Final Results - Part 4 of 8

RNS Number : 7246F
Standard Life Aberdeen plc
23 February 2018
 

Standard Life Aberdeen plc

Full Year Results 2017

Part 4 of 8

 

5. Directors' remuneration report

5.1 Remuneration Committee Chairman's statement

This report sets out the new remuneration policy for the Directors of Standard Life Aberdeen plc, what we paid them in 2017 and how we will pay them in 2018, 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 KPMG LLP we have marked them as 'audited' for clarity.

The report is structured in the following sections:

·  The annual statement from the Chairman of the Remuneration Committee

·  Summary of the proposed remuneration policy, key remuneration decisions, and performance and remuneration for 2017 on pages 98 to105.

·  The new Directors' Remuneration Policy, set out on pages 106 to 114, and which is subject to a shareholder vote at the 2018 AGM 

·  The annual report on remuneration. This will be subject to an advisory vote at the 2018 AGM.

Approval

The Directors' remuneration report was approved by the Board and signed on its behalf by

Richard Mully

Chairman, Remuneration Committee

23 February 2018

Dear Shareholder

2017 Events

On behalf of the Board I am pleased to present the Remuneration Committee's report on Directors' remuneration for the year ended 31 December 2017.

This is my first report as Chairman of the Remuneration Committee for Standard Life Aberdeen plc, having previously served as Chairman of the Remuneration Committee for Aberdeen Asset Management PLC and taken on the role for Standard Life Aberdeen plc in August 2017 following the merger. I would like to thank Melanie Gee, who served as the previous Committee Chairman for Standard Life plc, the Board and my fellow Committee members for their continued support.

Standard Life plc amended its Directors' Remuneration Policy on 19 June 2017 at the General Meeting for the period from completion of the merger to 31 December 2017 on the underlying principle that minimal changes would be made to the policy as we were already part way through a performance year. Due to the different remuneration structures in place at Standard Life Group and Aberdeen some changes were made to the transitional policy to accommodate the existing remuneration arrangements of the Aberdeen executive directors, who were joining the Standard Life Aberdeen plc Board, and the remuneration structure for the Chief Investment Officer who joined the Board on the effective date of the merger. Given the transformation of the Company, as a result of the merger, during the period from August 2017 the Committee has undertaken a holistic review of our approach to executive remuneration to align this to our strategy and business plan. This has also included careful consideration of the complex regulatory, political and social landscape for executive remuneration, which we continue to follow closely. The outcome is the new Remuneration Policy which I now present for your approval.

A key principle underlying our remuneration approach is that reward should be aligned to performance outcomes of the Group and the shareholder experience. In this year of change, the Group has delivered total shareholder return of 23.7% in 2017 and a total 2017 dividend of 21.30p per share which is a 7.5% year-on-year increase from the total 2016 dividend. More details on Group performance are set out in the Strategic report

Board changes

This year has also seen a number of changes to our executive leadership in light of the merger, with the appointment of the Co-Chief Executive Officers (Co-CEOs) Keith Skeoch and Martin Gilbert, Chief Financial Officer (CFO) Bill Rattray and Chief Investment Officer (CIO) Rod Paris to the Board. The following executive Directors stepped down from the Board during 2017: Barry O'Dwyer (CEO, Pensions and Savings), Luke Savage (CFO), Colin Clark (Global Client Director), and Paul Matthews (UK and Europe Chief Executive Officer). Our performance, along with the principles of our remuneration policy, have shaped the remuneration decisions that we have made during 2017 both in relation to the current and former executive Directors. The remuneration arrangements for the executive Directors who stepped down from the Board are detailed on pages 126 to 127.

Our strategy and remuneration policy

Our approach to executive remuneration going forward

In considering the approach to remuneration for executive Directors going forward, the Committee considered the following principal factors:

·  Alignment to our business model

·  Alignment with the strategy of the Group

·  Consideration of the industry within which the Group operates

·  Harmonisation of approach across the leadership team

The corporate aim and rationale behind the merger was to create a world-class investment company. With the merger of the two companies, as set out elsewhere in the Annual report and accounts 2017 in more detail, this journey has been significantly accelerated.

In this context we reviewed our remuneration arrangements to ensure that we have a remuneration structure which both incentivises our leadership team to deliver our strategy and is appropriate in the context of the business model going forward.

In developing our new policy, we considered the policies of Aberdeen and Standard Life Group and adopted elements of these policies where these were well aligned to the strategic direction of the merged Company and introduced new elements where these would strengthen the link between reward and the delivery of our strategy. Given the Group's business model going forward, the Committee also took into consideration the structure of remuneration within global asset management peers, whilst being cognisant of the approach to remuneration at FTSE listed peers of a similar size.

The objective for our proposed remuneration structure is to reward focus on sustainable value creation over the long term for our clients and shareholders through a simple and transparent design.

To deliver our strategy, a priority was ensuring the right Board composition. To support this priority a key driver of our design has been the harmonisation of the pay structure and maximum opportunity for the Co-CEOs to incentivise the delivery of the challenging integration plan and delivery of the strategic and financial objectives for the merger.

In light of these considerations, the Committee have designed a new remuneration structure that is based around:

·  A simplified annual package for executive Directors comprised of fixed pay and benefits (aligned to the wider workforce) plus a single variable pay award, of which 75% is deferred in shares with no release of value to participants until year 5. Our aim is to improve transparency between performance and reward outcomes for our executive Directors and our shareholders over the long term.

·  Both backward and forward looking performance measures to ensure that reward is linked to the delivery of sustainable long-term value for shareholders, through (i) a scorecard for the initial determination of awards which measures performance over a backward looking period of one to three years; and (ii) the introduction of forward looking three-year underpin performance conditions for all deferred awards.

·  Maintaining focus on long-term sustained levels of performance through a variable pay award that is subject to an appropriate balance of performance metrics that will, over the course of the policy term, cover a six-year period. As it would not be appropriate to consider the performance of the businesses prior to the merger, trailing performance measures will be introduced over the next three years.

·  Alignment with shareholders through a shareholding requirement that is at the top end of the market (500% of salary for the Co-CEOs and 300% of salary for other executive Directors) and which must be maintained for 12 months post departure from the Company.

The resulting package has significantly increased both (i) the focus on long-term performance and (ii) the time horizons of the delivery of remuneration from the previous remuneration structure for both our Co-CEOs. This has been achieved with a package that delivers a lower package at target and maximum levels for both Co-CEOs. The proposed package for our executive Directors is detailed in the table below.

Individual

Maximum package -proposed

Maximum package -previous

Martin Gilbert

Reduced to £4,320k

(Salary - £600k; pension -20%; variable pay award - 600%)

£5,764k

(Fixed pay - £524k; variable pay award - 1,000%)

Keith Skeoch

Reduced to £4,320k

(Salary - £600k; pension -20%; variable pay award - 600%)

£4,900k

(Salary - £700k; pension-25%; incentives - 575%)

Rod Paris

Reduced to £3,240k

(Salary - £450k; pension -20%; variable pay award-600%)

£4,005k

(Salary - £450k; pension -25% incentives - 765%)

 

Bill Rattray

Set at £2,115k to reflect increased scale of role

(Salary - £450k; pension - 20%; variable pay award - 350%)

£1,541k

(Fixed pay - £367k; pension - 20%; variable pay award - 300%)

These changes align our remuneration structures more closely with the market for the asset management industry and consider the FTSE and MSCI reclassification of Standard Life Aberdeen in the asset management subsector following the merger.

Further details on how the remuneration structure is directly aligned to the Group's strategic priorities, as well as our culture and values, and how the structure will be implemented in 2018 are set out in the 'Appoach to remuneration going forward' section on page 98.

Alignment of remuneration across our workforce

The Committee views alignment of our approach to determination of pay for executive Directors with wider Company policy on remuneration as critical to the successful delivery of strategy and development of future talent. A core principle of the reward structure for employees around the Group is to ensure success is shared appropriately and there is a fair approach to the determination of remuneration outcomes. As part of this the aggregate variable pay pool in any year is typically expected to be no higher than 25% of adjusted profit before variable pay and this will include the variable pay of executive Directors and all employees.

Shareholder engagement

Since completion of the merger the Committee have consulted extensively with our largest shareholders (representing c.40% of our shareholder base) and with the Investment Association, Institutional Shareholder Services and Glass Lewis. The Committee found the discussions helpful and constructive and the feedback we received shaped our final proposals.

Shareholders consulted with were generally supportive of the proposed approach going forward, and in particular:

·  Our approach to simplification and improved transparency

·  The increased focus on long-term performance measures and targets through introduction of backward and forward looking performance measures extending the time period that performance is measured from the previous policies for both CEOs

·  The increased alignment to shareholders through the five-year time horizon for all deferred awards alongside high shareholding requirements

In light of shareholder feedback, the Committee extended the proportion of deferred awards subject to the underpin performance conditions to 100% of the award for the duration of this policy (the original proposal was for the underpin performance conditions to apply to 50% of the deferred award), in recognition of the fact that the Company is undergoing a period of extensive change and both the strategy and the proposed approach for alignment of executive Director remuneration are new to our shareholders.

The level of remuneration for executives remains under intense scrutiny from shareholders and their representatives, the government and the general public. As a result, with the introduction of the new remuneration structure and alignment of the remuneration for our
Co-CEOs, we have reduced the maximum opportunity for both of the Co-CEOs and reduced the fixed pay level for Keith Skeoch as detailed above. The maximum opportunity has also been reduced for the CIO. The package for the CFO has been adjusted to reflect the increase in the scale and complexity of the role compared to his role as CFO for Aberdeen. Furthermore, as a Committee, we understand that critical to any discussion on the levels of executive remuneration is an understanding of our scorecard measures and the process for target setting to ensure this delivers the right alignment between performance and reward. The proposed scorecard for awards (set out on page 100) reflects the feedback that we received from our shareholders on the scorecard measures.

In addition, in response to shareholder feedback the Committee has taken the decision to disclose the targets that will be used to determine the annual variable pay award, where not considered commercially sensitive, for the 2018 performance year on a prospective basis. Where for reasons of commercial sensitivity the actual target is not disclosed an explanation of the process for target setting has been provided. The disclosures are provided in the 'Approach to remuneration going forward' section on page 102.

I would like to thank our shareholders and the Investment Association, Institutional Shareholder Services and Glass Lewis, for their time and constructive feedback.

In-flight performance targets

As a result of the scale of the merger the Committee has carefully considered the impact of this on the performance targets for existing incentive plans. In line with the principle set out in the Circular to the merger that there should be minimal changes for 2017, no changes are proposed to the performance targets for incentive plans in place in Standard Life Group and Aberdeen based on performance to the end of December 2017. Details on the out-turns for these plans are provided below.

The Committee has determined, however, that it is appropriate to restate the financial performance targets for the 2016 and 2017 Standard Life Executive Long-Term Incentive Plan (Executive LTIP) awards and the 2016 and 2017 Standard Life Investments Long-Term Incentive Plan (Standard Life Investments LTIP) awards to account for the changes in the structure of the Group. This is because it is no longer possible to consider the performance metrics of Standard Life Group separately from Standard Life Aberdeen beyond the end of 2017. Vesting for these awards is based in part on performance during 2018 for the 2016 awards, and 2018 and 2019 for the 2017 awards.

The Executive LTIP and Standard Life Investments LTIP are based on three-year cumulative performance targets. Given the timing of the merger, no changes have been made to the proportion of the targets relating to 2017 performance. Adjustments have, however, been made to the proportion of the targets relating to the 2018 and 2019 performance years to reflect the enlarged Company.

The underlying principle used in setting the revised targets is that they should be no more and no less difficult to achieve than the original targets.

Details of the restated 2016 and 2017 Executive LTIP and Standard Life Investments LTIP targets can be found on pages 122 to 125.

We have also updated the profit related measures for the 2018 grants under the Executive LTIP and Standard Life Investments LTIP to align with the financial measures to be used for the new remuneration plan for executive Directors and the updated core Key Performance Indicators (KPIs) for the Company.

Business context and remuneration outcomes for 2017

In accordance with the Directors' Remuneration Policy adopted at the 2017 general meeting, variable pay for Keith Skeoch and Rod Paris is based on performance measures and objectives consistent with the Standard Life Group and Standard Life Investments measures that were set at the start of the 2017 performance year and assessed against the results of these businesses for this period.

Variable pay for Martin Gilbert and Bill Rattray from the date of the merger to the end of this performance year is based on performance measures and objectives consistent with Aberdeen measures that applied up to the merger and assessed against Aberdeen results for the period from 14 August 2017 to 31 December 2017.

In reaching its decisions in terms of the annual bonus scorecard and 2017 LTIP vesting levels for Keith Skeoch and Rod Paris and the variable pay awards for Martin Gilbert and Bill Rattray, the Committee considered a range of factors in order to ensure that the awards are fair and appropriately reflect overall performance. As well as considering the achievement against the targets, the Committee reviewed the individual components which contributed to the delivery of the financial performance. Looking externally, the Committee also considered the alignment of its decisions on remuneration with the interests of shareholders. In particular, the Committee have sought to ensure that there are no unintended consequences of the merger on 2017 performance outcomes.

As detailed earlier in the Annual report and accounts as a result of the announcement on 15 February 2018 that Lloyds Banking Group and Scottish Widows are seeking to terminate arrangements for the assets we manage we have recognised an impairment charge of £40m relating to this intangible asset in our 2017 results. The impact of this will be reviewed during 2018 and any implications in respect of executive Director remuneration will be considered as part of the 2018 year end decision making in relation to remuneration as the impact together with mitigating actions becomes clearer.

In addition, as a result of today's announcement regarding the sale of the Group's capital heavy insurance business, during 2018 the Committee will review the impact of this on remuneration measures and targets set for the 2018 and in-flight incentive arrangements and consult with shareholders as appropriate.

Keith Skeoch and Rod Paris

Having considered the financial performance, the non-financial performance in 2017 and performance against personal objectives, the Committee approved a bonus award of 143% of salary for Keith Skeoch and 310% of salary for Rod Paris (which is the sum of his bonus awards under the Standard Life Group and Standard Life Investments bonus arrangements based on his salary pro-rated for the period in the year for which he was a Director). The Committee also approved the vesting level of the 2015 Executive LTIP as 70% of maximum and awards granted under the 2015 Standard Life Investments LTIP will vest at 42.3% of maximum. Keith Skeoch and Rod Paris will also be granted a final award under the Executive LTIP in 2018 in relation to performance in 2017. The award levels will be 400% of their respective salaries as at 31 December 2017.

Martin Gilbert and Bill Rattray

Having considered financial and non-financial performance in the period from the merger to 31 December 2017 and personal performance against objectives, the Committee approved a bonus award of 569% of salary for Martin Gilbert and 168% of salary for Bill Rattray (based on salary pro-rated for the period in the year for which they were a Director).

In order to maximise transparency, we have also included a section in the annual remuneration report disclosing the variable pay outcome for the period 1 October 2016 to the date of the merger. These awards were determined by the remuneration committee of Aberdeen Asset Management PLC.

Further details regarding the implementation of our policy in 2018 are provided in the 'Approach to remuneration going forward' section of this report on page 103.

I hope that you find this report a clear account of how the Committee has developed our policy proposals for 2018 and implemented the policy during 2017 and are able to support the decisions we have taken. I would again like to thank our shareholders for their time and sharing their views during our meetings. I welcome any comments from shareholders and will be available to answer any questions
at the AGM.

Approach to remuneration going forward - explained

The following section sets out an overview of the Group's remuneration principles which underpin the new remuneration framework, how our new remuneration policy will be operated going forward, how it aligns with our business strategy and the way in which it will be implemented in 2018.

What principles were used to develop the new remuneration framework?

The Remuneration Committee developed three key principles designed to support our strategy, culture and values which guided the design of the remuneration framework going forward, as follows:

Underlying principles

How this is achieved with the proposed framework

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

 

 

·  Our remuneration framework and the basis for awards is simple, transparent and fair for both participants and shareholders alike

 

 

·  The remuneration framework rewards the achievement of long-term sustained business results which support our strategy, cultures and values

·  Conduct and how performance has been achieved will form a key part of how remuneration levels are determined

·  The remuneration design encourages significant long-term share ownership to ensure wealth and not just income is at risk

·  An appropriate level of fixed remuneration is provided to balance risk and reward

 

 

·  Our remuneration design aligns the interests of executives, shareholders and importantly our clients

The following chart illustrates the key elements of our remuneration structure for executive Directors going forward and the time-horizons for each element.

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

How does the remuneration structure support delivery of strategy?

The remuneration structure for executive Directors has consciously been designed to support the delivery of the Group's key strategic priorities as illustrated below:

Our strategy

What this means for us

 

How our remuneration structure delivers our strategy

 

Developing strong relationships with customers and clients

 

·  We focus on putting customers and clients first with the aim of operating to the highest standards. If we don't meet our own high standards, we look to put it right

 

·  A balance of non-financial measures will form part of our scorecard for reward 

·  These will be assessed in determining reward outcomes to ensure that our culture and values have been adhered to in achieving results delivered

 

 

 

Broadening and deepening our investment capability

 

·  Investment capability is central to attraction of future customers and clients that require propositions and fund choices to deliver value over the long term

 

·  Investment performance and flows are included in performance measures for reward outcomes, with performance measured over an extended time period

·  Investment performance will be measured over three and five years and flows over three years 

·  This will also form part of underpin measures post-award for a further three years

 

Building an efficient and effective business

 

·  Delivering cost synergies whilst maintaining client service

 

·  Cost/income ratio will be included in performance measures for reward outcomes and will also form part of underpin measures post-award for a further three years

 

Growing and diversifying our revenue and profit

 

·  Growth and diversification is a critical part of our strategy for delivering sustainable value to shareholders

 

·  A variable pay award based on a pre-determined balanced scorecard of measures that will reward achievement of key financial milestones across our global business over the long term (up to six years).  This includes flows based on growth channels.

 

Attracting, retaining and developing talented people

 

·  Engaged people are central to our success and delivering for customers, clients and our shareholders

 

·  Simplified remuneration structure to improve transparency between performance and reward and reduce unexpected outcomes

·  Appropriate balance of package between fixed pay and performance related pay (delivered in cash variable pay and deferred variable pay)

 

 

 

 

 

How will performance be measured?

The tables on the following pages set out the Executive Incentive Plan (EIP) scorecards for variable pay awards going forward, both in terms of determining annual awards under the plan, and the underpin performance conditions to be used for deferred awards together with the rationale for their inclusion. As illustrated below, a significant proportion of annual award (60%) will be based on long-term financial measures. Details of the targets that will be used to determine the 2018 awards are also provided.

Performance scorecard

Performance measures

Time period for measurement

Weightings

Rationale for inclusion/additional details

Investment performance

Three and five years

20%

·  Aggregate performance data of mandates and funds against the relevant client-specific benchmarks, calculating the average, weighted by AUM. Blend of three-year and five-year performance, in equal proportions.

·  Three-year investment performance is a KPI for the Group

New business flows

Building up to three years over duration of policy

20%

·  The metric will be split into two parts:

(i) 50% weighting to gross new business flows (all channels)

(ii) 50% weighting to net new business flows (growth channels only)

·  Excludes flows arising from investment in cash and liquidity funds

·  Measures a key driver of AUMA in terms of new business and its retention

Adjusted profit before tax (excluding spread/risk margin)

Building up to three years over duration of policy

20%

·  Excludes spread/risk margin which can be volatile due to impact of demographic assumption changes

·  Links executive reward to profit generation

Cost/income ratio

(excluding spread/risk margin)

Annual

20%

·  Aligned to the Group's strategy of building an efficient and effective business 

Total financial

 

80%

 

Strategic measures

Annual

 

 

 

 

10%

Focuses management on the delivery of the business' strategic priorities to drive improved performance in future years.

Customer and client measures

Annual

Focuses management on growing customer and client volumes through winning new customers and clients and growing revenue from our existing customers and clients which will ultimately lead, through growth in assets under management and quality revenue flows, to increasing profitability and increased shareholder value.

People measures

Annual

Focuses management on developing organisational capability by building the resources for the future, supporting the diversity agenda and encouraging the desired behaviours.

Risk, compliance and conduct measures

Annual

Focuses management on risk accountability, advancing an effective risk management environment, the management of conduct risk and the embedding of a robust control environment.

Personal

Annual

10%

Rewards delivery of performance against key personal performance objectives.

Total non-financial

 

20%

 

 

How are the performance metrics set?

Long-term financial targets

Long-term financial targets (excluding Investment performance) are three-year cumulative targets based on adding the discrete one-year figures from the relevant budget and operating plan approved by the Board each year. This ensures that meaningful and challenging targets can be set by reference to, amongst other things, the trend of prior year results and the prevailing market and economic conditions.

To avoid reliance on historic results for periods before completion of the merger, the three-year targets will be introduced on a transitional basis, under which the targets in the first year will be set for 2018 only based on the 2018 budget and operating plan, in the second year they will be set on a cumulative basis for the two years 2018 and 2019, with the full three-year cumulative measure applying in the third year, covering the years 2018, 2019 and 2020.

Adjusted profit before tax (excluding spread/risk margin) (20%)

·  This metric compares actual adjusted profit before tax excluding spread/risk margin, on a cumulative basis over a rolling three-year period, against the targets set as detailed above

·  The threshold, target and stretch figures will be disclosed retrospectively following the end of each performance period

Gross new business flows (10%)

·  This metric compares actual total gross new business flows on a cumulative basis over a rolling three-year period, covering both growth and mature channels (but excluding cash and liquidity funds), against the targets set as detailed above

Net new business flows (10%)

·  This metric compares actual net new business flows on a cumulative basis over a rolling three-year period, covering only the Company's growth channels (but excluding cash and liquidity funds), against the targets set as detailed above

Investment performance
(20%)

·  Investment performance is measured by reference to the aggregation of performance data of mandates and funds against the relevant client-specific benchmarks and calculating the average, weighted by AUM. This metric used for remuneration purposes is a blend of three-year and five-year relative performance, in equal proportions.

·  The target is set at 60% of AUM by value to be outperforming benchmark

·  In considering relative investment performance, the GARS strategy is measured by reference to a LIBOR +2.5% return over the relevant period, which is midway between the benchmark and target performance

Short-term financial target

Cost/income ratio (20%)

·  This metric compares the actual cost/income ratio (excluding the effects of spread/risk margin, consistent with the profit measure), measured over a single year, against targets set by the Committee at the beginning of each period

Scorecard for 2018 EIP

The following table sets out the performance scorecard to be used to determine 2018 EIP awards.

Performance metrics

Weighting

2017 Actual



Threshold (0% of maximum)

Target (50% of maximum)

Stretch (100% of maximum)

Long-term financial










Adjusted profit before tax (excluding spread/risk margin)

20%

Due to commercial sensitivity this measure will only be disclosed at the end of the performance period.

Gross new business flows (all channels)

10%

£73.4bn



£76.8bn

£85.3bn

£93.8bn

Net new business flows (growth channels only)

10%

(£13.5bn)



£1.0bn

£3.3bn

£6.0bn

Investment performance

20%

59.5%



50.0%

60.0%

70.0%

Short-term financial

 

 



 

 

 

Cost/income ratio (excluding spread/risk margin)

20%

69.7%



68.0%

66.0%

64.0%

Total

 

 








Annual non-financial measures

10%

 



Remuneration Committee assessment


Annual personal performance

10%

 



Remuneration Committee assessment


Underpin performance conditions applied to deferred variable pay awards

All of the deferred awards made to executive Directors for the duration of the policy will be subject to underpin performance conditions measured over a three-year period. Taken together with the long-term financial measures used for the financial scorecard, this extends the performance measurement period for awards to up to six years.

Performance measure

Weighting

Definition/rationale for inclusion

Investment performance

25%

·  Aggregate performance data of mandates and funds against the relevant client-specific benchmarks, calculating the average, weighted by AUM. Blend of three-year and five-year performance in equal proportions, over the three-year period following the EIP performance period.

·  Rewards sustained performance

Flows

25%

·  Excludes flows arising from investment in cash and liquidity funds

·  50% weighting to gross new business flows, to include both growth and mature channels

·  50% weighting to net new business flows, which considers net flows within growth channels only to limit potential for ongoing run-off of mature business to unduly influence the aggregate net new business figures as management's ability to influence the quantum and timing of these run-off flows is limited

·  Rewards a key driver of AUMA

Return on adjusted equity

25%

·  Return on adjusted equity is defined as the annualised adjusted profit before tax (excluding spread/risk margin), expressed as a percentage of opening IFRS equity, adjusted for (i) time-apportioned dividends paid to equity holders, (ii) the defined benefit pension surplus and (iii) the incremental goodwill and intangible assets arising from the IFRS accounting for the merger or any similar transaction in the future

·  Rewards efficient profit generation

Cost/income ratio

25%

·  This metric will compare the actual average cost/income ratio (excluding spread/risk margin), consistent with adjusted profit before tax (excluding spread/risk margin) against target achieved over the relevant three-year underpin period

·  Aligned to the Group's strategy of building an efficient and effective business

Underpins to be applied for deferred variable pay awards to be granted in 2019 in respect of 2018 performance

The following table sets out the underpin measures that will be used for the deferred awards to be granted in 2019 (which will be made in respect of 2018 performance).

Performance measure

Weighting

Underpin level

Investment performance

25%

·  The outcome will be calculated at the end of each financial year in the three-year underpin period (2019-2021), with the average of the three years' results to be at or above 55% of AUM by value to be outperforming benchmark

Flows1

25%

·  Gross flows underpin will be set by aggregating the gross new business flows budgets from the 2019 approved budget/plan for the three-year period 2019-2021

·  Underpin for gross flows will be set at the midpoint between the three-year aggregated 2019 budget total and the related threshold measure calculated for the 2019 performance scorecard

·  Net flows underpin will be set by aggregating the growth channel net new business flows budgets from the 2019 approved budget/plan for the three-year period 2019-2021

·  Underpin target for net flows will be set at the midpoint between the three-year aggregated 2019 budget total and the related threshold measure calculated for the 2019 performance scorecard

Return on adjusted equity

25%

·  The underpin will require return on adjusted equity, calculated as the average rate over the three-year underpin period (2019-2021), to be 17% or higher

Cost/income ratio1

25%

·  The underpin will be set by averaging the annual cost/income ratios for each of the three years in the  underpin period (2019-2021) from the 2019 budget and operating plan

1    Actual underpin target to be published at time of grant of the award in quarter one 2019.

Performance against the annual performance scorecard and the underpin performance conditions will be assessed against the above measures.  Prior to making any award and prior to an award vesting the Risk and Capital Committee and Audit Committee formally advise the Committee on matters including, but not limited to operational performance, conduct and compliance. The Committee has the discretion to amend awards if it does not consider that these reflect the performance of the Group.

The Committee recognises that alongside the alignment to strategy, our reward policy must promote sound ethics, appropriate conduct and risk management and operating with integrity. We have fully consulted with the Chief Risk Officer during the development of our remuneration policy to ensure that this supports our own aims and objectives for a responsible business.

How will the policy be implemented in 2018?

Element

Implementation in 2018

Base salary

With effect from 1 January 2018 base salaries are as follows:

·  Co-Chief Executive Officers (Co-CEOs): £600,000 (Keith Skeoch £600,000 (reduced from £700,000), Martin Gilbert (£600,000 increased from £522,000))

·  Chief Investment Officer (CIO): £450,000

·  Chief Financial Officer (CFO): £450,000 (increased from £365,000)

Benefits and pension

·  Benefits to be provided in line with benefit policy

·  The pension allowance for each of the executive Directors has been set at 20% of salary (reduced from 25% of salary for Keith Skeoch and the CIO)

Executive Incentive Plan

The maximum opportunities under the EIP in respect of 2018 have been set as follows:

-      Co-CEOs: 600% of salary

-      CIO: 600% of salary

-      CFO: 350% of salary

·  Subject to performance, 75% of awards will be delivered in the form of deferred shares subject to underpin performance conditions measured over a three-year period. The remainder of the award (25%) will be delivered in the form of cash.

·  For grants made in 2018 at least 80% of the performance metrics will be based on financial performance

·  The performance conditions used to determine awards and subsequent performance conditions to be applied to the deferred awards are set out above in the section 'How will performance be measured'

Share ownership

Executive Directors are required to build up substantial interests in the Group as follows:

·  Co-CEOs: 500% of salary

·  CIO: 300% of salary

·  CFO: 300% of salary

·  Shares up to the value of the share ownership guidelines must be held for 12 months following departure from the Group

 

Performance and remuneration for 2017 at a glance

Key performance measures

The tables below illustrate outcomes against key performance measures relevant to 2017 remuneration for Co-CEOs Keith Skeoch and Martin Gilbert. The annual bonus outcome for 2017 for Keith Skeoch is driven by assessment of performance against a scorecard, which includes financial and non-financial measures and personal performance. Keith also participates in the Standard Life Group long-term incentive plans, details of which are provided below. The variable pay outcome for Martin Gilbert for the period 14 August 2017 to 31 December 2017, which determines his full incentive opportunity, was based on achievement against a mixture of long-term and annual financial metrics, non-financial metrics and personal performance.

Keith Skeoch

Annual bonus performance measures

2017

Financial

4.25/5

Non-financial

 

-      Strategic/delivery/process

5/5

-      Customer and external leadership

4.5/5

-      People

4.75/5

Weighted combined scorecard outcome

4.4/5

Personal performance

4/5

Martin Gilbert

Variable pay performance measures

2017

Financial

42.1%/80%

Non-financial strategic

6.75%/10%

Personal performance

8%/10%

The 2015 Executive LTIP targets measure Group performance over a three-year period against a range of financial measures. The Standard Life Investments 2015 LTIP target measures Standard Life Investments' consolidated cumulative three-year third party earnings before interest, tax, depreciation and amortisation (EBITDA) performance.

Keith Skeoch

 

Executive LTIP 2015 performance measure

Threshold

Actual performance

Weighted vesting level1

Cumulative Group operating profit before tax

£1,670m

£2,122m

70%

Cumulative Group net flows

£16.6bn

(£8.4bn)

0%

Final vesting

 

 

70%

Standard Life Investments LTIP 2015 performance measure

 

 

 

Consolidated cumulative three-year third party (EBITDA)

60% of target

93.84% of target

42.3%

1    Executive LTIP 2015 weighted 70% cumulative Group operating profit before tax, and 30% cumulative Group net flows.

Following completion of the merger the Group have changed the calculation of adjusted profit before tax (named operating profit before tax when the target for the 2015 award was set). This is explained further on page 176.The actual operating profit before tax for the purpose of the 2015 Executive LTIP has been calculated based on the calculation methodology when the target was set and also excludes the impact of the merger. Operating profit/adjusted profit is not defined under IFRS and is therefore deemed an alternative performance measure.

A definition of adjusted profit can be found in the Glossary. Further information including reconciliations to relevant IFRS metrics are provided in Supplementary information in Section 10.

Total remuneration - Co-Chief Executive Officers

These tables measure for each Co-Chief Executive Officer, for the period in 2017 in which they held that position, the remuneration reportable in the single figure table on page114 compared to the maximum remuneration permissible under the remuneration policy.

Keith Skeoch

In this table maximum remuneration includes the value of dividend equivalents added to LTIP awards and share price movement from the value when the awards were granted. The LTIPs are valued on the same basis as in the single figure table.

 

£000s

2017 single figure remuneration

3,028

Maximum remuneration

4,151

Martin Gilbert

Martin was appointed as Co-Chief Executive Officer on 14 August 2017 and both this and the single figure table report his remuneration in the period from 14 August 2017 to 31 December 2017.

 

£000s

2017 single figure remuneration

1,317

Maximum remuneration

2,162

Pay Ratios

The Committee is mindful of the relationship between Chief Executive Officer pay and the pay of other employees across the Standard Life Aberdeen Group. In line with emerging best practice, the Committee has again therefore voluntarily decided to include the pay ratio between the Co-Chief Executive Officers and the median pay of other employees within the Group. The Committee notes that the UK Government intends to require companies to report this figure annually but the proposed legislation has not been published at the time of this report.

Based on the averaged annualised Co-Chief Executive Officers' single figures set out on page 114 the ratio of pay to the median of all other UK based employees is 60:1. Employee pay includes base salary, employer pension contributions, benefits and incentive payments.

There is no external guidance on the methodology to be used for the calculation of the pay ratio. The Committee used the median as the comparator as it is affected less by changes in the remuneration of a small number of employees when comparing between years.

5.2 Future Policy Report

This section sets out the remuneration policy for executive Directors and non-executive Directors, which is subject to a binding vote of shareholders and will, if approved, take effect from 15 May 2018 - the date of the 2018 AGM.

Remuneration policy for executive Directors

Base salary

Purpose and link to strategy

To provide a core reward for undertaking the role, commensurate with the individual's role, responsibilities and experience.

Maximum opportunity

Salaries for executive Directors are set at an appropriate level to attract and retain individuals of the right calibre and with the experience required.

Whilst no maximum is set, when considering increases, the Remuneration Committee is guided by the general increase for the broader employee population.

The Remuneration Committee may determine larger increases in certain circumstances, such as: development in role; change in responsibility; where a new or promoted employee's salary has been set lower than the market level for such a role and larger increases are justified as the individual becomes established in the role.

Operation

Normally reviewed annually, taking into account a range of factors including: (i) the individual's skills, performance and experience; (ii) increases for the broader employee population; (iii) external market data and other relevant external factors; (iv) the size and responsibility of the role; and (v) the complexity of the business and geographical scope.

 

Performance metrics

Not applicable.

Benefits

Purpose and link to strategy

To provide market competitive and cost effective benefits.

Maximum opportunity

There is no maximum value of the core benefit package. The costs associated with benefits provision are monitored and controlled by the Remuneration Committee.

 

Operation

Executive Directors are provided with a package of core benefits, which include (i) health screening; (ii) private healthcare; (iii) death in service protection; (iv) disability income protection benefit; and (v) reimbursement of membership fees of professional bodies.

In line with other employees, executive Directors are eligible to participate in the Company's voluntary benefits programme.

Specific benefit provision may be subject to minor change from time to time. Additional benefits may be provided on recruitment or to support relocation.

In the event of recruitment or relocation additional benefits may be provided as considered appropriate by the Remuneration Committee, including, but not limited to: housing rental costs; education allowance; travel and accommodation costs; and other relocation costs.

 

 

Performance metrics

Not applicable.

 

Pension

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

Group contribution of up to 20% of base salary, or equivalent cash allowance in lieu.

Operation

Employee contributions are made to the Group's defined contribution pension arrangement, or equivalent cash allowances are paid.

The level of contribution/ cash equivalent is reviewed periodically taking into account: (i) the pension opportunity offered to other employees within the Group; (ii) external market data; and (iii) pension legislation.

The Group would continue to honour legacy arrangements (e.g. defined benefit pension arrangements) in the event of an individual with a contractual entitlement to such a pension benefit being promoted to an executive Director role.

Performance metrics

Not applicable.

 

All employee share plans

Purpose and link to strategy

To permit participation in all employee share plans on the same basis as other employees.

Maximum opportunity

Maximum contributions under all employee share plans will be set in line with other employees and within the limits set by the relevant tax authority.

 

Operation

To the extent operated by the Company, participation in an HMRC approved Share Incentive Plan or Sharesave plan is permitted.

 

 

Performance metrics

Not applicable.

Executive Incentive Plan (EIP)

Purpose and link to strategy

To reward the delivery of the Group's business plan in a range of financial and non-financial areas and to align executives' interests to those of shareholders and our customers and clients.

Maximum opportunity

The maximum award opportunity in respect of a financial year under the plan is 700% of salary.

For 2018, the opportunity levels are:

-      Martin Gilbert - 600% salary

-      Keith Skeoch - 600% salary

-      Rod Paris - 600% salary

-      Bill Rattray - 350% salary

The Remuneration Committee will normally consult with the Company's largest institutional shareholders in advance of increasing award levels above the current grant levels.

Operation

Annual award

The performance measures, their respective weightings and targets are set annually by the Remuneration Committee.

The Remuneration Committee exercises its judgement to determine awards at the end of the performance period, which in normal circumstances, will be a period of 12 months, to ensure that the outcome is fair in the context of overall Group performance. The Risk and Capital Committee and the Audit Committee will formally advise the Committee as part of this process and the Committee has the discretion to amend awards if it does not consider that these reflect the performance of the Group.

Once the award has been determined:

·  25% will normally be paid in the form of cash; and

·  75% will normally be deferred into instruments.

Deferred award

Deferred awards will be subject to underpin performance conditions which will normally be measured based on performance over the three financial years from award.

Deferred awards will normally vest in equal tranches on the third, fourth and fifth anniversary of the grant date.

Deferred awards are, where appropriate, subject to a holding period to the end of the fifth anniversary of the grant date.

The measures, their respective weightings and targets for the purpose of the underpin performance conditions are set annually by the Remuneration Committee.

The Remuneration Committee exercises its judgement to determine the extent to which the underpin performance conditions have been met to ensure that the outcome is fair in the context of overall Group performance.

Deferred awards will normally be delivered as share awards. Where required, for regulatory purposes, deferred awards can be made in a combination of share awards and fund awards (which are conditional rights to receive a cash sum based on the value of a notional investment in a range of Standard Life Aberdeen funds). The balance of each award is determined by the Remuneration Committee; however, the share element would not be less than 50% of the deferred award.

Deferred awards will accrue the value of dividends (payable in cash or shares or such equivalent form) over the deferral / holding period (or, if later, the exercise of the award during a retention period), to the extent the awards vest.

Awards are subject to malus and clawback.

Performance metrics

Annual award

Performance is assessed against a range of key financial, non-financial (including strategy, customer and client, risk, conduct and compliance and engaging our talent) and personal performance measures.

Performance is measured both on annual, and where appropriate, trailing performance. Trailing performance will be measured over a period increasing to three years over the duration of the policy and will form at least 50% of an award.

At least 70% will be based on financial performance measures and no more than 10% will be based on personal performance measures.

For threshold performance, the award opportunity is 0%, with 100% of the award payable for maximum performance.

Deferred award subject to underpin performance

Performance is measured against at least four underpin performance conditions.

Underpin performance conditions are determined by the Committee on an annual basis, however, at least three will be based on financial measures.

For threshold performance, the amount of deferred award that vests is zero with 100% of the award vesting if the underpin condition is met in full.

Other features

Malus and clawback

Malus and clawback provisions apply to awards under the Executive Incentive Plan.

Under the malus and clawback provisions, the Remuneration Committee can reduce awards that have not yet vested (malus) and can require repayment of an award (clawback) for a period of five years from the date of award.

The circumstances in which malus or clawback would apply, include but are not limited to:

-      A material misstatement of the Group's audited financial statement

-      Any failure of risk management, fraud or other material financial irregularity

-      Serious misconduct by a participant or otherwise.

Share ownership

Executive Directors are required to build up a substantial interest in Group shares.

The current requirements are as follows:

500% of salary for the Co-Chief Executive Officers and 300% of salary for other executive Directors

Executive Directors will normally be required to retain shares held in satisfaction of the requirements for a period of one year following their departure from the Group.

Notes to the policy table

Remuneration Committee discretion in relation to existing commitments

The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed: (i) before the policy set out above, or (ii) at a time when a previous policy, approved by shareholders (be it Standard Life Aberdeen plc, Standard Life plc, or Aberdeen Asset Management PLC shareholders), was in place provided the payment is in line with the terms of that policy, or (iii) at a time when the relevant individual was not a Director of the Company and the payment was not in consideration for the individual becoming a Director of the Company.

For these purposes, payments include the Remuneration Committee satisfying awards of variable remuneration in relation to awards over shares set out in the table below. This means making payment in line with the terms that were agreed at the time the award was granted.

In the interests of transparency the key terms of the executive Directors 'awards' under legacy plans are set out below.

Overview of key terms for awards

Executive Long-Term Incentive Plan (Executive LTIP)

·  Awards granted in 2014, 2015, 2016, 2017 and 2018.

·  Awards (in the form of nil-cost options) granted to executive Directors under the Executive LTIP prior to the approval of this policy are subject to the achievement of cumulative Group operating profit before tax and cumulative Group net flows performance over the three-year performance periods. Awards are subject to a two-year holding period after the end of the performance period.

·  Adjustments have been made to update the profit measure to adjusted profit before tax in the 2016 and 2017 LTIP performance measures and to adjusted profit excluding spread /risk margin in the 2018 LTIP performance measures. In addition, the net flows target has been updated in the 2018 LTIP performance measures to Group growth net flows. Finally the cumulative targets which relate to the 2018 performance year onwards reflect the enlarged Company.

·  The Remuneration Committee has the discretion to amend the final vesting level of these awards if it does not consider that it reflects the overall performance of the Group. Awards are also subject to review by the Risk and Capital Committee at the end of the performance period to confirm that vesting of the award is appropriate. These awards accrue dividend equivalents over the vesting period which will normally be paid in shares on a reinvested basis. Awards are subject to malus and clawback provisions on the same basis as EIP awards.

Standard Life Investments Long-Term Incentive Plan (Standard Life Investments LTIP)

·  Awards granted in 2016 and 2017.

·  Awards (in the form of nil-cost options) granted to executive Directors under the Standard Life Investments LTIP prior to the approval of this policy are subject to the achievement of Standard Life Investments' consolidated cumulative three-year third party earnings before interest, tax, depreciation and amortisation (EBITDA) in the final financial year of the three-year performance periods.

·  The vesting of awards is also subject to an investment performance gateway which requires Standard Life Investments' performance to be above the lower quartile of the money-weighted average of all assets under management compared to other asset managers.

·  Adjustments have been made to update the profit measure to total adjusted profit before tax (including both third party and mature business) in the 2016 and 2017 LTIP measures and to reflect the enlarged Company in the targets which relate to the 2018 performance year onwards.

·  The Remuneration Committee has the discretion to amend the final vesting level of these awards if it does not consider that it reflects the overall performance of Aberdeen Standard Investments. Awards are also subject to review by the Risk and Capital Committee at the end of the performance period to confirm that vesting of the award is appropriate. These awards accrue dividend equivalents over the performance period which will normally be paid in shares on a reinvested basis. For awards made prior to 2017, awards are subject to malus provisions if the award is found to be granted based on inaccurate information as a result of an individual's conduct, and clawback provisions within two years of vesting if there is a material misstatement of results by a Group member. For awards made from 2017 onwards, awards are subject to malus and clawback provisions on the same basis as EIP awards.

Aberdeen Variable Pay in Deferred shares

·  Pre-merger awards - Under the terms of the merger, existing awards granted to employees of Aberdeen under the Aberdeen Deferred Share Plan 2009 or the Aberdeen USA Deferred Share Award Plan prior to completion were exchanged for equivalent awards over shares in the Company.

·  Awards granted post-merger - Awards (in the form of nil-cost options) that were granted to executive Directors under the Aberdeen Deferred Share Plan 2009. Awards will be released in equal tranches over five years from grant. Awards are eligible to receive dividend equivalents between the date of grant and the date of exercise, which may be paid only after the earliest vesting date has passed. Awards are subject to malus and clawback provisions under the same basis as EIP awards.

 

Remuneration Committee discretion in relation to future operation of the remuneration policy

The Committee will operate variable pay plans according to the respective rules of the plans. The Committee will retain flexibility in a number of areas regarding the operation and administration of these plans, including (but not limited to) the following:

·  How to deal with a change of control or restructuring of the Group, or a demerger or similar event (including allowing awards to vest/be released and disapplying any relevant time pro-rating)

·  How and whether any award may be adjusted in certain circumstances (including in the event of a variation of share capital, demerger, special dividend, fund merger, or winding up or similar event)

·  How to deal with changes in regulatory requirements (e.g. the inclusion of retention periods post vesting, the form of any deferred award)

The Committee also retains the discretion within the policy to adjust targets and/or set different measures and weightings if events happen that cause it to determine that the original targets or conditions are no longer appropriate and that amendment is required so that the targets or conditions achieve their original purpose. Revised targets/measures will be, in the opinion of the Committee, no less difficult to satisfy than the original conditions.

Share awards, under the Company's share plans, may be granted as conditional share awards, nil cost options or forfeitable shares at the discretion of the Committee. Awards may at the Committee's discretion be settled in cash.

The Committee may accelerate the vesting and/or the release of awards if an executive Director moves jurisdictions following grant and there would be greater tax or regulatory burdens on the award in the new jurisdiction.

Choice of performance measures - approach to target setting

Performance targets for the Group's incentive arrangements are set on an annual basis by the Committee. The Committee takes into account a range of factors including business forecasts, prior year performance, degree of stretch against the performance targets in the business plan, the economic environment, market conditions and expectations.

The following table sets out details on why the performance measures for the purpose of the Executive Incentive Plan (EIP) were chosen. Further details on the proposed measures for the 2018 EIP award are provided on pages 100 to 102.

Measure

Rationale

Financial measures

·  Measures chosen to support the delivery of financial performance as set out in the Group's business plan

·  Measures chosen may include, but are not limited to:

-      Investment performance

-      New business flows

-      Adjusted profit before tax

-      Cost/income ratio

-      Return on adjusted equity

Strategic measures

·  Focuses management on the delivery of the business's strategic priorities to drive improved performance in future years

Customer and client measures

·  Focuses management on growing customer and client volumes through winning new customers and clients and growing revenue from our existing customers and clients which will ultimately lead, through growth in assets under management and quality revenue flows, to increasing profitability and increased shareholder value

People measures

·  Focuses management on developing organisational capability by building the resources for the future, supporting the diversity agenda and encouraging the desired behaviours

Risk, compliance and conduct measures

·  Focuses management on risk accountability, advancing an effective risk management environment, the management of conduct risk and the embedding of a robust control environment

Changes to the remuneration policy

As set out in the statement from the Remuneration Committee Chairman, a new remuneration policy has been designed to reflect the strategic priorities of the Group going forward. The key change that has been made, further details of which can be found in the statement from the Remuneration Committee Chairman, is the approach to incentives going forward.

Scenario charts

The chart below illustrates how much the current executive Directors could earn under different scenarios for 2018. This is based on the following assumptions:

·  Threshold performance is based on fixed pay only, which includes salary, pension allowance and benefits

·  Target includes the potential value of the Executive Incentive Plan which would be payable for target performance (being 50% of maximum)

·  Maximum includes the potential value of the Executive Incentive Plan which would be payable for maximum performance (100%)

·  Share price movements and dividend equivalents have been ignored

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

Remuneration policy for new appointments

Area

Policy

Principles

In determining remuneration arrangements for new appointments to the Board (including internal promotions), the Committee applies the following principles:

-      The Committee takes into consideration all relevant factors, including the calibre of the individual, local market practice and existing arrangements for other executive Directors, adhering to the underlying principle that any arrangements should reflect the best interests of the Group and its shareholders

-      Remuneration arrangements for new appointments will typically align with the remuneration policy presented above

-      In the case of internal promotions, the Committee will honour existing commitments entered into before promotion.

Components and approach

The remuneration package offered to new appointments may include any element of remuneration included in the remuneration policy set out in this report, or any other element which the Committee considers is appropriate given the particular circumstances but not exceeding the maximum level of variable pay set out below.

In considering which elements to include, and in determining the approach for all relevant elements, the Committee will take into account a number of different factors, including (but not limited to) typical market practice and existing arrangements for other executive Directors and internal relativities.

The maximum level of variable pay which may be awarded to a new executive Director at or shortly following recruitment shall be limited to 700% of salary. These limits exclude buyout awards and are in line with the policy table above.

Buyouts

To facilitate recruitment, the Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer. In doing so, the Committee will adhere to regulatory guidance in relation to the practice of buyout awards to new recruits.

In considering buyout levels and conditions, the Committee will take into account such factors as the type of award and performance measures and the likelihood of performance conditions being met. The buyout award will reflect the foregone award in amount and terms (including any deferral or retention period and performance conditions) as closely as possible.

Where appropriate, the Committee retains the discretion to utilise Listing Rule 9.4.2 for the purpose of making an award to 'buy out' remuneration terms forfeited on leaving a previous employer or to utilise any other incentive plan operated by the Group.

 

Service Contracts and loss of office payment policy

Executive Directors

Within executive service contracts, the Committee aims to strike the right balance between the Company's interests and those of the executive Directors, whilst ensuring that the contracts comply with best practice, legislation and the agreed remuneration principles. Contracts are not for a fixed term, but set out notice periods in line with the executive Director's role.

Area

Policy

Notice period

Our standard notice policy is:

·   Six months by the executive Director

·   Up to 12 months by the employer to the executive Director

Executive Directors may be required to work during the notice period or take a period of 'garden leave' or may be provided with pay in lieu of notice if not required to work the full notice period.

Termination payments

Any payment in lieu of notice will be made up of up to 12 months' salary, pension contributions and the value of other contractual benefits. The payment may be made in phased instalments and the policy is to do this for notice periods of over six months. A duty to mitigate applies.

Non-compete clauses

Applies during the contract and for up to six months after leaving at the Company's choice.

Treatment of incentive awards

Awards under the EIP

Within the EIP, good leavers are defined as those whose office or employment comes to an end because of death, ill-health, injury or disability, redundancy, or retirement with the agreement of the employing company; the sale of the individual's employing company or business out of the Group or any other reasons at the discretion of the Committee.

Leavers during the award year

Typically, for good leavers, rights to awards under the EIP will be pro-rated for time in service to termination as a proportion of the performance period, and will, subject to performance be paid at the normal time in the normal manner (i.e. in cash / deferred awards as appropriate). Typically for other leavers, rights to awards under the EIP will be forfeit.

Leavers during the deferral period

Outstanding deferred awards under the EIP will be paid at the normal time, subject to performance against the underpin performance conditions. The Committee retains the discretion to apply time pro-rating (over the deferral period) for good leavers and to accelerate the vesting and/or release of awards if it considers it appropriate. Typically for other leavers, rights to deferred awards will be forfeit.

Legacy awards under the Standard Life Group bonus arrangements

A good leaver is defined as someone whose office or employment comes to an end because of death, ill health, injury, disability, redundancy or retirement, sale of the employing company or business or any other reason at the discretion of the Remuneration Committee.

Typically for good leavers, outstanding deferred share awards granted in respect of Group annual bonus or Standard Life Investments' company and personal bonus plan will vest in full at the normal vesting date, unless the Committee determines to accelerate payment.

Legacy awards under the Standard Life Executive LTIP and the Standard Life Investments' LTIP

A good leaver is defined as someone whose employment comes to an end because of death, ill health, injury, disability, redundancy or retirement as determined by their employing company, the sale of the individual's employing company or business out of the Group or any other reason at the discretion of the Remuneration Committee. For the purposes of the Standard Life Investments LTIP, a good leaver may also include an individual who is transferred out of Standard Life Investments to another company in the Group.

Typically, for good leavers, rights to awards will be pro-rated for the proportion of the performance period that has elapsed on cessation and will, subject to performance, be paid at the usual time (which in the case of the Executive LTIP will normally include the holding period).

The Committee retains the discretion to dis-apply time pro-rating and in the case of the Executive LTIP, performance pro-rating for good leavers and to accelerate payment if it considers it appropriate.

Typically, for other leavers, rights to outstanding awards will be forfeit.

Legacy awards under the Aberdeen Deferred Share Plans

A good leaver is defined as someone whose employment comes to an end because of death, ill health, injury, disability, redundancy or retirement, sale of the employing company or business or any other reason at the discretion of the Remuneration Committee. Unvested awards granted to good leavers will typically vest in full at the normal vesting date, unless the Remuneration Committee decides it will vest on the date of termination.

Other payments

The Committee reserves the right to make any other payments (including appropriate legal fees) in connection with an executive Director's cessation of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim arising in connection with the cessation of an executive Director's office or employment.

Change of control

Outstanding awards will be treated in line with the terms of the respective plans.

 

 

Remuneration policy for non-executive Directors

Approach to fees

·  Fees for the Chairman and non-executive Directors are set at an appropriate level to reflect the time commitment, responsibility and duties of the position and the contribution that is expected from non-executive Directors

·  Board membership fees are subject to a maximum cap which is stated in the Company's articles of association. Any changes in this would be subject to shareholder approval.

Operation

·  The Board annually sets the fees for the non-executive Directors, other than the fee for the Chairman of the Company which is set by the Committee

·  Fees are set at a market rate with reference to the level of fees paid to other non-executive directors of FTSE100 financial services companies

·  The Chairman receives an aggregate fee, which includes the chairmanship of any appropriate Board committee

·  The remuneration policy for non-executive Directors is to pay: (i) Board membership fees; and (ii) Further fees for additional Board duties such as chairmanship or membership of a committee, the Senior Independent Director, and the chairman of subsidiary boards, in each case to take into account the additional responsibilities and time commitments of the roles. Additional fees may be paid in the exceptional event that non-executive Directors are required to commit substantial additional time above that normally expected for the role.

·  The Board retains discretion to remunerate the non-executive Directors in shares rather than cash where appropriate

Other items

·  The Chairman and non-executive Directors are not eligible to participate in any incentive arrangements

·  Additional fees or benefits may be provided at the discretion of the Committee in the case of the Chairman, and the Board in the case of the other non-executive Directors, to reflect, for example, housing, office, transport and other business-related expenses incurred in carrying out their role

Non-executive Directors, including the Chairman, have letters of appointment that set out their responsibilities. The key terms are:

·  Period of appointment: A three-year term, which can be extended by mutual consent and is subject to re-election by shareholders in line with the Company's articles of association and the UK Corporate Governance Code

·  Time commitment: Two to three days a week for the Chairman. 30 to 35 days per year for non-executive Directors.

·  Notice periods: Six months for the Chairman. No notice period for other non-executive Directors.

·  Termination payment: There is no provision for compensation payments for loss of office for non-executive Directors

If a new Chairman or non-executive Director is appointed, the remuneration arrangements will normally be in line with those detailed in the remuneration policy detailed for non-executive Directors above.

Remuneration arrangements throughout the Group

When setting the policy for executive Directors' remuneration, the Committee takes into account the pay and employment conditions elsewhere in the Group, recognising international variance and jurisdictional differences, where appropriate. The Committee is informed about the approach to salary increases, Group-wide benefits offerings including pensions, the structure of incentive arrangements and distribution of outcomes throughout the wider organisation, as well as the take-up of all-employee share plans, employee engagement survey results and staff morale although it does not directly consult employees in the Group on the remuneration policy for executive Directors.

The Group applies a consistent remuneration philosophy for staff at all levels. Base salaries are targeted at an appropriate level in the relevant markets in which the Group competes for talent. The Committee considers the base salary percentage increases for the Group's broader UK and international employee populations when determining any annual salary increases for the executive Directors.

All employees are eligible to be considered for performance related variable pay, which will reward delivery of results over appropriate time horizons and includes deferred variable compensation at an appropriate level for the employee's role. Variable pay for all employees, including executive Directors is determined as a total pool, capped as a percentage of adjusted profit before variable pay.

The Group engages with its employee associations from an early stage in the annual remuneration cycle. The areas discussed include: external market data, economic factors, employee expectations and congruence of executive pay with that of the wider workforce in terms of overall pay budgets and approach. The Group operates a Compensation Committee constituted of the Chief People Officer (Chairman), Chief Financial Officer and Chief Risk Officer. The role of the Compensation Committee is to consider the implementation of the remuneration policy across the Group. The Compensation Committee refers its terms of reference to the Remuneration Committee for approval and the Chairman of the Compensation Committee formally reports to the Remuneration Committee on all matters which fall within the Compensation Committee's remit.

Consideration of shareholder views

The Committee values the opportunity to listen to the Company's shareholders. As detailed in the Committee Chairman's statement, a detailed shareholder consultation exercise was undertaken on the proposed remuneration policy for the Group going forward, and the proposed policy incorporates the feedback received in this regard.

5.3 Annual remuneration report - what we did in 2017 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 2017. Where a Director has been appointed or stepped down during the year the remuneration included in the table is that paid or reportable for the period for which they were an executive Director.

Executive Directors

 

Basic salary for year
£000s

Taxable benefits in year
£000s1

Annual bonus earned
 for year
 £000s

Long-term incentives with performance period ending
 during the year
£000s2,3

Other payments £000s4

Pension allowance paid
 in year
£000s

Total remuneration
 for the year
£000s

Keith Skeoch

2017

700

-

1,001

1,151

1

175

3,028

 

2016

700

-

988

926

-

175

2,789

Martin Gilbert5

2017

199

1

1,117

-

-

-

1,317


2016

-

-

-

-

-

-

-

Rod Paris5

2017

170

-

535

83

-

43

831


2016

-

-

-

-

-

-

-

Bill Rattray5

2017

139

1

231

-

-

25

396


2016

-

-

-

-

-

-

-

Colin Clark6

2017

372

-

558

517

-

93

1,540

 

2016

600

-

843

396

-

150

1,989

Paul Matthews6

2017

105

2

123

229

-

26

485

 

2016

630

14

747

90

-

158

1,639

Barry O'Dwyer6

2017

238

6

295

41

-

59

639


2016

-

-

-

-

-

-

-

Luke Savage6

2017

381

10

459

468

-

95

1,413

 

2016

612

16

729

245

-

153

1,755

1   This includes the taxable value of all benefits paid in respect of the year ended 31 December 2017. This includes car allowances of £9,827 for Luke Savage, £2,303 for Paul Matthews and £6,260 for Barry O'Dwyer. Also included for Keith Skeoch, Rod Paris, Colin Clark, Paul Matthews and Barry O'Dwyer is private health cover at a cost to the Group of £422 per annum per employee and medical insurance for Martin Gilbert and Bill Rattray at a cost of £2,000 per annum.

2   The values reported for 2017 are the market values of the Executive LTIP awards and the Standard Life Investments LTIP awards granted in 2015 that will vest based on the three-year performance measurement period ending on 31 December 2017. As the share price at the date of vesting is not known at the date of publication of this report the number of Standard Life Aberdeen plc shares that will vest (including additional Standard Life Aberdeen plc shares received in respect of accrued dividends from grant through to 31 December 2017) has been multiplied by the average share price over the quarter ending 31 December 2017 (426.70 pence).

3   The values reported for 2016 have been restated to reflect the value of the shares vesting in respect of the three-year performance measurement period ending on 31 December 2016. Where the awards vested in 2017 the price has been restated using the share price on the vesting date. For the Executive LTIP awards which do not vest until 2019 the restatement is based on share price on the first trading day following the third anniversary of grant.

4   Keith Skeoch, Martin Gilbert, Rod Paris, Barry O'Dwyer and Luke Savage participate in the Standard Life Sharesave Plan. Keith Skeoch, Rod Paris, Paul Matthews and Luke Savage participate in the Standard Life (Employee) Share Plan - the maximum annual award of matching shares in 2017 was £600.

5   Martin Gilbert, Rod Paris and Bill Rattray were appointed to the Board on 14 August 2017. The annual bonus reported is in respect of the period 14 August 2017 to 31 December 2017. The LTIP reported for Rod Paris represents the value of the proportion of the award which relates to the period 14 August 2017 to 31 December 2017.

6   Paul Matthews stepped down from the Board with effect from 1 March 2017 and Colin Clark stepped down from the Board with effect from 14 August 2017. Barry O'Dwyer was appointed to the Board from 1 March 2017 and stepped down with effect from 14 August 2017. Luke Savage stepped down from the Board with effect from 14 August 2017. The figures reported for their LTIP awards in both 2016 and 2017 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.

 

Base salary (audited)

The table below shows the annual base salary payable and the actual base salary paid to executive Directors in 2017.

 

At 1 Jan 2017 or

date of appointment if later

At 31 Dec 2017 or

date of cessation if earlier

Total base salary paid in 2017

Keith Skeoch

£700,000

£700,000

£700,000

Martin Gilbert

£522,000

£522,000

£199,258

Rod Paris

£450,000

£450,000

£170,288

Bill Rattray

£365,000

£365,000

£139,328

Colin Clark

£600,000

£600,000

£371,774

Paul Matthews

£630,000

£630,000

£105,000

Barry O'Dwyer

£525,000

£525,000

£237,802

Luke Savage

£615,000

£615,000

£381,069

Pension (audited)

Executive Directors received a cash allowance in lieu of pension as follows:

 

Paid in 2017

Keith Skeoch

£175,000

Martin Gilbert

-

Rod Paris

£42,572

Bill Rattray

£24,522

Colin Clark

£92,742

Paul Matthews

£26,250

Barry O'Dwyer

£59,451

Luke Savage

£95,060

In addition to the cash allowance shown above Paul Matthews was a member of the Standard Life Staff Pension Scheme at the date he ceased to be a Director. Under the pension scheme rules his normal retirement date is at age 60. At 1 March 2017 he was aged 56 and his accrued defined benefit pension was £61,897 per annum. There is no additional value paid on early retirement.

Annual bonus and variable pay plans

Standard Life Group annual bonus plan

The Directors in appointment during the year who participated in this plan were Keith Skeoch, Rod Paris, Colin Clark, Paul Matthews, Barry O'Dwyer and Luke Savage.

Standard Life Group annual bonus opportunity

The target and maximum bonus award opportunities expressed as a percentage of base salary at 31 December 2017 (or at the date of cessation of employment if earlier) that could be earned in respect of 2017 Standard Life Group performance (pro-rated for time in role as appropriate) were:

 

Target

Maximum opportunity

Keith Skeoch

75%

175%

Rod Paris

30%

60%

Colin Clark

75%

175%

Paul Matthews

65%

150%

Barry O'Dwyer

65%

150%

Luke Savage

65%

150%

 

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

 

The award opportunity for bonus at threshold performance is zero.

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 and Rod Paris and 80% based on Group performance and 20% on personal performance in respect of the other executive Directors.

The scorecard is based on a scale of 1 to 5 with 5 reflecting maximum, 3 on target and 1 unsatisfactory performance.

More information on the Group's financial key performance indicators can be found in the Chief Financial Officer's overview section of the Strategic report.

Standard Life Group annual bonus outcome

Before approving the level of performance in 2017, the Remuneration Committee sought the views of the Group Audit Committee on material accounting issues that it considered during the year and the Group Chief Risk Officer and the Risk and Capital Committee on the management of risk within the business.

The performance measures for the non-financial elements of the bonus scorecard are reviewed by the Remuneration Committee each year. Assessment of achievement against these outcomes takes into account corporate performance on environmental, social and governance issues either as a specific measure in the scorecard (e.g. brand advocacy and employee engagement) or in the exercise of judgement at the end of the year in determining awards when the Remuneration Committee seeks to ensure the outcome is fair in the context of overall Group performance. This includes performance against our sustainability priorities as set out in the Sustainability section within the Strategic report.

Element

Financial

Performance measures

Operating profit before tax

Threshold: £685m

Target: £725m

Maximum: £765m

Outcome: £736m

Operating return on equity (RoE)

Threshold: 13.3%

Target: 14.1%

Maximum: 14.9%

Outcome: 15.0%

Achievements against measures

The reported outcomes reflect the out-turns attributed to the Standard Life Group consistent, as far as possible, with the original targets. Adjustments include, as a result of the change to the Group's key alternative performance measure to adjusted profit1, the restatement of the adjusted profit out-turn for 2017 to reflect the targeted operating basis as well as the removal of items considered specific to the merger which were not included in the original targets.

Score (out of 5)

4.25



Element

Strategic/delivery/process2

Performance measures

Management of Standard Life Group's strategy and its delivery across the Company, including the annual investment and strategic change programmes, any corporate transactions, and the efficiency of the Group's balance sheet.

Achievements against measures

The merger of Standard Life plc and Aberdeen Asset Management PLC has accelerated our ambition of creating a world-class investment company - broadening and deepening investment capabilities, extending global distribution footprint and providing scale and platform efficiency to compete and grow globally.

Post-merger integration programme work is progressing at pace and on track to deliver against the plan set out in merger announcement.

The Group also delivered a next generation investment data platform for its asset management business.

On Friday 17 November 2017, HDFC Life listed on the National Stock Exchange of India Limited and The Bombay Stock Exchange Limited following completion of the Initial Public Offering generating £359m from the sale of part of the Group's holding.

Good progress has been made in upgrading the technology infrastructure for our pensions and savings business but technical challenges have been encountered in certain aspects of this work.

Score (out of 5)

5

Element

Customer and external leadership2

Performance measures

Drive customer focus within the organisation and build advocacy for the Standard Life Group brand.

Deliver meaningful progress in brand advocacy as measured through Net Promotor Score (NPS) measures or equivalent indices/measures.

Protect and enhance Standard Life's corporate reputation.

Enhance collaboration and co-operation across the company to support customer and client needs

Ensure that the appropriate processes and controls are in place in order to deliver fair outcomes for customers and clients.

Achievements against measures

Standard Life's KPMG Nunwood Brand NPS score increased from 0 in 2016 to +12 in 2017, moving the Group up 100 places on the index to 33.

Continued promotion of the brand through high profile partnerships with the British and Irish Lions, the Ryder Cup and Andy Murray.

During 2017 the Group received a number of industry accolades including the Moneywise 2017 Investment Trust Award (Property Direct UK), 20 years of excellence in defined contribution pension schemes award at the Professional Pensions UK Pensions Awards and four awards at the Schroders UK Platform Awards.

The Group also continued to feature on a number of key sustainability indices, including the Dow Jones Sustainability Index World and Europe, FTSE4Good and the Climate Disclosure Project and was ranked fourth in the Social Mobility Employer Index 2017

Score (out of 5)

4.5

Element

People2

Performance measures

Develop our organisational capability by building the environment, the resources, capabilities and developing the behaviours we will need.This will include:

-      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

-      Demonstrating commitment and action to progress the Group's diversity and inclusion strategy

-      Ensuring the environment we work in reflects our values and creates a culture of appropriate risk taking and continuous improvement

Improvement in the employee effectiveness scores for enablement and engagement as measured by the Interaction survey and other supplementary indicators

Achievements against measures

In a survey carried out after the merger completed, 60% of colleagues shared their views and whilst it was encouraging that 87% considered the merger to present an 'opportunity', it is equally important to address areas of concern which the executive team have been working on post completion.

The Group continued its focus on developing organisational and leadership capability with the launch of a digital learning campaign and piloting of a more inclusive approach to leadership development.

The Group was also named by Business in the Community as one of the UK's Best Employers for Race and published our gender action plan for the combined organisation.

Succession plans are in place for the combined organisation for key executive and regulatory roles across the organisation, for contingency and at a short/medium and long-term level.

Score (out of 5)

4.75

1    Following completion of the merger the Group have changed the calculation of adjusted profit before tax (named operating profit before tax when the target for the 2017 annual bonus award was set). This is explained further on page 176.

2    The non-financial measures used for the determination of the annual bonus plans for 2017 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 2017.

Based on performance against each of the four Standard Life Group performance elements and considering the performance of Standard Life Group as a whole, the Remuneration Committee approved a rating of 4.4 out of 5 for performance against the Standard Life Group annual bonus scorecard during 2017.

In determining the bonus awards for personal performance in respect of the Standard Life Group annual bonus the Remuneration Committee considered individual performance with regard to the Company's overall strategic priorities.

Keith Skeoch

 

·  Leading role in ensuring the merger was delivered and was well received by our shareholders

·  Good pace of delivery in the integration of the merged companies to deliver the synergies targets

·  Return of gross flows performance and development of an investment philosophy which reflects a multi-strategy approach

·  Delivering growth in the Pensions and Savings business

·  Strong focus on the people agenda prior to and after the merger to engage and retain key talent and development of the shared culture across the company

·  Strong leadership of the planning and budgeting process for the combined company

Rod Paris

 

·  Launch of new funds across a range of asset classes , including equities, multi asset, fixed income and private markets

·  Investment performance within a complex investing environment was mixed but with strength across most fixed income and tactical asset allocation products balanced against mixed performance in equities. Stronger longer term returns with strength in elements of all asset classes.

·  Launch of our first investment trust as a combined business

·  Provided very strong leadership on the integration of the investment teams and capabilities with a focus on stabilising the combined investment teams to maximise collaboration

·  Led the focus on building a forward looking investment platform to meet the needs of our clients 

·  Progress towards the integration of stewardship and environmental, social and governance activities across the company

Paul Matthews

 

·  Leadership of Standard Life Pensions and Savings until stepping down from the Board at the end of February

·  Support and development of Barry O'Dwyer and handover of the leadership role

·  Continued strategic support for Keith Skeoch for the period to his retirement in August

Colin Clark

 

·  Launch of new funds across a range of different asset classes including equities, multi-asset, fixed income and private markets

·  Forged further asset management partnerships around the world to drive product innovation and open up possibilities for our clients and continued growth in our strategic partnerships serving our clients in markets worldwide

·  Maintenance of strong relationships with customers, clients and advisers and delivery of resilient flows in growth channels in a challenging market environment

Luke Savage

 

·  Effective management of our strong capital position to support strategic investments to grow our business and maintain our progressive dividend policy

·  Continued active engagement with our investors and the analyst community

·  Provided support and effective handover of responsibilities to Bill Rattray

Barry O'Dwyer

 

·  Leadership of Standard Life Pensions and Savings with an increase in AUA, UK Retail gross inflows and Platform AUA

·  Building our advice capability with the continued growth of 1825 business, our financial planning and personal tax advice business with further acquisitions to increase our national footprint

·  Integration of the Elevate platform to complement our existing WRAP platform

 

 

As a result of the approved ratings, the Group annual bonus outcome as approved by the Remuneration Committee for 2017 is:

 

Bonus opportunity based on Group performance as a % of total bonus

Bonus opportunity based on personal performance as a % of total bonus

Total bonus payable as a % of bonus maximum

Total bonus payable as a % of salary

Total payable1

Keith Skeoch

 

 

 

 

 

Maximum

90%

10%

100%

175%

 

Actual

75%

7%

82%

143%

£1,001,000

Rod Paris

 

 

 

 

 

Maximum

90%

10%

100%

60%

 

Actual

77%

10%

87%

52%

£89,590

Colin Clark

 

 

 

 

 

Maximum

80%

20%

100%

175%

 

Actual

66%

20%

86%

151%

£558,459

Paul Matthews

 

 

 

 

 

Maximum

80%

20%

100%

150%

 

Actual

67%

14%

81%

121%

£123,290

Barry O'Dwyer

 

 

 

 

 

Maximum

80%

20%

100%

150%

 

Actual

67%

16%

83%

124%

£295,240

Luke Savage

 

 

 

 

 

Maximum

80%

20%

100%

150%

 

Actual

67%

14%

81%

121%

£459,074

1    Where a Director has been appointed or stepped down during the year shown the bonus shown is that payable for the period for which they were an executive Director.

If the bonus payable amounts to more than 25% of salary, then half of the amount above 25% of salary is deferred for three years into an award over Standard Life Aberdeen plc shares. The deferral is not made if the amount to be deferred is less than 10% of salary.

Standard Life Investments annual bonus plan

Rod Paris participated in the Standard Life Investments' personal and company bonus plans, in addition to the Group annual bonus plan.

Standard Life Investments annual bonus plan annual bonus targets

The bonus pool is determined by reference to Standard Life Investments' financial performance. Personal bonus awards are based on personal performance against agreed Standard Life Investments' business scorecard objectives and awarded from the bonus pool. Company bonus awards are made from the bonus pool after deduction of personal bonus payments and the size of the award reflects the value of total reward positioned against the market. The actual targets are not disclosed as Standard Life Investments is a subsidiary business of Standard Life Aberdeen plc and the Board deems that this is commercially sensitive information which, if disclosed, could seriously prejudice the Group's business.

Standard Life Investments annual bonus plan opportunity

Rod Paris has a personal bonus opportunity of 105% of salary and a company bonus opportunity of 200% of salary.

Standard Life Investments annual bonus plan outcome

Based on Rod Paris' and Standard Life Investments' performance in 2017, the Remuneration Committee approved a personal bonus award of 88% and a company bonus award of 170%.

·  Strong investment performance in third party assets over 1, 3 and 5 years

·  Strengthening performance for Money weighted assets with performance over each of 1, 3, 5 and 10 years being between median and upper quartile 

·  Recovery across range of assets, especially within Absolute Return, UK and GEM Equities and continuing outperformance within the Credit Fixed Income range

·  Launch of new funds across a range of asset classes to meet the changing investment needs of our clients and customers

·  Net outflows in growth channels and multi-asset with net inflows for MyFolio.

·  Improving three-year information ratios demonstrating that returns continue to be generated within a controlled risk environment.

·  Earnings before interest, taxes, depreciation and amortisation (EBITDA) behind plan with EBITDA margin on plan and adjusted operating expenses favourable to plan.

 

Rod Paris

Bonus opportunity based on Standard Life Investments' performance as a % of total bonus

Bonus opportunity based on personal performance as a % of total bonus

Total bonus payable as a % of bonus maximum

Total bonus payable as a % of salary at 31 December 2017

Total payable1

Maximum

66%

34%

100%

305%

 

Actual

56%

29%

85%

258%

£445,705

1    Where a Director has been appointed or stepped down during the year shown the bonus shown is that payable for the period for which they were an executive Director.

If the bonus payable amounts to more than 25% of salary, then half of the amount above 25% of salary is deferred for three years into an award over Standard Life Aberdeen plc shares. The deferral is not made if the amount to be deferred is less than 10% of salary.

Aberdeen Variable Pay plan (cash and deferred shares)

In line with the legacy remuneration arrangements in place at Aberdeen, Martin Gilbert and Bill Rattray participated in this plan which was incorporated into the Standard Life Aberdeen plc Remuneration Policy with effect from 14 August 2017 for the period to 31 December 2017 only.

The table below shows the outcome of their participation in this plan from the date of the merger of the Standard Life Group and the Aberdeen Asset Management Group (14 August 2017). Although the Company is not required to disclose details of pay-outs from the legacy Aberdeen Asset Management incentive arrangements in the period from 1 October 2016 to 13 August 2017, the period prior to the merger, in the interests of transparency details of the out-turns in this period are set out on page 134.

Aberdeen Variable Pay plan targets

Variable pay awards for the period 14 August 2017 to 31 December 2017 were based on targets agreed by the Remuneration Committee and were based, insofar as it was possible, on existing performance measures for these plans.

 

Maximum cash variable pay as a % of fixed pay

Maximum variable pay in deferred shares as a % of fixed pay

Martin Gilbert

250%

750%

Bill Rattray

75%

225%

Aberdeen Variable Pay plan outcome for the period 14 August 2017 to 31 December 2017

Performance metrics

Weighting

Threshold (25% of maximum)

Target (50% of maximum)

Stretch (100% of maximum)

Actual

Result (% of max variable x weighting)

Long-term quantitative

 

 

 

 

 

 

Compound growth in underlying earnings per share

12.5%

6%

9%

12%

(13.2%)

0%

Average return on capital employed

12.5%

16%

20%

22%

17.3%

4.1%

Investment performance

25.0%

50%

60%

70%

64.6%

18.3%

Annual quantitative

 

 

 

 

 

 

Underlying profit before tax

15.0%

£98.9m

£123.6m

£148.4m

£139.4m

12.3%

Operating margin

15.0%

29.3%

32.6%

35.9%

32.6%

7.4%

Total

 

 

 

 

 

42.1%

Annual non-financial strategic

10.0%

Remuneration Committee assessment - see below

6.75%

Annual personal performance

10.0%

Remuneration Committee assessment - see below

7%-8%

Non-financial strategic performance

The performance measures for the non-financial elements of the bonus scorecard are reviewed by the Remuneration Committee. The scorecard is based on a scale of 0 to 10 with 0-4 below expectation, 5-6 meets expectation, 7-8 exceeds expectation and 9-10 significantly exceeds expectation.

Key performance indicators

Key points in period from 14 August 2017 to 31 December 2017

Client retention

Completed six significant communication exercises to customers and clients as well as their advisers, pre and post-merger completion covering merger progress, senior management and organisational changes. These six exercises covered all regions, channels and countries across the combined client base. As a result of the engagement there were no adverse changes to consultant ratings between 14 August and 31 December 2017. Proactive defence was taken by Distribution teams globally, increasingly focused on specific products due to performance and merger concerns.

Distribution

Senior management held in excess of 60 meetings with strategic clients between 14 August and 31 December 2017. Distribution teams participated in many more, with approximately 20,000 engagements held across all regions with clients between 14 August and 31 December 2017 covering all aspects of client activities. Continued inflows across all asset classes emphasised strength of existing relationships maintained in the period since 14 August 2017 as well as being evidenced by annual results.These included cross-business wins as well as new mandates across asset classes. Significant marketing events, sponsorship, and sales related activities were carried out pre and post-merger to support the above, which included our Annual Conferences as well as other events across the globe.Commenced work on our newly combined pipeline of nearly £100bn GBP opportunities across the globe.

Talent management

Talent retention: our retention of key talent is strong following the implementation of our aligned retention plan. Succession: plans are in place for key role succession, focused on contingency, medium and long term requirements. Further development planning is also in progress for talent pools. Culture: following a robust gap analysis, detailed work is now underway in each functional stream to build a positive culture for the new business aligned to our corporate values. Diversity: there is a strong focus on diversity, with the heritage networks merging and focusing on a unified approach to the wide range of diversity and inclusion topics. In addition, an action plan is in place to address, and discuss with colleagues, the issues raised by recent Gender Pay Gap legislation. Integration: good progress has been made on restructuring both management and team structures of the newly merged business.

Risk management and conduct

Ongoing focus on promotion of good conduct and development of a positive conduct culture. Appropriate and effective structures in place for the management of risk and compliance.

Total

6.75%

Personal Performance

Martin Gilbert

·  Leading role in ensuring the merger was delivered and was well received by our shareholders

·  Good pace of delivery in the integration of the merged companies to deliver the synergies targets

·  Strong representation with external organisations and government bodies to build the profile and reputation of the merged company

·  Solid progress against the objectives in relation to geographic and asset class diversification

·  Effective delivery on the distribution and marketing agenda, including the new visual identity, and improved organisational design for distribution to support our clients and customers

Bill Rattray

·  Leadership of the finance function and integration of the finance teams

·  Maintenance of strong liquidity and solvency positions

·  Oversight of the regulatory and capital management requirements

·  Delivery of combined results reporting and target setting for the combined company

·  Support and direction for the investor relations activity for the company from the point of the merger

The variable pay awards for the period were as follows:


Cash £'000s

Deferred £'000s



 

Maximum

Actual

Maximum

Actual

Total actual £'000

Total actual

(% of max)

Martin Gilbert

491

279

1,474

838

1,117

56.85%

Bill Rattray

103

58

309

173

231

55.85%

2017 Annual bonus and variable pay outcomes (audited)

The following table shows the total bonus awards made in respect of 2017 and the cash and deferred elements. Annual bonus payments are not pensionable.

 

Group cash bonus

Group deferred bonus

Standard Life Investments cash bonus

Standard Life Investments deferred bonus

Aberdeen variable pay cash

Aberdeen variable pay deferred shares

Total

Keith Skeoch

£588,000

£413,000

-

-

-

-

£1,001,000

Martin Gilbert

-

-

-

-

£279,276

£837,827

£1,117,103

Rod Paris

£66,373

£23,217

£244,430

£201,275

-

-

£535,295

Bill Rattray

-

-

-

-

£57,648

£172,943

£230,591

Colin Clark

£325,459

£233,000

-

-

-

-

£558,459

Paul Matthews

£74,371

£48,919

-

-

-

-

£123,290

Barry O'Dwyer

£177,466

£117,774

-

-

-

-

£295,240

Luke Savage

£276,923

£182,151

-

-

-

-

£459,074

Long-term incentives

2015 Executive LTIP awards vesting in respect of performance ending in 2017 (audited)

The awards granted in 2015 under the Executive LTIP have two performance conditions. The outcome is based 70% on cumulative Group operating profit before tax and 30% on cumulative Group net flows.

The awards are also subject to two underpins when assessing the Group performance. The first requires the Risk and Capital Committee to be satisfied that performance obtained has been achieved within acceptable defined risk parameters. The second requires the Remuneration Committee to be satisfied that Group operating profit performance and Group net flows performance reflect overall Group performance.

Awards were made in March 2015 of 200% of salary to Keith Skeoch and of 125% of salary for Luke Savage. Awards were also granted to Paul Matthews and Barry O'Dwyer who were not Directors at the time of grant in March 2015.

 

Threshold

Target

Maximum

Actual2

Cumulative Group operating profit before tax1 for Standard Life Group for the three years ended 31 December 20171

£1,670m

£1,820m

£2,040m

£2,122m

Vesting outcome (70% weighting)

 

 

 

100%

Cumulative Group net flows for the Standard Life Group for three years ended 31 December 20171

£16.6bn

£21.0bn

£27.6bn

(£8.4bn)

Vesting outcome (30% weighting)

 

 

 

0%

1    Following completion of the merger the Group have changed the calculation of adjusted profit before tax (named operating profit before tax when the target for the 2015 award was set). This is explained further on page 176.

2    The actual outcome includes the 2017 out-turn of £736m consistent with the annual bonus outcome noted on page 116.

In line with the above results, the Remuneration Committee determined a vesting factor of 70% reflects the overall performance of the Standard Life Group. These awards will be delivered to Keith Skeoch, Luke Savage and Paul Matthews at the end of the holding period in 2020. In line with the terms of his award at the time of grant, Barry O'Dwyer's award will be delivered in 2018.

2015 Standard Life Investments LTIP awards vesting in respect of performance ending in 2017 (audited)

Under the Standard Life Investments LTIP, awards will only be capable of vesting if Standard Life Investments' investment performance (three-year money-weighted average) is above the lower quartile of the money-weighted average of all assets under management (both captive and third party assets) compared to other asset managers.

The level of vesting is then subject to consolidated cumulative three-year third party earnings before interest, taxes, depreciation and amortisation (EBITDA) performance shown in the following table. The actual EBITDA targets are not disclosed as Standard Life Investments is a subsidiary business of Standard Life Aberdeen plc and the Board deems that this is commercially sensitive information which, if disclosed, could seriously prejudice the Group's business.

Before an award can vest, the Risk and Capital Committee is required to verify to the 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 Committee will take this into account when determining the level of vesting.

In line with the above, Keith Skeoch received an award under this plan in March 2015 equivalent to 200% of salary (at maximum vesting). Awards were also granted to Colin Clark and Rod Paris who were not Directors at the time of grant in March 2015.

The following table sets out performance against targets for the 2015 award:

Performance level

Below threshold

Threshold

Target

Maximum

Consolidated cumulative three-year third party EBITDA

<60% of target

60% of target

100% of target

140% of target

Actual performance

 

 

 

93.84% of target

As performance was above the lower quartile of the money-weighted average of all assets under management (both captive and third party assets) compared to other asset managers and the consolidated cumulative three-year third party EBITDA was 93.84% of target, the Remuneration Committee determined that 84.6% of the target award (42.3% of the maximum award) granted in 2015 would vest in 2018.

Awards granted in 2017

Executive LTIP

Awards were made in March 2017 to Keith Skeoch, Luke Savage, Barry O'Dwyer and Colin Clark under the Executive LTIP.

In addition to business performance criteria, all of the awards are subject to an additional personal performance underpin whereby, if an executive Director performs at an unsatisfactory level in any year during the three-year performance period, their original award would be reduced by one-third, unless the Co-Chief Executive Officers, or the Remuneration Committee in the case of Keith Skeoch, recommends otherwise.

As set out in the Committee Chairman's statement, the performance targets for the 2017 award under the Executive Plan have been adjusted in light of the merger.

The following adjustments have been made to the performance targets for the 2017 awards:

·  Update of the existing operating profit targets to adjusted profit before tax

·  Preservation of perfomance outcomes at the end of 2017 resulting from Standard Life Group operating profit/net flows targets and outcomes to end 2017

·  Inclusion of Aberdeen profits and net flows, and proposed synergies for performance years 2018 and onwards

·  Removal of the change in the share of HDFC Life profits and flows from existing targets and inclusion of interest on the sales proceeds

·  No change to the original net flows target

The table below shows the original performance targets for the 2017 LTIP award:

Threshold and % of award vesting at threshold

Vesting: 0%

Cumulative Group operating profit before tax

Threshold: £2,240m

Cumulative Group net flows

Threshold: £27.7bn

Maximum and % of award vesting at maximum

Vesting: 100%

Cumulative Group operating profit before tax

Maximum: £2,725m

Cumulative Group net flows

Maximum: £45.9bn

 

The table below summarises the key details of the awards made in 2017 to Directors with the amended performance targets:

 

Basis of award (% of salary)

Face value at grant

Number of shares1

Keith Skeoch

400%

£2,800,000

778,902

Colin Clark

300%

£1,800,000

500,723

Barry O'Dwyer

120%

£630,000

175,253

Luke Savage

125%

£768,750

213,850

Nature of award

Nil cost option

 

Performance criteria

Cumulative adjusted profit before tax (80%) and cumulative net flows (20%) for the three-year period ended 31 December 2019

 

Threshold and % of award vesting at threshold

Vesting: 0%

Cumulative Group adjusted profit before tax

Threshold: £3,000m

Cumulative Group net flows

Threshold: £27.7bn

 

Maximum and % of award vesting at maximum

Vesting: 100%

Cumulative Group adjusted profit before tax

Maximum: £3,650m

Cumulative Group net flows

Maximum: £45.9bn

 

1    Based on the average share price for the five dealing days immediately before the awards were granted (359.48 pence).

Standard Life Investments LTIP

In March 2017, prior to his appointment to the Board, Rod Paris was granted an award under this plan.

The level of vesting in the Standard Life Investments LTIP is currently subject to consolidated cumulative three-year third party EBITDA performance and this measure has been used to capture vesting outcomes at the end of 2017.

As a consequence of the merger the awards will become subject to an adjusted profit before tax target for Aberdeen Standard Investments for performance years 2018 onwards (the remainder of the performance period).


Basis of award (% of salary)

Face value at grant

Number of shares1

Rod Paris

600%

£1,800,000

500,723

1    Based on the average share price for the five dealing days immediately before the awards were granted (359.48 pence).

The same principles were applied to the adjustments made to awards made to Rod Paris under the Standard Life Investments LTIP in 2016.

Group deferred share awards

Under the Group annual bonus plan, if the bonus payable amounts to more than 25% of salary, then half of the amount above 25% of salary is deferred for three years into an award over Standard Life Aberdeen plc shares. This resulted in the award of the following shares in 2017 in respect of the bonus earned for 2017. The award made to Barry O'Dwyer is in respect of a bonus earned prior to his appointment to the Board.

 

Face value at grant

Number of shares1

Keith Skeoch

£406,438

112,059

Colin Clark2

£346,500

95,533

Barry O'Dwyer

£58,602

16,157

Paul Matthews2

£294,683

81,247

Luke Savage2

£287,667

79,312

1    Based on the average share price for the month of December 2016 as per plan rules (362.7 pence).

2    If for any technical, legal, or regulatory reason the deferred award cannot be made over Standard Life Aberdeen plc shares a cash equivalent payment will be paid on the date that the deferred share award would otherwise have vested.

Sharesave Awards

Martin Gilbert was granted an award over 4,349 shares under the Standard Life Sharesave Plan on 28 September 2017. The award will normally become exercisable on 1 November 2022. The exercise price is 344.9 pence.

Awards to be granted in 2018

As set out in the Committee Chairman's statement the Remuneration Committee intends to grant awards in 2018 to Keith Skeoch and Rod Paris, in the form of nil-cost options, under the Executive LTIP plan, which will vest in March 2023. These are set out in the table below.

 

Basis of award (% of salary at 31 December 2017)

Face value at grant

Keith Skeoch

400%

£2,800,000

Rod Paris

400%

£1,800,000

Performance criteria

Cumulative adjusted profit before tax (excluding spread/risk margin) (80%) and cumulative growth net flows (20%) for the three-year period ended 31 December 2020

Threshold and % of award vesting at threshold

Vesting: 0%

Cumulative Group adjusted profit excluding spread/risk margin:

Threshold: £2,675m

Cumulative Group growth net flows

Threshold: £45.1bn

Maximum and % of award vesting at maximum

Vesting: 100%

Cumulative Group adjusted profit before tax excluding spread/risk margin

Maximum: £3,615m

Cumulative Group growth net flows

Maximum: £83.7bn

Long-term incentive awards granted in 2016

As set out in the Committee Chairman's statement, the performance targets for the 2016 Executive LTIP awards were also adjusted in light of the merger.

In line with the approach for the 2017 award the following adjustments have been made to the performance targets for the 2016 awards:

·  Update of the existing operating profit targets to adjusted profit before tax

·  Preservation of performance outcomes at the end of 2017 resulting from Standard Life Group operating profit/net flows targets and outcomes to end 2017

·  Inclusion of Aberdeen profits and net flows, and proposed synergies for performance year 2018

·  Removal of the change in the share of HDFC Life profits and flows from existing targets and inclusion of interest on the sales proceeds

·  No change to original net flows target

The table below summarises the original performance targets and the adjusted targets:

 

Original targets

Adjusted targets

Threshold and % of award vesting at threshold

Vesting: 0%

Cumulative Group operating profit before tax

Threshold: £2,130m

Cumulative Group net flows

Threshold: £30.8bn

Vesting: 0%

Cumulative Group adjusted profit before tax

Threshold: £2,490m

Cumulative Group net flows

Threshold: £30.8bn

Maximum and % of award vesting at maximum

Vesting: 100%

Cumulative Group operating profit before tax

Maximum: £2,595m

Cumulative Group net flows

Maximum: £51.0bn

Vesting: 0%

Cumulative Group adjusted profit before tax

Maximum: £3,030m

Cumulative Group net flows

Maximum: £51.0bn

Share ownership

A shareholding requirement was implemented in 2014 and we continue to require executive Directors and senior management to maintain a material long-term investment in Standard Life Aberdeen plc shares.

The current requirement is that the Co-Chief Executive Officers acquire and maintain a shareholding valued at 500% of salary. For 2017, the other executive Directors were required to acquire and maintain a shareholding valued at 200% of salary. As part of the new policy going forward, the shareholding guideline for other executive Directors (excluding the Co-Chief Executive Officers) has been increased to 300% of salary with effect from 2018.

The shares which the executive Directors are required to hold to reach their respective shareholding requirement under the current requirements 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 retain shares held in respect of the requirement for a period of one year following their departure from the Group. The Remuneration Committee reviews progress against the requirement annually and retains discretion to require executive Directors to purchase shares to meet the requirement. Personal investment strategies (such as hedging arrangements) are not permitted.

Directors' interests in shares (audited)

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 2017 or date of appointment if later

Shares acquired/ (sold) during the period 1 January 2017or appointment if later to earlier of
 31 December 2017or date ceased to be a Director

Total number of shares owned at 31 December 2017 or date ceased to be a Director if earlier

Total number of shares available as unrestricted vested deferred awards1

Total value2 of shares and unrestricted awards at 31 December 2017 as a % of salary at 31 December 2017

Shares acquired/(sold) during the period 31 December 2017 to
 22 February 2018

Keith Skeoch

2,246,569

100,898

2,347,467

-

1,464%

40

Martin Gilbert

139,185

-

139,185

1,414,039

1,299%

-

Bill Rattray

1,743,549

-

1,743,549

566,958

2,764%

-

Rod Paris

601,997

260

602,257

-

584%

46

Colin Clark

757,766

245,939

1,003,705

-

-

-

Barry O'Dwyer

66,913

-

66,913

-

-

-

Paul Matthews

236,988

147

237,135

-

-

-

Luke Savage

827

17,825

18,652

-

-

-

1    These are deferred awards under the Aberdeen Variable Pay plan which have vested and can be exercised.

2    The closing share price at 31 December 2017 used to determine total value was 436.6 pence.

At 31 December 2017 all executive Directors have complied with the current requirement in respect of retaining shares from vested awards. Keith Skeoch, Martin Gilbert, Bill Rattray and Rod Paris hold significantly more shares than their shareholding requirements.

David Nish, our former Chief Executive, was required to hold 703,651 shares until 31 March 2017 and met this requirement. Paul Matthews is required to hold 157,934 shares until 1 March 2018. Colin Clark will be required to hold 100,921 shares until 31 December 2018. Luke Savage will be required to hold 15,940 shares until 28 February 2019.

This table shows, in relation to each executive Director, the total number of share options with and without performance conditions held at 31 December 2017:      

 

Unvested options with performance measures1

Unvested options without performance measures2

Vested but unexercised options at 31 December3

Exercised during the year4

Aggregate gains made on awards exercised during the year

Keith Skeoch

1,961,963

352,050

-

189,011

£669,875

Martin Gilbert

-

980,432

1,414,039

-

-

Bill Rattray

-

190,047

566,958

-

-

Rod Paris

1,331,201

2,746

-

282,474

£999,280

Colin Clark

1,011,002

112,770

-

465,072

£1,646,944

Barry O'Dwyer

406,472

21,679

32,196

-

-

Paul Matthews

247,977

133,901

-

112,679

£459,140

Luke Savage

390,372

220,820

-

32,948

£126,751

1    This comprises Executive LTIP awards made in 2015, 2016 and 2017, awards under the Standard Life Investments LTIP made in 2015, 2016 and 2017 and awards made under the Standard Life Restricted Stock Plan excluding, in each case, shares to be awarded in lieu of dividend equivalents.

2    This comprises awards under the Executive LTIP granted in 2014, deferred bonus awards (including unvested awards under the Aberdeen Variable Pay plans and excluding shares to be awarded in lieu of dividend equivalents) and options granted under the Standard Life Sharesave Plan.

3    For Martin Gilbert and Bill Rattray this comprises awards made under the Aberdeen Variable Pay plans prior to the merger which are now exercisable. In relation to Barry O'Dwyer - this relates to an unexercised 2014 Executive LTIP award.

4    This comprises awards made under the 2014 Standard Life Investments LTIPs, deferred share awards granted in 2015 in respect of the 2014 Group bonus plan and Restricted Stock Plan that were exercised during the year. It includes shares awarded in lieu of dividend equivalents.

The closing market price of Standard Life Aberdeen plc shares at 31 December 2017 was 436.6 pence and the range for the year was 345p to 447.1p.

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

2017 Fees

Keith Skeoch

Non-executive director of the Financial Reporting Council

£nil

Martin Gilbert

Non-executive director Glencore plc

$130,000

Non-executive Director Sky plc

£115,408

Chairman of the Practioner Panel - Prudential Regulation Authority

£nil

Bill Rattray

Non-exectutive director- Curtis Banks Group PLC

£50,000

Loss of office payments (audited)

Colin Clark

Colin Clark stepped down from the Board with effect from 14 August 2017 and was on garden leave from 1 September 2017 until 31 December 2017 at which point he left the Company. He continued to be eligible for his salary and benefits until his termination date of 31 December 2017. Colin Clark accrued bonus until 31 August 2017. Details of Colin Clark's bonus for 2017, for the period in which he served as an executive Director, are set out on page114.

From 1 January 2018 to 31 August 2018 Colin Clark will be entitled to a payment in lieu of notice, which includes salary, pension allowance and payments in respect of private medical cover and life insurance, which is paid in instalments subject to mitigation.

In respect of outstanding incentive awards Colin Clark was treated as a good leaver. The following treatment of outstanding options therefore applies:

·  2016 Deferred share award (the deferred element of the 2015 short-term bonus) vested on 31 December 2017. The number of shares vested is 19,149.

·  2017 Deferred award (the deferred element of the 2016 short-term bonus) will vest on 31 March 2020. The number of shares that will vest (excluding future dividend-equivalents) is 100,667.

·  2015 Standard Life Investments LTIP award: will vest on 30 March 2018. The number of shares that will vest (including dividend equivalents) is 203,761.

·  2016 Executive LTIP award: pro-rated to cessation of employment. The maximum number of shares that will vest on 24 March 2021, subject to performance (but excluding additional dividend-equivalents) is 365,248.

·  2017 Executive LTIP award: pro-rated to cessation of employment. The maximum number of shares that will vest on 27 March 2022, subject to performance (but excluding additional dividend-equivalents) is 175,508.

·  Restricted Stock Plan (2015): pro-rated to cessation of employment. The number of shares that will vest on 30 March 2018 is 110,601.

Luke Savage

After stepping down from the Board with effect from 14 August 2017 Luke Savage remains employed to provide support to Bill Rattray through to the publication of the 2017 full-year results and will leave the Company on 28 February 2018. He will continue to be eligible for his salary and benefits until his last working day of 28 February 2018 and will accrue a short-term bonus until this date including any deferred element as per the plan rules. Details of Luke Savage's bonus for 2017, for the period in which he served as an executive Director, are set out on page 114.

From 1 March 2018 to 31 August 2018 Luke Savage will be entitled to payment in lieu of notice which includes salary, pension allowance, car allowance and payments in respect of private medical cover and life insurance, which is paid in instalments subject to mitigation.

In respect of outstanding incentive awards Luke Savage will be treated as a good leaver. The following treatment of outstanding options therefore applies:

·  2016 Deferred share award (deferred element of the 2015 short-term bonus) will vest on termination of employment. The number of shares that will vest is 88,010.

·  2017 Deferred award (deferred element of the 2016 short-term bonus) will vest on 31 March 2020. The number of shares that will vest (excluding future dividend-equivalents) is 83,574.

·  2014 Executive LTIP award: this award is not pro-rated as employment continued throughout the performance period

·  2015 Executive LTIP award: this award is not pro-rated as employment continued throughout the performance period. The number of shares that will vest on 27 March 2020 (adjusted for the performance outcome but excluding future dividend equivalents) is 125,871.

·  2016 Executive LTIP award: pro-rated to cessation of employment. The maximum number of shares that will vest on 24 March 2021 subject to performance (excluding future dividend equivalents) is 168,582.

·  2017 Executive LTIP award: pro-rated to cessation of employment. The maximum number of shares that will vest on 27 March 2022, subject to performance (excluding future dividend equivalents) is 87,073.

Luke Savage will not be eligible to participate in the 2018 Executive LTIP award.

Paul Matthews

After stepping down from the Board with effect from 1 March 2017 Paul Matthews continued to be eligible for his salary and benefits from 1 March 2017 until his retirement on 31 August 2017 and accrued bonus until this date in respect of services he continued to provide to the Group. Details of Paul Matthews's bonus for 2017, for the period in which he served as an executive Director, are set out on page 114.

In respect of outstanding incentive awards Paul Matthews was treated as a good leaver. The following treatment of outstanding options therefore applies:

·  2016 Deferred share award (the deferred element of the 2015 short-term bonus) vested on 31 August 2017. The number of shares vested was 61,695.

·  2017 Deferred award (the deferred element of the 2016 short-term bonus) will vest on 31 March 2020. The number of shares that will vest (excluding future dividend-equivalents) is 85,613.

·  2014 Executive LTIP award: this award is not pro-rated as employment continued throughout the performance period

·  2015 Executive LTIP award: pro-rated to cessation of employment. The number of shares that will vest on 24 March 2020, (excluding additional dividend-equivalents) is 107,384.

·  2016 Executive LTIP award: pro-rated to cessation of employment. The maximum number of shares that will vest on 24 March 2021, subject to performance (but excluding additional dividend-equivalents) is 127,799.

Barry O'Dwyer

Barry O'Dwyer was appointed to the Board with effect from 1 March 2017. He stepped down from the Board with effect from 14 August 2017 but continues in his role as Chief Executive, Standard Life. He continues to be eligible for salary, benefits and bonus. Details of Barry O'Dwyer's bonus for 2017, for the period in which he served as an executive Director, are set out on page114. Outstanding incentive awards granted to Barry O'Dwyer will remain unchanged and will be subject to the terms agreed at the time of grant.

No other payments were made to former directors that are not reported elsewhere.

 

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

Pay compared to performance

The graph shows the difference in value at 31 December 2017 between having invested £100 on 1 January 2009, respectively, in Standard Life Aberdeen plc and in the FTSE 100. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as Standard Life Aberdeen plc is a member of this FTSE grouping.

The following table shows the single figure of total remuneration for the Directors in the role of Chief Executive Officer for the same nine 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.

Year ended 31 December

Chief Executive Officer single figure of total remuneration (£000s)

Annual bonus award rates against maximum opportunity (%)1

Long-term incentive plan vesting rates against maximum opportunity (%)

2017

Keith Skeoch

3,028

82

70

2017

Martin Gilbert

1,317

56

-

2016

Keith Skeoch

2,746

81

31.02

2015

Keith Skeoch

1,411

87

40.77

2015

David Nish

2,143

90

40.77

2014

David Nish

6,083

95

100

2013

David Nish

4,206

75

64

2012

David Nish

5,564

88

100

2011

David Nish

2,601

77

63.5

2010

David Nish

1,971

83

-

2009

Sir Sandy Crombie

2,175

67

49.67

1    The annual bonus award rates against maximum opportunity are in respect of the Group annual bonus plan in respect of Keith Skeoch and the Aberdeen Asset Management award in respect of the period 14 August 2017 to 31 December 2017 for Martin Gilbert.

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 adjusted profit before tax which is provided for context as it is one of our key performance measures:

 

2016

2017

% change

Remuneration payable to all Group employees (£m)1

596

781

31.0%

Dividends paid in respect of financial year (£m)

390

627

60.8%

Adjusted profit before tax (£m)1

718

854

18.9%

1   Shown on a reported basis therefore remuneration includes remuneration paid to Aberdeen employees from 14 August 2017 and adjusted profit includes Aberdeen from 14 August 2017. The increase in the dividend paid for the year ended 2017 when compared to 2016 included both the increase in the dividend paid and the increased share capital on which the payment is made as a result of the merger

Percentage change in remuneration of the Director in the position of Chief Executive Officer

The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the year ended 31 December 2016 and the year ended 31 December 2017 for Keith Skeoch as Co-Chief Executive Officer compared to the average UK-based Group employee. The Committee considers these appropriate comparators as the Co-Chief Executive Officers are UK-based and the largest number of Group employees are based in the UK. Martin Gilbert has not been included in the comparison as he was only appointed as Co-Chief Executive Officer in August 2017.

 

% change in base salary

% change in bonus

% change in benefits

Keith Skeoch

0%

1.3%

0%

UK-based employees of Standard Life Group1

4.8%

2.38%

0%

1    In providing a comparator to the year ended 31 December 2016 the employees considered as the appropriate consistent comparator group are those in Standard Life Group.

5.4 Annual remuneration report - what we did in 2017 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 2017. Non-executive Directors do not participate in bonus or long-term incentive plans and do not receive pension funding.

Non-executive Directors

 

Fees for year ended
31 December £000s

Taxable benefits in year ended
 31 December £000s1

Total remuneration for the year ended
31 December £000s

Sir Gerry Grimstone

2017

380

15

395


2016

380

17

397

Simon Troughton2

2017

77

-

77


2016

-

-

-

Julie Chakraverty2

2017

40

-

40

 

2016

-

-

-

John Devine

2017

92

4

96


2016

41

-

41

Gerhard Fusenig2

2017

36

-

36


2016

-

-

-

Melanie Gee

2017

104

4

108


2016

93

4

97

Richard Mully2

2017

43

-

43


2016

-

-

-

Kevin Parry

2017

118

7

125


2016

116

7

123

Lynne Peacock

2017

153

3

156


2016

143

5

148

Martin Pike

2017

107

4

111


2016

104

6

110

Jutta af Rosenborg2

2017

36

-

36


2016

-

-

-

Akira Suzuki2,3

2017

-

-

-


2016

-

-

-

Pierre Danon4

2017

64

7

71


2016

78

36

114

Noel Harwerth4

2017

46

-

46


2016

73

5

78

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 to the Board with effect from 14 August 2017.

3    No fee is paid to non-executive directors who represent a shareholder. Akira Suzuki, a managing executive officer of Mitsubishi UFJ Trust and Banking (MUTB), did not receive a fee as a non-executive director of Aberdeen, and as MUTB has continued to hold shares in the combined Group post the merger, this position has been maintained.

4    Stepped down from the Board with effect from 14 August 2017.

The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and responsibilities. The key terms are set out on page 113.

The service agreements/letters of appointment for Directors are available to shareholders to view on request from the Company Secretary at the Company's registered address (details of which can be found in Section 12) and at the 2018 AGM.

Chairman/Non executive Director

Initial Appointment to the Board1

Initial election by shareholders

Chairman



Sir Gerry Grimstone2

29 May 2007

AGM 2007

Deputy Chairman

 

 

Simon Troughton

14 August 2017

 

Senior Independent Director

 

 

Kevin Parry

27 October 2014

AGM 2015

Non-executive Directors

 

 

Julie Chakraverty

14 August 2017

 

John Devine

4 July 2016

AGM 2017

Gerhard Fusenig

14 August 2017

 

Melanie Gee

1 November 2015

AGM 2016

Richard Mully

14 August 2017

 

Lynne Peacock

1 April 2012

AGM 2012

Martin Pike

27 September 2013

AGM 2014

Jutta af Rosenborg

14 August 2017

 

Akira Suzuki

14 August 2017

 

1    All Directors were appointed to the Board of Standard Life Aberdeen plc on 14 August 2017 for election by shareholders at the 2018 AGM and all non-executive Directors including the Chairman received new appointment letters at that time. These confimed that continuation of the appointment is subject to proposal for election of the individual at the 2018 AGM and is contingent thereafter on re-election at subsequent AGMs.

2    Appointment as Chairman

Non-executive Directors' interests in shares (audited)

The following table shows the total number of Standard Life Aberdeen plc shares held by each of the non-executive Directors and their connected persons:

 

Total number of shares owned at 1 January 2017 or date of appointment if later

Shares acquired/(sold) by the Directors during the period to 31 December 2017 or date of cessation of earlier

Total number of shares owned at 31 December 2017 or date of cessation if earlier

Shares acquired/ (sold) by the Directors during the period 31 December 2017 to 22 February 2018

Sir Gerry Grimstone

206,626

-

206,626

-

Simon Troughton

52,990

-

52,990

-

Julie Chakraverty

2,302

-

2,302

-

John Devine

1,321

-

1,321

-

Gerhard Fusenig

26,495

-

26,495

 

Melanie Gee

20,000

-

20,000

-

Richard Mully

52,990

-

52,990

 

Kevin Parry

50,000

10,754

60,754

-

Lynne Peacock

12,554

-

12,554

-

Martin Pike

32,727

-

32,727

-

Jutta af Rosenborg

-

-

-

-

Akira Suzuki

-

-

-

-

Pierre Danon

49,656

1,704

51,360

-

Noel Harwerth

10,074

-

10,074

-

The Chairman continues to be subject to a guideline holding of 100% of the value of his annual fee in Standard Life Aberdeen plc shares within four years of appointment. Sir Gerry Grimstone, as Chairman, fully met this requirement in 2017 with the value of his shares at the end of the year being 237% of his fees.

Implementation of policy for non-executive Directors in 2018

The following table sets out non-executive Director fees to be paid in 2018. No changes have been made to fee levels, except for the Senior Independent Director.

Role

2018 fees1

2017 fees

Chairman's fees2

£380,000

£380,000

Deputy Chairman's Fees

£200,000

£200,000

Non-executive Director fee3

£73,500

£73,500

Additional fees:

 

 

Senior Independent Director

£25,000

£18,000

Chairman of the Audit Committee

£30,000

£30,000

Chairman of the Risk and Capital Committee

£30,000

£30,000

Chairman of the Investment Performance Commitee

£30,000

-

Chairman of the Remuneration Committee

£30,000

£30,000

Chairman of Standard Life Assurance Limited

£75,000

£75,000

Committee membership (Audit, Risk and Capital, Remuneration, Investment Performance and Nomination Committees)

£10,000

£10,000

1    The core fee of £73,500 paid to each non-executive Director (including the Chairman and Deputy Chairman) is expected to total £808,500 for 2018 (2017: £670,688). This is within the maximum £1,000,000 permitted under Article 87 of Standard Life Aberdeen plc's articles of association. Total fees including additional duties are expected to amount to £1,577,500 for 2018 (2017:£1,286,000).

2    The Chairman's and Deputy Chairman's fees are inclusive of the non-executive Directors' core fee and no additional fees are paid to the Chairman or Deputy Chairman where they chair, or are members of, other committees/boards. In 2018 the Chairman will also receive £20,000 (2017: £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 being the senior independent Director or, the chairman of, or member of, committees and subsidiaries' boards where a greater responsibility and time commitment is required.

5.5 The Remuneration Committee

Membership

During 2017 the Remuneration Committee was made up of independent non-executive Directors: Melanie Gee (Chairman from 17 May 2016 until 13 August 2017), Richard Mully (Chairman from 14 August 2017), Martin Pike (until 13 August 2017), John Devine and from 14 August 2017 Kevin Parry, Gerhard Fusenig, and Jutta af Rosenberg.

Member

Richard Mully (Chairman)

3/3

John Devine

13/13

Gerhard Fusenig

3/3

Kevin Parry

3/3

Jutta af Rosenborg

3/3

 

 

Former member

 

Melanie Gee

10/10

Martin Pike

10/10

The role of the Committee

To consider and make recommendations to the Board in respect of the total remuneration policy across the Group, including:

·  Rewards for the executive Directors, senior employees and the Chairman

·  The design and targets for any employee share plan

·  The design and targets for annual cash bonus plans throughout the Group

·  Changes to employee benefit structures (including pensions) throughout the Group

The terms of reference are published within the Board Charter on our website at www.standardlifeaberdeen.com/annualreport

Committee effectiveness

The Committee reviews its remit and effectiveness annually. The 2017 review was carried out via an internal self-assessment questionnaire. The review concluded that the Committee remained effective and fulfilled its remit.

External advisers

The Committee received information on comparative pay data from Willis Towers Watson. Pinsent Masons LLP provided legal interpretation of variable pay plan rules and contractual terms to the Committee.

Fees paid to Pinsent Masons LLP were £16,930.

During the year, the Committee also took advice from Deloitte LLP (a member of the Remuneration Consultants Group).

The Committee approached a number of remuneration consultants in September 2017 to tender for appointment. Following the review Deloitte LLP were re-appointed as external advisers to the Committee from 19 September 2017.

A representative from Deloitte LLP attends, by invitation, all Committee meetings to provide information and updates on external developments affecting remuneration as well as specific matters raised by the Committee. Outside of the meetings, the Committee's Chairman seeks advice on remuneration matters on an ongoing basis. As well as advising the Committee, Deloitte LLP also provided tax, risk, data, consultancy and transaction related services 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 Aberdeen 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 Aberdeen has been appointed to provide defined contribution arrangements for Deloitte's clients through competitive tender.

Fees paid to Deloitte LLP during 2017 for professional advice to the Committee were £244,450. Additional fees of £179,100 were paid to Deloitte LLP in respect of professional advice in relation to adjustments to the 2016 Standard Life Group annual bonus scorecard rating and the 2014 Executive LTIP vesting level, in consideration of the outcome of the Financial Conduct Authority's thematic review into the sale of non-advised annuities, and remuneration related advice in relation to the merger.

Where appropriate, the Committee receives input from the Chairman, Co-Chief Executive Officers, 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. The Committee also receives input from the Risk and Capital Committee and Audit Committee.

As noted in Section 2 Sir Gerry Grimstone is an independent non-executive 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 Committee recognised the need to ensure there is no conflict of interest arising from the appointment process. The 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 and the Chairman was not involved in the tender process that resulted in the reappointment of Deloitte LLP. Whilst Sir Gerry Grimstone has access to the Committee adviser to the extent that he is invited to attend Committee meetings, he does not meet with the Committee adviser, other than in those meetings, to discuss matters relating to Standard Life Aberdeen. Communication between Deloitte LLP and the Committee is on instruction from the Committee Chairman.

The Committee's work in 2017

An indicative breakdown as to how the Committee spent its time is shown below:

Chart removed for the purposes of this announcement.  However it can be viewed in full in the pdf document.

 

Jan - Mar

·  2016 Directors' Remuneration Report

·  2016 bonus payments and 2014 LTIP outcomes

·  2017 annual bonus and LTIP targets

·  Paul Matthews' retirement and Barry O'Dwyer's appointment

·  Review of remuneration awards and proposals for senior management and material risk takers

·  Review of implications of the merger on remuneration

·  Employee retention plans in relation to the merger (see Section 5.6)

 

 

 

Apr - Jun

·  Remuneration policy for period from 14 August 2017 including investor engagement

·  Remuneration input for the prospectus for the General Meeting

·  Governance update

·  Sales force remuneration

·  Termination of employment remuneration implications for executive Directors stepping down as a result of the merger

·  Extension of Sharesave plan participation to Aberdeen Asset Management for the 2017 invitation

·  Directors' expense policy

·  Regulatory update

·  Material risk takers and 2017 disclosures

Jul - Sep

·  Mid-year review of performance against target for annual bonus and LTIP awards

·  Directors' remuneration policy - design for 2018

Oct - Dec

·  Directors' remuneration policy - design for 2018, including investor engagement

·  Regulatory update

·  2017 Directors' remuneration report

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 Committee seek to understand the reasons for any such vote, and will detail here any actions in response to it.

The remuneration policy was subject to a vote at the 2017 General Meeting held on 19 June 2017 and the following table sets out the outcome of the vote.

Policy

For

Against

Withheld

(% of total votes)

94.55%

5.45%

 

(No. of votes cast)

715,476,157

41,212,837

123,003,556

The Directors' remuneration report was subject to a vote at the 2017 AGM on Tuesday 16 May 2017 and the following table sets out the outcome.

2016 Directors' Remuneration Report

For

Against

Withheld

(% of total votes)

97.47%

2.53%

 

(No. of votes cast)

765,570,038

19,888,754

8,290,600

Promoting all-employee share ownership

We believe that share ownership by our employees helps them to understand the interests of the Company's shareholders. We promote employee share ownership with a range of initiatives:

·  The Standard Life (Employee) Share Plan which allows eligible employees to buy Standard Life Aberdeen plc shares directly from their earnings. A similar tax-approved plan is used in Ireland. At 31 December 2017, 3,912 employees in the UK were making a monthly average contribution of £59 and 189 employees in Ireland were making an average contribution of €55. Even though the plan cannot be structured on a tax-favourable basis in Germany and Austria, 102 employees in these countries participated in December 2017 with an average contribution of €42. On 31 December 2017, 4,814 of our employees were Standard Life Aberdeen plc shareholders through participation in the Standard Life (Employee) Share Plan.

·  The Sharesave Plan, offered in 2017 to the majority of employees in the UK. This plan allows UK tax resident employees to save towards the exercise of options over Standard Life Aberdeen 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. At 31 December 2017, 4,152 employees in the UK were saving to buy Standard Life Aberdeen plc shares.

·  The Sharesave Plan in Ireland launched in August 2012, with invitations made annually thereafter. As at 31 December 2017, 146 employees were saving towards one or more of the Sharesave Ireland offers.

Share dilution limits

The Executive LTIP, the Standard Life Investments LTIP, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan, the Aberdeen Asset Management Deferred Share plans and the Standard Life Ireland Sharesave Plan contain dilution limits that comply with the guidelines produced by The Investment Association (IA). On 31 December 2017, therefore, the Company's standing against these dilution limits was:

·  1.51% where the guideline is no more than 5% in any ten years under all discretionary share plans in which the executive Directors participate

·  2.17% where the guideline is no more than 10% in any ten years under all share plans

As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, Standard Life Investments LTIP, the Restricted Stock Plan, the deferred elements of the Standard Life annual bonus plan and the Aberdeen Asset Management deferred plans. On 31 December 2017 the trusts held 39,735,984 shares acquired to satisfy these awards. Of these shares 9,093,106 are committed to satisfying vested but unexercised awards. The percentage of share capital held by the employee trusts is 1.33% - well within the 5% best practice limit endorsed by the IA.

Related party transactions

All transactions between Directors and the Group are on commercial terms that are equivalent to those available to all employees. During the year to 31 December 2017, the Directors (including close family members) contributed £3,156,250 (2016: £1,408,546) to products sold by the Group.

5.6 Additional Information

Aberdeen Variable Pay plan outcome for the period 1 October 2016 to 13 August 2017

The bonus entitlement for the directors of Aberdeen Asset Management who are now Directors of Standard Life Aberdeen plc was as follows:

 

Maximum cash variable pay
(multiple of fixed pay)

Maximum variable pay in deferred shares (multiple of fixed pay)

Martin Gilbert

250%

750%

Bill Rattray

75%

225%

 

Variable pay awards for the year under review were based on the following key performance indicators, weightings and targets.

The performance outcomes and bonus result for each KPI (as a percentage of maximum bonus) are also shown.

Performance metrics

Weighting

Threshold (25% of maximum)

Target (50% of maximum)

Stretch (100% of maximum)

Actual

Result (% of max variable x weighting)

Long-term quantitative

 

 

 

 

 

 

Compound growth in underlying earnings per share

12.5%

6%

9%

12%

(13.2%)

0.0%

Average ROCE

12.5%

16%

20%

22%

16.8%

3.7%

Investment performance

25.0%

50%

60%

70%

74.3%

25.0%

Annual quantitative

 

 

 

 

 

 

Underlying profit before tax

15.0%

£263.8m

£329.7m

£395.6m

£350.0m

9.8%

Operating margin

15.0%

29.3%

32.6%

35.9%

33.5%

9.6%

Total

 

 

 

 

 

48.1%

Annual non-financial strategic

10.0%

Aberdeen remuneration committee assessment

7.5%

Annual personal performance

10.0%

Aberdeen remuneration committee assessment

8.5%-9.5%

 

Personal Performance

Rating

Martin Gilbert

9.5%

Bill Rattray

8.5%

The variable pay awards for the period from 1 October 2016 to 13 August 2017 are

 

Cash £'000

Deferred £'000

Total £'000

Martin Gilbert

746

2,239

2,985

Bill Rattray

154

464

618

 

Retention Awards

As previously disclosed in the merger prospectus retention awards were awarded to certain employees (excluding executive Directors). In total, 249 participants were granted awards in the form of nil-cost options over shares, phantom options or cash conditional awards over notional shares, or deferred cash awards. Awards are subject to a combination of personal and company performance conditions. Awards will normally only vest and awards will normally only be released on the earlier of (i) announcement of the successful completion of the integration of Standard Life Group and Aberdeen following the merger and (ii) the second anniversary of the date of the merger. For some participants, awards will vest on a later date due to regulatory requirements. The value of awards at the time of grant was £37.8m.

6. Statement of Directors' responsibilities in respect of the Annual report and the financial statements

The Directors are responsible for preparing the Annual report and accounts and the Group and parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and parent Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law and have elected to prepare the parent Company financial statements on the same basis. 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of their profit or loss for that period. In preparing each of the Group and parent Company financial statements, the Directors are required to: 

·  Select suitable accounting policies and then apply them consistently

·  Make judgements and estimates that are reasonable, relevant and reliable

·  State whether they have been prepared in accordance with IFRSs as adopted by the EU

·  Assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern

·  Use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006.  They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' remuneration report and Corporate governance statement that complies with that law and those regulations. 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

·  The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole

·  The Directors' report and Strategic report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

By order of the Board

Sir Gerry Grimstone

Chairman

23 February 2018

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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