(2.0)
0.4
348.6

2017
£’Million
281.4
100.0
(101.0)
(0.9)
0.4
279.9

The fair value of the outstanding borrowings is not materially different from amortised cost. Interest expense on borrowings is recognised
within expenses in the consolidated statement of comprehensive income.

The Group also guarantees loans provided by third parties to Partners. In the event of default of any individual Partner loan, the Group
guarantees to repay the full amount of the loan, with the exception of Metro Bank plc, where 50% of the loan is guaranteed. These loans are
secured against the future renewal income streams of the Partner. The value of the loans guaranteed is as follows:

Bank of Scotland
Metro Bank plc
Santander plc
Total loans

Loans drawn

Facility

31 December
2018
£’Million
61.7
52.5
49.5
163.7

31 December
2017
£’Million
65.4
46.7
55.0
167.1

31 December
2018
£’Million
80.0
61.0
50.0
191.0

31 December
2017
£’Million
80.0
61.0
75.0
216.0

The fair value of these guarantees has been assessed as £nil (2017: £nil).

FINANCIAL COMMITMENTS
The Group has commitments under non-cancellable operating leases in connection with the rental of office buildings and office equipment
with varying lease end dates ranging from 2019 to 2042. The following table represents the future minimum lease payments under non-
cancellable operating leases, including VAT, service charges and buildings insurance:

Not later than one year
Later than one year and not later than five years
Later than five years
Total financial commitments

31 December
2018
£’Million
18.0
53.7
69.6
141.3

31 December
2017
£’Million
18.1
56.2
74.4
148.7

As at 31 December 2018, there was £0.1 million (2017: £0.2 million) of future minimum sub-lease payments expected to be received under
non-cancellable sub-leases.

16. Financial risk
RISK MANAGEMENT OBJECTIVES AND RISK POLICIES
The Group’s financial risk can usefully be considered in two categories of assets:

1. Assets backing unit liabilities (see Note 10); and

2. Shareholder assets.

In general, the policyholder bears the financial risk on assets backing the unitised business, and risk from shareholder assets is minimised
through investment in liquid assets with a strong credit rating.

Exposure to the following risks for the two categories of assets is analysed separately in the following sections, in line with the requirements
of IFRS 7:

• Credit risk;

• Liquidity risk;

• Market risk; and

• Currency risk.

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16. Financial risk continued
Credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit. Credit risk also arises from holdings of cash and
cash equivalents, deposits and formal loans with banks and financial institutions. The Group has adopted a risk averse approach to such risk
and has a stated policy of not actively pursuing or accepting credit risk except when necessary to support other objectives.

Risk
Shareholders’ assets

Description
Loss of assets or reduction
in value

Reinsurance

Failure of counterparty
or counterparty unable
to meet liabilities

Business loans to Partners Inability of Partners to

repay loans or advances
from the Group

Management
Shareholder funds are predominantly invested in AAA-rated unitised money market
funds, which are classified as investments in collective investment schemes (CIS),
and deposits with approved banks, but may be invested in sovereign fixed interest
securities such as UK gilts where regulatory constraints on other assets apply.
Maximum counterparty limits are set for each company within the Group and
aggregate limits are also set at a Group level.
Credit ratings of potential reinsurers must meet or exceed AA-. Consideration is also
given to size, risk concentrations/exposures and ownership in the selection of
reinsurers. The Group also seeks to diversify its reinsurance credit risk through the
use of a spread of reinsurers.
Loans and advances are managed in line with the Group’s secured lending policy.
Loans are secured on the future renewal income stream expected from a Partner’s
portfolio and loan advances vary in relation to the projected future income of the
relevant Partner. Outstanding balances are regularly reviewed and assessed on a
conservative basis. Support is provided to help Partners manage their business
appropriately. Expected credit losses are recognised as provisions against the loans.

Liquidity risk is the risk that the Group, although solvent, either does not have available sufficient financial resources to enable it to meet its
obligations as they fall due, or can secure such resources only at excessive cost. The Group is averse to liquidity risk and seeks to minimise
this risk by not actively pursuing it except where necessary to support other objectives.

Risk
Cash or expense
requirement

Description
A significant cash or
expense requirement
needs to be met at short
notice.

Management
The majority of free assets are invested in cash or cash equivalents and the cash
position and forecast are monitored on a monthly basis. The Group also maintains a
margin of free assets in excess of the minimum required solvency capital within its
regulated entities. Further, the Group has established committed borrowing facilities
(see Note 15) intended to further mitigate liquidity risk.

Market risk is the impact a fall in the value of equity or other asset markets may have on the business. The Group adopts a risk-averse
approach to market risk, with a stated solvency policy of not actively pursuing or accepting market risk except where necessary to support
other objectives. However, the Group accepts the risk that a fall in equity or other asset markets will reduce the level of annual management
charge income derived from policyholder assets and the risk of lower future profits.

The table below summarises the main market risks that the business is exposed to and the methods by which the Group seeks to mitigate them.

Risk
Client liabilities

Retention

New business

Description
As a result of a reduction in
equity values, the Group
may be unable to meet
client liabilities.
Loss of future profit on
investment contracts due
to more clients than
anticipated withdrawing
their funds, particularly as
a result of poor investment
performance.
Poor performance in the
financial markets in
absolute terms, and
relative to inflation, leads to
existing and future clients
rejecting investment in
longer-term assets.

Management
This risk is substantially mitigated by the Group’s strategic focus on unitised
business, by not providing guarantees to clients on policy values and by the
matching of assets and liabilities.

Retention of investment contracts is closely monitored and unexpected experience
variances are investigated. Retention has remained consistently strong throughout
2018, despite volatile market conditions.

The benefit to clients of longer-term equity investment as part of a diversified
portfolio of assets is fundamental to our philosophy. Advice and marketing become
even more important when market values fall, and greater attention is required to
support and give confidence to existing and future clients in such circumstances.
This is taken account of by the Group in its activities.

The Group is not subject to any significant direct currency risk, since all material shareholder financial assets and financial liabilities are
denominated in Sterling. However, since future profits are dependent on charges based on FUM, changes in FUM as a result of currency
movements will impact future profits.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 185

SHAREHOLDER ASSETS
Categories of financial assets and financial liabilities
The categories and carrying values of the shareholder financial assets and financial liabilities held in the Group’s statement of financial position
are summarised in the table below:

31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 3
Other receivables 4
– Business loans to Partners
– Renewal income assets
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities

31 December 2017
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 3
Other receivables 4
– Business loans to Partners
– Renewal income assets
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities

Financial assets
at fair value
through profit
and loss 1
£’Million

Financial assets
measured at
amortised cost 2
£’Million

Financial
liabilities
measured at
amortised cost
£’Million

5.4
1,297.0

–
72.1
–
72.1
–
1,374.5

–
–
–

–
–

394.5
–
75.1
469.6
248.5
718.1

–
–

–
–
–
–
–
–

–
–
–

348.6
1,013.1
1,361.7

Financial assets
at fair value
through profit
and loss 1
£’Million

Financial assets
measured at
amortised cost 2
£’Million

Financial
liabilities
measured at
amortised cost
£’Million

46.1
1,416.8

–
71.6
–
71.6
–
1,534.5

–
–
–

–
–

263.9
–
540.3
804.2
274.7
1,078.9

–
–

–
–
–
–
–
–

–
–
–

279.9
1,079.7
1,359.6

Total
£’Million

5.4
1,297.0

394.5
72.1
75.1
541.7
248.5
2,092.6

348.6
1,013.1
1,361.7

Total
£’Million

46.1
1,416.8

263.9
71.6
540.3
875.8
274.7
2,613.4

279.9
1,079.7
1,359.6

1 All financial assets at fair value through profit or loss are designated as such upon initial recognition. Renewal income assets of £71.6 million, which were classified

as available-for-sale financial assets at 31 December 2017, were reclassified to fair value through profit and loss upon adoption of IFRS 9 on 1 January 2018.

2 These financial assets, which were classified as loans and receivables at 31 December 2017, were reclassified to financial assets measured at amortised cost

upon transition to IFRS 9 on 1 January 2018.

3 All assets included as shareholder investment in collective investment schemes are holdings of high-quality, highly liquid money market funds, containing assets

which are cash and cash equivalents.

4 Other receivables exclude prepayments and unearned commission, which are not considered financial assets.

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16. Financial risk continued
SHAREHOLDER ASSETS CONTINUED
Income, expense, gains and losses arising from financial assets and financial liabilities
The income, expense, gains and losses arising from shareholder financial assets and financial liabilities are summarised in the table below:

Year ended 31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income assets
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities

Year ended 31 December 2017
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income assets
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities

Financial assets
at fair value
through profit
and loss 1
£’Million

Financial assets
measured at
amortised cost 2
£’Million

Financial
liabilities
measured at
amortised cost
£’Million

Total
£’Million

0.6
6.2

–
(9.0)
(9.0)
–
(2.2)

–
–

9.0
–
9.0
1.2
10.2

–
–

–
–
–
–
–

(6.1)
(6.1)

0.6
6.2

9.0
(9.0)
–
1.2
8.0

(6.1)
(6.1)

Financial assets
at fair value
through profit
and loss 1
£’Million

Financial assets
measured at
amortised cost 2
£’Million

Financial
liabilities
measured at
amortised cost
£’Million

Total
£’Million

0.1
3.0

–
(1.8)
(1.8)
–
1.3

–
–
–

–
–

6.9
–
6.9
0.6
7.5

–
–
–

–
–

–
–
–
–
–

(4.9)
(0.8)
(5.7)

0.1
3.0

6.9
(1.8)
5.1
0.6
8.8

(4.9)
(0.8)
(5.7)

1 All financial assets and liabilities at fair value through profit or loss are designated as such upon initial recognition. Net losses arising from renewal income

assets were £1.8 million for the year ended 31 December 2017. Following the reclassification of renewal income assets from available-for-sale financial assets at
31 December 2017 to fair value through profit and loss upon adoption of IFRS 9 on 1 January 2018, the £1.8 million net losses have been presented in the fair value
through profit and loss column.

2 Income, expenses, gains and losses arising from these financial assets, which were classified as loans and receivables at 31 December 2017, were reclassified to

financial assets measured at amortised cost upon transition to IFRS 9 on 1 January 2018.

Losses on renewal income assets have been recognised within the investment return line in the statement of comprehensive income.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 187

Fair value estimation
Financial assets and liabilities, which are held at fair value in the financial statements, are required to have disclosed their fair value
measurements by level of the following fair value measurement hierarchy:

• quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or

indirectly (that is, derived from prices) (Level 2); and

• inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group’s shareholder assets measured at fair value. There are no shareholder liabilities measured at fair value:

31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Renewal income assets
Total financial assets

31 December 2017

Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Renewal incomes assets
Total financial assets

Level 1
£’Million

5.4
1,297.0
–
1,302.4

Level 1

£’Million

46.1
1,416.8
–
1,462.9

Level 2
£’Million

Level 3
£’Million

Total balance
£’Million

–
–
–
–

–
–
72.1
72.1

5.4
1,297.0
72.1
1,374.5

Level 2

£’Million

Level 3

Total balance

£’Million

–
–
–
–

–
–
71.6
71.6

46.1
1,416.8
71.6
1,534.5

1 All assets included as shareholder investment in collective investment schemes are holdings of high-quality, highly liquid unitised money market funds, containing

assets which are cash and cash equivalents.

The fair value of financial instruments traded in active markets is based on quoted bid prices at the reporting date. These instruments are
included in Level 1. Level 2 financial assets and liabilities are valued using observable prices for identical current arm’s length transactions.

The renewal income assets are Level 3 and are valued using a discounted cash flow technique and the assumptions outlined in Note 11. The
effect of applying reasonably possible alternative assumptions of a movement of 100bps on the discount rate and a 10% movement in the
lapse rate would result in an unfavourable change in valuation of £7.4 million and a favourable change in valuation of £5.0 million, respectively.

There were no transfers between Level 1 and Level 2 during the year, nor into or out of Level 3.

Movement in Level 3 portfolios

Renewal income assets
Opening balance
Additions during the year
Disposals during the year
Unrealised losses recognised in the statement of comprehensive income
Closing balance

2018
£’Million
71.6
9.7
(0.2)
(9.0)
72.1

2017
£’Million
58.9
14.5
–
(1.8)
71.6

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16. Financial risk continued
SHAREHOLDER ASSETS CONTINUED
Credit risk
The following table sets out the maximum credit risk exposure and ratings of shareholder financial and other assets which are susceptible to
credit risk:

31 December 2018
Fixed income securities
Investment in Collective Investment Schemes 1
Reinsurance assets
Other receivables
Cash and cash equivalents
Total

31 December 2017
Fixed income securities
Investment in Collective Investment Schemes 1
Reinsurance assets
Other receivables
Cash and cash equivalents
Total

AAA
£’Million
4.1
1,297.0
–
–
–
1,301.1

AAA
£’Million
3.9
1,416.8
–
–
–
1,420.7

AA
£’Million
1.3
–
82.8
6.2
63.6
153.9

AA
£’Million
42.2
–
82.8
7.1
76.2
208.3

A
£’Million
–
–
–
–
161.7
161.7

A
£’Million
–
–
–
–
162.2
162.2

BBB
£’Million
–
–
–
–
0.3
0.3

BBB
£’Million
–
–
–
–
14.2
14.2

Unrated
£’Million
–
–
–
535.5
22.9
558.4

Unrated
£’Million
–
–
–
868.7
22.1
890.8

Total
£’Million
5.4
1,297.0
82.8
541.7
248.5
2,175.4

Total
£’Million
46.1
1,416.8
82.8
875.8
274.7
2,696.2

1 Investment of shareholder assets in Collective Investment Schemes refers to investment in unitised money market funds, containing assets which are cash and

cash equivalents.

Other receivables includes £394.5 million (2017: £263.9 million) of loans to St. James’s Place Partners, which are interest-bearing (linked to
Bank of England base rate plus a margin), repayable on demand and secured against the future renewal income streams of the Partner.

Impairment of these loans is determined using the expected loss model set out in IFRS 9. Expected credit losses are based on the historic
levels of loss experienced on business loans to Partners, with due consideration given to forward-looking information. A range of factors,
including the nature or type of the loan and the security held, are taken into account in calculating the provision.

The loan balance is presented net of a £3.1 million provision (2017: £4.5 million); see also Note 11. The movement in the impairment provision
will reflect utilisation of the existing provision during the year, but the overall cost of Partner business loans (including new provisions)
recognised within administration expenses in the statement of comprehensive income during the year was a charge of £3.0 million
(2017: £1.8 million).

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC Contractual maturity and liquidity analysis
The following table sets out the contractual maturity analysis of the Group’s financial assets and financial liabilities:

31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities

31 December 2017
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities

Up to 1
year
£’Million

5.4
1,297.0

47.4
13.3
75.1
135.8
248.5
1,686.7

1.0
816.7
817.7

Up to 1
year
£’Million

46.1
1,416.8

57.0
13.4
540.3
610.7
274.7
2,348.3

1.2
989.0
990.2

1–5
years
£’Million

Over 5
years
£’Million

–
–

123.4
28.5
–
151.9
–
151.9

279.7
41.8
321.5

–
–

223.7
30.3
–
254.0
–
254.0

71.2
50.0
121.2

1–5
years
£’Million

Over 5
years
£’Million

–
–

108.8
30.2
–
139.0
–
139.0

185.4
48.3
233.7

–
–

98.1
28.0
–
126.1
–
126.1

95.1
70.0
165.1

189

Total
£’Million

5.4
1,297.0

394.5
72.1
75.1
541.7
248.5
2,092.6

351.9
908.5
1,260.4

Total
£’Million

46.1
1,416.8

263.9
71.6
540.3
875.8
274.7
2,613.4

281.7
1,107.3
1,389.0

Sensitivity analysis to market risks
Financial assets and liabilities held outside unitised funds primarily consist of fixed interest securities, units in money market funds, cash and
cash equivalents, and other accounting assets and liabilities. The fixed interest securities are short-term and are held as an alternative to cash.
Similarly, cash held in unitised money market funds and at bank is valued at par and is unaffected by movement in interest rates. Other assets
and liabilities are similarly unaffected by market movements.

As a result of these combined factors, the Group’s financial assets and liabilities held outside unitised funds are not materially subject to
market risk, and movements at the reporting date in interest rates and equity values have an immaterial impact on the Group’s profit after
tax and equity. Future profits from annual management charges may be affected by movements in interest rates and equity values.

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16. Financial risk continued
UNIT LIABILITIES AND ASSOCIATED ASSETS

Categories of financial assets and financial liabilities
Assets held to cover unit liabilities are summarised in Note 10, and all are held at fair value through profit or loss. They are designated as such
upon initial recognition.

Income, expense, gains and losses arising from financial assets, investment properties and financial liabilities
The income, expense, gains and losses arising from financial assets, investment properties and financial liabilities are summarised in the table
below:

Financial assets and investment properties
Investment properties
Other assets backing unit liabilities
Total financial assets and investment properties
Financial liabilities 1
Unit liabilities
Total financial liabilities

31 December
2018
£’Million

31 December
2017
£’Million

60.5
(3,046.0)
(2,985.5)

(3,357.1)
(3,357.1)

154.7
5,545.1
5,699.8

4,921.3
4,921.3

1 None of the change in the fair value of financial liabilities at fair value through profit or loss is attributable to changes in their credit risk.

Losses have been recognised within the investment return line in the statement of comprehensive income.

• quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices)

or indirectly (that is, derived from prices) (Level 2); or

• inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group’s assets and liabilities measured at fair value:

31 December 2018
Financial assets and investment properties
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total financial assets and investment properties
Financial liabilities
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Total financial liabilities

Level 1
£’Million

Level 2
£’Million

Level 3
£’Million

Total balance
£’Million

–
56,077.9
6,322.3
3,457.3
–
6,629.1
72,486.6

–
–
22,502.9
22,502.9

–
–
15,638.3
–
508.8
–
16,147.1

67,796.1
517.4
–
68,313.5

1,820.7
–
–
1.8
–
–
1,822.5

–
–
–
–

1,820.7
56,077.9
21,960.6
3,459.1
508.8
6,629.1
90,456.2

67,796.1
517.4
22,502.9
90,816.4

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 31 December 2017
Financial assets and investment properties
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total financial assets and investment properties
Financial liabilities
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Total financial liabilities

191

Level 1
£’Million

Level 2
£’Million

Level 3
£’Million

Total balance
£’Million

–
55,086.9
4,666.0
4,483.7
–
7,005.9
71,242.5

–
–
21,349.1
21,349.1

–
–
12,468.6
–
343.4
–
12,812.0

64,014.3
190.3
–
64,204.6

1,630.9
–
–
2.9
–
–
1,633.8

–
–
–
–

1,630.9
55,086.9
17,134.6
4,486.6
343.4
7,005.9
85,688.3

64,014.3
190.3
21,349.1
85,553.7

In respect of the derivative financial liabilities, £387.5 million of collateral has been posted at 31 December 2018 (2017: £116.0 million),
comprising cash and treasury bills, in accordance with the terms and conditions of the derivative contracts.

The fair value of financial instruments traded in active markets is based on quoted bid prices at the reporting date. These instruments are
included in Level 1.

The Group closely monitors the valuation of assets in markets that have become less liquid. Determining whether a market is active requires
the exercise of judgement and is determined based upon the facts and circumstances of the market for the instrument being measured.
Where it is determined that there is no active market, fair value is established using a valuation technique. The techniques applied incorporate
relevant information available and reflect appropriate adjustments for credit and liquidity risks. These valuation techniques maximise the use
of observable market data where it is available and rely as little as possible on entity specific estimates. The relative weightings given to
differing sources of information and the determination of non-observable inputs to valuation models can require the exercise of significant
judgement.

If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant
inputs is not based on observable market data, the instrument is included in Level 3.

Note that all the resulting fair value estimates are included in Level 2, except for certain equities and investments in CIS and investment
properties as detailed below.

Specific valuation techniques used to value Level 2 financial assets and liabilities include:

• the use of observable prices for identical current arm’s length transactions, specifically:

- the fair value of unit-linked liabilities is assessed by reference to the value of the underlying net asset value of the Group’s unitised

investment funds, determined on a bid value basis, at the reporting date; and

- the Group’s derivative financial instruments are valued using valuation techniques commonly used by market participants. These consist of

discounted cash flow and option pricing models, which typically incorporate observable market data, principally interest rates, basis
spreads, foreign exchange rates, equity prices and counterparty credit.

Specific valuation techniques used to value Level 3 financial assets and liabilities include:

• the use of unobservable inputs, such as expected rental values and equivalent yields; and

• other techniques, such as discounted cash flow and historic lapse rates, which are used to determine fair value for the remaining financial

instruments.

There were no transfers between Level 1 and Level 2 during the year.

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16. Financial risk continued
UNIT LIABILITIES AND ASSOCIATED ASSETS CONTINUED
Transfers into and out of Level 3 portfolios
Transfers out of Level 3 portfolios arise when inputs that could have a significant impact on the instrument’s valuation become
market-observable; conversely, transfers into the portfolios arise when consistent sources of data cease to be available.

Transfers in of certain equities and investments in CIS occur when asset valuations can no longer be obtained from an observable market
price; i.e. become illiquid, in liquidation, suspended etc. The converse is true if an observable market price becomes available.

The following table presents the changes in Level 3 financial assets and liabilities at fair value through the profit and loss:

Year ended 31 December 2018
Opening balance
Transfer into Level 3
Additions during the year
Disposed during the year
Losses recognised in the income statement
Closing balance
Unrealised losses
Realised gains
Losses recognised in the income statement

Year ended 31 December 2017
Opening balance
Transfer into Level 3
Additions during the year
Disposed during the year
Gains recognised in the income statement
Closing balance
Realised losses
Unrealised gains
Gains recognised in the income statement

Investment
property
£’Million
1,630.9
–
277.3
(64.7)
(22.8)
1,820.7
(36.3)
13.5
(22.8)

Investment
property
£’Million
1,462.4
–
95.5
(6.2)
79.2
1,630.9
(1.1)
80.3
79.2

CIS
£’Million
2.9
0.5
–
(1.6)
–
1.8
–
–
–

CIS
£’Million
1.4
1.6
–
(0.1)
–
2.9
–
–
–

Gains/(losses) recognised in the statement of comprehensive income are included within investment return for certain equities and
investments in collective investment schemes and investment property.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 193

Level 3 valuations
The principal assets classified as Level 3 are investment properties amounting to £1,820.7 million (2017: £1,630.9 million). Investment property
is initially measured at cost including related acquisition costs and subsequently valued monthly by professional external valuers at their
respective fair values at each reporting date. The fair values derived are based on anticipated market values for the properties in accordance
with the guidance issued by The Royal Institution of Chartered Surveyors, being the estimated amount that would be received from a sale of
the assets in an orderly transaction between market participants. The valuation of investment property is inherently subjective as it requires,
among other factors, assumptions to be made regarding the ability of existing tenants to meet their rental obligations over the entire life of their
leases, the estimation of the expected rental income into the future, an assessment of a property’s potential to remain as an attractive
technical configuration to existing and prospective tenants in a changing market and a judgement to be reached on the attractiveness of a
building, its location and the surrounding environment.

31 December 2018
Gross ERV (per sq ft) 1
Range
Weighted average
True equivalent yield
Range
Weighted average

31 December 2017
Gross ERV (per sq ft) 1
Range
Weighted average
True equivalent yield
Range
Weighted average

Investment property classification

Office

Industrial

Retail and leisure

All

£14.66–£99.97
£34.03

£4.00–£29.39
£8.17

£4.50–£159.96
£15.92

£4.00–£159.96
£14.89

4.1%–8.6%
5.2%

4.1%–6.7%
4.9%

4.6%–13.7%
6.2%

4.1%–13.7%
5.5%

£14.66–£96.50
£32.02

£3.50–£15.75
£7.28

£4.50–£427.84
£15.51

£3.50–£427.84
£14.12

3.9%–8.4%
5.3%

4.2%–6.7%
5.3%

4.6%–13.8%
6.0%

3.9%–13.8%
5.6%

1 Equivalent rental value (per square foot)

Sensitivity of Level 3 valuations
The valuation of certain equities and investments in CIS are based on the latest observable price available. Whilst such valuations are sensitive
to estimates, it is believed that changing the price applied to a reasonably possible alternative would not change the fair value significantly.

Investment property is initially measured at cost including related acquisition costs and subsequently valued monthly by professional external
valuers at their respective fair values at each reporting date. The fair values derived are based on anticipated market values for the properties in
accordance with the guidance issued by The Royal Institution of Chartered Surveyors, being the estimated amount that would be received
from a sale of the assets in an orderly transaction between market participants. The following table sets out the effect of applying reasonably
possible alternative assumptions, being a 5% movement in estimated rental value and a 25 bps movement in relative yield, to the valuation of
the investment properties. Any change in the value of investment property is matched by an associated movement in the policyholder liability,
and therefore would not impact on the shareholder net assets.

31 December 2018
31 December 2017

Investment property significant unobservable inputs
Expected rental value/Relative yield
Expected rental value/Relative yield

Credit risk
Credit risk relating to unit liabilities is borne by the unit holders.

Effect of reasonable possible
alternative assumptions
Favourable
changes
£’Million
1,994.9
1,782.1

Unfavourable
changes
£’Million
1,665.2
1,496.1

Carrying value
£’Million
1,820.7
1,630.9

Contractual maturity and liquidity analysis
Unit liabilities (and the associated assets) are deemed to have a maturity of up to one year since they are repayable and transferable on
demand. In practice the contractual maturities of the assets may be longer than one year, but the majority of assets held within the unit-linked
and unit trust funds are highly liquid and the Group also actively monitors fund liquidity.

Sensitivity analysis to market risks
The majority of the Group’s business is unitised and the direct associated market risk is therefore borne by unit holders. For completeness, we
note that there is an indirect risk associated with market performance as future shareholder income is dependent upon markets; however, the
direct risk has been mitigated through the Group’s approach to matching assets and liabilities.

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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S C O N T I N U E D

17. Capital management and allocation
The Group’s Capital Management policy, set by the Board, is to maintain a strong capital base in order to:

• protect clients’ interests;

• meet regulatory requirements;

• protect creditors’ interests; and

• create shareholder value through support for business development.

The policy requires that each subsidiary manages its own capital, in particular to maintain regulatory solvency, in the context of a Group capital
plan. Any capital in excess of planned requirements is returned to the Group’s Parent Company, St. James’s Place plc, normally by way of
dividends. The Group capital position is monitored by the Audit Committee on behalf of the St. James’s Place plc Board.

REGULATORY CAPITAL
The Group’s capital management policy is, for each subsidiary, to hold the higher of:

• the capital required by any relevant supervisory body uplifted by a specified margin to absorb changes; or

• the capital required based on the Company’s internal assessment.

For our insurance companies, we hold capital based on our own internal assessment, recognising the regulatory requirement. For other
regulated companies we generally hold capital based on the regulatory requirement uplifted by a specified margin.

The following entities are subject to regulatory supervision and have to maintain a minimum level of regulatory capital:

Entity
St. James’s Place UK plc
St. James’s Place International plc
St. James’s Place Unit Trust Group Limited
St. James’s Place Investment Administration Limited
St. James’s Place Wealth Management (PCIS) Limited
St. James’s Place Wealth Management plc
St. James’s Place Partnership Services Limited
BFS Financial Services Limited
Hale Financial Solutions Limited
Linden House Financial Services Limited
LP Financial Management Limited
St. James’s Place (Hong Kong) Limited

St. James’s Place International (Hong Kong) Limited
St. James’s Place (Singapore) Private Limited

Rowan Dartington & Co Limited

Regulatory body and jurisdiction
PRA and FCA: Long-term insurance business
Central Bank of Ireland: Life insurance business
FCA: UCITS Management Company
FCA: Investment Firm
FCA: Securities and Futures Firm
FCA: Personal Investment Firm
FCA: Consumer Credit Firm
FCA: Personal Investment Firm
FCA: Personal Investment Firm
FCA: Personal Investment Firm
FCA: Personal Investment Firm
Securities and Futures Commission (Hong Kong): A Member of The
Hong Kong Confederation of Insurance Brokers
Insurance Authority (Hong Kong)
Monetary Authority Singapore: A Member of the Association of
Financial Advisers
FCA: Investment Firm

In addition, the St. James’s Place Group is regulated as an insurance group under Solvency II, with the PRA as the lead regulator.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 195

As an insurance group, St. James’s Place is subject to the Solvency II regulations, which were implemented on 1 January 2016. More
information about capital position of the Group under Solvency II regulations is set out in the separate Solvency and Financial Condition Report
document. The overall capital position for the Group at 31 December 2018, assessed on the standard formula basis, is presented in the
following table:

IFRS total assets
Less Solvency II valuation adjustments and unit-linked liabilities
Solvency II net assets

Management Solvency Buffer (MSB)
Excess of free assets over MSB

Solvency II VIF
Risk margin
Standard formula SCR (A)
Sub-total
Solvency II free assets (B)
Solvency II ratio ((A + B)/A)

31 December
2018
£’Million
94,827.0
(93,719.0)
1,108.0

31 December
2017
£’Million
90,006.0
(88,910.9)
1,095.1

491.0
617.0

461.9
633.2

3,388.8
(989.4)
(2,447.3)
(47.9)
1,060.1
143%

3,244.3
(946.1)
(2,449.2)
(151.0)
944.1
139%

An overall internal capital assessment is required for insurance groups. This is known as an ORSA (Own Risk and Solvency Assessment)
and is described in more detail in the ORSA section of the Risk and Risk Management report; refer to page 50.

The regulatory capital requirements of companies within the Group, and the associated solvency of the Group, are assessed and monitored by
the Finance Executive Committee, a Committee of the Executive Board, with oversight by the Audit Committee on behalf of the Group Board.
Ultimate responsibility for individual companies’ regulatory capital lies with the relevant subsidiary boards.

There has been no material change in the level of capital requirements of individual companies during the year, nor in the Group’s management
of capital. All regulated entities exceeded the minimum solvency requirements at the reporting date and during the year.

IFRS CAPITAL COMPOSITION
The principal forms of capital are included in the following balances on the consolidated statement of financial position:

Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
Total equity

31 December
2018
£’Million
79.4
174.5
(23.7)
2.5
787.3
1,020.0
(0.9)
1,019.1

31 December
2017
£’Million
79.4
171.7
(26.7)
2.5
832.1
1,059.0
(0.9)
1,058.1

The above assets do not all qualify as regulatory capital. The required minimum regulatory capital and analysis of the assets that qualify as
regulatory capital are outlined in Section 3 of the Financial Review on page 44, which demonstrates that the Group has met its internal capital
objectives. The Group and its individually regulated operations have complied with all externally and internally imposed capital requirements
throughout the year.

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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S C O N T I N U E D

18. Share capital, earnings per share and dividends
SHARE CAPITAL

At 1 January 2017
– Issue of share capital
– Exercise of options
At 31 December 2017
– Exercise of options
At 31 December 2018

Number of
ordinary shares

527,482,348
372,325
1,223,223
529,077,896
375,501
529,453,397

Called-up
share capital
£’Million
79.1
0.1
0.2
79.4
–
79.4

The total authorised number of ordinary shares is 605 million (2017: 605 million), with a par value of 15 pence per share (2017: 15 pence per
share). All issued shares are fully paid.

Included in the issued share capital are 3,505,217 (2017: 4,210,906) shares held in the shares in trust reserve with a nominal value of
£0.5 million (2017: £0.6 million). The shares are held by the SJP Employee Share Trust and the St. James’s Place 2010 SIP Trust to satisfy
certain share-based payment schemes. The trustees of the SJP Employee Share Trust retain the right to dividends on the shares held by
the Trust but have chosen to waive their entitlement to the dividends on 845,897 shares at 31 December 2018 and 1,755,831 shares at
31 December 2017. No dividends have been waived on shares held in the St. James’s Place 2010 SIP Trust in 2018 or 2017.

The number of shares reserved for issue under options and contracts for sale of shares, including terms and conditions, is included within
Note 19.

EARNINGS PER SHARE

Earnings
Profit after tax attributable to equity shareholders (for both basic and diluted EPS)

Weighted average number of shares
Weighted average number of ordinary shares in issue (for basic EPS)
Adjustments for outstanding share options
Weighted average number of ordinary shares (for diluted EPS)

Earnings per share (EPS)
Basic earnings per share
Diluted earnings per share

DIVIDENDS
The following dividends have been paid by the Group:

Final dividend in respect of previous financial year
Interim dividend in respect of current financial year
Total dividends

Year ended
31 December
2018
£’Million

Year ended
31 December
2017
£’Million

173.5

145.9

Million

526.0
8.7
534.7

524.3
8.8
533.1

Pence

33.0
32.4

27.8
27.4

Year ended
31 December
2018
Pence per share
27.45
18.49
45.94

Year ended
31 December
2017
Pence per share
20.67
15.41
36.08

Year ended
31 December
2018
£’Million
145.0
97.7
242.7

Year ended
31 December
2017
£’Million
108.8
81.2
190.0

The Directors have recommended a final dividend of 29.73 pence per share (2017: 27.45 pence). This amounts to £157.4 million
(2017: £145.2 million) and will, subject to shareholder approval at the Annual General Meeting, be paid on 24 May 2019 to those shareholders
on the register as at 5 April 2019.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 197

19. Share-based payments
During the year ended 31 December 2018, the Group operated a number of different equity and cash-settled share-based payment
arrangements, which are aggregated as follows:

SHARE OPTION SCHEMES
• Save As You Earn (SAYE) Plan – this is a standard HMRC approved equity-settled scheme that is available to all employees where individuals
may contribute up to £250 per month over the three-year vesting period to purchase shares at a price not less than 80% of the market price
at the date of the invitation to participate. 563,553 (2017: 415,590) SAYE options were granted on 23 March 2018 and 21 September 2018
(2017: 23 March 2017). The are no other vesting conditions.

• Partner Share Option Schemes – these equity-settled awards were offered to the Partners of the St. James’s Place Partnership and vest over
three to six years subject to satisfying personal new business-related performance criteria. The last award under these schemes was made
in 2007.

• Partner Performance Share Plan – under this plan Partners are entitled to purchase shares in the future at nominal value (15 pence). The

number of shares the Partners are entitled to purchase will depend on their personal business volumes in a specified 12-month period and
validation over the following three years. The first award under the scheme was made on 29 July 2016, when 3,456,281 shares were granted.
No grants were made in 2018 (2017: Nil).

• Partner and Adviser Chartered Plan – the scheme was launched during 2015 as part of the Partner Performance Share Plan whereby
Partners and advisers are entitled to purchase shares in the future at nominal value (15 pence). The number of shares the Partners are
entitled to purchase will depend upon achieving specific professional qualifications and a threshold new business level in a specified
12-month period and validation over the following three years. The first award under the scheme was made on 29 July 2016, when 2,019,000
shares were granted. No grants were made in 2018 (2017: Nil).

• Associate Partner Plan – a new equity-settled scheme was launched during 2017 whereby Partners and advisers are entitled to purchase a

set number of shares in the future at the market price at the date of the invitation if they meet the required business volumes over the
following three years. 1,422,500 shares were granted under this scheme on 19 March 2018 (2017: 4,805,000).

SHARE AWARDS
• Share Incentive Plan (SIP) – this is an HMRC approved equity-settled scheme, available to all employees, where individuals may invest up to
an annual limit of £1,800 of pre-tax salary in St. James’s Place plc shares, to which the Group will add a further 10%. The vesting period is
three years, however if the shares are held for five years they may be sold free of income tax or capital gains tax. There are no other vesting
conditions. 8,166 (2017: 7,100) shares were granted under the SIP on 29 March 2018 (2017: 27 March 2017).

• Executive Deferred Bonus Schemes – under these plans the deferred element of the annual bonus is used to purchase shares at market
value in the Company. The shares are held in trust over the three-year vesting period and may be subject to further non-market-based
performance conditions. The plans are predominantly equity-settled. 794,750 (2017: 694,149) shares were granted under the deferred bonus
schemes on 26 March 2018 (2017: 27 March 2017).

• Executive Performance Share Plan – the Remuneration Committee of the Group Board may make awards of performance shares to the

Executive Directors and other senior managers. Two-thirds of shares awarded to Directors are subject to an earnings growth condition of the
Group and one-third of shares awarded to Directors are subject to a comparative total shareholder return condition, both measured over a
three-year vesting period. Further information regarding the vesting conditions of the earnings growth and total shareholder return dependent
portions of the award is given in the Directors' Remuneration Report on page 126. Awards made to senior managers are largely only subject
to the earnings growth condition of the Group. This is predominantly an equity-settled scheme. 1,101,308 (2017: 961,106) shares were
granted under the Executive Performance Share Plan across two grants made on 26 March 2018 and 21 September 2018 (2017: three grants
made on 27 March 2017, 26 September 2017 and 7 November 2017).

• Restricted Share Plan – upon acquisition of the Rowan Dartington Group a new scheme was launched for eligible employees. Employees
were granted shares, 50% of which vest after 18 months, and the remaining 50% vest after three years providing the individual remains in
employment within the Group and maintains any applicable professional qualifications. The plan is predominantly equity-settled. 323,300
shares were granted under the Restricted Share Plan on 29 July 2016. No grants were made in 2018 (2017: Nil).

Share options and awards outstanding under the various share-based payment schemes set out above at 31 December 2018, amount to
18.2 million shares (2017: 16.4 million). Of these, 11.2 million (2017: 10.1 million) are under option to Partners of the St. James’s Place
Partnership, 5.4 million (2017: 5.0 million) are under option to executives and senior management (including 1.1 million (2017: 1.4 million) under
option to Directors as disclosed in the Directors' Remuneration Report on page 133), 0.2 million (2017: 0.2 million) are under option to
employees who became employees of the Group on acquisition of the Rowan Dartington Group and 1.4 million (2017: 1.2 million) are under
option through the SAYE and SIP schemes. These are exercisable on a range of future dates.

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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S C O N T I N U E D

19. Share-based payments continued
FINANCIAL ASSUMPTIONS UNDERLYING THE CALCULATION OF FAIR VALUE
The fair value expense has been based on the fair value of the instruments granted, as calculated using appropriate derivative pricing models.
The table below shows the weighted average assumptions and models used to calculate the grant-date fair value of each award:

Valuation model
Awards in 2018
Fair value (pence)
Share price (pence)
Exercise price (pence)
Expected volatility (% pa) 1
Expected dividends (% pa) 2
Risk-free interest rate (% pa)
Expected life (years)
Volatility of competitors (% pa)
Correlation with competitors (%)

Awards in 2017
Fair value (pence)
Share price (pence)
Exercise price (pence)
Expected volatility (% pa) 1
Expected dividends (% pa) 2
Risk-free interest rate (% pa)
Expected life (years)
Volatility of competitors (% pa)
Correlation with competitors (%)

SAYE
Plan
Black Scholes

Share
Incentive Plan
Black Scholes

Executive
Deferred
Bonus
Black Scholes

Executive
Performance
Share Plan 5
Monte Carlo

Associate
Partner Plan 6
Black Scholes

230.7/235.6 3
1,109.0/1,138.5 3
911.0/906.0 3
27/25 3
3.9/4.0 3
0.95/0.94 3
3.5
N/A
N/A

244.6
1,041.0
844.0
29.0
3.1
0.5
3.5
N/A
N/A

1,090.0
1,090.0
0.0
N/A
0.0
N/A
3
N/A
N/A

1,056.0
1,056.0
0.0
N/A
0.0
N/A
3
N/A
N/A

1,092.0
1,092.0
0.0
N/A
0.0
N/A
3
N/A
N/A

1,061.0
1,061.0
0.0
N/A
0.0
N/A
3
N/A
N/A

565.7/1,092.0 4
1,092.0
0.0
27
0.0
N/A
3
14–57
20

628.1/1,061.0 4
1,061.0
0.0
29.0
0.0
N/A
3
17.0–59.0
20.0

227.3
1,142.0
1,135.0
27.0
0.0
0.9
3
N/A
N/A

219.5
1,080.0
1,083.0
29.0
0.0
0.5
3
N/A
N/A

1 Expected volatility is based on an analysis of the Company’s historic share price volatility over a period which is commensurate with the expected term of the

options or the awards.

2 For schemes where dividends are payable on the shares during the vesting period, the dividend yield assumption in the Black-Scholes option pricing model is

set at zero.

3 Two SAYE awards were made during 2018 on 23 March and 21 September, the assumptions for which are shown in the table above as the first and second

figures, respectively.

4 The awards made under the Executive Performance Share Plan are dependent upon earnings growth in the Company (two-thirds of the award) and a total

shareholder return of a comparator group of companies (one-third of the award). This results in having two fair values for each of the awards made in the table above,
the first being in relation to the comparator total shareholder return which is a market-based performance condition and so valued using a Monte-Carlo simulation,
and the second relating to the Company’s earnings growth, which is a non-market-based performance condition and so valued using the Black-Scholes model.

5 The awards made under the Executive Performance Share Plan for members of the Executive Board Committee (ExBo) are subject to a two-year holding period

once the award has vested. This results in discounted fair values for the ExBo population of 519.8/1,002.5 (2017: 571.9/966.8) to reflect the reduced marketability
of the awards.

6 The fair value of the grants made under the Associate Partner Plan has been determined using the Black-Scholes valuation model. This is the most appropriate
valuation method because the value of the services that the Partners and advisers are providing, for which they are being remunerated via the plan, cannot be
readily separated from the overall value of the services provided by the Partners and advisers.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC SHARE OPTION SCHEMES

SAYE Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Partner Share Options
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Partner Performance Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Partner & Adviser Chartered Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Associate Partner Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year

199

Year ended
31 December
2018
Number of
options

Year ended
31 December
2018
Weighted
average
exercise price

Year ended
31 December
2017
Number of
options

Year ended
31 December
2017
Weighted
average
exercise price

1,148,540
563,553
(89,718)
(280,309)
1,342,066
66,005

£7.73
£8.97
£8.30
£7.34
£8.27
£7.24

1,030,703
415,590
(86,990)
(210,763)
1,148,540
451

–
–
–
–
–
–

3,380,289
–
(52,893)
–
3,327,396
–

1,947,000
–
(59,000)
–
1,888,000
–

4,725,000
1,422,500
(167,500)
–
5,980,000
–

–
–
–
–
–
–

£0.15
–
£0.15
–
£0.15
–

£10.83
£11.35
£10.92
–
£10.95
–

19,100
–
–
(19,100)
–
–

3,380,289
–
–
–
3,380,289
–

1,986,648
–
(39,648)
–
1,947,000
–

–
4,805,000
(80,000)
–
4,725,000
–

£7.28
£8.33
£7.35
£6.77
£7.73
£6.77

£4.55
–
–
£4.55
–
–

£0.15
–
–
–
£0.15
–

£0.15
–
£0.15
–
£0.15
–

–
£10.83
£10.83
–
£10.83
–

The average share price during the year was 1,121.9 pence (2017: 1,142.0 pence).

The SAYE Plan options outstanding at 31 December 2018 had exercise prices of 738 pence (438 options), 724 pence (65,567 options),
687 pence (380,279 options), 844 pence (352,442 options), 911 pence (322,015 options) and 906 pence (221,325 options), and a weighted
average remaining contractual life of 1.5 years.

The options outstanding under the Partner Performance Share Plan and the Partner & Adviser Chartered Plan at 31 December 2018 had an
exercise price of 15 pence and a weighted average remaining contractual life of 0.6 years.

The options outstanding under the Associate Partner Plan at 31 December 2018 had an exercise price of 1,083 pence and 1,135 pence and a
weighted average remaining contractual life of 1.4 years.

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19. Share-based payments continued
SHARE AWARDS
All shares awards under the below schemes have exercise prices of £nil.

Share Incentive Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Executive Deferred Bonus Scheme
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Executive Performance Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Restricted Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year

Year ended
31 December
2018
Number of
options

Year ended
31 December
2017
Number of
options

30,283
8,166
(716)
(2,724)
35,009
8,858

2,034,801
794,750
(33,063)
(664,074)
2,132,414
–

2,973,806
1,101,308
(137,997)
(686,471)
3,250,646
349,380

158,916
–
(3,600)
–
155,316
–

27,256
7,100
(871)
(3,202)
30,283
7,125

1,833,436
694,149
(4,634)
(488,150)
2,034,801
–

2,953,269
961,106
(24,772)
(915,797)
2,973,806
404,620

321,860
–
(24,768)
(138,176)
158,916
–

EARLY EXERCISE ASSUMPTIONS
An allowance has been made for the impact of early exercise once options have vested in the SAYE Plan where all option holders are assumed
to exercise half-way through the six-month exercise window.

ALLOWANCE FOR PERFORMANCE CONDITIONS
The Executive Performance Share Plan includes a market-based performance condition based on the Company’s total shareholder return
relative to an index of comparator companies. The impact of this performance condition has been modelled using Monte Carlo simulation
techniques, which involve running many thousands of simulations of future share price movements for both the Company and the comparator
index. For the purpose of these simulations it is assumed that the share price of the Company and the comparator index are 20% (2017: 20%)
correlated and that the comparator index has volatilities ranging between 14% p.a. to 57% p.a. (2017: 17% p.a. to 59% p.a.).

The performance condition is based on the Company’s performance relative to the comparator index over a three-year period commencing
on 1 January each year. The fair value calculations for the awards that were made in 2018 therefore include an allowance for the actual
performance of the Company’s share price relative to the index over the period between 1 January 2018 and the various award dates.

CHARGE TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
The table below sets out the charge to the consolidated statement of comprehensive income in respect of the share-based payment awards:

Equity-settled share-based payment expense
Cash-settled share-based payment expense
Total share-based payment expense

Year ended
31 December
2018
£’Million
33.4
0.7
34.1

Year ended
31 December
2017
£’Million
30.5
2.2
32.7

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 201

LIABILITIES RECOGNISED IN THE STATEMENT OF FINANCIAL POSITION
The liabilities recognised in the statement of financial position in respect of the cash-settled share-based payment awards, and national
insurance obligations arising from share-based payment awards, are as follows. These liabilities are included within other payables on the face
of the statement of financial position. None of the liability in respect of cash-settled share-based payment awards at 31 December 2018 or
31 December 2017 is in respect of vested cash-settled share-based payments.

Liability for cash-settled share-based payments
Liability for employer national insurance contributions on cash-settled and equity-settled share-based payments

Year ended
31 December
2018
£’Million
1.3
4.8

Year ended
31 December
2017
£’Million
1.8
5.1

20. Interests in unconsolidated entities
UNCONSOLIDATED STRUCTURED ENTITIES
The Group operates investment vehicles, such as unit trusts. Clients are able to invest in these directly, but also indirectly through products
offered by SJPUK and SJPI. As a result, the Group’s insurance companies can be significant investors in the unit trusts. Note 2 sets out the
judgements inherent in determining when the Group controls, and therefore consolidates, the relevant investment vehicles.

The majority of the risk from a change in the value of the Group’s investment in unconsolidated unit trusts is matched by a change in unit holder
liabilities. The maximum exposure to loss, prior to considering unit holder liabilities, is equal to the carrying value of the investment. This is
recognised within investments in Collective Investment Schemes.

The following unit trusts are not consolidated within the Group financial statements; however, the Group does act as the fund manager of these
unit trusts.

Name of entity
St. James’s Place Property Unit Trust

St. James’s Place UK High Income Unit
Trust

% of ownership interest

2018

0.00

2017

0.00

10.91

10.65

Nature of
relationship

Measurement
method

Manager of
unit trust
Manager of
unit trust

N/A

Fair value through
profit or loss

Net asset value as at
31 December
2018
£’Million
1,325.5

2017
£’Million
1,205.7

1,312.5

1,835.3

2,638.0

3,041.0

As at 31 December 2018 the value of the Group’s interests in the individual unconsolidated unit trusts were £nil (2017: £nil) in St. James’s Place
Property Unit Trust and £143.2 million (2017: £195.5 million) in St. James’s Place UK High Income Unit Trust.

ASSOCIATES
The St. James’s Place UK High Income Unit Trust, registered in England and Wales, is not consolidated within the Group financial statements;
however, it does meet the criteria of an associate. Details are provided in the table above.

21. Subsidiary undertakings
PRINCIPAL SUBSIDIARIES:

Investment Holding Companies

Life Assurance

Unit Trust Management
Unit Trust Administration and ISA Management
Distribution
Management Services
Treasury Company
IFA Acquisitions
Asia Distribution
Discretionary Fund Management

1 Directly held by St. James’s Place plc

2 The Company also operates a branch in Singapore

3 The Company also operates a branch in the Republic of Ireland

Cirenco Limited 1
St. James’s Place Wealth Management Group Limited 1
St. James’s Place DFM Holdings Limited 1
St. James’s Place UK plc
St. James’s Place International plc (incorporated in Ireland) 2
St. James’s Place Unit Trust Group Limited
St. James’s Place Investment Administration Limited
St. James’s Place Wealth Management plc
St. James’s Place Management Services Limited 3
St. James’s Place Partnership Services Limited
St. James’s Place Acquisition Services Limited
St. James’s Place International Distribution Limited
Rowan Dartington & Co. Limited

The Company owns either directly or indirectly 100% of the voting ordinary equity share capital of the above-named subsidiaries, as such they
have been appropriately consolidated. Ongoing solvency requirements within the life assurance, unit trust and financial services companies of
the Group restrict their ability to distribute all their distributable reserves.

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21. Subsidiary undertakings continued
Included below is a full list of the entities within the St. James’s Place plc Group at 31 December 2018:

Entity
BFS Financial Services Limited
Cabot Portfolio Nominees Limited

Company
number
04609753
03636010

Cirenco Limited
Dartington Portfolio Nominees Limited

01773177
01489542

Future Proof Limited
Hale Financial Solutions Limited
Lansdown Place Group Holdings Limited

07608319
04373946
06390547

Lansdown Place Wealth Management
Limited

05458948

Linden House Financial Services Limited
Linden House Group Limited
LP Auto Enrolment Solutions Limited

02990295
08464570
08257531

LP Financial Management Limited

02195886

LP Holdco Limited
08323278
00559995
M.H.S. (Holdings) Limited
M.S. Estates and Financial Services Limited 02224813
02752304
Rowan Dartington & Co. Limited

Rowan Dartington Holdings Limited
SJP AESOP Trustees Limited
SJP Interim Services Limited
SJP Partner Loans No.1 Limited

07470226
04089795
10735786
11390901

SJPC Corporate Investments Limited
St. James’s Place (Hong Kong) Limited

01476292
275275

Registered office
*
Colston Tower, Colston
Street, Bristol BS1 4RD,
United Kingdom
*
Colston Tower, Colston
Street, Bristol BS1 4RD,
United Kingdom
*
*
2 Oakfield Road, Clifton,
Bristol, BS8 2AL,
United Kingdom
2 Oakfield Road, Clifton,
Bristol, BS8 2AL,
United Kingdom
*
*
2 Oakfield Road, Clifton,
Bristol, BS8 2AL,
United Kingdom
2 Oakfield Road, Clifton,
Bristol, BS8 2AL,
United Kingdom
*
*
*
*

*
*
*
Level 37, 25 Canada
Square, Canary Wharf,
London, E14 5LQ, United
Kingdom
*
1st Floor, Henley Building,
5 Queen’s Road Central,
Hong Kong

Country of incorporation
England and Wales
England and Wales

Principal activity
Financial Advice
Nominee Company

Audit
exemption
Yes
Yes

England and Wales
England and Wales

Holding Company
Nominee Company

England and Wales
England and Wales
England and Wales

Financial Advice
Financial Advice
Holding Company

Yes
Yes

Yes
Yes
Yes

England and Wales

Financial Advice

Yes

England and Wales
England and Wales
England and Wales

Financial Advice
Holding Company
Pension
Auto-enrolment

Yes
Yes
Yes

England and Wales

Financial Advice

Yes

England and Wales
England and Wales
England and Wales
England and Wales

Holding Company
Non-trading
Financial Advice
Stockbroker and
Investment Manager
Holding Company
Nominee Company
Non-trading
Securitisation

No
Yes
Yes
No

Yes
Yes
Yes
No

England and Wales
Hong Kong

Holding Company
Yes
Overseas Distribution No

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 203

Entity
St. James’s Place (PCP) Limited

St. James’s Place (Shanghai) Limited

Company
number
02706684

913100005
66573326L

Registered office
*

Country of incorporation
England and Wales

China

Suite 2006-2007, 20th
Floor, Tower 1 (North),
Jing An Kerry Centre,
1515 West Nanjing Road,
Shanghai, China 200040

Principal activity
Transacts and Services
SJP Income Streams
Overseas Distribution No

Audit
exemption
Yes

200406398R 1 Raffles Place,

Singapore

Financial Advice

St. James’s Place (Singapore) Private
Limited

07730835

St. James’s Place Acquisition Services
Limited
St. James’s Place Client Solutions Limited 05487108
09131866
St. James’s Place Corporate Secretary
Limited
St. James’s Place DFM Holdings Limited
St. James’s Place International
(Hong Kong) Limited

09687687
2207694

St. James’s Place International Assurance
Group Limited
St. James’s Place International Distribution
Limited
St. James’s Place International plc

St. James’s Place Investment
Administration Limited

02661044

08764214
08201211

St. James’s Place Management Services
Limited
St. James’s Place Nominees Limited
St. James’s Place Partnership Services
Limited
St. James’s Place UK plc
02628062
St. James’s Place Unit Trust Group Limited 00947644
06604824
St. James’s Place Wealth Management
(PCIS) Limited
St. James’s Place Wealth Management
(Shanghai) Limited

1511517

#15-61 One Raffles
Place, Tower 2, Singapore
048616, Singapore
*

England and Wales

IFA Acquisitions

*
*

England and Wales
England and Wales

Policy Administration
Corporate Secretary

*
Unit 201, 2nd Floor Henley
Building, 5 Queen’s Road
Central, Hong Kong
*

England and Wales
Hong Kong

Non-trading
Life Assurance

02727326

England and Wales

Holding Company

08798683

England and Wales

Holding Company

Yes

185345

08764231

Fleming Court, Flemings
Place, Dublin 4, Ireland
*

Ireland

Life Assurance

England and Wales

Unit Trust
Administration and
ISA Manager
Management Services No

England and Wales
England and Wales

Nominee Company
Treasury Company

Yes
No

England and Wales
England and Wales
England and Wales

Hong Kong

Life Assurance
No
Unit Trust Management No
No
Securities and
Futures Firm
Overseas Distribution No

*
*

*
*
*

1st Floor, Henley Building,
5 Queen’s Road Central,
Hong Kong
*

St. James’s Place Wealth Management
Group Limited
St. James’s Place Wealth Management
International Pte. Ltd

02627518

England and Wales

Holding Company

201323453N 1 Raffles Place, #15-

Singapore

Holding Company

St. James’s Place Wealth Management plc 04113955
03866935
Stafford House Investments Limited
03178474
Technical Connection Limited

61 One Raffles Place,
Singapore 048616,
Singapore
*
*
*

England and Wales
England and Wales
England and Wales

UK Distribution
Financial Advice
Tax and Advisory
Services

* Indicates that the registered office is St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire GL7 1FP, United Kingdom.

Yes

Yes
Yes

Yes
No

No
Yes
Yes

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21. Subsidiary undertakings continued
Future Proof Limited was acquired by the Group on 13 November 2018.

The following wholly-owned subsidiary companies were dissolved during the year:

• G.M.B. Financial Services Limited (on 27 March 2018);

• Chapman Associates Limited (on 3 April 2018);

• St. James’s Place (Properties) Limited (on 8 May 2018);

• Chapman Hunter Group Limited (on 24 July 2018);

• PFPTime Limited (on 31 July 2018);

• Australian Expatriate Services Limited (on 26 October 2018); and

• St. James’s Place EIS Limited (on 18 December 2018).

Where indicated above, subsidiaries of St. James’s Place plc have taken advantage, or are expected to take advantage, of the exemption from
statutory audit granted by section 479A of the Companies Act 2006. In accordance with section 479C, St. James’s Place plc has guaranteed
all the outstanding liabilities as at 31 December 2018 of these companies, with the exception of Lansdown Place Group Holdings Limited, LP
Financial Management Limited, Lansdown Place Wealth Management Limited and LP Auto Enrolment Solutions Limited where LP Holdco
Limited has guaranteed all the outstanding liabilities as at 31 December 2018.

All Group companies have an accounting reference date of 31 December except Future Proof Limited which has an accounting reference date
of 12 November. Future Proof Limited intends to take advantage of the exemption from statutory audit granted by section 477 of the
Companies Act 2006’s for the period ended 12 November 2018 as it meets applicable criteria and during that period was not a part of the
Group. Unless otherwise stated, the tax residency of each subsidiary is the same as the country of incorporation.

100% of the equity share capital is held for the above subsidiaries with the exception of:

a) LP Holdco Limited (08323278), where 43.14% of equity share capital is held (comprising 100% of the nominal value of the Class A ordinary
shares, which confer 52.83% of voting rights along with the 75.62% holding of the nominal value of the Class C ordinary shares, which carry
voting rights but are not defined as equity);

b) Lansdown Place Group Holdings Limited (06390547), where 92.40% of the equity share capital is held by LP Holdco Limited (comprising

95.29% of the nominal value of the Class A ordinary shares, 100.00% of the nominal value of the Class B and D ordinary shares, and 70.11%
of the nominal value of the Class C shares); and

c) SJP Partner Loans No.1 Limited (11390901), where 100% of the equity share capital is held by a third-party entity outside of the Group.
Despite this, following an assessment of control in accordance with IFRS 10 it was determined that SJP Partner Loans No.1 Limited is
controlled by the Group and thus is consolidated. For further information, refer to Note 2. Note that all assets and liabilities of SJP Partner
Loans No.1 Limited are restricted and ring-fenced from the other assets and liabilities of the Group.

In addition, the Group financial statements consolidate the following unit trusts, all of which are registered in England and Wales.
The registered address of the unit trust manager, St. James’s Place Unit Trust Group Limited, is St. James’s Place House, 1 Tetbury Road,
Cirencester, Gloucestershire GL7 1FP:

St. James’s Place Adventurous Growth Unit Trust
St. James’s Place Adventurous International Unit Trust
St. James’s Place Allshare Income Unit Trust
St. James’s Place Alternative Assets Unit Trust
St. James’s Place Asia Pacific Unit Trust
St. James’s Place Balanced Growth Unit Trust
St. James’s Place Balanced International Growth Unit Trust
St. James’s Place Balanced Managed Unit Trust
St. James’s Place Conservative Growth Unit Trust
St. James’s Place Conservative International Growth Unit Trust
St. James’s Place Continental European Unit Trust
St. James’s Place Corporate Bond Unit Trust
St. James’s Place Diversified Assets (FAIF) Unit Trust 1
St. James’s Place Diversified Bond Unit Trust
St. James’s Place Emerging Markets Equity Unit Trust
St. James’s Place Equity Income Unit Trust
St. James’s Place Equity A Unit Trust
St. James’s Place Equity B Unit Trust
St. James’s Place Equity C Unit Trust
St. James’s Place Gilts Unit Trust
St. James’s Place Global Emerging Markets Unit Trust
St. James’s Place Global Equity Income Unit Trust
St. James’s Place Global Equity Unit Trust

1 Denotes a unit trust launched during 2018.

St. James’s Place Global Growth Unit Trust
St. James’s Place Global Smaller Companies Unit Trust
St. James’s Place Global Unit Trust
St. James’s Place Greater European Progressive Unit Trust
St. James’s Place Index Linked Gilts Unit Trust
St. James’s Place International Corporate Bond Unit Trust
St. James’s Place International Equity Unit Trust
St. James’s Place Investment Grade Corporate Bond Unit Trust
St. James’s Place Japan Unit Trust
St. James’s Place Managed Growth Unit Trust
St. James’s Place Money Market Unit Trust
St. James’s Place Multi Asset Unit Trust
St. James’s Place North American Unit Trust
St. James’s Place Strategic Income Unit Trust
St. James’s Place Strategic Managed Unit Trust
St. James’s Place Sustainable & Responsible Equity Unit Trust
St. James’s Place UK & General Progressive Unit Trust
St. James’s Place UK & International Income Unit Trust
St. James’s Place UK Absolute Return Unit Trust
St. James’s Place UK Growth Unit Trust
St. James’s Place UK Income Unit Trust
St. James’s Place Worldwide Income Unit Trust
St. James’s Place Worldwide Opportunities Unit Trust

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 205

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S U N D E R
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N DA R D S C O N T I N U E D

22. Related party transactions
TRANSACTIONS WITH ST. JAMES’S PLACE UNIT TRUSTS
In respect of the non-consolidated St. James’s Place managed unit trusts that are held as investments in the St. James’s Place life and
pension funds, there were losses recognised of £36.2 million (2017: income £10.9 million) and the total value of transactions with those
non-consolidated unit trusts was £26.1 million (2017: £38.0 million). Net management fees receivable from these unit trusts amounted to
£12.2 million (2017: £15.4 million). The value of the investment into the non-consolidated unit trusts at 31 December 2018 was £143.2 million
(2017: £195.5 million). These transactions are all with the Group’s associate, as set out in Note 20.

TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management personnel have been defined as the Board of Directors and members of the Executive Board. The remuneration paid
to the Board of Directors of St. James’s Place plc is set out in the Directors’ Remuneration Report on pages 120 to 137, in addition to the
disclosure below.

The Remuneration Report also sets out transactions with the Directors under the Group’s share-based payment schemes, together with
details of the Directors’ interests in the share capital of the Company.

Compensation of key management personnel is as follows:

Short-term employee benefits
Post-employment benefits
Share-based payment
Total

Year ended
31 December
2018
£’Million
5.9
0.5
4.5
10.9

Year ended
31 December
2017
£’Million
7.4
0.5
6.6
14.5

The total value of Group FUM held by related parties of the Group as at 31 December 2018 was £24.7 million (2017: £36.1 million). The total
value of St. James’s Place plc dividends paid to related parties of the Group during the year was £1.2 million (2017: £1.4 million).

Commission, advice fees and remuneration of £3.6 million (2017: £3.9 million) was paid, under normal commercial terms, to St. James’s Place
advisers and employees who were related parties by virtue of being connected persons with key management personnel. The outstanding
amount payable at 31 December 2018 was £0.5 million (2017: £0.5 million).

Outstanding at the year-end were Partner loans of £4.2 million (2017: £3.3 million) due from St. James’s Place advisers who were related
parties by virtue of being connected persons with key management personnel. The Group either advanced, or guaranteed, these loans.
During the year £3.2 million (2017: £3.7 million) was advanced and £0.5 million (2017: £2.1 million) was repaid by advisers who were related
parties. Due to changes in related parties during 2018, a loan of £1.9 million which was a loan to a related party at 31 December 2017 became
a loan to a non-related party.

Business loans to Partners are interest-bearing (linked to Bank of England base rate plus a margin), repayable on demand and secured
against the future renewal income streams of that adviser. Interest of £0.1 million was received during 2018 (2017: £0.1 million).

At the start of the year, related parties of key management personnel held 31,017 (2017: 28,273) shares and options under various St. James’s
Place plc share option schemes. During the year 2,500 (2017: 10,000) shares and options were granted, nil (2017: 1,000) options lapsed and nil
(2017: nil) options were exercised.

23. Post balance sheet events
On 1 January 2019, the Group entered into a lease for new office accommodation in London. The lease term is 15 years and the annual rent
is £3.8 million, subject to review every five years.

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FINANCIAL STATEMENTS

PARENT COMPANY FINANCIAL
STATEMENTS UNDER FINANCIAL
REPORTING STANDARD 101

Parent Company Statement of Financial Position ............................................. 207

Parent Company Statement of Changes in Equity ............................................. 207

Notes to the Parent Company Financial Statements ........................................208

ST. JAMES’S PL AC E PL C

PA R E N T C O M PA N Y S TAT E M E N T O F F I N A N C I A L P O S I T I O N

207

Registered number: 03183415

Investment in subsidiaries
Current assets
Amounts owed by Group undertakings
Cash and cash equivalents
Current liabilities
Corporation tax liabilities
Amounts owed to Group undertakings
Other payables
Net current assets
Net assets
Equity
Share capital
Share premium
Share option reserve
Miscellaneous reserves
Retained earnings
Total shareholders’ funds

As at
31 December
2018
£’Million
508.0

As at
31 December
2017
£’Million
406.0

Note
2

793.7
0.1

(2.0)
(189.4)
(0.1)
602.3
1,110.3

79.4
174.5
193.9
0.1
662.4
1,110.3

606.1
0.1

(2.3)
(188.5)
(0.1)
415.3
821.3

79.4
171.7
160.5
0.1
409.6
821.3

In publishing the Parent Company financial statements, the Company has taken advantage of the exemption in Section 408 of the Companies
Act 2006 not to present its individual income statement and related notes that form part of these financial statements. The Company is not
required to present a statement of comprehensive income. The Company’s profit after tax for the financial year was £495.5 million
(2017: £305.0 million) which can be seen in the statement of changes in equity on page 207.

The financial statements on pages 207 to 212 were approved by the Board of Directors on 26 February 2019 and signed on its behalf by:

ANDREW CROFT
Chief Executive

CRAIG GENTLE
Chief Financial Officer

The Notes and information on pages 208 to 212 form part of these financial statements.

PA R E N T C O M PA N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Y

At 1 January 2017
Profit and total comprehensive income for the year
Dividends
Issue of share capital
Exercise of options
Cost of share options expensed in subsidiaries
At 31 December 2017
Profit and total comprehensive income for the year
Dividends
Exercise of options
Cost of share options expensed in subsidiaries
At 31 December 2018

Note

5
3
3

5
3

Share
capital
£’Million
79.1
–
–
0.1
0.2
–
79.4
–
–
–
–
79.4

Share
premium
£’Million
164.5
–
–
4.1
3.1
–
171.7
–
–
2.8
–
174.5

Share option
reserve
£’Million
130.0
–
–
–
–
30.5
160.5
–
–
–
33.4
193.9

Miscellaneous
reserves
£’Million
0.1
–
–
–
–
–
0.1
–
–
–
–
0.1

Retained
earnings
£’Million
294.6
305.0
(190.0)
–
–
–
409.6
495.5
(242.7)
–
–
662.4

Total
shareholders’
funds
£’Million
668.3
305.0
(190.0)
4.2
3.3
30.5
821.3
495.5
(242.7)
2.8
33.4
1,110.3

As at 31 December 2018 the total distributable reserves of the Company were £662.4 million (2017: £409.6 million). Information on the
Company’s dividend policy can be found within Note 5 on page 211.

The Notes and information on pages 208 to 212 form part of these financial statements.

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N O T E S T O T H E PA R E N T C O M PA N Y F I N A N C I A L S TAT E M E N T S

1. Accounting policies
BASIS OF PREPARATION
St. James’s Place plc (the Company) is a limited liability company incorporated in England and Wales, domiciled in the United Kingdom and
whose shares are publicly traded. The Company offers a range of insurance, investment and other wealth management services through its
subsidiaries, which are incorporated in the UK, Ireland and Asia.

The financial statements have been prepared under the historical cost convention, on a going concern basis and in accordance with Financial
Reporting Standard 101 (FRS 101) ‘Reduced Disclosure Framework’ and the Companies Act 2006 as applicable to companies using FRS 101.

The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in applying the Company’s accounting policies. No significant accounting judgements have been made.

ADOPTION OF AMENDED ACCOUNTING STANDARDS
The Annual Improvements 2014-2016 cycle were adopted by the Company as of 1 January 2018. This has not had any material impact on the
Company’s financial statements.

ADOPTION OF NEW ACCOUNTING STANDARDS
IFRS 9 Financial Instruments (and associated amendments to various other standards) was adopted by the Company as of 1 January 2018.
This resulted in changes to accounting policies and the reclassification certain financial assets. In accordance with the transition provisions of
IFRS 9, comparative figures have not been restated.

Classification and measurement of financial instruments
On the date of initial application of IFRS 9, being 1 January 2018, amounts owed by Group undertakings of £606.1 million and cash and cash
equivalents of £0.1 million were reclassified from the loans and receivables measurement category under IAS 39 to amortised cost under
IFRS 9.

The business model for these assets is to hold and collect or sell, and the contractual cash flows consist solely of payments of principal and
interest. There was no difference between the previous carrying amount under IAS 39 and the revised carrying amount under IFRS 9, no
change to the underlying accounting treatment, and the reclassification had no impact on the Company’s equity.

No reclassifications were required for financial liabilities.

FRS 101 – REDUCED DISCLOSURE EXEMPTIONS
The Company has taken advantage of the following disclosure exemptions under FRS 101:

• the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment;

• the requirements of IFRS 7 Financial Instruments: Disclosures;

• the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement;

• the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of paragraph

79(a)(iv) of IAS 1;

• the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of Financial

Statements;

• the requirements of IAS 7 Statement of Cash Flows;

• the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;

• the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures;

• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of

a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and

• the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairment of Assets, provided that

equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 209

GOING CONCERN
The Company is a non-trading investment holding company which has positive net assets. The Board believes the Company will continue to
be in business, with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant to laws
or regulations for a period of at least 12 months from the date of approval of the Company financial statements. As a result, the Company
continues to adopt the going concern basis in preparing these financial statements.

SIGNIFICANT ACCOUNTING POLICIES
The following principal accounting policies have been applied consistently to all the years presented.

(a) Investment return
Investment return comprises dividends from subsidiaries, which are accounted for when received.

(b) Taxation
Taxation is based on profits and income for the year as determined in accordance with the relevant tax legislation, together with adjustments
to provisions for prior years.

(c) Investment in subsidiaries
Investments in subsidiaries are carried at cost stated after any impairment losses, plus the cost of equity-settled share awards granted by the
Company of its own shares.

(d) Receivables
Receivables are initially recognised at fair value and subsequently held at amortised cost less impairment losses.

(e) Amounts owed to Group undertakings
Amounts owed to Group undertakings initially are recognised at fair value and subsequently held at amortised cost.

(f) Impairment losses
Non-financial assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to
amortisation are reviewed for impairment when circumstances or events indicate there may be uncertainty over their value. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell and value in use.

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C O N T I N U E D

2. Investment in subsidiaries

At 1 January 2017
Movements in the year
Share awards granted
At 31 December 2017
Movements in the year
Share awards granted
Share capital injection
At 31 December 2018

Cost
£’Million
269.4

Share awards
£’Million
130.0

Impairment

provision Net book value
£’Million
£’Million
375.5
(23.9)

–
269.4

–
68.6
338.0

30.5
160.5

33.4
–
193.9

–
(23.9)

–
–
(23.9)

30.5
406.0

33.4
68.6
508.0

The carrying value of the investments has been tested for impairment. The investments are supported by the value in use of the subsidiaries.

The investment in subsidiaries net book value is broken down as follows:

St. James’s Place Wealth Management Group Limited
Cirenco Limited
St. James’s Place DFM Holdings Limited
Directly held investments
St. James’s Place Management Services Limited
St. James’s Place Wealth Management plc
St. James’s Place International plc
Rowan Dartington & Co Limited
Stafford House Investments Limited
Investments held due to share awards granted
Total

3. Called-up share capital

At 1 January 2017
– Issue of share capital
– Exercise of options
At 31 December 2017
– Exercise of options
At 31 December 2018

31 December
2018
£’Million
87.6
157.9
68.6
314.1
145.3
45.0
0.1
3.3
0.2
193.9
508.0

31 December
2017
£’Million
87.6
157.9
–
245.5
130.6
27.4
0.1
2.2
0.2
160.5
406.0

Number of
ordinary shares

527,482,348
372,325
1,223,223
529,077,896
375,501
529,453,397

Called-up
share capital
£’Million
79.1
0.1
0.2
79.4
–
79.4

The total authorised number of ordinary shares is 605 million (2017: 605 million), with a par value of 15 pence per share (2017: 15 pence per
share). All issued shares are fully paid.

The Company received consideration of £2.8 million (2017: £7.5 million) for the shares issued during the year.

4. Auditor’s remuneration
The total audit fee in respect of the Group is set out in Note 5 to the consolidated financial statements on page 169. The audit fee charged to
the Company for the year ended 31 December 2018 is £1,120 (2017: £1,000), which is borne by another entity within the Group.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 211

5. Dividends
The following dividends have been paid by the Company:

Final dividend in respect of previous financial year
Interim dividend in respect of current financial year
Total dividends

Year ended
31 December
2018
Pence per share
27.45
18.49
45.94

Year ended
31 December
2017
Pence per share
20.67
15.41
36.08

Year ended
31 December
2018
£’Million
145.0
97.7
242.7

Year ended
31 December
2017
£’Million
108.8
81.2
190.0

The Directors have recommended a final dividend of 29.73 pence per share (2017: 27.45 pence). This amounts to £157.4 million
(2017: £145.0 million) and will, subject to shareholder approval at the Annual General Meeting, be paid on 24 May 2019 to those shareholders
on the register as at 5 April 2019.

DIVIDEND RESOURCES
The Company’s expected dividend policy is based on a pay-out ratio to Underlying cash of 80%. The capacity of the Company to make
dividend payments to shareholders is determined by the availability of distributable reserves and cash resources.

DISTRIBUTABLE RESERVES
The Company is a non-trading investment holding company which derives its distributable reserves from dividends paid by its subsidiaries.
The primary subsidiary which pays dividends to the Company is St. James’s Place Wealth Management Group Limited, an intermediate
holding company which in turn receives dividends primarily from St. James’s Place UK plc, St. James’s Place Unit Trust Group Limited
and St. James’s Place Investment Administration Limited. Ongoing solvency requirements within the life assurance, unit trust and financial
services companies of the Group limit their ability to distribute all their distributable reserves. Analysis of solvency requirements is included
in the Solvency section of the Financial Review on page 44 and further information about regulation and capital requirements is included in
Note 17 to the consolidated financial statements on page 194.

The Directors review the distributable reserves of the Company ahead of each interim and final dividend being proposed to ensure the
Company has sufficient distributable reserves to allow a lawful dividend to be paid. As at 31 December 2018, the total distributable reserves
of the Company were £662.4 million (2017: £409.6 million). The Directors are satisfied that this is sufficient to support the proposed dividend
of £157.4 million.

CASH RESOURCES
The shareholder cash resources within the Group at 31 December 2018 were £248.5 million (2017: £274.4 million) as set out in Note 10 to the
consolidated financial statements. These cash resources are held by the operating entities within the Group. The cash generated by the Group
during the year was £309.0 million on an Underlying cash basis (2017: £281.2 million) and £268.7 million on a Cash basis (2017: £252.6 million)
as set out in the Financial Review on page 36. Under both bases the cash generated during the year is sufficient to cover the total proposed
dividend for 2018 of £255.1 million.

The Cash and Underlying cash bases should not be confused with the IFRS statement of cash flows, which is presented in accordance with
IAS 7 on page 157.

6. Related party transactions and balances
At the year end the following related party balances existed, in addition to the investments in subsidiaries which are set out in Note 2 to the
Parent Company financial statements.

Intra-group debtors
St. James’s Place Partnership Services Limited
Total

Intra-group creditors
Cirenco Limited
Total

31 December
2018
£’Million

31 December
2017
£’Million

793.7
793.7

606.1
606.1

31 December
2018
£’Million

31 December
2017
£’Million

189.4
189.4

188.5
188.5

The intra-group debtors are loans granted by the Company which are unsecured and repayable on demand. The loans incur interest at an
agreed rate above the Bank of England's base rate, as stated in the loan agreements.

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C O N T I N U E D

6. Related party transactions and balances continued
During the year, the Company received £483.8 million (2017: £304.0 million) of dividends from subsidiary undertakings. The total value of
St. James’s Place FUM held by related parties of the Company as at 31 December 2018 was £24.7 million (2017: £36.1 million). The total value
of dividends paid to related parties of the Company during the year was £1.2 million (2017: £1.4 million).

The following wholly-owned subsidiaries of St. James’s Place plc have taken advantage of the exemption from statutory audit granted by
section 479A of the Companies Act 2006. In accordance with section 479C, St. James’s Place plc has therefore guaranteed all the outstanding
liabilities as at 31 December 2018 of:

BFS Financial Services Limited
Cabot Portfolio Nominees Limited
Cirenco Limited
Dartington Portfolio Nominees Limited
Future Proof Limited
Hale Financial Solutions Limited
Lansdown Place Group Holdings Limited
Lansdown Place Wealth Management Limited
Linden House Financial Services Limited
Linden House Group Limited
LP Auto Enrolment Solutions Limited
LP Financial Management Limited
M.H.S. (Holdings) Limited
M.S. Estates and Financial Services Limited
Rowan Dartington Holdings Limited
SJP AESOP Trustees Limited
SJP Interim Services Limited
SJPC Corporate Investments Limited
St. James’s Place (PCP) Limited
St. James's Place Acquisition Services Limited
St. James's Place Client Solutions Limited
St. James's Place Corporate Secretary Limited
St. James’s Place DFM Holdings Limited
St. James's Place International Distribution Limited
St. James's Place Nominees Limited
Stafford House Investments Limited
Technical Connection Limited

04609753
03636010
01773177
01489542
07608391
04373946
06390547
05458948
02990295
08464570
08257531
02195886
00559995
02224813
07470226
04089795
10735786
01476292
02706684
07730835
05487108
09131866
09687687
08798683
08764214
03866935
03178474

7. Directors’ emoluments
The Directors’ responsibilities relate primarily to the trading companies of the Group and accordingly their costs are charged to those
companies and none are met by the Parent Company. Disclosure of the Directors’ emoluments is made within the Directors’ Remuneration
Report on pages 120 to 137.

8. Company information
In the opinion of the Directors there is not considered to be any ultimate controlling party. Copies of the consolidated financial statements
of St. James’s Place plc may be obtained from the Company Secretary, St. James’s Place plc, St. James’s Place House, 1 Tetbury Road,
Cirencester, Gloucestershire, GL7 1FP.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC SUPPLEMENTARY INFORMATION:
CONSOLIDATED FINANCIAL
STATEMENTS ON A CASH RESULT
BASIS (UNAUDITED)

Consolidated Statement of Comprehensive Income
on a Cash Result Basis (unaudited) ...................................................................... 214

Consolidated Statement of Changes in Equity
on a Cash Result Basis (unaudited) ...................................................................... 215

Consolidated Statement of Financial Position
on a Cash Result Basis (unaudited) ...................................................................... 216

Notes to the Consolidated Financial Statements
on a Cash Result Basis (unaudited) ...................................................................... 217

213

S
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R
A
T
E
G
C
R
E
P
O
R
T

G
O
V
E
R
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A
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C
E

O
T
H
E
R

N
F
O
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AN N UA L R EPO RT & ACCOUNTS 2018

w ww.sjp.co.uk

FINANCIAL STATEMENTS

214

C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
O N A C A S H R E S U LT B A S I S ( U N A U D I T E D )

Fee and commission income
Investment return
Net income

Expenses

(Loss)/profit before tax

Tax attributable to policyholders’ returns
Tax attributable to shareholders’ returns

Total Cash result for the year

Cash result basic earnings per share
Cash result diluted earnings per share

Year ended
31 December
2018
£’Million
1,523.6
7.6
1,531.2

Year ended
31 December
2017
£’Million
1,788.5
28.1
1,816.6

Note

(1,540.5)

(1,370.1)

(9.3)

446.5

296.5
(18.5)

(156.2)
(37.7)

268.7

252.6

III
III

Pence
51.1
50.2

Pence
48.2
47.4

The Note references above cross refer to the Notes to the consolidated financial statements under IFRS on pages 158 to 205, except where
denoted in roman numerals.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC C O N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
O N A C A S H R E S U LT B A S I S ( U N A U D I T E D )

215

At 1 January 2017
Cash result for the year
Dividends
Issue of share capital
Exercise of options
Consideration paid for own shares
Shares sold during the year
Change in deferred tax
Change in tax discounting
Change in goodwill and intangibles
At 31 December 2017
Cash result for the year
Dividends
Exercise of options
Consideration paid for own shares
Shares sold during the year
Change in deferred tax
Change in tax discounting
Change in goodwill and intangibles
At 31 December 2018

Note

18
18
18

18
18

Equity attributable owners of the Parent Company

Share
capital
£’Million
79.1
–
–
0.1
0.2
–
–
–
–
–
79.4
–
–
–
–
–
–
–
–
79.4

Share
premium
£’Million
164.5
–
–
4.1
3.1
–
–
–
–
–
171.7
–
–
2.8
–
–
–
–
–
174.5

Shares in
trust
reserve
£’Million
(20.9)
–
–
–
–
(11.3)
5.5
–
–
–
(26.7)
–
–
–
(6.0)
9.0
–
–
–
(23.7)

Retained
earnings
£’Million
845.6
252.7
(190.0)
–
–
–
(5.5)
(15.0)
(16.2)
(2.5)
869.1
268.7
(242.7)
–
–
(9.0)
(31.8)
23.4
(1.5)
876.2

Misc
reserves
£’Million
2.5
–
–
–
–
–
–
–
–
–
2.5
–
–
–
–
–
–
–
–
2.5

Non-
controlling
interests
£’Million
(0.8)
(0.1)
–
–
–
–
–
–
–
–
(0.9)
–
–
–
–
–
–
–
–
(0.9)

Total equity
£’Million
1,070.0
252.6
(190.0)
4.2
3.3
(11.3)
–
(15.0)
(16.2)
(2.5)
1,095.1
268.7
(242.7)
2.8
(6.0)
–
(31.8)
23.4
(1.5)
1,108.0

Total
£’Million
1,070.8
252.7
(190.0)
4.2
3.3
(11.3)
–
(15.0)
(16.2)
(2.5)
1,096.0
268.7
(242.7)
2.8
(6.0)
–
(31.8)
23.4
(1.5)
1,108.9

The Note references above cross refer to the Notes to the consolidated financial statements under IFRS on pages 158 to 205, except where
denoted in roman numerals.

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C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N
O N A C A S H R E S U LT B A S I S ( U N A U D I T E D )

Assets
Property and equipment
Fixed income securities
Investment in Collective Investment Schemes
Cash and cash equivalents
Other receivables
Income tax assets
Deferred tax assets
Total assets
Liabilities
Borrowings
Other provisions
Other payables
Income tax liabilities
Deferred tax liabilities
Preference shares
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
Total shareholders’ equity on a Cash result basis

Net assets per share

Note

9
16
16
16

15
14

31 December
2018
£’Million

31 December
2017
£’Million

28.5
5.4
1,297.0
248.5
890.1
9.7
111.6
2,590.8

348.6
22.7
956.9
–
154.5
0.1
1,482.8
1,108.0

79.4
174.5
(23.7)
2.5
876.2
1,108.9
(0.9)
1,108.0

26.4
46.1
1,416.8
274.7
1,122.4
–
144.1
3,030.5

279.9
20.0
1,079.7
125.3
430.4
0.1
1,935.4
1,095.1

79.4
171.7
(26.7)
2.5
869.1
1,096.0
(0.9)
1,095.1

Pence
209.3

Pence
207.0

The Note references above cross refer to the Notes to the consolidated financial statements under IFRS on pages 158 to 205, except where
denoted in roman numerals.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC 217

N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
O N A C A S H R E S U LT B A S I S ( U N A U D I T E D )

I. Basis of preparation
The consolidated financial statements on a Cash result basis have been prepared by adjusting the financial statements prepared in
accordance with International Financial Reporting Standards as adopted by the EU (‘adopted IFRSs’) and interpretations issued by the IFRS
Interpretations Committee (‘IFRS IC’) for items which do not reflect the cash emerging from the business. The adjustments are as follows:

1. Unit liabilities and net assets held to cover unit liabilities, as set out in Note 10 to the consolidated financial statements, are policyholder

balances which are removed in the statement of financial position on a Cash result basis. No adjustment for payments in or out is required
in the statement of comprehensive income as this business is subject to deposit accounting, which means that policyholder deposits and
withdrawals are recognised in the statement of financial position under IFRS, with only marginal cash flows attributable to shareholders
recognised in the statement of comprehensive income. However, adjustment is required for the investment return and the movement in
investment contract liabilities, which are offsetting and are both zero-ised.

2. Deferred acquisition costs, the purchased value of in-force business and deferred income assets and liabilities are removed from
the statement of financial position on a Cash result basis, and the amortisation of these balances is removed in the statement of
comprehensive income on a Cash result basis. The assets, liabilities and amortisation are set out in Note 8 to the consolidated
financial statements.

3. Share-based payment expense is removed from the statement of comprehensive income on a Cash result basis, and the equity and liability
balances for equity-settled and cash-settled share-based payment schemes respectively are removed from the statement of financial
position on a Cash result basis. Share-based payment balances are set out in Note 19 to the consolidated financial statements.

4. Non-unit-linked insurance contract liabilities and reinsurance assets, as set out in Note 13 to the consolidated financial statements, are
removed in the statement of financial position on a Cash result basis. The movement in these balances is removed from the statement
of comprehensive income on a Cash result basis.

5. Goodwill, computer software intangible assets and some other assets and liabilities which are inadmissible under the Solvency II regime
are removed from the statement of financial position on a Cash result basis, however the movement in these figures are included in the
statement of comprehensive income on a Cash result basis.

6. Deferred tax assets and liabilities are adjusted in the statement of financial position on a Cash result basis to reflect the adjustments noted
above and other discounting differences between tax charges and IFRS accounting. However, the impact of movements in deferred tax
assets and liabilities are not included in the statement of comprehensive income on a Cash result basis.

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N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
O N A C A S H R E S U LT B A S I S ( U N A U D I T E D ) C O N T I N U E D

II. Reconciliation of the IFRS Balance Sheet to the Cash Balance Sheet
The Solvency II (or Cash) balance sheet is based on the IFRS consolidated statement of financial position (on page 156), with adjustments
made to accounting assets and liabilities to reflect the Solvency II regulations and the provision for insurance liabilities set equal to the
associated unit liabilities. The following table sets out the full reconciliation.

31 December 2018
Assets
Goodwill
Deferred acquisition costs
Purchased value of in-force business
Developments
Property and equipment
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Reinsurance assets
Cash and cash equivalents
Other receivables
Income tax assets
Deferred tax assets
Total assets
Liabilities
Insurance contract liabilities
Borrowings
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Other provisions
Other payables
Income tax liabilities
Deferred tax liabilities
Deferred income
Preference shares
Total liabilities
Net Assets

IFRS
Balance Sheet
£'Million

Adjustment 1
£'Million

Adjustment 2
£'Million

Solvency II
Net Assets
Balance Sheet
£'Million

15.6
558.5
24.0
1.4
28.5
1,820.7
56,077.9
21,966.0
4,756.1
508.8
82.8
6,877.6
1,952.3
9.7
147.1
94,827.0

508.1
348.6
67,796.1
517.4
22,502.9
22.7
1,290.8
–
172.9
648.3
0.1
93,807.9
1,019.1

–
–
–
–
–
(1,820.7)
(56,077.9)
(21,960.6)
(3,459.1)
(508.8)
–
(6,629.1)
(1,059.1)
–
–
(91,515.3)

(421.2)
–
(67,796.1)
(517.4)
(22,502.9)
–
(277.7)
–
–
–
–
(91,515.3)
–

(15.6)
(558.5)
(24.0)
(1.4)
–
–
–
–
–
–
(82.8)
–
(3.1)
–
(35.5)
(720.9)

(86.9)
–
–
–
–
–
(56.2)
–
(18.4)
(648.3)
–
(809.8)
88.9

–
–
–
–
28.5
–
–
5.4
1,297.0
–
–
248.5
890.1
9.7
111.6
2,590.8

–
348.6
–
–
–
22.7
956.9
–
154.5
–
0.1
1,482.8
1,108.0

Adjustment 1 nets out the policyholder interest in unit-linked assets and liabilities.

Adjustment 2 comprises adjustment to the IFRS statement of financial position in line with Solvency II requirements, including removal
of DAC, DIR, PVIF and their associated deferred tax balances, goodwill and other intangibles.

FINANCIAL STATEMENTSST. JAMES’S PLACE PLC

219

IFRS
Balance Sheet
£'Million

Adjustment 1
£'Million

Adjustment 2
£'Million

Solvency II
Net Assets
Balance Sheet
£'Million

15.6
623.0
27.2
2.4
26.4
1,630.9
55,086.9
17,180.7
5,903.4
343.4
82.8
7,280.6
1,620.0
182.7
90,006.0

544.6
279.9
64,014.3
190.3
21,349.1
20.0
1,231.2
125.3
546.8
646.3
0.1
88,947.9
1,058.1

–
–
–
–
–
(1,630.9)
(55,086.9)
(17,134.6)
(4,486.6)
(343.4)
–
(7,005.9)
(475.9)
–
(86,164.2)

(459.0)
–
(64,014.3)
(190.3)
(21,349.1)
–
(151.5)
–
–
–
–
(86,164.2)
–

(15.6)
(623.0)
(27.2)
(2.4)
–
–
–
–
–
–
(82.8)
–
(21.7)
(38.6)
(811.3)

(85.6)
–
–
–
–
–
–
–
(116.4)
(646.3)
–
(848.3)
37.0

–
–
–
–
26.4
–
–
46.1
1,416.8
–
–
274.7
1,122.4
144.1
3,030.5

–
279.9
–
–
–
20.0
1,079.7
125.3
430.4
–
0.1
1,935.4
1,095.1

31 December 2017
Assets
Goodwill
Deferred acquisition costs
Purchased value of in-force business
Developments
Property and equipment
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Reinsurance assets
Cash and cash equivalents
Other receivables
Deferred tax assets
Total assets
Liabilities
Insurance contract liabilities
Borrowings
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Other provisions
Other payables
Income tax liabilities
Deferred tax liabilities
Deferred income
Preference shares
Total liabilities
Net Assets

Adjustment 1 nets out the policyholder interest in unit-linked assets and liabilities.

Adjustment 2 comprises adjustment to the IFRS statement of financial position in line with Solvency II requirements, including removal
of DAC, DIR, PVIF and their associated deferred tax balances, goodwill and other intangibles.

III. Earnings per share

Earnings
Cash result after tax attributable to equity shareholders (for both basic and diluted EPS)

Earnings per share (EPS)
Basic earnings per share
Diluted earnings per share

Year ended
31 December
2018
£’Million

Year ended
31 December
2017
£’Million

268.7

252.7

Million

526.0
8.7
534.7

524.3
8.8
533.1

Pence

51.1
50.2

48.2
47.4

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONANNUAL REPORT & ACCOUNTS 2018www.sjp.co.uk

220
220

OTHER INFORMATION

OTHER
INFORMATION

Shareholder Information ............. 222

How to Contact us
and Advisers .................................. 223

St. James’s Place
Partnership Locations ................ 224

Glossary of Key Performance
Indicators (KPIs) ........................... 226

Glossary of Alternative
Performance Measures ............... 227

Glossary of Terms ........................ 230

ST. JAMES’S PL AC E PL C

221

S
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P
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G
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W E L I S T E N A N D

R E SP ON D

The business has a broad range of stakeholders, and its duties to them
are reflected in our strategy which has a fundamental and clear focus
on each stakeholder, including our workforce, the Partnership, our
clients, shareholders, third-party suppliers, regulators and wider
society. This section provides information of particular interest to
shareholders, such as the financial calendar, information about our
locations and how stakeholders can contact us, and three glossaries
which provide further information on our key performance indicators,
alternative performance measures and key terms to assist stakeholders
in understanding the Annual Report and Accounts.

AN N UA L R EPO RT & ACCOUNTS 2018

w ww.sjp.co.uk

OTHER INFORMATION

222

S H A R E H O L D E R I N F O R M A T I O N

Analysis of number of shareholders

Analysis by number of shares
1–999
1,000–9,999
10,000–99,999
100,000 and above

Holders
2,355
1,922
550
314
5,141

%
45.81
37.38
10.70

Shares held
851,703
5,667,151
18,062,318
6.11 504,872,225
100.00 529,453,397

%
0.16
1.07
3.41
95.36
100.00

2019 financial calendar
Ex-dividend date for final dividend
Record date for final dividend
Announcement of first-quarter new business
Annual General Meeting
Payment date for final dividend
Announcement of Interim Results and second-quarter new business
Ex-dividend date for interim dividend
Record date for interim dividend
Payment date for interim dividend
Announcement of third-quarter new business

Thursday 4 April 2019
Friday 5 April 2019
Tuesday 30 April 2019
Tuesday 14 May 2019
Friday 24 May 2019
Wednesday 31 July 2019
Thursday 29 August 2019
Friday 30 August 2019
Friday 27 September 2019
Tuesday 22 October 2019

The above dates are subject to change and further information on the 2019 financial calendar can be found on the Company’s website,
www.sjp.co.uk.

Dividend Reinvestment Plan
If you would prefer to receive new shares instead of cash dividends, please complete a Dividend Reinvestment Plan (DRIP) form, which is
available from our Registrars, Computershare Investor Services PLC. Their contact details are on page 223.

Share dealing
A telephone share dealing service has been established with the Registrars, Computershare Investor Services PLC, which provides
shareholders with a simple way of buying or selling St. James’s Place plc shares on the London Stock Exchange. If you are interested in this
service, telephone 0370 703 0084.

An internet share dealing service is also available. Further information about share dealing services can be obtained by logging on to:
www.computershare.trade.

Electronic communications
If you would like to have access to shareholder communications such as the Annual Report and the Notice of General Meeting through the
internet rather than receiving them by post, please register at www.investorcentre.co.uk/ecomms.

OTHER INFORMATIONST. JAMES’S PLACE PLC H O W T O C O N T A C T U S A N D A D V I S E R S

223

Advisers
REGISTRARS AND TRANSFER OFFICE
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
email: webqueries@computershare.co.uk

Tel: 0370 702 0197
www.investorcentre.co.uk/contactus

INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside
London
SE1 2RT

BROKERS
JPMorgan Cazenove Limited
25 Bank Street
London
E14 5JP

Bank of America Merrill Lynch International Limited
2 King Edward Street
London
EC1A 1HQ

How to contact us
REGISTERED OFFICE
St. James’s Place House
1 Tetbury Road
Cirencester
Gloucestershire
GL7 1FP

Tel: 01285 640302
www.sjp.co.uk

CHAIR
Iain Cornish
email: chair@sjp.co.uk

CHIEF EXECUTIVE
Andrew Croft
email: andrew.croft@sjp.co.uk

CHIEF FINANCIAL OFFICER
Craig Gentle
email: craig.gentle@sjp.co.uk

COMPANY SECRETARY
Elizabeth Kelly
email: liz.kelly@sjp.co.uk

CUSTOMER SERVICE
Caroline Hallatt
Tel: 01285 717342
email: caroline.hallatt@sjp.co.uk

ANALYST ENQUIRIES
Tony Dunk
Tel: 020 7514 1951
email: tony.dunk@sjp.co.uk

MEDIA ENQUIRIES
Brunswick Group
Tel: 020 7404 5959
Charles Pretzlik
Email: cpretzlik@brunswickgroup.com
Tom Burns
Email: tburns@brunswickgroup.com

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONwww.sjp.co.ukANNUAL REPORT & ACCOUNTS 2018224

S T. J A M E S ’ S P L A C E PA R T N E R S H I P L O C AT I O N S

United Kingdom
1 ABERDEEN
St. James’s Place House
3 Queens Gate
Aberdeen
AB15 5YL

Mark Wyllie
Tel: 01224 202400

2 BELFAST
St. James’s Place House
14 Cromac Place
Belfast
BT7 2JB

Keith Willett
Tel: 028 9072 6500

3 BRISTOL
Beech House
Brotherswood Court
Great Park Road
Bradley Stoke
Bristol
BS32 4QW

Sean Aldom
Tel: 01454 618700

4 CAMBRIDGE
8200 Cambridge Research Park
Beach Drive
Waterbeach
Cambridge
CB25 9TL

Paolo Payne
Tel: 01223 607700

5 EDINBURGH
Melville House
18–22 Melville Street
Edinburgh
EH3 7NS

Steve Herkes
Tel: 0131 459 9200

6 GLASGOW
St. James’s Place House
168 West George Street
Glasgow
G2 2NR

Ross Cameron
Tel: 0141 304 1700

7 LEEDS
2nd Floor
Chancellor Court
21 The Calls
Leeds
LS2 7EH

Tim Willis
Tel: 0113 244 4054

8 LIVERPOOL
5th Floor
Walker House
Exchange Flags
Liverpool
L2 3YL

Mark Brereton
Tel: 0151 224 8700

9 LONDON
Canary Wharf
Fourth Floor
40 Bank Street
Canary Wharf
London
E14 5NR

Nick Froggatt
Tel: 0207 516 5700

City
St. James’s Place House
3 Moorgate Place
London
EC2R 6EA

Roger McKibbin
Tel: 0207 638 2400

OTHER INFORMATIONST. JAMES’S PLACE PLC 225

3 SINGAPORE
St. James’s Place
(Singapore) Pte. Limited
#15–61
1 Raffles Place
Tower 2
Singapore 048616

Gary Harvey
Tel: +65 6536 0121

Asia
1 HONG KONG
St. James’s Place (Hong
Kong) Limited
1/F Henley Building
5 Queen's Road Central
Hong Kong

Matthew Deeprose
Tel: +852 2824 1083

2 SHANGHAI
St. James’s Place
(Shanghai) Limited
Suite 2006-2007
20/F, Tower 1
Jing An Kerry Centre
1515 Nanjing Road West
Shanghai
China 200040

Spiros Christoforatos
Tel: +86 21 8028 5300

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Elstree
St. James’s Place House
5 Oaks Court
Warwick Road
Borehamwood
Hertfordshire
WD6 1GS

Carol Giles
Tel: 0208 207 4000

Hamilton Place
11 Hamilton Place
Mayfair
London
W1J 7DR

Nigel Harwood
Tel: 0207 495 1771

Kingsway
1st Floor
York House
23 Kingsway
London
WC2B 6UJ

Jamie McNish
Tel: 0207 744 1600

Piccadilly
117 Piccadilly
London
W1J 7JU

Damian Bradbury
Tel: 0207 399 6889

10 MANCHESTER
7th Floor
Sunlight House
Quay Street
Manchester
M3 3JZ

Frank Gorrie
Tel: 0161 834 9480

11 NEWBURY
Montague Court
21–25 London Road
Newbury
Berkshire
RG14 1JL

Andy Deegan
Tel: 01635 582424

12 NEWCASTLE
One Trinity Gardens
Broad Chare
Newcastle upon Tyne
NE1 2HF

Philip Pringle
Tel: 0191 260 5373

13 NOTTINGHAM
Embankment House
Electric Avenue
Nottingham
NG2 1AS

Andy Marks
Tel: 0115 924 2899

14 SOLENT
St. James’s Place House
1480 Parkway
Solent Business Park
Whitley
Fareham
Hampshire
PO15 7AF

Sarah Ellis
Tel: 01489 881400

15 SOLIHULL
St. James’s Place House
Central Boulevard
Blythe Valley Business Park
Shirley
Solihull
B90 8AR

Sam Porter
Tel: 0121 733 6733

16 WESTERHAM
1st Floor
The Crown
London Road
Westerham
Kent
TN16 1DJ

David McIntosh
Tel: 01959 561 606

OTHER INFORMATIONwww.sjp.co.ukANNUAL REPORT & ACCOUNTS 2018

226

G L O S S A R Y O F K E Y P E R F O R M A N C E I N D I C AT O R S ( K P I s)

The Group’s KPIs on clients, the Partnership, funds and
financials are set out on pages 19, 21, 23 and 25 respectively.
This KPI glossary sets out why each of these KPIs are
important to the Group.

CLIENT KPIs
Client numbers
Our business model is based on managing client wealth and so the
number of clients is a key measure of the health of the business.
As well as reflecting past performance, it also indicates future
opportunity, as our experience suggests that over 90% of new
business comes from existing clients or their referrals. In 2018,
we were pleased that client numbers increased from 633,000 to
682,000.

Client retention
Our business is long-term and client retention feeds directly into the
financial result. However, it is also an indication of minimum
standards having been met. We are therefore delighted that retention
was again above 95%, continuing the trend of recent years.

Client advocacy
Our reputation is vitally important to our business model and this is
best expressed through the experience of our clients. Our Wealth
Account survey, conducted biennially from 2016 onwards, provides
an excellent insight into client experience. Responses to the question
‘Would you recommend St. James’s Place to anyone else?’, have
been very positive over time, with the 2018 data indicating a 94%
advocacy rate.

THE PARTNERSHIP KPIs
Adviser numbers
Without our advisers, we would have no clients. We were therefore
pleased to deliver growth in line with our long-term aspirations,
supported by Academy graduates and recruitment in Asia. Adviser
numbers grew from 3,661 in 2017 to 3,954 in 2018.

Adviser retention
Adviser retention reflects advisers’ continuing satisfaction with our
proposition. We are therefore pleased to note that retention has
remained at the high level of 93%.

Gross inflows per adviser
Gross inflows per adviser is a measure of their success as
business people, but also feeds into success for the Company.
In 2018 gross inflows per adviser remained flat at £3.98 million
(2017: £3.99 million), reflecting the 8% increase in grows inflows
being matched by the 8% increase in adviser numbers.

FUND KPIs
Gross inflows
Gross inflows are the gross new investment and pensions business
(principally single premium) received during the year. We aim to grow
gross inflows by 15% to 20% per annum over the long term. In 2018,
gross inflows grew by 8%. This reflected both the difficult market
conditions that prevailed in 2018, and the exceptional outcome in
2017.

Net inflows
Retention of funds is a result of satisfied clients and is essential if
FUM is to continue to grow. Growth of 8% in the year was in line with
growth in gross inflows, demonstrating our continued strength in
retaining client FUM.

Funds Under Management (FUM)
The profitability measures of the Group are ultimately driven by the
income we earn from FUM. The FUM has exhibited compound
annual growth of 19% over the last ten years.

FINANCIAL KPIs
EEV operating profit before tax
The European Embedded Value (EEV) reporting basis assesses the
full value of the emergence of shareholder cash returns over the long
term. New business (gross inflows) is the most significant underlying
driver of EEV operating profit. An increase in gross inflows of 8%,
along with operational economies of scale achieved as fixed
expenses are spread across more new business, drove a 9%
increase in EEV operating profit before tax year on year.

Underlying cash result
Underlying cash profit reflects the regular emergence of cash from
the business operations whilst also reflecting the impact of the
strategic investments we are making. Underlying cash profit was up
10% reflecting the continuing growth in the business.

Dividends
Growth in profit measures, particularly cash, means the Company is
able to increase the level of dividend. We are pleased to confirm an
increase of 12.5% in dividend in the year, bringing the total increase
over the last five years to 202%.

OTHER INFORMATIONST. JAMES’S PLACE PLC G L O S S A R Y O F A LT E R N AT I V E P E R F O R M A N C E M E A S U R E S

227

Within the Annual Report and Accounts various
alternative performance measures (APMs) are disclosed.

An APM is a measure of financial performance, financial position or cash flows which is not defined by the relevant financial reporting
framework, which for the Group is International Financial Reporting Standards (IFRS) as adopted by the European Union. APMs are used to
provide greater insight into the performance of the Group and the way it is managed by the Directors. The table below defines each APM,
explains why it is used and, if applicable, where the APM has been reconciled to IFRS:

Financial position related APMs

APM
Solvency II
net assets

Definition
Based on IFRS Net Assets, but with the following
adjustments:

1. Reflection of the recognition requirements of the
Solvency II regulations for assets and liabilities.
In particular this removes deferred acquisition
costs (DAC), deferred income (DIR), purchased
value of in-force (PVIF) and their associated
deferred tax balances, other intangibles and
some other small items which are treated as
inadmissible from a regulatory perspective; and

2. Adjustment to remove the matching client assets

and the liabilities as these do not represent
shareholder assets.

No adjustment is made to deferred tax, except for
that arising on DAC, DIR and PVIF, as this is treated
as an allowable asset in the Solvency II regulation.
A discounted cashflow valuation methodology,
assessing the long-term economic value of the
business.

Our embedded value is determined in line with the
EEV principles, originally set out by the Chief Financial
Officers (CFO) Forum in 2004, and amended for
subsequent changes to the principles, including
those published in April 2016, following the
implementation of Solvency II.

EEV net asset value per share is calculated as the
EEV net assets divided by the year end number of
ordinary shares.

IFRS net asset value per share is calculated as the
IFRS net assets divided by the year-end number of
ordinary shares.

Total
embedded
value

Net asset
value (NAV)
per share
(EEV)
NAV per share
(IFRS)

Reconciliation
to the financial
statements
Refer to page 38.

Why is this measure used?
Our ability to satisfy our liabilities to clients, and
consequently our solvency, is central to our
business. By removing the liabilities which are fully
matched by assets, this presentation allows the
reader to focus on the business operation. It also
provides a simpler comparison with other wealth
management companies.

Life business and wealth management business
differ from most other businesses, in that the
expected shareholder income from the sale of a
product emerges over a long period in the future.
We therefore supplement the IFRS and Cash results
by providing additional disclosure on an embedded
value basis, which brings into account the net
present value of expected future cash flows, as
we believe that a measure of total economic value
of the Group is useful to investors.
Total embedded value provides a measure of total
economic value of the Group, and assessing the
NAV per share allows analysis of the overall value
of the group by share.
Total IFRS net assets provides a measure of value of
the Group, and assessing the NAV per share allows
analysis of the overall value of the Group by share.

Not applicable.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONwww.sjp.co.ukANNUAL REPORT & ACCOUNTS 2018228

G L O S S A R Y O F A LT E R N AT I V E P E R F O R M A N C E M E A S U R E S
C O N T I N U E D

Financial performance related APMs

APM
Operating cash
result,
Underlying
cash result
and Cash
result

Underlying
cash basic and
diluted
earnings per
share (EPS)
EEV profit

Definition
The Cash result is defined as the movement
between the opening and closing Solvency II net
assets adjusted for the following items:

1. The movement in deferred tax is removed to

reflect just the cash realisation from the deferred
tax position;

2. The movements in goodwill and other intangibles

are included; and

3. Other changes in equity, such as dividends paid
in the year and non-cash-settled share option
costs, are excluded.

The Operating cash result reflects the regular
emergence of cash from the business operations.

The Underlying cash results additionally reflects the
cash impact of the strategic investments we are
making.

Finally, the Cash result reflects all other cash items,
including those whose emergence is volatile, varying
over time and often influenced by markets, together
with the short-term costs associated with the
back-office infrastructure project.

Neither the Cash result nor the underlying cash
result should be confused with the IFRS
consolidated statement of cash flows which is
prepared in accordance with IAS 7.
These EPS measures are calculated as Underlying
cash divided by the number of shares used in the
calculation of IFRS basic and diluted EPS.

Derived as the movement in the total EEV during the
year.

EEV operating
profit

A discounted cashflow valuation methodology,
assessing the long-term economic value of the
business.

Our embedded value is determined in line with the
EEV principles, originally set out by the Chief
Financial Officers (CFO) Forum in 2004, and
amended for subsequent changes to the principles,
including those published in April 2016, following the
implementation of Solvency II.

The EEV operating profit reflects the total EEV result
with an adjustment to strip out the impact of stock
market and other economic effects during the year.

Reconciliation
to the financial
statements
Refer to pages
34, 35 and also
see Note 3 –
Segment Profit
to the
consolidated
financial
statements

Why is this measure used?
IFRS income statement methodology recognises
non-cash items such as deferred tax and non-cash-
settled share options. By contrast, dividends can
only be paid to shareholders from appropriately
fungible assets. The Board therefore uses the Cash
results to monitor the level of cash generated by the
business.

While the Cash result gives an absolute measure of
the cash generated in the year, the Underlying and
Operating cash results are particularly useful for
monitoring the expected long-term rate of cash
emergence, which supports dividends and
sustainable dividend growth.

As Underlying cash is the best reflection of the cash
generated by the business, Underlying cash EPS
measures allow analysis of the shareholder cash
generated by the business by share.

Not applicable.

Both the IFRS and Cash results reflect only the
cashflows in the year. However our business is
long-term, and activity in the year can generate
business with a long-term value. We therefore
believe it is helpful to understand the full economic
impact of activity in the year, which is the aim of the
EEV methodology.
Both the IFRS and Cash results reflect only the cash
flows in the year. However, our business is long-term,
and activity in the year can generate business with a
long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in
the year, which is the aim of the EEV methodology.

See Note 3 –
Segment Profit
to the
consolidated
financial
statements

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

OTHER INFORMATIONST. JAMES’S PLACE PLC 229

Reconciliation
to the financial
statements
Not applicable.

Definition
These EPS measures are calculated as EEV
operating profit after tax divided by the number of
shares used in the calculation of IFRS basic and
diluted EPS.

Why is this measure used?
As EEV operating profit is the best reflection of the
EEV generated by the business, EEV operating profit
EPS measures allow analysis of the long-term value
generated by the business by share.

APM
EEV operating
profit basic
and diluted
earnings per
share (EPS)
Policyholder
and
Shareholder
tax

Shareholder tax is estimated by making an
assessment of the effective rate of tax that is
applicable to the shareholders on the profits
attributable to the shareholders. This is calculated
by applying the appropriate effective corporate tax
rates to the shareholder profits.

The remainder of the tax charge represents tax
on policyholders’ investment returns.

This calculation method is consistent with the
legislation relating to the calculation of the tax
on shareholders’ profits.

Profit before
shareholder
tax

A profit measure which reflects the IFRS result
adjusted for policyholder tax, but before deduction
of shareholder tax. Within the consolidated
statement of comprehensive income the full title
of this measure is ‘Profit before tax attributable
to shareholders' returns’.

Underlying
profit

A profit measure which reflects the IFRS result
adjusted to remove the DAC, DIR and PVIF
adjustments.

The UK tax regime facilitates the collection of tax
from life insurance policyholders by making an
equivalent charge within the corporate tax of the
Company. The total tax charge for the insurance
companies therefore comprises both this element
and an element more closely related to normal
corporation tax.

Disclosed as
separate line
items in the
statement of
comprehensive
income on page
154.

Life insurance business impacted by this tax
typically includes policy charges which align with the
tax liability, to mitigate the impact on the corporate.
As a result, when policyholder tax increases, the
charges also increase. Given these offsetting items
can be large, and typically do not perform in line with
the business, it is beneficial to be able to identify the
two elements separately. We therefore refer to that
part of the overall tax charge, which is deemed
attributable to policyholders, as policyholder tax,
and the rest as shareholder tax.
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, we believe it is
also useful to separately identify the profit before
shareholder tax, which reflects the IFRS profit
before tax, adjusted only for tax paid on behalf
of policyholders.
The IFRS methodology promotes 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 (DAC and
DIR). Due to the Retail Distribution Review (RDR)
regulation change in 2013, there was a step change
in the progression of these items in our accounts,
which resulted in significant accounting presentation
changes despite the fundamentals of our vertically-
integrated business remaining unchanged. We
therefore believe it is useful to consider the IFRS
result having removed the impact of movements in
these intangibles as it better reflects the underlying
performance of the business.

Disclosed as
a separate line
item in the
statement of
comprehensive
income on page
154.

Refer to page
34.

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230

G L O S S A R Y O F T E R M S

Adviser or financial adviser
An individual who is authorised by an appropriate regulatory authority
to provide financial advice. In the UK our advisers are authorised by
the FCA.

Administration platform, also Bluedoor
A new client-centric administration system, being developed in
conjunction with our third-party outsourced administration provider,
DST. The system is owned by DST.

Capita
A provider of business process outsourcing and integrated
professional support service solutions, which is our third-party
outsourced provider, responsible for the administration of our
Dublin-based life insurance company, SJPI.

Chief Operating Decision Maker (CODM)
The Executive Committee of the Board (Executive Board), which is
responsible for allocating resources and assessing the performance
of the operating segments.

Client advocacy
The Company requests feedback from clients biennially through a
survey distributed alongside the Wealth Account. Advocacy is
measured by the response to the question ‘Would you recommend
SJP services to others?’. The potential responses distinguish
between ‘Yes, and have done so already’, ‘Yes, but have yet to do so’
and ‘No’.

Client numbers
The number of individuals who have received advice from a
St. James’s Place Partner and own a St. James’s Place wrapper.

Client retention
Client retention is assessed by calculating the proportion of clients at
1 January in the year who remain as a client throughout the year and
are still a client on 31 December of the same year.

Company
The Company refers to St. James’s Place plc, which is also referred
to as ‘St. James’s Place’, ‘St. James’s Place plc’ and ‘SJP’ throughout
the Annual Report and Accounts.

Deferred Acquisition Costs (DAC)
An intangible asset required to be established through the application
of IFRS to our long-term business. The value of the asset is equal to
the amount of all costs which accrue in line with new business
volumes. The asset is amortised over the expected lifetime of the
business.

Deferred Income (DIR)
Deferred income, which arises from the requirement in IFRS that
initial charges on long-term financial instruments, should only be
recognised over the lifetime of the business. The initial amount of the
balance is equal to the charge taken.

Discretionary Fund Management (DFM)
A generic term for a form of investment management in which buy
and sell decisions are made (or assisted) by a portfolio manager for a
client's account. Within St. James’s Place, the services provided by
Rowan Dartington (including investment management, advisory
stockbroking and wealth planning) are collectively referred to as
Discretionary Fund Management, distinguishing them from the
services provided by our Partners and from the Investment
Management Approach (IMA).

DST Systems (DST)
A provider of investor and policyholder, administration and
technology services, formerly known as International Financial Data
Services (IFDS). DST is our third-party outsourced provider,
responsible for the administration of our UK life insurance company
SJPUK, our unit trust manager SJPUTG, and our investment
administration company SJPIA.

European Embedded Value (EEV)
EEV reflects the fact that the expected shareholder income from the
sale of wealth management products emerges over a long period of
time by bringing into account the net present value of the expected
future cash flows. EEV is calculated in accordance with the EEV
principles originally issued in May 2004 by the Chief Financial
Officers Forum (CFO Forum), supplemented in both October 2005
and, following the introduction of Solvency II, in April 2016.

Field Management Team (FMT)
The team of managers within St. James’s Place with day-to-day
responsibility for support and supervision of the Partnership.

Financial Conduct Authority (FCA)
The FCA is a company limited by guarantee and is independent of the
Bank of England. It is responsible for the conduct of business
regulation of all firms (including those firms subject to prudential
regulation by the Prudential Regulation Authority (PRA)) and the
prudential regulation of all firms not regulated by the PRA. The FCA
has three statutory objectives: securing an appropriate degree of
protection for consumers, protecting and enhancing the integrity of
the UK financial system, and promoting effective competition in the
interests of consumers.

OTHER INFORMATIONST. JAMES’S PLACE PLC 231

Financial Services Compensation Scheme (FSCS)
The FSCS is the UK’s statutory compensation scheme for customers
of authorised financial services firms. This means that the FSCS can
pay compensation if a firm is unable, or is likely to be unable, to pay
claims against it. The FSCS is an independent body, set up under the
Financial Services and Markets Act 2000 (FSMA), and funded by a
levy on ‘authorised financial services firms’. The scheme covers
deposits, insurance policies, insurance brokering, investments,
mortgages and mortgage arrangement.

Funds Under Management (FUM)
Represents all assets actively managed or administered by or on
behalf of the Group, including all life insurance and unit trust assets,
but not assets managed by third parties where we have only
introduced or advised on the business. Assets managed by Rowan
Dartington count as FUM from the date of acquisition.

Gross inflows
Total new funds under management accepted in the period. New
funds accepted by Rowan Dartington count for Gross inflows from
the date of acquisition.

Group
The Group refers to the Company together with its subsidiaries as
listed in Note 21 to the consolidated financial statements.

International Financial Reporting Standards (IFRS)
These are accounting regulations issued by the International
Accounting Standards Board (IASB) designed to ensure comparable
preparation and disclosure of statements of financial position, and
are the standards that all publicly listed companies in the European
Union are required to use.

Investment Management Approach (IMA)
The IMA is how St. James’s Place manages clients’ investments.
It is managed by the St. James’s Place Investment Committee,
which in turn is advised by respected independent investment
research consultancies, including Stamford Associates, Redington
and Aon Consulting. The Investment Committee is responsible
for identifying fund managers for our funds, selecting from fund
management firms all around the world. It is also responsible
for monitoring the performance of our fund managers, and, if
circumstances should change and it becomes necessary, then
it is responsible for changing the fund manager as well.

Maturities
Those sums paid out where a plan has reached the intended,
pre-selected, maturity event (e.g. retirement).

Net inflows
Net inflows are Gross inflows less the amount of FUM withdrawn by
clients during the same period. The net inflows is the growth in FUM
not attributable to investment performance.

Paraplanner
Staff in a Partner practice who support the advisers in that practice.

Policyholder and Shareholder tax
The UK tax regime facilitates the collection of tax from life insurance
policyholders by making an equivalent charge within the corporate
tax of the Company. This part of the overall tax charge, which is
attributable to policyholders, is called policyholder tax. The rest is
shareholder tax.

Prudential Regulation Authority (PRA)
The PRA is a part of the Bank of England and is responsible for the
prudential regulation of deposit-taking institutions, insurers and
major investment firms. The PRA has two statutory objectives: to
promote the safety and soundness of these firms and, specifically
for insurers, to contribute to the securing of an appropriate degree
of protection for policyholders.

Purchased Value of In-force (PVIF)
An intangible asset established on takeover or acquisition, reflecting
the present value of the expected emergence of profits from a
portfolio of long-term business. The asset is amortised in line with
the emergence of profits.

Registered Individuals (RI)
An individual who is registered by the FCA, particularly an individual
who is registered to provide financial advice. See also Adviser and
St. James’s Place Partner.

Regular income withdrawals
Those amounts, pre-selected by clients, which are paid out by way
of periodic income.

Retirement Account (RA)
A pension product, launched during 2016, which incorporates both
pre-retirement pension saving and post-retirement benefit receipts
in the same investment product.

STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONwww.sjp.co.ukANNUAL REPORT & ACCOUNTS 2018
232

G L O S S A R Y O F T E R M S C O N T I N U E D

Rowan Dartington
A wealth management business providing investment management,
advisory stockbroking and wealth planning services acquired by
St. James’s Place during 2016.

Solvency II
Insurance regulations designed to harmonise EU insurance
regulation which became effective on 1 January 2016. The key
concerns of the regulation are to ensure robust risk management
in insurance companies and to use that understanding of risk to
help determine the right amount of capital for European insurance
companies to hold to ensure their ongoing viability in all but the
most severe stressed scenarios.

St. James’s Place Charitable Foundation
The independent grant-making charity established at the same
time as the Company in 1992. More information about the Charitable
Foundation can be found on pages 71 to 75 or on the website
www.sjpfoundation.co.uk.

St. James’s Place Partner
A member of the St. James’s Place Partnership. Specifically,
the individual or business that is registered as an Appointed
Representative of St. James’s Place on the FCA website. St. James’s
Place Partner practices vary in size and structure. Many are sole
traders but there are also a growing number of businesses
employing many advisers.

St. James’s Place Partnership
The collective name for all of our advisers, who are Appointed
Representatives of St. James’s Place.

State Street
State Street is a global financial services holding company offering
custodian services, investment management services, and
investment research and trading services. State Street is responsible
for the custody of the majority of the St. James’s Place assets, and
also provides other investment management services.

Surrenders and part-surrenders
Those amounts of money which clients have chosen to withdraw
from their plan, which were not pre-selected regular income
withdrawals or maturities.

Vertically integrated
When we describe St. James’s Place as being vertically integrated,
we are referring to the fact its distribution capability (the Partnership)
and the manufacturers of the its investment products are both part
of the Group.

OTHER INFORMATIONST. JAMES’S PLACE PLC ST. JAMES’S PLACE PLC

St. James’s Place House

1 Tetbury Road

Cirencester

Gloucestershire GL7 1FP

T: 0800 01 38 137