Our purpose Together we invest for a better future. Our strategy is to build a vibrant and value-creating purpose-led organisation, with the current and future needs of our stakeholders at the heart of all we do. • For our clients and customers, this means building solutions to create wealth and help meet their needs
While the net fund flow of the business is improving, market conditions and competitive pricing are constraining the revenue growth we had expected. This had a consequential negative impact on the carrying value of goodwill on the Group balance sheet and resulted in a further impairment charge. Stephanie talks more about this in the Chief Financial Officer’s review.
Finally, the empowering yet disruptive impacts of technological innovation and data management will change many business models faster than we have seen in the past. It is for all these reasons we invest heavily in investment research, in our own technology and in human talent to build the agile and responsive active asset management capabilities that we believe are essential to meeting the demands of all our stakeholders.
A key example of stakeholder activity in 2019 was the appointment of Melanie Gee as the non-executive Director for employee engagement. Strong progress has been made in this area and regular communications will continue in 2020.
In last year’s annual report, we stated our intention to maintain our dividend at a stable level through our transformation. During this period, we have sustained the dividend, despite tough market conditions, and our shareholders have also benefited from a substantial return of capital: with £1.75bn returned over 2018/2019 through our ‘B’ share scheme and our on-market share buyback. In 2020, we also announced a further share buyback of up to £400m.
A transforming business We are now over two years on from our merger, and over a year on from the sale of our UK and European insurance business to Phoenix. A great deal has been achieved over the last two years with some 700 milestones delivered as we integrated the two fund management businesses. The positive benefits were reflected in improved investment performance and flows, excluding Lloyds Banking Group, in the second half of the year. Expected cost synergies from integration and transformation have increased. However, given the increased complexity that the separation programme has added to the already challenging integration programme, the expected gross cost of delivery has also increased and the timing of the completion has lengthened. While we plan to complete the build-out of the integrated investment platform and commence migration of portfolios in 2020, migration of all portfolios will now complete in 2021.
Our strategic drivers The foundations from which we deliver for all our stakeholders.
Generating revenue Revenue is primarily generated from asset management and platform and advice fees we charge based on the value of the assets we look after for clients and customers.
We have a strong heritage in a wide range of private market capabilities. In 2019 we launched an integrated private markets franchise encompassing infrastructure, natural resources, private credit, private equity and real estate.
You can find out more about our employee engagement activities in the Directors’ report on page 58.
Read more about our approach to diversity and inclusion in our Corporate sustainability report, available on our website www.standardlifeaberdeen.com/annualreport
During 2019, we put actions in place to address this employee feedback. This included a focused programme of internal communications activity to engage our people on our strategy. Our next employee survey, to measure progress, is planned for later in 2020.
Governance Our Chief Executive is the overall executive lead for our work on climate change. He delegates operational oversight to the Chief Operating Officer and investment oversight to the Chief Investment Officer. We have a working group that addresses the impact of climate change risks and opportunities on our investment activities, and another to ensure we have the governance, strategy and metrics to manage our material climate-related risks and opportunities.
Strategy Through our operations and investments, we have a strategy to support the transition to a low-carbon future. We believe that understanding climate-related risks and opportunities leads to better investment decisions. In 2019 we published a report setting out our approach to this, titled ‘Climate Change: Our approach for investments’. We also published two white papers for investors: ‘Investing in a changing climate’ and ‘Going Green: A climate policy toolkit for investors’.
Our impact through charitable giving During 2019 we reviewed the social and environmental impact of our approach to charitable giving. Combined with data from measurement of past community investment programmes and philanthropy, we conducted stakeholder interviews and analysed activities taking place externally.
Supplier code of conduct1 Our role in society (page 27) Other matters Business model Our stakeholders and business model (pages 10 to 11)
Global code of conduct Our global code of conduct, which details the standards of behaviour we expect in our business, is reviewed and updated annually. All our employees are required to read, agree and adhere to the principles of the code which focuses on doing the right thing and putting our clients and customers at the heart of our business.
During 2019, we reduced our stake in HDFC Life through sales totalling 14.49%, realising £1.5bn of net proceeds. We also sold a 3.02% share of HDFC Asset Management.
• We have invested in the business to support new opportunities which align to our strategic priorities, including growing our Platforms and Wealth proposition, enhancing our investment capabilities and global coverage and attracting, retaining and developing talented people
Eliminations (2.1) (2.3) 0.5 (0.2) Total (Excluding LBG tranche withdrawals1) 86.2 75.2 (17.4) (40.9) LBG tranche withdrawals1 – – (41.0) – Total 86.2 75.2 (58.4) (40.9) 1 Net outflows excluding Lloyds Banking Group (LBG) do not include the tranche withdrawals relating to the settlement of arbitration with LBG. Refer to Note 5 of the Group financial statements.
Intangible assets of £1.7bn (2018: £3.4bn) primarily relate to goodwill, customer relationships, technology and brands from acquired businesses. The reduction in intangibles is due to the impairment of asset management goodwill of £1.6bn, further details are provided in Note 15 of the Group financial statements.
Shareholder return Total shareholder return (TSR) TSR represents the total return to shareholders in a period and includes share price growth and the reinvestment of dividends. The TSR was 39%, 5% and 162% over one-year, five-years and ten-years respectively.
• A significant breakdown in the SLA-Phoenix relationship: this work highlighted that, in the event of a breakdown in the relationship, SLA’s viability was not expected to be threatened over the short to medium-term as a result of any commercial impacts; the work also highlighted the importance of actions being taken to reduce the operational reliance on Phoenix for certain outsourced services.
• The Chief Executive (supported by the executive leadership team) is responsible for the development and promotion of our strategy and the monitoring of its progress and success
• Representation on the boards of our associates and joint ventures as well as wider business engagement
• Mandatory training modules embed a strong conduct culture across our business
• Scanning of the regulatory horizon to ensure we engage early in any areas of potential regulatory change
The risk that resources and employment practices do not align with our strategic objectives. We are a people business and the engagement of our people is critical to the implementation of our business plan, our strategy and the overall success of the business.
• Managing the impact of COVID-19 coronavirus, utilising business continuity and resilience processes where appropriate
• Global Code of Conduct and Policy Framework providing our people with minimum standards and drives our culture
The risks of failure in the management of strategic and operational change initiatives. This risk is a function of implementing strategies for effecting change, controlling change and helping staff to adapt to change. We have a significant change programme arising from the ongoing integration of legacy systems and the decoupling of IT systems from Phoenix.
This risk was broadly stable throughout 2019 however delays were experienced with the payment of invoices in respect of some subsidiaries during 2019 which required remedial action.
Pages 2 to 49 constitute the Strategic report which was approved by the Board and signed off on its behalf by: Kenneth A Gilmour Company Secretary,
He is deputy chair of the Investment Association, and assumes the role of chair on 1 May 2020. He is also a board member of the Financial Reporting Council and a trustee of the Edinburgh International Festival.
Jonathan is deputy chairman and senior independent director of 3i Group plc and non-executive director of CiCap Limited (Coller Capital), Northill Capital Services Limited and Northill UK Management Holdings Limited. Previously, he has been chairman of Citigroup Global Markets Limited, Citibank International Limited, Dexion Capital PLC and AXA Investment Managers. He has also been a director of Ashmore Group plc and AXA UK PLC.
John’s previous roles in asset management, his experience in the US and Asia and his background in operations and technology, are all areas of importance to our strategy. John’s experience is important to the Board’s discussions of financial reporting and risk management, and in his role as Chairman of our Audit Committee.
Previously Melanie held various roles with UBS, having been appointed a managing director in 1999 and served as a senior relationship director from 2006 to 2008. She was a non-executive director of The Weir Group PLC between 2011 and 2017 and the Drax Group plc between 2013 and 2016.
The Board regularly reviews reports from the Chief Executive and from the Chief Financial Officer on progress against approved strategies and the business plan, as well as updates on stock market and global economic conditions. There are also regular presentations from the Chief Investment Officer as well as key business functional leaders and regional heads.
The Board’s policy encourages executive Directors to take up one external non-executive director role as the Directors consider this can bring an additional perspective to the Director’s contribution. Keith Skeoch does not have any FTSE 100 non-executive roles but continued as a non-executive director of the Financial Reporting Council (FRC) and will be appointed Chairman of the Investment Association on 1 May 2020. Martin Gilbert is a non-executive director at Glencore plc. He was also appointed chair of Revolut on 1 January 2020, this additional appointment having been approved by the Board and recognising that his full-time role had been reduced by 20% on 1 January 2020.
 Introduce a mentoring programme for any new Board member who has not previously served on a UK plc board, including executive directors
To support the review, the Risk and Compliance function undertook an assessment of the effectiveness of risk management and internal controls in line with the FRC’s guidance on the requirements of the annual review. In carrying out the review, the Risk and Compliance function considered reports presented to the Board, the Audit Committee and Risk and Capital Committee during the period. Key risk items were also discussed at the Enterprise Risk Management Committee throughout the period. At the request of the Audit Committee, management also reported that they had considered the effectiveness of the system of internal control from a ‘first line of defence’ point of view, and confirmed that they supported the conclusions of the Risk and Compliance review.
Accounting estimates and judgements The Audit Committee considered all estimates and judgements that Directors understood could be material to the 2019 financial statements. The Committee also focused on disclosure of these key accounting estimates and judgements.
 The Key Performance Indicators (KPIs) for the period are consistent with the key messages outlined in the Strategic report
 Three drafts of the Annual report and accounts 2019 were reviewed by the Audit Committee at three meetings. The Committee complemented its knowledge with that of executive management and the Internal and External auditors. An interactive process allowed each draft to embrace contributions.
Membership All members of the Risk and Capital Committee are independent nonexecutive Directors. The table below reflects the composition of the Committee and the members’ attendance for 2019: Member Attendance
Disclosure  Cyber risk and cyber security related matters  Liquidity risk framework overview  Results from stress tests and scenario analysis  Actions taken to enhance the conduct risk framework
Committee effectiveness The Committee reviews its remit and effectiveness each year. In 2019, this was carried out by external consultants IBE via an external review and IBE was appointed as the external facilitator. The review included observation of a meeting, access to papers and interviews with Committee members. The key points arising from the review were:  The Committee has been able to focus its work on the most important issues: succession, culture and D&I, and employee engagement
Full detail on the Committee’s assessment is provided on page 86 together with the achievements of each of the individual executive Directors against the personal targets which make up the final 10% of their scorecards.
 While the existing EIP achieves a degree of shareholder alignment by delivering rewards in the form of shares, there is no explicit linkage between the quantum delivered and any of the conventional independent measures of shareholder value
Further detail regarding the proposed new policy and its implementation for 2020 is summarised in the ‘At a glance’ section on page 83 and set out in full in the ‘Future remuneration policy’ section starting from page 96.
Annual bonus At the beginning of each year the Remuneration Committee sets the performance measures for the annual bonus based on strategic priorities. For 2020, 75% of the measures are based on financial performance, with the remainder based on non-financial performance. The Remuneration Committee retains an appropriate level of flexibility to apply discretion to ensure that remuneration outcomes are reflective of a holistic view of overall performance. The discretionary assessment will include, but will not be limited to risk, compliance and conduct, and culture.
A similar tax-approved plan is used in Ireland. At 31 December 2019, 1,717 individuals in the UK and Ireland were making a monthly average contribution of £64. On 31 December 2019, 2,188 individuals were Standard Life Aberdeen plc shareholders through participation in the Plan.
Jutta af Rosenborg 2019 94 – 94 2018 – – – 1 Appointed to the Board with effect from 1 November 2018. Appointed Chairman with effect from 1 January 2019. Sir Douglas Flint is eligible for life assurance of 4x his annual fee. For 2019 this figure relates to the period 19 December-31 December which was the relevant period that cover was in place. 2 Stepped down from the Board on 14 May 2019. 3 Appointed to the Board with effect from 1 September 2019. 4 Appointed to the Board with effect from 1 August 2018. 5 Appointed to the Board with effect from 1 October 2019.
Sir Douglas Flint 50,374 38,650 89,024 Simon Troughton1 64,054 – 64,054 Jonathan Asquith2 – 20,000 20,000 John Devine 28,399 – 28,399 Melanie Gee 67,500 – 67,500 Richard Mully1 90,116 – 90,116 Martin Pike 69,476 – 69,476 Cathleen Raffaeli – 9,315 9,315 Jutta af Rosenborg 8,750 – 8,750 Cecilia Reyes3 – – – 1 Stepped down from the Board on 14 May 2019. 2 Appointed to the Board with effect from 1 September 2019. 3 Appointed to the Board with effect from 1 October 2019. 4 There were no changes to the number of shares held by Directors between 31 December 2019 and 9 March 2020.
Shareholder voting We remain committed to ongoing shareholder dialogue and take an active interest in voting outcomes. As set out in the Chairman’s statement, the Committee was disappointed with the outcome of the vote on the 2019 Directors’ Remuneration Report. Details of the follow-up actions taken by the Committee following the vote are published in the Remuneration Committee Chairman’s statement.
For threshold performance, the award opportunity is 25%, with 100% of the award payable for maximum performance. Payouts between threshold and maximum (100%) are determined on an annual basis. Details of the payout schedule will be disclosed in the relevant DRR.
Purpose and link to strategy To align with our shareholders and promote sustainability by rewarding the delivery of long-term growth in shareholder value.
Subject to these restrictions, the Committee retains the discretion to introduce other or additional performance metrics for future awards. Were the Committee to intend to introduce any such alternative or additional metric(s) for future awards, it would expect to consult with the Company’s largest institutional shareholders in advance.
The circumstances in which malus or clawback would apply, include but are not limited to:  A material misstatement of the Company‘s audited financial statement
How our proposed remuneration structure supports our long-term strategy and strategic drivers Our remuneration policy is designed to support our long-term strategy of delivering shareholder value, by aligning the interests of our executive Directors with our stakeholders – including our customers, our shareholders and our people. The performance goals that are set for the shortterm element of variable remuneration reward the delivery of the Company’s business plan, while the long-term element promotes sustainability and alignment by rewarding the delivery of long-term growth in shareholder value. A significant proportion of variable remuneration is delivered in the form of shares and deferred over a period of time, ensuring our Directors are further aligned to the shareholder experience. The remuneration policy is also designed to support our strategic drivers, as follows: Our strategic drivers How our remuneration structure supports our strategic drivers
Performance areas are grouped by category below, together with their weightings for the 2020 performance period:  Positioning for growth (45%): Investment performance, Fee based revenue, Cost/income ratio may be used to support delivery of financial performance as set out in the business plan
The remuneration package offered to new appointments may include any element of remuneration included in the remuneration policy set out in this report, or any other element which the Committee considers is appropriate given the particular circumstances but not exceeding the maximum level of variable remuneration set out below.
In considering buyout levels and conditions, the Committee will take into account to the best of their ability the type of award, performance measures and the likelihood of performance conditions being met in setting the quantum of the buyout. The buyout award will reflect the foregone award in amount and terms (including any deferral or retention period) as closely as possible.
Applies during the contract and for up to 12 months after leaving, at the Company’s choice.
 The Chairman receives an aggregate fee, which includes the chairmanship of any appropriate Board committee  The Board annually sets the fees for the non-executive Directors, other than the fee for the Chairman of the Company which is set by the Committee  Fees are set at a market rate with reference to the level of fees paid to other non-executive Directors of FTSE100 financial services companies  The Board retains discretion to remunerate the non-executive Directors in shares rather than cash where appropriate
Using the IFRS basis, the results of the Group are presented in the Group financial statements. A detailed description of the basis of preparation of the IFRS results (including adjusted profit) is set out in the Group financial statements section. More information about the Group’s use of derivative financial instruments and related financial risk management matters can be found in Note 20 and Note 38 to the Group financial statements.
The UK Corporate Governance Code recommends that directors of FTSE 350 companies should stand for election every year. During the year, Simon Troughton and Richard Mully retired as Directors on 14 May 2019, and on 31 May 2019 Bill Rattray retired as Director and CFO. Stephanie Bruce was appointed to the Board on 1 June 2019 as Director and CFO after shareholders were given and took the opportunity to vote on her election at the 2019 AGM. Jonathan Asquith was appointed to the Board on 1 September 2019. Cecilia Reyes was appointed to the Board on 1 October 2019. Rod Paris stood down from the Board on 31 December 2019 but remains as the Company’s Chief Investment Officer. As announced, Brian McBride will join the Board on 1 May 2020.
Diversity of succession pipelines is closely monitored as part of our succession review to create appropriately diverse talent pools from which future leaders are drawn. In particular our Women in Finance Charter commitments mean we must ensure balanced representation at all levels of our workforce. We have launched female leadership development programmes at senior and mid-career levels, with more than 200 participants in 2019 which have been well-received by participants and their managers.
2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, 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. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and our findings from those procedures in order that the Company's members as a body may better understand the process by which we arrived at our audit opinion. These matters were addressed,and our findings are based on our procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
The effect of these matters is that, as part of our risk assessment, we determined that the provision for separation costs has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. The financial statements (Note 37) disclose the range estimated by the Group.
Assessing transparency: We assessed whether the Group’s disclosures detailing separation costs to be incurred adequately disclose the potential expense for the Group, including the range of costs and potential estimation uncertainty.
Our findings: We found the Group’s share of the Phoenix profit to be balanced (2018: balanced) with proportionate (2018: proportionate) disclosure of the related assumptions.
The key economic assumptions are the discount rate and inflation. The risk is that inappropriate assumptions are used in determining the present value of the funded obligation.
6. Independent auditors’ report to the members of Standard Life Aberdeen plc continued 6. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion:  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
The potential effect of these laws and regulations on the financial statements varies considerably.
Other equity holders From discontinued operations – perpetual notes2 – 28
Non-controlling interests From continuing operations – preference shares 5 5 From discontinued operations – ordinary shares – 5 1 The Group has initially applied IFRS 9 and IFRS 16 at 1 January 2019. Under the transition methods chosen, comparative information is not restated. Refer Basis of preparation. 2 The presentation of amounts attributable to certain perpetual debt instruments in 2018 has been restated to show these amounts separately as related to other equity holders rather than as part of non-controlling interests. Refer Note 30.
Adjusted profit before tax Asset management, platforms and wealth2 395 – 395 510 – 510 Insurance associates and joint ventures 189 – 189 140 – 140 UK and European insurance – – – – 210 210
Other movements in non-controlling interests in the year – – – – – – 1 – 1 Reserves credit for employee share-
 Information on impairment including the Group’s approach to expected credit losses  Additional disclosure on hedging activities
Transition The Group has applied the cumulative catch up approach to IFRS 16 and therefore comparatives have not been restated. On transition to IFRS 16, the Group recognised right-of-use assets and lease liabilities. Right-of-use assets for property have been calculated as if IFRS 16 has always been applied, recognising the difference between the assets and liabilities in retained earnings. For non-property leases, the right-of-use assets initially recognised were equal to the lease liabilities calculated with no impact on retained earnings.
When measuring lease liabilities for leases previously classified as operating leases, the Group used discount rates determined on a portfolio basis depending on the geographic location and term of the lease. The weighted average rate used at initial application was 2.6%. The lease commitments for operating leases as previously disclosed in the Group’s Annual report and accounts for the year ended 31 December 2018 is reconciled to the lease liabilities at 1 January 2019 below: £m
Accounting policies The updated accounting policies for leases are included in Note 18.
Tax credit relating to coupons payable on perpetual notes classified as equity – (6) Tax relating to items taken directly to equity – (6)
Expenses Insurance and participating investment contract claims and change in liabilities 1,657 Change in non-participating investment contract liabilities 1,470 Administrative expenses
 Phoenix include the impact of strategic asset allocation activities, such as investment in higher yielding illiquid assets, as investment variances. Wholly owned subsidiaries treat these within adjusted profit where they are directly related to a significant management action.
Key assumptions used by management in setting the three-year profit forecasts are:  Revenue is modelled based on future levels of assets under management and fee revenue yields by asset class  Assets under management is modelled from future net flow assumptions and market movements. Net flow assumptions take into account past experience, the pipeline of sales, improved investment performance, the withdrawal of LBG assets and assume a reduction in institutional channel redemptions over the three-year forecast period. Market assumptions assume modest equity market growth, for example UK equity market growth of 3% per annum (excluding dividends).
Reclassified from held for sale – – – 8 – 8
Fair value of interest held by the Group at 31 December
At 31 December 2019 the market value of the Group’s interest in Phoenix was £1,079m and this has been used as the value in use. On this basis, a reversal of the impairment above of £243m has been recognised in the consolidated income statement for the year ended 31 December 2019.
The total cash outflow for lease liabilities recognised in the consolidated statement of cash flows for the year ended 31 December 2019 was £32m.
Amounts receivable from contracts with customers 4(b) 130 112 Accrued income 231 214 Cancellations of units awaiting settlement 111 189 Net investment in finance leases 15 – Collateral pledged in respect of derivative contracts 38 18 8 Contingent consideration asset 40 1 8
(c) Other equity – perpetual debt instruments 6.75% Sterling fixed rate perpetual subordinated guaranteed bonds and 6.546% Sterling fixed rate perpetual Mutual Assurance Capital Securities From the date of the repayment of a £100 internal subordinated loan note issued by Standard Life Assurance Limited (SLAL) to the Company on 30 August 2018, the perpetual subordinated guaranteed bonds and Mutual Assurance Capital Securities (MACS) issued by the Company were reclassified to equity from subordinated liabilities (refer Note 33). The perpetual subordinated guaranteed bonds and MACS were recognised in equity at their fair value of the subordinated debt liabilities at 30 August 2018 of £672m and £334m respectively. During the year ended 31 December 2018, the Group recognised a fair value loss of £198m on the reclassification which is included in Restructuring and corporate transaction expenses from discontinued operations (refer Note 9).
Participating insurance and investment contract liabilities Participating contract liabilities arising under contracts issued by with profits funds which were within the scope of the Prudential Regulation Authority (PRA) realistic capital regime prior to the introduction of Solvency II are measured on the PRA realistic basis that was used in the PRA realistic capital regime. Under this approach, the value of participating insurance and participating investment contract liabilities in each with profits fund is calculated as:  With profits benefits reserves (WPBR) for the fund as determined under the PRA realistic basis, plus  Future policy related liabilities (FPRL) for the fund as determined under the PRA realistic basis, less  Any amounts due to equity holders included in FPRL, less  The portion of future profits on non-participating contracts included in FPRL not due to equity holders, where this portion can be separately identified
 Future expected cash flows on non-participating contracts are not recognised as an asset of the HWPF on the consolidated statement of financial position. However, future expected cash flows on non-participating contracts that are not recourse cash flows under the Scheme are used to adjust the value of participating insurance and participating investment contract liabilities on the consolidated statement of financial position.
UK and European insurance business The liability for annuity in payment contracts was measured by discounting the expected future annuity payments together with an appropriate estimate of future expenses at an assumed rate of interest derived from yields on the underlying assets.
Total subordinated liabilities 40 £655m £1,081m 1 The Group has initially applied IFRS 9 at 1 January 2019. Under the transition method chosen, comparative information is not restated and the cumulative effect of initially applying this standard is recognised in retained earnings at the date of initial application. Refer Basis of preparation.
(b) Analysis of amounts recognised in the consolidated statement of financial position 2019 2018
Total assets measured at fair value based on level 2 or 3 inputs 752 808 111 58 863 866
Further information on risks is provided in Section (g) of this note. The £3,257m (2018: £2,688m) of debt securities includes £3,205m (2018: £2,622m) government bonds (including conventional and index-linked). Of the remaining £52m (2018: £66m) debt securities, £22m (2018: £42m) are investment grade corporate bonds or certificates of deposit.
practices Separation costs Other provisions Total provisions 2018 £m £m £m £m
For the purposes of this note:  Shareholder business refers to the assets and liabilities to which the shareholder is directly exposed. The shareholder refers to the equity holders of the Company and the preference shareholders.
The Group generally does not hedge the currency exposure relating to revenue and expenditure, nor does it hedge translation of overseas profits in the income statement. Where appropriate, the Group may use derivative contracts to reduce or eliminate currency risk arising from individual transactions or seed capital and co-investment activity.
(b)(ii) Sensitivity of financial instruments to market risk analysis The Group’s profit after tax and equity are sensitive to variations in respect of the Group’s market risk exposures and a sensitivity analysis is presented below. The analysis has been performed by calculating the sensitivity of profit after tax and equity to changes in equity security prices (price risk), changes in interest rates (interest rate risk) and changes in foreign exchange rate (foreign currency risk) as at the reporting date applied to assets and liabilities other than those classified as held for sale. These sensitivities concern only the direct impact on financial instruments and exclude indirect impacts on fee income and certain costs that may be affected by changes in the variable. The changes used in the sensitivity analysis are considered reasonable assumptions and are consistent with market peers.
As at 31 December 20181 £m £m £m £m Financial assets Derivatives2 18 – (14) 4 Reverse repurchase agreements 50 – (50) – Total financial assets 68 – (64) 4 Financial liabilities Derivatives2 (3) – 3 – Total financial liabilities (3) – 3 – 1 Comparatives for 2018 have been represented to exclude unit linked liabilities. Refer Note 25. 2 Only OTC derivatives subject to master netting agreements have been included above.
Total financial investments 929 688 Receivables and other financial assets 221 280 Other financial liabilities 129 177
Our assessment of the expected resolution taking into account our legal advice
The contingent consideration related to the annuity sales practices indemnity was considered a critical estimate in 2018 but is not considered a critical estimate in 2019 as the review of non-advised annuity sales is now substantially complete. The valuation of the contingent consideration in relation to the annuity sales practices indemnity takes into account our view of the need for any changes in the provision held by SLAL. During 2019 SLAL has released £79m of the provision that it recognised at 31 December 2017. This reflected the view that the overall level of the provision at 31 December 2017 was in excess of the amount required to cover the redress due to customers. The fair value of this component of the contingent consideration is based on an estimate of the amount expected to be paid by Phoenix to the Group under this indemnity.
Investment property – (303) Equity securities and interests in pooled investment funds 135 1,369 Debt securities (55) 3,142 Derivative financial instruments (12) 269 Reinsurance assets – 328 Receivables and other financial assets and other assets 227 (1,796) Deferred acquisition costs – (13) Loans – 27 Assets held for sale (137) 250 Change in operating assets 158 3,273
At 31 December 268 1 The Group has initially applied IFRS 16 at 1 January 2019. Under the transition method chosen, comparative information is not restated. Refer Basis of preparation.
The following table shows the weighted average assumptions that were considered in determining the fair value of options granted during the year.
Aberdeen Standard OEIC V ASI UK Impact – Employment Opportunities Equity Fund 5 OEIC 86%
Aberdeen Trust Limited4 Ordinary shares 100% Aberdeen U.S. Mid Cap Equity Fund57 OEIC 69% Aberdeen UK Infrastructure Carry GP Limited4 Ordinary shares 100% Aberdeen UK Infrastructure Carry Limited4 Ordinary shares 100% Aberdeen UK Infrastructure GP Limited5 Ordinary shares 100% Aberdeen UK Infrastructure Partners Carry LP5 Limited partnership 25% Aberdeen UK Infrastructure Partners LP58 Limited partnership 0% Aberdeen Unit Trust Managers Limited4 Ordinary shares 100% Aberdeen U.S. Private Equity Company VII, LLC25 Limited liability company 61% Aberdeen U.S. Private Equity VII, L.P.25 Limited partnership 1% Aberdeen Venture Company X, LLC25 Limited liability company 67% Aberdeen Venture Partners X, L.P.25 Limited partnership 0% Aberdeen Venture Partners X SPV-A, L.P.25 Limited partnership 0% ACM Carry LP4 Limited partnership 40% AEROF (Luxembourg) GP S.a.r.l.26 Ordinary shares 100% AIPP Folksam Europe II Kommanditbolag59 Limited partnership 0% AIPP Pooling I SA26 Ordinary shares 100% Airport Industrial GP Limited5 Ordinary shares 100% Airport Industrial Limited Partnership5 Limited partnership 0% Aldwych Capital Partners, L.P. Limited partnership 0% Amberia General Partner Oy15 Ordinary shares 100% Andean Social Infrastructure Fund I LP4 Limited partnership 0% Andean Social Infrastructure GP Limited13 Ordinary shares 100% Arden Asset Management (UK) Limited24 Ordinary shares 100% Arden Asset Management LLC21 Limited liability company 100% Arden Garden State NJ Fund, L.P.25 Limited partnership 0% Arden Institutional Advisers, L.P.25 Limited partnership 0% Arden Institutional Advisers, L.P. – AIA Series T Holdings LLC25 Limited partnership 0% Arden Institutional Fund LP25 Limited partnership 0% Arthur House (No.6) Limited5 Ordinary shares 100%
Self Directed Investments Ltd.74 Ordinary shares 100% Serin Wealth Limited3 Ordinary shares 100% Shin Global Investment Partners LP13 Limited partnership 95% SL Capital 2016 Co-Investment GP LP Limited partnership 5% SL Capital 2016 Co-Investment LP Limited partnership 0%
(b) Critical accounting estimates and judgement in applying accounting policies The preparation of financial statements requires management to make estimates and assumptions and exercise judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
 On 12 December 2019 the Company increased its investment in Standard Life Employee Services Limited through the purchase of 3,389 ordinary shares for a cash consideration of £3.4m
The Company’s investment in its subsidiary Focus Solutions Group Limited (Focus) was impaired during 2019 by £15m (2018: £19m). The recoverable amount of Focus is £nil (2018: £13m) which is its value in use and has been determined using a discount rate of 12% (2018: 12%). The impairment resulted from revenue projections being lower than those previously forecast as a result of lower projected new business.
Cash outflows Cash flow hedges (18) (73) (632) – (723) Foreign exchange forwards (56) – – – (56)
Due from related parties 12 49 Contingent consideration asset 1 8 Other financial assets 2 – Total receivables and other financial assets 15 57
Capital redemption reserve Cash flow hedges Total 2019 £m £m £m £m £m £m
During 2019 £26m (2018: £11m) was recognised in the capital redemption reserve for the share buyback (refer Note 26 of the Group financial statements).
The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £35m (2018: £22m).
R. Related party transactions (a) Compensation of key management personnel The Directors and key management personnel of the Company are considered to be the same as for the Group. See Note 45 of the Group financial statements for further information.
Profit attributable to non-controlling interests – ordinary shares – – – – 5 25 – 5 25 1 Discontinued operations shown as profit before tax expense attributable to equity holders.
Analysis of AUMA by channel Average AUMA (£bn) Fee based revenue (£m) Fee revenue yield (bps)
For 2019, we changed our definition of AUMA to include AUAdv as we continue to build scale in the 1825 business. 2018 AUMA has not been restated and therefore 2019 market and other movements include 1825 AUAdv of £4.0bn as at 1 January 2019.
Last date for DRIP elections for 2020 interim dividend 9 September