When a fund is growing, cashflow into the fund needs to be invested in the underlying assets and as such units are generally priced on a maximum valuation basis which takes account of the cost of purchasing the underlying assets.

When a fund is contracting, cashflow from the fund to customers requires that assets are sold and as such, units are generally priced on a minimum valuation basis which takes account of the cost of selling the underlying assets.

Standard Life, like other companies, monitors the cashflow into and out of the fund on an ongoing basis. Depending on the cashflow we would move from a maximum to a minimum basis (and vice versa) as part of our normal business processes. We are now moving to a minimum basis to reflect the current cashflow position in the fund.

As the difference between the two bases is not large for most asset classes these differences are often not significant relative to underlying fund performance. However, in property funds, the costs of purchasing or disposing of property assets is more significant than for other forms of assets. Of all investment linked funds, the main Property Fund (and sub-funds) has the largest margin between the maximum basis and the minimum basis (mainly due to stamp duty), hence the difference of 6.7%.

This approach to valuing property funds reflects standard industry practice and we believe that this change is fair and equitable to both new and existing clients.

A number of property funds are affected as follows:

We will continue to review the position on an ongoing basis.

PIPELINE PROCESSES

Life

• New Business date stamped 4 July - would receive 4 July's price that was set at 2.00pm 3 July.
• New Business date stamped 5 July - would receive 5 July's price set at 2.00pm 4 July.
• Surrenders requested or date stamped 4 July - would receive 5 July's price set at 2.00pm 4 July.
• Switches requested before 10.00am 4 July - would receive 5 July's price set at 2.00pm 4 July.
• Switches requested after 10.00am 4 July - would receive Friday's price set at 2.00pm 5 July.
• Deaths and Maturities on or before 4 July would receive price on old basis. Thereafter, would receive prices on new basis.

• New Business date stamped 4 July - would receive 4 July's price that was set at 2.00pm 3 July.
• New Business date stamped 5 July - would receive 5 July's price set at 2.00pm 4 July.
• Surrenders requested or date stamped 4 July - would receive 4 July's price set at 2.00pm 3 July.
• Switches requested before 10.00am 4 July - would receive 5 July's price set at 2.00pm 4 July.
• Switches requested after 10.00am 4 July - would receive Friday's price set at 2.00pm 5 July.
• Deaths and Retirals on or before 4 July would receive price on old basis. Thereafter, would receive prices on new basis.

PROPERTY MARKET

The UK commercial property market is currently experiencing a slowdown from the outstanding run seen over the last 4 to 5 years. We have long predicted that the UK property market will slow to high single-digit returns in 2007, compared to the 17%-18% returns seen in 2005 and 2006. We believe that this slowdown is merely a return to more historical levels of returns for the property asset class, between those of bonds and equities, and is by no means a drop into negative territory.

There has been no major change to market fundamentals and we still expect positive investment performance from this asset class going forward. We see this slowdown as a cyclical shift which is normal in a historical context.

Past performance is not an indication of future performance.

If you wish to discuss this further please contact your Standard Life account manager.

Pensions

Protection & Healthcare

Savings & Investment