Hargreaves Lansdown : Preliminary Results 2017

• Net new business of £6.9 billion

• Strong growth in Assets Under Administration, up 28% to £79.2 billion

• 954,000 active clients, an increase of 118,000 in the year

• Profit before tax increase of 21% to £265.8 million

• Ordinary dividend up 20% at 29.0 pence per share

"We have had a good year for gathering new clients and assets as a result of our relentless focus on the exceptional service we provide. Key to this has been understanding the needs of our clients and expanding our range of solutions and services to help them. There are considerable challenges for people in the current saving and investment environment but there are also opportunities, and Hargreaves Lansdown is ideally placed to help people make their investment decisions with confidence."

Hargreaves Lansdown is the UK's largest direct to investor investment service administering £79 billion of investments for over 950,000 clients. Our purpose is to empower people to save and invest with confidence. We aim to provide a lifelong, secure home for people's savings and investments that offers great value, an incredible service and makes their financial life easy.

For media enquiries: For analyst enquiries:

Danny Cox, Head of Communications James Found, Head of Investor Relations

+44(0)117 317 1638 +44(0)117 988 9898

Chris Hill, Chief Executive Officer Philip Johnson, Chief Financial Officer

Hargreaves Lansdown will be hosting an investor and analyst presentation at 9.00am on 15 August 2017 following the release of the results for the year ended 30 June 2017. To attend the presentation contact james.found@hl.co.uk. Slides accompanying the analyst presentation will be available this morning at www.hl.co.uk/investor-relations and an audio recording of the analyst presentation will be available by close of business on the day.

*Alternative financial performance measures

Included in this announcement are various alternative performance measures used by the Company in the course of explaining the results for the year to 30 June 2017. These measures are listed along with the calculations to derive them and an explanation of why we use them on page 22 in the Glossary of Alternative Financial Performance Measures. An explanation of why we use these adjusted measures is given in the Operating and Financial Review section along with a reconciliation to profit before tax.

Forward-looking statements

This document has been prepared to provide additional information to shareholders to assess the current position and future potential of the Hargreaves Lansdown Group ("the Group"). It should not be relied on by any other party for any other purpose. This document contains forward-looking statements that involve risks and uncertainties. The Group's actual results may differ materially from the results discussed in the forward-looking statements as a result of various economic factors or the business risks, some of which are set out in this document.

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I am delighted to introduce my first Chief Executive's review. I am proud to be leading a business that has clients at the heart of how it operates. We are a market leader, looking after the wealth of nearly a million individuals; a huge responsibility at a time when people need more help than ever in managing their savings and investments. We take this responsibility very seriously. Our expertise and client service are well respected and I believe the strength and scale of our business means we can continue to develop its offering to the benefit of all our stakeholders in the future.

It was a busy year at Hargreaves Lansdown, providing us with a strong foundation on which to build future growth. We have broadened our offering, adding products such as the Lifetime ISA and two new HL Select Funds, launched our new mobile apps, increased our digital marketing presence and continued to grow our execution-only stockbroking market share. We added record net new business ("NNB") of

£6.9 billion, introduced 118,000 net new active clients to our services and grew our active client base by a further 14% to 954,000. All achieved while maintaining our client service at the high standards to which we aspire to.

The importance of offering a wide range of services to clients was made clear during 2017. Brexit proved a drag on investor confidence and NNB in the first part of the year, although we still increased our market share and grew assets faster than the UK D2C platform market. However, we also saw a significant uplift in client share trading and associated revenues which carried on throughout the year. This resulted in our execution only stockbroking market share increasing from 26.9% to 30.1%1, reflecting our competitive charges and user-friendly proposition.

In the second half of the year, improved investor confidence allied with bringing selected fund launches such as CF Woodford Income Focus, the increased ISA allowance and targeted transfer campaigns saw NNB accelerate. Strong flows and supportive markets saw Assets Under Administration (AUA) increase 28% to £79.2 billion. This drove revenue growth of 18% and, despite selective investment to support both higher client activity levels and our growth ambitions, we increased Profit Before Tax by 21% to £265.8 million. It was disappointing that we had to announce on 4 August that we could not pay a special dividend for the 2017 financial year from these profits, but we have had a very strong year and are well positioned to deliver future value for our shareholders.

We continually look to enhance the offering that we provide to clients, and 2017 was no exception. Having identified that clients wanted to trade shares more, we also established that for some people, their levels of confidence in doing so were low. Consequently we developed two equity funds: the HL Select UK Growth Shares fund and HL Select UK Income Shares fund. The innovation was to increase the communication and engagement with participating clients, allowing them to gain insight into the management of a share portfolio. As at the end of the year, £525 million was invested in these funds. We were also one of the first to launch the Lifetime ISA (LISA). Having been uncertain as to demand for this, we surveyed our clients, determined there was real interest and went live just after midnight on 6 April 2017. We now have 14,550 LISA clients with £36 million of invested assets, with half of these clients being new to the business. I am always impressed at how Hargreaves Lansdown listens to its clients and pulls together to provide solutions that help.

Our desire to bring market leading propositions to our clients is critical to our ongoing success. We remain excited by the potential of Active Savings, our upcoming cash management service and we are targeting a live proposition which is ready to launch around the end of the year. This has taken longer to launch than originally anticipated due to the significant technology development required. This is essential as we are determined that Active Savings must deliver the same levels of client service as our existing offering. This year we took the tough decision to drop our plans to set up a peer-to-peer lending platform. Peer-to-peer is an interesting area and we can see the attraction to selected investors; however, the market size remains relatively small compared to the other exciting opportunities we have in front of us.

We have seen a significant increase in client activity this year. The number of calls, applications, transfers, trades and other client instructions have all increased and we have continued to invest in the resources to maintain client satisfaction with their experience. Our IT is scalable and has coped well with the events of the last year, including the general election. Our client and asset retention levels remain high at 94.7% and 93.2% respectively and it is pleasing that our Net Promoter ScoreSM2 is at an all-time high. We continue to strive to provide an incredible level of client service in all that we do.

Expanding our digital footprint is a key strategic drive: we received 138.4 million digital visits for the year to June 17 (up 31% on last year). An important enhancement this year was the launch of our new mobile app in February. Mobile functionality is no longer an optional extra, it is essential for people who want to manage their investments. The app has been well received and we are getting great feedback from users. We have now had over 486,000 downloads, and the additional functionality that enables clients to place cash with us has resulted in £72 million being added to the Vantage platform. The introduction of Touch ID as a means to login has also seen a change in client behaviour with more frequent engagement with their investments. As a result, we now see more digital contact from mobile devices and app visits than through our traditional desktop site.

With all of this in mind, I want to recognise the hard work and commitment of my colleagues throughout the business and thank them. They have strived this year to deliver incredible service to clients in the face of significant increases in activity and have also managed to develop the range and extent of the services we provide.

As the new Chief Executive, my challenge is to drive the next phase of Hargreaves Lansdown's growth. Our vision is to be a household name and the best place for savers and investors in the UK. This means investment in our people, marketing and technology as Hargreaves Lansdown continues to grow and add clients. During the year, we deepened our people focus with work on leadership and development, our reward structure, culture and succession planning. We have worked hard to build on feedback from our colleague survey and improve engagement. We have also commenced a broader initiative to bring our values, the enthusiasm for client service and pride in working for Hargreaves Lansdown to the heart of how people work here.

We have a leading brand and reputation in marketing. In 2017, we have particularly been looking at how we use digital marketing and client segmentation to improve the effectiveness of spend across our channels. We believe these are sources of competitive advantage and will

continue to invest in these where we can see the benefit come through. We have also reviewed our marketing team and restructured it to focus more actively in these areas, concluding that we will expand it to embrace the opportunities that new technology brings.

Effective investment in technology is also key. In February, we took the decision to set up HL Tech in Warsaw, Poland to leverage the considerable IT development talent located there. Our aim is to have 50 developers up and running during 2018, enabling us to push forward with improvements and developments to our services at a faster pace. Equally, businesses must ensure that they have resources allocated to, and continually adapting their response to cyber attack, and we continue to invest heavily here. Ensuring the security of our clients' assets is the most important thing we do.

I am pleased that we have delivered strong 2017 results in an environment where the UK has many challenges. Global politics are unsettled, our position with Europe in a state of flux and markets continue to be uncertain. Unfortunately, this state of affairs is set to continue for a while yet. At the same time, society is going through long term changes in demographics meaning that people are older for longer. Pension arrangements are moving from defined benefit to defined contributions where individuals must take responsibility for managing their financial future, and over a longer period. People are not making sufficient provision for this so the country has a long-term savings gap of an estimated £314 billion3.

At a time where people need to be taking greater involvement with their finances, pensions and savings are increasingly more complicated. The advent of pension freedoms, the challenges of drawdown, the complexity of lifetime and annual allowance pension caps, new dividend and savings tax structures and six different forms of ISA have all made it more difficult. People need help.

Our purpose is to empower people to save and invest with confidence. We achieve this by continuing to place our clients at the centre of what we do: offering them great value, incredible service, making it easy and efficient for them to manage their savings and investments in a secure environment, and establishing a lifelong relationship with them as a partner. 44% of UK investors now claim to deal with their investments themselves, up from 29% in late 20134. This is the significant opportunity for Hargreaves Lansdown. We might have a 38% share of the execution-only UK D2C platform market but in the wider accessible investment market of over £1.1 trillion, in which we already operate, we have a much smaller share and an even smaller share of the relevant £2.4 trillion savings and investment pool. Our scale combined with our expertise and capabilities places us in pole position to be able to provide this help.

Chief Executive Officer 14 August 2017

1. Source: Compeer Limited XO Quarterly Benchmarking Report Quarter 2 2016 and Quarter 2 2017

2. Net Promoter, NPS and the NPS-related emoticons are registered service marks and Net Promoter Score and Net Promoter Systems are service marks of Bain & Company Inc., Satmetrix Systems, Inc. and Fred Reichheld

3. "Mind the Gap" (Aviva and Deloitte, September 16) 4 Source: Platforum UK D2C Guide (July 2017)

In the current period, consideration has been given to the nature of the operating segments previously disclosed and it is the view of the Board and of the Executive Committee that there is in fact only one segment, being the Group. The disclosure provided below, whereby the whole business is reported as one unit, reflects how the Group is managed in practice and we intend to report on this basis going forward.

The diversified nature of Hargreaves Lansdown, the breadth of our product offering and the provision of high quality services tailored to the needs of our clients has allowed us to deliver another strong year for NNB and significant growth in AUA. We believe the Group's focus on client service is core to our success as a business and positions us well for the structural growth opportunity in the UK savings and investments market.

Net new business for the year totalled £6.9 billion. This was a strong result given first half NNB was held back during a period of low investor confidence after the UK's vote to leave the European Union on 23 June 2016. However, with hindsight, these flows were a good outcome against the wider environment as we maintained our platform market share and increased our stockbroking market share over this period.

The second half of the year is typically our busiest as the tax year end is an important driver of new business. This year was no exception, with NNB rebounding to new highs. This was driven by a recovery in investor confidence ahead of the tax year end and a number of self- help initiatives. These included new products such as the latest Woodford fund launch, two new HL Select UK funds, and the introduction of the Lifetime ISA and the increased ISA allowance from 6 April 2017. The Group's flows have also benefited from its increased digital marketing presence, including the launch of our new mobile app, and ongoing transfer activity as our clients continue to consolidate their wealth onto our platform. We introduced 118,000 net new clients to our services in the year to 30 June 2017 and grew our active client base by a further 14% to 954,000.

Total AUA increased by 28% to £79.2 billion as at 30 June 2017 (£61.7 billion as at 30 June 2016). This was driven by £6.9 billion of NNB and higher market levels which added a further £10.6 billion. This result was supported by our continued high retention rates. Our focus on service and the value our clients place on our offering is evidenced in these, with client and asset retention rates remaining strong at 94.7% and 93.2% respectively.

The value of assets managed by Hargreaves Lansdown in our range of Multi-Manager Funds and Select Funds increased by 40% to £8.8 billion as at 30 June 2017 (2016: £6.3 billion). The growth in assets consisted of net new business of £1.2 billion (2016: £0.8 billion), combined with a stock market increase of £1.3 billion (2016: decrease of £0.1 billion). During the year we successfully launched two of our own equity funds, HL Select UK Growth Shares and HL Select UK Income Shares, which had £525 million of AUM by 30 June 2017. Performance of our range has remained good, with 65% of client assets above median after fees over the past three years.