Our business today 2 Message from the Chairman 4 Chief Executive’s overview 6 Our business model and strategic objectives 8 Chief Financial Officer’s overview 20 Standard Life Investments 26 Pensions and Savings 30 India and China 34 Risk management 36 Sustainability 42 Basis of preparation 47
Governance 2. Board of Directors 50 3. Directors’ report 54 4. Corporate governance statement 59 5. Directors’ remuneration report 80 6. Statement of Directors’
Financial information 7. Independent auditors’ report – Group financial statements 106 8. Group financial statements 113 9. Independent auditors’ report –
Certain measures, such as operating profit, are not defined under IFRS and are therefore termed alternative performance measures (APMs). Further details on APMs are included in Supplementary information in Section 11.
We were established in Edinburgh in 1825. Today we’re an investment company employing 6,300 people – through operations in the UK, Europe, North America, Asia and Australia.
Wherever we operate, we aim to make a positive long-term impact. Whether it’s by encouraging people to save for their future, by investing responsibly, or by providing support and expertise to benefit the communities around us.
Where we operate We have offices in many of the world’s financial centres and market locations. Operating this way lets us understand where and how markets and trends are developing and also how best we can respond to them.
Our associate businesses in India, HDFC Life and HDFC Asset Management, are based in Mumbai. Our joint venture in China, Heng An Standard Life, operates out of Tianjin.
Expanding our reach We are building on the strong foundation of our business in the UK, with acquisitions during 2016 that have strengthened our position in the advice and adviser platform markets. We continued to expand internationally too, including a new office in Tokyo and commencing a strategic partnership with Challenger, a leading retirement income group in Australia.
Standard Life Investments £383m Pensions and Savings £362m India and China £36m
Through a combination of associate and joint venture life businesses, we have extensive reach in the key savings markets in India and China. We also have a wholly owned business in Hong Kong. Across these businesses, we help to look after the life insurance needs of over 25 million customers.
How we operate Our investment funds and solutions are available to clients through two distribution channels.
We also provide active asset management services for life insurance books to the wider Standard Life Group and to strategic partners such as the Phoenix Group.
Our valuable mature book includes UK mature Retail as well as spread/risk products, such as annuities and protection.
In Ireland and Germany, we offer savings and investment products to a variety of customers and clients.
HDFC Life, our associate business in India, sells individual and group life insurance policies via a network of around 400 branches as well as through a number of key bancassurance relationships.
Heng An Standard Life (HASL), our joint venture business in China has 82 offices offering life and health insurance products on both a group and individual basis. Sales are predominantly made direct to customers and clients. HASL also maintains relationships with bank and insurance brokers.
We will continue to develop innovative investment solutions and global distribution to further diversify our business. This includes expanding our liability aware offering and range of multi-asset investment solutions. We are also strengthening our private markets capabilities.
Our Workplace business is expected to continue to benefit from ongoing implementations from auto enrolment, securing a steady flow of regular contributions into our pension products.
Following the announcement in August 2016, the aim is to complete the proposed combination of the life insurance businesses of HDFC Life and Max Life within the next 12 months, subject to necessary approvals being obtained.
We are well positioned for expected future growth in the life insurance markets in India and China. We continue to develop our future business strategy in mainland China and Hong Kong.
In China, HASL continues to work towards gaining a pensions licence from the China Insurance Regulatory Commission.
See p26 for more information See p30 for more information See p34 for more information
Across the world, markets continued to feel the effects of short-term peaks and troughs and this has affected our investment performance in certain asset classes. However, we have a very fine investment management business and a good many excellent investment professionals and I'm confident that our robust processes will continue to deliver strong performance over the longer term.
The major developments in our business in 2016 have been aimed at increasing the depth and reach of what we do. Increased scale is allowing us to improve our operational efficiency and to widen the services we can provide to our customers and clients around the world.
We have very substantial investments in India through our partner HDFC – one of the leading players in both asset management and life insurance. A change in legislation gave us the opportunity to increase our investment in HDFC Life, which has continued to expand in the Indian life and pensions market, as well as geographically too into the Gulf region. HDFC Life is also working towards combining its life insurance business with that of Max Life, which will give it significantly increased scale and opportunity.
European Union The decision of the people of the UK to leave the European Union after over 40 years is one of profound importance which is bound to impact our business. For example, we use ‘passporting’ to service our 500,000 customers in Ireland, Germany and Austria through branches of our UK business, and to allow our Ireland business to service those UK customers invested in our International Bond. Whatever the outcome of the negotiations that will shortly start between the UK and the EU, our intention is to maintain current levels of service for all our customers.
We intend to play our full part in influencing the negotiations and helping to build a solution that is right for the UK. We believe that this will benefit our customers, our shareholders, our employees and, ultimately, our country.
Culture and governance Our company’s culture is built on a set of strong values, including customer focus and trust. We embody these values in everything that we do. Governance and conduct are the measures we put in place, in part, to ensure we are continuing to follow our values consistently. I have always been very vocal in championing effective governance at board level. In 2016, we continued to look at how best we can serve the needs of our business, our customers and clients and, of course, our shareholders.
In January 2017 we announced that Paul Matthews would be stepping down from the Board as Chief Executive of Pensions and Savings on 1 March 2017, prior to his retirement on 31 August 2017. His successor, Barry O’Dwyer, joins the Board from 1 March, bringing with him a great deal of customer insight experience from his role as CEO of Standard Life Assurance Limited.
Lord Darling, the former Chancellor of the Exchequer, is chair of the Foundation, supported by a team of very experienced trustees. The Foundation will focus on independent research to strengthen financial well-being and resilience in the UK. I expect it to become highlyregarded and a very influential force in commissioning and disseminating research, both on its own account and working alongside other like-minded organisations too.
Our achievements during 2016 are down to our dedicated employees. Tremendous people work for Standard Life and I'm very grateful to all of them for their hard work and talent. I’d also like to thank our shareholders for your continued support.
Over recent years we have fundamentally reshaped Standard Life and, very importantly, have created substantial value for shareholders. Standard Life has the potential to achieve much more and your company is in good shape to continue creating value for you in this increasingly complex and ever-changing world.
Creating a worldclass investment company Q&A with Keith Skeoch, Chief Executive
We continued to attract new assets from customers and clients with £42bn of gross inflows across our business. One of the hallmarks of 2016 was the industry wide retreat from parts of the investment market, which saw the most challenging conditions for the UK mutual funds industry in over 20 years.
What are Standard Life’s ambitions? Our ambition is to create a world-class investment company: a global business which competes in our home markets and against the leading companies across the world.
We’ll continue to look for new opportunities to run our business more efficiently to drive real long-term value for all of our stakeholders. And we’ll continue to focus on attracting the best talent from around the world to make our ambitions a reality.
A culture is not developed overnight. It takes time to win the hearts and minds of those involved and is only evidenced through actions and behaviours. One key indicator of how we are progressing is our employee survey scores. Against the backdrop of change, it was pleasing that our employee engagement score increased slightly compared to the previous year.
So we are making good progress and we are already seeing the benefits of working more closely together, delivering a number of initiatives in the last year across the business.
We delivered new investment propositions across an increasingly broad range of asset classes and geographies to meet the emerging needs of our Institutional, Wholesale, Retail and Workplace customers and clients. Our very successful MyFolio suite of funds was also launched in Germany.
In the UK our financial adviser platform proposition grew following the acquisition of Elevate, building on our already successful platform business, and ensuring we now work with a broader adviser population. Our own UK-wide financial planning brand, 1825, continued to develop through the acquisition of three financial planning businesses.
The Ryder Cup Our partnership with the Ryder Cup has provided opportunities to raise awareness of our brand through one of the world’s most iconic sporting events. Like the Ryder Cup, we too have a culture based on teamwork and shared values of integrity and respect. We were therefore delighted to confirm our extended partnership to Paris in 2018.
The British and Irish Lions During 2016 we also announced our sponsorship of the British and Irish Lions’ team and the tour to New Zealand in summer 2017. We believe that teams which work together succeed together and win. The Lions personify this and we’re already looking forward to a thrilling rugby test series.
How does the leadership team you have in place play its part in delivering Standard Life’s strategy?
My executive team brings together leadership skills and expertise from across the business. It’s responsible for developing a single strategic plan that identifies our targeted investments in diversification and capitalises on the opportunities open to our asset management and pension and savings businesses, and those created by our various partnerships around the world. We also have a diverse, experienced and strong leadership population supporting the executive team in implementing our single strategy.
Our purpose in everything that we do is to invest for a better future. We will continue to do this with the aim of making a real difference to the lives of our stakeholders.
Increasing assets We aim to grow the assets that we administer or manage, by deepening our relationships with existing customers and by attracting new customers.
Growing revenue We aim to grow revenue by providing propositions which customers and clients value because of the quality of our service and the long-term investment returns we deliver. Most of the fees we charge are based on the level of assets managed or administered.
Lowering unit costs We aim to reduce our unit costs by controlling expenses and investing carefully to improve both the scalability and efficiency of our business.
Driving profit Increasing assets, growing revenue and lowering unit costs enables us to drive our profit and further invest in growing our business.
We ensure that we have the appropriate level of capital to support our operations and provide protection for our policyholders, while continuing to focus on growing our capital-efficient fee business. We balance investing for business growth with continuing to pay growing dividends to shareholders.
Innovation, technology and digitalisation We aim to develop innovative products and services – helping us to work more efficiently while improving the ways customers and clients can access, invest and keep track of their assets.
We aim to create value for our stakeholders by:  Providing investment growth and excellent service for our customers and clients
 Providing employment and opportunities for career growth to our people
 Delivering increased profits and dividends to grow shareholder value 8 Standard Life 2016
…with a strategy to achieve our worldclass ambitions Our strategy is designed to help us make the most of our market opportunities and support our world-class ambitions.
Our strategic objectives are the key areas that we are focusing on to deliver against our business model. By developing strong relationships with customers and clients and broadening and deepening our investment capability, we can increase assets and grow our revenue. We can lower our unit costs and grow our profits by building an efficient and effective business.
Attracting, retaining and developing our people will support us in performing strongly in the future.
Together our investments in diversification will help improve the resilience of our business model and the returns and value it delivers for our shareholders.
“We have continued to demonstrate our capabilities as a forward-looking, responsible company, as we look to deliver the investment outcomes our customers and clients expect.” Rod Paris, Chief Investment Officer
 Increased our focus on private markets where we believe better investment returns are possible over the long term
 Launched MyFolio in our European markets following its success in the UK
Success is measured by delivering investment performance that meets the desired outcomes of our customers and clients. Our propositions and fund choices demonstrate our capabilities as a forward-looking, responsible investor. As a long-term asset manager, our customers and clients expect us to have a long-term view on how their investments will perform.
2016 performance Our short-term investment performance was weaker in 2016 and this had an adverse impact on net flows. Net outflows of £2.6bn were less than 1% of assets at the start of 2016. Our overall long-term investment performance remains strong.
Our MyFolio range of risk-based funds, which launched in 2010, reached £10bn in assets under management – a positive demonstration of our reputation and ability to actively manage assets over the long term.
 Target opportunities from growing global markets for outsourcing of management of insurance assets
Broadening capabilities to meet the needs of our customers and clients
We recognise that corporate governance along with responsible stewardship of a business’ capital, employees, customers, environment and society has a fundamental impact on longterm investment returns. Our commitment to socially responsible investing is a fundamental component of our Focus on Change investment philosophy and process.
The addition of the Elevate adviser platform provides further scale, expertise and resources to support the growing market demand for platform services and high-quality financial advice.
 Change management  IT failure and security  Outsourcer relationship management  Political change
Market forces To meet the expectations of our customers, advisers and employers, we’ve continued to work to deliver modern, consistent experiences across all of our platforms. Innovation, technology and digitalisation are major market trends – and we are investing in technology that helps us to become more scalable and operate more efficiently.
We’re supportive of changes that will improve regulation, and we respond in an efficient and effective manner. For example, we’ve been early adopters of the European Market Infrastructure Regulation (EMIR) principles, designed to improve transparency and reduce risk in the derivatives market.
2016 performance We celebrated 10 years of our Wrap platform. Since launching in 2006, the platform has been adopted by over 1,500 financial advice and wealth management firms, and currently serves over 200,000 customers.
 Modernise the information storage systems in our Pensions and Savings business to address risks around technology going out of date and to reduce costs
 Transform the way we use digital platforms to provide information to customers and clients
 Implemented the Living Wage Foundation’s latest UK hourly rate of £8.45 (£9.75 in London)
Market forces We compete in a global marketplace where talented people are in high demand. We invest in mentoring, coaching and development programmes for our people as part of their ongoing career development.
We have a robust succession planning process in place for our strategic executive committee members. This includes ongoing talent management for people who have the potential and drive to become our future business leaders.
2016 performance Around 1,200 of our people were supported through employee networks. We launched a Carers Network for people who are, or support, carers and also LGBT+ Allies, which aims to raise awareness of lesbian, gay, bisexual and transgender issues in the workplace.
We continued our commitment to employing young people, recruiting 46 graduates and 158 people through our youth employment initiatives. 8% of our people in the UK and Ireland are aged 25 or under, compared to just 0.5% in 2010.
We had some small changes in the overall engagement and enablement scores from our latest employee survey. In 2017, we will create action plans to address the key themes from the survey.
Outlook and 2017 objectives  Continue to invest in our leaders and further develop our strong talent pipeline  Promote the continued importance and benefits of cooperation and collaboration to create high performing teams
 Progress the policies and initiatives for a diverse and inclusive culture, including working towards our targets for the proportion of women in leadership roles
Team We collaborate and work together to deliver great performance for all our stakeholders
Client and customer focused We put our clients and customers at the centre of everything we do by building long term relationships
Respect We treat each other with respect and build mutually bene�cial relationships with all our stakeholders
Excellence We are committed to excellence in all that we do, raising standards
We are committed to providing an inclusive workplace where everyone is valued for who they are and what they contribute. A key aspect of this is gender equality. We know it is an area where we have more work to do.
In 2016 we extended the range of funds we offer to John Hancock’s retail investors, by launching the Global Focused Strategies Fund. We have also increased our distribution and client service operations in Boston to support our growing activity in this area. At the end of 2016, we managed £5.4bn of assets through this strategic partnership.
 Supported leading advisers and consultants in the UK to embed workplace and platform solutions
Market forces Increased regulatory and legislative complexity, as well as political uncertainty, have meant a greater need for advice and tailored investment solutions. Individual and institutional clients are looking to trusted organisations and advisers to help them make the right choices. In the UK, we’ve also seen increased complexity through pension freedoms – where people have greater choice in how they take their pension.
Our brand net promoter score is an important measure of customer advocacy. In 2016 our score fell by 11 points. We believe the reasons for this include the processes around pension freedoms – which is a complex area – and lower customer confidence in financial services as a whole. We also saw challenges arising from new technology designed to improve customer experience. We’ve planned a number of actions for 2017 to improve customer experiences – including automating and simplifying key processes, better self service online, and greater collaboration to better understand customer needs.
 Integrating new technology to improve our telephone systems and online capabilities to deliver services that are scalable, automated and cost efficient
Administration We offer innovative products and services that allow customers and clients to easily manage their savings and investments. We make the most of technology to ensure people can easily access, service and consolidate their assets.
Asset management We’re an active asset manager. We offer market-leading investment products that have clear investment outcomes. Our approach is supported by a team of investment experts and a philosophy which is focused on anticipating market change and carefully managing risks.
“Our targeted opportunities to further diversify our business help us to grow revenues and profits.” Luke Savage, Chief Financial Officer
Key activities  Completed the acquisition of Elevate, making us one of the UK’s largest and fastest growing adviser platform businesses
 Increased our holding in HDFC Life to 35% and also announced the proposed combination of this business with Max Life
Underlying cash generation £502m +9% Operating profit £723m +9% Full year dividend per share 19.82p +8% Key risks Read more on p36-41
To support diversification, we will continue to pursue organic growth opportunities from our own resources and activities – while also carefully targeting appropriate acquisitions and new strategic partnerships.
We’ve seen increased customer and client appetite for simple and transparent products that have clear investment objectives, and to take a more active approach to managing their investments. These are areas of strength for our business, built on our track record of strong long-term investment performance and innovation.
2016 performance We benefited from our diversified client base with business channels responding in different ways to the market environment – which was impacted by political and economic developments in the UK, the US and other parts of the world. We also enhanced our focus on financial discipline.
We continued to expand our global capabilities and distribution through new strategic relationships. These relationships are an important way of supporting our global growth and diversification plan by providing a cost-effective way of quickly accessing new markets.
Outlook and 2017 objectives  Expand our business in Europe, North
 Pursue a structured programme to seek further opportunities to grow and diversify our business, while also reducing costs
 We have delivered strong increases in revenue and profit by leveraging the scalability of our growth businesses
Delivering diversified and sustainable growth “Our financial performance demonstrates continued growth and resilience during a period of market uncertainty.”
We have continued to attract high levels of gross flows, indicating strong demand for our products, but we saw an increase in redemptions, particularly in wholesale markets which were impacted by weaker investor sentiment. We delivered another year of increased revenue which together with our improved focus on cost discipline has driven a 9% increase in operating profit to £723m.
You announced that there would be an increased focus on efficiency across the business during 2016. How has that work progressed so far and what can we expect during the remainder of 2017? Standard Life has a good track record over recent years of improving operational efficiency. This has been demonstrated by the reduction in the cost/income ratio which has fallen by seven percentage points since 2012. The integration of Ignis which has delivered over £50m of annual cost savings and our investment in IT architecture are good examples of what we have done to improve efficiency. Whilst, in the short term, the investment to build our 1825 business and the acquisition of Elevate will impact the downward trajectory in the cost/income ratio, we are confident that the underlying direction remains unchanged. We remain focused on delivering further operational efficiencies at the same time as continuing to invest in the growth of our business.
Standard Life has a strong capital and cash position. How can we expect to see this being used? Our strong capital position is very important to us. It provides a buffer to support our progressive dividend policy which has continued uninterrupted for the last 10 years, something we are all very proud of. It also allows us to make strategic investments and acquisitions to grow our business, such as our increased stake in HDFC Life and the acquisition of Elevate. We intend to maintain our progressive dividend policy and continue to invest capital where we believe it increases shareholder value.
Can you explain what is included in the results in relation to the FCA’s enhanced annuity thematic review? Our IFRS profit before tax includes a non-operating impact of £175m relating to a provision for an estimate of the redress payable to customers, the costs of conducting the review, and other related expenses. At this stage there is significant uncertainty relating to all of these elements. Note 40 of the Group financial statements provides further background, and explains that we are seeking for up to £100m of the financial impact to be mitigated by insurance. Discussions are ongoing with our insurers and, as a result, no insurance recovery has been recognised as an asset in these financial statements.
Alternative performance measures (APMs) We assess our financial performance using a variety of measures. Some of these measures are defined under IFRS such as IFRS profit. Others, such as operating profit, are not defined under IFRS and are therefore termed alternative performance measures.
Financial performance 2015 comparatives exclude the Canadian and Singapore discontinued operations unless otherwise stated.
Assets under administration and net flows The increase in AUA from £307.4bn to £357.1bn was driven by market movements, including benefits from a lower Sterling exchange rate since the EU referendum, and the acquisition of the Elevate platform business.
Operating assumption and actuarial reserving changes provided a benefit of £42m (2015: £44m), primarily relating to future longevity assumptions.
We invest to enhance our propositions and capabilities in a disciplined manner that aims to improve both the scalability and efficiency of our business. The cost/income ratio which includes our share of associates’ and joint ventures’ (JVs) profit before tax, has improved by 1% point to 62%. This reflects not just the rise in revenue but also our continued cost discipline and drive for greater cost efficiencies.
Operating expenses increased by 3% to £1,159m (2015: £1,124m) reflecting further investment in expanding the distribution and global reach of Standard Life Investments, building scale in the 1825 business, the acquisition of Elevate, ongoing investment in technology in our Pensions and Savings business and the impact of exchange rate movements.
Operating profit benefited by approximately £20m from lower average Sterling exchange rates in 2016 compared to 2015.
IFRS profit1 IFRS profit from continuing operations increased to £368m (2015: £276m) due to a 9% increase in operating profit and reduced restructuring costs offset by the £175m provision for annuity sales practices.
Short-term fluctuations in investment return and economic assumption changes generated a profit of £8m (2015: loss £63m) mainly due to a narrowing of credit spreads and a fall in yields.
Restructuring and corporate transaction expenses reduced to £67m (2015: £115m), and included £24m relating to the integration of Ignis, £5m for staff pension scheme restructuring, £4m of costs relating to the Elevate acquisition, £15m Pensions and Savings transformation costs and a number of other business unit restructuring programmes and corporate transactions.
The total tax expense attributable to equity holders’ profit from continuing operations was £68m (2015: £77m). Further details are included on the next page.
IFRS profit from continuing operations1 368 276 IFRS profit from discontinued operations - 1,147 Total IFRS profit1 368 1,423
Underlying cash generation increased to £502m driven by the growth in fee based revenue within underlying performance.
Underlying performance 681 630 Associates and JVs adjustment1 (60) (44) Current tax on underlying performance (106) (114) DAC/DIR adjustment (2) 5 Fixed and intangible assets adjustment (11) (18) Underlying cash generation 502 459
Group tax expense from continuing operations The total tax expense attributable to equity holders’ profits from continuing operations was £68m (2015: £77m), of which £127m (2015: £114m) related to operating items and a credit of £59m (2015: credit £37m) to non-operating items. The reduction in the tax expense mainly reflects non-recurring items which increased the tax charge in 2015. The effective tax rate was 14%2 (2015: 19%2) compared to a UK corporation tax rate of 20% (2015: 20.25%). The main reasons for the rate being less than the UK corporation tax rate are the inclusion within profit before tax of our share of post-tax profit of JVs and associates with no added tax charge and low tax rates relating to profit attributed to noncontrolling interests which are included in profit before tax. These are also expected to reduce the effective tax rate in future periods. There are also a number of one-off items affecting both years. Excluding the effect of the accounting for JVs and associates profit and non-controlling interests the effective tax rate would be 18% (2015: 25%). Excluding these effects, in the medium term we would expect the effective tax rate on profit attributable to equity holders (subject to one-off items in any given year) to be broadly in line with the UK corporation tax rate.
We are strongly capitalised with a Solvency II capital surplus (Investor view) of £3.3bn (2015: £3.3bn) representing a solvency cover of 214% (2015: 222%). Capital requirements have increased by £0.2bn as a result of lower interest rates and higher equity values. We disclose an Investor view of our solvency position as this provides insight into the solvency capital provided by equity and debt investors. The Solvency II Investor view capital surplus of £3.3bn would change by £0.2bn or less following a:  ¢20% rise or fall in equities, or  ¢100bps rise or fall in fixed interest yields, or  ¢50bps rise or fall in credit spreads
Add with profits funds and pension scheme Regulatory view Investor view
Own funds £6.2bn (£0.2bn) £1.2bn £7.2bn £6.0bn (£1.2bn) £0.7bn £5.5bn Solvency capital requirement (SCR) (£2.9bn) - (£1.2bn) (£4.1bn) (£2.7bn) - (£0.7bn) (£3.4bn) Solvency II capital surplus £3.3bn (£0.2bn) - £3.1bn £3.3bn (£1.2bn) - £2.1bn 1 Underlying cash generation now includes dividends received from our Indian associates. Prior period figures have been restated. Further details are included in the Supplementary information section of this report. 2 Tax expense attributable to equity holders’ profits divided by profit before tax expense attributable to equity holders’ profits. Includes profit attributable to non-controlling interests. 3 31 December 2016 based on draft regulatory returns. 1 January 2016 based on final regulatory returns.
Operating return on equity Operating return on equity measures our success in generating operating profit relative to our shareholder capital. We will continue to manage our capital position to ensure that we generate sustainable returns for our shareholders. For example, in April 2016 we invested £179m to increase our stake in HDFC Life.
Our key growth channels including Standard Life Investments Institutional and Wholesale, and UK Workplace and Retail are ‘capital-lite’ which means that they do not require significant amounts of additional capital as they continue to grow.
The dividend payment which is expected to be £262m is strongly supported by underlying cash generation. At 31 December 2016 Standard Life plc held £0.9bn of cash and liquid resources and £1.6bn of distributable reserves.
Liquidity management Standard Life plc, the Group holding company, holds substantial cash and liquid resources. At 31 December 2016, Standard Life plc held £395m (2015: £522m) of cash and short-term debt securities, £304m (2015: £290m) of bonds and £201m (2015: £200m) of holdings in pooled investment funds managed by Standard Life Investments.
In April 2016 we increased our stake in HDFC Life by 9% to 35%. This was funded from existing Standard Life plc resources. In October 2016 we completed the purchase of the Elevate platform business. This purchase was funded by Standard Life Assurance Limited, but the cost impact will be absorbed by Standard Life plc’s resources over time.
In April 2016 we extended the maturity date of our syndicated revolving credit facility by a further year to 2021. This £400m facility is held as part of our contingency funding plans and is currently undrawn.
Standard Life Investments is a leading active asset manager. We offer market-leading investment funds and solutions to our third party clients through two main distribution channels:  Institutional: managing assets for a wide range of institutions, such as pension fund clients, government authorities, corporates, charities and insurance companies
As truly active managers, we place significant emphasis on rigorous research and a strong team ethos. This, combined with disciplined risk management and shared commitment to a culture of investment excellence, is key to helping our clients look to their future with confidence.
Our distinctive investment philosophy, Focus on Change, lies at the heart of our wide range of investment funds and solutions. Focus on Change helps analyse key factors driving the market price of an investment and identifies the drivers that the wider market may have missed. Our core belief is that our experienced investment professionals can consistently add value to client portfolios by exploiting these market inefficiencies.
Britain’s decision to leave the EU may also affect our future operating environment. We are monitoring developments on behalf of our stakeholders and we remain ready to adapt our business to future changes in regulations and markets. We remain committed to our strategy of European business development. Work has commenced to identify the optimal structure and distribution model in order to continue to meet our clients’ needs.
We support the aims of the Financial Conduct Authority (FCA) Market Study of the asset management industry and are committed to improving transparency, value and outcomes for customers and clients. As a truly active asset manager we have always been committed to delivering consistent, long-term investment outperformance, and we welcome any moves which help individuals understand the merits of different approaches to investing. We will continue to work with the FCA throughout the period of its market study.
(2015: £31.4bn), while net outflows of £0.7bn (2015: inflows £10.3bn) were impacted by higher redemptions
 Operating profit increased by 12% to £383m (2015: £342m) driven by increased fee revenue and controlled growth in expenses
Wholesale1 – challenging markets Investor sentiment has been weak in this channel globally given market volatility, the EU referendum result, other political uncertainty and weaker short-term investment performance. Despite this, we have achieved a top 5 gross sales position2 in the UK wholesale market for 17 consecutive quarters and remain well positioned with a share of gross sales of 4.7%3 (2015: 5.4%). In terms of net sales, our ranking was 30th in 2016. Lower gross flows and significantly increased redemptions of £13.8bn (2015: £7.5bn) led to a net outflow of £1.7bn (2015: inflows £9.3bn). Net inflows into MyFolio and fixed income are particularly strong although multi-asset saw net outflows during the year, largely due to GARS net outflows of £3.9bn.
By geography: North America returned net outflows in the year of £0.7bn (2015: inflows £3.0bn), with over half as a result of fund rationalisation activity. European and Asian net outflows of £1.5bn and £0.1bn respectively (2015: inflows of £3.4bn and £1.2bn respectively), reflected the impact of investment volatility on wholesale markets. This also impacted our domestic UK business with net inflows reducing to £0.1bn (2015: £4.4bn). In India, our share of HDFC AMC net inflows increased to £1.5bn (2015: £0.8bn).
Mature books Our mature books business, which is in natural run-off, saw overall net outflows of £4.8bn (2015: £6.8bn). This was due to net outflows of £2.7bn (2015: £4.8bn) from the assets managed on behalf of Phoenix Group as well as net outflows of £2.1bn (2015: £2.0bn) from the life insurance books we manage for Standard Life Group. Notably, 2016 included the award of a new mandate for £1.2bn of assets from Phoenix Group, as our relationship with this strategic partner develops. 2015 included a £1.4bn one-off redemption by Phoenix Group.
Further information on AUM and net flows is included in the Supplementary information section of this report
Increased fee based revenue Growth channels fee based revenue increased by 9% to £680m due to higher AUM, a continued shift in mix towards our higher margin growth products and favourable foreign exchange movements. Total fee based revenue grew by 5% to £885m with a robust performance from our mature business. The average revenue yield on growth AUM was 53bps (2015: 52bps) and for mature books reduced slightly to 16bps (2015: 17bps) due to lower performance fees.
Controlled operating expense growth We have reduced our cost/income ratio to 58% (2015: 61%), which is helped by the integration of Ignis together with the operational leverage inherent within our business model. We have maintained flexibility in our cost base which provides resilience in current market conditions. Total operating expenses increased modestly by 1% to £537m demonstrating our ability to continue expanding our investment capabilities and global reach while maintaining cost discipline.
Operating profit before tax increased by 12% to £383m driven by the increase in fee revenue and the closely controlled growth in expenses. Operating return on equity increased to 39.5% (2015: 36.3%).
EBITDA, which is closely aligned with operating profit, increased to £395m. Our EBITDA margin grew to 45% (2015: 42%), achieving the target set when we acquired Ignis.
Total IFRS profit1 increased to £259m (2015: £225m) due to strong operating performance and the benefit of lower Ignis integration costs.
Ignis integration As at 31 December 2016, in our second full year of ownership, the migration of the Ignis business onto the Standard Life Investments platform is substantially complete, with the final integration costs to be incurred in H1 2017.
The integration of Ignis has allowed us to deliver annual synergies in excess of £50m and helped us to achieve an EBITDA margin for the combined business of 45%, a year ahead of target.
Delivering long�term investment performance Investment performance in 2016 was weak as short-term performance was adversely impacted by the market reaction to macro-economic and geopolitical events. Over one year, 20% of growth channels funds were ahead of benchmark. Despite this, the longer-term performance remains strong; 76% of funds were ahead over three years while 88% were ahead of benchmark over five years (2015: one year 88%, three years 95%, five years 90%).
Portfolios were positioned for a modest recovery in economic growth. Market volatility, initially in China but more latterly in response to the result of the UK’s referendum on EU membership, undermined investor confidence, boosting prices for defensive assets at the expense of more growth orientated stocks. Performance did, however, stage a late recovery as investors regained their appetite for risk assets. However, this rebound was insufficient to offset the losses from earlier in the year.
 Best Targeted Absolute Return Fund Provider – Moneyfacts Awards  �Large Fund Manager of the Year – Local authority pension fund awards  �UK Equity Income Unconstrained platinum award – Portfolio Adviser
Best 2016  �Standard Life Wealth won 'Boutique Investment Management' at the
Charity Times Awards  Boston office ranked best medium-sized employer – 2016 Pensions &
Private equity (~$2.1 trillion) ∙ Levereged buyouts ∙ Growth investing ∙ Venture capital ∙ Mezzanine capital ∙ Distressed
Real assets (~$2.4 trillion) ∙ Real estate ∙ Infrastructure ∙ Agriculture ∙ Energy ∙ Commodities
In the UK we offer products and services through two broad growth channels:  Retail: pensions and savings where the relationship is either directly with the customer, or with their financial adviser
The Europe business consists of our domestic and international bond businesses in Ireland as well as our business in Germany.
Close collaboration with Standard Life Investments allows us to support customers with a full suite of solutions. Pensions and Savings accounts for 84% of total MyFolio AUA. Standard Life Investments manage 71% of our Workplace AUA and 21% of our Wrap assets. The interaction between the two businesses helps strengthen our relationship with our customers by improving the quality of our propositions and the choices available.
Broadening and deepening relationships We acquired the Elevate platform from AXA on 31 October 2016, bringing a further £11.1bn of AUA to the business. Elevate, with its broad market appeal, award-winning service and positive net flows, will complement our existing Wrap platform with c£30bn of assets which is focused on the wealth management market. Together our platforms have over £44bn of assets and they will give more than 3,000 adviser firms access to the full range of Standard Life’s pension and investment capabilities.
Our Workplace business continues to build scale. Since auto enrolment began in 2012 we have supported over 8,000 employers to set up Qualifying Workplace Pension Schemes (QWPS), with over one million members enrolled into these schemes.
External factors A number of external factors have impacted global economic growth and led to increased uncertainty, increasing the customer need for advice, guidance and information. Volatility in financial markets resulted in lower daily average asset values in the first half of the year, whilst the rise in market levels increased asset values in the second half of 2016. The weakening of Sterling led to an increase in the value of overseas denominated assets.
 Growth channels gross inflows of £13.5bn – the highest year ever  Growth channels net inflows of £5.9bn – down 12% as customers continue to take advantage of pension freedoms  Operating profit before tax remained stable at £362m
(2015: £357m), including a £5m loss from Elevate  Operating expenses are stable in real terms after excluding costs relating to the growth of 1825 and the acquisition of Elevate. We remain committed to driving further cost efficiencies to support future growth.
Following pension freedoms we have seen more of our customers moving into our drawdown products, with total assets invested in drawdown products increasing by 21% to £16.4bn (2015: £13.6bn) reflecting both inflows and positive market movements. Gross Retail outflows increased by 22% to £4.4bn as the size of our proposition grows and customers make use of drawdown functionality.
UK Workplace UK Workplace AUA increased by 13% to £37.4bn (2015: £33.0bn), benefiting from net inflows of £1.7bn. Whilst we have seen fewer large scheme transfers across the market as employers adapt to new pension regulations, we are benefiting from growing contributions into existing schemes which provide a steady long-term source of growth.
Our success in attracting new flows through auto enrolment has resulted in a 5% increase in regular premiums to £3.1bn. Regular premiums now account for 75% of Workplace inflows.
Further information on AUA and net flows are included in the Supplementary information section of this report £181.5bn +21% £8.1bn +8%
Profitability UK Europe Pensions and Savings £m £m £m £m 2016 £m £m 1 Relates to operating assumption changes of £42m (2015: £44m), included in the spread/risk margin and principally in respect of longevity assumption changes. The 2015 underlying adjustment also included £9m shareholder support provided to the German with profits business, included in operating expenses. 2 Non-operating items primarily relate to a provision for annuity sales practices of (£175m), short-term fluctuations in investment return and economic assumption changes of £13m
Fee based revenue UK fee based revenue increased by 5% to £664m. Fee based revenue benefited from a combination of strong net inflows together with positive movement in market levels over the second half of the year. Our continued focus on the growth of 1825 and the acquisition of Elevate has enabled us to diversify our sources of revenue, increasing fee revenue by £8m. Average fee revenue yield remained broadly stable at 58bps (2015: 59bps).
Ongoing investment in technology to reduce future customer operations and IT maintenance costs has allowed further process automation and customer self service. Examples of our progress include:  In 2016, 30% of our customers who took action following pension freedoms transacted entirely online
Total UK UK excluding 1825 and Elevate 32 Standard Life 2016
Operating profit Pensions and Savings operating profit before tax remained stable at £362m (2015: £357m) including a loss of £5m from Elevate, £2m of which is underlying trading. Operating profit includes the £22m spread/risk margin benefit from an acceleration of payments from our main with profits fund relating to changes to the Scheme of Demutualisation in response to the transition to Solvency II.
Operating return on equity Operating return on equity decreased to 13.4% (2015: 15.2%) reflecting higher opening shareholder net assets and a higher tax charge. Operating return on equity continues to be diluted by the impact of the £1.1bn pension scheme surplus. Excluding the impact of the pension scheme surplus, operating return on equity was 20.4% (2015: 22.1%).
Awards and recognition  Best Group Personal Pension Provider, Money Observer Pension
Awards 2016  Group Pension Provider of the Year, Corporate Adviser Awards 2016  Group Personal Pension provider of the Year, Pensions Insight DC
Awards 2016  Wrap awarded a Platinum Platform rating, Adviser Asset 2016  Wrap awarded Best Platform Provider with AUM over £15bn,
We’re delighted to have won the Best Large Adviser Platform Provider (AUM over £15bn) award at the Schroders UK Platform Awards 2016.
Elevate also won the Best Smaller Adviser Platform (AUM up to £15bn) award. This is an exciting time for us as we work towards bringing together two of the best platforms in the industry.
An excellent example is how we guide our customers online through their retirement journey. Here we’ve built an efficient, scalable solution meeting the needs of customers following the introduction of pension freedoms.
We continue to be encouraged by the future outlook for the life insurance market in India. The insurable population is anticipated to reach 750 million in 2020 and life insurance is projected to comprise 35% of total savings by the end of this decade. Demographic factors such as a growing middle class, young insurable population and increasing awareness of the need for protection and retirement planning are anticipated to support the growth of the life insurance and pensions industry in India.
In August 2016, we announced that HDFC Life had agreed terms with Max Life Insurance Company Limited (Max Life), Max Financial Services Limited (Max FS) and Max India Limited for the combination of the life insurance businesses of HDFC Life and Max Life. The strategic benefits of this transaction include increased scale and enhanced distribution and product mix. Max Life’s bancassurance relationships with three of the leading private sector banks in India will complement HDFC Life’s already strong distribution capability.
Following completion, Standard Life, based on current shareholdings, would hold a 24.1% stake in the enlarged entity. The shares of HDFC Life would list on the Bombay Stock Exchange and the National Stock Exchange of India, subject to approval of these stock exchanges and the Securities and Exchange Board of India.
After a significant amount of change over recent years the regulatory framework is now fairly stable with the Government of India focused on ensuring greater social security for Indian citizens. HDFC Life has responded well to these historic changes maintaining its position as one of the leading private companies in the life insurance market and will continue to work with regulators, in order to better understand and shape future changes and adapt to them efficiently and effectively.
In Hong Kong, market volatility and recent regulatory changes have made growing flows challenging. We remain focused on retaining and efficiently managing the policies currently on our books as we continue to define our future business strategy.
Source: International Monetary Fund, March 2016. Graph reflects relative growth in GDP.
 India is the 10th largest life insurance market in the world with Rs 3.7trillion in total premiums in 2016
Total AUA increased by 64% to £4.6bn reflecting favourable market movements, including the benefit from a lower Sterling exchange rate. HDFC Life’s AUA increased to £3.4bn (2015: £1.8bn). £0.8bn of the increase reflects our higher share of HDFC Life AUA following our stake increase in April 2016.
In Hong Kong, net inflows decreased to £46m (2015: £63m) as a result of lower regular premium new business.
HDFC Life’s commitment to digital leadership and product innovation for its customers has driven the development of the successful ‘Click2’ online product series and award-winning cancer care plan. Through their broad product range, premium income increased by 18% compared to 2015.
Heng An Standard Life’s new business sales have increased by 39% compared to 2015.
In Hong Kong fee based revenue decreased by £21m due to lower regular premium business which we stopped selling in 2015. This reduction is expected, as regular premium business generates most of its revenue during the first two years from policy issue date.
Operating profit before tax increased to £36m driven by an increase in operating profit from HDFC Life to £34m1 (2015: £21m) and an increase in Heng An Standard Life to £7m (2015: £4m). Both our associate and JV businesses continue to benefit from growth in premium income.
Note: Results are presented on the basis of Standard Life ownership percentages during 2016 and do not include the 40% share in HDFC Asset Management which is included in the results for Standard Life Investments. HDFC Life ownership was 26% until the end of April 2016 and then 35% from May 2016, Heng An Standard Life ownership is 50% and Hong Kong is 100%. 1 Based on Standard Life ownership percentages during 2016. Assuming a constant 26%
Our approach to risk management The consistent application of effective and pre-emptive risk management across our business protects the value of Standard Life in the short-term while encouraging the development of long-term value. We ensure that:  Well informed risk-reward decisions are taken in pursuit of our business plan objectives
 Capital is delivered to areas where most value can be created from the risks taken
Our approach to risk management, delivered through our Enterprise Risk Management (ERM) Framework, is well embedded in our business. The pace of change in the business and risk environment, and the threats and opportunities arising from it, mean we will always review and adapt our methods to ensure we are well placed to respond pre-emptively.
Over the past year our risk management approach has received external recognition. In May 2016, Standard & Poor’s increased their rating on the Risk and Capital Models component of our framework to ‘positive’ and maintained their ‘strong’ rating of our overall ERM Framework.
We are building a simplified, well diversified and scalable world-class investment company and in order to deliver this effective risk management is essential. We must ensure that change is successfully implemented with any change in our overall risk profile understood. This includes the ongoing integration of Elevate and 1825 acquisitions.
The major political event for our business in 2016 was the UK’s vote to leave the EU. We will be directly impacted by the outcome of the negotiations between the UK and EU, although the details may not be known for some time. We have a strong track record of successfully responding to changing circumstances and are ready to adapt our business as appropriate to any post-Brexit changes in regulations and markets.
From within these categories we have identified our principal risks and uncertainties. These should not be considered to be an exhaustive list of all the risks that the Company faces, but rather those which we currently believe have the greatest potential to affect our business model, future performance, solvency or liquidity. These principal risks were subject to robust assessment by the Board during 2016.
Quantitative stress and scenario testing which investigates Standard Life’s liquidity and capital positions’ exposure to specific risks and combined scenarios. Stresses are calibrated at the 1-in-200 probability level, or more extreme, and test Standard Life’s resilience to market, credit, expense and demographic shocks. Standard Life remains solvent in such circumstances and can support potential cash outflows.
 Emerging risks: The aim of emerging risk management is to identify risks before they materialise. This gives us time to engage with the risk, understand it and respond accordingly. We use our emerging risk process to inform reverse stress testing and capital adequacy requirements across Standard Life. Our proactive screening process which looks across broad sources of risk including geopolitical, technological, environmental and societal, helps us to anticipate future threats.
 Our appetite for these risks and how we manage them  Our own assessment of current solvency and capital requirements with respect to the risks  A forward-looking assessment of the risk and solvency needs of the
Company over a multi-year time horizon in light of the business plans The ORSA plays a key role in supporting decision making and strategy development at our boards and risk committees.
Identify Business environment and �ture strategy New products and projects Emerging risks Model validation activity Risk registers
Assess Assess signi�cance of risk Assess probability of risk occurring Determine the capital requirement
Control Establish ownership Set up risk indicators Identi� methods of risk mitigation or pre-emptive actions De�ne principles of risk management Determine procedures
Monitor Collect data Analyse Ensure response process is followed if controls are breached
Investment Performance (New) Our strategy to be a world-class investment company is underpinned by our ability to offer our customers and clients superior long-term investment performance through active management.
Poor investment performance relative to peers, benchmarks or internal targets may impact our ability to grow assets under administration and can increase the level of outflows across our business. This in turn can also cause a stagnation or decline in revenues.
Short periods of market dislocation and heightened volatility, such as that seen in 2016, carries a risk that investment performance is weaker. However, our Focus on Change investment philosophy has a good track record of delivering resilient long-term performance.
In 2016 we reviewed our investment processes to ensure they continue to work effectively for our customers and clients.
 Our Focus on Change investment philosophy is driven by a robust and repeatable investment decision process which is highly disciplined, research intensive and risk informed
 We regularly engage with our customers and clients on service and performance
 We regularly seek customer feedback on our performance and use focus groups to help with proposition development
 We invest in initiatives to build trust and longterm relationships with customers
Following the UK’s vote to leave the EU in June, our business operations in Europe will be directly impacted by the outcome of the forthcoming negotiations. Also, the recent announcement from Theresa May confirming that the UK will leave the European single market provides an indication of the environment we will face outside the EU.
Since the change of leadership within the UK Government we have seen different approaches being taken, for example with secondary annuities. As we look forward to the 2017 budget we may see further changes that could impact our business and our customers and clients.
 Political risks are considered under our stress and scenario testing programme (which includes both quantitative and reverse stress testing) and emerging risk process
We operate in a highly regulated industry and our global growth requires us to comply with an increasing number of regulatory regimes.
New or changing regulations can create opportunities for our business but can also increase risk. They can increase compliance costs, impact profitability and demand for our propositions, or tie up resources which may slow the delivery of other developments to support our growth plans.
Strategic Transition and Delivery (New) We continue our strategic delivery towards a simplified, well diversified and scalable world-class investment company. We aim to take advantage of a number of growth opportunities in the key markets in which we operate.
There is a risk that we fail to deliver long-term value for shareholders because we are unable to successfully deliver this strategic transition.
At the FCA’s request, we shall be reviewing all non-advised annuity sales from July 2008 to identify whether our customers received sufficient information about enhanced annuity options. It is essential that conduct risk is properly understood and managed throughout this process in order to deliver fair customer outcomes.
 Strong oversight and challenge is provided within our business by our Conduct and Compliance risk centre
 We maintain a strong and open relationship with the FCA and other regulators
Our definition and appetite Risk of loss or adverse consequences resulting from inadequate or failed internal processes, people or systems, or from external events. We have limited appetite for large operational losses due to the related reputational damage and opportunity costs. We will seek to manage existing operational risk exposures and proactively control new exposures.
We use a number of outsourcing providers to operate and deliver core systems, capabilities and processes. Key relationships include Citigroup for our investment business and FNZ’s role in the delivery of platform functionality for our Pensions and Savings business.
Our acquisition of Elevate broadens our relationship with FNZ. This change in risk exposure is well understood and was assessed as part of our due diligence.
 Our outsourcing policy sets out standards that must be complied with
 We maintain strong relationships with external providers to ensure that the risks arising are well understood
 Outsourcing risks are considered under our stress and scenario testing programme
 For the most extreme scenarios we maintain appropriate business continuity and contingency plans and these are regularly tested and reviewed
Our risk committees maintain a strong focus on ensuring the effective management of our change risk portfolio.
 In recent years, our business has built up significant experience of successfully responding to change, whilst continuing to develop market-leading propositions for customers
As significant new powers are devolved to the Scottish Parliament it is essential for our business that these are used to make Scotland an attractive place for talented individuals to live and work.
We continue to develop the diversity of our workforce and are involved in a wide range of initiatives aimed at promoting social mobility and increased diversity across the organisation. These include how we consider diverse Board representation, talent pipeline development, talent acquisition, as well as actions to ensure a more inclusive workplace. In 2016 we signed up to the HM Treasury Women in Finance Charter.
 We regularly benchmark our terms and conditions against the market
 Our Sustainability section explains the range of initiatives that we use to support employee wellbeing and engagement
Our definition and appetite Risk of losses due to risks inherent in financial markets. Standard Life has appetite for market risk exposures where exposures arise as a consequence of core strategic activity. We have an appetite for credit risk to the extent that acceptance of this risk optimises Standard Life’s risk adjusted return.
Our business is exposed to market risk from the direct investment of shareholder assets, indirectly from UK and German with profits funds in our Pensions and Savings business, and as a result of fluctuations in fees that we earn which are linked to the value of underlying assets in both our Pensions and Savings and investment businesses.
Global political and economic events caused financial markets to be volatile over 2016 and we expect this uncertainty to continue in 2017. This volatility in markets has an impact on asset values as well as investor sentiment.
 We use our stress and scenario testing programme to understand our sensitivities to markets and identify mitigating actions
In response to economic, political and regulatory developments we saw a number of ratings downgrades from external credit rating agencies in 2016.
 Limits for individual counterparties are overseen by our Group Credit Risk Committee
 Where appropriate, counterparties are collateralised and internal credit assessments are used
Our definition and appetite Risk that arises from the inherent uncertainties as to the occurrence, amount and timing of future cash flows due to demographic and expense experience differing from that expected which, for the purpose of risk management, includes liabilities of insurance and investment contracts. Within demographic risk we have an appetite for longevity risk since we expect acceptance of this risk to be value additive.
This is the risk that our annuity customers live longer than we expect.
We expect our longevity risk to decrease over time as our existing annuity book steadily runs off.
Determination of longevity assumptions is a critical accounting estimate. Further details on this judgement are discussed in the Audit Committee report and in Note 33 of the Group financial statements section.
 We set limits for longevity risk exposure  We have a robust governance process for setting our longevity assumptions using the latest data sources
 We consider longevity scenarios under our stress and scenario testing programme and emerging risk process
You can find out more about our review and what we are doing in these areas in our sustainability report at www.standardlife.com/sustainability
Our best ever DJSI and FTSE4Good index scores In 2016, we were listed for the sixth year running in the DJSI World and Europe indices, which include the top 10% and 20% respectively of sustainable companies in our sector. We received our best ever score in this and the FTSE4Good index, and our first ever Silver class distinction from RobecoSAM. These are based on an assessment of how we manage economic, environmental and social factors relevant to company success.
Sir Andy Murray Our partnership with Sir Andy Murray means a lot more than simply supporting a world famous tennis champion. It means sharing a set of values and goals. Andy’s deep sense of purpose, commitment to excellence and personal ambition fits perfectly with ours and inspires and motivates our people.
On Andy’s most recent visit to our offices in September he met 400 of our people to tell them about his historic year and pass around his Olympic medals. 200 employees, their family and friends also attended his inaugural tennis event for charity in Glasgow, raising money for UNICEF and local Glasgow charity Young People’s Futures. Through our 2016 Master Your Dreams campaign we’ve shared exclusive content, news and photos telling the story of how Andy has achieved his goals and mastered his dreams.
Like us, Andy is also committed to investing for the future and to giving back through his support of key charity partners. Andy is a WWF global ambassador and we actively support the charity’s Earth Hour across all our global offices. We also promote responsible investment and were delighted to secure Andy’s support of Good Money Week, when he spoke about embracing saving and investing in line with his values.
Investing responsibly We are a responsible investor and a steward of our clients’ investments 42 Standard Life 2016
Business ethics We recently updated our global code of conduct, which provides a set of guidelines on how we expect our people to behave. In the code, we frame many of the aspects of good conduct as a question, such as ‘am I doing the right thing?’ or ‘what would our customers and clients think?’ As part of the launch, we promoted our independent speak-up helpline - an anonymous way to raise concerns. We commit to follow up all issues raised and to support and protect the caller.
We held a series of events in collaboration with the University of Edinburgh Sustainable Business Initiative, the Institute of Business Ethics, and the Institute of Corporate Responsibility and Sustainability. These events were designed to raise awareness of the importance and benefits of investing in an ethical culture. As both a large business and an investor in other companies, we have a distinct perspective on this area and used the events to share best practice and further our learning.
Human rights We have a responsibility to protect and respect human rights as an employer, investor, procurer and provider of services and through our business partnerships. We have a statement on our website setting out our approach and commitment to human rights and will be reviewing and building on this during 2017 using the UN Guiding Principles on Business and Human Rights framework. We have also published our Modern Slavery statement setting out the steps we are taking to help prevent modern slavery in our business and supply chains. You can find out more at www.standardlife.com/annualreport
Managing our environmental impact Our operational environmental impact strategy focuses on our highest greenhouse gas (GHG) emitting activities: energy use in our buildings and business travel.
In 2016, we continued to run our awareness programme for our people and customers, including an environmental champions network, promoting sustainable travel, collaborative technology workshops and ongoing energy reduction and recycling initiatives.
 In Germany, Hilfe für krebskranke Kinder Frankfurt e.V – supports children with cancer
Greenhouse gas emissions (continuing operations) 2016 20156 2013 (baseline) Actual change7 2016 target7
FTE / Tonnes CO2e ratio5 Total 3.21 3.39 3.75 (8%) (6%)
We want to provide inclusive and engaging employment, encourage collaboration, and enable our people to reach their potential.
Diversity We continue to show our commitment to inclusion and supporting diversity and believe we have leading policies and practices in many areas. We aim to provide an inclusive workplace where everyone is valued and able to fulfil their potential. Our latest employee engagement survey showed that 85% of our people believe that our company appreciates difference among our employees, a 7% increase from the previous survey.
Parental Leave Policy featuring enhanced shared parental pay, the change to our enhanced paternity pay policy (which means new parents taking paternity leave will be entitled to be paid up to two weeks’ salary regardless of how long they've worked at Standard Life), increasing the proportion of our people aged 25 and under in the UK and Ireland to 8% and providing unconscious bias training across our organisation. We also continued supporting our employee networks; Armed Forces, LGBT, LGBT+ Allies, Young People, Carers and Women’s Development.
A key strand in our approach is gender equality as we know this is an area where we have more work to do. In 2016, we were one of the first signatories to the HM Treasury Women in Finance Charter. We have made firm, public commitments to support actions which will improve the representation of senior women in our industry, including setting progressive target ranges for our leadership population which is currently 25% women. We will also develop wider targets incorporating other aspects of diversity across our people including reporting our gender targets and our gender pay gap in the coming year.
We believe job creation is vital to creating healthy communities. Providing quality employment, paid at a living wage, with access to skills and on-the-job experience for all, can turn jobs into careers and allow people to plan and look to the future with confidence. We work with people from disadvantaged backgrounds who are less well qualified or living in poverty, those who have been through the care system, people serving as carers, people with disabilities and people who are transitioning from a career with the Armed Forces.
In 2016 we published our UK community impact report highlighting our employability and financial capability work from 2013-2016.
Early careers We offer challenging and rewarding opportunities for school leavers and graduates, and internships for those in their penultimate year of study.
Throughout 2016 we have continued our work with the Edinburgh Guarantee Scheme, providing 33 young people with paid work experience for six months. We have also continued our work with the Investment2020 scheme, offering 12-month paid work experience placements to 11 people. Across our global employability programmes we have provided 46 jobs in total in 2016.
Our talent pipeline, which we’ve been developing since 2011, is pivotal to attaining these targets. The numbers we report for our talent pipeline and our leadership population are not mutually exclusive, with the pipeline feeding into our leadership population – 38% of our leadership population are also in our talent pipeline for succession to more senior roles.
Wellbeing We know that people who work in a healthy and supportive workplace are more engaged in their roles. We base our ongoing wellbeing programme activities around three essential areas: healthy mind, healthy body and healthy culture.
Our analysis shows that mental health is one of the main wellbeing issues our people can face, so we are committed to creating a workplace where everyone feels comfortable discussing any and all mental health issues. To help raise awareness, we offer workplace training on how to build a mentally healthy environment, signed up to the Time for Change pledge, supported World Mental Health Day and in 2016 we became a See Me in Work Partner.
Workplace pensions We support action which can make saving more inclusive and can help address the savings gap. In 2012 the UK Government introduced auto enrolment – where employers are required to offer workers a workplace pension – which opens up long-term saving into a pension for more people. Since then, we have helped over one million people to access saving through a workplace pension and look forward to their future with more confidence.
Inclusion We have a customer inclusion panel, made up of internal and external specialists, to develop practical ways that we can make our products and services more accessible. We also work with The Wisdom Council – an organisation which helps provide insight on our customers and clients. Most recently we have been looking at financial services jargon and what would help to make communications simpler and more accessible for customers.
Standard Life Foundation First announced at our AGM in May 2016, the Foundation is a charity that will focus on independent research to strengthen financial wellbeing and resilience in the UK. We will make a gift of around £80m to the Foundation which is funded from unclaimed shares and cash entitlements as a result of our demutualisation in July 2006. During the past decade we have made continued efforts to trace those entitled to claim and were successful in uniting over 97% of people with their entitlements before the deadline of 9 July 2016. Lord Darling, the former Chancellor of the Exchequer, is chair of the Foundation and is supported by a team of very experienced trustees. The Foundation will set out the priorities of its work during the course of 2017.
Our approach to responsible investment and stewardship considers investments as a tool to promote positive change.
As stewards of our clients’ investments we act responsibly in our investment activities. At Standard Life Investments we integrate ESG issues into our investment process as we believe these issues are significant components of investment risk and can have a fundamental impact on the achievement of sustainable long-term investment returns. We apply this approach throughout our investment processes and to mandates which have tailored sustainable responsible investment (SRI) or ethical criteria.
As a leading investment company, we take our role in this area seriously. We research, analyse and engage with companies on ESG issues to understand the risks and drive positive change. We transparently disclose our discussions and thematic reviews within our quarterly and annual update reports.
We actively use our influence through voting at shareholder meetings of investee companies – in order to hold boards to account and promote high standards of governance. We regularly provide updates of our voting records on our website.
Sustainable real estate We are committed to sustainability across our direct real estate portfolio. We have a comprehensive Sustainable Real Estate Investment (SREI) Policy and accompanying procedures that govern how we embed ESG factors into development projects and asset management. Our strategic priorities for SREI cover climate change, resource scarcity and the health, wellbeing and productivity of building occupiers. We have targets in place to reduce waste, and water and energy use.
You can find out more about our measures and definitions in our 2016 sustainability report at www.standardlife.com/sustainability
Overview Our Strategic report for the year to 31 December 2016 has been prepared in line with the Companies Act 2006 and the Disclosure and Transparency Rules (DTR) issued by the FCA. Under section 414 of the Companies Act 2006, DTR 4.1.8 and DTR 4.1.9, the Group is required to provide a fair, balanced and understandable review of the business and a description of the principal risks and uncertainties facing the Group. Principal risks and uncertainties are detailed in the Risk management section of this Strategic report and Note 41 in the Group financial statements section. To provide clear and helpful information, we have also considered the voluntary best practice principles of the Guidance on the Strategic report issued by the Financial Reporting Council in 2014. We have also considered the European Securities and Markets Authority (ESMA) guidelines on alternative performance measures issued in October 2015.
Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in this Strategic report. This includes details on our liquidity and capital management in the Chief Financial Officer’s overview section and our viability statement and principal risks in the Risk management section. In addition, the Group financial statements section includes notes on the Group’s subordinated liabilities (Note 36), management of its risks including market, credit and liquidity risk (Note 41), its contingent liabilities and commitments (Notes 45 and 46), and its capital structure and position (Note 49).
The Group continues to meet Group and individual entity capital requirements, and day-to-day liquidity needs through the Group’s available credit facilities. The Company has a revolving credit facility of £400 million as part of our contingency funding plans and this is due to mature in 2021. The Group has considerable financial resources together with a diversified business model, with a spread of business and geographical reach. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.
Contents 2. Board of Directors 50 3. Directors’ report 54 4. Corporate governance statement 59 5. Directors’ remuneration report 80 6. Statement of Directors’ responsibilities 103
Keith was appointed Chief Executive in August 2015, having been a Director since May 2006. He has been a Director for 10 years.
He holds an MA and MSc from the University of Oxford.
Keith’s reputation and breadth of experience in the industry, his market insights and his extensive knowledge of Standard Life are of great benefit to the Board and to the Group.
For 30 years Luke has provided corporate and financial support within the financial services sector and by bringing that experience to the Board, has continued to make an effective contribution to Board deliberations.
Paul was appointed Director in November 2015. He has been a Director for 1 year. Paul is standing down from the Board on 1 March 2017.
Background: With his background in investment management and client services, both with Standard Life and elsewhere, Colin brings important skills to the Board.
Kevin’s international commercial and acquisition experience is particularly valuable to the Board. He has extensive audit and regulatory knowledge gained in a ‘Big 4’ firm and a FTSE 100 asset management and private banking group.
Kevin is chairman of Intermediate Capital Group plc (ICG) and a non-executive director of Nationwide Building Society (Nationwide) and Daily Mail and General Trust plc (DMGT). At ICG he is chairman of the nominations committee and a member of the remuneration committee. At Nationwide he chairs the audit committee and is a member of the risk and nominations committees. At DMGT he chairs the audit and risk committee. He is chairman of the Royal National Children’s Foundation.
He was formerly chairman of the Homes and Communities Agency, a nonexecutive board member of Knight Frank LLP, CFO of Schroders plc, CEO at Management Consulting Group PLC and a managing partner at KPMG.
Background: With extensive experience in leading technology and customer-facing businesses, Pierre brings a strong combination of international commercial and customer skills to the Board.
Pierre is vice chairman of TDC, executive chairman of Volia, independent director of CIEL Investment Limited and vice chairman of AgroGeneration. From 2000 to 2005, Pierre was chief executive officer of BT Retail and, subsequently, chief operating officer of Capgemini Group and chairman of Eircom. Until June 2012, he served as chief executive officer and then non-executive chairman of Numericable Completel in Paris.
From April 2015 until August 2016, John was non-executive chairman of Standard Life Investments (Holdings) Limited. He is a non-executive director of GE Capital International Holdings Limited, Euroclear plc and Citco Custody Limited.
From 2008 to 2010, John was chief operating officer of Threadneedle Asset Management Limited (Threadneedle). Prior to joining Threadneedle, John held a number of senior positions at Merrill Lynch in London and New York.
He holds a BA (Hons) from Preston Polytechnic and is a Member of the Chartered Institute of Public Finance and Accounting.
Melanie brings deep understanding of investment banking and financial services to the Board.
Melanie is a non-executive director of The Weir Group PLC where she chairs the remuneration committee and is a member of the audit and nomination committees. She has also served as a non-executive director of Drax Group plc.
Melanie was appointed a managing director of Lazard and Co. Limited in 2008 and became a senior adviser in 2012. Previously, she 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 holds an MA in Mathematics from the University of Oxford.
 Remuneration (c)  Investment  Risk and Capital 52 Standard Life 2016
Martin was appointed Director in September 2013. He has been a Director for 3 years.
With a successful career in the UK financial services industry and a strong focus on customer care, Lynne brings important skills to the Board. Her experience as a chief executive officer and in managing change in the financial services sector has been of great value to the Board.
The Board continues to benefit from Martin’s insight, based on his broad commercial and strategic risk experience.
Martin is a non-executive director of esure Group plc, where he chairs the remuneration committee and is a member of the audit and risk committees. He is a non-executive director of Faraday Underwriting Limited which manages a syndicate at Lloyds, where he is chair of the audit and risk committee and member of the remuneration committee. He is also a non-executive adviser to Travers Smith LLP.
Martin spent nearly 30 years as a strategic risk consultant carrying out a wide range of strategic consulting projects and M&A assignments. His senior roles included managing director, risk consulting & software, EMEA at Towers Watson.
 Audit  Risk and Capital (c)  Audit  Remuneration
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 operating profit) is set out in the Group financial statements section. More information about the Group’s use of financial instruments and related financial risk management matters can be found in Note 23 and Note 41 to the Group financial statements.
This report was prepared by the executive team together with the Board and forms part of the management report.
Dividends The Board recommends paying a final dividend for 2016 of 13.35p per ordinary share. This will be paid on 23 May 2017 to shareholders whose names are on the Register of members (the Register) at the close of business on 18 April 2017.
Share capital You can find full details of the Company’s share capital, including movements in the Company’s issued ordinary share capital during the year, in Note 28 to the Group financial statements. You can also find an analysis of registered shareholdings by size, as at 31 December 2016, in the Shareholder information section.
In 2016, in accordance with the terms of the Standard Life Employee Trust Deed, the trustees of the Standard Life Employee Trust waived all entitlements to current or future dividend payments for shares they hold under option on behalf of participants in the Company’s discretionary share plans between the grant and vest dates. Details of ordinary shares under option in respect of the Company’s discretionary share plans are shown in Note 47 to the Group financial statements.
The trustees of the Standard Life (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan. Details of the Company’s employee share plan can be found in Note 47 to the Group financial statements.
The Board may decline to register the transfer of:  ¡A share that is not fully paid  ¡A certificated share, unless the instrument of transfer is duly stamped or duly certified and accompanied by the relevant share certificate or other evidence of the right to transfer, is in respect of only one class of share and is in favour of a sole transferee or no more than four joint transferees
 ¡An uncertificated share, in the circumstances set out in the uncertificated securities rules (as defined in the Articles) and, in the case of a transfer to joint holders, where the transfer is in favour of no more than four joint transferees
Every member and duly appointed proxy present at a general meeting or class meeting has one vote on a show of hands, provided, that where a proxy is appointed by more than one shareholder entitled to vote on a resolution and is instructed by one shareholder to vote ‘for’ the resolution and by another shareholder to vote ‘against’ the resolution, then the proxy will be allowed two votes on a show of hands – one vote ‘for’ and one vote ‘against’. On a poll, every member present in person or by proxy has one vote for every share they hold. For joint shareholders, the vote of the senior joint shareholder who tenders a vote, in person or by proxy, will be accepted and will exclude the votes of the other joint shareholders. For this purpose, seniority is determined 54 Standard Life 2016
A shareholder’s rights will not change if additional shares ranking ‘pari passu’ with their shares are created or issued – unless this is expressly provided in the rights attaching to their shares.
 �Disapply, up to a maximum total nominal amount of £12,038,952 or 5% of its issued ordinary share capital, shareholders’ pre-emption rights in respect of new ordinary shares issued for cash
The Company did not make any market purchases of its ordinary shares during the year ended 31 December 2016, and has not done so since then and up to the date of this report.
Significant agreements There are a number of agreements to which the Company, or one of its subsidiaries, is party that entitle the counterparties to exercise termination or other rights in the event of a change of control of the Company. These agreements are noted in the paragraphs below.
Biographies of the current Directors can be found on pages 50 to 53.
3. Directors’ report continued and the share-based executive long-term incentive plans (LTIPs) are set out in the Directors’ remuneration report together with details of the executive Directors’ service contracts and non-executive Directors’ appointment letters.
No Director has any interest in the Company’s listed debt securities or in any shares, debentures or loan stock of the Company’s subsidiaries. No Director has any material interest in any contract with the Company or a subsidiary undertaking which was significant in relation to the Company’s business, except for the following:  ­The benefit of a continuing third party indemnity provided by the Company (in accordance with company law and the Articles)
Directors’ liability insurance During 2016, the Company maintained directors’ and officers’ liability insurance on behalf of its directors and officers to provide cover should any legal action be brought against them. The Company also maintained a pension trustee liability indemnity policy (which includes third party indemnity) for the boards of trustees of the UK and Irish staff pension schemes. The trustees include individuals who are directors of subsidiaries within the Group.
We treat those with disabilities fairly in relation to job applications, training, promotion and career development. Adjustments are made to train and enable employees who become disabled whilst working at Standard Life to allow them to continue and progress in their role.
In recent years we have seen considerable progress in our gender balance within our talent pipeline particularly in our graduate, emerging leaders and senior high potentials. This year we have signed up to the Women in Finance Charter, supporting our aim for an inclusive workplace and in particular, to support actions which will improve the representation of senior women in our industry. We are committed to continuing to improve the gender balance split at a senior management level and in October 2016 we published our target ranges for gender balance. Although 25% of our leadership population is female, we appreciate that there is still more work to be done. We continue to run our Non-Executive Director curriculum to encourage female talent to develop executive team and board experience and are working with our female employees to focus career conversations on development. In addition, we are working with executive search partners who have signed up to providing an equal balance of men and women on shortlists provided.
Talent Since 2010 we have increased the number of employees aged 25 and under in the UK and Ireland from 0.5% to 8%. Through a series of initiatives and partnerships and by offering traineeships and apprenticeships, Standard Life demonstrates it is committed to youth employment. On our Edinburgh Guarantee programme we have, to date, taken on more than 140 school leavers, providing six-month placements across the business, paid at the living wage. Our experience has been good, with 98% of our placements leading to a positive destination – whether it be a role within Standard Life or progression to further education, training or other employment. This commitment extends to supporting young people through education, as we work with Career Ready to equip young people for better futures, with mentors and paid internships.
We want to hear from our people about how to make things better, so we get insight from our employee engagement survey ‘InterAction’, as well as through our employee associations and conversations with leavers. The InterAction survey gives our employees the chance to tell the leadership teams how they feel about working for Standard Life. In November 2016, 80% of our employees completed our most recent InterAction survey, which is up from 79% in 2015. The responses gave us a clear update on how our people feel about a range of topics.
We want our employees to be engaged in their work and give their best every day. We have collaborated with the voluntary movement Engage for Success to focus on the best ways to make this happen. Their aim – like ours – is to improve employee engagement.
As a result of these collaborations, we have launched our own engagement network which will begin work early in 2017 to focus on our group-wide engagement priorities.
To support our healthy body strategy, we took part in our fifth Global Corporate Challenge – a 100-day walking challenge. We averaged 14,037 steps a day (well above World Health Organisation target of 10,000). We also work with our on-site caterers to provide healthy, nutritious lunch and snack choices for our people.
To help our people in work and home life, we provide a variety of support from our people networks to our family friendly policies, and we provide an employee assistance programme called Solutions. It is a free, confidential service available to our people and their families whenever they need it.
We also run free regular mindfulness and meditation sessions, where employees can get space and time to clear their minds in the middle of a working day.
Changes to the UK employee pension were implemented on 16 April 2016. From this date, pension scheme members build up future pension on a defined contribution basis rather than a career average defined benefit basis. In 2016 over 95% of our UK employees were in our pension scheme.
Our new Group intranet, Stan, launched in March 2016, enhances engagement, collaboration and communication across the whole business, helping employees to do their job more quickly and connect with each other more easily. In addition, independent analysis of Stan conducted by Digital Workplace Group highlighted that we are well positioned to build on the initial positive impact of the site. Stan achieved an extremely high score for its strategy and governance, ranking third in the global league tables compiled by Digital Workplace Group.
As at 31 December 2016, approximately 73% of the Group's employees were shareholders through participation in the Standard Life (Employee) Share Plan (the Plan). The Plan allows employees to buy ordinary shares in the Company directly from their earnings up to a market value of £150 per month, or an equivalent sum in a relevant currency. These are called partnership shares. For each partnership share that an employee buys under the Plan in the UK, the Company matches the purchase by allocating them ordinary shares up to a maximum total value of £50 per month. As at 31 December 2016, 68% of eligible employees in the UK were making a monthly average contribution of £58. A similar tax approved plan is used in Ireland, where the maximum monthly matched amount is €70, and has a 55% take-up. Even though the Plan cannot be structured on a tax favourable basis in Germany or Austria, at the end of the year, 35% of eligible employees were buying shares on a monthly basis.
Sustainability The commercial aims of our business are linked to our environmental, social and governance responsibilities. You can find out more about how we run our business sustainably, including our greenhouse gas emissions, in the Sustainability section of the Strategic report.
Auditors The Audit Committee is responsible for considering the Group’s external audit arrangements. PricewaterhouseCoopers LLP is not seeking reappointment as auditors of the Company. Following the conclusion of the audit tender process, resolutions proposing the appointment of KPMG LLP as auditors of the Company and giving authority to the Audit Committee to determine their remuneration will be submitted at the AGM to be held on 16 May 2017.
Annual General Meeting Details of the meeting content can be found in our AGM guide 2017 which will be available online at www.standardlife.com from 22 March 2017. The AGM was held in London for the first time last year. As it is intended to hold the AGMs in Edinburgh and London in alternate years, it will be held in Edinburgh in 2017.
Edinburgh International Conference Centre The Exchange 150 Morrison Street Edinburgh EH3 8EE Scotland
Overview  ¢Introduction – the Chairman will introduce the Directors and outline the business of the AGM  ¢Presentations and question and answer session – the Chairman and the Chief Executive will review the business and provide an overview of Standard Life’s plans for 2017. After this, there will be an opportunity to ask questions
 ¢Voting – shareholders will be asked to consider and vote on a number of resolutions
Other information Under Listing Rule 9.8.4.CR, a listed company must include all information required by LR 9.8.4R in a single identifiable location or cross-reference table. For the purposes of LR 9.8.4CR, the information required to be disclosed can be found in the following locations. All the relevant information cross-referenced below is hereby incorporated by reference into this Directors’ report.
4. Corporate governance statement 4.1 Nomination and Governance Committee report The Nomination and Governance Committee oversees the governance framework so the report on its activities is presented both in summary on this page and integrated in more detail into the relevant parts of the corporate governance statement.
In this statement you can read about the Committee’s role in:  �Identifying and recommending Directors to be appointed to the Board  �Reviewing Board diversity, skills and experience  �Supporting the review of the Board’s effectiveness  �Overseeing succession planning, leadership and talent development and diversity levels throughout the Group
The Committee’s work in 2016 An indicative breakdown as to how the Committee spent its time is shown below:  Reviewed compliance with the Corporate Governance Code
 �Reviewed the corporate governance statement  ��Reviewed the Board Charter  �Committee Effectiveness review  Recommended appointment of Senior Independent
Regulation (MAR)  �Signed up to Women in Finance Charter Recommended appointment of non-executive Director
 Reviewed Organisation Design reshaping and output  �Reviewed executive succession and talent
The Committee’s work in 2016 An indicative breakdown as to how the Committee spent its time is shown below: Committee effectiveness The Committee reviews its remit and effectiveness each year. The 2016 review was carried out via an internal self-assessment questionnaire. The review concluded that the Committee:  �Continued to focus Director and senior manager recruitment on the skills and experience required by the Board, reflecting the changing shape of the business
 �Continued to look for strength in the succession, talent and development, diversity and leadership programmes across the Group
Roles and responsibilities The roles and responsibilities of the Board, Chairman and Chief Executive are outlined below: 60 Standard Life 2016
Code compliance As well as covering the formal disclosure requirements of the UK Corporate Governance Code (the Code), this statement describes how the Board meets its governance responsibilities.
You can read the Board Charter on our website at www.standardlife.com/annualreport
The roles of the Chairman and the Chief Executive are separate. Each has clearly defined responsibilities, which are described in the Board Charter.
The heads of each business unit and the corporate centre functions manage their teams within authorities set out in the Board Charter and within an approved scheme of delegation. This includes reporting to the Chief Executive on how they are complying with Group policies and performing against approved plans and budgets.
 �Believes that it should have a blend of skills, experience, independence, knowledge and gender amongst its individual members that is appropriate to its needs
 �Is committed to maintaining its diverse composition  �Supports the Chief Executive’s commitment to achieve and maintain a diverse workforce, both throughout the Group, and within his executive team
You can read more about our Directors in their biographies in Section 2
Taking account of the regulatory changes that have been or will be introduced to the responsibilities of the board of Standard Life Assurance Limited (SLAL), including:  The transition from the current Individual Capital Assessment regime to Solvency II
 The Prudential Regulation Authority’s (PRA) Position Paper on Corporate Governance: Board Responsibilities
 SIMR regime changes  The role of the Independent Governance Committee During 2016, the Committee considered and strengthened the oversight of the governance of key subsidiaries. Specifically, the Committee supported changes to the composition of the board of SLAL, in particular that a non-executive chairman and three independent non-executive directors should be appointed.
After identifying the capabilities needed for Board roles, and the succession timeframe, the Committee considers the related role profile submitted to external search consultants along with the request to prepare a list of suitable candidates. The Group has used the services of JCA Group, Heidrick and Struggles, Odgers Berndtson, Zygos and Egon Zehnder to support its recent recruitment searches and Egon Zehnder has also provided executive development assessment support. Standard Life administers three active pension plans for Heidrick and Struggles and provides a group self-invested pension plan for The Zygos Partnership. In addition, Standard Life hold a fully paid-up executive pension plan for Egon Zehnder. The Board is not aware of any other connection between the Group and the aforementioned consultants, JCA Group or Odgers Berndtson.
The role of our non-executive Directors is to participate fully in the Board’s decision-making work – advising, supporting and challenging management as appropriate.
The letter of appointment confirms that the amount of time we expect each non-executive Director to commit to each year, once they have met all of the approval and induction requirements, is around 35 days. Nonexecutive Directors are required to confirm that they can allocate sufficient time to carry out their duties and responsibilities effectively. You can read more about the induction and development programme later in this section.
You can read more background information about the Directors, including the reasons why the Chairman believes you should support their election or re-election, in our AGM guide 2017, which will be published online at www.standardlife.com from 22 March 2017, and in Section 2 – Board of Directors.
Director independence, external activities and conflicts of interest The Board carries out a formal review of the independence of nonexecutive Directors annually. The review considers relevant issues including the number and nature of their other appointments, any other positions they hold within the Group, any potential conflicts of interest they have identified and their length of service. Their individual circumstances are also assessed against independence criteria, including those in the Code. Following this review, the Board has concluded that all the non-executive Directors are independent.
The Board’s policy encourages executive Directors to take up one external non-executive director role. Keith Skeoch continued as a nonexecutive director of the Financial Reporting Council. Paul Matthews is a member of the Association of British Insurers board and of the FCA’s practitioner panel.
Advice Directors may sometimes need external professional advice to carry out their responsibilities. The Board’s policy is to allow them to seek this where appropriate and at the Group’s expense. Directors also have access to the advice and services of the Company Secretary, whose appointment and removal is a matter for the Board. No Directors sought external advice in 2016.
The 2016 review was facilitated internally. It comprised an online selfassessment questionnaire, followed up by individual meetings between each Director and the Company Secretary and individual meetings between the Chairman and each Director. Directors completed questionnaires about the Board, each Committee they sit on, the Chairman’s performance and their own individual performance. They were encouraged to provide open and honest feedback, explain the ratings they gave and suggest how the Board or Committee could improve.
Outcome Following the review process, the Company Secretary analysed the selfassessment responses and prepared a summary report which also included the findings from his interviews and a series of related points for possible action. The report was discussed with the Chairman and then considered in detail by the Nomination and Governance Committee at its October meeting before being formally presented to the Board in December.
The key outputs from the review included:  �Recognising the Directors’ collective role in setting the ‘tone from the top’ and monitoring how culture was embedded across the Group
 �The Board’s continuing desire to connect with and hear from people in the whole business to support future leaders and key role successors
Chairman The review of the Chairman’s performance was led by the SID, Kevin Parry. It was based on feedback given in the confidential online questionnaires and followed up by individual interviews between the SID and each Director. The questions covered:  The Chairman’s role to lead the Board and encourage effective participation and consensus decision-making
The feedback was summarised into a report which was reviewed by the SID and distributed to all Board members, except the Chairman. The report also contained the reflections from the SID’s individual meetings. The Directors, led by the SID and without the Chairman being present, met to consider the report. They concluded that the Chairman had performed his role effectively, showed strong leadership of the Board, continued to devote significant time to the Group and continues to have sufficient time to carry out his duties. The SID met with the Chairman to pass feedback from the review directly to him.
The formal preparation and induction programme includes:  �Meetings with the executive Directors, key members of senior management, the heads of the operating businesses and our corporate centre functions
When Directors are appointed to the Board, they make a commitment to broaden their understanding of the Group’s business. Our corporate centre monitors relevant external governance and financial and regulatory developments and keeps the ongoing Board training and information programme up to date. During 2016, specific Board sessions took place on the Group’s balance sheet, Solvency II and conduct risk matters. Similarly, the relevant Board Committees received updates on developments in financial reporting, remuneration and corporate governance. Non-executive Directors are actively invited to all parts of the Group’s business in order to familiarise themselves with how our business is conducted and to meet with our people.
At its meetings, the Committee discussed the future leadership and talent needs of the Group and how the current programmes would be revised to take account of the skills and expertise required by the Board and senior management. The programmes recognise the changing shape of the Group, and also identify both the talent available within the Group and the need for external recruitment. The programmes are led by the Chief People Officer, with input from the Chief Executive and supported by the Group Talent and Organisation Development team.
The results of the Committee’s discussions are presented at least annually to the Board. During 2016, the non-executive Directors held specific discussions on Board and executive succession, the results of which fed into the overall plan.
The review included all elements of the SoG as follows:  �General requirements – governance structure, Board decision making documentation, allocation of responsibilities, policy framework, contingency plans, internal review of system of governance, organisational and operational structure
 �Remuneration  �Fit and proper requirements  �Risk management including Own Risk and Solvency Assessment
In carrying out the annual effectiveness review of the SoG, the Risk function liaised with subject matter experts (SMEs) around the business and reviewed and challenged all elements of the SoG to ensure they were fit for purpose and had operated effectively during 2016. The Risk function also produced a report detailing the assurance activity which had been conducted throughout the year in relation to the System of Internal Control and a summary of the key risk items discussed at business unit ERMCs on an ongoing basis throughout the year.
 �Steps have been taken to identify any relevant audit information that the External auditors should be made aware of
the effectiveness review of the SoG, which concluded that there had been no significant failings or weaknesses, were presented to the Audit Committee which subsequently reported this conclusion to the Board.
Communicating with investors The Company continues to maintain and further develop a dialogue with its shareholders. As part of this, our investor relations and Group secretariat teams support communication with investors. During 2016, the Group continued its programme of domestic and international presentations and meetings between Directors and institutional investors, fund managers and analysts. The wide range of relevant issues discussed, in compliance with regulations, at investor presentations and meetings, includes business strategy, financial performance, operational activities and corporate governance. The Chairman has his own investor contact programme and brings relevant issues to the attention of the Board. The Remuneration Committee also consulted with major institutional investors regarding executive remuneration plans during the year. More information on this consultation can be found in the Directors’ remuneration report.
The Board is equally committed to the interests of the Company’s 1.2 million individual shareholders who hold approximately 52% of the Company’s issued shares. Given this large shareholder base, it is impractical to communicate with all shareholders using the same direct engagement model we follow for our institutional investors. The Company has continued to gather and respond to shareholders’ views on the services and means of communication available to them, mainly via the Shareholder Questions mailbox and surveys conducted with shareholders contacting the shareholder helpline. Around 430,000 shareholders receive all communications electronically helping to reduce our environmental impact. We encourage shareholders to use our share portal to access information relating to their personal shareholding and dividend history and around 300,000 have signed up to this service. Share portal participants can also change their details and dividend mandates online and receive tax information electronically. We also encourage our individual shareholders to hold their shares in the Standard Life Share Account where shares are held electronically in a secure environment and 86% of individual shareholders hold their shares in this way.
We publish company profiles to provide a high level introduction to the Group and its divisions. We also distribute a quarterly newsletter featuring articles designed to give investors deeper insight into particular areas of our business including our sustainability strategy. Copies of our Company profiles and newsletters are available on the Investors section of the Group’s website.
The Chairman is not a member of the Audit, Risk and Capital, Remuneration or Investment Committees. He does, however, attend the meetings of all Committees, by invitation, in order to keep abreast of their discussions. Directors’ attendance at the 2016 Board meetings is shown in the table below. The Board met nine times during the year.
Executive Directors Keith Skeoch 9/9 Luke Savage 9/9 Paul Matthews 9/9 Colin Clark 8/9
The Committee Chairmen are happy to engage with you on their reports. Please contact them via questions@standardlifeshares.com
In the interests of transparency we have included the reports from the Chairmen of the key Committees of Standard Life Assurance Limited – the With Profits Committee and the Independent Governance Committee as well as a report from the chairman of the Standard Life Master Trust Co. Ltd. You can read more in Section 12.
4.2 Audit Committee report The Audit Committee assists the Board in discharging its responsibilities for financial reporting, internal control and the relationship with the External auditors.
Dear Shareholder During 2016, the activities of the Audit Committee increased once again. We:  �Undertook the external audit tender, resulting in the recommendation to appoint KPMG LLP for the 2017 financial year
 �Recruited a new Chief Internal Auditor and spent more time discussing the work of Internal audit
 �Updated our approach to considering non-audit services from the External auditors
The Committee schedules six meetings per annum, four of which are coordinated with external reporting timetables. In 2016, there were two extra meetings, of which one was focused solely on the external audit tender and the other on a presentation of Solvency II disclosures.
 �The clarity of the disclosures relating to accounting judgements and estimates
4. Corporate governance statement continued co-ordinated with the Group Audit Committee. During 2016, this Committee considered all key financial and regulatory reporting issues in relation to SLAL. The Audit Committee chairman will regularly attend meetings of the SLAL audit committee and the SLAL audit committee chairman will be invited to report regularly to the Audit Committee.
 �Received sufficient, reliable and timely information from management and the External auditors to enable it to fulfil its responsibilities, recognising a desire to provide focused information in the face of increasing obligations
Audit agenda The Audit Committee has a rolling agenda comprising recurring business, seasonal business and other business.
As recurring business, at every meeting the Committee reviews and discusses:  �Updates from Group Finance on significant financial accounting, reporting and disclosure matters
 �Findings from Internal audit reports and how high priority findings are being followed up by management
 �Reports from the chairmen of the subsidiary audit committees  �Updates on work completed by the External auditors  �Details of non-audit services requested of the External auditors by business units
Other agenda items Other agenda items were aligned to the annual financial cycle as set out below.
 �Solvency II ‘day one’ reporting  �Audit tender (including special meeting)
Financial reporting The Committee supported the recommendation that International Financial Reporting Standards (IFRS) provide a clearer view of the performance and condition of the Group compared to other accounting conventions such as embedded value.
The Committee believes that some Alternative Performance Measures (APMs, which are also called non-GAAP measures) can add insight to the IFRS reporting and help to give shareholders a fuller understanding of the performance of the business. The Committee considered guidance on APMs issued during the year as discussed further in the ‘Fair, balanced and understandable’ section below.
In addition, the Committee considered the form of the viability statement and in particular whether the three-year period remained appropriate and concluded that it did. This reflects both our internal planning cycle and the timescale over which changes to major regulations and the external landscape affecting our business typically take place. In formulating the statement, the Committee used the same information it uses when considering the risks that are taken into account to determine regulatory capital. The Committee recommended the viability statement to the Board.
We received a letter from the Financial Reporting Council informing us that they had carried out a review of our Annual report and accounts 2015 and that there were no questions or queries that the FRC wished to raise. The FRC asked us to note that their letter provides no assurance that our report and accounts are correct in all material respects, and that the FRC’s role is not to verify the information provided but to consider compliance with reporting requirements. The FRC noted that their review is based on our report and accounts and does not benefit from detailed knowledge of our business or an understanding of the underlying transactions entered into.
Accounting estimates and judgements The Committee focused on the disclosure of key accounting estimates and judgements.
We considered the carrying value of intangible assets in a number of areas including the acquisition of Ignis and agreed with management that it was necessary to write them down by £9m (2015: £5m) resulting from the loss of clients and associated revenues. We also considered the valuation of intangibles relating to the acquisition of the Elevate platform and concluded that a customer contract asset should be recognised with a value of £6m. After challenge, we agreed with management that it was appropriate to recognise a ‘bargain purchase’ gain (where the purchase price of an acquisition is less than the net assets acquired) arising from near-term losses in the acquired business. We also discussed capitalisation and useful lives for internally developed software. This software is generally amortised over a period of between 3 and 6 years. In respect of one major software development asset, we challenged management’s view that a 10-year amortisation period was appropriate, concurring with their conclusion following review of supporting evidence. See Note 16 of the Group financial statements for further details relating to intangible assets.
In 2015, we determined that there was a need to disclose a contingent liability in relation to the sale of annuities in prior years. In 2016, taking account of further investigatory work and regulatory developments, we determined that we should book a provision in respect of past sales practices of annuities. We reviewed the estimate of the provision and considered sensitivities on its calculation. We were satisfied that the quantification of £175 million is an appropriate estimate at this time. In addition to the provision, there remain a number of uncertainties in respect of annuities sales practices so we continue to provide disclosures in the contingent liability note.
Fair, balanced and understandable The Committee supported the financial reporting team’s continued review of the Annual report and accounts. Notable improvements in 2016 include the addition of a Supplementary Information section in this year’s report, which provides more transparency around Standard Life’s key alternative performance measures, and enhanced reporting of our business model and strategic objectives in the Strategic report.
Standard Life’s principles To create clarity around what Standard Life means when it talks of being fair, balanced and understandable, a set of principles were developed, which can also act as an organisational definition for each aspect.
 The key messages in the narrative in the 'front half' of the report reflect the financial reporting contained in the financial statements
 The Key Performance Indicators (KPIs) results for the period are consistent with the key messages outlined in the Strategic report
 The report presents the 'whole' story where both successes and challenges experienced during the year and expected in the future are covered
 There is a clear and easy to understand framework to the report which is effective in addressing Standard Life’s objectives, vision, mission and values
 There is a consistent tone across and good linkage between all sections in a manner that reflects a complete story and clear signposting to where additional information can be found
Activities  �An Internal Review Group (IRG) is in place which reviews the Annual report and accounts specifically from a fair, balanced and understandable perspective and provides feedback to our financial reporting team on whether it conforms to our standards. The members of the IRG are independent of the financial reporting team.
 �We provided fair, balanced and understandable training and guidance to all key stakeholders involved in the Annual report and accounts production process
 Three drafts of the Annual report and accounts 2016 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.
The Committee also reviewed the use and presentation of Alternative Performance Measures (APMs) which complement the statutory IFRS results in order to give a more complete view of the performance of the business. This review considered guidelines issued by the European Securities and Markets Authority in the year. As noted previously an additional Supplementary Information section has been added to the Annual report and accounts to explain why we use these metrics and to provide reconciliations of these metrics to IFRS measures where relevant. This section also provides increased transparency over the calculation of reported financial ratios.
Operating profit is a key APM. The Committee particularly considered operating profit policies and ensured that the allocation of items to operating profit were in line with our established accounting policies and were consistent with previous practice. The Committee relied on the verification process for other financial metrics. Processes and controls relating to assets under administration and net flows were also reviewed by Internal audit during the year.
We agreed to recommend to the Board that the Annual report and accounts 2016, taken as a whole, is fair, balanced and can be understood by someone with a reasonably informed knowledge of financial statements and our industry.
The Committee considered actuarial assumptions used for year end 2016 Solvency II reporting, including mortality, persistency and expense assumptions. Similar work was undertaken as for financial reporting (see the Accounting estimates and judgements section above).The Committee reviewed disclosures relating to Solvency II results included in the Strategic report section of this Annual report and accounts, and related assurance reports and was satisfied with the disclosures.
Internal audit The Group has an Internal audit function comprising of approximately 40 people. In addition, there was a co-sourcing agreement with KPMG LLP and this was used to support specific technical reviews. KPMG LLP were selected as External auditors for year end 2017 and have not undertaken any internal audit work after 30 September 2016. Ernst and Young have been engaged to provide co-source support for Internal audit until a tender process is undertaken in 2017. The Chief Internal Auditor reports to the Committee Chairman.
During 2016, approximately 70 internal audits were completed. The Committee considered the reports on:  Readiness for Solvency II reporting for the 2016 year end  Data governance, cyber security incident response and social media  Financial controls and end user applications to be particularly insightful and contributed to the strengthening of the control environment.
During the year, Committee members increased the amount of time spent with senior team members, meeting them before most formal meetings to discuss emerging topics and to advise on the scope of work they would like undertaken. This enhanced the regular dialogue that takes place at least monthly between the Committee chairman and the Chief Internal Auditor.
The appointment The Committee has responsibility for making recommendations to the Board on the reappointment of the External auditors, determining their independence from the Group and its management and agreeing the scope and fee for the audit.
The Committee complies with the UK Corporate Governance Code, the FRC Guidance on Audit Committees with regard to the external audit tendering timetable and the provisions of the EU Regulation on Audit Reform and the Competition and Markets Authority Statutory Audit Services Order with regard to mandatory auditor rotation and tendering. In compliance with those regulations, the Committee tendered the audit for the year ending 31 December 2017, as discussed in the audit tender section below.
The services prohibited by the Policy include:  �Book-keeping or other services related to the accounting records or financial statements
The Policy permits non-audit services to be purchased, following approval, when they are closely aligned to the external audit function and when the external audit firm’s skills and experience make it the most suitable supplier.
Group  �Consultations concerning financial accounting and reporting standards not relating to the audit of the Group’s financial statements  �Sustainability audits/review
PwC has reviewed its own independence in line with these criteria and its own ethical guideline standards. PwC has confirmed to the Committee that following its review it is satisfied that it has acted in accordance with relevant regulatory and professional requirements and that its objectivity is not impaired.
Having considered compliance with our policy and the fees paid to PwC, the Committee is satisfied that PwC has remained independent.
Audit and non-audit fees The Group audit fee payable to PwC in respect of 2016 was £4.1m (2015: £3.7m). In addition fees payable were £0.8m (2015: £0.7m) in relation to the audit of investment funds which are not consolidated by the Group, and £0.8m (2015: £1.6m) was incurred on audit related services. Fees for audit related services are primarily in respect of Solvency II regulatory reporting, client money reporting and the half year review. The reduction in these fees compared to 2015 largely relates to lower Solvency II assurance services and no longer also requiring audit reporting under the previous regulatory regime. The Committee is satisfied that the audit fee is commensurate with permitting PwC to provide a quality audit and monitors regularly the level of audit and nonaudit fees. Non-audit work can only be undertaken if the fees have been approved in advance in accordance with the Board’s policy for non-audit fees. Unless fees are clearly trivial (which we have defined as less than £50,000), the approval of the whole Committee is now required.
Non-audit fees amounted to £1.4m (2015: £1.3 million). This includes tax compliance fees of £0.4m (2015: £0.4m) which are primarily services provided to Standard Life Investments’ funds. Tax advisory fees were £0.2m (2015: £0.1m) and related to areas that the Committee was comfortable did not impact auditor independence. Non-audit fees also included £0.5m (2015: £0.5m) relating to control assurance reports, in particular those provided to Standard Life Investments’ clients, which are closely associated with audit work. Other non-audit services of £0.3m (2015: £0.3m) included a review of internal credit ratings and support provided to fund mergers. The External auditors were considered the most suitable supplier for these services taking into account the alignment of these services to the work undertaken by external audit and the firm’s skill sets.
Further details of the fees paid to the External auditors for audit and nonaudit work carried out during the year in are set out in Note 9 of the Group financial statements.
Audit quality and materiality The Committee places great importance on the quality and effectiveness of the External audit. The Committee looks to the audit team’s objectivity, professional scepticism, continuing professional education and its relationship with management, all in the context of regulatory requirements and professional standards. Specifically:  �The Committee discussed the scope of the audit prior to its commencement
 �The Committee reviewed the annual findings of the Audit Quality Review team of the FRC in respect of PwC’s audits. We requested a formal report from PwC of the applicability of the findings to Standard Life both in respect of generally identified failings and failings specific to individual audits. We were satisfied insofar as the issues might be applicable to Standard Life’s audit, that PwC had proper and adequate procedures in place for our audit.
 �The Committee Chairman had at least monthly meetings with the lead audit partner to discuss Group developments
 �The Committee reviewed and discussed the audit findings including audit differences prior to the approval of the financial statements. See the discussion on materiality in the paragraph below for more detail.
We have discussed the accuracy of financial reporting (known as materiality) with PwC both as regards accounting errors that will be brought to the Committee’s attention and as regards amounts that would need to be adjusted so that the financial statements give a true and fair view. Differences can arise for many reasons ranging from deliberate errors (fraud etc.) to good estimates that were made at a point in time that, with the benefit of more time, could have been more accurately measured. Overall audit materiality has been set at £34 million (2015: £31 million). This equates to approximately 5% of continuing pre-tax operating profit. This is within the range in which audit opinions are conventionally thought to be reliable. To manage the risk that aggregate uncorrected differences become material, we supported that audit testing would be performed to a lower materiality threshold for individual reporting units. Further, PwC agreed to draw the Committee’s attention to all identified uncorrected misstatements greater than £2 million (2015: £2 million). The aggregated net difference between the reported pre-tax profit and the auditor’s judgment of pretax profit was less than £8m which was significantly less than audit materiality. The gross differences were attributable to various individual components of the consolidated income statement and balance sheet. No audit difference was material to any line item in either the income statement or the balance sheet. Accordingly, the Committee did not require any adjustment to be made to the financial statements as a result of the audit differences reported by the External auditors. Work that PwC perform on Solvency II reporting uses a higher level of materiality.
PwC has confirmed to us that the audit complies with their independent review procedures. Last year’s audit was subject to an independent quality assurance process undertaken internally by PwC.
Introduction In our Annual report and accounts 2015, we disclosed the decision to commence a process for the appointment of our External auditors to be completed by Q2 2016, with the chosen firm to be appointed for the 2017 financial year at the earliest. The external audit tender resulted in the proposal, subject to shareholder approval at the 2017 AGM, to appoint KPMG LLP as the External auditors for the 2017 financial year.
PwC was not invited to tender as the maximum time under the new regulations that they could serve as our auditor is three years. The business would be too disrupted by another audit tender in quick succession.
Selection Committee Approve the detail of the audit tender Agree objectives and evaluation criteria Oversee the execution of the audit tender
In order to be successful in the audit tender, the participants were assessed on certain minimum requirements. In addition, a number of selection criteria were applied with specific weightings, as described below: Minimum requirements were in respect of:  Willingness to bid  Audit firm and auditor independence  Commercial scoping, including price range  Ethics and compliance standards  Investigations by regulators  Acceptance of legal terms and conditions
At this stage, one firm withdrew from the process and therefore two firms progressed to the next stages.
Engagement sessions To promote a level playing field, Standard Life arranged a series of structured and targeted engagement sessions with Standard Life’s key business and function leaders. These sessions provided participating firms the opportunity to understand Standard Life’s business and discuss certain subject matter areas in greater depth.
In addition to the engagement sessions the participating firms were given the opportunity to meet with the Chief Executive, the CFO, the Audit Committee Chairman and all of the Audit Committee members.
Technical tests Each of the participants in the tender was given the opportunity to demonstrate its differentiating technical capability relevant to the Standard Life audit in a presentation dedicated to that subject. This meeting was attended by the Audit Committee, the Steering Committee and selected functional specialists.
1 to 1 interviews Each of the participating firms’ lead engagement partners met with the Chairman of the Audit Committee and the CFO, with the Company Secretary in attendance, and answered a series of identical questions related to Standard Life’s financial reporting and wider industry matters.
Final presentations and evaluation Each firm provided a final presentation of their proposal to the Audit Committee in early May 2016, with the Chief Executive and the CFO in attendance.
In early May 2016 the Audit Committee reviewed the evaluation conducted by the Steering Committee and concluded that KPMG LLP was the preferred firm to conduct the Standard Life audit engagement. The Audit Committee also considered the transition arrangements and concluded there were no significant blockers.
Conclusion The Audit Committee during its May 2016 meeting considered the results of the tender and agreed to recommend to the Board that it would propose KPMG LLP for appointment as the External auditors of Standard Life plc at the Annual General Meeting (AGM) for the 2017 financial year. The Committee believed that the strength of the various presentations, and the interaction with the proposed engagement team during the course of the tender supported this decision. This advice resulted in a resolution by the Board to recommend KPMG LLP to shareholders at the 2017 AGM.
The Committee will continue to follow the annual appointment process but does not currently anticipate re-tendering the audit before 2026.
Dear Shareholder The work of the Risk and Capital Committee in 2016 continued to focus on ensuring the effective oversight and independent challenge of the use of capital and the management of risks, in particular the management of conduct risk. The year has been characterised by heightened uncertainty as a result of global economic and political developments as well as further regulatory focus on conduct risk and these factors have provided a keen focus for the Committee. Following regulatory approval for the Group to use an Internal Model for the purpose of calculating its capital requirements for Solvency II reporting, the Committee has also focused on ensuring the Group’s Internal Model remains fit for purpose.
Former member Pierre Danon 3/3 Crawford Gillies 3/3 Isabel Hudson 3/3
Key responsibilities Our ambition of being a world-class investment company results in exposure to a range of risks and uncertainties. Understanding and actively managing the sources and scale of these risks and uncertainties are key to fulfilling this ambition.
In supporting the Company’s work to fulfil its ambition, the Risk and Capital Committee is responsible for overseeing, challenging and advising the Board on:  �The Group’s risk appetite, material risk exposures and the impact of these on the levels and allocation of capital
 �The structure and implementation of the Group’s Enterprise Risk Management (ERM) framework and its suitability to react to forwardlooking issues and the changing nature of risks
 �Changes to the risk appetite framework and quantitative risk limits  �Risk aspects of major investments, major product developments and other corporate transactions  �Regulatory compliance across the Group
 �The Group Views on Risk report which provides a holistic view of the key risks and uncertainties across all of the Group’s businesses and the actions being taken to manage these
(MARS) process  �The impact of global risks on the nature and complexity of our business environment
UK referendum on EU membership  �Overview of the triggers framework used to support the Internal Model  �Update on the FCA thematic review: Meeting
 �Proposed risk and capital disclosures in the half year financial statements
 Update on the status of acquisitions within the 1825 advice business
 �Critical IT applications and services, hot spots and the framework used to manage associated risks
 �Principal risks proposed for disclosure in the Annual report and accounts
 �Review of material supporting the viability statement proposed for inclusion in the Annual report and accounts
 �Initial advice to the Remuneration Committee regarding the delivery of performance in 2016
Risk appetites, exposures and capital The Group continues to use its risk appetite framework to provide a common framework to enable stakeholders to communicate, understand and control the risks that Standard Life is willing to accept in pursuing its business plan objectives and the associated capital required.
Specific items discussed in this context included the impact on the measurement of longevity risk exposure as a result of falling yields and narrowing credit spreads during the year, backlogs in the handling of customer calls, risks arising from material projects undertaken as part of the change programme and risks arising from the suspension of certain property funds during the year.
As highlighted in the table opposite, we received a number of one-off papers during the year which directly supported the Committee in our 76 Standard Life 2016
oversight of risk appetites, exposures and capital. One example of this was the review of third party supplier management provided by the Risk function which provided an assessment of Standard Life’s capabilities relative to external benchmarking data. In reviewing this item the Committee noted the conclusion that Standard Life compared well against the external benchmark in its management of large suppliers and supported proposals for clarifying the ownership of governance, appetite setting and training.
Another paper which supported the Committee in discharging our responsibilities in this area was the paper regarding conduct risk in the context of Workplace pricing policy. This paper responded to a request from the Committee for information on the approach to pricing Workplace propositions and an assessment of why the business was comfortable that any differences in pricing did not give rise to conduct risk. The paper concluded that Workplace provided fair value to customers and highlighted that this conclusion was consistent with the independent views of the Standard Life Master Trust Co. Ltd. and the Independent Governance Committee.
We also received an update from the Standard Life Investments Chief Investment Officer on the market response to the results of the UK referendum on EU membership where we explored the potential impacts of this on investment performance and the risks posed to our fee based business. The results of the referendum were noted as having contributed to momentum-driven trading conditions with the expectation that these conditions would persist until US interest rates increased and there was a return to more cyclical investing conditions. One consequence of the referendum was that a number of UK property funds were temporarily suspended leading to certain unit linked funds being placed into deferral. The Committee received regular reporting on this matter including the additional steps being taken to protect customers’ interests at that time.
 �Reverse stress testing – considering circumstances or severe events, including as a result of operational, conduct and reputational risks, that have the potential to cause the business plan to become unviable
The conclusion of the stress and scenario testing was that Standard Life had high quality regulatory capital and remained solvent under the stress scenarios considered. Furthermore the reverse stress testing exercise confirmed that Standard Life is resilient to extreme events as a result of the robust controls, monitoring and triggers in place to identify events quickly and to help mitigate their escalation.
The analysis highlighted the triggers and actions that could be taken by the business to protect solvency and delivery of the business plan. Overall Standard Life remained solvent but was reliant on reducing expenses to protect profits and dividends under the assumed stressed conditions.
Enterprise Risk Management (ERM) framework The ERM framework is used to identify, assess, control and model the Group’s risks and consists of five elements:  �Risk control processes  �Strategic risk management  �Risk and capital models  �Emerging risks  �Risk culture
Our view of the ERM framework is also informed by the Chief Internal Auditor’s assessment of the internal control environment related to the management of risk and capital. The Committee receives semi-annual assessments for Standard Life Investments and our Pensions and Savings business with the most recent assessments highlighting both businesses had maintained a stable control environment in the face of challenging external conditions.
Strategic risk management within the context of the ERM framework refers to the process of optimising risk-adjusted returns and for evaluating and prioritising strategic options. This takes place as part of the Group’s ORSA reporting process whereby the Risk function provides a forward-looking assessment of the Group’s risk and capital position as a result of the business strategy and business plan. The operation of this process was observed during the year with the Committee reviewing this reporting when assessing the business plan. Aligned to this, the Committee also received a presentation from the Finance function in 2016 outlining work being undertaken to enhance the optimisation of the balance sheet and ensure the optimal use of capital.
Solvency II was implemented at the start of 2016. The Committee has continued to keep under review the methodology of the Group’s Internal Model which was developed in response to the new regime and which represents a key component within the risk and capital models section of the ERM framework. This has included reviewing the key elements of design, the use of significant assumptions and expert judgements, key sensitivities, significant limitations and uncertainty in the model.
Scrutiny of with profits risk and capital matters The Committee is advised of relevant updates on with profits risk and capital matters through content in the Group Chief Risk Officer’s regular risk reporting. In addition, mechanisms exist for the Chairman of the SLAL With Profits Committee to highlight specific matters to the Committee. No matters were highlighted to the Committee during the year.
As part of the tail risk analysis looking into a possible severe financial stress prompted by falling oil prices and record low growth in China the Risk function explored the potential impact on the with profits funds. The analysis presented to the Committee highlighted that, in response to a tail risk event such as the one investigated, there were a range of triggers and actions available within the with profits funds to protect the solvency of these funds.
Business Risk Reviews and other reporting The Committee has continued to receive a number of reports from the Business Risk Review team in 2016. These reports provide the Committee with an independent assessment from the Risk function of aspects of the business that could have a material impact on long-term profitability or delivery of strategy, or that introduce a material new risk. Business Risk Reviews presented to the Committee in 2016 have included:  �Standard Life Investments, liability aware insurance proposition – assessing the readiness of the business to provide third party insurance asset management
 �Strategy for the Pensions and Savings Workplace business – assessing the threats and uncertainty affecting the strategy
 �1825 business readiness review – assessing the defined target operating model and adequacy of the framework for managing risks including conduct risk
These Business Risk Reviews reports supported the Committee in allowing informed discussion regarding the progress of these propositions and businesses and included various recommendations aimed at supporting the businesses and propositions achieve their respective objectives. The Committee endorsed the recommendations that were presented.
During the year, the Committee has reviewed and challenged due diligence risk assessments relating to proposed material strategic transactions. This included considering the risks relating to the acquisition of Elevate and the risks associated with the proposed combination of the life insurance businesses of HDFC Life and Max Life.
Governance changes As already highlighted in this report, with effect from 2017 risk and capital committees have been established within SLAL, Standard Life Savings Limited and AXA Portfolio Services Limited.
This Committee receives and reviews minutes from the SLAL risk and capital committee and any other reports escalated by the chairman of that committee. Arrangements also exist for the Committee Chairman to attend the SLAL risk and capital committee. Corresponding arrangements have been put in place between the SLAL risk and capital committee and the risk and capital committees for Standard Life Savings Limited and AXA Portfolio Services Limited.
Given the Committee’s existing responsibilities regarding oversight of Group companies, the decision to stand down the SLIH Audit, Risk and Compliance Committee in 2016 has not significantly impacted the responsibilities of this Committee.
Committee effectiveness The Committee reviews its remit and effectiveness annually. In 2016 this review was completed via an internal self-assessment questionnaire.
For 2017, the review highlighted an expectation that to continue to operate effectively the Committee would need to remain focused on evolving in response to a range of factors including the changing risk profile of the Group as well as the increased regulatory focus on matters such as conduct risk.
5. Directors’ remuneration report 5.1 Remuneration Committee Chairman’s statement This report sets out what we paid the Directors of Standard Life plc in 2016 and how we will pay them in 2017, together with an explanation of what the Remuneration Committee considered in reaching its recommendations. Where tables and charts in this report have been audited by PricewaterhouseCoopers LLP we have marked them as ‘audited’ for clarity.
The report is structured in the following sections:  This statement which sets actual remuneration for 2016 and proposed remuneration for 2017 for our Directors in the context of Group performance
 An ‘at a glance’ summary of the key remuneration decisions for 2016 on page 83
Dear Shareholder On behalf of the Board I am pleased to present the Remuneration Committee’s report on Directors’ remuneration for the year ended 31 December 2016. This sets out how our remuneration policy, adopted at our 2015 AGM, was applied during 2016.
Looking back at the 2016 AGM When we appointed Keith Skeoch to replace David Nish as Chief Executive in August 2015 the Remuneration Committee restructured his pay to reflect his new responsibilities of running both an investment business and a life assurance business. We believe in the alignment of reward and performance and compared to his predecessor, David Nish, the variable component of Keith's pay was increased, the deferral period of the shares was lengthened and the shareholding requirements were increased. His basic salary was increased but was positioned considerably below that of his predecessor. We also set stretching performance targets, so that the highest levels of reward are only delivered for exceptional performance.
However, it became clear in the lead up to the 2016 AGM that views on executive remuneration had continued to evolve. Whilst a number of our shareholders were comfortable with our proposals, others had concerns with elements of our executive Director remuneration. The concerns raised by these shareholders were in respect of the terms for new appointments to the Board, Keith’s promotion, and the termination arrangements for David Nish. As such, prior to the 2016 AGM, the Chairman and the Director of Group Reward and Employment Policy held discussions with a number of our largest investors and also with the Investment Association (IA) and Institutional Shareholder Services Inc. (ISS) to understand these concerns.
How our remuneration policy was applied in 2016 2016 Group annual bonus The bonus award is based on Group performance and personal performance. The relative weightings are 90% based on Group performance and 10% on personal performance for Keith Skeoch. For all other executive Directors their awards are based 80% on Group performance and 20% on personal performance. The Group performance element is based on performance against four quadrants weighted as follows:  Financial – 70% – Operating profit before tax – Operating return on equity (RoE)
 Strategic/delivery/process – 10% – Management of the Group’s strategy and its deployment in each business unit including the annual investment programme, any corporate actions and the efficiency of the Group’s balance sheet
As part of the discussion of the scorecard rating the Committee considered the experience of our customers and clients including the deterioration in our net promoter score and the outcome of the Financial Conduct Authority’s thematic review into the sale of non-advised annuities and the provision we have made in our accounts for the costs that we may incur in relation to this. Having considered the experience of our customers and clients the Committee reduced the score for the customer quadrant from 3 to zero. This change took the overall score from 4.625 to 4.325.
 79% of the Chief Financial Officer's maximum potential bonus (119% of salary)
 80% of the Global Client Director’s maximum potential bonus (141% of salary)
As well as determining the bonus for executive Directors, the Group annual bonus scorecard is also included in the determination of bonus for all employees in central supporting functions, and in the Pensions and Savings business, to provide alignment in reward and performance at all levels of the company.
Until now we have disclosed our bonus threshold and maximum in the Directors’ remuneration report published in the year following the bonus payment. In line with best practice, increased transparency and to demonstrate further the alignment of the Company’s performance and remuneration, the Committee has decided to accelerate the disclosure of the bonus targets. As such, the threshold, target and maximum for the financial measures used to determine the 2016 Group annual bonus payments are detailed on page 88.
2014 LTIP Having considered performance over the past three financial years against the three-year cumulative targets set in 2014, as set out in the ‘at a glance’ section, the Remuneration Committee also approved the vesting level of the 2014 Executive Long-Term Incentive Plan as 31.02% and awards granted under the Standard Life Investments Long-Term Incentive Plan will vest at 62.44%.
In relation to the vesting of the 2014 Executive LTIP, on a purely arithmetic basis the vesting level would be 41.02%. However, when determining the final vesting level for this award the Committee considered performance during the three-year performance period, including the outcome of the Financial Conduct Authority’s thematic review into the sale of non-advised annuities and the provision we have made in our accounts for the costs that we may incur in relation to this. Considering these factors the Committee determined that a reduction in the vesting level by circa 25% to 31.02% more appropriately represented the overall performance of the company.
Board changes As announced, on 26 January 2017 Barry O’Dwyer will join the Board on 1 March 2017 in the role of Chief Executive Pensions and Savings. From his appointment to the Board his base salary will be £525,000 per annum and his maximum bonus will be 150% of base salary. For the 2017 Executive LTIP the Committee is proposing to grant an award of 120% of base salary.
2016/2017 policy implementation This year the Committee has decided not to increase the salaries for any of the executive Directors, with salary increases only being awarded by exception across our senior cadre of employees. This is to ensure that the available pay review budget is targeted towards more junior employees, for whom base pay forms a significant proportion of their total compensation.
As in previous years we will continue to set stretching targets for the Group annual bonus and the Executive LTIP to ensure that the maximum opportunity will only be earned for exceptional performance. The financial targets for the 2017 Group annual bonus will be disclosed at the end of this performance year in the Annual report and accounts 2017. The threshold and maximum for the proposed grants under the 2017 Executive LTIP plan are detailed on page 98.
Looking forward to 2018 As the strategy and structure of Standard Life continues to evolve, and we continue our progress to become a world-class investment company, we will continue to review the remuneration arrangements for our executive Directors and the performance measures to ensure that the awards are aligned to the company’s strategy and structure and the experience of our shareholders. During 2016 we commenced a fundamental review of our remuneration structures and are actively considering a major simplification of these for 2018. In the development of our new remuneration policy the Committee wants to consider as wide a range of views as possible and to this end has discussed research on executive remuneration and consulted an academic in this field. We will present a new Directors’ remuneration policy to shareholders at the 2018 AGM. We will consult the Company’s major institutional investors in good time as part of this review.
Key performance measures The tables below illustrate outcomes against the Group’s key performance measures relevant to 2016 remuneration. The annual bonus outcome is driven by assessment of performance against a scorecard, which includes financial and non-financial measures and personal performance. The Executive LTIP targets measure Group performance over a three-year period against a range of financial measures. The Standard Life Investments LTIP target measures Standard Life Investments’ consolidated cumulative three-year third party EBITDA performance.
Cumulative group operating profit before tax £1,795m £1,967m 41.02% Cumulative group net flows £15.5bn £3.2bn 0% Final vesting after performance adjustment 31.02% Standard Life Investments LTIP 2014 Performance Measure Threshold
60% of target 109.96% of target 62.44% of maximum 1 Executive LTIP 2014 weighted 70% cumulative group operating profit before tax, and 30% cumulative group net flows.
Operating profit is not defined under IFRS and is therefore deemed an alternative performance measure.
Keith Skeoch 3,981 2,746 Luke Savage 2,424 1,733 Paul Matthews 2,012 1,631 Colin Clark 2,418 1,979
The chart illustrates the elements of remuneration that contribute to the single figure of remuneration.
Purpose and link to strategy To provide market competitive monetary and non-monetary benefits, in a cost effective manner, to assist employees in carrying out their duties efficiently.
Core benefits include health screening, private healthcare, death in service protection, disability benefit and reimbursement of membership fees of professional bodies
Purpose and link to strategy To promote share ownership by all employees to drive performance aligned to the Company’s shareholders’ interests.
Maximum opportunity The maximum opportunity is in line with all other employees and is as determined by the prevailing HMRC opportunity.
Purpose and link to strategy To provide a competitive, flexible retirement benefit in a way that does not create an unacceptable level of financial risk or cost to the Group.
Maximum opportunity Employer contribution into the Group’s defined contribution pension plan of up to 32% of salary. Alternatively a cash allowance of up to 30% of salary.
To date, 50% of any bonus above 25% of salary has been deferred into shares which vest two years from the date of award.
Maximum opportunity The maximum award opportunity in respect of any financial year is based on role and is up to 175% of salary.
Performance measures Performance is measured against a range of key financial metrics, strategic, customer and people indicators and personal performance.
Purpose and link to strategy To reward participants for the delivery of the Group’s goals of driving shareholder value through customer experience including measures such as cumulative Group operating profit and cumulative Group net flows.
Awards are subject to review by the Remuneration Committee and the Risk and Capital Committee at the end of the three-year performance period to confirm that vesting of the award is appropriate.
The maximum award possible under the plan rules is 500% of salary. No award in excess of 400% of salary will be made to an executive Director under this policy.
 �Cumulative Group net flows weighted at no more than 50% of the award
There is currently no intention to make further awards under the following plans to executive Directors:  �Standard Life Investments personal and company bonus plans – last operated (for an executive Director) for the Chief Executive Standard Life Investments, before his appointment to his role as Chief Executive in August 2015.
 �Standard Life Investments’ Long-Term Incentive plan – last award (to an executive Director) made in March 2015 to the Chief Executive, Standard Life Investments before his appointment to his new role
 �Group Long-Term Incentive Plan – was replaced by the Executive LTIP at the 2014 Annual General Meeting and the last awards under this plan were made in March 2013
 Remuneration arrangements for new appointments will typically align with the remuneration policy approved by shareholders
 �In the case of internal promotions, the Remuneration Committee will honour existing commitments entered into before promotion
Remuneration Salary, pension contributions and core benefits are specified in the contracts and are treated as described in the policy table.
The remuneration policy for loss of office for executive Directors is as follows: Provision Policy
Awards under all-employee share plans vest in accordance with their terms, under which good leavers are entitled to shares on or shortly after cessation. Other leavers would usually forfeit awards.
In certain circumstances, such as the individual’s death, the Remuneration Committee retains the discretion to accelerate payments if it is considered appropriate.
Typically, for other leavers, rights to annual bonus and outstanding long-term incentive awards will be forfeited.
Remuneration Committee discretion in relation to future operation of the remuneration policy In the event of a variation of share capital, demerger, special dividend or similar event, the Remuneration Committee may adjust or amend awards in accordance with the rules of the relevant plan.
The Remuneration Committee retains the discretion to amend the performance target in exceptional business or regulatory circumstances. If discretion is exercised in this way, the Remuneration Committee will consult with major shareholders as appropriate.
5. Directors’ remuneration report continued 5.3 Annual remuneration report – what we did in 2016 for executive Directors Single total figure of remuneration – executive Directors (audited) The following table sets out the single total figure of remuneration for each of the executive Directors who served as a Director at any time during the financial year ending 31 December 2016. Where a Director has been appointed or stepped down during the year shown the remuneration included in the table is that paid for the period for which they were an executive Director.
3 The value reported for 2015 has been restated to reflect the value of the shares that vested using the share price on the vesting date rather than the estimate provided in the Annual report and accounts 2015. The value at vesting was £185k, £2k and £6k lower than the estimate for Keith Skeoch, Paul Matthews and Colin Clark respectively due to a reduction in the share price.
4 Keith Skeoch and Luke Savage participate in the Standard Life Sharesave Plan. Keith Skeoch, Luke Savage and Paul Matthews participate in the Standard Life (Employee) Share Plan – the maximum annual award of matching shares in 2016 was £475.
5 Paul Matthews and Colin Clark were appointed as Directors on 1 November 2015 and the figures reported for their long-term incentive awards in both 2015 and 2016 represent the value of the proportion of the award which relates to the period of time in the performance period for which they were executive Directors.
Year ended 31 December 2015 The financial targets used in the determination of the 2015 Group annual bonuses and not previously disclosed are shown in the following table. Those bonuses were paid in March 2016 and were disclosed in the Annual report and accounts 2015.
Operating profit before tax £645m £680m £715m £723m Operating return on equity 13.5% 14.3% 15.0% 15.2%
Non-financial measures The non-financial measures used for the determination of the annual bonus plans for 2016 have not been disclosed in this Directors’ remuneration report as the Board deems that, the disclosure of these could seriously prejudice the Group’s business.
Detailed disclosure is provided on key achievements in the year to provide shareholders with context on the level of performance delivered in 2016.
In determining the bonus awards for personal performance the Remuneration Committee considered individual performance with regard to the Company’s overall strategic priorities.
Keith Skeoch Keith’s performance has been reviewed in relation to both aspects of his role: as Chief Executive and Chief Executive, Standard Life Investments. The comments below cover both roles:  Good increase in pace of delivery across all key aspects of our strategy to become a world-class investment company
Luke Savage  Effective management of our strong capital position to support our progressive dividend policy and strategic investments and acquisitions to grow our business
 Improvements in the operational efficiency of the company and continued progress on reducing the cost/income ratio whilst focussing on the growth of the business
 Continued growth of 1825 business, our financial planning and personal tax advice business, with three further acquisitions broadening our reach across the country and increasing total assets under advice
 Expansion of our liability aware range with launch of our unique Integrated Liability Plus Solution and enhanced choice of investment fund with 16 funds launched during 2016 across a range of different asset classes
The key achievements, scores for each scorecard element and overall score for the 2016 scorecard are shown in the following tables: Standard Life 2016 89
Strong financial performance with operating profit before tax and operating return on equity both above maximum.
Maintain consistent and effective progress with the IT programme of work.
Enhance collaboration and co-operation across the Group to support customer and client needs.
 Sponsorship with a direct link to our shared values which includes our continued partnership with Sir Andy Murray, extended Ryder Cup partnership and announced sponsorship of the British and Irish Lion’s team and the tour to New Zealand
 Announcement of Standard Life Foundation (May 2016), a charity that will focus on independent research to strengthen financial well-being and resilience in the UK and subsequent appointment of the Board of Trustees
Score (out of 5) 3 revised to 0 (see the explanation in the Remuneration Committee Chairman’s statement)
Performance measures Develop our organisational capability by building the environment, the resources, and the capabilities we will need through developing the right behaviours.
This will include:  Ensuring the environment we work in creates a culture of continuous improvement  �Improving the employee effectiveness scores for enablement and engagement as measured by the Group engagement survey ‘InterAction’ and other supplementary indicators  �Developing powerful and consistent leadership, identifying and growing tomorrow’s leaders  �Developing and actively managing robust and future facing plans to ensure sustainable succession for critical roles  �Embedding our remuneration and performance management strategy to encourage high performance and the delivery of our business objectives
 Developed our people managers with a tailored 12-month training programme and encouraged our people to develop their skills through external board appointments
 Continued commitment to youth employment. Awarded Investors in Young People Gold accreditation and increased the percentage of employees aged 25 and under to 8% in the UK and Ireland. Continued our work with the Edinburgh Guarantee Scheme, providing young people with paid work experience for six months and the Investment2020 scheme offering 12-months paid work experience placements.
Based on performance against each of the four Group performance elements and considering the performance of the Group as a whole, the Remuneration Committee approved a rating of 4.325 out of 5 (reduced from 4.625 to 4.325 as explained in the Remuneration Committee Chairman’s statement) for performance against the Group annual bonus scorecard during 2016.
Executive Long-Term Incentive Plan (Executive LTIP) The Executive LTIP has been used to grant awards since May 2014.
2014 Executive LTIP awards vesting in respect of performance ending in 2016 (audited) Awards were made in March 2014 of 200% of salary to Keith Skeoch and in September 2014 of 125% of salary for Luke Savage. An award was also granted to Paul Matthews who was not a Director when the grant was made in March 2014. The original targets for the 2014 Executive LTIP award were adjusted to reflect the impact of corporate activities in 2014 and 2015. Further details of the adjustments made are provided in the Annual report and accounts 2014 from page 92 onwards.
Before an award can vest, the Risk and Capital Committee is required to verify to the Remuneration Committee that the level of vesting was not as a result of behaviour that has exposed the Group to undue risk. If the Risk and Capital Committee determines that the Group has been exposed to undue risk, the Remuneration Committee will take this into account when determining the level of vesting.
The following table sets out performance against targets for the 2014 award: Performance level Below threshold Threshold Target Maximum
The table below summarises the key details of the awards made in 2016: Basis of award (% of salary) Face value at grant
Keith Skeoch1 400% £2,800,000 Luke Savage 125% £768,750 Paul Matthews 120% £756,000 Colin Clark 300% £1,800,000 Nature of award Nil cost option Performance criteria
Vesting: 0% Cumulative Group operating profit before tax Threshold: £2,130m Cumulative Group net flows Threshold: £30.8bn
The requirement (increased in respect of the Chief Executive in 2015) is that the Chief Executive acquires and maintains a shareholding valued at 500% of salary. The other executive Directors are required to acquire and maintain a shareholding valued at 200% of salary.
The shares which the executive Directors are required to hold to reach their respective shareholding requirement are based on the net vested shares arising from the exercise of an award. Net vested shares are those shares which the executive Director would retain after selling sufficient shares to cover the costs of the income tax and employee national insurance payable when the award is exercised. Executive Directors will be required to hold shares arising from the following awards:  �100% of the net vested shares that could be acquired from the exercise of awards granted from May 2014 onwards or the date of their appointment if later (this includes the awards arising from the deferral of annual bonus and awards granted under the Executive LTIP and the Standard Life Investments LTIP)
Keith Skeoch and Paul Matthews were subject to previous shareholding guidelines and from 2014, when the requirement was introduced, to a shareholding requirement. Luke Savage became subject to the requirement on appointment. As Colin Clark was not subject to the previous shareholding guidelines, under the requirement he is only required to hold shares from awards granted in 2016 onwards.
Total value1 of shares owned at 31 December 2016 as a %
December 2016 to 1 The closing share price at 31 December 2016 used to determine total value was 372.0p.
2 This comprises deferred bonus awards made in 2015 and 2016 (excluding shares to be awarded in lieu of dividend equivalents) and options granted under the Standard Life Sharesave Plan. This includes the 2015 deferred bonus award granted to Paul Matthews before his appointment as executive Director on 1 November 2015.
3 This comprises exercises of awards made under the 2013 Group and Standard Life Investments LTIPs and deferred share awards granted in 2014 in respect of the 2013 Group bonus plan, and includes shares awarded in lieu of dividend equivalents.
Executive and Standard Life Investments LTIPs Awards are subject to vesting conditions that are based on continuous employment and on satisfying corporate performance targets over the performance period. All awards lapse six months after the expected first date of exercise and carry the right to receive rolled-up dividends, but only to the extent awards vest. All awards were granted under the Executive LTIP unless otherwise noted.
Total value on exercise date - 492,826 27,959 - - 520,785 1 The 2013 Group LTIP vested at 40.77% and the 2013 Standard Life Investments LTIP vested at 84.20%. 2 Based on the average share price for the five dealing days immediately before the awards were granted. 3 Awards granted under the Group LTIP. 4 Awards granted under the Standard Life Investments LTIP. 5 The shares shown against the awards granted in 2013 lapsed as a result of performance outcome. Following grant, the 2016 award was reduced from 500% of salary to 400% of salary and the corresponding number of shares lapsed.
Shares in lieu of rolled-up dividends from grant to end of year Exercised during year Lapsed during year At end of year
Shares in lieu of rolled-up dividends from date of grant to end of year
Total value on exercise date 17,237 925 - - 18,162 1 Based on the average share price for the month of December preceding the date on which the options were granted.
Keith Skeoch was granted an option under this plan on 16 September 2016 over 5,292 Standard Life plc shares exercisable from 1 November 2021. The exercise price for these options is £2.834.
Executive Directors’ external appointments Subject to the Board’s approval, executive Directors are able to accept a limited number of external appointments to the boards of other organisations and can retain any fees paid for these services. Significant executive Director appointments held during the year are shown below: Executive Director Role and Organisation 2016 Fees
Paul Matthews Member of the board of the Association of British Insurers Member of the Practitioner Panel of the Financial Conduct Authority £nil
Loss of office payments (audited) No loss of office payments were made in the year.
Payments to former directors (audited) Payments made to former directors during the year (if not reported elsewhere) will be reported here if they are in excess of £20,000.
Details of the nature of the payments to be made to David Nish in 2016 following his stepping down as Chief Executive in August 2015 were set out in the Annual report and accounts 2015. The bonus to be paid in March 2017 in respect of his employment in the period 1 January 2016 to 31 March 2016 amounts to £294,860. This has been determined with reference to company performance as measured by the Group annual bonus scorecard. No further cash payments are to be made. In addition the value of his 2014 Executive LTIP award at 31 December 2016 following the application of the performance outcome is £388,336 (valued using the average Standard Life plc share price for the quarter 1 October 2016 to 31 December 2016 in line with the approach taken in the single figure disclosures for Directors). This award does not vest until 20 May 2019.
Pay compared to performance The graph shows the difference in value at 31 December 2016 between having invested £100 on 1 January 2009, respectively, in Standard Life plc and in the FTSE 100. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as the comparator index because we consider it to be the widely recognised benchmark for large companies in the UK. Standard Life plc is a member of this FTSE grouping.
The following table shows the single figure of total remuneration for the Director (and in the case of 2015 the Directors) in the role of Chief Executive (CE) for the same eight financial years as shown in the graph above. Also shown are the annual bonus awards and LTIP awards which vested based on performance in those years.
1 The annual bonus award rates against maximum opportunity are in respect of the Group annual bonus plan. 2 The figure shown is the remuneration shown in the single figure table on page 88, time apportioned for the period 5 August 2015 to 31 December 2015. Annual bonus award rates against maximum opportunity and the long-term incentive plan vesting rate relates to the Group annual bonus and Group LTIP.
3 David Nish ceased to be Chief Executive with effect from 5 August 2015 and the figure reported is that relating to the period 1 January 2015 to 5 August 2015.
Relative importance of spend on pay The following table compares what the Group spent on employee remuneration to what is paid in the form of dividends to the Company’s shareholders. Also shown is the Group’s operating profit before tax from continuing operations which is provided for context as it is one of our key performance measures: Remuneration payable to all Group employees (£m) 635 596 6% Dividends paid in respect of financial year (£m) 362 389 7% Operating profit before tax (£m) 665 723 9%
Percentage change in remuneration of the director in the position of Chief Executive The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the year ended 31 December 2015 and the year ended 31 December 2016 for the Chief Executive compared to the average UK-based Group employee. The Committee considers these appropriate comparables as the Chief Executive is UK-based and the largest number of Group employees are based in the UK.
Keith Skeoch £700,000 Luke Savage £615,000 Paul Matthews £630,000 Colin Clark £600,000 Barry O’Dwyer1 £525,000 1 From the date of his appointment to the Board.
Keith Skeoch 75% 175% Luke Savage 65% 150% Paul Matthews1 65% 150% Colin Clark 75% 175% Barry O’Dwyer2 65% 150% 1 The bonus will be apportioned to 31 August 2017. 2 From the date of his appointment to the Board.
For Keith Skeoch, 90% of the award will be based on Group performance and 10% on personal performance. For the other executive Directors and for Barry O’Dwyer from appointment, 80% of the award will be based on Group performance and 20% on personal performance.
Pension Cash allowances of 25% of salary are paid in lieu of pension contributions to all executive Directors.
Keith Skeoch 400% £2,800,000 Luke Savage 125% £768,750 Colin Clark 300% £1,800,000 Barry O’Dwyer 120% £630,000 Performance criteria
Cumulative Group operating profit before tax (80%) and cumulative Group net flows (20%) for the threeyear period ended 31 December 2019
Vesting: 100% Cumulative Group operating profit before tax Maximum: £2,725m Cumulative Group net flows Maximum: £45.9bn 5.4 Annual remuneration report – what we did in 2016 for non-executive Directors Single total figure of remuneration – non�executive Directors (audited) The following table sets out the single total figure of remuneration for each of the non-executive Directors who served as a Director at any time during the financial year ending 31 December 2016. Non-executive Directors do not participate in bonus or long-term incentive plans and do not receive pension funding.
Total remuneration for the year ended 31 December £000s 1 Sir Gerry Grimstone received an allowance of £15,000 towards his business related accommodation costs in Edinburgh in addition to his Chairman’s fees. Other amounts reported relate to expenses such as travel and accommodation expenditure incurred on Group business. While these payments are the reimbursement of expenses and not benefits, they are included as being a payment which is subject to tax.
2 Appointed with effect from 4 July 2016. 3 Appointed with effect from 1 November 2015. 4 Stepped down from the Board following the conclusion of the AGM on 17 May 2016. 5 Resigned with effect from 24 June 2016. 6 Appointed Senior Independent Director following the conclusion of the AGM on 17 May 2016. 7 Appointed chairman of Standard Life Assurance Limited on 1 April 2016.
Period of appointment Three-year term which can be extended by mutual consent and is subject to annual re-election by shareholders in line with Company’s articles of association and the UK Corporate Governance Code.
Remuneration Fees (as set out on the following page). Reimbursement of travel and other reasonable expenses incurred in the performance of their duties. No pension, annual bonus or other incentive payment permitted.
Total number of shares owned at 31 December 2016 or date of cessation if earlier
Implementation of policy for non�executive Directors in 2017 Following a review of non-executive Director fees, no changes were proposed for 2017.
2 The Chairman’s fee is inclusive of the non-executive Directors’ core fee and no additional fees are paid to the Chairman where he chairs, or is a member of, other committees/boards. In 2017 the Chairman will also receive £15,000 (2016: £15,000) as an allowance towards his business related accommodation costs in Edinburgh.
3 For non-executive Directors, individual fees are constructed by taking a base fee and adding extra fees for chairing committees and subsidiaries’ boards where a greater responsibility and time commitment is required.
 �The design and targets for any employee share plan  �The design and targets for annual cash bonus plans throughout the
The terms of reference are published within the Board Charter on our website at www.standardlife.com/annualreport
Committee effectiveness The Committee reviews its remit and effectiveness annually. The 2016 review was carried out via an internal self-assessment questionnaire. The review concluded that the Committee remained effective and fulfilled its remit .
A representative from Deloitte LLP attends, by invitation, all Remuneration Committee meetings to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Remuneration Committee. Outside of the meetings, the Remuneration Committee’s Chairman seeks advice on remuneration matters on an ongoing basis. As well as advising the Remuneration Committee, Deloitte LLP also provided tax, risk and data advice to the Group during the year. Deloitte Total Rewards and Benefits is an investment adviser to the trustees of the Standard Life Staff Pension Scheme. In addition, Standard Life is the current appointed provider for the Defined Contribution Master Plan that Deloitte LLP provides for its employees and Deloitte LLP is one of the employee benefit consultants through which Standard Life has been appointed to provide defined contribution arrangements for Deloitte’s clients through competitive tender.
Fees paid to Deloitte LLP during 2016 for professional advice to the Committee were £179,800. This reflects all the fees paid to Deloitte LLP in relation to remuneration matters.
Where appropriate, the Remuneration Committee receives input from the Chairman, Chief Executive, Chief Financial Officer, Chief People Officer, Group Reward and Employment Policy Director, Group Chief Risk Officer and the Head of Corporate Governance at Standard Life Investments. This input never relates to their own remuneration.
As noted in Section 2 Sir Gerry Grimstone is an independent nonexecutive board member of Deloitte LLP. He was appointed to this role to represent the public interest following a recommendation by the Financial Reporting Council that all major audit firms should have such representation. His remuneration for that role is a fixed sum and has no relationship to Deloitte’s business activities. Both the Chairman and the Remuneration Committee recognised the need to ensure there is no conflict of interest arising from the appointment process. The Remuneration Committee was satisfied at the date of the appointment that the nature of the Chairman’s appointment to Deloitte LLP did not create a conflict of interest. The Remuneration Committee continues to monitor this position and are satisfied that the continuing appointment does not give rise to a conflict of interest. Deloitte LLP operates appropriate safeguards to maintain the independence of its advice, for example, the team responsible for providing advice to the Remuneration Committee are not rewarded for cross-selling non-related services to Standard Life and work is contracted for independently from work performed by the rest of the firm. Whilst Sir Gerry Grimstone has access to the Remuneration Committee adviser to the extent that he is invited to attend Remuneration Committee meetings, he does not meet with the Remuneration Committee adviser, other than in those meetings, to discuss matters relating to Standard Life. Communication between Deloitte LLP and the Remuneration Committee is on instruction from the Remuneration Committee Chairman.
The Committee’s work in 2016 An indicative breakdown as to how the Remuneration Committee spent its time is shown below:  �2015 Directors’ remuneration report  �2015 bonus payments and 2013 LTIP outcomes  �2016 annual bonus and LTIP targets  �2016 salaries and LTIP awards  �Investor feedback on executive Directors’
 Mid-year review of performance against target for annual bonus and LTIP awards
 Review of bonus and LTIP terms  Regulatory update on in-force and pending regulations impacting different parts of the Group  Investor consultation on executive remuneration
 Investor feedback on executive remuneration  2016 Directors' remuneration report  Governance of incentive arrangements, including sales incentives, in line with regulatory compliance
Shareholder voting We remain committed to ongoing shareholder dialogue and take an active interest in voting outcomes. Where there are substantial votes against resolutions in relation to Directors’ remuneration, the Remuneration Committee seek to understand the reasons for any such vote, and will detail here any actions in response to it.
The remuneration policy was not subject to a vote at the 2016 AGM and the following table sets out the outcome of the vote on the remuneration policy presented at the 2015 AGM on 12 May 2015.
The Remuneration Committee acknowledges that a significant number of votes were cast against the 2015 Directors’ remuneration report notwithstanding that all remuneration paid and awarded was within the approved policy. We understand that a key concern was the increase in the quantum of variable deferred remuneration awarded to the Chief Executive in 2016.
5. Directors’ remuneration report continued generally. The points raised by investors at these meetings were discussed with the Remuneration Committee and have informed our 2017 remuneration decisions and our consideration of a new remuneration policy to be presented at the 2018 AGM. Further detail can be found in the Remuneration Committee Chairman’s statement.
 �The Standard Life Sharesave Plan which allows UK tax resident employees to save towards the exercise of options over Standard Life plc shares with the option price set at the beginning of the savings period at a discount of up to 20% of the market price. Sharesave invitations have been made annually since 2011 to UK employees and, as at 31 December 2016, over 3,300 employees in the UK were saving towards one or more of the Sharesave offers.
 �The Standard Life Ireland Sharesave Plan which launched in August 2012. Invitations have been made annually from August 2012. As at 31 December 2016, over 100 employees were saving towards one or more of the Sharesave Ireland offers.
Share dilution limits The Executive LTIP, the Group LTIP, the Standard Life Investments LTIP, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan and the Standard Life Ireland Sharesave Plan contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2016, the Company’s standing against these dilution limits was:  �4.6% where the guideline is no more than 5% in any 10 years under all discretionary share plans in which the executive Directors participate (Executive LTIP and Standard Life Investments LTIP)
As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP and Standard Life Investments LTIP and the Standard Life (Employee) Share Plan. On 31 December 2016, the number of unallocated shares held within these trusts was 3,611 in respect of the Standard Life (Employee) Share Plan. In addition, the trusts held 1,287,431 shares acquired to satisfy deferred bonus awards, Executive LTIP, Group LTIP and Standard Life Investments LTIP awards and other share plan awards. Of these shares 66,131 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is significantly less than the 5% best practice limit endorsed by the IA.
The Directors are responsible for preparing the Annual report and accounts 2016. It is also their responsibility to state that they consider that the Annual report and accounts 2016, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Under the Companies Act 2006, the Directors are required to prepare and approve financial statements for each financial year. The Directors must only approve the financial statements when they are satisfied that they give a true and fair view of how the Group and the Company have performed at the end of the financial year, and that they give a true and fair view of the profit of the Group and the Company for that year. The financial statements of the Group and, where relevant, the Company have been prepared in accordance with:  �International Financial Reporting Standards (IFRS) as adopted by the European Union (EU)
 �The Companies Act 2006  �The Disclosure Guidance and Transparency Rules (DTR) issued by the
In preparing these financial statements, the Directors are required to:  �Select suitable accounting policies and then apply them consistently  �Make judgements and accounting estimates that are reasonable and prudent  �State whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements
The Directors are responsible for ensuring that proper accounting records are maintained. These must disclose, with reasonable accuracy at any time, the financial position of the Group and the Company and enable the Directors to ensure that the financial statements and the Directors’ remuneration report comply with the Companies Act 2006 and the DTR. The Directors should also make sure that the Group financial statements comply with Article 4 of the IAS Regulation.
The Directors are also responsible for:  �Safeguarding the assets of the Company and the Group  �Taking reasonable steps to prevent and detect fraud and other irregularities  �The maintenance and integrity of the Group’s website  �Preparing a Strategic report, Directors’ report, Annual remuneration report and Corporate governance statement which comply with applicable law and regulations
 �The maintenance and integrity of the corporate and financial information included on the Company’s website
 The Strategic report includes the information required by DTR 4.1.8 and DTR 4.1.9 – a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces
We have not audited the elements of Note 49 – Capital management on pages 209 and 210 described as unaudited which have been prepared by Standard Life plc.
 For the remaining 15 reporting units across all segments, specific audit procedures were performed on certain account balances and transactions
Refer to page 69 (Audit Committee report), page 122 (Critical accounting estimates and judgements), pages 160 to 166 (Accounting policies and notes).
Refer to page 69 (Audit Committee report), page 122 (Critical accounting estimates and judgements), pages 168 to 173 (Accounting policies and notes).
Our audit work in respect of actuarial assumptions in respect of life insurance contract liabilities included:  Assessing the key changes in the assumptions against regulatory and reporting requirements and industry standards
 Obtaining audit evidence in respect of the key controls over the key actuarial models, data collection and analysis and the assumptions setting processes used by management, evaluating their design and implementation and testing their operating effectiveness
Specifically for annuitant mortality assumptions:  Evaluating the choice of the industry standard Continuous Mortality Investigation (‘CMI’) model against the outputs of management's internal cause of death model, wider market data from benchmarking and regulatory feedback
Our audit work in respect of methodologies used in the valuation of life insurance contract liabilities included:  Challenging management’s methodology, focusing on changes to methodology in the year, by applying our industry knowledge and experience to compare whether the methodology and/ or changes are in compliance with recognised actuarial practices and regulatory and reporting requirements
Our audit work in respect of actuarial assumptions in respect of pension scheme liabilities included:  Testing management’s discount rate by creating an independent discount rate expectation based on our knowledge of the Standard Life pension scheme and other schemes of a similar nature
Area of focus How our audit addressed the area of focus Valuation of complex financial instruments and investment property We focused on this area as valuation, specifically in respect of derivatives, commercial mortgages and investment property, is an area which requires the use of judgement by the Directors and/or the involvement of valuation experts.
Derivative and commercial mortgage valuations require judgements because, for some instruments, quoted prices are not readily available. As such, management use models to estimate their fair value.
 Understanding and assessing the models and methodology used for a sample of derivative investments across the investment portfolio, which management value using models. This included recalculating the sample of valuations using independent models and sourcing our own input data from recognised independent market data and investigating any differences found that were greater than predefined thresholds.
We gave specific focus to the changes in assumptions used in the revaluation of the remaining institutional intangible, as changes to these assumptions were most likely to result in an impairment charge within the consolidated income statement for the year.
Our audit work in respect of the valuation of the intangible assets arising through the acquisition of Ignis included:  Evaluating whether there had been indicators of impairment that would trigger an impairment review of any of the intangibles assets
 Challenging whether the cash generating units for the intangibles are supportable by reference to the progress of Ignis’ integration into the Group
 Challenging assumptions used in forecasting fund flows. We checked that the forecasts used had been through management’s internal challenge and approval process and considered the sensitivity of forecasts relative to the historical accuracy of management’s forecasting.
 Challenging the discount rate used through a comparison of the range of discount rates used in the industry, as well as company specific metrics such as the weighted average cost of capital and our assessment of the risk associated with forecast cash flows
Provision for annuity sales practices The Directors’ determination of the valuation of the provision for annuity sales practices involves a range of accounting judgements. A key area of focus for our audit is the consideration of the reporting implications of the FCA’s 2015 Thematic Review of Annuity Sales Practices relating to the period since July 2008. There are a number of elements to consider, including:  An assessment of the recognition criteria for this liability  The estimated valuation of any such provision, based on the latest available information, including associated costs  The separate recognition criteria for any reimbursement asset arising from existing indemnity insurance contracts
 Challenging the assumptions set by management and used within the model to supporting evidence, including regulatory communications from October to February 2017 and budgeted project costs as approved by the steering committee in February 2017. Due to the uncertain nature of such assumptions, there is a range of possible factors identified by management.
 Assessing the selection of the model assumption within the range and the sensitivities disclosed within the Annual report and accounts
Our work over the recognition criteria of any potential reimbursement asset relating to the provision for annuity sales practices included evaluating communications with the relevant insurers.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the reporting units by us, as the Group engagement team, or component auditors either within PricewaterhouseCoopers LLP or from other PricewaterhouseCoopers network firms operating under our instruction.
We identified eight of the Group's reporting units which, in our view, required an audit of their complete financial information (‘full scope’ reporting units). These focused on the material reporting units within the Standard Life Investments and Pensions and Savings segments.
7. Independent auditors’ report to the members of Standard Life plc continued
 The Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements
 The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated We have nothing material to add or to draw attention to.
Directors’ remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit Our responsibilities and those of the Directors As explained more fully in the Statement of Directors’ responsibilities set out on page 103, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Other matter We have reported separately on the company financial statements of Standard Life plc for the year ended 31 December 2016 and on the information in the Directors’ remuneration report that is described as having been audited.
Stephanie Bruce (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 24 February 2017 a) The maintenance and integrity of the Standard Life plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Expenses Claims and benefits paid 4,801 4,543 Claim recoveries from reinsurers (492) (514) Net insurance benefits and claims 4,309 4,029 Change in reinsurance assets and liabilities 33 140 520 Change in insurance and participating contract liabilities 33 2,115 (1,693) Change in unallocated divisible surplus 33 53 (117) Change in non-participating investment contract liabilities 34 8,768 3,363 Expenses under arrangements with reinsurers 6 509 42 Administrative expenses
Total administrative expenses 1,556 1,628 Provision for annuity sales practices 40 175 Change in liability for third party interest in consolidated funds 32 296 531 Finance costs 82 83 Total expenses 18,003 8,386
Consolidated statement of comprehensive income For the year ended 31 December 2016
Items that may be reclassified subsequently to profit or loss: Fair value losses on cash flow hedges - (1) Net investment hedge - (1) Fair value gains/(losses) on available-for-sale financial assets 17 (8) Exchange differences on translating foreign operations 173 (6) Equity movements transferred to unallocated divisible surplus 31 (62) 1 Share of other comprehensive income/(expense) of associates and joint ventures 30 (10) 2 Equity holder tax effect relating to items that may be reclassified subsequently to profit or loss 11 (3) 2 Total items that may be reclassified subsequently to profit or loss 115 (11) Other comprehensive income for the year from continuing operations 279 156 Other comprehensive income for the year from discontinued operations - (187) Total other comprehensive income for the year 279 (31) Profit for the year from discontinued operations 12 - 1,147 Total comprehensive income for the year 698 1,454
Short-term fluctuations in investment return and economic assumption changes 14 8 (63) 63 Restructuring and corporate transaction expenses 10 (67) (115) (10) (125) Impairment of intangible assets (19) (7) (2) (9) Gain on sale of Canadian business 12 - - 1,102 1,102 Provision for annuity sales practices 40 (175) - - -
Singapore included in discontinued operations segment2 2 - (42) 42 Share of associates’ and joint ventures’ tax expense 2 (13) (13) - (13) Profit attributable to non-controlling interests 2 51 62 - 62 Profit before tax expense attributable to equity holders’ profits 487 415 1,167 1,582 Tax (expense)/credit attributable to
Singapore included in discontinued operations segment2 2 - - - -
The Group’s key alternative performance measure is operating profit. Refer to Note 14 for further details.
Derivative financial assets 21 3,534 2,444 Equity securities and interests in pooled investment funds 21 83,307 71,679