Letter from Chris Headdon, Equitable Chief Executive, to Vincent Nolan, Chair of EMAG 5 February 2001

Dear Vincent

Thank you for your e-mail of 2.2.01.

You will have seen earlier today the details of the sale which have been negotiated with the Halifax. Although fund management will be on commercial terms in future, I am particularly please that the administration will be provided at cost. Indeed costs should be lower than in the `run off ' situation because the Society will benefit from economics of scale from the expanding administration platform. I know that was a key concern of EMAG when we last met.

Although investment management costs will be higher going forward, Clerical Medical has an excellent performance record and the fee is performance-related. Taking the whole deal together the Halifax offer is a very substantially more beneficial to members than any conceivable `run-off' option.

Halifax was not prepared to do the transaction without the investment management contract. They also made it very clear that they would not proceed if the transaction was conditional on a members' vote. That is not surprising as this is a major strategic move for them which would be significantly disrupted by the delay of at least 6 weeks that calling on an EGM would involve.

The Board considered this matter very carefully, particularly in view of the current circumstances. They had a strong preference for a members' vote if that were practicable but concluded that members' best interests were served by accepting the deal offered. Indeed, they were strongly advised that they would failing in their duty if they let the opportunity to conclude this deal escape through insisting on a members' vote. The commercial reality was that if a members' vote was insisted on, the only choice available to members would be the `run-off' option.

The notes to the Press Release deal with Jonathan Dawson position and the relevant note is quoted below:

Lazard Brothers & Co Ltd ("Lazard") is advising Halifax on this transaction. Jonathan Dawson, a non executive director of Equitable, is a managing director of Lazard. Whilst Jonathan Dawson supports the transaction, he did not take part in the Board's decision to approve the sale of the Society's operations to Halifax.

Given the circumstances in which I took over as Chief Executive, this is a better outcome for members than I would reasonably have expected to achieve. Although there may be detailed aspects which are less than ideal I hope that, taken in this mind, EMAG will feel pleased with the outcome.

We will be arranging to meet shortly to discuss the GAR resolution proposals in detail. That is a little later than I hoped when we last met but I am sure that you will appreciate that the last week has been one of intense activity for me and my senior team.

Yours sincerely



Chris Headdon
Chief Executive