OUR APPROACH TO INVESTMENT MANAGEMENT

AND THE INVESTMENT COMMITTEE

Introducing

Contents

3 Foreword by Chris Ralph

4 The St. James’s Place Approach to Investment Management

7 The Investment Committee

8 Members of the Investment Committee

11 Stamford Associates Limited

12 The benefi t to clients of investing with St. James’s Place

13 Our record

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uccessful investment is critical to your future fi nancial wellbeing, but it is a fi eld which presents a unique problem: future performance is unpredictable.

A widely used method of assessing the quality of an investment manager is to look at their previous performance; however this can only give you part of the picture. Some of the best managers will occasionally underperform the market over a short period and equally the worst managers can sometimes achieve impressive performance. This happened during the dot-com bubble when some managers looked good for a while. Clearly past performance can provide no guarantee of future performance.

Also consider that the manager who performed successfully in the past may no longer manage the fund, having moved onto another fund or left the company. It may also be that a management style which had historically worked so well may not be right for current or future market conditions.

As a result, when you choose someone to manage your money, no matter how successful they have been in the past, how can you be sure that you have made the right choice and that it will continue to be the right choice in future years?

Crucially, what can you do to monitor the manager you have chosen and to ensure that they are continuing to do a good job for you?

St. James’s Place adopts a radical and effective solution to this problem. Recognising that no single investment house has a monopoly of investment expertise, we do not employ any in-house managers. Instead, we carefully select a number of external managers of outstanding ability to manage our range of funds.

This document explains how you can benefi t from this approach, as well as the role of the St. James’s Place Investment Committee and Stamford Associates – key elements which are at the heart of the St. James’s Place Approach to Investment Management.

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Foreword by Chris RalphChief Investment Offi cer of St. James’s Place

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hen it was formed in 1992 the St. James’s Place Wealth Management Group decided to take a radical and effective approach to investment management. Our approach recognises that no single investment house has a monopoly on investment expertise so we carefully select a number of external managers of outstanding ability to manage our funds.

This has a number of advantages:

• It gives us the freedom to select fi rst-class managers from the global investment market to manage our funds on behalf of our clients.

• It enables us to change any of these managers at short notice if we have lost confi dence in them, without any charges, or tax, or inconvenience to our clients.

• It offers our clients a real opportunity to diversify their investments by spreading their money across funds managed by different managers with different styles.

The St. James’s Place Investment Committee ‘manage the fund managers’ on your behalf. In order to achieve the objective of consistently generating superior investment results, having selected the best individuals within the appropriate investment company, the key is to monitor both the individuals and the company they work for to ensure they remain appropriate for the fund that they are managing. If the Committee loses confi dence in a manager, they will be replaced, quickly and effi ciently. In carrying out this task, the Committee is assisted by independent investment consultants Stamford Associates.

The work of the Investment Committee

The St. James’s Place Investment Committee focuses on:

1. Selecting the best investment managers – which includes careful examination of the people and procedures within a large number of investment companies.

2. Continually monitoring those managers to ensure they maintain the standards for which they were selected – this process includes monitoring of both their portfolios and their processes.

3. Changing managers if necessary – where St. James’s Place becomes unhappy with a manager, it will remove that manager and appoint another to manage the fund. This is a seamless transition to the new manager. There is no charge to investors and, as you still hold the same fund, no tax consequences either.

4. Ensuring clients have an appropriate spread of investments by providing a comprehensive range of Managed and Specialist funds – the managers of these funds are carefully selected not only for their quality but also to ensure that they have different styles of investment management.

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The St. James’s Place Approach to Investment Management

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A distinctive approach to investment management

Whilst many companies now offer a ‘multi-manager’ approach, the St. James’s Place approach remains distinctive:

1. Unlike most other companies, St. James’s Place only uses external investment managers for its funds.

Whilst other companies will have an interest in directing as much business as possible to the investment funds managed by the ‘in-house’ fund managers they employ, in order to maximise their own profi tability, St. James’s Place has no such confl ict of interest or investment bias.

2. The Investment Committee of St. James’s Place appoints and replaces managers on behalf of all of its clients, ensuring no client is ‘left behind’. We do not wait to act if we have lost confi dence in a manager.

This contrasts with the approach of many other companies who simply try to provide access to as many existing funds in the market as possible. This leaves the individual investor with the diffi cult challenge of having to decide which of the investment companies and funds they believe is likely to produce the best results.

3. St. James’s Place offers a range of investment stylesthat together provide a truly diversifi ed portfolio for clients.

The funds available include Managed funds invested in a balanced portfolio of UK and international equities as well as a range of more Specialist funds, including a range of income and growth options.

4. St. James’s Place chooses the managers for portfolios based on their skills in active management rather than following a benchmark.

As pointed out by the Myners Report1 commissioned by the Treasury, institutional investment managers tend to invest the huge amounts of money they handle largely in line with market indices or industry benchmarks and many other companies are content to follow this line. St. James’s Place insists that its managers are truly active rather than passive.

5. Clients of St. James’s Place have the peace of mind of knowing that investment manager changes are implemented promptly and seamlessly.

There are no explicit charges for changing a fund manager since it is simply that the responsibility for managing the underlying assets has been handed over to a new investment professional who will then make their own adjustments to the portfolio.

Another important advantage is that there are no capital gains or income tax implications involved for investors in the change – this means that longer-term wealth strategies are not disturbed by unwanted taxable events.

1 Institutional Investment in the UK: A Review, Paul Myners, 2001

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Investment management companies are asked by us to change the individual handling funds for the group or we may replace the manager and company when we no longer have confi dence in the structure and approach of the managers.

If you, as an investor, are unhappy with a particular manager, you can move money from that manager to any other within the St. James’s Place range of managers. This transfer will involve little or no charges for you and where you are invested in one of our life, pension or overseas life funds, will have no tax consequences.

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he cornerstone of the St. James’s Place approach to investment management is the St. James’s Place Investment Committee. The Committee’s role is to ‘manage the fund managers’ on behalf of St. James’s Place clients.

Their overriding objective is to generate consistently superior investment results over the medium term by selecting the best individuals within the appropriate investment company; monitoring both the individuals and the company to ensure the Committee remain happy with the choice, and changing them where necessary. The Committee does not seek to infl uence the investment policy of the managers. Its aim is to ensure success by selecting superior managers and holding them accountable for their performance.

In general, exceptional investors are able to perform better than their peers over a wide range of market conditions by exhibiting skills in stock selection. The Investment Committee uses a range of tools to analyse and assess these skills. The aim is to avoid managers who periodically add value by betting on the direction of the market. The managers selected by the Investment Committee typically take a ‘bottom-up’ approach, looking at the fundamentals of individual stocks, rather than sectors or regions, to identify quality investments. By identifying quality investments at a stock level, investment growth is more likely to be repeatable as returns are less reliant on the manager ‘winning’ their bet on the market or a particular area outperforming.

The St. James’s Place Investment Committee closely monitors the management of each of the funds. Whilst the Committee’s members possess a great deal of expertise and knowledge, the breadth of available managers from around the world necessitates a dedicated research resource. The Committee is aided in this by the independent investment research consultancy Stamford Associates.

Monitoring includes direct presentations by the particular individuals who manage the funds at the regular meetings of the St. James’s Place Investment Committee, giving members the opportunity to question the managers closely, as well as ongoing monitoring of each portfolio. To enable the Committee to fulfi l its objectives it meets a minimum of six times a year, although this can increase depending on market conditions.

At each meeting the Committee will make crucial decisions about the best way forward. It has four options:

• Leave the portfolio of managers unchanged because the Committee retains confi dence in the way clients’ funds are being managed

• Retain the investment company but change the manager – the departure of an individual manager may cause this to happen

• Change the investment company and manager because the Committee no longer has confi dence in their ability to manage our clients’ funds

• Introduce a new investment fund or strategy to give our investors greater opportunity or to improve performance prospects

Based on our investment management approach and the work of the Investment Committee, St. James’s Place is able to offer our clients a diversifi ed investment proposition where overall risk control is achieved by the careful selection and combination of managers pursuing different investment disciplines across their respective asset classes. This strategy creates our investment proposition that offers realistic scope to produce added value over time, belying the notion that low risk must result in low returns.

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The Investment Committee

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he Committee’s responsibilities require a broad range of knowledge, skills and experience. As with any governing body the Committee includes representatives who will bring independent expertise as well as experience in representing the views of those who will ultimately be impacted upon by our fund performance - our investors. The members of the Committee have been carefully selected to ensure all these requirements are met.

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Members of the Investment Committee

ichael was appointed to the St. James’s Place Board as an independent non-executive director in January 2002. He was appointed Senior Independent Director in May 2005 and is Chairman of the Remuneration Committee and a member of the Nomination and Audit Committees. Michael joined the Investment Committee in 2007.

He joined Hambros Bank in 1968, was a director of Hambros PLC between 1986 and 1998 and a managing director of S G Hambros from 1998 to 2001. He is Vice Chairman of Investment Banking at N M Rothschild Corporate Finance Limited and a non-executive director of J Z Equity Partners PLC.

MMichael Sorkin

ir Mark Weinberg is President of St. James’s Place plc. He is also Chairman of the Investment Committee of the London School of Economics. He has previously held many key roles within the fi nancial services industry. In 1961 he founded Abbey Life Assurance and in 1970 Hambro Life Assurance.

He has also held senior positions within the industry’s regulatory framework, including Chairman of the Stock Exchange Committee on Private Share Ownership and Deputy Chairman of the Securities and Investment Board.

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Sir Mark Weinberg Chairman

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arah has had a wide range of experience in investments, starting as a securities analyst for a broking fi rm, then managing UK retail, institutional and ‘fund of fund’ investments and later becoming CEO of Invesco’s institutional businesses in the UK.

She is now a director of Witan Pacifi c Investment Trust, Invesco English and International Trust and New India Investment Trust, as well as a strategic investment adviser to the Merseyside and East Riding Pension Funds and to The Royal College of Surgeons. Sarah was appointed to the Investment Committee and Board of St. James’s Place plc in September 2004.

eter was also appointed to the St. James’s Place Investment Committee in 2009. Peter is the Head of Pensions Investments at the BBC where he advises the trustees on investment strategies, portfolio development and appointing new investment managers.

Educated at Oxford, Peter began his investment career with Simon & Coates in 1971. In 1975 he joined Imperial Investments progressing to become Joint Managing Director of the pension fund. His responsibilities covered investment strategy, manager selection, monitoring, portfolio management and compliance.

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Sarah Bates

Peter Dunscombe

ivian was appointed to the St. James’s Place Investment Committee in 2009. Vivian is currently an adviser to BAE Systems Pension Fund and sits on the board of a number of investment trusts, including Perpetual Income & Growth. He is also Vice Chairman of Governors to Dulwich College.

Vivian’s investment career started in 1979 with James Capel before moving on to Mercury Asset Management and then Gartmore before becoming M&G’s Chief Investment Offi cer; and subsequently Prudential’s following their takeover in 1999. He continued to hold the post until 2002, stepping down to pursue other interests.

VVivian Bazalgette

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enior members of the St. James’s Place Wealth Management Group also sit on the Committee, bringing a wealth of investment experience from extensive careers in the fi nancial services and fund management arenas:S

avid joined St. James’s Place in 1992. He is responsible for developing the Group’s Wealth Management proposition and fund range. He was appointed to the Board in December 2007. David is a graduate of City University, London and a Fellow of the Institute of Actuaries.

hris joined St. James’s Place in 2009. After joining Cazenove & Co in 1984, specialising in convertible bonds, Chris subsequently worked with S.G. Warburg and NatWest Markets becoming recognised as a market leader in analysis in the income fund sector. He joined Fidelity to undertake peer group fund manager analysis leading to building a specialist team responsible for the manager selection process. Most recently he was involved in the launch of a new multi-manager boutique.

his is an annual report detailing the decisions made by the Investment Committee during the previous year. It also highlights the goals and objectives which our Investment Committee has for the future and reiterates the roles which they and the independent investment research consultants, Stamford Associates, play in achieving those goals.

A copy of the latest Report of the Investment Committee can be obtained from your St. James’s Place Partner.

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David Lamb Business Development Director

Chris Ralph Chief Investment Offi cer

Report of the Investment Committee

ndrew joined St. James’s Place in 1993 and was appointed Finance Director in 2004. He qualifi ed as a Chartered Accountant in 1988 and has a degree in Accounting and Economics from The University of Southampton. He is a trustee of the St. James’s Place Foundation.

ndrew joined St. James’s Place in 2003 and has responsibility for the distinctive multi-manager investment approach. Andrew graduated from The University of York with an economics degree. Prior to joining St. James’s Place, Andrew spent 20 years in the City of London working in a variety of investment and business development roles within the fi nancial services sector including various roles at Prudential and GE Capital.

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Andrew Croft Finance Director

Andrew Humphries Executive Director, Asset Management

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tamford Associates is a leading international investment research consultancy. It was established in 1984 in London and is authorised and regulated by the Financial Services Authority. Its aim is to provide superior-quality services to deliver intelligent investment solutions for its clients. Stamford Associates has been closed to new business for six years and it concentrates its entire resource to servicing a small number of institutional clients amongst which St. James’s Place is unique, being the only provider of wealth management solutions to private individuals. It has a dedicated team that has a wealth of experience encompassing asset management, portfolio analysis, performance measurement, behavioural fi nance and investment consultancy.

Stamford Associates is totally independent of St. James’s Place and, like our external fund managers, is under contract to us to provide a range of investment consultancy services. Stamford Associates’ assessment of managers is based on its close day-to-day involvement in the investment industry rather than on investment performance tables which can be of limited value. Their task is to work with the Investment Committee to help achieve its objective of generating superior investment results over time.

Stamford Associates’ forward-looking philosophy aims to achieve superior investment results by applying a fundamentally driven investment discipline and through identifying exceptional investment professionals. They provide highly specialised skills that would not normally be available to private clients or trustees but which are essential if investors want to aim to achieve superior performance – a point highlighted in a report commissioned by the Government to investigate the UK savings and investment market1.

“Identifi cation of likely future performance requires highly sophisticated and time-intensive analysis of performance data and fund managers’ styles. Only a tiny minority of consumers have access to this sort of analysis. Yet without doing so, simply looking at past performance is of minimal value.”

As an independent consultancy, Stamford Associates is able, in fulfi lling its research and monitoring role for the Investment Committee, to analyse and compare the portfolio activities of managers as well as other pertinent data with complete objectivity. This is something which is not easy to do where the portfolios being monitored include funds managed by a company’s own investment department – or, as is sometimes the case, where that department is itself responsible for the monitoring.

Stamford Associates’ philosophy is that superior investment decisions are made by individuals rather than the companies they work for and it always looks to the individual rather than the company in recommending a manager. Even where St. James’s Place makes use of a large fund management company, it insists that its portfolio is handled by the particular individual in whom Stamford Associates and the Investment Committee have confi dence.

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Stamford Associates Limited

1 Sandler Review: Medium and Long-Term Retail Savings in the UK

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very client who invests with St. James’s Place will automatically benefi t from the highly specialist skills that Stamford Associates provides, which ordinarily private individuals or advisers would not be able to access. If this level of monitoring were not available how would you know when a particular manager within an investment company has been taken off their fund in order to start a new fund, or has perhaps left the company altogether? How would you know if the key analysts in the organisation who supplied the manager with the good ideas have left the company?

Whenever Stamford Associates recommends a manager there is conscious risk control through consideration of how the manager will combine with our other managers. By using individuals with different investment approaches you benefi t from diversifi cation of management style.

Since the start of the relationship with St. James’s Place in 1999, Stamford Associates has advised the Investment Committee on 29 fund manager and investment mandate changes. Whilst this clearly demonstrates a robust approach to the monitoring of our independent fund managers and the need for change, it is not change for change’s sake.

Our approach to investment therefore means that all of our clients benefi t from the sophisticated analysis provided continuously by Stamford Associates through the services it offers to St. James’s Place.

This has signifi cant strategic benefi ts for investors and brings peace of mind to our clients, as the individuals responsible for managing our funds are being continuously monitored by full-time professionals.

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The benefi t to clients of investing with St. James’s Place

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January 2007

January 2007

January 2007

October 2007

October 2007

Cautious Managed FundsJupiter Asset Management appointed to manage the new funds with Ian McVeigh as lead manager

Worldwide Managed FundsBernard Horn of Polaris Capital Management appointed to manage the new funds

UK Growth FundsJohn Innes of RWC Partners appointed to manage the new funds

Continental European Fund BIAM is replaced by Stuart Mitchell of S.W. Mitchell Capital

Diversified Income Funds George Luckraft of AXA Framlington appointed to manage the new funds

The Committee felt strengthening the lower risk part of the fund range was important. A Managed fund combining equities and fixed income provided a lower risk investment opportunity.

The Committee identified the opportunity to strengthen the global equity offering. Bernard Horn represented a seasoned US investment professional with a contrarian style based on extensive fundamental research.

To complement the value style of some of our UK equity managers the Investment Committee appointed John Innes with his highly growth-orientated approach to UK equity investing.

Following a number of senior-level departures from BIAM the Committee decided to appoint Stuart Mitchell to succeed the incumbent managers. Stuarts’s concentrated all-cap approach and consistent performance has served investors well over the medium term.

In deciding to strengthen the UK equity income part of our fund range the Committee appointed George Luckraft of AXA Framlington, an established and renowned equity income manager. In discussions with George, the Committee decided to focus on a small/mid/large cap mandate different to other mandates he manages for other UK investors.

Date Change Notes

utlined below are recent examples of decisions made by the Investment Committee. Sometimes the decision is not to replace a manager, even if there has been deterioration in performance in the short term. In a situation like this, the Committee takes the view that the manager’s strategy over the longer term remained valid. In the Committee’s view, good investment managers formulate a strategy in advance of something happening as opposed to following fashionable trends. In turn, this can lead to considerably better long-term performance.

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Our record

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April 2008/ April 2009

April 2008

August 2008

September 2009

September 2009

April 2010

April 2010

April 2010

Corporate Bond Funds Appointed Paul Causer and Paul Read at Invesco Perpetual to replace Wellington

High Octane Funds Jointly appointed Richard Oldfield of Oldfield Partners and Vin Walden of Thornburg Investment Management to manage the new funds

Alternative Assets Funds Appointed BGI (now BlackRock) to manage the new funds

Greater European Funds Appointed Burgundy Asset Management and S.W. Mitchell Capital to replace THS Partners

UK & General Progressive Fund Appointed Liberty Square Asset Management and J O Hambro Capital Management to replace THS Partners

Global Emerging Markets Funds Appointed Jonathan Asante at First State to manage the new funds

Absolute Return Funds Mark Lyttleton and Nick Osborne at BlackRock appointed managers of the new funds

International Corporate Bond Funds Appointed Jill Fields and Zak Summerscale of Babson Capital to manage the new funds

Following a fundamental review of the investment objectives and parameters of SJP fixed income funds, Invesco Perpetual were appointed to manage the Corporate Bond funds for St. James’s Place. This was followed a year later with the launch of an Investment Grade Corporate Bond fund also managed by Paul Causer and Paul Read.

Client requests led the Committee to investigate the opportunities for a concentrated aggressive portfolio to take advantage of global equity opportunities resulting in the High Octane mandate. The managers’ experience of concentrated portfolios and differing approaches led to a joint appointment.

In response to the developing investment landscape and investors’ search for investments not correlated to traditional equity markets, the Committee appointed BGI (now BlackRock) to manage a portfolio of diversified alternative asset classes.

Following a detailed review, the Investment Committee concluded that THS Partners’ investment process and philosophy was best suited to diversified global equity investing, rather than the narrower geographic mandates of the UK and European portfolios. The review reinforced the Committee’s comfort in THS’s ability to continue managing the THSP Managed funds and International Unit Trust. Joint managers on each fund provided for diversification of investment styles.

The continued development of emerging economies presented the opportunity for a new fund which could achieve diversification across a number of markets.

Recognising our clients’ desire to achieve greater diversification and less correlation to equity markets the Committee appointed Mark Lyttleton and Nick Osborne as managers of the St.James’s Place UK Absolute Return Funds.

As an alternative to the Absolute Return Fund and, to provide higher income returns, at a lower risk level, the Committee appointed Babson Capital to manage the International Corporate Bond Funds.

Date Change Notes

Members of the St. James’s Place Wealth Management Group are authorised and regulated by the Financial Services Authority.The St. James’s Place Partnership and the title ‘Partner’ are the marketing terms used to describe St. James’s Place representatives.

St. James’s Place Wealth Management Group plc.Registered Offi ce: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom

Registered in England Number 2627518

www.sjp.co.uk SJP917-VR21 (04/10)