Importantly, many of last year’s uncertainties are now resolved. We have a new president in the White House, the UK has agreed a Trade and Cooperation Agreement with the EU avoiding a ‘no deal’ Brexit, a variety of vaccines to counter the threatening impact of the coronavirus pandemic are being rolled out and economic forecasts are predicting a bounce-back in consumption and activity once a normalisation of daily life is achieved. On the other side of the world, Asia led by China is already well underway with relatively stronger economic growth. The US economy is also now projected to bounce back strongly given the fiscal stimulus support recently approved.
My belief in the strengths and potential of our company is one of the key reasons I chose to take the role at Standard Life Aberdeen. I have been in the job now a little over six months and we have already taken decisive action, and there is a lot more to do so that this business can deliver on its full potential. I am really looking forward to meeting more colleagues, clients and shareholders face to face to talk more about the work we are doing, and I am incredibly excited about the opportunities we have before us.
Building a culture of curiosity and ownership To deliver better futures, we need to nurture talent, giving our colleagues every opportunity to grow, be heard and perform. We need to enable collaboration, encourage innovation, and help our people feel engaged and empowered to be at their best.
Listening to colleagues Our 2020 employee engagement survey asked for views about our business as an employer, ways of working, strategy and direction, senior leadership and management. Our overall engagement score was 72%. While we saw very positive findings in several areas, the results also highlighted particular areas for us to improve. These included defining a clear strategic vision, as well as making it easier to get things done and get decisions made. The work on our strategy, led by our executive leadership team, is helping us address the points raised.
Mentoring Our global mentoring programme offers all colleagues an opportunity to find a mentor inside the business, or to share their skills and experience by becoming one. We use algorithms based on development interests and preferences to match mentees with appropriate mentors. At the end of 2020 we had established about 100 internal mentoring relationships, and we expect this number to grow significantly in 2021.
Colleagues’ physical, emotional and financial wellbeing was paramount, so we communicated extensively about support available inside and outside the organisation. This included highlighting counselling resources for anyone who needed them. We also made it mandatory for colleagues to use their entire 2020 holiday allocation.
• The ethnic diversity targets we have put in place follow the recommendations of the Sir John Parker Review (2017) for all FTSE 100 companies. We met the recommendation to have at least one qualifying Board member in 2019, and have set a target to have an additional qualifying Board member by 2025.
Data has been independently assured by Bureau Veritas. Bureau Veritas assurance can be found at www.standardlifeaberdeen.com/annualreport
By building on the technology we have become accustomed to, we can reduce the need for business travel in the future.
(Total CO are locations based emissions)e2 28 Standard Life Aberdeen 2020
Working with third parties We strive to build effective and supportive relationships with our third parties. Our global third party code of conduct sets out the minimum standards and principles we require third parties to follow, and that we expect them to demand from their own supply chains.
Total tax contribution Total tax contribution is a measure of all the taxes Standard Life Aberdeen pays to and collects on behalf of governments in the territories in which we operate. Our total tax contribution was £484m (2019: £526m). Of the total, £203m (2019: £211m) was borne by Standard Life Aberdeen whilst £281m (2019: £315m) represents tax collected by us on behalf of the tax authorities. Taxes borne mainly consist of corporation tax, employer’s national insurance contributions and irrecoverable VAT. The taxes collected figure is mainly comprised of pay-as-you-earn deductions from employee payroll payments, employee’s national insurance contributions, VAT collected and income tax collected on behalf of HMRC on platform pensions business.
Viability We consider that three years is an appropriate period for assessing viability as this is in line with the horizon used for our business planning and stress testing and scenario analysis processes. In considering the viability statement, the Board performed a robust assessment of the Group’s principal risks and took account of these processes, the results of reverse stress testing activity and the impact of COVID-19 as follows: The business planning process includes the projection of profitability, regulatory capital and liquidity over a three year period, based on a number of assumptions. This includes assumptions regarding the economic outlook which have been reshaped during 2020 as a result of the COVID-19 pandemic.
Whilst the impact of all the scenarios explored meets the definition of reverse stress tests, the scenarios were considered to have a very low likelihood of occurrence. This, and the range of mitigants in place to respond to the scenarios, supports the assessment of viability and no qualification is considered necessary.
We maintain heightened vigilance over risks to our operations from financial crime and cyber intrusion. Our dedicated, expert internal teams monitor and manage these risks as they evolve, with the support of external specialists.
From the early stages of the pandemic, we successfully established new ways of operating with most colleagues moving to home working. We provided tools to support remote working and collaboration and moved our learning and development offer online. We also offered support for wellbeing, such as counselling, and asked colleagues to use their entire 2020 holiday allocation.
This risk is relevant to a wide range of potential threats to the business including weather events, internal failure, external intrusion and supplier failure.
We have an ongoing programme to invest in, and enhance, our IT infrastructure controls. We benchmark our IT systems environment to identify areas for improvement. IT resilience is monitored at senior executive committees.
In other current roles, Sir Douglas is chairman of IP Group plc and serves as HM Treasury's Special Envoy for Financial and Professional Services to China's Belt and Road Initiative. He is also a member of the Monetary Authority of Singapore's international advisory panel, and of the board of the International Chamber of Commerce UK.
The main general feedback themes which were escalated to the Board during 2020 included the need for continuing focus on comprehensive and quality communications to help employees understand the impact of COVID-19 on our offices; how they would be supported to carry out their roles and how employee interests were being considered in the ELT’s initiatives.
• Review of charitable giving strategy • ESG commercialisation presentations to the Board
• Considered as input to the Group’s culture and strategic drivers
Chairman The review of Sir Douglas’s performance as Chairman was led by the SID, Jonathan Asquith. It was based on feedback given in the Company Secretary’s individual interviews with each Director as well as focused discussions between the SID and the other Directors.
Board meetings and meeting attendance The Board and its Committees meet regularly, operating to an agreed timetable. Meetings are usually held in Edinburgh or London and, sometimes, at the offices of one of our overseas locations. During the year, the Board held specific sessions to consider the Group’s strategy and business planning. The Chair and the non-executive Directors also met during the year, formally at each Board meeting, and informally, without the executive Directors present and where matters including executive performance and succession and Board effectiveness were discussed. The Board had planned to hold eight formal meetings and a focused strategy meeting in 2020. As the COVID-19 pandemic grew, the Board held additional update calls. When there were recommendations to be decided on, these were structured as formal Board meetings. There were also additional calls which were not constituted as formal Board meetings, but when the Board was able to hear from and question SMEs from the risk, operations, client and HR teams to understand how the organisation was responding to the pandemic. The Board was keen to find the balance between overseeing how the ELT was operating at this time and allowing the ELT time to focus on delivering priorities e.g. the means for the workforce to be able to work from home.
The Committee considered whether Phoenix should continue to be classified as an associate, and concluded that this classification remained appropriate, notwithstanding that the holding was significantly less than 20%. The classification as an associate was based on significant influence from the contractual relationships with Phoenix, including the licencing to Phoenix of the Standard Life brand, and the Group’s Board representation on the Phoenix board. The Committee noted that if the holding was considered an investment rather an associate we would no longer report our share of Phoenix’s profits but would instead account for Phoenix as an investment at fair value.
• The Committee reviewed the annual findings of the Audit Quality Review team of the FRC in respect of KPMG’s audits. We requested a formal report from KPMG of the applicability of the findings to Standard Life Aberdeen 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 Aberdeen’s audit, that KPMG had proper and adequate procedures in place for our audit.
• Performance of the Group’s ICAAP processes in accordance with the Capital Requirements Directive including the firm’s stress and scenario testing programme. The ICAAP supports the Committee in understanding changes to the risk profile of the Group and the capital position over the course of the year.
After each meeting, the Committee Chairman reports to the Board, summarising the key points from the Committee’s discussions and any specific recommendations.
Risk exposures and risk strategy Standard Life Aberdeen’s risk appetite framework provides a common framework to enable the communication, understanding and control of the types and levels of risk that the Board is willing to accept in its pursuit of the strategy of the Group, including the business plan objectives and the capital and liquidity it requires.
• Risks associated with the delivery of the business plan • Climate risk in funds • Enhancements to components of the Group’s risk appetite framework • The Standard Life Aberdeen ICAAP report • Steps taken to strengthen the conduct risk framework • The management of cyber risk across the Group • The approach to management of the Group’s liquidity risk framework
The Committee reports regularly to the Board so that all Directors can be involved in discussing these topics as appropriate.
• Agreed the revised schedule of Matters reserved for the Board
The structure and quantum of the CEO’s remuneration package is consistent with our Directors’ Remuneration Policy and falls below the maximum permitted under those rules. In calibrating his package the Committee considered what it would take to attract the unique skillset and talent required to guide our business through its next phase of development and benchmarked the outcome against the remuneration arrangements for similar roles in asset management peer group companies.
Total: Total: Salary and pension Bonus cash Bonus deferred LTIP All figures in £000s
– Development of the return on capital framework to support evaluation of growth pathways. – Lead role in working with Phoenix, evaluating costs and benefits of deal configurations which laid the groundwork for the agreement to sell the Standard Life Brand and acquire the Wrap SIPP and Onshore Bond portfolios concluded in February 2021.
Keith Skeoch stepped down from the Board with effect from 1 September 2020 but remains employed in the role of non-executive Chairman of Aberdeen Standard Investments Research Institute until the end of his notice period on 30 June 2021, at which point he will leave the Company. Details of his pro-rata remuneration until stepping down from the Board are included in the table on page 79. He continues to be eligible for his salary, benefits and pension from 1 September 2020 until his termination date of 30 June 2021 (totalling £605k). Entitlement to an annual bonus ceased on 31 August 2020.
The following table shows the total number of Standard Life Aberdeen plc shares held by the executive Directors and their connected persons: Total number of shares owned at 1 January 2020
The Remuneration Committee approved the vesting level of the first tranche of the one-off award at 100% and this vested on 22 June 2020. The first tranche of the award remains subject to malus and clawback provisions in line with the Remuneration Policy.
3 This comprises awards made under the Aberdeen Variable Pay plans which are now exercisable. 4 For Keith Skeoch this comprises of awards made under the LTIP in 2015 and deferred bonus awards, for Stephanie Bruce this comprises the first tranche of the one-off award granted in 2019. Includes dividend equivalent shares awarded in accordance with the plan rules. 5 The aggregate gains have been calculated using the share price at the date of exercise of each underlying award. The range for the year of Standard Life Aberdeen plc shares was 170.30 pence to 336.90 pence.
Remuneration for non-executive Directors and the Chairman 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 2020. Non-executive Directors do not participate in bonus or long-term incentive plans and do not receive pension funding: Non-executive Directors
Chairman Sir Douglas Flint 1 November 2018 AGM 2019 Senior Independent Director Jonathan Asquith 1 September 2019 AGM 2020 Non-executive Directors John Devine 4 July 2016 AGM 2017 Melanie Gee 1 November 2015 AGM 2016 Brian McBride 1 May 2020 AGM 2020 Martin Pike 27 September 2013 AGM 2014 Cathleen Raffaeli 1 August 2018 AGM 2019 Jutta af Rosenborg 14 August 2017 AGM 2018 Cecilia Reyes 1 October 2019 AGM 2020
The remuneration policy was subject to a vote at the 2020 AGM on 12 May 2020 and the following table sets out the outcome. Policy 2020 AGM For Against Withheld
The Directors present their annual report on the affairs of the Standard Life Aberdeen group of companies (the Group), together with the audited International Financial Reporting Standards (IFRS) consolidated financial statements for the Group, financial information for the Group and financial statements for Standard Life Aberdeen plc (the Company) for the year ended 31 December 2020.
Dividends The Board recommends paying a final dividend for 2020 of 7.30p per ordinary share. This will be paid on 25 May 2021 to shareholders whose names are on the register of members at the close of business on 16 April 2021.
Share capital The Company’s issued share capital as at 31 December 2020 comprised a single class of ordinary share. You can find full details of the Company’s share capital, including movements in the
Directors and their interests The Directors who served during the year were: Sir Douglas Flint (Chairman) John Devine Keith Skeoch4 Melanie Gee Martin Gilbert2 Martin Pike Stephen Bird3 Cathleen Raffaeli Stephanie Bruce Cecilia Reyes Jonathan Asquith Jutta af Rosenborg Brian McBride1 1 Appointed 1 May 2020. 2 Resigned 12 May 2020. 3 Appointed 1 July 2020. 4 Resigned 1 September 2020.
Talent Attracting, nurturing and retaining high quality people is critical to meeting our strategic objectives and future prosperity. We are fully committed to attracting and developing the required pools of talent at all levels of the organisation to meet both current and anticipated needs. We aim to create an environment where people can achieve their full potential at every stage of their career.
Mentoring supports personal development and professional growth across generations, functions and regions and, in 2020, we launched a global mentoring programme following a successful pilot. Everyone in the company can request to have an internal mentor or become a mentor to others with support offered in building the mentoring relationship. We are also using mentoring relationships to explore and understand different cultural experiences, through a Reverse Mentoring programme that forms part of the overall mentoring approach. All members of the Executive leadership team and selected other senior leaders are mentored by someone from our Unity network.
Reward At the end of 2019 in the UK we introduced a new, unified, set of terms and conditions of employment. These were designed to be fair and consistent amongst those who had become part of the Group from different heritages, and to help us continue to attract and retain talented people. Implementing these terms and conditions represented an important step towards unifying colleagues as a single team, with consistent and competitive benefits, including pension, life assurance, group income protection and private healthcare.
The Group’s shareholding in Phoenix remains at 14.4%. Following the changes to the commercial agreements set out above, in particular in relation to the licencing of the ‘Standard Life’ brand, our judgement is that Phoenix should no longer be accounted for as an associate with effect from 23 February 2021, and should instead be accounted for as an investment at fair value. The primary impact of this reclassification is that the Group will recognise changes in fair value of the investment in the consolidated income statement rather than the Group’s share of Phoenix profits under the equity method.
The Group continues to meet group and individual entity capital requirements and day-to-day liquidity needs. The Company has a revolving credit facility of £400m as part of our contingency funding plans and this is due to mature in 2024. 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.
• The Strategic report and Directors’ report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face
Contents Group primary statements .............................................115 Presentation of consolidated financial statements ........ 123 Note 1. Group structure .............................................127 Note 2. Segmental analysis .......................................129 Note 3. Investment return ...........................................133 Note 4. Revenue from contracts with customers ....... 133 Note 5. Other income .................................................134 Note 6. Other administrative expenses ......................135 Note 7. Staff costs and other employee‑related costs ................................135 Note 8. Auditors’ remuneration ..................................135 Note 9. Restructuring and corporate transaction expenses.....................................136 Note 10. Taxation .........................................................136 Note 11. Discontinued operations ................................139 Note 12. Earnings per share ........................................140 Note 13. Adjusted profit and adjusting items ...............141 Note 14. Dividends on ordinary shares ........................142 Note 15. Intangible assets ............................................143 Note 16. Investments in associates and joint ventures ..........................................147 Note 17. Property, plant and equipment ......................153 Note 18. Leases ...........................................................154 Note 19. Financial assets .............................................156 Note 20. Derivative financial instruments .....................157 Note 21. Receivables and other financial assets ......... 159 Note 22. Other assets ..................................................159 Note 23. Assets and liabilities held for sale .................160 Note 24. Cash and cash equivalents ...........................161
Note 25. Unit linked liabilities and assets backing unit linked liabilities ..........................162
As a result of any declines in Phoenix’s share price there is a risk of impairment of the carrying value of the investment.
Assessing principles: Our component auditor critically assessed the acquisition accounting approach adopted by Phoenix against the principles of IFRS 3 Business Combinations, including the identification and valuation of intangible assets in the business combination against the principles of accounting standards.
Refer to page 59 (Audit Committee Report), page 143 (accounting policy) and financial disclosures).
Subjective estimate: The Group’s customer related intangible assets include customer relationships and investment management contracts. There is a risk of impairment to the carrying value of these intangible assets.
Where indicators were identified, we used our own valuation specialists to assist us in assessing the appropriateness of the Group's valuation model. This included comparing the Group discount rate assumptions with our own estimate of a range of reasonable discount rates, based on comparable company information.
percentage in ateriality beca g an elevated eport to the Au ntified misstat in addition to o reporting on q the Group ch ential increase entified. Of the e subjected 15 s and none (2 es. In the year ually financial for Group pur that needed to e previous an considered it a e use to determ resented oppo new benchm rocess ts within the sc s illustrated op otal Group fee losses that m : 2%) of net G reporting com resented more oup profit befo eriality and a ncial statemen etermined as 5 de at the plan on of the level o turing costs an ast associate s
We considered whether the going concern disclosure in note (a) (v) to the financial statements gives a full and accurate description of the Directors’ assessment of going concern.
Reconciliation of consolidated adjusted profit before tax to IFRS profit for the year For the year ended 31 December 2020
The Group’s accounting policies have been updated to reflect these amendments. Management considers the implementation of the above amendments to existing standards has had no significant impact on the Group’s financial statements.
• The fundamental basis of our business has not been impacted by COVID-19, although fee based revenue has been reduced as a result of the fall in global equity markets and the shift in client preferences to assets with lower fees. We consider that COVID-19 will accelerate the key global trends already underway in our industry and already factored into our strategy which are discussed further in the Strategic report on pages 10 to 11, and that the Group is well placed to manage its business risks successfully.
(c)(iii) Prior year disposal of associates HDFC Life During 2019, the Group completed the following sales of equity shares in HDFC Life on the National Stock Exchange of India Limited and BSE Limited: • 92,181,992 equity shares in HDFC Life sold through an Offer for Sale on 12 and 13 March 2019 • 33,032,381 equity shares in HDFC Life sold through an Offer for Sale from 3 to 6 May 2019 • 67,100,000 equity shares in HDFC Life sold through a Bulk Sale on 14 August 2019 • 100,000,000 equity shares in HDFC Life sold through a Bulk Sale on 30 October 2019
(a) Basis of segmentation The Group’s reportable segments for 2020 and 2019 were as follows: Continuing operations: Asset management, platforms and wealth This segment primarily relates to our asset management, platforms and wealth activities. The Investments, Adviser and Personal vectors are all part of this segment. Our asset management subsidiaries and our asset management associate in India, HDFC Asset Management, provide a range of investment products and services for individuals and institutional customers through a number of different investment vehicles. Our platforms include the Standard Life branded Wrap and Elevate platforms which provide administration services to advisers. Our Wealth activity primarily relates to: Aberdeen Standard Capital which manages assets for private clients, intermediaries acting for clients, charities and trustees; 1825 which undertakes our financial planning and advice activity; Parmenion which undertakes activities for clients and intermediaries; and our strategic joint venture with Virgin Money (VMUTM). The segment also includes other wholly owned activities of the Group including the corporate centre and related activities and the UK and Ireland Standard Life staff defined benefit pension plans.
UK 629 1,700 Europe, Middle East and Africa 15 60 Asia Pacific 17 71 Americas 76 142 Total 737 1,973
4. Revenue from contracts with customers Revenue from contracts with customers is recognised as services are provided i.e. as the performance obligation is satisfied and it is highly probable that a significant reversal will not occur. Where revenue is received in advance (front-end fees), this income is deferred and recognised as a deferred income liability until the services have been provided (refer Note 35).
Fee income 193 204 Other revenue from contracts with customers 80 68 Total revenue from contracts with customers from continuing operations 1,527 1,743 1 In addition to revenues earned as a percentage of AUM, management fee income includes certain other revenues such as registration fees.
Information in respect of Directors’ remuneration is provided in the Directors’ remuneration report on pages 73 to 95.
Restructuring and corporate transaction expenses 297 374 Asset management joint venture and insurance associate restructuring and corporate transaction expenses
The standard UK corporation tax rate for the accounting period is 19%. In the Spring Budget 2020, the government announced that the standard UK corporation tax rate would remain at 19% from 1 April 2020 rather than reducing to 17% as previously enacted. This new legislation was substantively enacted on 17 March 2020 to repeal the planned reduction in the standard UK corporation tax rate and maintain the rate at 19%. This will impact both current tax in the UK going forward and also the valuation of deferred tax assets and liabilities in the UK, which have been revalued at the balance sheet date to take account of this change.
and, in 2020, mainly comprises a non-recurring reconciling item associated with the gain arising on a sale of shares in our associate HDFC Asset Management being taxed at a rate of less than 19%. This arose because the Indian rate of tax on long-term capital gains is less than the UK corporate tax rate.
(c) Deferred tax assets and liabilities (c)(i) Movements in net deferred tax asset/(liability)
Pence Pence Pence Pence Pence Pence Basic earnings per share 38.5 (0.7) 37.8 8.9 2.3 11.2 Diluted earnings per share 37.9 (0.7) 37.2 8.8 2.3 11.1 Adjusted earnings per share 18.4 – 18.4 19.5 – 19.5 Adjusted diluted earnings per share 18.1 – 18.1 19.3 – 19.3 13. Adjusted profit and adjusting items Adjusted profit before tax is the Group’s key alternative performance measure. Adjusted profit excludes the impact of the following items: • Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory change. • Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts • Profit or loss arising on the disposal of a subsidiary, joint venture or associate accounted for using the equity method • Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method • Change in fair value of significant listed investments • Fair value movements in contingent consideration • Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of the Group
The recoverable amount of this group of cash-generating units at 31 December 2019 was £2,603m based on VIU, which was assessed by management as being higher than the FVLCD. The VIU continues to be significantly reduced by the IFRS requirement to add back certain expense savings to management’s expectation of the level of future operating expenses, as was also the case at 31 December 2019. Considering this, and as a result of the increased market uncertainty in the COVID-19 environment and the impact of reduced reported revenue and future revenue projections, management has now assessed that the FVLCD is higher.
For the remaining goodwill of £85m (2019: £85m), which is attributable to a number of smaller cash-generating units in the Asset management, platforms and wealth segment, we concluded that no impairment was required.
2 As noted above, the Group’s investment in HDFC Life was reclassified to equity securities and interests in pooled investment funds in 2020 so HDFC Life was not a material associate at 31 December 2020 (refer below for further details of the reclassification).
Management Other4 Total Phoenix HDFC Life2 HDFC Asset Management Other Total £m £m £m £m £m £m £m £m £m Carrying value of associates accounted for using the equity method 1,008 116 10 1,134 961 167 120 9 1,257 Dividends received 67 13 – 80 67 9 17 – 93 Share of profit/(loss) after tax4 110 48 19 177 (5) 26 42 – 63 1 Revenue and profit after tax for HDFC Asset Management are presented for the 12 months to 31 December 2020 and total assets and total liabilities are presented as at 31
Fair value as at 31 December 2019 £m £m Financial assets with contractual cash flows that are solely payments of principal and interest (SPPI) excluding those held for trading or managed on a fair value basis 13,436 6,197 Financial assets other than those above1 298,176 218,355 Total 311,612 224,552 1 The change in fair value in the year to 31 December 2020 of all other financial assets that are FVTPL is a gain of £11,087m (2019: gain of £20,231m).
Financial assets with contractual cash flows that are solely payments of principal and interest (SPPI) excluding those held for trading or managed on a fair value basis 13,436 6,197 Financial assets other than those above1 298,176 218,355 Total 311,612 224,552 1 The change in fair value in the year to 31 December 2020 of all other financial assets that are FVTPL is a gain of £11,087 (2019: gain of £20,231m).
As the Group’s investment in HDFC Life is now measured at fair value, we are no longer applying the temporary exemption from IFRS 9 in relation to HDFC Life at 31 December 2020. The fair value of HDFC Life’s financial assets at 31 December 2019 that remained under IAS 39 for equity accounting purposes and the change in fair value during the year ended 31 December 2019 were as follows: Fair value as at
Net derivative financial instruments cash inflows 3 19 20 25 (7) 17 – – – – – – 16 61
(a)(i) Parmenion Capital Partners LLP On 30 November 2020, the Group confirmed its exploration of the potential sale of Parmenion Capital Partners LLP (Parmenion) and has subsequently classified these operations as held for sale. Parmenion is reported in the asset management, platforms and wealth segment.
The Company can issue shares to satisfy awards granted under employee incentive plans which have been approved by shareholders. Details of the Group’s employee plans are provided in Note 44.
Number of shares held by trusts Standard Life Aberdeen Employee Benefit Trust 37,667,681 15,378,831 Standard Life Employee Trust 23,773,359 26,685,390 Aberdeen Asset Management Employee Benefit Trust 2003 6,294,765 10,579,914 28. Retained earnings The following table shows movements in retained earnings during the year. The movements are aggregated for both continuing and discontinued operations.
Opening balance carried forward 2,886 2,778 Effect of change in accounting policy to IFRS 91 – (12) Effect of change in accounting policy to IFRS 161 – (5) Opening balance at 1 January 2,886 2,761
(b) Non-controlling interests – preference shares 2020 2019 £m £m 5% 2015 Non-voting perpetual non-cumulative redeemable preference shares – 99
SL Asia’s non-participating investment contracts were unit linked and details of the accounting policies for these contracts are given in Note 25. The accounting policies for SL Asia’s non-participating insurance contracts are given below.
One Other UK plan has a contract in place to hedge longevity risk for pensioners. The fair value of this derivative is £nil at 31 December 2020 (2019: £nil).
37. Provisions and other liabilities Provisions are obligations of the Group which are of uncertain timing or amount. They are recognised when the Group has a present obligation as a result of a past event, it is probable that a loss will be incurred in settling the obligation and a reliable estimate of the amount can be made.
Credit The risk of financial loss as a result of the failure of a counterparty, issuer or borrower to meet their obligations or perform them in a timely manner. The shareholder is directly exposed to credit risk from holding cash, debt securities, loans and derivative financial instruments.
(b)(i)(i) Exposure to equity risk The Group is exposed to the risk of adverse equity market movements which could result in losses. This applies to daily changes in the market values and returns on the holdings in its equity securities portfolio.
Financial assets 19 3,170 3,387 1,233 – 258 256 373 356 37 80 179 211 5,250 4,290 Financial liabilities 32 (1,025) (1,246) – – (60) (57) (750) (718) (23) (19) (47) (52) (1,905) (2,092) Cash flow hedges (549) (566) – – – – 549 566 – – – – – – Non- designated derivatives 297 266 – – (80) (62) (156) (131) (1) – (60) (73) – – 1,893 1,841 1,233 – 118 137 16 73 13 61 72 86 3,345 2,198
In the table above debt securities exclude debt securities relating to third party interests in consolidated funds of £24m (2019: £44m). Cash and cash equivalents exclude cash and cash equivalents relating to third party interests in consolidated funds of £7m (2019: £6m). Derivative financial assets exclude derivative financial assets relating to third party interests in consolidated funds of £nil (2019: £nil). Receivables and other financial assets exclude receivables and other financial assets relating to third party interests in consolidated funds of £nil (2019: £nil). The shareholder is not exposed to the credit risk in respect of third party interests in consolidated funds since the financial risk of the assets are borne by third parties.
Transfers of equity securities and interests in pooled investment funds and debt securities into level 3 generally arise when external pricing providers stop providing a price or where the price provided is considered stale. Transfers of equity securities and interests in pooled investment funds and debt securities out of level 3 arise when acceptable prices become available from external pricing providers.
Equity securities and interests in pooled investment funds 23 135 Debt securities 9 (55) Derivative financial instruments (12) (12) Receivables and other financial assets and other assets 46 227 Assets held for sale 751 (137) Change in operating assets 817 158
(b) Capital commitments As at 31 December 2020, the Group has capital commitments other than in relation to financial instruments of £7m (2019: £nil).
Annual bonus deferred share options Outstanding at 1 January 22,956,158 15,469,459 – 26,220,720 Granted 27,486,468 – 23,636,874 – Forfeited (3,134,233) (113,150) (257,360) (651,976) Exercised (1,231,007) (4,685,978) (423,356) (10,099,285) Expired – – – – Outstanding at 31 December 46,077,386 10,670,331 22,956,158 15,469,459 Exercisable at 31 December 973,894 8,109,711 35,295 10,357,995 Remaining contractual life of options outstanding (years)1 8.85 5.28 9.29 5.99 Options exercised during the year Share price at time of exercise1 232p 268p 275p 271p 1 Weighted average.
The options granted under the deferred and discretionary share plans were made throughout the year ended 31 December 2020 with a main grant date of 9 April 2020 and had a £nil exercise price. The weighted average option term was 2.31 years. The weighted average share price at grant date was 234p which was also the weighted average fair value at grant date. The options include an entitlement to the receipt of dividends in respect of awards that ultimately vest between the date of grant and the vesting date.
The following table shows the range of exercise prices of Sharesave options outstanding at 31 December 2020. 2020 2019
Name of related undertaking Share class1 % interest held2 C.C. U.S. Private Equity Fund GP II, LLC13 Limited liability company C.C. U.S. Private Equity Fund, L.P.24 Limited Partnership 0% C.C. U.S. Private Equity Fund II, L.P.13 Limited Partnership 0% Concession Infrastructure Investments Manager Limited56 Ordinary shares 50% Coutts Asian Private Equity Limited Partnership10 Limited Partnership 0% Coutts Global Property Limited Partnership10 Limited Partnership 0% Coutts Middle East and North Africa Private Equity Limited Partnership10 Limited Partnership 0% Coutts Private Equity Limited Partnership10 Limited Partnership 0% Coutts Private Equity Limited Partnership II10 Limited Partnership 0% CPP General Partner Limited Partnership Limited Partnership 20% Cumberland Place Financial Management Limited3 Ordinary shares 100% Edinburgh Fund Managers Group Limited4 Ordinary shares 100% Edinburgh Fund Managers Plc Ordinary shares 100% Edinburgh Unit Trust Managers Limited4 Ordinary shares
Healthcare Private Equity Limited Partnership3 Limited Partnership 0% Healthcare Private Equity LP58 Limited Partnership 0% Heng An Standard Life Insurance Company Limited59 Ordinary shares 50% Ignis Asset Management Limited Ordinary shares 100% Ignis Cayman GP2 Limited10 Ordinary shares 100% Ignis Cayman GP3 Limited10 Ordinary shares 100% Ignis Fund Managers Limited Ordinary shares 100% Ignis Investment Services Limited Ordinary shares 100% Jones Sheridan Financial Consulting Limited3 Ordinary shares 100% Jones Sheridan Holdings Limited3 Ordinary shares 100% KFAS Real Estate Limited Partnership Limited Partnership 0% Lothian Thirty L.P. Limited Partnership 0% Murray Johnstone Holdings Limited4 Ordinary shares 100% Murray Johnstone Limited4 Ordinary shares 100% NASP 2006 General Partner Limited Partnership Limited Partnership 5% NASP 2006 Special Limited Partnership Limited Partnership 0%
Share premium reserve Retained earnings Other reserves Total equity 2019 Notes £m £m £m £m £m £m 1 January 353 (88) 640 2,035 4,505 7,445 Profit for the year – – – 1,020 – 1,020 Other comprehensive income for the year – – – – 10 10 Total comprehensive income for the year – – – 1,020 10 1,030 Dividends paid on ordinary shares – – – (518) – (518) Share buyback G (26) – – (390) (100) (516) Reserves credit for employee share-based payment J – – – – 43 43 Transfer to retained earnings for vested employee share-based payment J – – – 57 (57) – Transfer between reserves on impairment of investment in subsidiaries J – – – 780 (780) – Shares acquired by employee trusts – (76) – – – (76) Shares distributed by employee and other trusts and related dividend equivalents – 45 – (52) – (7) Transfer from the Standard Life Unclaimed Asset Trust – – – 1 – 1 31 December 327 (119) 640 2,933 3,621 7,402
(a) Investment in subsidiaries, associates and joint ventures The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies, unit trusts and limited partnerships whose primary function is to generate capital or income growth through holding investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.
Subordinated liabilities L 638 655 638 655 Other financial liabilities N 110 25 110 25 Total 748 680 748 680 219Standard Life Aberdeen 2020
• Profit or loss arising on the disposal of a subsidiary, joint venture or associate • Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted for using the equity method • Changes in fair value of significant listed investments and related dividend income • Fair value movements in contingent consideration • Items which are one-off and, due to their size or nature, are not indicative of the longterm operating performance of the Group • Impacts arising from investment return variances and economic assumption changes in the Group’s associate and joint venture insurance entities where they have a policy for determining investment return variances and economic assumption changes
• Profits on the disposal of a subsidiary, joint venture or associate are also removed to assist comparability of results period on period. Profit on disposal of interests in associates in 2020 of £1,858m (2019: £1,542m), includes a one-off accounting gain of £1,051m following the reclassification of HDFC Life from an investment in associates accounted for using the equity method to equity securities measured at fair value (see Note 16), £540m from the sale of 5.83% of shares in HDFC Life (2019: £1,337m, 14.49%) and £263m from the sale of 5.64% of shares in HDFC Asset Management (2019: £204m, 3.02%). Details are provided in Note 1 of the Group financial statements.
• Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of customer contracts is included as an adjusting item. This is consistent with peers and therefore excluding these items aids comparability. Highlighting this as an adjusting item aims to give a fuller understanding of these accounting impacts which arise where businesses have been acquired but do not arise where businesses have grown organically. Further details are provided in Note 15 of the Group financial statements.
The average revenue yield on fee based business is a measure that illustrates the average margin being earned on the assets that we manage, administer or advise our clients on.
Investment performance has been aggregated using a money weighted average of our assets under management which are outperforming their respective benchmark. Calculations for investment performance are made gross of fees with the exception of those for which the stated comparator is net of fees. The investment performance calculation covers all funds that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected, such as private markets, execution only mandates and Aberdeen Standard Capital, as well as replication tracker funds which aim to perform in line with a given index.
Reallocation of technology business and Virgin Money revenue Parmenion reallocation Fee based revenue 2019 as previously disclosed £m £m £m £m £m 2019 on revised basis
Equities 73 59 74 31 62 31 Fixed income 78 83 81 86 85 72 Multi-asset 61 68 33 46 36 61 Real estate 41 39 37 48 44 36 Alternatives 95 89 95 98 93 100 Quantitative 32 44 17 52 24 58 Cash/Liquidity 94 91 89 88 87 88 Total 71 74 66 60 68 67 1 The investment performance calculation covers all funds (including Insurance) that aim to outperform a benchmark, with certain assets excluded where this measure of performance is not appropriate or expected. Calculations for investment performance are made gross of fees except where the stated comparator is net of fees. Further details about the calculation of investment performance are included in the Glossary.
Net flows represent gross inflows less gross outflows or redemptions. Gross inflows are new funds from clients. Gross outflows or redemptions is the money withdrawn by clients during the period.
9. Supplementary information continued 9.5 Assets under management and administration and flows Definition Purpose and changes
Developed markets equities 12.9 2.7 (3.4) (0.7) 2.5 – 14.7 Emerging markets equities 25.0 2.1 (9.5) (7.4) 4.0 – 21.6 Asia Pacific equities 22.5 3.8 (5.3) (1.5) 2.3 – 23.3 Global equities 12.5 1.0 (5.6) (4.6) 1.5 – 9.4 Total equities 72.9 9.6 (23.8) (14.2) 10.3 – 69.0 Developed markets credit 32.1 6.0 (7.8) (1.8) 1.9 – 32.2 Developed markets rates 5.2 0.6 (2.8) (2.2) 0.3 – 3.3 Emerging markets fixed income 9.4 3.7 (2.5) 1.2 0.3 – 10.9 Total fixed income 46.7 10.3 (13.1) (2.8) 2.5 – 46.4 Absolute return 21.9 1.1 (12.8) (11.7) 2.5 – 12.7 Diversified growth/income 1.7 0.5 (0.3) 0.2 – – 1.9 MyFolio 13.9 2.5 (2.4) 0.1 1.7 – 15.7 Other multi-asset 5.5 0.8 (2.2) (1.4) – – 4.1 Total multi-asset 43.0 4.9 (17.7) (12.8) 4.2 – 34.4 Private equity 12.3 2.1 (2.8) (0.7) 0.5 – 12.1 Private credit and solutions – – (0.1) (0.1) 0.1 – – Infrastructure equity 3.7 0.4 – 0.4 (0.1) – 4.0 Total private markets 16.0 2.5 (2.9) (0.4) 0.5 – 16.1 UK real estate 15.3 0.9 (2.3) (1.4) (0.5) – 13.4 European real estate 12.2 1.6 (0.8) 0.8 (0.9) – 12.1 Global real estate 0.8 0.1 (0.2) (0.1) (0.4) 0.7 1.0 Real estate multi-manager 1.4 0.3 (0.2) 0.1 (0.1) – 1.4 Total real estate 29.7 2.9 (3.5) (0.6) (1.9) 0.7 27.9 Total alternatives 12.3 7.7 (1.7) 6.0 (0.6) – 17.7 Total quantitative 2.1 5.2 (0.8) 4.4 1.3 – 7.8 Total cash/liquidity 16.5 7.8 (5.4) 2.4 (1.5) – 17.4 Total 239.2 50.9 (68.9) (18.0) 14.8 0.7 236.7 9.7 Analysis of Insurance
AUA is a measure of the total assets we administer for clients through our Platforms. AuAdv is a measure of the total assets we advise our clients on, for which there is an ongoing charge.
• Adviser: Our Wrap and Elevate adviser platforms • Personal: Comprises our 1825 financial planning and advice business and our Aberdeen Standard Capital discretionary investment management business
Reported basis The merger of Standard Life plc and Aberdeen completed on 14 August 2017, with the merger accounted for as an acquisition of Aberdeen by Standard Life plc on that date. The financial statements for 2017 have been prepared on this basis, with Aberdeen results included only from the date of merger onwards. This is referred to as the Reported basis.
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